EVER BETTER, EVER STRONGER 2018 FULL YEAR RESULTS PRESENTATION 5 March 2019
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. 5 March 2019 2
AGENDA Performance Highlights 01 2018 Financial Results 02 5x5 Strategy Update 03 2019 Outlook by Division 04 Conclusion 05
01 PERFORMANCE HIGHLIGHTS
7.7% EPS GROWTH… 1.6X REVENUE GROWTH Adjusted Operating Margin Adjusted Operating Profit (£m) Revenue (£m) 17.2% 482 16.9% 468 2,801 2,769 16.0% 15.9% 410 2,567 15.5% 343 2,166 324 2,093 FY14 FY15 FY16 FY17 FY18 FY 14 FY 15 FY 16 FY 17 FY 18 FY 14 FY 15 FY 16 FY 17 FY 18 +1.2% +3.0% + 30bps 14-18 CAGR: 7.6% 14-18 CAGR: 10.4% 14-18: +170BPS +4.7% CCR +6.9% CCR + 40bps CCR Adjusted EPS (p) Dividend (p) Free Cash Flow (£m) 351 342 318 99.1 235 198.3 191.6 71.3 185 62.4 167.7 52.3 140.7 49.1 132.1 FY 14 FY 15 FY 16 FY 17 FY 18 FY 14 FY 15 FY 16 FY 17 FY 18 FY 14 FY 15 FY 16 FY 17 FY 18 +3.5% +39% +2.6% 14-18 CAGR: 10.7% 14-18 CAGR: 19.2% 14-18 CAGR: 17.4% +7.7% CCR 5
CONTINUOUS ORGANIC REVENUE GROWTH ACCELERATION Organic growth at constant currency FY18 organic growth by division Organic revenue growth 1 (%) 4.0% 10% 3.4% Products: +5.2% 2.5% 77% 1.7% of earnings 17% Trade: +2.2% of earnings Revenue 6% growth 1 (%) (5%) 10% Resources: 0.3% H1 17 H2 17 H1 18 H2 18 []% 6 (5%) Note: (1) At 2018 constant currency rates
17.2% OPERATING PROFIT MARGIN… +40BPS YOY, +170 BPS SINCE 2014 Margin improvement 1 110bps +40bps +30bps +20bps FY 15 FY 16 FY 17 FY 18 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 2016 550 £10m benchmarking business units 2017 400 £7m • Site span of performance management • Consolidation of facilities 2018 400 £7m • Cost discipline 7 Notes: (1) At 2018 constant currency rates; (2) Annualised
STRONG CASH PERFORMANCE Cash Generated from Operations Free Cash Flow Adjusted EBITDA £571m £563m £351m £579m £581m £342m £499m £543m £318m £429m £442m £401m £387m £235m £185m FY 14 FY 15 FY 16 FY 17 FY 18 FY 14 FY 15 FY 16 FY17 FY18 FY 14 FY 15 FY 16 FY 17 FY 18 14-18 CAGR: 9.2% 14-18 CAGR: 10.7% 14-18 CAGR: 17.4% Dividend Payout Ratio Net Debt / EBITDA Working Capital as % of Revenue 50% 9.3% 1.8x 8.8% 37% 37% 37% 37% 1.6x 7.1% 1.5x 1.4x 5.0% 3.9% 1.0x FY 14 FY 15 FY 16 FY17 FY18 FY 14 FY 15 FY 16 FY17 FY18 FY14 FY 15 FY 16 FY17 FY18 14-18: (540BPS) 8
M&A IN ATTRACTIVE GROWTH AND MARGIN SECTORS A leading provider of SaaS-based People Assurance solutions A leading network security and assurance services provider FY18 A leading provider of quality and quantity cargo inspection services Leading provider of product security certification solutions A leading provider of laboratory testing, inspection, metrology and Market leader in food assurance training services and inspection in Italy FY17 Non-Destructive Testing services for the energy Leading provider of materials FY16 industry across Australasia testing and speciality construction Leading provider of on-road inspection in New York vehicle testing services Leading provider of cyber security FY15 network assurance services Leading US provider of Leading certification body in Market leader in the provision of testing and assurance Denmark with an established environmental water testing services to commercial and network and expertise in auditing, services in Mexico civil construction markets certification and training 9
02 2018 FINANCIAL RESULTS 10
KEY FINANCIALS YoY % Actual Constant FY 18 Rates Rates Revenue £2,801m 1.2% 4.7% Organic revenue 1 £2,770m 0.2% 3.7% Operating profit 2 £482m 3.0% 6.9% Operating profit margin 2 17.2% 30bps 40bps Adjusted Diluted EPS 2 198.3p 3.5% 7.7% Free cash flow £351m 2.6% Notes: (1) Organic revenue excludes the impact of acquisitions and disposals in 2017 and 2018; (2) Before separately disclosed items 11
OPERATING MARGIN BRIDGE 18.0% 40bps (20bps) 10bps 10bps (10bps) 0bps 17.2% 17.2% 17.0% 16.9% 16.0% +30bps organic at constant rates 15.0% 14.0% 13.0% FY 2017 Products Trade Resources Divisional mix Excluding FX and Acquisitions FX FY 2018 & Disposals Acquisitions & Disposals 12 Note: Organic excludes the impact of acquisitions and disposals in 2017 and 2018
CASH FLOW & NET DEBT £m @ actual exchange rates FY 17 FY 18 • 3.0% at actual rates Adjusted operating profit 1 467.7 481.8 Depreciation/amortisation 94.8 88.7 Change in working capital 19.7 13.1 Other 2 16.7 21.3 Cash flow for cash conversion 598.9 604.9 • 126% cash conversion Cash conversion % 128% 126% Net capex (109.7) (109.7) Other 3 (147.6) (144.6) • FCF 109% of adjusted Net Income Free cash flow 341.6 350.6 Acquisitions 4 (27.4) (387.9) Net debt 544.1 778.2 • Net debt / 1.4x EBITDA Notes: 13 (1) Before Separately Disclosed Items; (2) Comprises Equity Settled transactions and other Non-Cash Items; (3) Comprises: Exceptionals, Interest Paid/Received and Tax; Special pension contributions (4) Total cash consideration in FY18 for 2018 acquisitions £393.5m, with cash acquired of £5.6m
FINANCIAL GUIDANCE FY 2019 Guidance Net finance cost £31 – 33m Effective tax rate 24.5 – 25.5% Minority interest £21 – 23m Diluted shares (as at 31 December 2018) 162.8m Capex £130 – 140m Net Debt £670 – 700m 14 Note: Net debt guidance before any material change in FX rates, any additional M&A and impact of IFRS 16
03 5X5 STRATEGY UPDATE 15
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 16
THE 21ST CENTURY HAS CREATED A TRULY GLOBAL MARKET 69% 47% 61% 64% 87% 62% 26% 49% 63% 63% 31% 45% 38% 78% Global trade as a % of global GDP 56% 24% 72% 123% 34% 51% 26% 41% 39% 47% 24% 75% 52% 25% 58% 42% 1960 1980 2000 2017 Demand has become truly global, reflected in global supply Today Global Trade represents 72% of Global GDP 17 Trade as % of GDP Source: World Bank. Trade is the sum of exports and imports of goods and services measured as a share of gross domestic product.
CORPORATIONS ARE INCREASING THEIR FOCUS ON SYSTEMIC OPERATIONAL RISK SUPPLY PRODUCTION DISTRIBUTION RETAIL TIER 3 TIER 2 TIER 1 3RD PARTY OWNED TRANSPORTATION DISTRIBUTION CENTRES IN-STORE ONLINE CONSUMER Global multi-tier sourcing Global manufacturing Multi-country distribution Multi-channel routes to market GROWING COMPLEXITY DRIVING DEMAND FOR END-TO-END SYSTEMIC QUALITY ASSURANCE 18
ATIC SOLUTIONS HELPING OUR CLIENTS MANAGE GREATER COMPLEXITY TIC PROVIDES QUALITY & SAFETY CONTROLS IN HIGH RISK AREAS A SUPPLY PRODUCTION DISTRIBUTION RETAIL TIER 3 TIER 2 TIER 1 3RD PARTY OWNED TRANSPORTATION DISTRIBUTION CENTRES IN-STORE ONLINE CONSUMER T T I I C C ASSURANCE PROVIDES AN END-TO-END ASSESSMENT OF QUALITY & SAFETY PROCESSES 19
SUPERIOR CUSTOMER SERVICE WITH OUR TQA VALUE PROPOSITION Assurance Assurance ensures our customers identify and mitigate the intrinsic risk in their operations, supply chain and quality management systems RESEARCH & DEVELOPMENT Testing RAW Our Customer CONSUMER MATERIALS Testing is evaluating how products and MANAGEMENT Promise SOURCING services meet and exceed quality, safety, sustainability and performance standards Intertek Total Quality Assurance expertise delivered consistently with precision, pace and passion, enabling Inspection our customers to power ahead safely Assurance | Testing | Inspection | Certification Inspection is validating the specifications, DISTRIBUTION value and safety of raw materials, products COMPONENT & RETAIL and assets SUPPLIERS CHANNELS Certification Certification is certifying that products and services meet trusted standards TRANSPORTATION MANUFACTURING TQA END-TO-END SYSTEMIC APPROACH TO QUALITY ASSURANCE 20
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