2019 FULL YEAR RESULTS PRESENTATION REVENUE ACCELERATION, ROBUST EPS GROWTH, STRONG CASH AND HIGHER ROIC 3 March 2020
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. 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. Nothing in this presentation should be construed as a profit forecast. 3 March 2020 2
01 02 03 04 05 Performance 2019 Financial 5+5 Strategy 2020 Outlook Conclusion Highlights Results Review
CONTINUOUS PROGRESS ON REVENUE, EPS, CASH AND DIVIDEND Adjusted Operating Margin Adjusted Operating Profit (£m) Revenue (£m) 14-19 CAGR: 7.4% 14-19: +170BPS 14-19 CAGR: 9.6% 513 2,987 482 17.2% 17.2% 468 2,769 2,801 16.9% 410 2,567 16.0% 15.9% 343 15.5% 2,166 324 2,093 FY14 FY15 FY16 FY17 FY18 FY19 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 +6.6% +6.5% +0bps +4.8% CCR +5.2% CCR +10bps CCR Adjusted EPS (p) Free Cash Flow (£m) Dividend (p) 380 351 14-19 CAGR: 15.5% 14-19 CAGR: +16.6% 14-19 CAGR: 9.9% 342 105.8 99.1 318 235 71.3 211.7 62.4 191.6 198.3 185 52.3 49.1 167.7 140.7 132.1 FY 14 FY 15 FY 16 FY 17 FY 18 FY19 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 +6.8% +8.4% +6.8% +5.2% CCR 4
IMPROVED ORGANIC REVENUE GROWTH MOMENTUM IN H2 Organic growth at constant currency FY19 organic growth by division 1 Organic revenue growth 1 (%) 7.0% 6.0% Resources: +5.7% 5.0% []% Trade: +4.1% of earnings 4.0% 4.0% 3.6% 3.4% 3.0% 3.0% Products: +2.3% 78% 2.5% of 1.7% 17% earnings 2.0% of earnings 1.0% 6% []% Revenue 0.0% H1 17 H2 17 H1 18 H2 18 H1 19 H2 19 growth (%) 0% 5% 10% 5 Note: (1) At 2019 constant currency rates
5 TH CONSECUTIVE YEAR OF MARGIN PROGRESSION AT CCR Margin Accretion, CCR 1 Operating Margin, Actuals 110 17.2% 17.2% 16.9% 16.0% 15.9% 15.5% 40 30 20 10 FY14 FY15 FY16 FY17 FY18 FY19 FY15 FY16 FY17 FY18 FY19 Productivity management Portfolio strategy Portfolio review Headcount Savings 2 • • Monthly performance reviews for Top 30 Growth and margin accretive portfolio strategy reduction countries/16 Business Lines 2017 400 £7m • Organic and inorganic investments • Business Line and country benchmarking 2018 400 £7m • Consolidation of facilities • Site span of performance management 2019 300 £5m 6 Note: (1) In bps and at constant currency of that year; (2) Annualised
STRONG CASH PERFORMANCE Cash Generated from Operations Free Cash Flow Adjusted EBITDA £318m £342m £351m £380m £543m £579m £581m £637m £563m £571m £617m 14-19 CAGR: 9.0% 14-19 CAGR: 10.5% 14-19 CAGR: 15.5% £499m £387m £442m £401m £429m £235m £185m FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 +8.1% +9.6% +8.4% Working Capital as % of Revenue Cash Conversion (%) Financial Net Debt / EBITDA 9.3% 1.8x 14-19: (590)BPS 8.8% 139% 1.6x 7.1% 136% 1.5x 1.4x 5.0% 128% 3.9% 127% 126% 3.4% 125% 1.0x 1.0x FY 14 FY 15 FY 16 FY17 FY18 FY19 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 14 FY 15 FY 16 FY17 FY18 FY19 (50)bps 7
01 02 03 04 05 Performance 2019 Financial 5+5 Strategy 2020 Outlook Conclusion Highlights Results Review
KEY P&L FINANCIALS YoY % 2019 Actual Rates Constant Rates 2019 Δ versus IAS 17 IAS 17 IAS 17 IFRS 16 IAS 17 Revenue £2,987.0m 6.6% 4.8% £2,987.0m - Organic revenue 1 £2,925.6m 5.1% 3.3% £2,925.6m - Operating profit 2 £513.3m 6.5% 5.2% £524.2m +£10.9m Operating profit margin 2 17.2% 0bps 10bps 17.5% +30bps Adjusted diluted EPS 2 211.7p 6.8% 5.2% 212.5p +0.8p Notes: (1) Organic revenue excludes the impact of acquisitions and disposals in 2018 and 2019; (2) Before separately disclosed items 9
OPERATING MARGIN BRIDGE 18.0% 10bps 0bps 0bps (10bps) 10bps (10bps) 17.0% 17.2% 17.2% 17.2% 16.0% 0bps organic at constant rates 15.0% 14.0% 13.0% FY 2018 Products Trade Resources Divisional mix Excluding FX and Acquisitions FX FY 2019 & Disposals Acquisitions & Disposals 10 Note: Organic excludes the impact of acquisitions and disposals in 2018 and 2019
CASH FLOW & NET DEBT 2019 2019 Δ versus £m @ actual exchange rates 2018 IAS 17 IFRS 16 IAS 17 Adjusted operating profit 1 481.8 513.3 524.2 10.9 Depreciation/amortisation 88.7 103.2 171.5 68.3 Change in working capital 13.1 16.3 15.9 (0.4) Other 2 19.3 19.0 19.0 - Adjusted cash flow from 602.9 651.8 730.6 78.8 operations Net capex (109.7) (114.3) (114.3) - Other 3 (120.6) (142.2) (221.0) (78.8) Adjusted free cash flow 372.6 395.3 395.3 - Acquisitions (387.9) (16.9) (16.9) - Net debt 4 778.2 629.4 875.4 246.0 Net debt/Adjusted EBITDA 1.4x 1.0x 1.3x 0.3 (rolling 12 months) 11 Notes: (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; (4) Net financial debt for 2019 IAS 17 basis
FINANCIAL GUIDANCE, PRIOR TO THE CORONAVIRUS OUTBREAK FY 2020 Guidance (IFRS16) Net finance cost (pre-fx) £35 – 38m Effective tax rate 25.5 – 26.0% Minority interest £21 – 23m Diluted shares (as at 31 December 2019) 162.6m Capex £130 – 140m Financial Net Debt £520 – 550m 12 Note: Net debt guidance before any material change in FX rates, any additional M&A and impact of coronavirus
01 02 03 04 05 Performance 2019 Financial 5+5 Strategy 2020 Outlook Conclusion Highlights Results Review
5 YEARS AGO, THIS IS WHAT WE SAID WE WILL DO… 14
STRONG PROGRESS ON OUR 5 STRATEGIC PRIORITIES DIFFERENTIATED TQA SUPERIOR EFFECTIVE SALES GROWTH AND MARGIN OPERATIONAL BRAND PROPOSITION CUSTOMER SERVICE STRATEGY ACCRETIVE PORTFOLIO EXCELLENCE • Focused on delivering • Introduced disciplined • Moving Intertek's • Positioned Intertek as • Ever Better approach to the highest standards approach to Sales centre of gravity continuous the global market of customer service towards the sectors, improvement across leader in TQA • 5 Sales Goals to geographies, entire organisation • 7,000+ NPS interviews • Created global support Customer 1 st businesses and service • Disciplined performance every month processes and create awareness and lines that deliver the accountability: management cadence: understanding of TQA • Customer centric best growth and margin daily, weekly, monthly, • Customer Retention • Launched distinct new organisational model prospects annual and 5-year basis ensures our people are brand identity • Customer • Disciplined approach to in close personal • Built depth and Penetration contact with our capital allocation breadth of ATIC • ATIC Selling Customers offering • New Customer • Developing mission- • Developed innovative Wins critical ATIC innovations new solutions for our in collaboration with • Customer clients our clients Outsourcing 15
STRONG PROGRESS ON PERFORMANCE DELIVERY Adj. Operating Margin (%) Revenue (£m) Adjusted EPS (p) +170 2,987 +43% 17.2% 211.7 +60% bps 15.5% 2,093 132.1 FY14 FY19 FY14 FY19 FY14 FY19 Free Cash Flow (£m) ROIC - Actual (%) Revenue per employee (£) 22.8% 66,425 380 +650 +21% +106% bps 54,845 16.3% 185 FY14 FY19 FY14 FY19 FY14 FY19 16
DISCIPLINED INVESTMENTS IN ATTRACTIVE GROWTH AND MARGIN SECTORS CONNECTED WORLD SAAS PLATFORMS GEOGRAPHIC EXPANSION FOOD & HOSPITALITY SUSTAINABILITY LAB EXPANSION £560m in CAPEX and £710m in M&A invested in 2015-2019 17
5X5 DIFFERENTIATED STRATEGY FOR GROWTH 5x5 Mid-to Long-Term Goals 1 2 3 4 5 Fully engaged Superior customer Margin accretive revenue Strong cash conversion Accretive, disciplined employees working in service in Assurance, growth based on GDP+ from operations capital allocation a 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 18
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