Intertek Presentation May 2012

Transcription

1 Intertek Presentation May 2012 Investor Relations: +44 (0)

2 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 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. May

3 The Global Quality Partner Origins back to 1885 Floated 2002, entered FTSE 100 in 2009 Market Capitalisation 4bn 2011 Sales 1.7bn, Operating Profit 281m 9% Average FY Organic Revenue growth

4 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

5 10 years from IPO A decade of consistent revenue growth Revenue m 2,000 OUR STRATEGY 1,000 OUR GROWTH DRIVERS OUR PLATFORM The Future

6 Our people We are Electrical engineers Chemists Mechanical engineers Medical doctors Consultants Biologists Inspectors Geologists Advisors to Government Auditors 6

7 Quality Services Our organisation Industries we operate in Services Supporting our customers in their global trade Intertek as One Our organisation The industries we operate in What What we we do do Aerospace & Automotive Commodities Building Products Chemical Industry & Assurance Consumer Goods & Retailers Electrical & Electronic Consumer Goods Energy Food & Agriculture Commercial & Electrical Government & Institutions Industrial Chemical & Pharma IT & Telecom Medical & Pharmaceutical Petroleum Textile, Apparel & Footwear Toys, Games & Hardlines Testing Inspection Certification Auditing Outsourcing Advisory Training Quality Assurance 30,000 employees 7

8 What we do for our customers Support Their products and processes in their global trade in all quality related aspects Speed to Market Cut lead times and costs without compromising quality safety or environment Protect Reduce financial, operational, reputational and environmental risks 8

9 Global Intertek EMEA 32% Americas 32% Asia Pacific 36% Emerging Markets 34% 9

10 Our Strategy: Target the entire supply chain Quality Assurance Advisory Testing Auditing Training Certification Outsourcing CSR Inspection Supply/Value Chain End user R&D Performance Certification -Compliance Production Distribution Performance (Tech, Env, Social) Issues/Returns/ Recalls 10

11 Our Strategy: Target all Quality aspects What is Quality? 11

12 Financial Highlights For the twelve months to 31 December 2011 Revenue 1,749m + 27% at actual + 8.3% at constant organic (2) Operating profit (1) 281.1m + 24% at actual + 9.6% at constant organic (2) Operating profit margin (1) 16.1% 50bps at actual + 20bps at constant organic (2) Profit before tax (1) 260.1m + 23% Diluted EPS (1) 107.2p + 20% Operating cash flow (1) 314.8m + 14% (1) Before separately disclosed items; see appendix slide 42 for further information (2) Growth excluding acquisitions at constant exchange rates 12

13 Dividend Increased by 20% Full Year Dividend Per Share Full year dividend of 33.7p, up 20% Full year pay-out of 54m Strong and consistent record of dividend growth Dividend cover of

14 Financing, Tax & Investment Funding Maturity Profile % Adjusted cash flow from operations 315m Capex 81m, 4.6% of revenue 5 acquisitions for 460m % Net debt: EBITDA of 1.6 Interest charge 21m Adjusted effective tax rate at 28% 0.9bn facilities 50% Bond: 50% Bank Maturity profile strong 14

15 Interim Management Statement - 17 May 2012 First four months 2012 Organic revenue growth 9.5% (40% as reported): Industry & Assurance, including Moody acquisition, ahead of expectations Commodities, Consumer, Commercial & Electrical also growing well Stable margin In-fill acquisitions continuing 15

16 Divisional Mix % of Group Revenue % of Group Profit Chemicals & Pharma Commodities 30% 24% Commercial & Electrical Commodities Industry & Assurance 27% 18% Consumer Goods 18% 38% Consumer Goods Industry & Assurance Commercial & Electrical 17% 16% Chemicals & Pharma 8% 4% 16

17 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 17

18 Market Drivers in our Industries End-User Quality Expectations & Diversity New Technologies Innovation and product variety What Developed and emerging economies Market Drivers Supply Chain Changes Shifting cycles, sourcing and complexity Energy Growth & Diversity Capex and Opex Regulation Quality, Safety and Environmental standards 18

19 Industry consolidation We are an acquisitive company; our strategy is: R&D New expertise Widen the portfolio Complementary services Increase scale Service lines/industries Leverage synergies Group wide rollout Track record Acquisitions since IPO in 2002 Annual average for in-fills: 54m spend on 8 acquisitions One strategic deal: Moody for 450m in

20 Moody Acquisition Performance m 400 Revenue History + 15% Organic April 2011 for 450m cash 2500 people, 60 countries 300 Industry Services (87%) and Systems 200 Certification (13%) Pre- Acquisition Margin % Performing ahead of expectations Strategic growth platform created Good cultural fit Locations consolidating 8 months:

21 Divisional Performance Summary FY 2011 Revenue Margin constant exchange FY 11 Change Organic change FY 11 Change Organic change Commodities % 11.9% 12.6% 110bps 110bps Industry & Assurance % 7.5% 10.9% 230bps (60)bps Consumer Goods % 4.8% 33.7% (130)bps (120)bps Commercial & Electrical % 8.7% 15.2% 100bps 100bps Chemicals & Pharma % 3.9% 8.9% 30bps 120bps Group Total 1, % 8.3% 16.1% (40)bps 20bps 21

22 Industry & Assurance 27% of 2011 Group Revenue 18% of 2011 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 consulting, greenhouse gas services Food & Agri Major Clients 22 2

23 Industry & Assurance FY 11 Performance constant exchange FY 11 Change Organic change Revenue % 7.5% Operating profit % (0.6)% Developments Acquisitions in UK & Chile New global client contracts in Industry & Business Assurance Margin 10.9% 230bps (60)bps New growth platform in energy sector Benefitting from structural recovery Moody delivering ahead of plan Agri difficult first half; Food good performance Outlook Increased energy sector investment in energy assets and diversification Portfolio of complementary services across infrastructure spectrum Further consolidation of global contracts Good Food opportunities Add chart 23

24 Commodities 30% of 2011 Group Revenue 24% of 2011 Group Operating Profit Cargo inspection, analytical assessment, calibration and related technical services to the world s energy, petroleum, chemical and agricultural industries Cargo scanning, fiscal support services and product conformity programmes to Governments Mine site sample preparation, laboratory analysis of samples, inspection of cargoes Major Clients 24

25 Commodities FY 11 Performance constant exchange FY 11 Change Continued strong performance in Minerals and Government Trade Services Good demand for oil cargo and analytical testing driven by growth economies North America improving Organic change Revenue % 11.9% Operating profit % 22.9% Margin 12.6% 110bps 110bps Developments 24m invested in laboratories, equipment and network expansion Expansion of additive services, Minerals facilities in Asia and Africa Outlook Continued network and service expansion Emerging economies continuing to drive demand for commodities and product quality 25

26 Consumer Goods 18% of 2011 Group Revenue 38% of 2011 Group Operating Profit Textiles, toys, footwear, hardlines, food, and retail Shorter time to market, cost reductions, brand value support to retailers with global supply chains Major Clients 26 2

27 Consumer Goods FY 11 Performance constant exchange FY 11 Change Organic change Revenue % 4.8% Operating profit % 1.2% Margin 33.7% (130)bps (120)bps H1: HK and coastal China flat with textile industry rapid upsizing and downsizing H2: Improved growth and margin in Textiles Good demand in Auditing and Health & Beauty Developments New service innovations and network expansion: Guatemala, Bangladesh, Vietnam, Cambodia, Turkey Acquisition: Product lifecycle analysis in Europe Outlook Quality and safety demand increasing in growth economies Sustainability creating new opportunities Product variety and technological innovation by major global brands Higher brand awareness among emerging market consumers 27

28 Commercial & Electrical 17% of 2011 Group Revenue 16% of 2011 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 and certification in manufacturing supply chains bringing global market access faster and at lower cost Major Clients 28 2

29 Commercial & Electrical FY 11 Performance constant exchange FY 11 Change Organic change Revenue % 8.7% Operating profit % 15.7% Margin 15.2% 100bps 100bps Good growth with excellent performance in high tech areas Strong performance in China H2 margin lower due to investments Developments Organic capital investment of > 20m and business development to drive growth Value-adding services Outlook Technology innovations for better energy usage and communications Network and capability enhancement Technical standards increasing in new technology areas eg medical & lighting China producing more high-value, hightech products 29

30 Chemicals & Pharma 8% of 2011 Group Revenue 4% of 2011 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 Laboratory outsourcing Major Clients 30

31 Chemicals & Pharma FY 11 Performance constant exchange FY 11 Change Organic change Revenue % 3.9% Operating profit % 16.5% Developments Acquisition: Oil and lubricants in UK Increased expertise in counterfeit drugs and biologics Margin 8.9% 30bps 120bps Good growth in Chemicals & Materials H2 growth moderated against strong PY regulatory environment (REACH) Pharma flat Renegotiation of 2010 outsourcing contract in H2 Insolvency of key Irish client Outlook Development of new materials, polymers, composites and packaging EU REACH and new cosmetics regulations High-end materials and chemicals expertise sought by global brand clients Pipeline of outsourcing opportunities 31

32 Summary High barriers to entry Full year Moody in 2012 (8 months 2011) High single digit organic growth average Margin progression Industry consolidation 32

33 Summary GLOBAL TRADE COMMODITIES & MATERIALS RETAIL & MANUFACTURED PRODUCTS MARKET DRIVERS NETWORK & SERVICE QUALITY OUTSOURCING & CONSULTING INDUSTRY CONSOLIDATION INDUSTRY ASSETS 33

34 Appendix 34

35 TIC Industry Composition TIC Industry Total > $200bn Global supply chain >$100bn Required 3rd Party Obligation In house/outsourced Voluntary 10% 45% 45% Regional statutory >$100bn 35

36 Global Trade: The Future? Forecast Shipped Container Volumes (million TEUs) Intra-Europe Asia-Europe 26 EUROPE 25 Europe-Asia ASIA USA-Asia Asia-USA 27 Intra- North America 3 USA USA-Europe USA-LATAM 3 Rate of growth in TEU Volume from % - 310% 310% - 410% >410% 10 Asia - Australasia 17 Intra-Asia Asia - LATAM 8 LATAM 6 Intra-LATAM Based on Goldman Sachs Equity Research 36

37 End-User Quality Demand in 2020 $1 $5 trillion by soft innovators on product variety trillion on innovations for the next big thing $ billion new consumers trillion extra consumer spend from growth markets Source: Bain & Company 37

38 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 Anta Samsung Vale Dabur Vestel Big Bazaar PetroChina Matahari Li-Ning Tata Reliance Baosteel LG Petrobras Huawei Pertamina Lenovo Hyundai Joyalukkas 38

39 Revenue Growth m % Actual rates m 1,800 1,750 1,700 1,650 1,600 1,550 1,500 1,450 1,400 1,350 1,300 1,250 1,200 1, % Constant rates 112 Organic 268 (5) Acquisitions FX 1, ,800 1,750 1,700 1,650 1,600 1,550 1,500 1,450 1,400 1,350 1,300 1,250 1,200 1, I&A 57 Commodities 22 C&E 12 7 CG C&P 1,

40 Five Year Performance 2007 to 2011 Revenue Adjusted Operating Profit (1) Adjusted Diluted EPS (1) m 2,000 m 23% CAGR 23% CAGR Pence % CAGR 107 1,700 1, , , (1) Before separately disclosed items 40

41 Margin Enhancement Programme Underlying margin increase of 20bps in 2011 Moody integration cost savings; 6m per annum from 2012 Finance and IT outsourcing; 10m per annum from 2014 Operational margin improvement and Intertek as One Economies of Scale 41

42 Profit Before Tax & Separately Disclosed Items actual exchange rates Adjusted operating profit (1) Separately disclosed items: Amortisation of acquisition intangibles (25.3) (12.9) Acquisition transaction and integration costs (14.1) (5.3) Restructuring costs Business Process Outsourcing (7.7) - Claims and settlements - (2.8) Statutory operating profit Net interest expense (21.0) (16.6) Profit before tax (1) Before separately disclosed items 42

43 Taxation actual exchange rates Profit before tax Tax (61.9) (50.9) Profit after tax Reported tax rate 29.1% 26.8% Effective tax rate on adjusted operating profit 28.2% 26.7% 43

44 Operating Cash Flow actual exchange rates Operating Profit before changes in working capital and provisions Changes in working capital: Inventory (2.1) (1.3) Debtors and prepayments (34.8) (32.5) Creditors and accruals (3.5) 22.9 Cash generated from operations Separately disclosed items cash flow Adjusted cash flow from operations % 44

45 Free Cash Flow actual exchange rates Operating cash flow Net interest (20.3) (14.5) Taxation (53.4) (61.7) Net capital expenditure (79.0) (65.1) Free cash flow Separately disclosed items cash flow Adjusted free cash flow % 45

46 Net Debt actual exchange rates Borrowings Cash (181.9) (217.0) Net debt Net debt to EBITDA (Proforma 12mths Moody) 1.6x 0.6x 46

47 Liquidity Position actual exchange rates Debt facilities Borrowings (762.6) (386.7) Undrawn committed borrowing facilities Cash Liquid funds

48 Currency Analysis Revenue By Currency Local currency to GBP USD 3.5% Other ~ 26% GBP & EUR ~ 19% USD, CNY & HKD ~ 55% CNY 1.1% EUR 1.7% HKD 3.7% AUD 9.0% CAD 1.0%