Intertek Group plc · LSE:ITRK
Intertek — Investor Presentation (April 2013)
47 slides from Intertek's investor presentation, April 2013
Slide 1: Intertek Investor Presentation
Intertek Investor Presentation April 2013 aston.swift@intertek.com sarah.ogilvie@intertek.com +44 (0)20 7396 3400 1 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: Profile
Profile Leading quality solutions provider Origins back to 1885 Floated 2002, entered FTSE 100 in 2009 Market Capitalisation > £5bn 2012 Sales £2.0bn, EBITA £335m (16.3%) 9.0% Average FY Organic Revenue growth 2002-12 3 www.intertek.com
Slide 4: Investment Proposition
Investment Proposition Strong structural growth drivers High barriers to entry Low customer penetration, high market fragmentation Balanced portfolio (industries, geographies & customers) Emerging market exposure Low capital intensity, flexible cost structure Highly cash generative 4 www.intertek.co
Slide 5: 10 years from IPO: a decade of consistent revenue growth
10 years from IPO A decade of consistent revenue growth Revenue £m 2,000 OUR STRATEGY 1,000 OUR GROWTH OUR PLATFORM DRIVERS 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 The Next 10 Years 5 www.intertek.com
Slide 6: Five Year Performance 2008 to 2012
Five Year Performance 2008 to 2012 (1) (1) Revenue Adjusted Operating Profit Adjusted Diluted EPS £m Pence £m 20% CAGR 19% CAGR 18% CAGR 350 140 2,200 2,054 +19% 335 +22% 131.2 +17% 1,925 300 281 120 1,749 107.2 1,650 250 100 227 89.4 1,374 209 81.5 1,375 1,237 200 80 165 67.1 1,100 1,004 150 60 825
Slide 7: Our Network
Our Network Over 35,000 people Working in more than 1,000 laboratories and offices In more than 100 countries 7 www.intertek.com
Slide 8: Global Intertek
Global Intertek EMEA 32% Americas 33% Asia Pacific 35% Emerging Markets 36% 8 www.intertek.com
Slide 9: Intertek as One
Quality Services Our organisation Industries we operate in Services Supporting our customers in their global trade Our organisation The The industries industries&we Aerospace we operate operate in Automotive in What Whatwe wedodo Building Products Testing Industry & Assurance Chemical Consumer Goods
Slide 10: Intertek at a glance
Intertek at a glance Consumer Goods Margin: 32.8% 17% Commodities 28% Margin: 13.5% Products Commodities Commercial & Electrical Margin: 15.9% 15% Industry 8% Chemicals & Pharmaceuticals 32% Industry & Assurance Margin: 11.0% Margin:11.6% 10 www.intertek.com
Slide 11: What we do for our customers
What we do for our customers Support Speed to Protect Their products and Market Reduce financial, processes in their Cut lead times operational, global trade in all and costs without reputational and quality related compromising quality environmental risks aspects safety or environment 11 www.intert
Slide 12: Financial Highlights
Financial Highlights For the twelve months to 31 December 2012 Revenue £2,054m + 17.4% at actual + 8.6% at constant organic(2) Operating profit(1) £335m + 19.2% at actual + 11.2% at constant organic(2) Operating profit margin(1) 16.3% + 20bps at actual + 40bps at constant organic(2) Profit before ta
Slide 13: Enduring Growth Drivers
Enduring Growth Drivers 1 Global Trade & Emerging Market Trade Growth 2 Market Drivers in our Industries 3 Network & Service Expansion 4 Outsourcing & Consulting Services 5 Industry Consolidation 13 www.intertek.com
Slide 14: 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 15: Supply Chain Pressures
Supply Chain Pressures Clients’ Cost Time Sales Pressures Race to the Change sourcing patterns Product innovation bottom in sourcing More suppliers Reduce inventory Improve logistics & speed to market Complex supply Outsource to focus chain on core Respond quicker to diversity of end- user trends En
Slide 16: From Quality Control to Quality Confidence
From Quality Control to Quality Confidence Independent view On risk; Different angle to developer Assurance Knowledge Greater visibility & Focussed in each control; Integrating supply chain area & multiple services Intertek industry Supply Chain Support End-to-end presence Global & Responsive Suppor
Slide 17: Connecting Responsible Buyers with Trusted Suppliers
Service Innovation Example Connecting Responsible Buyers with Trusted Suppliers • Helping buyers and sellers find each other on a trusted platform • New qualification and verification matching-platform for buyers with suppliers • Supplier qualification programmes: Validating credentials, visibility,
Slide 18: Our Growth Platform
Our Growth Platform Commodities Products Industry 18 www.intertek.com
Slide 19: Outlook
Outlook • Structural drivers for “Quality” continue to evolve with increasing opportunities to provide support • Product innovation, supply chain changes and regulations driving market growth • Continue to deliver against our growth framework: • Organic revenue growth • Acquisitions • Margin enhance
Slide 20: Appendix
Appendix 20 www.intertek.com
Slide 21: Industry & Assurance
Industry & Assurance FY 12 Performance Developments £m @ constant Organic • More Framework Agreements exchange FY 12 Change change Revenue 665.6 43.3% 10.4% • Acquisition of NDT Services Ltd, Non-Destructive Testing, in UK for Operating profit 77.4 53.6% 19.0% £10m Margin 11.6% 70bps 60bps Outlook •
Slide 22: Industry & Assurance
Industry & Assurance 32% of H1 2012 Group Revenue 23% of H1 2012 Group Operating Profit • Oil, gas, petrochemical, power, renewable energy, civil infrastructure • Industrial and technical inspection, supplier evaluation, asset integrity management, systems certification, health and safety and risk c
Slide 23: Commodities
Commodities FY 12 Performance Developments £m @ constant Organic • Increased lab capacity in Africa, exchange FY 12 Change change Asia and LatAm Revenue 572.3 9.0% 8.6% • Closed and restructured some Operating profit 77.2 15.4% 15.2% laboratories Margin 13.5% 80bps 80bps Outlook • Slower 2H growth:
Slide 24: Commodities
Commodities 28% of H1 2012 Group Revenue 23% of H1 2012 Group Operating Profit • Cargo inspection, analytical assessment, calibration and related technical services to the world’s energy, petroleum and chemical industries • Mine site sample preparation, lab analysis of samples, cargo inspection • Ca
Slide 25: Consumer Goods
Consumer Goods FY 12 Performance Developments £m @ constant Organic • Tradegood – major investment into exchange FY 12 Change change new platform for suppliers & buyers Revenue 343.4 8.3% 7.3% • Continued lab investment: India Operating profit 112.8 4.6% 4.5% China, Bangladesh, Vietnam, Margin 32.8%
Slide 26: Consumer Goods
Consumer Goods 17% of H1 2012 Group Revenue 34% of H1 2012 Group Operating Profit • Textiles, toys, footwear, hardlines (eg furniture, sports equipment, bicycles, candles), cosmetics and retail • Shorter time to market, brand value support to retailers with global supply chains through laboratory te
Slide 27: Commercial & Electrical
Commercial & Electrical FY 12 Performance Developments £m @ constant Organic • Lab and capability expansion mainly exchange FY 12 Change change in US and Asia Revenue 318.2 8.7% 8.7% • Electric Vehicle leading position in Operating profit 50.6 12.9% 12.9% all 3 global regions Margin 15.9% 60bps 60bp
Slide 28: Commercial & Electrical
Commercial & Electrical 15% of H1 2012 Group Revenue 15% of H1 2012 Group Operating Profit • Home appliances and electronics, lighting, medical, building, industrial, heating, ventilation and air conditioning (HVAC), IT, renewable energy, automotive and life safety • One stop shop to quality, safety
Slide 29: Chemicals & Pharma
Chemicals & Pharma FY 12 Performance Developments £m @ constant Organic • Abu Dhabi Quality and Conformity exchange FY 12 Change change Council contract commenced H2 Revenue 154.8 9.9% 9.0% • Restructured labs in weaker Operating profit 17.1 35.7% 29.7% markets Margin 11.0% 210bps 180bps Outlook • S
Slide 30: Chemicals & Pharma
Chemicals & Pharma 8% of H1 2012 Group Revenue 5% of H1 2012 Group Operating Profit • Laboratory and consultancy services to chemical, pharmaceutical, oil and gas and users/ producers of advanced materials eg; automotive and aerospace • Health and safety and risk consulting, greenhouse gas services
Slide 31: Revenue Growth
Revenue Growth £m £m + 17.4% 2,200 Actual rates 2,200 42 28 27 11 197 2,000 185 9 2,000 1,800 129 1,800 253* + 8.6% 1,600 Constant 1,600 rates 1,400 1,400 1,200 2,054 1,200 2,054 1,749 1,000 1,000 1,496* 800 800 600 600 400 400 2011 2012 FX Organic Acquisitions 2012 2011 I&A Commodities CG C&E C&P 2
Slide 32: Margin Progression 40bps
Margin Progression 40bps % 16.5 + 10 bps + 40 bps - 30 bps 16.0 15.5 16.3% 15.0 16.1% 14.5 14.0 2011 Moody extra Organic Margin FX 2012 4 months Progression 32 www.intertek.com
Slide 33: Cash Flow and Financing
Cash Flow and Financing Adjusted Cash flow from Operations £m 400 • Adjusted cash generated from operations up 10% to £345m 300 • Increased working capital in high 200 growth technical inspection business 100 • Capex £115m; 5.6% of revenue 2010 2011 2012 Financing – Strong Maturity Profile • 6 acqui
Slide 34: Underlying Margin Progression
Underlying Margin Progression 17.0 % • Reported margin: • Moody dilution and growth mix 16.0 • Underlying margin: • Good progression • Supported by margin improvement 15.0 programme • Investment in new service development in Consumer Goods 14.0 2010 2011 2012 Reported Margin Margin with Moody profor
Slide 35: Separately Disclosed Items
Separately Disclosed Items £m @ actual exchange rates 2012 2011 Adjusted operating profit (1) 335.1 281.1 +19.2% Separately disclosed items: Amortisation of acquisition intangibles (29.3) (25.3) Bolt-on acquisition and integration costs (1.8) (1.0) Moody acquisition and integration costs (3.7) (13.1
Slide 36: Business Restructuring Programme
Business Restructuring Programme £m 22 2013 Other £2m 20 £8m • Portfolio review Asset / 18 Leases £9m • Restructuring underperforming 16 and non strategic businesses 14 2012 • 17 countries, Europe focus 12 £14m 10 Staff • £14m in 2012, c£8m in 2013 £11m 8 • Loss of c£10m revenue 6 4 2 0 Timing Type
Slide 37: Taxation
Taxation Adjusted Group Effective Tax Rate • Early completion of Moody % 30 integration 25 26.7% 28.2% • Lower rates and profits mix 26.0% • 2013 broadly stable 20 • Mix and acquisition dependent 15 10 5 0 2010 2011 2012 37 www.intertek.com
Slide 38: Dividend Increased by 22%
Dividend Increased by 22% Full Year Dividend Per Share Pence 18% CAGR • Full year dividend of 41p, up 22% 45 40 • Full year pay-out of £66m 35 30 • Strong and consistent record of dividend growth 25 20 • Dividend cover of 3.2 on adjusted 15 profits 10 5 0 2008 2009 2010 2011 2012 38 www.intertek.com
Slide 39: Adjusted EPS
Adjusted EPS £m @ actual exchange rates 2012 2011 Adjusted operating profit 335.1 281.1 +19% Net interest expense (26.7) (21.0) Profit before tax 308.4 260.1 Tax 26.0% (28.2%) (80.3) (73.3) Profit after tax 228.1 186.8 Non-controlling interest (14.4) (12.3) Net Profit 213.7 174.5 FD Shares 162.9 162
Slide 40: Taxation
Taxation £m @ actual exchange rates 2012 2011 Reported profit before tax 256.6 213.0 Reported tax (68.4) (61.9) Reported profit after tax 188.2 151.1 Reported tax rate 26.7% 29.1% Effective tax rate 26.0% 28.2% on adjusted operating profit 40 www.intertek.com
Slide 41: Operating Cash Flow
Operating Cash Flow £m @ actual exchange rates 2012 2011 Operating Profit before changes in working 389.9 329.1 capital and provisions Changes in working capital (57.3) (40.4) Cash generated from operations 332.6 288.7 Separately disclosed items – cash flow 12.8 26.1 Adjusted cash generated from ope
Slide 42: Free Cash Flow
Free Cash Flow £m @ actual exchange rates 2012 2011 Adjusted cash generated from operations 345.4 314.8 +10% Net interest (24.2) (20.3) Taxation (72.6) (53.4) Net capital expenditure (113.3) (79.0) Adjusted free Cash Flow 135.3 162.1 -17% 42 www.intertek.com
Slide 43: Net Debt
Net Debt £m @ actual exchange rates 2012 2011 Borrowings 717.2 762.6 Cash (166.5) (181.9) Net debt 550.7 580.7 Net debt to EBITDA 1.3x 1.6x (2011: Proforma 12mths Moody) 43 www.intertek.com
Slide 44: Liquidity Position
Liquidity Position £m @ actual exchange rates 2012 2011 Debt facilities 881.4 911.2 Borrowings (717.2) (762.6) Undrawn committed borrowing facilities 164.2 148.6 Cash 166.5 181.9 Liquid funds 330.7 330.5 Average debt facility maturity of six years 44 www.intertek.com
Slide 45: Revenue By Currency
Currency Analysis Local currency Revenue By Currency 2012 2011 to GBP USD 1% 1.59 1.60 Other CNY 3% 10.01 10.35 ~26% USD, CNY & EUR 7% 1.23 1.15 HKD ~55% GBP & EUR HKD 1% 12.31 12.47 ~19% AUD 1% 1.53 1.55 CAD - 0% 1.59 1.59 45 www.intertek.com
Slide 46: Divisional Performance Summary
Divisional Performance Summary FY 2012 Revenue Margin Organic Organic £m @ constant exchange FY 12 Change change FY 12 Change change Industry & Assurance 665.6 43.3% 10.4% 11.6% 70bps 60bps Commodities 572.3 9.0% 8.6% 13.5% 80bps 80bps Consumer Goods 343.4 8.3% 7.3% 32.8% (120)bps (90)bps Commercial
Slide 47: Valued Quality. Delivered.
Valued Quality. Delivered. 47 www.intertek.com