Intertek Group plc · LSE:ITRK
Intertek — FY2002 Earnings Presentation
25 slides from Intertek's earnings presentation, Mar 10, 2003
Slide 1: Group Results 2002 Analysts' Presentation
Group Results 2002 Analysts’ Presentation, London 10 March 2003 Richard Nelson, Chief Executive Officer Bill Spencer, Chief Financial Officer 1
Slide 2: Financial Highlights
Financial Highlights Turnover £461.1m Up 2% @ actual exchange rates Up 6% @ constant exchange rates Operating Profit*1 £76.9m Up 10% @ actual exchange rates Up 15% @ constant exchange rates Operating margin 16.7% Up from 15.5% in 2001 Profit before tax £53.9m Earnings per share*2 27.1 pence Proposed
Slide 3: Operating Profit Translation Exposure
Operating Profit Translation Exposure • Up to 80% of operating profits are in US dollars or pegged/linked currencies • 1% change in the average exchange rate = 0.8% change in operating profit • Average exchange rate 2002 £1 = $1.50 3
Slide 4: Profitability
Profitability 2002 - £m Actual Pro-forma Operating profit 76.0 76.0 Exceptional items 15.6 ─ Exceptional finance charges (15.5) ─ Net interest payable (22.2) (10.5) Profit before tax 53.9 65.5 Interest cover 3.4 times 7.2 times 4
Slide 5: Taxation
Taxation 2002 - £m Actual Pro-forma Profit before tax 53.9 65.5 Tax (16.0) (19.6) Effective tax rate 29.7% 29.9% 5
Slide 6: Basic Earnings per Share
Basic Earnings per Share Year 2002 - £m Actual Pro-forma Profit before tax 53.9 65.5 Taxation (16.0) (19.6) Less minorities (4.3) (4.3) Shareholders’ earnings 33.6 41.6 Divided by shares in millions 123.7 153.4 Basic EPS in pence 27.2 27.1 Basic underlying EPS* in pence 27.8 27.7 * Excluding goodwil
Slide 7: Dividends
Dividends December Full Year 2002 Final Equivalent Dividend per share 5.2 pence 7.8 pence Actual dividend cover 4.2 times Pro forma dividend cover 3.5 times 7
Slide 8: Operating Cash Flow
Operating Cash Flow 2002 - £m 2002 2001 EBITDA 94.5 85.5 Change in operating working capital (10.7) (6.8) Capital expenditure (23.6) (25.8) Operating cash flow 60.2 52.9 Operating cash flow to operating profit% 78% 76% Capital expenditure to sales % 5.1% 5.7% Operating working capital to sales % 6.9
Slide 9: Cash Generation
Cash Generation £m 2002 2001 Operating cash flow 60.2 52.9 Exceptional cash flow 13.6 (8.7) Taxation (12.7) (13.6) Dividends paid to minorities (4.0) (3.5) Free cash flow*1 57.1 27.1 *1 Before servicing of finance, acquisitions and investments 9
Slide 10: Capital Structure
Capital Structure £m 2002 2001 Borrowings 237.5 341.1 Cash balance (70.6) (23.7) Net debt 166.9 317.4 Shareholders’ funds* 181.3 50.4 Net debt to shareholders equity 92% 630% Pro forma 2002 interest cover = 7.2 times * Excludes goodwill written off to reserves of £264.7m (2001 £286.1m) when Intertek
Slide 11: Trend in Turnover
Trend in Turnover* At Constant Exchange Rates At Actual Exchange Rates £m £m 500 461 500 461 451 434 450 450 398 390 400 356 400 349 338 351 350 350 300 300 250 250 200 200 150 150 100 100 50 50 0 0 1998 1999 2000 2001 2002 1998 1999 2000 2001 2002 CAGR = 7.2% CAGR = 8.1% * Continuing business 11
Slide 12: Trend in Operating Profit
Trend in Operating Profit* At Constant Exchange Rates At Actual Exchange Rates £m £m 80 76.9 80 76.9 69.8 70 66.7 70 61.0 58.6 60 60 49.4 48.9 50 46.8 50 45.0 40 40 30 30 20 20 10 10 0 0 1998 1999 2000 2001 2002 1998 1999 2000 2001 2002 CAGR = 13.2% CAGR = 14.3% * Continuing business before goodwill
Slide 13: Operating Performance 2002
Richard Nelson Chief Executive Officer Operating Performance 2002 Analysts’ Presentation – 10 March 2003 13
Slide 14: Testing, Inspection & Certification of Products and Commodities
Testing, Inspection & Certification of Products and Commodities Growing Market • More products, shorter lifecycles • Increasing safety and quality standards • Migration of sourcing to Asia • Trend to outsourcing • Low cost, high value 14
Slide 15: World Leader & High Barriers to Entry
World Leader & High Barriers to Entry • Laboratory network for local testing • Safety labels, accreditations, reputation • Local labour developed over many years • Customer focus (turnaround time, responsiveness) • Strong compliance 15
Slide 16: Operating Performance - Overview
Operating Performance - Overview £m @ constant 2002 exchange rates 2002 2001 Growth % Turnover 461.1 434.4 6% Operating profit 76.9 66.7 15% Margin 16.7% 15.4% 16
Slide 17: Labtest (Consumer Goods)
Labtest (Consumer Goods) £m @ constant 2002 exchange rates 2002 2001 Growth % Turnover 123.8 109.3 13% Operating profit 41.5 33.9 22% Margin 33.5% 31.0% 17
Slide 18: Labtest Drivers
Labtest (Consumer Goods) Drivers • Widening ranges of products • Increasing quality and safety requirements • Expansion in China with lower prices and costs • Strong growth in India and Turkey • USA improved textile and toy testing • In fill acquisitions (ISO 9000) 18
Slide 19: Caleb Brett (Oil & Chemical)
Caleb Brett (Oil & Chemical) £m @ constant 2002 exchange rates 2002 2001 Growth % Turnover 172.8 168.4 3% Operating profit 16.3 16.5 (1)% Margin 9.4% 9.8% 19
Slide 20: Caleb Brett Drivers
Caleb Brett (Oil & Chemical) Drivers • Cargo related (77%) of total sales – Secure but mature market – 2002 Competitive • Outsourcing (23%) of total sales – Growth in EBITA – Prospects increasing well – Higher margin – In fill acquisitions 20
Slide 21: ETL SEMKO (Electrical)
ETL SEMKO (Electrical) £m @ constant 2002 exchange rates 2002 2001 Growth % Turnover 104.7 99.9 5% Operating Profit 14.0 12.4 13% Margin 13.4% 12.4% 21
Slide 22: ETL SEMKO Drivers
ETL SEMKO (Electrical) Drivers • Growth in safety testing and HVAC • Telecoms downturn (8% of business, 10% in ‘01), cost base being monitored • Growth in Asia (19% of business, 17% in’01) • High profit margins in Asia (20% +) • In fill acquisitions (low market share) 22
Slide 23: FTS (Foreign Trade Standards)
FTS (Foreign Trade Standards) £m @ constant 2002 exchange rates 2002 2001 Growth % Turnover 59.8 56.8 5% Operating profit 11.3 9.1 24% Margin 18.9% 16.0% 23
Slide 24: FTS Drivers
FTS (Foreign Trade Standards) Drivers • High shipments to Nigeria, (about 1/3 of division) • Additional products in SASO programme (about 1/ of division) 3 • Eight other contracts • Kuwait scheduled start Q2, 2003 • Potential New Contracts 24
Slide 25: Summary
Summary • Business going well, in line with expectations at the time of float • Infill acquisitions being pursued – Caleb Brett outsourcing – ETL SEMKO expansion – Systems certification • Organic growth prospects 25