Slide 1: Strongly Cash Generative Earnings Model: 2020 Half Year Results Presentation
STRONGLY CASH GENERATIVE EARNINGS MODEL 2020 HALF YEAR RESULTS PRESENTATION 31 July 2020
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: Performance Highlights
01 02 03 04 05 Performance H1 2020 Financial Strategy Update Divisional Review Conclusion Highlights Results
Slide 4: Global pandemic triggered unprecedented global supply chain disruption
GLOBAL PANDEMIC TRIGGERED UNPRECEDENTED GLOBAL SUPPLY CHAIN DISRUPTION Global Greater China Asia Pacific 200k 16k 3,000 100k 8k 1,500 0 0 0 Jan Feb Mar Apr May Jun Jan Feb Mar Apr May Jun Jan Feb Mar Apr May Jun South Asia MENAP Sub-Saharan Africa Active 24k 20k 10k cases: 3,617,58 1 Total 12k 10k 5
Slide 5: The pandemic has severely restricted global mobility
THE PANDEMIC HAS SEVERELY RESTRICTED GLOBAL MOBILITY Global Greater China Asia Pacific 20% - 0% - - (6%) (20%) (12%) (11%) (10%) (2%) (15%) (20%) (20%) (16%) (19%) (40%) (22%) (40%) (21%) (40%) (34%) (34%) (60%) (60%) (60%) (45%) (48%) (80%) (80%) (80%) Feb Mar Apr May Jun Feb Mar Apr May Jun Feb Ma
Slide 6: We responded quickly with laser focussed priorities
WE RESPONDED QUICKLY WITH LASER FOCUSSED PRIORITIES Employee Customer Health and Margin Cash Engagement Service Safety • Employee health and • Passionate, customer- • Disciplined approach to • Cash collection controls • Best-practices to engage safety is our first priority centric organisation margi
Slide 7: We operate a strongly cash generative earnings model
WE OPERATE A STRONGLY CASH GENERATIVE EARNINGS MODEL YoY % / bps YoY % / bps H1 2020 H1 2019 (Actual rates) (Constant rates) Revenue £m 1,330.6 1,442.6 (7.8%) (7.8%) Like-for-like revenue1 £m 1,326.7 1,440.9 (7.9%) (8.0%) Operating Profit2 £m 168.2 248.9 (32.4%) (32.2%) Adjusted Operating Mar
Slide 8: We delivered a resilient revenue and a robust margin performance
WE DELIVERED A RESILIENT REVENUE AND A ROBUST MARGIN PERFORMANCE Revenue YoY 1 Operating Profit and margin1,2 Like-for-like revenue growth1 (%) Operating profit YoY1 (%) (15.0%) (10.0%) (5.0%) 0.0% (60.0%) (40.0%) (20.0%) 0.0% 0.0% 0 Resources: (2.1%) Resources: (15.4%) 5.3% £235.6m £235.6m (200)bps
Slide 9: Targeted cost management to keep full ATIC capability for recovery and growth
TARGETED COST MANAGEMENT TO KEEP FULL ATIC CAPABILITY FOR RECOVERY AND GROWTH H1 19 Budget H1 20 +c.4% vs Budget 20 vs H1 19 Total costs c.(6%) Total costs (2.6%) £1,194 £1,162m m 1 1 Total Costs 1 Total Costs Total Costs Productivity management Portfolio strategy Portfolio review Headcount • Monthl
Slide 10: Strong cash performance
STRONG CASH PERFORMANCE Adjusted EBITDA (£m)1 Cash Generated from Operations (£m) 1 Adjusted Free Cash Flow (£m) 1 264 261 142 336 132 218 271 270 196 99 105 255 164 85 228 143 146 206 53 59 190 HY 14 HY 15 HY 16 HY 17 HY 18 HY 19 HY 20 HY 14 HY 15 HY 16 HY 17 HY 18 HY 19 HY 20 HY14 HY15 HY16 HY17 H
Slide 11: H1 2020 Financial Results
01 02 03 04 05 Performance H1 2020 Financial Strategy Update Divisional Review Conclusion Highlights Results
Slide 12: Key P&L financials
KEY P&L FINANCIALS YoY % H1 20 H19 Actual Rates Constant Rates Revenue £1,330.6m £1,442.6m (7.8%) (7.8%) Like-for-like revenue1 £1,326.7m £1,440.9m (7.9%) (8.0%) Operating costs £1,162.4m £1,193.7m (2.6%) (2.7%) Adjusted operating profit2 £168.2m £248.9m (32.4%) (32.2%) Adjusted operating profit mar
Slide 13: Operating margin bridge
OPERATING MARGIN BRIDGE 18.0% 17.3% 16.0% 14.0% (280bps) 12.7% 12.6% 12.0% (150bps) (10bps) (20bps) (10bps) (460bps) at constant rates 10.0% 8.0% 6.0% Resources Products H1 19 FX H1 20 Trade Divisional mix Excluding FX 13
Slide 14: Cash flow & net debt
CASH FLOW & NET DEBT £m @ actual exchange rates H1 20 H1 19 YoY Adjusted operating profit1 168.2 248.9 (80.7) Depreciation/amortisation 87.3 86.6 0.7 Change in working capital 6.9 (76.2) 83.1 Other2 5.7 14.7 (9.0) Adjusted cash flow from operations 268.1 274.0 (5.9) Net capex (31.2) (45.7) 14.5 Adju
Slide 15: Well balanced debt maturity profile enhanced by new $200m USPP
WELL BALANCED DEBT MATURITY PROFILE ENHANCED BY NEW $200M USPP • New $200m USPP signed June 2020: $120m 3 year / $80m 5 year • Drawdown in December 2020, aligned with repayment of existing $150m facility • Strong demand resulting in an attractive coupon rate of c.2% £800 m £700 m RCF New USPP USPP £
Slide 16: Financial guidance
FINANCIAL GUIDANCE FY 2020 Guidance (IFRS 16) Net finance cost £35 - 38m Effective tax rate 25.5 – 26.0% Minority interest £19 – 21m Diluted shares (as at 30 June 2020) 162.4m Capex £90 – 100m Financial net debt £625 – 675m Full year FX impact Broadly neutral Note: Before any material change in FX r
Slide 17: Strategy Update
01 02 03 04 05 Performance H1 2020 Financial Strategy Update Divisional Review Conclusion Highlights Results
Slide 18: Mission critical ATIC services will benefit from Covid-19 recovery
MISSION CRITICAL ATIC SERVICES WILL BENEFIT FROM COVID-19 RECOVERY TESTING, INSPECTION & CERTIFICATION PROVIDES QUALITY & SAFETY CONTROLS • Enabling our customers to identify and mitigate intrinsic risk in their SUPPLY PRODUCTION DISTRIBUTION RETAIL operations, their supply and TIER 3 TIER 2 TIER 1
Slide 19: Deep and long-lasting customer relationships
DEEP AND LONG-LASTING CUSTOMER RELATIONSHIPS Customer Net Promoter Centric Score Entrepreneurial, putting Listening to c.7,000 the Customer 1st customers per month Our TQA Customer Promise Intertek Total Quality Assurance expertise delivered consistently, with precision, pace and passion, enabling D
Slide 20: Intertek TQA value proposition: a systemic approach to quality assurance
INTERTEK TQA VALUE PROPOSITION A SYSTEMIC APPROACH TO QUALITY ASSURANCE Assurance Assurance ensures our customers identify and RESEARCH & mitigate the intrinsic risk in their operations, DEVELOPMENT supply chain and quality management systems RAW Testing CONSUMER Our Customer MATERIALS MANAGEMENT Pr
Slide 21: Innovation and Kaizen
INNOVATION AND KAIZEN INNOVATIONS: CUSTOMER FACING DIFFERENTIATED SOLUTIONS INNOVATIONS FROM THE CORE INNOVATIONS IN ADJACENT SEGMENTS BREAKTHROUGH INNOVATIONS Launch of POSI Check 5G Testing Centre, Shenzhen First Sustainable Wine bottle KAIZEN: OPERATIONAL MARGIN ACCRETIVE SOLUTIONS OPERATING SYST
Slide 22: Innovations: Products
INNOVATIONS: PRODUCTS INTERTEK PROTEK INLIGHT 2.0 ALCHEMY PLAYBOOK • Innovation: The world’s first industry- • Business Assurance Innovation: Our market- • Business Assurance Innovation: An app to agnostic, end-to-end health, safety and leading supply chain compliance solution enable clients to crea
Slide 23: Innovations: Trade
INNOVATIONS: TRADE INTERTEK INVIEW FOR GTS BLOCKCHAIN POWERED POST- DIGITAL CETANE TESTING • GTS Innovation: Our unique remote auditing TRADE MANAGEMENT (SHANGHAI) and inspection solution, which connects • Caleb Brett Innovation: Intertek Caleb Brett • Caleb Brett Innovation: Caleb Brett’s new clien
Slide 24: Innovations: Resources
INNOVATIONS: RESOURCES INTERTEK CARBON CLEAR WINDFARM ASSURANCE XRD BATCH PROCESS FOR IRON ORES • Industry Services Innovation: The world’s • Industry Services Innovation: An end-to-end • Minerals Innovation: A unique batching first independent certification program that offshore windfarm solution i
Slide 25: The world will be a better and safer place post Covid-19
THE WORLD WILL BE A BETTER AND SAFER PLACE POST COVID-19 SAFER SUPPLY BETTER PERSONAL SAFETY • Higher health, safety, well-being • Increased supply resilience • Faster access to critical supplies BUILD BACK standards everywhere • Increased regulation EVER BETTER • Mainstream usage of masks • Increas
Slide 26: Build back ever better will make the total quality assurance market greater
BUILD BACK EVER BETTER WILL MAKE THE TOTAL QUALITY ASSURANCE MARKET GREATER GLOBAL ATIC MARKET GROWTH OPPORTUNITY 01 CUSTOMER $50BN RETENTION Currently 02 outsourced CUSTOMER PENETRATION 03 $200bn ATIC CROSS- SELLING Currently in-house 04 NEW CUSTOMER WINS Untapped 05 potential CUSTOMER OUTSOURCING
Slide 27: Attractive quality assurance structural growth drivers
ATTRACTIVE QUALITY ASSURANCE STRUCTURAL GROWTH DRIVERS PRODUCTS ATIC TRADE ATIC RESOURCES ATIC 60% OFREVENUE 22% OFREVENUE 18% OFREVENUE 81% OFPROFIT 12% OFPROFIT 7% OFPROFIT GDP+ GDP GROWTH LONG-TERM GROWTH Growth in Brands, Faster Population Growth Population Growth Investment in E&P, GDP growth S
Slide 28: Well positioned to seize these growth opportunities
WELL POSITIONED TO SEIZE THESE GROWTH OPPORTUNITIES Untapped Potential TQA SUPERIOR POWERFUL HIGH QUALITY PASSIONATE EVER BETTER CUSTOMER PORTFOLIO COMPOUNDER CUSTOMER- PERFORMANCE SERVICE EARNINGS MODEL CENTRIC MANAGEMENT ORGANISATION • Global network of • Leadership • GDP + like-for-like • Site-BL
Slide 29: Track record of value creation with high quality earnings model
TRACK RECORD OF VALUE CREATION WITH HIGH QUALITY EARNINGS MODEL Revenue (£m) Adjusted EPS (p) 11y CAGR 11y CAGR 10.4% 11.0% 2,567 2,769 2,801 2,987 191.6 198.3 211.7 2,054 2,184 2,093 2,166 GDP+ organic 167.7 1,749 131.2 138.6 132.1 140.7 1,237 1,374 revenue growth 1,004 107.2 in real terms 81.5 89.
Slide 30: Divisional Review
01 02 03 04 05 Performance H1 2020 Financial Strategy Update Divisional Review Conclusion Highlights Results
Slide 31: Resilient revenue and robust margin performance in Products
RESILIENT REVENUE AND ROBUST MARGIN PERFORMANCE IN PRODUCTS Revenue (£m) Like-for-like Revenue (£m) Operating Profit1 (£m) Operating Margin1 (%) 188 21.7 867 866 800 797 135 % 16.9 % H1 19 H1 20 H1 19 H1 20 H1 19 H1 20 H1 19 H1 20 (8.4%) CCR (8.7%) CCR (28.3%) CCR (470)bps CCR (7.7%) (8.0%) (27.9%)
Slide 32: Resilient revenue and robust margin performance in Products (continued)
RESILIENT REVENUE AND ROBUST MARGIN PERFORMANCE IN PRODUCTS HY20 Actual LfL Growth Drivers Increased focus of ISO Increased consumer and High‐single‐digit Business Assurance corporations on supply chain standards government focus on ethical negative and risk management upgrades and sustainable suppl
Slide 33: Trade benefited from agri defensive strengths
TRADE BENEFITED FROM AGRI DEFENSIVE STRENGTHS Revenue (£m) Like-for-like Revenue (£m) Operating Profit1 (£m) Operating Margin1 (%) 13.8 333 333 46 295 295 % 20 6.8% H1 19 H1 20 H1 19 H1 20 H1 19 H1 20 H1 19 H1 20 (10.2%) CCR (10.2%) CCR (54.6%) CCR (670)bps CCR (11.4%) (11.4%) (56.3%) (700)bps HY20
Slide 34: Commendable revenue and margin performance in Resources
COMMENDABLE REVENUE AND MARGIN PERFORMANCE IN RESOURCES Revenue (£m) Like-for-like Revenue (£m) Operating Profit1 (£m) Operating Margin1 (%) 243 242 15 6.1% 236 235 13 5.3% H1 19 H1 20 H1 19 H1 20 H1 19 H1 20 H1 19 H1 20 (2.2%) CCR (2.1%) CCR (15.4%) CCR (90)bps CCR (3.1%) (3.0%) (15.4%) (80)bps HY2
Slide 35: Conclusion
01 02 03 04 05 Performance H1 2020 Financial Strategy Update Divisional Review Conclusion Highlights Results
Slide 36: Well placed to seize growth opportunities ahead
WELL PLACED TO SEIZE GROWTH OPPORTUNITIES AHEAD • Industry leader in an attractive $250bn ATIC market with increased needs for quality assurance • Scale positions in end-markets and 100+ countries with a unique Total Quality Assurance proposition offering superior customer service • Sustainable valu
Slide 37: Intertek: Total Quality. Assured.
ntertek Total Quality. Assured.
Slide 38: Group performance (H1 19 – H1 20)
GROUP PERFORMANCE (H1 19 – H1 20) Revenue (£m) Adjusted Operating Profit (£m) 1,442.6 248.9 1,330.6 168.2 866.8 800.3 188.0 135.5 332.7 294.7 46.0 243.1 235.6 20.1 14.9 12.6 H1 19 H1 20 H1 19 H1 20 Margin Key Metrics H1 2020 H1 19 H1 20 % Group % Group Like-for-like Revenue Revenue Profit Growth1 Pr
Slide 39: Key investor information
KEY INVESTOR INFORMATION Key dates: July - October Trading Update 24 November 2020 FY20 Results Announcement 2 March 2021 Conference attendance: Bernstein, Strategic Decisions Conference, London 23 September 2020 CEO, IR Berenberg, Testing, Inspection & Certification Conference, London 1 October 202