Strategy Update. André Lacroix Chief Executive Officer. Portfolio Focus on Attractive Growth and Margin Opportunities. 2 March

Transcription

1 Strategy Update Portfolio Focus on Attractive Growth and Margin Opportunities André Lacroix Chief Executive Officer 2 March

2 Disclaimer 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. 2 March

3 Agenda Intertek 5 Fundamental Strengths Attractive Growth Opportunities Intertek Quality Assurance Proposition Strategy for Sustainable Growth Short Term Priorities in

4 01 Intertek 5 Fundamental Strengths Video: Looking Back at Our History

5 Track Record of Sustainable Growth Change Employees 11,192 41, ,242 Revenue 461m 2,166m + 1,705m Operating Profit 77m 343m + 266m Market Cap 0.6bn¹ 4.5bn + 3.9bn TSR 864%² 1 As at IPO 29 May 2002 ² TSR since IPO to 31 December

6 5 Fundamental Strengths Global Network of State of the Art Facilities Powerful Portfolio with Leadership Positions Depth and Breadth of Quality Assurance Solutions Passionate and Entrepreneurial Culture High Margin and Strongly Cash Generative Earnings Model 6

7 Powerful Portfolio with Leadership Positions 8 Global Business Lines (GBLs) Softlines Hardlines Electrical and Wireless Business Assurance Government and Trade Services Cargo and Analytical Assessment Agriculture Industry Services 8 Regional Business Lines (RBLs) Transportation Technologies Building Products Food Product Assurance Minerals Health, Environmental and Regulatory Services Chemicals and Pharma Exploration and Production 1,670m 2015 Revenue 77% of Group Revenue 496m 2015 Revenue 23% of Group Revenue Global scale and leadership positions Attractive global growth prospects Regional scale and strength Attractive regional growth prospects 7

8 Scale Positions in Top 30 Countries Top 30 Countries 92% 80% 76% 91% of Intertek Revenue of Global GDP of Global Trade of Global Production Americas Brazil Canada Mexico USA EMEA (Europe, Middle East & Africa) Belgium France Germany Italy Netherlands Norway South Africa Sweden Switzerland Turkey UAE UK Asia Pacific Australia Bangladesh China Hong Kong India Indonesia Japan Korea Malaysia Philippines Singapore Taiwan Thailand Vietnam 8

9 Top 30 Countries Strong Portfolio at Local Business Unit Level Softlines 8 Global Business Lines 8 Regional Business Lines Hardlines Electrical & Business GTS Cargo Agriculture Industry Food Building Trans. Product Minerals HERS C&P E&P Wireless Assurance & AA Services Products Tech Assurance Australia Bangladesh Belgium Brazil Canada China France Germany Hong Kong India Indonesia Italy Japan Korea Malaysia Mexico Netherlands Norway Philippines Singapore South Africa Sweden Switzerland Taiwan Thailand Turkey UAE UK USA Vietnam In-depth portfolio review C. 300 business units High quality portfolio Positioned strongly for growth 9

10 High Quality Earnings Model ¹ Revenue 2bn+ EBITDA Margin c. 20% Cash Conversion² 140% Capex 5% of Revenue Dividend Payout c. 40% FCF³ 150m Balance Sheet 1.7x Net Debt to EBITDA 1 Based on 2015 Actuals ² Cash from operations ³ After Capex and Dividends 10

11 02 Attractive Growth Opportunities

12 Attractive Testing, Inspection and Certification Structural Growth Drivers Corporations investments in quality and innovation Higher regulatory standards Global and regional trade flow Increased demand for energy to support GDP and population growth 12

13 Attractive Assurance Structural Growth Drivers Assurance Structural Growth Drivers Increasingly complex operations with decentralised supply chains Greater customer focus on risk management to manage systemic operational risk Customers require Quality Assurance solutions beyond TIC Customers Expect Total Quality Assurance Quality and safety of physical components, products and assets Reliability of operating processes and quality management systems Industry Evolution From TIC to ATIC Assurance Testing Inspection Certification Video: The Future of Our Industry 13

14 Global Intertek Network Strongly Positioned for ATIC Growth Global Market Leader in Assurance Global Market Leader in TIC 3,000 auditors 1,000+ lab and offices 90,000+ audits 100+ countries Global ATIC Business with 41,434 Employees 14

15 Portfolio Geared for GDP+ Organic Growth Profit Mix 1 Economic Sectors Structural Growth Drivers Mid-Long Term Growth 68% Products CG, C&E, C&P, Food & Business Assurance 51% Revenue 2 Quality solutions for end-products, their components, processes and R&D Product variety, brand and supply chain expansion, innovation and regulations Increasing quality and sustainability demands by developed and emerging economies Increased Corporate focus on risk Continuing growth from expanding investment in quality & innovation 22% Trade Cargo & Analytical, Government Services & Agri Global and regional trade-driven, through GDP growth Increased customer focus on quality and quantity controls Trade-flow growth: global & regional 25% Revenue 2 10% Resources Industry Services & Minerals Capex & opex investment supporting world economic growth Servicing oil & gas and other sectors of the economy Long-term growth 24% Revenue 2 (1) 2015 adjusted operating profit. (2) 2015 revenues Global GDP Plus Organic Revenue Growth 15

16 03 Intertek Quality Assurance Proposition

17 Our Purpose, Vision and Mission Bringing Quality and Safety to Life. The world s most trusted partner for Quality Assurance Exceed our customers expectations with innovative and bespoke Assurance, Testing, Inspection and Certification solutions for their operations and supply chain. Globally. 24/7. 17

18 Strong Business Model to Seize Growth Opportunities What We Do Everyday Where Which Economic Sectors Assurance Products Testing Inspection Trade Certification 100+ countries 1,000+ laboratories 41,434 people Resources 18

19 Well Diversified Revenue Streams Across Sectors, Geographies and Services Revenue Split¹ Sector Geographic Service 24% 29% 35% 8% 10% 51% 30% 25% 52% 36% Products Trade Resources Americas Asia Pacific EMEA Assurance Testing Inspection Certification Strength in Products Largest by Revenues Highest margin Fastest organic growth Excellent exposure to fast growing markets Asia Pacific largest Americas strong position Good exposure to fast growing markets Breadth and Depth of ATIC Solutions Testing largest service offering Assurance fastest growing (1) Based on

20 Depth and Breadth of ATIC Solutions Assurance Testing Inspection Certification Management Systems Benchmarking in Quality & Performance Sustainability & environment Facility / Plant & Equipment Legal & Regulatory Product Development Vendor Compliance Corporate Social Responsibility Failure investigation Laboratory Outsourcing Risk Management Supply Chain Assessment Softlines Hardlines Automotive Biofuels Building Product Chemical & Pharmaceutical Electrical Food Health & Beauty Mineral Packaging Pharmaceutical Oil & Gas Agriculture Asset Integrity Building Product Chemical & Petrochemical Electrical Exporter & importer Field Labelling Industrial Mineral Oil & Gas Site Construction Textile & Apparel Appliance & Electronic Aerospace & Automotive Building Products Conformity by Country Eco-Textile Food & Food Service Hazardous Location 1 HVACR Industrial Equipment IT & Telecom Life Safety & Security Lighting Medical Device (1) Heating Ventilation Air Conditioning and Refrigeration 20

21 Aligned Organisational Structure Intertek Organisational Structure Business Lines Products Softlines, Hardlines, Electrical & Wireless, Business Assurance, Building Products, Transportation Technologies, Chemicals & Pharma and Food Trade Cargo & Analytical Assessment, Agriculture and Government & Trade Services Resources Industry Services and Minerals Geographic Areas Americas, Pacific and North East Asia China South and South-East Asia Middle East and Africa Europe Functional Areas ATIC Operational Excellence Corporate Development HR Finance and IT Legal and Compliance 21

22 Intertek Total Quality Assurance Value Proposition Research and Development Consumer Management Distribution and Retail Channels Intertek Total Quality Assurance (Assurance, Testing, Inspection and Certification) Raw Materials Sourcing Component Suppliers Transportation Manufacturing Systemic Approach to Quality and Safety with ATIC Solutions 22

23 04 Strategy for Sustainable Growth

24 Attractive Growth Opportunities Quality Assurance market worth c.$250bn 01 Structural Growth Drivers 02 Existing Customers Continued growth in Testing, Inspection and Certification Increased demand for Assurance Increase account penetration Assurance, Testing, Inspection and Certification cross selling 03 New Customers 04 Industry Consolidation New contracts Outsourcing Expand geographic coverage Access to new solutions 24

25 Corporate Medium to Long Term Goals Fully engaged employees in a safe working environment Deliver superior customer service Margin accretive organic revenue growth based on GDP + organic growth Strong cash conversion from operations Accretive disciplined capital allocation policy for both capex (5% of Revenue) and M&A 25

26 5 Strategic Priorities Strategic Priorities Action Plans KPIs 01 Strong Brand Proposition Position Intertek as leading Quality Assurance provider Improve brand awareness across sectors and geographies Compelling Total Quality Assurance Brand positioning Revenue growth New leads Customer acquisitions Pricing power A&P effectiveness 02 Superior Customer Service Build customer loyalty and win new customers Measure quality of customer service delivery Develop innovative ATIC solutions NPS Customer retention Customer acquisition Pricing power Growth from innovation 03 Effective Sales Strategy Increase existing account penetration Drive ATIC cross selling Business development with new accounts Growth from existing customers Growth from new customers Customer cross selling Customer profitability 04 Growth and Margin Accretive Portfolio Prioritised business lines, geographies and service areas Invest in areas with good growth and good margin prospects Disciplined resource, capital and people allocation Revenue growth Margin accretion Portfolio mix ROCE Capital allocation 05 Operational Excellence Continuous improvement to drive productivity Best in class management to reduce span of performance Eliminate non essential costs - facilities/offices/processes/ purchasing Direct costs Overheads Productivity per employee Site capacity utilisation ROCE 26

27 5 Enablers Enablers Action Plans KPIs 01 Living Our Customer Centric Culture Strong entrepreneurial culture Decentralised organisation Customer centric culture Revenue and profit growth NPS Organisation engagement Employee turnover 02 Disciplined Performance Management Performance management with financial and non-financial metrics Forecast and review processes focused on margin accretive revenue growth with strong cash conversion EBIT margin Working capital Cash conversion ROCE and ROIC 03 Superior Technology Upgrade business intelligence system Leverage back-office synergies Improve customer experience Productivity/cost savings Customer feedback/nps IT operating costs 04 Energising Our People Invest in capability Aligned reward system Promote internal growth Internal promotions Employee turnover Organisation engagement 05 Delivering Sustainable Results Sustainable growth for customers and shareholders Importance of sustainability for the community Right balance between performance and sustainability 5 year revenue growth 5 year profit growth CO2 footprint Health and safety Employee turnover 27

28 5x5 Strategy for Growth Purpose Vision Customer Promise Bringing Quality and Safety to Life The world s most trusted partner for Quality Assurance Our Innovative Assurance, Testing, Inspection and Certification solutions delivered 24/7 with precision, pace and passion enabling you to power ahead safely 5 Strategic Priorities 5 Enablers Strong Brand Proposition Living Our Customer Centric Culture 5x5 Superior Customer Service Effective Sales Strategy Disciplined Performance Management Superior Technology Growth and Margin Accretive Portfolio Energising Our People Operational Excellence Delivering Sustainable Results 28

29 Geographic GBL Three Tier Portfolio Strategy Grow Scale Businesses Invest in Fast Growing Businesses Improve Performance Softlines Hardlines Electrical & Wireless Cargo & Analytical Assessment Government & Trade Services Business Assurance Agriculture Building Products Transportation Technologies Food Industry Services Minerals North America Greater China South Asia South East Asia South America Middle East and Africa Australia Europe 29

30 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 dividends M&A focused on strong growth and margin prospects in businesses with leading market positions or in new exciting growth areas, geographies or services Efficient balance sheet with flexibility to invest in growth with Net Debt / EBITDA target of 1.5x - 2.0x 04 30

31 Organisation and Reward Alignment Group Leadership Team André Lacroix CEO Global Business Lines Products Calvin Yam Softlines John Qin Hardlines Tim Hubbard Transportation Technologies Rich Adams Electrical & Wireless Calin Moldovean Business Assurance & Food Trade Ian Galloway Resources Jan-Jörg Müller-Seiler Geographic Areas Americas, Pacific and North East Asia Gregg Tiemann China Fred Bai South & South East Asia Rajesh Saigal Middle East & Africa Ian Galloway Europe Graham Ritchie Functional Areas ATIC Operational Excellence Nimer Al-Hafi Corporate Development Julia Thomas HR Tony George Finance & IT Ed Leigh Legal & Compliance Mark Thomas Yearly Incentives based on Revenues, Operating Profit and ROCE 31

32 05 Short Term Priorities in

33 Internal Alignment to Execute Our 5x5 Strategy What we have done Implemented organisational structure to support our business model Strategy communicated to top 200 leaders New short-term incentive system and 2016 targets communicated to all What we will do Cascade 5x5 strategy throughout the organisation Increase internal communication efforts to share best practice Performance management focus on financial and non-financial metrics 33

34 Focused 2016 Plans to Deliver Revenue Growth Business Line and Country Initiatives SOFTLINES Growth in footwear and footwear electronics Launch of Chemical Smart Screening HARDLINES Supply chain expansion in India and Mexico Launch of innovative technology for factory inspections ELECTRICAL & WIRELESS EMC expansion in S.Korea and Mexico Regulatory changes in Energy Efficiency Internet of Things BUILDING PRODUCTS Growth of Commercial and Civil construction markets in the USA Integration of PSI TRANSPORTATION TECHNOLOGIES Focus on electrical and hybrid vehicles CHEMICALS & PHARMA New pharma products in the USA and UK Increased corporate focus on regulatory risk CARGO & AA New lab openings in Australia, PNG, Texas Increased shipment of refined products GTS Increased scope in Saudi Arabia New programmes in new markets MINERALS Cost and capacity control AGRI Business development with existing and new accounts in fast growing markets FOOD Integration of FIT Development of food services BA Leverage leadership position in supply chain management INDUSTRY SERVICES Cost and capacity control in capex related activities Continue diversification in opex related activities with NDT Group Initiatives Implement NPS to measure customer service delivery on monthly basis Drive ATIC cross selling with existing and new customers Launch innovative ATIC solutions in Products, Trade and Resources Performance management based on financial and non-financial metrics Capex investments in businesses with good growth and good margin prospects 34

35 Disciplined Margin and Cash Management Cost Management Q cost restructuring Headcount reduction of 207 Full year cost reduction of 4m Manage capacity and costs tightly Industry Services Minerals Continuous focus on costs Consolidation of facilities Consolidation of offices Process streamlining Purchasing synergies Benchmarking/Productivity Drive best-in-class performance management Site span of performance reduction with Best in Class tool Business line and country monthly benchmarking with financial and nonfinancial metrics Cash Management Tight controls on working capital Business line and country monthly benchmarking 35

36 2015 Performance Based on Future Disclosures Revenue ( m) Adjusted Operating Profit ( m) 2,093 2,166 Growth 3.5% Growth 5.9% 1,008 1, % % % (9.2)% % (33.9)% Resources Trade Products Resources Trade Products Margin Key Metrics Products 20.6% 21.1% Trade 12.7% 14.1% Resources 9.0% 6.5% Group 15.5% 15.9% % Group Revenue % Group Profit Organic Revenue Growth¹ Products 51% 68% 6.0% Trade 25% 22% 5.4% Resources 24% 10% (10.2)% Group 1.6% 1 At constant rates 36

37 Summary Track record of sustainable growth and shareholder value creation High margin and strongly cash generative earnings model Attractive growth prospects in the Quality Assurance market Portfolio focus on attractive growth and margin opportunities Disciplined approach to performance management and capital allocation 37

38 Appendix Strategy Update Presentation 38

39 Financial Performance by Sector in 2015 and 2014 Products 2015 m 2014 m Change at actual rates Change at constant rates Organic 1 change at constant rates Revenue 1, , % 7.7% 6.0% Adjusted operating profit % 8.4% Adjusted operating margin 21.1% 20.6% 50bps 10bps Trade Revenue % 5.5% 5.4% Adjusted operating profit % 18.3% Adjusted operating margin 14.1% 12.7% 140bps 150bps Resources Revenue (9.2)% (7.3)% (10.2)% Adjusted operating profit (33.8)% (32.7%) Adjusted operating margin 6.5% 9.0% (250)bps (250)bps Group Revenue 2, , % 3.2% 1.6% Adjusted operating profit % 4.0% Adjusted operating margin 15.9% 15.5% 40bps 20bps 39

40 Financial Performance by Sector in 2015, H1 and H2 Products Revenue ,110.6 Adjusted operating profit Adjusted operating margin 20.7% 21.4% 21.1% Trade Revenue Adjusted operating profit Adjusted operating margin 13.8% 14.4% 14.1% Resources Revenue Adjusted operating profit Adjusted operating margin 6.7% 6.3% 6.5% Group Revenue 1, , ,166.3 Adjusted operating profit Adjusted operating margin 15.5% 16.2% 15.9% H1 m H2 m FY m 40

41 Broad Based ATIC Services to Deliver Total Quality Assurance A Assurance ensures our customers identify and mitigate the intrinsic risk in their operations, supply chain and quality management systems T Testing is evaluating how products and services meet and exceed quality, safety, sustainability and performance standards I Inspection is validating the specifications, value and safety of raw materials, products and assets C Certification is certifying that products and services meet trusted standards 41