HALF YEAR RESULTS PRESENTATION - 2019 CONTINUOUS PROGRESS ON REVENUE, MARGIN AND CASH - AWS
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2019
HALF YEAR RESULTS
PRESENTATION
CONTINUOUS PROGRESS ON REVENUE, MARGIN AND CASH
1 August 2019
1
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.
IFRS 16 was adopted on 1 January 2019 for our statutory reporting, without restating prior year figures.
As a result, the discussion of our operating results is on an IAS 17 basis for all periods presented, unless
otherwise stated.
1 August 2019
2
AGENDA
01 Performance Highlights
02 H1 2019 Financial Results
03 Total Quality Assurance
04 2019 Outlook by Division
05 Summary
3
01
PERFORMANCE
HIGHLIGHTS
4
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 HY18 HY19
+4.9% CCR +6.8% CCR
14-19 CAGR: +7.1% 14-19 CAGR: +9.8% 14-19: +200bps +30bps CCR
+7.0% +7.9% +10bps
Adjusted Operating Cash Flow (£m) Adjusted EPS (p) Interim Dividend (p)
226 229 31.9 34.2
204 97.8
90.4 91.2
148 170 156 23.5
65.3 74.5 17.0 19.4
61.2 16.0
HY14 HY15 HY16 HY17 HY18 HY19 HY14 HY15 HY16 HY17 HY18 HY19 HY14 HY15 HY16 HY17 HY18 HY19
14-19 CAGR: 9.1% +12.4% +6.0% CCR 14-19 CAGR: 16.4% +7.2%
14-19 CAGR: +9.8%
+7.2%
5
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: +3.5%
Resources 16.9% Resources +70bps
0%
0% 5% 10%
Organic revenue growth1 (%)
6
Note: (1) At 2019 constant currency rates; (2) Adjusted
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 of laboratory testing,
A leading provider of quality and A leading network security and A leading provider of SaaS solutions
Market position inspection, metrology and training
quantity cargo inspection services assurance services provider for People Assurance
services
Structural growth in regional and Structural growth in regional and Increased corporate and consumer Increased focus on food safety, and
Growth drivers
global trade flows global trade flows focus on data security increased regulation; scalability
RNS Aldo Abela Surveys (AAS) Proasem NTA Monitor Alchemy
7
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
Productivity management Portfolio strategy Portfolio review
• Monthly performance reviews for Top 30 • Growth and margin accretive portfolio strategy Headcount Savings2
countries/16 Business Lines reduction
2017 400 £7m
• Business Line and country benchmarking • Organic and inorganic investments
2018 100 £2m
• Site span of performance management • Consolidation of facilities
2019 250 £4m
8
Note: (1) In bps and at constant currency of that year; (2) Annualised; (3) Organic definition of that year
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% 14-19 CAGR: 18.6% 14-19: (420bps)
Cash Conversion (%) 2 Free Cash Flow as % of Net Income 1,2 Net Debt / Adjusted EBITDA2
130%
143%
100% 107% 2.0
90% 97%
77% 1.6 1.5 1.4
125% 127% 125% 126% 1.3
123% 1.0
HY14 HY15 HY16 HY17 HY18 HY19 HY14 HY15 HY16 HY17 HY18 HY19 HY14 HY15 HY16 HY17 HY18 HY19
9
Note: (1) Adjusted; (2) On a last twelve months basis
02
H1 2019 FINANCIAL RESULTS
10KEY 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% +40bps
Adjusted diluted EPS2 97.8p 7.2% 6.0% 98.2p +0.4p
Notes: (1) Organic revenue excludes the impact of acquisitions and disposals in 2018 and 2019; (2) Before separately disclosed items
11OPERATING 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
12CASH 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
204.1 229.4 274.0 44.6
operations
Net capex (46.3) (45.7) (45.7) -
Other3 (58.7) (79.1) (123.7) (44.6)
Adjusted Free cash flow 99.1 104.6 104.6 -
Acquisitions (10.6) - - -
Net debt 568 826 1,082 256
Net debt/Adjusted EBITDA
1.0 1.4 1.7 0.3 13
Notes:
(rolling 12 months)
(1) Before separately disclosed items; (2) Comprises special pension payments, add back equity settled transactions and other non-cash items; (3) Comprises: interest paid/received and tax, lease liability repayment.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
1403
TOTAL QUALITY ASSURANCE
15DEEP 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 our customers
Data to power ahead safely TQA Value
Intelligence Delivery
Disciplined operating
Benchmarking by site,
processes and continuous
service, and customer
ATIC innovations
16ATTRACTIVE QUALITY ASSURANCE GROWTH PROSPECTS
GLOBAL ATIC MARKET GROWTH OPPORTUNITY
17INTERTEK 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
18INNOVATION 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
19INNOVATIONS: 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 (Science, Technology, a proprietary global database of Sanitation
solution, through which our TQA Experts are Engineering, and Math) Toy Mark, verifying Authorised Materials, materials which have
able to audit remotely. This allows us to that our customers’ Toys have met stringent been evaluated by Intertek and determined
deliver our audits faster and with a wider quality and safety standards, as well as to be safe to come into contact with food
audience of observers bringing educational benefits in STEM skills
development
• Customer benefit: As the world of our clients • Customer benefit: With the STEM Toys Mark, • Customer benefit: Through this unique
becomes increasingly complex, our our customers are able to give consumers the solution our customers can save substantial
customers can now benefit from real time peace of mind that their STEM Toy is safe, as time in providing the required information
quality audits, delivering robust assurance well as educational while making sure their products comply with
against key risk areas across their supply safety standards.
chains
20INNOVATIONS: 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-centric outlook Experts’ deep technical expertise on soya
Laboratories, staffed by Intertek TQA Experts has led us to open Iraq’s first commercial protein analysis has now been augmented
and have partnered with our customers to hydrocarbon testing lab, with state of the art with new state-of-the-art protein analysers
install these on their ships technology enabling our TQA experts to
deliver industry leading hydrocarbon testing
services
• Customer benefit: Our Oceanlab initiative • Customer benefit: Our customers benefit • Customer benefit: Using the new technology,
has substantially reduced turnaround time from rapid turnaround times and from our Experts have been able to reduce the
and allowed our customers to introduce mission critical services which were not turnaround time of soya protein tests from
more flexibility into their sample testing previously available in the country several hours down to a few minutes
processes
21INNOVATIONS: 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 at our customers operations, Intertek experts addressed our customers’
methodology that combines 3D laser scanning use state-of-the-art infrared spectroscopy to safety risks by developing a Helicopter
and precise metrology data with advanced Non- analyse samples quickly and proprietary Underwater Escape Simulation programme
Destructive Testing results in 3D space to give software to create highly accurate under international standards
an accurate representation of current condition quantitative models for predicting a range of
and mechanical integrity of critical assets chemical and physical properties
• Customer benefit: DeepView3D allows our • Customer benefit: Customers benefit from • Customer benefit: Our Exploration and
customers to take a smarter approach to Intertek’s on-site experts, delivering best in Production customers now have peace of
maintenance, allowing them to move from class analytics that are customised to their mind that their staff are best prepared for
Time Based Maintenance to highly-efficient needs and saving them much-valued time the most dangerous situation they can face
Condition Based Maintenance Programmes,
reducing expensive operational downtime 2204 2019 OUTLOOK BY DIVISION
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
− Performance management
− Portfolio strategy
• Strong cash conversion
• Capex: £130m – £140m
• Net debt: £670m – £700m1
Note: (1) Guidance given on an IAS 17 basis and before any material change in FX rates and any additional M&A 24CONTINUOUS 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 Drivers FY19 Outlook
Supply chain
Solid organic Increased number of Increased demand in Solid organic
Softlines expansion in new
growth Brands & SKUs chemical testing growth
markets
Innovation from our
Solid organic Increased demand Innovative inspection Good organic
Hardlines customers leveraging
growth for chemical testing technology growth
wireless technology
Electrical appliance innovations to Increased demand for IoT
Electrical & Robust organic Robust organic
provide better efficiency and Assurance services, including cyber
Connected World growth growth
connectivity security
25CONTINUOUS 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 and sustainable supply
Building & Solid organic Growing demand for greener, safer and Increased investment in large Good organic
Construction growth higher quality commercial buildings infrastructure projects growth
Continued investment of our Growth in the hybrid Increased
Transportation Robust organic Robust organic
clients in new models and new / electric engine scrutiny on
Technology growth growth
fuel efficient engines segment emissions
Growth in the food
Good organic Continuous food Increased focus on the Good organic
Food service assurance
growth innovation safety of supply chains growth
business
Increased concerns on
Chemicals and Growth of Expansion of the supply Solid organic
Below PY organic product safety and
Pharma SKUs base in emerging markets growth
traceability
26REVENUE 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 Growth Drivers FY19 Outlook
Good organic Global and regional trade structural Good organic
Caleb Brett Increased transport infrastructure
growth growth drivers growth
Government & Trade Double-digit Award of new Strong organic
GDP growth Population growth
Services organic growth contracts growth
Good organic The expansion of our clients’ supply Good organic
AgriWorld New customer wins
growth chains in fast growing markets growth
27IMPROVED 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 Growth Drivers FY19 Outlook
Good organic Technological Good organic
Capex Inspection Demand for energy Asset productivity
growth innovation growth
Opex Inspection Stable revenue Capacity utilisation Ageing of equipment Asset productivity Stable Revenue
Robust organic Technological Good organic
Minerals growth Minerals demand Outsourcing
innovation growth
2805 SUMMARY
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 in attractive
revenue growth growth and margin sectors
Strong free with Capex / M&A
cash flow
Disciplined
capital allocation
30ATTRACTIVE 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
Increased consumer
Growth in
Increased focus on Development of Supply chain risk Growth in
transport
regulation sustainable regional trade management alternative energy
infrastructure
products
Improvements in Increased
safety, corporation focus Increased focus on Growth in port Sustainability of Focus on health &
performance and on risk traceability infrastructure energy supply safety
quality management
76% of Group profit based on GDP agnostic 18% of Group profit based on global trade 6% of Group profit based on global growth
growth drivers growth drivers in the energy sector
GDP+ GDP growth Long-term growth
Growth outlook: GDP+ Organic revenue growth in real terms 31EVER 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 discipline making Intertek Ever Stronger
Insert Footer Here 32
32GROUP 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 13.4% 13.3% 23% 18% 5.1%
Resources 5.5% 6.0% 17% 6% 3.5%
Group 16.8% 16.9% 100% 100% 3.0%
34
Note: (1) At 2019 constant currency ratesKEY 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 & Certification Conference, London 1 October 2019 CEO, IR
Key contacts:
Denis Moreau, VP Investor Relations; +44 (0)20 7396 3400; investor@intertek.com
www.intertek.com/investors
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