intertek 2010 half year results presentation...business of intertek group plc. these statements and...

2010 Half YearResults PresentationResults Presentation2 August 2010

Wolfhart HauserChief Executive Officer

Lloyd PitchfordChief Financial Officer

Cautionary statement regarding forward-looking statements

This presentation contains certain for ard looking statementsThis 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 andinvolve 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 implieddevelopments 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.

2 August 2010

2010 Half Year Results Presentation www.intertek.com 202/08/2010

Lloyd PitchfordChief Financial Officer

Financial PerformanceFinancial Performance2010 Half Year Results Presentation

Results overview

• G d d i i th• Good and improving revenue growth

• Resilient profitability

• Cash conversion in line with first half trend

• Three acquisitions for £30m; good pipeline

• Strong financial position: 0.9 net debt/EBITDA

• Interim dividend increased by 13%Interim dividend increased by 13%

4

1H Financial highlights

1H Revenue 1H Operating profit (adjusted)

650

725£m

125£m

1H Revenue 1H Operating profit (adjusted)

500

575

650

75

100

350

425 50

200

275

2006 2007 2008 2009 20100

25

2006 2007 2008 2009 2010

5

1H Revenue growth

Constant

(1.7)4.028 0

660£m

(1.7)3.81.86.3650

660£m

rates

+ 5.2%

28.0

630

640

650 11.9

5.62.6630

640

650

600

610

620

600

610

620

580

590

600

009 nic ns FX 010

580

590

009

CG &E &A ical

rial

als FX 010

6

1H 20

09

Organ

iAcq

uisitio

ns FX

1H 20

10

1H 200 CG

C&

OC&AAnaly

ticIndustr

iaMinera

l FX1H

201

Financial highlights

For the six months to 30 June 2010

Revenue £652.6m+ 4.9% at actual

+ 4.6% at constant organic

+ 0 2% at actualOperating profit 1 £103.7m

+ 0.2% at actual

+ 1.5% at constant organic

Operating profit margin 1 15 9%- 70bps at actual

Operating profit margin 15.9%- 50bps at constant organic

Profit before tax 1 £97.3m + 3.3%

Diluted adjusted EPS 40.6p + 1.0%

Operating cash flow £87.7m - 25.1%

7

1. Before separately disclosed items

p g

Adjusted operating margin

O tl k

18

% OutlookBroadly similar

Full Year margin

Inventory t ti

Inventory testing

17

Inventory testing

testing

15

16

14

15

1H 2008 1H 2009 1H 2010 FY 2008 FY 2009 FY 2010

8

1H 2008 1H 2009 1H 2010 FY 2008 FY 2009 FY 2010

Interest, tax and other

• I t t h f £6 4 d £2 9• Interest charge of £6.4m, down £2.9m

• Effective tax rate of 27.0%

• Net debt of £240m, net debt/EBITDA of 0.9x

• Dec 2011 facilities of £365m to be refinanced

• Separately disclosed items

• £6.4m amortisation of acquisition intangiblesq g

• £6.4m acquisition related and settled claims

9

Cash flow

Cash conversion

£m @ actual exchange rates 1H 2010 1H 2009

EBITDA 128.7 132.4 120

140

% 1H 2H

Cash flow from operations 87.7 117.1

Cash Conversion % 68 8880

100

Cash Conversion % 68 88

Debtor days 68 6220

40

60

Capex £24.8m £23.5m 02006 2007 2008 2009 2010

1H 71 75 71 62 68

10

2H 72 70 69 62 -

Days Sales Outstanding (DSO)

Currency analysis

Cumulative average exchange ratesRevenue by currency

Other~25%

Value of £1 1H 2010 1H 2009 FY 2009

Cumulative average exchange ratesRevenue by currency

USD 1.53 1.49 1.56

CNY 10.45 10.15 10.63

EUR 1 1 1 11 1 12

USD

GBP & EUR~15%

EUR 1.15 1.11 1.12

HKD 11.89 11.51 12.06USD,

CNY & HKD~60%

~15%AUD 1.72 2.10 1.99

CAD 1.59 1.78 1.77

11

Interim dividend

• I t i di id d f 9 3Interim dividend per share • Interim dividend of 9.3p, up 13.4%

• Interim payout of £15m9.0

10.0Pence

Interim dividend per share

Interim payout of £15m

• Strong and consistent record of dividend growth6.0

7.0

8.0

3.0

4.0

5.0

0.0

1.0

2.0

2006 2007 2008 2009 2010

12

Results overview

• G d lt• Good results

• Strong financial position

• Investment to grow the business

13

Wolfhart HauserChief Executive Officer

Operating PerformanceOperating Performance2010 Half Year Results Presentation

Our industries

Supporting our customers in their global tradeOur organisation Industries we operate in What we doOur organisation Industries we operate in What we doSupporting our customers in their global tradeOur organisation Industries we operate in What we doOur organisation Industries we operate in What we doSupporting our customers in their global tradeOur organisation The industries we operate in What we doOur organisation What we doThe industries we operate in

g pg p

Testing

I tiConsumer Goods

Aerospace & AutomotiveBuilding Products

Supporting our customers in their global tradeOur organisation The industries we operate in What we doOur organisation What we doThe industries we operate in

g pg p

Testing

I ti

Testing

I tiConsumer Goods

Aerospace & AutomotiveBuilding Products

Inspection

Certification

Auditing

Commercial & Electrical

Oil, Chemical & Agri

ChemicalConsumer Goods & RetailersElectrical & ElectronicEnergyF d & A i lt

Inspection

Certification

Auditing

Inspection

Certification

Auditing



ChemicalConsumer Goods & RetailersElectrical & ElectronicEnergyF d & A i ltas

One

Auditing

Outsourcing

Advisory

Analytical

Industrial

Food & AgricultureGovernment & InstitutionsIndustrialIT & TelecomMedical & Pharmace tical

Auditing

Outsourcing

Advisory

Auditing

Outsourcing

Advisory

Analytical

Industrial

Food & AgricultureGovernment & InstitutionsIndustrialIT & TelecomMedical & Pharmace tical

Inte

rtek

a

Training

Quality Assurance

MineralsMedical & PharmaceuticalPetroleumTextile, Apparel & FootwearToys, Games & Hardlines

Training

Quality Assurance

Training

Quality Assurance

MineralsMedical & PharmaceuticalPetroleumTextile, Apparel & FootwearToys, Games & Hardlines

1526,000 employees

Market drivers in an industry

New Technologies

Changing Product

Supply Chain Costs

Supply Chain Complexity

CO2

CSR

Health effects

Quality issues

Publicity

Awareness

Regulations

Prosecutions & Enforcement

Product Lifecycles

Technical Standards

Development

Complexity

Desire for Supply Chain

Flexibility

Access to Low

Environmental impacts

Biodegradable & Recycling

Brand

Competitiveness

Global access

Access to Low Cost Markets

PRODUCT SUPPLY CHAIN

y g

Product Life Cycle

SOCIAL-ENVIRONMENTAL QUALITY ISSUES REGULATION

External considerationsInternal considerations

17Client

Trending of industry growth

Regulatory changes

Industry Awareness & Recalls

Revenue Social-environmentalRevenue

New Generation Product launched

18

Time

Acquisitions

2005 toOur StrategyAcquisition Track Record

2005 to 1H 2010

Number Completed 55R&D • New expertise

Our Strategy

Total Spent £328m

Average Purchase Multiple

6.4x EBIT

New expertise

Widen the Portfolio

• Complementary services p

Average Margin >18%

Average Annual Expenditure £60m

• Complementary services

Scale

S i li /i d t i Average Annual Expenditure £60m

Average Completed Annually 10

• Service lines/industries

19

Year to date •£30m on 3 acquisitions

Consumer Goods of Group Revenue25%

£m @ constant exchange rates Half Year 2010 Change Organic

change

Revenue 161.9 1.6% 1.6%

Operating profit 51.2 (2.3)% (2.3)%

Margin 31 6% (130)bps (130)bpsMargin 31.6% (130)bps (130)bps

Review of 1H 2010

• Strong textiles testing• Toys revenue and margin downy g• Growth in inspection and food Paul Yao

20Textiles; Toys; Hardlines; Food; CSR; Health & Beauty

Consumer Goods

OutlookOutlook

• Textiles strong growth expected to continue• G d th i f d• Good growth in food• Toys could benefit from further safety concerns and

regulationsg

21

Commercial & Electrical of Group Revenue20%


change

Revenue 129.6 4.5% 4.5%



Review of 1H 2010

• Strong growth from China• Renewable energy and auto gy

components developing• Building products declined

Gregg Tiemann

22

Home Appliances; Lighting; Medical; Building; IT & Telecom; HVAC; Renewable Energy; Automotive


OutlookOutlook

• China and US expected to drive growth• B ildi d t t bili i• Building products stabilising• Continued investment in renewable energy

23

Oil, Chemical & Agri of Group Revenue34%


change

Revenue 218.4 5.8% 5.8%

Operating profit 23.7 14.5% 14.5%

Margin 10 9% 90bps 90bpsMargin 10.9% 90bps 90bps

Review of 1H 2010

• Inspection resilient• Signs of improvement in testingg p g• Asia, Middle East and Latin

America offset flat market in USAJay Gutierrez

24Oil Cargo; Free Standing Testing; Agriculture; Government Services


OutlookOutlook

• Increasing growth from emerging markets • USA t t t bili• USA expect to stabilise• Margin to improve from higher utilisation rates

25

Analytical Services of Group Revenue11%


change

Revenue 72.3 9.5% 5.8%



Review of 1H 2010

• Materials services improving• New standards in US auto fuel

and lubes Andrew Swift

26Upstream; Chemicals & Materials; Pharmaceutical

Analytical Services

OutlookOutlook

• Recovery in materials services set to continue• N t i t t• New outsourcing contracts:

• Air Products, £6m pa• CIBA Expert Services from BASF, £20m pap , £ p

• Upstream increased safety regulations expected

27

Industrial Services of Group Revenue6%


change

Revenue 41.8 4.5% 1.1%



Review of 1H 2010

• Delayed infrastructure projects • Systems certification growing welly g g• Developing new HSE services

• Carbon footprint offsetStefan Butz

28

• REACHIndustry; Systems Certification; Health, Safety & Environment

Industrial Services

OutlookOutlook

• Infrastructure order books filling• HSE i ki i ll REACH• HSE picking up, especially REACH• Further acquisitions to come • New servicesNew services

29

Minerals of Group Revenue4%


change

Revenue 28.6 15.3% 15.3%



Review of 1H 2010

• Strong end to 1H • Exploration and production p p

sample volumes increase Marc Hoffer

30Mining; Exploration; Robotic Testing

Minerals

OutlookOutlook

• Expect continuation of good market conditions • M i t i l t• Margin to improve as volumes restore

31

Summary and outlook

• Good results – 2010 outlook improved

• Overall growth drivers remain strongg g

• Expect organic revenue growth of mid single digits

• Broadly similar margin to 2009

• As markets recover further, high single digits , g g gorganic growth will return

32

2010 Half Year Results P t tiPresentation

Q&A

Profit before tax


Adjusted operating profit 1 103.7 103.5

Amortisation of acquisition intangibles (6.4) (6.5)

Acquisition and integration costs (3.6) -

Claims and settlements (2.8) -

Statutory operating profit 90.9 97.0

N t i t t (6 4) (9 3)Net interest expense (6.4) (9.3)

Share of Associates - -

Profit before tax 84 5 87 7

34

1. Before separately disclosed items

Profit before tax 84.5 87.7

Taxation


Profit before tax 84.5 87.7Profit before tax 84.5 87.7

Tax (23.1) (23.9)

P fit ft t 61 4 63 8Profit after tax 61.4 63.8

Reported tax rate 27.3% 27.3%

Effective tax rate on adjusted operating profit

27.0% 26.6%

35

Free cash flow


Operating cash flow 87.7 117.1p g

Net interest (7.6) (5.7)

Taxation (30 7) (35 5)Taxation (30.7) (35.5)

Capital expenditure (24.8) (23.5)

F h fl 24 6 2 4Free cash flow 24.6 52.4

Capital expenditure to revenue % (6M) 3.8% 3.8%

36

Capital expenditure to revenue % (12M) 4.3% 5.5%

Net debt at 30 June 2010


Borrowings 379.9 394.7Borrowings 379.9 394.7

Cash (139.8) (116.1)

N t d bt 240 1 278 6Net debt 240.1 278.6

Net debt to EBITDA (LTM) 0.9x 1.2x

37

Liquidity position at 30 June 2010


Debt facilities 650.9 600.1

Repayments to 30 June (110.0) (103.9)

Borrowings (379 9) (394 7)Borrowings (379.9) (394.7)

Letters of credit (5.6) (7.9)

U d i d b i f ili i 1 4 93 6Undrawn committed borrowing facilities 155.4 93.6

Cash 139.8 116.1

38

Liquid funds 295.2 209.7

intertek 2010 half year results presentation...business of intertek group plc. these statements and...

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