Slide 1: 2019 Half Year Results Presentation
2019 HALF YEAR RESULTS PRESENTATION CONTINUOUS PROGRESS ON REVENUE, MARGIN AND CASH 1 August 2019 1
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: Agenda
AGENDA 01 Performance Highlights 02 H1 2019 Financial Results 03 Total Quality Assurance 04 2019 Outlook by Division 05 Summary 3
Slide 4: Performance Highlights
01 PERFORMANCE HIGHLIGHTS 4
Slide 5: Continuous Progress on Revenue, Margin and Cash
CONTINUOUS PROGRESS ON REVENUE, MARGIN AND CASH Revenue (£m) Adjusted Operating Profit (£m) Adjusted Operating Margin (%) 1,443 226 244 16.8% 16.9% 1,372 1,348 224 16.3% 1,204 186 1,024 1,060 152 164 15.5% 15.4% 14.9% HY14 HY15 HY16 HY17 HY18 HY19 HY14 HY15 HY16 HY17 HY18 HY19 HY14 HY15 HY16 HY17 HY
Slide 6: Broad-Based Revenue, Profit and Margin Performance
BROAD-BASED REVENUE, PROFIT AND MARGIN PERFORMANCE Revenue Growth 1 Operating Profit Growth 1,2 Margin Accretion1,2 10% Total revenue growth1 (%) Group 6.8% Group +30bps Products: +4.9% 18% of Trade: +5.8% Products 6.0% Products +20bps 76% earnings 5% of earnings 6% Trade 6.8% Trade +10bps Resources
Slide 7: M&A in Attractive Markets Adding 1.9% to Revenues in H1
M&A IN ATTRACTIVE MARKETS ADDING 1.9% TO REVENUES IN H1 Aldo Abela Surveys Proasem NTA Monitor Alchemy Business line Cargo / AA Cargo / AA Network Assurance People Assurance Location Malta Colombia UK, Malaysia USA, Canada Completion Date March 2018 April 2018 June 2018 August 2018 Leading provider
Slide 8: 5th Consecutive Year of Margin Progression in H1
5TH CONSECUTIVE YEAR OF MARGIN PROGRESSION IN H1 Operating Margin, Actuals Margin Accretion, CCR1 Organic Margin Accretion, (bps) 1,3 16.8% 16.9% 110 100 16.3% 15.5% 15.4% 60 14.9% 40 30 40 30 30 30 20 20 10 HY14 HY15 HY16 HY17 HY18 HY19 HY14 HY15 HY16 HY17 HY18 HY19 HY14 HY15 HY16 HY17 HY18 HY19 Pr
Slide 9: Sustained Strong Cash Performance
SUSTAINED STRONG CASH PERFORMANCE Operating Cash Flow (£m) 1 Free Cash Flow (£m) 1 Working Capital as % of Revenue2 132 13.4% 226 204 229 105 99 10.6% 11.0% 148 170 85 156 8.2% 53 59 7.7% 6.4% HY14 HY15 HY16 HY17 HY18 HY19 HY14 HY15 HY16 HY17 HY18 HY19 HY14 HY15 HY16 HY17 HY18 HY19 14-19 CAGR: 9.1%
Slide 10: H1 2019 Financial Results
02 H1 2019 FINANCIAL RESULTS 10
Slide 11: Key P&L Financials
KEY P&L FINANCIALS YoY % H1 19 Actual Rates Constant Rates H1 19 Δ versus IAS 17 IAS 17 IAS 17 IFRS 16 IAS 17 Revenue £1,442.6m 7.0% 4.9% £1,442.6m - Organic revenue1 £1,415.0m 5.1% 3.0% £1,415.0m - Operating profit2 £243.6m 7.9% 6.8% £248.9m +£5.3m Operating profit margin2 16.9% 10bps 30bps 17.3% +
Slide 12: Operating Margin Bridge
OPERATING MARGIN BRIDGE 17.5% 17.1% 10bps 0bps 10bps 17.0% 16.8% 10bps 16.9% (20bps) 16.5% 16.0% 15.5% +30bps at constant rates 15.0% 14.5% 14.0% FX Trade Resources H1 18 H1 19 Products Divisional mix Excluding FX 12
Slide 13: Cash Flow & Net Debt
CASH FLOW & NET DEBT £m @ actual exchange H1 19 H1 19 Δ versus H1 18 rates IAS 17 IFRS 16 IAS 17 Adjusted operating profit1 225.8 243.6 248.9 5.3 Depreciation/amortisation 43.8 51.0 86.6 35.6 Change in working capital (75.4) (76.2) (76.2) - Other2 9.9 11.0 14.7 3.7 Adjusted cash flow from 204.1 229.
Slide 14: Financial Guidance (IAS 17)
FINANCIAL GUIDANCE (IAS 17) FY 2019 Guidance (IAS 17) Net finance cost £31 – 33m Effective tax rate 24.5 – 25.5% Minority interest £21m – 23m Diluted shares (as at 30 June 2019) 162.7m Capex £130 – 140m Net debt £670 – 700m Note: Before any material change in FX rates and any additional M&A 14
Slide 15: Total Quality Assurance
03 TOTAL QUALITY ASSURANCE 15
Slide 16: 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 o
Slide 17: Attractive Quality Assurance Growth Prospects
ATTRACTIVE QUALITY ASSURANCE GROWTH PROSPECTS GLOBAL ATIC MARKET GROWTH OPPORTUNITY 17
Slide 18: Intertek TQA Value Proposition: A Systemic Approach to Quality Assurance
INTERTEK TQA VALUE PROPOSITION A SYSTEMIC APPROACH TO QUALITY ASSURANCE Helping corporations manage the complexity of their supply chains by taking a systemic risk-based approach to quality assurance 18
Slide 19: Innovation and Kaizen
INNOVATION AND KAIZEN INNOVATIONS: CUSTOMER FACING DIFFERENTIATED SOLUTIONS Acquisition of leading and Digital Based Innovations Technology Based Innovations innovative solutions KAIZEN: OPERATIONAL MARGIN ACCRETIVE SOLUTIONS Operating Systems Shared Services Systems 19
Slide 20: Innovations: Products
INNOVATIONS: PRODUCTS Virtual Audits Intertek STEM Toy Mark Global Sanitation Authorised Materials Database • Business Assurance innovation: Intertek has • Hardlines innovation: Intertek has developed • Electrical innovation: Intertek has developed developed a pioneering Virtual Audit a unique STEM
Slide 21: Innovations: Trade
INNOVATIONS: TRADE Oceanlab Intertek Pioneers Hydrocarbon Testing Rapid Protein Analysis for Soya Exports • Caleb Brett innovation: We have developed • Caleb Brett innovation: Intertek’s • AgriWorld innovation: Our AgriWorld TQA self-contained Oceanlab Oil Quality Testing entrepreneurial, customer-c
Slide 22: Innovations: Resources
INNOVATIONS: RESOURCES DeepView3D TM Pioneering the use of Spectroscopy Helicopter Underwater Escape Simulations • Industry Services innovation: Intertek has • Minerals innovation: Intertek’s TQA experts, • Intertek innovation: Our entrepreneurial developed DeepView3D, a new inspection based on-site
Slide 23: 2019 Outlook by Division
04 2019 OUTLOOK BY DIVISION
Slide 24: Group Outlook 2019: On Track to Deliver Full Year Targets
GROUP OUTLOOK 2019: ON TRACK TO DELIVER FULL YEAR TARGETS • Good organic revenue growth at constant currency − Good growth momentum in Products − Good growth momentum in Trade − Good growth momentum in Resources • Moderate Group margin expansion at constant currency1 − Continuous cost discipline − P
Slide 25: Continuous Margin Accretive Revenue Growth in Products
CONTINUOUS MARGIN ACCRETIVE REVENUE GROWTH IN PRODUCTS Revenue (£m) Organic Revenue (£m) Operating Profit (£m) Operating Margin (%) 867 843 185 21.3% 21.3% 806 805 172 H1 18 H1 19 H1 18 H1 19 H1 18 H1 19 H1 18 H1 19 +4.9% CCR +2.1% CCR +6.0% CCR +20bps CCR +7.6% +4.7% +7.8% +0bps HY19 Actual Growth
Slide 26: Continuous Margin Accretive Revenue Growth in Products
CONTINUOUS MARGIN ACCRETIVE REVENUE GROWTH IN PRODUCTS HY19 Actual Growth Drivers FY19 Outlook Increased focus of ISO Increased consumer and Good organic Robust organic Business Assurance corporations on supply standards government focus on ethical growth growth chain and risk management upgrades an
Slide 27: Revenue Momentum Acceleration with Margin Accretion in Trade
REVENUE MOMENTUM ACCELERATION WITH MARGIN ACCRETION IN TRADE Revenue (£m) Organic Revenue (£m) Operating Profit (£m) Operating Margin (%) 333 329 13.4% 13.3% 44 311 309 42 H1 18 H1 19 H1 18 H1 19 H1 18 H1 19 H1 18 H1 19 +5.8% CCR +5.1% CCR +6.8% CCR +10bps CCR +7.1% +6.4% +6.5% +(10bps) HY19 Actual
Slide 28: Improved Revenue Momentum and Margin Accretion in Resources
IMPROVED REVENUE MOMENTUM AND MARGIN ACCRETION IN RESOURCES Revenue (£m) Organic Revenue (£m) Operating Profit (£m) Operating Margin (%) 243 243 15 6.0% 232 232 13 5.5% H1 18 H1 19 H1 18 H1 19 H1 18 H1 19 H1 18 H1 19 +3.5% CCR +3.5% CCR +16.9% CCR +70bps CCR +5.0% +5.0% +14.2% +50bps HY19 Actual Gro
Slide 29: Summary
05 SUMMARY
Slide 30: Intertek High Quality Earnings Model
INTERTEK HIGH QUALITY EARNINGS MODEL Our Services Assurance Testing Inspection Certification Products Trade Resources Our Sectors GDP+ GDP growth Long-term growth GDP+ Organic Intertek Virtuous Economics Our Mid- to Long-Term revenue growth Value Creation in real terms Margin accretive Investments i
Slide 31: Attractive Structural Growth Drivers
ATTRACTIVE STRUCTURAL GROWTH DRIVERS Products Trade Resources 60% of Revenue 76% of Profit 23% of Revenue 18% of Profit 17% of Revenue 6% of Profit Increased number Faster innovation Long term demand Investment in Population growth GDP growth of Brands & SKUs cycle for energy infrastructure Increase
Slide 32: Ever Better… Ever Stronger
EVER BETTER… EVER STRONGER • Industry leader in a growing global $250bn ATIC market • Scale positions in attractive end-markets in 100+ countries • Unique Total Quality Assurance value proposition offering superior customer service • High quality compounder earnings model • Ever Better operational d
Slide 33: Intertek: Total Quality. Assured.
intertek Total Quality. Assured.
Slide 34: Group Performance (H1 18 – H1 19)
GROUP PERFORMANCE (H1 18 – H1 19) Revenue (£m) Adjusted Operating Profit (£m) 1,443 244 1,348 226 806 867 172 185 311 333 42 44 232 243 13 15 H1 18 H1 19 H1 18 H1 19 Margin Key Metrics H1 2019 % Group % Group Organic Revenue H1 18 H1 19 Revenue Profit Growth1 Products 21.3% 21.3% 60% 76% 2.1% Trade
Slide 35: Key Investor Information
KEY INVESTOR INFORMATION Key dates: Intertek Management Meeting 12 September 2019 July - October Trading Update 26 November 2019 FY19 Results Announcement 3 March 2020 Conference attendance: Bernstein, Strategic Decisions Conference, London 25 September 2019 CEO, IR Berenberg, Testing, Inspection &