Intertek Group Plc · LSE:ITRK
Intertek — H1 2011 Earnings Presentation
35 slides from Intertek's earnings presentation, Aug 1, 2011
Slide 1: 2011 Half Year Results Presentation
2011 Half Year Results Presentation 1 August 2011 Wolfhart Hauser Lloyd Pitchford Chief Executive Officer Chief Financial Officer 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: Financial Performance
Lloyd Pitchford Financial Performance 2011 Half Year Results Presentation 3 www.intertek.com
Slide 4: Results Overview
Results Overview • Strong growth in revenue, profit and earnings • Moody acquisition completed; strong momentum • Operating margin 15.6% • Diluted adjusted EPS up 12%; interim dividend up 15% • Progress on Intertek as One programme • Three bolt on acquisitions 4 www.intertek.com
Slide 5: Financial Highlights
Financial Highlights For the six months to 30 June 2011 Revenue £763m + 16.9% at actual + 8.3% at constant organic Operating profit(1) £119m + 14.5% at actual + 7.8% at constant organic Operating profit margin(1) 15.6% – 30bps at actual – 10bps at constant organic Profit before tax(1) £111m + 13.7%
Slide 6: 1H Revenue Growth
1H Revenue Growth + 16.9% Actual rates £m £m 800 (8) 800 65 763 7 763 12 63 2 750 750 53 700 700 26 653 653 650 650 600 + 8.3% 600 Constant 550 rates 550 500 500 450 450 400 400 Acquisitions Organic 1H 2010 1H 2011 FX I&A CG 1H 2010 Commodities 1H 2011 C&E C&P 6 www.intertek.com
Slide 7: Moody International Acquisition
Moody International Acquisition • Completed April 27th; £450 million • Good performance momentum • Two month performance • Revenue growth 13% on prior year • Operating margin 13% • Good progress on integration - savings delivery ahead of schedule 7 www.intertek.com
Slide 8: Interest, Tax and Other
Interest, Tax and Other • Interest charge of £8.1m, up £1.7m • Net debt of £638m, net debt/EBITDA of 1.9x • Effective tax rate of 28% • Separately disclosed items: • £9.5m amortisation of acquisition intangibles • £9.5m acquisition, transaction costs and integration costs • £6.3m restructuring charg
Slide 9: Intertek as One Finance & IT Restructuring
Intertek as One Finance & IT Restructuring • US Shared Service created in 2010 • Outsourcing of Finance and IT back office services • Accenture delivery centre in Delhi • Phased implementation over two years • Create platform for efficient, scalable growth • £11m restructuring costs across 2011 and
Slide 10: Cashflow and Investment
Cashflow and Investment % EBITDA Cash Conversion • DSO of 65 days (1H10: 68 days) 140 1H • Cash conversion broadly in line 120 2H with 1H trend 100 • Cashflow from operations £47.6m 80 • Capex £32m; 4.2% of revenue 60 • Moody acquisition £450m 40 20 0 2007 2008 2009 2010 2011 Days Sales Outstanding
Slide 11: Interim Dividend
Interim Dividend Interim Dividend Per Share • Interim dividend of 10.7p, up 15% Pence 12 • Interim payout of £17m 10 • Strong and consistent record of dividend growth 8 6 4 2 0 2007 2008 2009 2010 2011 11 www.intertek.com
Slide 12: Five Year 1H History 2007 to 2011
Five Year 1H History 2007 to 2011 1H Revenue 1H Adjusted Operating Profit £m £m 21% CAGR 22% CAGR 800 725 100 650 575 500 425 50 350 275 200 0 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 12 www.intertek.com
Slide 13: Financial Summary
Financial Summary • Strong growth in revenue, profit and earnings • Moody acquisition completed; strong momentum • Cost savings: Finance and IT outsourcing • 2011 Outlook • High single digit organic growth • Operating margin close to 2010 13 www.intertek.com
Slide 14: Operating Performance
Wolfhart Hauser Chief Executive Officer Operating Performance 2011 Half Year Results Presentation 14 www.intertek.com
Slide 15: 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 15 www.intert
Slide 16: Growth Drivers
Growth Drivers 1 GLOBAL TRADE 2 MARKET DRIVERS IN OUR INDUSTRIES 3 EXPANSION AND MARKET SHARE 4 OUTSOURCING 5 ACQUISITIONS 16 www.intertek.com
Slide 17: Our Strategy: Target the entire supply chain
Our Strategy Target the entire supply chain… Quality Advisory Assurance Testing Auditing Training Certification Outsourcing Inspection CSR Supply/Value Chain End user 17 www.intertek.com
Slide 18: Our Strategy: in each industry
Our Strategy ...in each industry Quality Advisory Assurance Testing Auditing Training Certification Outsourcing Inspection CSR Supply/Value Chain End user R&D Performance Certification -Compliance Production Distribution Performance (Tech, Env, Social) Issues/Returns/ Recalls 18 www.intertek.com
Slide 19: New Business Mix
New Business Mix 2010 Actual Pro-forma 1 Oil, Chem Commodities 33% (+) Minerals 29% & Agri Chemicals (-) Agri & Pharma Industrial Industry & Assurance 7% (+) Moody (acquisition); Services 29% Commodities Upstream; Food; Agri (-) Health & Environment Commercial Consumer & Electrical 25% Goods Consume
Slide 20: Commodities
Commodities H1 11 Performance Outlook £m @ constant exchange H1 11 Change Organic change • Demand growth for oil and minerals driven by emerging markets Revenue 251.2 12.2% 12.2% Operating profit 28.3 21.5% 21.5% • North American refining activity to Margin 11.3% 90bps 90bps gradually increase • Net
Slide 21: Industry & Assurance
Industry & Assurance H1 11 Performance Outlook £m @ constant exchange Total H1 11 Total Change Organic H1 11 Organic Change • Majors increasing investment in energy assets Revenue 154.6 70.3% 92.9 3.0% Operating profit 15.1 106.8% 6.2 (13.9)% • Good demand in emerging markets and Margin 9.8% 180bps
Slide 22: Industry & Assurance Our Strategy in Action
Industry & Assurance Our Strategy in Action…. Oil Major Global Mining Group Global supplier technical audit Behaviour- programme. based safety 1,500 suppliers training over 3 years programme over 4k staff over 2 years International Telecoms Beverage Industry maker Global Technical assurance inspecti
Slide 23: Consumer Goods
Consumer Goods H1 11 Performance Outlook £m @ constant Organic • Flexible global network will capture customers’ exchange H1 11 Change change new sourcing patterns Revenue 146.3 3.6% 3.6% • Adapting processes and cost base as industry Operating profit 47.0 (3.9)% (3.9)% shifts Margin 32.1% (250)bps
Slide 24: Commercial & Electrical
Commercial & Electrical H1 11 Performance Outlook £m @ constant exchange H1 11 Change Organic change • Positive product development pipeline across our markets Revenue 141.4 10.9% 10.9% Operating profit 22.9 33.1% 33.1% • Market share gains through service Margin 16.2% 270bps 270bps focus • New tech
Slide 25: Chemicals & Pharma
Chemicals & Pharma H1 11 Performance Outlook £m @ constant exchange H1 11 Change Organic change • Development of new materials, technologies and complexity continuing Revenue 69.6 13.5% 7.7% Operating profit 5.4 10.2% 2.1% • Biologics (macro-molecules), Margin 7.8% (20)bps (40)bps bio-similars will
Slide 26: Outlook
Outlook Outlook 2011 • Strong growth in revenue and earnings • Moody performing well • Cross selling synergies taking effect • Growth drivers intact; Different rates of acceleration across industries and regions Strategic Outlook Stronger platform Resilient business Leading positions in for profitab
Slide 27: 2011 Half Year Results Presentation
2011 Half Year Results Presentation 1 August 2011 Wolfhart Hauser Lloyd Pitchford Chief Executive Officer Chief Financial Officer 27 www.intertek.com
Slide 28: Appendix
Appendix 2011 Half Year Results Presentation 28 www.intertek.com
Slide 29: Profit before tax
Profit before tax £m @ actual exchange rates 1H 2011 1H 2010 Adjusted operating profit 1 118.7 103.7 Amortisation of acquisition intangibles (9.5) (6.4) Acquisition and integration costs (9.5) (3.6) Restructuring costs – Business Process (6.3) - Outsourcing Claims and settlements - (2.8) Statutory o
Slide 30: Taxation
Taxation £m @ actual exchange rates 1H 2011 1H 2010 Profit before tax 85.3 84.5 Tax (26.5) (23.1) Profit after tax 58.8 61.4 Reported tax rate 31.1% 27.3% Effective tax rate 28.0% 27.0% on adjusted operating profit 30 www.intertek.com
Slide 31: Operating cash flow
Operating cash flow £m @ actual exchange rates 1H 2011 1H 2010 Operating Profit before changes in working 136.5 128.7 capital and provisions Changes in working capital: Inventory (2.7) 0 Debtors and prepayments (33.0) (33.8) Creditors and accruals (24.5) (7.2) Cash generated from operations 76.3 87.
Slide 32: Free cash flow
Free cash flow £m @ actual exchange rates 1H 2011 1H 2010 Operating cash flow 76.3 87.7 Net interest (8.0) (7.6) Taxation (19.7) (30.7) Capital expenditure (31.3) (24.8) Free cash flow 17.3 24.6 Capital expenditure to revenue % (6M) 4.2% 3.8% Capital expenditure to revenue % (12M) 4.9% 4.3% 32 www.i
Slide 33: Net debt at June 2011
Net debt at 30 June 2011 £m @ actual exchange rates 1H 2011 1H 2010 Borrowings 809.9 379.9 Cash (171.8) (139.8) Net debt 638.1 240.1 Net debt to EBITDA (Proforma LTM) 1.9x 0.9x 33 www.intertek.com
Slide 34: Liquidity position at June 2011
Liquidity position at 30 June 2011 £m @ actual exchange rates 1H 2011 1H 2010 Debt facilities 925.0 540.9 Borrowings (809.9) (379.9) Letters of credit secured by facilities - (5.6) Undrawn committed borrowing facilities 115.1 155.4 Cash 171.8 139.8 Liquid funds 286.9 295.2 34 www.intertek.com
Slide 35: Currency analysis
Currency analysis Revenue by currency Value of £1 1H 2011 1H 2010 FY 2010 USD 5% 1.61 1.53 1.55 CNY 1% 10.55 10.45 10.47 Other ~ 27% EUR 0% 1.15 1.15 1.17 USD, CNY & HKD 5% 12.55 11.89 12.00 GBP & HKD EUR ~ 55% ~ 18% AUD 10% 1.56 1.72 1.69 CAD 1% 1.58 1.59 1.60 35 www.intertek.com