group results 2002 analysts’ presentation, london 10 march ... · 1 group results 2002...
TRANSCRIPT
1
Group Results 2002Analysts’ Presentation, London
10 March 2003
Richard Nelson, Chief Executive OfficerBill Spencer, Chief Financial Officer
2
Financial Highlights
£53.9mProfit before tax
5.2 penceProposed final dividend
27.1 penceEarnings per share*2
Up from 15.5% in 2001
Up 10% @ actual exchange ratesUp 15% @ constant exchange rates
Up 2% @ actual exchange ratesUp 6% @ constant exchange rates
16.7%Operating margin
£76.9mOperating Profit*1
£461.1mTurnover
*1 Operating profit is stated before goodwill amortisation and exceptional items (EBITA)*2 Basic EPS before exceptional items
3
Operating ProfitTranslation Exposure
• Up to 80% of operating profits are in US dollars or pegged/linked currencies
• 1% change in the average exchange rate = 0.8% change in operating profit
• Average exchange rate 2002 £1 = $1.50
4
Profitability
7.2 times3.4 timesInterest cover
─(15.5)Exceptional finance charges
65.553.9Profit before tax
(10.5)(22.2)Net interest payable
─15.6Exceptional items
76.076.0Operating profit
Pro-formaActual2002 - £m
5
Taxation
29.7%
(16.0)
53.9
Actual
29.9%Effective tax rate
(19.6)Tax
65.5Profit before tax
Pro-forma2002 - £m
6
Basic Earnings per Share
27.727.8Basic underlying EPS* in pence
27.2123.733.6(4.3)
(16.0)53.9
Actual
27.1Basic EPS in pence153.4Divided by shares in millions41.6Shareholders’ earnings(4.3)Less minorities
(19.6)Taxation65.5Profit before tax
Pro-formaYear 2002 - £m
* Excluding goodwill amortisation and exceptional items
7
Dividends
4.2 timesActual dividend cover
3.5 timesPro forma dividend cover
7.8 pence5.2 penceDividend per share
Full Year Equivalent
December Final 2002
8
Operating Cash Flow
5.9%6.9%Operating working capital to sales %
(6.8)(10.7)Change in operating working capital
5.7%5.1%Capital expenditure to sales %
76%78%Operating cash flow to operating profit%
52.960.2Operating cash flow(25.8)(23.6)Capital expenditure
85.594.5EBITDA
200120022002 - £m
Operating cash flow excludes exceptional cash inflow and is after capital expenditure
9
Cash Generation
(8.7)13.6Exceptional cash flow
27.157.1Free cash flow*1
(3.5)(4.0)Dividends paid to minorities
(13.6)(12.7)Taxation
52.960.2Operating cash flow
20012002£m
*1 Before servicing of finance, acquisitions and investments
10
Capital Structure
Pro forma 2002 interest cover = 7.2 times
630%
50.4
317.4
(23.7)
341.1
2001
237.5Borrowings
92%Net debt to shareholders equity
181.3Shareholders’ funds*
166.9Net debt
(70.6)Cash balance
2002£m
* Excludes goodwill written off to reserves of £264.7m (2001 £286.1m) when Intertek was acquired in 1996
11
Trend in Turnover*
349 356390
434461
0
50
100
150
200
250
300
350
400
450
500
1998 1999 2000 2001 2002
At Constant Exchange Rates
CAGR = 7.2%
£m
* Continuing business
338 351
398
451 461
0
50
100
150
200
250
300
350
400
450
500
1998 1999 2000 2001 2002
At Actual Exchange Rates
CAGR = 8.1%
£m
12
Trend in Operating Profit*
46.849.4
58.6
66.7
76.9
0
10
20
30
40
50
60
70
80
1998 1999 2000 2001 2002
At Constant Exchange Rates
CAGR = 13.2%
£m
45.048.9
61.0
69.876.9
0
10
20
30
40
50
60
70
80
1998 1999 2000 2001 2002
At Actual Exchange Rates
CAGR = 14.3%
£m
* Continuing business before goodwill amortisation and exceptional items
13
Richard NelsonChief Executive Officer
Operating Performance 2002
Analysts’ Presentation – 10 March 2003
14
Testing, Inspection & Certificationof Products and Commodities
Growing Market• More products, shorter lifecycles• Increasing safety and quality standards• Migration of sourcing to Asia• Trend to outsourcing• Low cost, high value
15
World Leader & High Barriers to Entry
• Laboratory network for local testing• Safety labels, accreditations, reputation• Local labour developed over many years• Customer focus (turnaround time,
responsiveness)• Strong compliance
16
Operating Performance - Overview
15.4%16.7%Margin
15%66.776.9Operating profit
6%434.4461.1TurnoverGrowth %20012002
£m @ constant 2002 exchange rates
17
Labtest(Consumer Goods)
£m @ constant 2002 exchange rates
31.0%33.5%Margin
22%33.941.5Operating profit
13%109.3123.8Turnover
Growth %20012002
18
Labtest (Consumer Goods)
Drivers• Widening ranges of products• Increasing quality and safety requirements• Expansion in China with lower prices and costs• Strong growth in India and Turkey • USA improved textile and toy testing• In fill acquisitions (ISO 9000)
19
Caleb Brett(Oil & Chemical)
£m @ constant 2002 exchange rates
9.8%9.4%Margin
(1)%16.516.3Operating profit
3%168.4172.8Turnover
Growth %20012002
20
Caleb Brett(Oil & Chemical)
Drivers• Cargo related (77%) of total sales
– Secure but mature market– 2002 Competitive
• Outsourcing (23%) of total sales– Growth in EBITA– Prospects increasing well– Higher margin– In fill acquisitions
21
ETL SEMKO(Electrical)
£m @ constant 2002 exchange rates
12.4%13.4%Margin
13%12.414.0Operating Profit
5%99.9104.7Turnover
Growth %20012002
22
ETL SEMKO(Electrical)
Drivers• Growth in safety testing and HVAC • Telecoms downturn (8% of business, 10% in
‘01), cost base being monitored• Growth in Asia (19% of business, 17% in’01)• High profit margins in Asia (20% +)• In fill acquisitions (low market share)
23
FTS(Foreign Trade Standards)
£m @ constant 2002 exchange rates
16.0%18.9%Margin
24%9.111.3Operating profit
5%56.859.8Turnover
Growth %20012002
24
FTS(Foreign Trade Standards)
Drivers• High shipments to Nigeria, (about 1/3 of division)• Additional products in SASO programme (about
1/3 of division)• Eight other contracts• Kuwait scheduled start Q2, 2003• Potential New Contracts
25
Summary
• Business going well, in line with expectations at the time of float
• Infill acquisitions being pursued– Caleb Brett outsourcing– ETL SEMKO expansion– Systems certification
• Organic growth prospects