2017 FULL YEAR RESULTS PRESENTATION Continued Progress in Revenue, Margin and Cash 6 March 2018
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. 6 March 2018 2
AGENDA Performance Highlights 01 2017 Financial Results 02 03 2017 Strategic Update 2018 Outlook by Division 04 Conclusion 05 3
01 PERFORMANCE HIGHLIGHTS
CONTINUED PROGRESS IN REVENUE, MARGIN AND CASH Adjusted Operating Margin (%) Adjusted Operating Profit (£m) Revenue (£m) 468 16.9 2,769 410 2,567 16.0 15.9 343 2,166 FY15 FY16 FY17 FY 15 FY 16 FY 17 FY 15 FY 16 FY 17 +7.9% +14.2% +90bps +3.0% CCR +10.0% CCR +110bps CCR Free Cash Flow Adjusted EPS (p) Dividend (p) £342m £318m 191.6 71.3 62.4 167.7 £235m 52.3 140.7 +35.2% +7.4% FY 15 FY 16 FY 17 FY 15 FY 16 FY 17 FY 15 FY 16 FY 17 +14.3% +14.3% +10.4% CCR 5
GDP+ ORGANIC GROWTH IN 94% OF EARNINGS Organic growth at constant currency GDP+ Products & Trade Organic Growth 4.8% % of FY 16 FY 17 earnings 1 Products 5.5% 5.5% 75% 4.1% Trade 1.3% 3.0% 19% 3.6% Products & Trade 4.1% 4.8% 94% 3.2% Resources (13.0%) (8.6%) 6% Group 0.1% 2.1% 100% 2016 World FY 16 2017 World FY17 GDP GDP +90bps +120bps 6 Notes: (1) Total % of earnings in 2017; (2) IMF Real GDP growth annual percentage change
ACQUISITIONS ACCELERATING REVENUE GROWTH £250m+ added in Leading provider of product security certification solutions annual revenues from acquisitions FY17 Market leader in the provision of since 2015 environmental water testing services in Mexico Leading provider of on-road vehicle testing services FY16 Market leader in food assurance and inspection in Italy Leading provider of cyber security network assurance services Non-Destructive Testing services for the energy industry across Australasia Leading provider of materials testing and speciality construction inspection in New York FY15 Leading certification body in Denmark with an established network and expertise in auditing, Leading US provider of certification and training testing and assurance services to commercial and civil construction markets Disciplined capital allocation in attractive growth and margin sectors 7
CONTINUOUS COST AND MARGIN DISCIPLINE Margin improvement 1 +110bps +30bps +20bps FY 15 FY 16 FY 17 Cost reduction activities Productivity management Portfolio strategy • Monthly performance reviews for Top • Organic growth in Products and Trade Savings 2 Headcount 30 countries/16 Business Lines • Margin accretive acquisitions 2015 200 £4m • Business Line and country • Strategic review of underperforming benchmarking 2016 550 £10m business units • Site span of performance management 2017 400 £7m • Consolidation of facilities 8 Notes: (1) At 2017 constant currency rates; (2) Annualised
HIGHLY CASH GENERATIVE BUSINESS MODEL Cash Generated from Operations Free Cash Flow Adjusted EBITDA £563m £342m £579m £543m £499m £318m £442m £429m £235m +35.2% +7.4% +16.3% +12.7% +22.9% +6.6% FY 15 FY 16 FY 17 FY 15 FY 16 FY 17 FY 15 FY 16 FY17 Dividend Payout Ratio Net Debt / EBITDA Working Capital as % of Revenue 1.8x 8.8% 37% 37% 37% 7.1% 1.5x 5.0% 1.0x FY 15 FY 16 FY17 FY 15 FY 16 FY17 FY 15 FY 16 FY17 9
ACCRETIVE DISCIPLINED ALLOCATION OF CAPITAL 01 Capex and working capital investment to support organic growth (target c.5% of revenue in capex) Sustainable shareholder returns through payment of progressive 02 dividends based on a target payout ratio of c.50% M&A focused on strong growth and margin prospects in businesses with leading market positions or in 03 new attractive growth areas, geographies or services Efficient balance sheet with flexibility to invest in growth with Net Debt / EBITDA target 04 of circa 1.5x - 2.0x 10
02 2017 FINANCIAL RESULTS
KEY FINANCIALS YoY % Actual Constant FY 17 Rates Rates Revenue £2,769m 7.9% 3.0% Organic revenue 1 £2,733m 6.9% 2.1% Operating profit 2 £468m 14.2% 10.0% Operating profit margin 2 16.9% 90bps 110bps Adjusted Diluted EPS 2 191.6p 14.3% 10.4% Free cash flow £342m 7.4% increase Notes: (1) Organic revenue excludes the impact of acquisitions and disposals in 2016 and 2017; (2) Before separately disclosed items 12
OPERATING MARGIN BRIDGE 18.0% 20bps 30bps 16.9% 16.9% 17.0% 70bps 0bps (20bps) (10bps) 16.0% 16.0% +90bps at constant rates 15.0% 14.0% 13.0% FY 2016 Products Trade Resources Divisional mix Excluding FX and Acquisitions FX FY 2017 & Disposals Acquisitions & Disposals 13
CASH FLOW & NET DEBT £m @ actual exchange rates FY 16 FY 17 • 14.2% at actual rates Adjusted operating profit 1 409.7 467.7 Depreciation/amortisation 89.5 94.8 Change in working capital 52.4 19.7 Other 2 13.7 13.9 Adjusted cash flow from operations 565.3 596.1 Net capex (102.5) (109.7) Other 3 (144.7) (144.8) • Increase in Free Cash Flow of 7.4% Free cash flow 318.1 341.6 Acquisitions 4 (34.8) (27.4) • Net debt / EBITDA ratio 1.0x Net debt 743.7 544.1 Notes: 14 (1) Before Separately Disclosed Items; (2) Comprises Special Pension payments, add back Equity Settled transactions and other Non-Cash Items; (3) Comprises: Exceptionals, Interest Paid/Received and Tax; (4) Total cash consideration in FY17 for 2017 acquisitions £29.5m, with cash acquired of £2.1m
FINANCIAL GUIDANCE FY 2018 Guidance Net finance cost £25 – 27m Effective tax rate 25.5 – 26.0% Minority interest c.£20m Diluted shares (as at 31 December 2017) 163.0m Capex £130 – 140m Net Debt £400 – 450m Note: Before any material change in FX rates and any additional M&A 15
03 2017 STRATEGIC UPDATE
INTERTEK HIGH QUALITY EARNINGS MODEL Our Services Assurance Testing Inspection Certification Products Trade Resources Our Sectors GDP+ GDP growth Long-term growth Our Mid- to Long-Term Intertek Virtuous Economics GDP+ Organic revenue growth Value Creation Margin accretive Investments in attractive revenue growth growth and margin sectors Strong free with Capex / M&A cash flow Disciplined capital allocation 17
ATTRACTIVE STRUCTURAL GROWTH DRIVERS Products Trade Resources 59% of Revenue 75% of Profit 23% of Revenue 19% of Profit 18% 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 75% of Group profit based on GDP agnostic 19% 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 18
5X5 DIFFERENTIATED STRATEGY FOR GROWTH 5x5 Strategic Goals 1 2 3 4 5 Fully engaged Superior customer Margin accretive revenue Strong cash conversion Accretive, disciplined employees working in a service in Assurance, growth based on GDP+ from operations capital allocation safe environment Testing, Inspection and organic growth policy Certification 5 Strategic Priorities 5 Enablers Differentiated Brand Proposition Living Our Customer Centric Culture Superior Customer Service Disciplined Performance Management Effective Sales Strategy Superior Technology Growth and Margin Accretive Portfolio Energising Our People Operational Excellence Delivering Sustainable Results 19
INTERTEK TQA VALUE PROPOSITION ATIC Revenue Split £2,769m RESEARCH & DEVELOPMENT 14% £2,166m CONSUMER 10% RAW MATERIALS MANAGEMENT SOURCING Systemic End-to-End 54% Quality and Safety 52% Approach with ATIC Solutions DISTRIBUTION & COMPONENT RETAIL CHANNELS SUPPLIERS 24% 30% 8% 8% TRANSPORTATION MANUFACTURING FY 15 FY 17 = + + + Intertek TQA Assurance Testing Inspection Certification 20
5X5 DIFFERENTIATED STRATEGY FOR GROWTH IN ACTION INTERTEK MARGIN MANAGEMENT 01 02 03 04 05 Growth & Superior Systemic Organisation Margin Innovation & Customer Performance Engagement Accretive Kaizen Service Management Portfolio 21
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