december ir presentation.pptx [read-only]
TRANSCRIPT
www.intertek.com1
Investor Presentation
[email protected]+44 (0)20 7396 3412
December 2013
For further information contact:
www.intertek.com2
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 events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. Nothing in this presentation should be construed as a profit forecast.
December 2013
Cautionary statement regarding forward-looking statements
www.intertek.com3
Profile
A global market leader in Quality and Safety services
Growth oriented industry and geographic exposures
Structural and cyclical drivers
Few global players with high barriers to entry
Fragmented local market in consolidation phase
Aligned to meet evolving customer demands
www.intertek.com4
27%
33%7%
16%
17%
Balanced Industry Portfolio
Commodities since 1885
Products since 1896
Industry since 1911
Consumer Goods• Textiles• Toys • Hardlines
Commercial & Electrical Electrical Automotive Wireless Building Products IT & Telecom Medical devices
Chemicals &Pharmaceuticals• Chemicals & Materials• Pharmaceuticals• Health & Regulatory
Industry & Assurance• Industry Services• Business Assurance• Food & Agriculture• Exploration &
Production
Commodities• Oil and Petrochemicals• Government & Trade
Services• Minerals
www.intertek.com5
Our Network
Working in more than
1,000laboratories and offices
In more than
100countries
Over
36,000people
www.intertek.com6
Strong Global Positioning
AmericasAsia Pacific
35%33%
Emerging Markets
36%
EMEA 32%
www.intertek.com7
Chemists Engineers Doctors Consultants Biologists Inspectors Geologists Auditors
We are We do
Testing Inspection Certification Auditing Outsourcing Advisory Training Quality Assurance
www.intertek.com8
Enduring Growth Drivers
1 Global Trade & Emerging Market Trade Growth
2 Outsourcing & Consulting Services
3 Network & Service Expansion
4 Industry Consolidation
5 Market Drivers in our Industries
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What
MarketDrivers
RegulationQuality, Safety and
Environmental standards
Supply Chain Changes
Shifting cycles, sourcing and complexity
New TechnologiesInnovation and product variety
Energy Growth & Diversity
Capex and Opex
End-User Quality Expectations & Diversity
Developed and emerging economies
Market Drivers in our Industries
www.intertek.com10
What we do for our Customers
SupportTheir products and processes in their global trade in all
quality related aspects
Protect
Reduce financial, operational,
reputational and environmental risks
Speed to MarketCut lead times
and costs without compromising qualitysafety or environment
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R&D Performance Performance Issues/Returns/
Recalls
Certification -Compliance(Tech, Env, Social)
Production Distribution
End userSupply/Value Chain
Our Strategy
...in each industry
Training
Advisory
Certification
Auditing
InspectionOutsourcing
QualityAssurance
Testing
CSR
www.intertek.com12
Quality Expectations
Established and emerging brands use quality as a foundation
Apple GE 3M
Heineken McDonalds Caterpillar
Volkswagen Bombardier Total
Cisco Philips Maersk
Nestle BASF IKEA
Unilever Hermes Bose
L’Oreal Chevron Burberry
P&G Boeing ENI
Shell Rolls Royce Marks & Spencer
Carrefour Inditex Valero
Haier Tata
Anta Reliance
Samsung Baosteel
Vale LG
Dabur Petrobras
Vestel Huawei
Big Bazaar Pertamina
PetroChina Lenovo
Matahari Hyundai
Li-Ning Joyalukkas
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For the six months to 30 June 2013
Revenue £1,085m + 9.5% at actual+ 6.3% at constant organic(2)
Operating profit(1) £158.3m + 4.0% at actual- 0.4% at constant organic(2)
Operating profit margin(1) 14.6% - 80bps at actual- 100bps at constant organic(2)
Profit before tax(1) £145.3m + 3.8%
Diluted EPS(1) 61.9p + 6.4%
Adjusted cash generatedfrom operations(1)
£123.7m + 4.7%
Financial Highlights
(1) Before separately disclosed items
(2) Growth excluding acquisitions and disposals at constant exchange rates
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Interim management statement: 19 Nov 2013
Commentary
• Minerals slowed further; Europe continued to drag; slower US Industrial inspection
• Consumer continued with strong growth
• Acquisition of Architectural Testing Inc for £59m
• Jan-Oct 2013: Total revenue growth 7.6%:Organic 4.9% + Acquisition 1.6% + Fx 1.1%
• H1 9.5% total; 6.3% organicSlower growth in last 4 months, 5% total, 3% organic
• 2H margin decline significantly better than 1H (80bps decline)
Highlights
www.intertek.com15
2007• 16 acquisitions• £100m cost
2008• 14 acquisitions• £79m cost
2009• 3 acquisitions• £29m cost
2010• 7 acquisitions• £41m cost
2011• Moody £450m cost• 4 others: £12m cost
In-fill and Strategic Acquisition summary
2012• 6 acquisitions• £45m cost
Recent Acquisition history
In-fill Acquisitions
• Add technical capabilities and IP in specific locations and industries
• Readily integrated: Usually <5 locations < 50 people per acquisition
Strategic Acquisitions (>£100m consideration )
• Bring capabilities across more than one region or industry
• New growth platforms
Track record – Acquisitions since 2007
Average annual for in-fills:£63m spend on 8 acquisitionsStrategic acquisitions: Moody, £450m in 2011
2013 YTD• 7 acquisitions• £120m cost
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Summary: Resilient Growth Platform
GLOBAL TRADE
MARKET DRIVERS
NETWORK & SERVICE
OUTSOURCING & CONSULTING
INDUSTRY CONSOLIDATION
QUALITY
COMMODITIES& MATERIALS
RETAIL & MANUFACTURED
PRODUCTS
INDUSTRY ASSETS
www.intertek.com17
Major Clients
• Oil, gas, petrochemical, power, renewable energy, civil infrastructure
• Industrial and technical inspection, supplier evaluation, asset integrity management, systems certification, health and safety and risk consulting, greenhouse gas services
• Food & Agri
33% of Group Revenue24% of Group Operating Profit
Industry & Assurance
www.intertek.com18
£m @ constant exchange H1 13 Change
Organicchange
Revenue 356.4 10.4% 8.5%
Operating profit 38.1 11.7% 7.7%
Margin 10.7% 10bps (10)bps
Industry & Assurance
• Continued high demand globally for technical inspection
• Systems Certification medium growth
• Food services growing strongly
• Agri slow due to veg oil (biofuels)
H1 13 Performance Outlook
Technical Inspection:
• Conventional energy sector strong, alternative slowing
• Increasing the opex part, NDT
Food:
• High demand for complex analytical services
Agri:
• Trade patterns more positive in second half
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Major Clients
• 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
• Cargo scanning, fiscal support services and product conformity programmes to Governments
27% of Group Revenue 19% of Group Operating Profit
Commodities
www.intertek.com20
£m @ constant exchange H1 13 Change
Organicchange
Revenue 295.4 5.0% 3.8%
Operating profit 30.7 (11.5)% (13.9)%
Margin 10.4% (190)bps (210)bps
Commodities
• Minerals (18% of business), decline sharper than expected, especially gold
• Oil services strong in North America, Middle East and Asia –weak in Europe
H1 13 Performance Outlook
• Expand services, labs and locations in key US areas for shale oil and gas
• Additives, blending and other value-add services increasing in Asia, Middle East and Latin America
• On going restructuring in Minerals and Oil laboratories in Europe
• Minerals continue to be weak
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• 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 testing, cargo inspection, auditing and consultancy
Major Clients
17% of Group Revenue 37% of Group Operating Profit
Consumer Goods
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£m @ constant exchange H1 13 Change
Organicchange
Revenue 184.0 9.1% 8.6%
Operating profit 58.0 9.0% 8.1%
Margin 31.5% (10)bps (20)bps
Consumer Goods
• Strong growth in Softlines testing across China, India and Turkey
• Good growth in Toy testing benefitting from EU toy directive
• Continued growth in Social Compliance auditing
• Tradegood progressing to plan
H1 13 Performance Outlook
• Acquisition of E-Test in Brazil provides global network for Toy testing
• Continued benefit of EU Toy Safety Directive and other chemical regulations
• Network expansion to meet market demands for comprehensive Asian supply chain support
www.intertek.com23
Major Clients
• 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 and certification in manufacturing supply chains bringing global market access faster and at lower cost
16% of Group Revenue16% of Group Operating Profit
Commercial & Electrical
www.intertek.com24
£m @ constant exchange H1 13 Change
Organicchange
Revenue 168.0 3.9% 3.9%
Operating profit 25.3 (6.3)% (6.3)%
Margin 15.1% (160)bps (160)bps
Commercial & Electrical
• Good growth in China
• Strong growth in LED and electric vehicles
• Weak growth in Europe and Renewables
H1 13 Performance Outlook
• Good growth in Telecoms (LTE) via network carriers in new markets
• Steady growth from North America
• New Chemical Testing Centre in US for consumer and electrical products
• Additional long term growth from growing middles classes in emerging economies
www.intertek.com25
Major Clients
• Laboratory and consultancy services to chemical, pharmaceutical, oil and gas and producers of advanced materials eg; automotive and aerospace
• Health and safety and risk consulting, greenhouse gas services
• Laboratory outsourcing
7% of Group Revenue4% of Group Operating Profit
Chemicals & Pharma
www.intertek.com26
£m @ constant exchange H1 13 Change
Organicchange
Revenue 80.9 9.3% 5.6%
Operating profit 6.2 (7.5)% (15.9)%
Margin 7.7% (140)bps (190)bps
Chemicals & Pharma
• Oil performance lab in US growing well
• High demand for analytics in biologics
• Challenging market conditions in European chemicals industry
H1 13 Performance Outlook
• Chemical and some PharmaConsultancy Services in Europe continue to be weak
• Benefits of new cosmetics directive
• Acquisition of vehicle engine and oil testing lab
• Synergies in drug formulation analysis from Melbourn Scientific acquisition
www.intertek.com28
Five Year Performance 2008 to 2012
Revenue Adjusted Operating Profit(1)
1,004
1,2371,374
1,749
2,054
0
275
550
825
1,100
1,375
1,650
1,925
2,200
2008 2009 2010 2011 2012
£m
165
209227
281
335
0
50
100
150
200
250
300
350
2008 2009 2010 2011 2012
£m20% CAGR 19% CAGR
67.1
81.589.4
107.2
131.2
0
20
40
60
80
100
120
140
2008 2009 2010 2011 2012
Pence
Adjusted Diluted EPS(1)
18% CAGR
(1) Before separately disclosed items
+17%+19% +22%
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Interim dividend increased by 15.4%
• Interim dividend of 15p, up 15%
• Interim pay-out of £24m
• Strong and consistent record of dividend growth
Interim Dividend Per Share
0
5
10
15
20
2009 2010 2011 2012 2013
Pence
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Divisional Performance Summary
FY 2012
£m @ constant exchange
Revenue Margin
FY 12 ChangeOrganic change FY 12 Change
Organic 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 & Electrical 318.2 8.7% 8.7% 15.9% 60bps 60bps
Chemicals & Pharma 154.8 9.9% 9.0% 11.0% 210bps 180bps
Group Total 2,054.3 18.0% 8.6% 16.3% 10bps 40bps
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£m @ constant exchange
Revenue Margin
H1 13 ChangeOrganic change H1 13 Change
Organic change
Industry & Assurance 356.4 10.4% 8.5% 10.7% 10bps (10)bps
Commodities 295.4 5.0% 3.8% 10.4% (190)bps (210)bps
Consumer Goods 184.0 9.1% 8.6% 31.5% (10)bps (20)bps
Commercial & Electrical 168.0 3.9% 3.9% 15.1% (160)bps (160)bps
Chemicals & Pharma 80.9 9.3% 5.6% 7.7% (140)bps (190)bps
Group Total 1,084.7 7.6% 6.3% 14.6% (80)bps (100)bps
Divisional Performance Summary
H1 2013
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• Adjusted cash generated from operations £123.7m; up 4.7%
• Cash holding reduced to £123.8m (2012: £160.2m)
• Net interest charge £13.0m
• Adjusted effective tax rate at 25.0%
• Capex £61.0m; 5.6% of revenue
• 4 acquisitions for £8.6m
Cash Flow, Tax & Investment
0
20
40
60
80
100
120
140
2011 2012 2013
%
H1
H2
EBITDA Cash Conversion*
H1 2011 2012 2013
Cash Conversion 56% 61% 61%
Cash Holding £m 172 160 124
* Adjusted cash from operations / adjusted EBITDA
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Mixed Market Conditions
Market Strength
• China
• Cargo and Analytical (US)
• Softlines (Asia)
• Technical Inspection Services
• Automotive Vehicles
Market Weakness
• Minerals
• Europe, particularly Chemicals
and Electrical
One off issues
• Health & Safety Training (US)
Restructuring Investment
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Restructuring Programme
• £22m restructuring programme announced with 2012 results, European focus
• £14m charged in 2012, a further £4m charged in H1 2013
• Progress
• Two business disposals
• Nine business closures completed, six planned
• Lost revenue of £2m in first half, £5m second half
• Savings building through second half and 2014
• Programme excludes on going Minerals business resizing
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+4.9%
+4.0%
Operating Profit & Separately Disclosed Items
£m @ actual exchange rates H1 2013 H1 2012
Adjusted operating profit (1) 158.3 152.2
Separately disclosed items:
Amortisation of acquisition intangibles (12.7) (15.0)
Acquisition and Project Costs (0.8) (2.9)
Restructuring costs (4.1) -
Profit on disposal 0.2 -
Statutory operating profit 140.9 134.3
(1) Before separately disclosed items