REG - Intertek Group Plc - Half-year Report
02/08/2024 07:00
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RNS Number : 8961Y Intertek Group PLC 02 August 2024
2024 HALF YEAR RESULTS ANNOUNCEMENT
2 August 2024
Strong performance with double digit growth in operating profit, EPS and free
cash flow
• Revenue of £1,669.5m, +6.6% at constant currency, and +1.8% at
actual rates
• Broad-based LFL revenue growth of 6.1%(1): Consumer Products 6.0%,
Corporate Assurance 8.3%, Health and Safety 8.5%, Industry and Infrastructure
2.2%, and World of Energy 8.3%
• Recent acquisitions in attractive growth and margin segments
performing well
• Cost reduction programme delivered savings of £5m in H1 24 and
£11m expected in 2024
• Adjusted operating profit of £265.1m, +14.2% at constant currency
and +8.0% at actual rates
• Strong margin progression of 110bps(1) driven by mix, pricing,
operating leverage, cost control and productivity
• Double digit adjusted EPS growth: +17.5% at constant currency and
+10.2% at actual rates
• Daily cash discipline delivers cash conversion of 118%(1) and
+14%(2) growth in free cash flow
• Strong financial position: net debt reduced to £708m(2) and net
debt/EBITDA improved to 1.0x
• Continuing investment in growth: acquisition of Base Met Labs and
capex of £56m
• Excellent progress in ROIC to 20.4% up +220bps at constant currency
and +110bps at actual rates
• Interim dividend of 53.9p, +43.0% year on year in line with new
dividend policy of 65% payout ratio
• Strong H2 2024 expected, on track to deliver our medium-term targets
of mid-single digit LFL revenue growth(1), 17.5%+ margin and strong cash
André Lacroix: Chief Executive Officer statement
"I would like to recognise all my colleagues for having delivered a strong
performance in the first half of 2024, resulting in double-digit growth in
adjusted operating profit, adjusted EPS and free cash flow. Our revenue grew
by 6.6%(1) driven by broad based LFL revenue growth of 6.1%(1) and the
contribution of acquisitions. We have seen strong margin progression of
110bps(1) driven by mix, pricing initiatives, operating leverage linked
growth, our disciplined cost approach and productivity improvements.
Our cash performance was excellent with cash conversion of 118%(1) and free
cash flow up 14% strengthening our balance sheet. We continue to invest in
growth to seize the exciting organic and inorganic opportunities we see in
high growth and high margin segments. We are pleased with the performance of
our acquisitions and the integration of Base Met Labs is progressing well. Our
ROIC increased by 220bps to 20.4%(1) demonstrating the strong returns of our
high-quality earnings model.
Our clients are increasing their focus on Risk-based Quality Assurance to
operate with higher standards on quality, safety and sustainability in each
part of their value chain. This is triggering higher demand for our ATIC
solutions and creating a significant value growth opportunity moving forward,
capitalising on our high-quality compounder earnings model. Indeed, during the
period from 2014 to 2023, we delivered growth of 59% in revenue, an 81% EBITDA
progression, a margin increase of 110bps, a cash flow improvement of +80%, a
128% dividend increase and 420bps improvement in ROIC.
Our good to great journey continues and in May 2023, we unveiled our Intertek
AAA differentiated growth strategy
(https://www.intertek.com/investors/capital-markets-event-presentations/) to
accelerate our revenue growth leveraging the best-in-class operating platform
we have built, and targeting the areas where we have opportunities to get
better. Our highly engaged, customer-centric organisation is laser-focused to
take Intertek to greater heights, and the execution of our AAA strategy is on
track to create sustainable growth and value for all stakeholders.
We enter the second half of the year with confidence, given the day-adjusted
LFL growth rate acceleration in the May/June period and we expect the Group
will deliver a strong performance in 2024 with mid-single digit LFL revenue
growth at constant currency, margin progression and a strong cash flow
performance. We are well-positioned to deliver our medium-term target of
17.5%+ margin, leveraging the revenue growth acceleration we are seeing for
our ATIC solutions, our disciplined performance management and our investments
in high growth and high margin segments."
Note 1: at constant currency
Note 2: at actual rates
Key Adjusted Financials 2024 H1 2023 H1 Change at actual rates Change at constant rates(1)
Revenue £1,669.5m £1,640.0m 1.8% 6.6%
Like-for-like revenue(2) £1,659.6m £1,637.5m 1.3% 6.1%
Operating profit(3) £265.1m £245.4m 8.0% 14.2%
Operating margin(3) 15.9% 15.0% 90bps 110bps
Profit before tax(3) £242.6m £223.2m 8.7% 16.2%
Diluted earnings per share(3) 104.9p 95.2p 10.2% 17.5%
Interim dividend per share 53.9p 37.7p 43.0%
Cash generated from operations(3) £267.4m £270.5m (1.1%)
Free cash flow(3) £90.6m £79.6m 13.8%
Financial net debt(4) £708.2m £791.3m (10.5%)
Financial net debt / EBITDA(3, 4) 1.0x 1.1x
ROIC (rolling 12 months) 20.4% 19.3% 110bps 220bps
Key Statutory Financials 2024 H1 2023 H1 Change at 1 Constant rates are calculated by translating H1 23 results at H1 24 exchange
rates.
actual rates
2 LFL revenue includes acquisitions following their 12-month anniversary of
ownership and excludes the historical contribution of any business
disposals/closures.
3 Adjusted results are stated before Separately Disclosed Items ('SDIs'), see
note 3 to the Condensed Consolidated Financial Statements.
1,2,3 Reconciliations for these measures are shown in the Presentation of
Results section on page 20.
4 Financial net debt excludes the IFRS 16 lease liability of £294.6m. Total
net debt is £1,002.8m. Reflects prior 12 months' EBITDA for relevant period.
See note 7 to the Condensed Consolidated Financial Statements.
Revenue £1,669.5m £1,640.0m 1.8%
Operating profit £232.4m £215.0m 8.1%
Operating margin 13.9% 13.1% 80bps
Profit before tax £206.2m £191.7m 7.6%
Profit after tax £153.3m £142.3m 7.7%
Diluted earnings per share 87.2p 80.4p 8.5%
Cash generated from operations £260.3m £261.6m (0.5%)
The Directors have approved an interim dividend of 53.9p per share (H1 23:
37.7p) to be paid on 8 October 2024 to shareholders on the register at close
of business on 13 September 2024.
Contacts
For further information, please contact:
Denis Moreau, Investor Relations
Telephone: +44 (0) 20 7396 3415
investor@intertek.com (mailto:investor@intertek.com)
Jonathon Brill/James Styles, DGA Group
Telephone: +44 (0) 7836 622 683
intertek@dgagroup.com (mailto:intertek@dgagroup.com)
Analysts' Call
A call for analysts and investors will be held today at 9.30am UK time.
Details can be found at http://www.intertek.com/investors/
(http://www.intertek.com/investors/)
Intertek is a leading Total Quality Assurance provider to industries
worldwide.
Our network of more than 1,000 laboratories and offices in more than 100
countries, delivers innovative and bespoke Assurance, Testing, Inspection and
Certification solutions for our customers' operations and supply chains.
Intertek is a purpose-led company to Bring Quality, Safety and Sustainability
to Life. We provide 24/7 mission-critical quality assurance solutions to our
clients to ensure that they can operate with well-functioning supply chains in
each of their operations.
Our Customer Promise is: Intertek Total Quality Assurance expertise, delivered
consistently, with precision, pace and passion, enabling our customers to
power ahead safely.
intertek.com
Intertek CEO Letter
I would like to recognise all my colleagues for having delivered a strong
performance in the first half of 2024, resulting in double-digit growth in
adjusted operating profit, adjusted EPS and free cash flow. Our revenue grew
by 6.6%(1) driven by broad based LFL revenue growth of 6.1%(1) and the
contribution of acquisitions. We have seen strong margin progression of
110bps(1) driven by mix, pricing initiatives, operating leverage linked
growth, our disciplined cost approach and productivity improvements.
Our cash performance was excellent with cash conversion of 118%(1) and free
cash flow up 14% strengthening our balance sheet. We continue to invest in
growth to seize the exciting organic and inorganic opportunities we see in
high growth and high margin segments. We are pleased with the performance of
our acquisitions and the integration of Base Met Labs is progressing well. Our
ROIC increased by 220bps to 20.4%(1) demonstrating the strong returns of our
high-quality earnings model.
Our clients are increasing their focus on Risk-based Quality Assurance to
operate with higher standards on quality, safety and sustainability in each
part of their value chain. This is triggering higher demand for our ATIC
solutions and creating a significant value growth opportunity moving forward,
capitalising on our high-quality compounder earnings model. Indeed, during the
period from 2014 to 2023, we delivered growth of 59% in revenue, an 81% EBITDA
progression, a margin increase of 110bps, a cash flow improvement of +80%, a
128% dividend increase and 420bps improvement in ROIC.
Our good to great journey continues and in May 2023, we unveiled our Intertek
AAA differentiated growth strategy
(https://www.intertek.com/investors/capital-markets-event-presentations/) to
accelerate our revenue growth leveraging the best-in-class operating platform
we have built, and targeting the areas where we have opportunities to get
better. Our highly engaged, customer-centric organisation is laser-focused to
take Intertek to greater heights, and the execution of our AAA strategy is on
track to create sustainable growth and value for all stakeholders.
We enter the second half of the year with confidence, given the day-adjusted
LFL growth rate acceleration in the May/June period and we expect the Group
will deliver a strong performance in 2024 with mid-single digit LFL revenue
growth at constant currency, margin progression and a strong cash flow
performance. We are well-positioned to deliver our medium-term target of
17.5%+ margin, leveraging the revenue growth acceleration we are seeing for
our ATIC solutions, our disciplined performance management and our investments
in high growth and high margin segments.
Note 1: at constant currency
Strong Value Delivered
In 2015, we took the decision to reinvent ourselves, making Assurance,
Testing, Inspection and Certification, or ATIC, our Customer Promise and we
rebranded Intertek as Total Quality. Assured.
Our strategic goal with ATIC is to provide a better-quality Assurance customer
service, given how much global trade has changed in the last 50 years. Today,
companies operate in a truly global market, running complex global
multi-sourcing and manufacturing operations, pursuing an omni-channel
approach, when distributing their products and services globally and locally.
When we did this, we were ahead of our time and our clients agree that our
industry has changed and is now all about Risk-based Quality Assurance powered
by ATIC. Assurance provides the independent end-to-end data on where the
quality, safety and sustainability risks are in the entire value chain of any
company, while Testing, Inspection and Certification provide the critical
independent quality controls in the high-risk areas of supply chains.
We have made strong progress between 2014 and 2023 notwithstanding the impact
of Covid and have delivered sustainable growth and value for all stakeholders
with the following achievements:
• Revenue growth of 59.0%, CAGR of 5.3%
• EBITDA growth of 81.2%, CAGR of 6.8%
• Operating margin increase of 110bps
• Cash generated from operations growth of 85.5%, CAGR 7.1%
• ROIC improvement of 420bps
Metric(1) 2014(2) 2023 Change CAGR
Revenue £2,093.3m £3,328.7m 59.0% 5.3%
EBITDA £400.9m £726.4m 81.2% 6.8%
Operating profit £324.6m £551.1m 69.8% 6.1%
Operating margin 15.5% 16.6% 110bps 12bps
Diluted earnings per share 132.1p 223.0p 68.8% 6.0%
Dividend 49.1p 111.7p 127.5% 9.6%
WC as % Revenue 9.3% (2.4%) (1,170bps) n/a
Cash generated from ops £403.7m £749.0m 85.5% 7.1%
ROIC 16.3% 20.5% 420bps 47bps
Note (1): On an adjusted basis, (2) 2014 metrics are on an IAS17 basis
Faster Global Growth for ATIC Solutions
Our industry has always benefitted from attractive growth drivers and now more
than ever everyone wants to build an ever-better world which means that
corporations will invest more in quality, safety and sustainability,
accelerating the demand for our industry-leading ATIC solutions.
Indeed, our customer research shows the well-known attractive structural
growth drivers in the Risk-based Quality Assurance industry will be augmented
by:
• The need to operate with safer and more resilient supply chains
• Continued investments by corporations in new products and services
• A step-change in how companies manage Sustainability
• Increased investments in traditional Oil & Gas ('O&G') and
renewables
• An increase in the number of new clients, both in developed and
emerging economies
Covid-19 has been a catalyst for many corporations to improve the resilience
of their supply chains. We are seeing a significant change of focus within our
clients on how they manage their value chains with:
· Better data on what is happening in all parts of the supply chain
· Tighter risk management with razor-sharp business continuity planning
· A more diversified portfolio strategy with tier 1/2/3 suppliers
· A more diversified portfolio strategy regarding factories
· Investments in processes, technology, training, and independent
assurance
Our superior Assurance offering means we are well positioned to help our
clients reduce the intrinsic risks in their operations.
Our clients have also realised that they need to invest more in product and
service innovation to meet the changing needs of their customers. A November
2023 survey by Capgemini shows that 67% of R&D leaders expect to increase
their R&D investments in 2024. These investments in innovation mean a
higher number of SKUs and a higher number of tests per SKUs - which will be
beneficial for our Testing and Certification solutions.
The other major area of investment inside corporations is of course
sustainability and we are seeing positive momentum with new and emerging
regulation. This means companies will have to re-invent the way they manage
their sustainability agenda with a greater emphasis on independently verified
non-financial disclosures. This is excellent news for our industry leading
Total Sustainability Assurance solutions. Sustainability is the movement of
our time.
The growth opportunities in the World of Energy are truly exciting as energy
companies are planning higher investments. In 2022 and 2023, we all witnessed
the concerns reflecting energy security, and everyone agrees that global
energy production capacity is an issue that needs to be addressed quickly to
meet the growing demand for energy today. Given the under-investments in
traditional O&G exploration and production in the last decade and the lack
of scale for Renewables, investment for production in traditional O&G and
in Renewables will increase. This is excellent news for our Caleb Brett and
Moody businesses.
We are seeing significant growth in the number of companies globally given the
lower barriers to entry for any brand with e-commerce capabilities. The lack
of Quality Assurance expertise of these young companies is excellent news for
our Global Market Access solutions. Our decentralised Customer 1(st)
organisation has a strong track record of winning new clients.
Intertek AAA Differentiated Growth Strategy
At our Capital Markets event in London last year, we unveiled our Intertek AAA
Differentiated Growth Strategy to capitalise on the best-in-class operating
platform we have built and target the areas where we have opportunities to get
better. Our passionate, innovative, and customer-centric organisation is
energised to take Intertek to greater heights delivering AAA performance for
all stakeholders. We are focused on delivering value consistently, targeting
mid-single digit LFL revenue growth, margin accretion to get back to our 17.5%
peak margin and beyond, and strong cash generation, while pursuing disciplined
investments in attractive growth and margin sectors.
We have made strong progress between 2015 and 2023 delivering sustainable
growth and value for our stakeholders and we are very excited about the
significant growth value opportunity ahead, capitalising on our
Science‐based Customer Excellence TQA advantage.
Our clients understand the mission‐critical nature of Risk‐based Quality
Assurance to make their businesses stronger, operating with higher quality,
safety and sustainability standards. Therefore, we expect the demand for our
ATIC solutions to accelerate post‐Covid.
Our Intertek AAA Differentiated Growth Strategy is about being the best and
creating significant value for every stakeholder every day.
We want to be the most trusted TQA partner for our customers, the employer of
choice with our employees, to demonstrate sustainability excellence everywhere
in our community and deliver significant growth and value for our
shareholders.
To seize the significant growth value opportunity ahead we will be
laser-focused on three strategic priorities and three strategic enablers. Our
Strategic Priorities are defined as Science-based Customer Excellence TQA,
Brand Push & Pull and Winning Innovations, and our three strategic
enablers are based on 10X Purpose-based Engagement, Sustainability Excellence
and Margin Accretive Investments. We will both further improve where we are
already strong and address the areas where we can get better.
Our high‐quality portfolio is poised for faster growth:
• The depth and breadth of our ATIC solutions positions us well to
seize the increased corporate needs for Risk‐based Quality Assurance
• All of our global business lines have plans in place to seize the
exciting growth drivers in each of our divisions
• At the local level, our country‐business mix is strong, with the
majority of our revenues exposed to fast growth segments
• Geographically we have the right exposure to the structural growth
opportunities across our global markets
We have improved our segmental disclosures to provide a deeper understanding
of our ATIC growth drivers in our businesses and we now report revenue,
operating profit and margin in five divisions:
· Consumer Products
· Corporate Assurance
· Health and Safety
· Industry and Infrastructure
· World of Energy
Mid-Single Digit LFL Revenue Growth Target
In terms of LFL revenue growth in the medium to long term, we are targeting
Group mid-single digit LFL revenue growth at constant currency with the
following expectations by division:
· Low- to mid‐single digit in Consumer Products
· High-single digit to double digit in Corporate Assurance
· Mid- to high-single digit in Health and Safety
· Mid- to high-single digit in Industry and Infrastructure
· Low- to mid‐single digit in the World of Energy
Margin Target of 17.5%+
Margin accretive revenue growth is central to the way we deliver value, and we
are confident that over time we will deliver our medium-term margin target of
17.5%+. Our confidence is based on three simple reasons: we have the proven
tools and processes in place, we operate with a span of performance giving us
significant benchmarking opportunity, and we pursue a disciplined accretive
portfolio strategy.
We announced a cost reduction programme in 2022 that targets productivity
opportunities based on operational streamlining and technology upgrade
initiatives. Our cost reduction programme delivered £13m of savings in 2023,
£5m in the first half of 2024 and we expect the programme to deliver a
further £6m additional savings in the second half.
We have also implemented some price increases and we will continue to do so in
2024.
AAA Virtuous economics
To deliver sustainable growth and value we will stay focussed on our AAA
Intertek Virtuous Economics based on the compounding effect year after year of
mid-single digit LFL revenue growth, margin accretive revenue growth, strong
free cash‐flow and disciplined investments in high growth and high margin
sectors.
We believe in the value of accretive disciplined capital allocation and pursue
the following priorities:
• Our first priority is to support organic growth through capital
expenditure and investments in working capital (target c.5% of revenue in
capex). In the first half of 2024, we invested £56m capital expenditure.
• The second priority is to deliver sustainable returns for our
shareholders through the payment of progressive dividends. We announced with
our preliminary results that we are increasing our targeted dividend payout to
circa 65% of earnings from 2024 in recognition of our highly cash generative
earnings model, our strong financial position and the Board's confidence in
the attractive long-term growth prospects for the Group and its ability to
fund continued growth investments.
• The third priority is to pursue M&A activities that strengthen
our portfolio in attractive growth and margin areas, provided we can deliver
good returns.
• And our fourth priority is to maintain an efficient balance sheet
with flexibility to invest in growth. Our leverage target is 1.3x - 1.8x net
debt to EBITDA with the potential to return excess capital to shareholders
subject to our future requirements and prevailing macro environment.
Our acquisitions of JLA Brasil Laboratório de Análises de Alimentos S.A.,
and Clean Energy Associates LLC, have been successfully integrated and are
performing well and in line with our expectations.
In April 2023, we announced the acquisition of Controle Analitico
(https://www.intertek.com/news/2023/04-03-intertek-to-acquire-controle-analitico/)
, a leading provider of environmental analysis, with a focus on water testing,
based in Brazil. The acquisition was a compelling strategic fit, expanding our
footprint of leading Food and Agri TQA solutions in Brazil.
In August 2023, we announced the acquisition of US-based PlayerLync
(https://www.intertek.com/news/2023/08-24-intertek-acquires-playerlync/) , a
leading provider of high-quality mobile-first training and learning content to
frontline workforces at some of the world's leading consumer brands,
strengthening our position as a leader in SaaS-based, technology-enabled
People Assurance services. We invested in our People Assurance business with
the acquisition of Alchemy/Wisetail in 2018, and PlayerLync provides a
compelling opportunity to further enhance our differentiated TQA proposition
and customer excellence advantage in what is a fast-evolving landscape.
In March 2024, we announced the acquisition of Base Metallurgical Laboratories
(https://www.intertek.com/news/2024/intertek-to-acquire-base-met-labs/) , a
leading provider of metallurgical testing services for the Minerals sector
based in North America, reinforcing and expanding Intertek's ATIC offering in
the Minerals Industry. The acquisition of Base Met Labs is highly
complementary to our ATIC service offering, establishing a Minerals testing
footprint for Intertek on the American continent and creating attractive
growth opportunities with existing and new clients.
We will continue to look at M&A opportunities in attractive high-margin
and high-growth areas to broaden our ATIC portfolio of solutions with new
services we can offer to our clients and to expand our regional coverage.
Sustainability Excellence
Sustainability is the movement of our time and is central to everything we do
at Intertek, anchored in our Purpose, our Vision, our Values and our Strategy.
Sustainability is important to all stakeholders in society who are
consistently demanding faster progress and greater transparency in
sustainability reporting. Companies therefore continuously need to upgrade and
reinvent how they manage their sustainability agenda, particularly with
regards to how they disclose their non-financial performance.
This is why, under our global Total Sustainability Assurance (TSA) programme,
we provide our clients with proven independent, systemic and end-to-end
assurance on all aspects of their sustainability strategies, activities and
operations.
The TSA programme comprises three elements:
• Intertek Operational Sustainability Solutions
• Intertek ESG Assurance
• Intertek Corporate Sustainability Certification
For Intertek's Sustainability Excellence progamme, we focus on the 10 highly
demanding TSA sustainability standards which are truly end-to-end and
systemic.
Intertek is committed to:
• Reducing absolute scope 1 and 2 GHG emissions by 50% by 2030 from
a 2019 base year;
• Reducing absolute scope 3 GHG emissions from business travel and
employee commuting by 50% within the same timeframe;
• Ensuring 70% of its suppliers by spend will have science-based
targets by 2027.
We will continue to lead by example by pursuing our Sustainability Excellence
agenda, energising deeply and genuinely all stakeholders: our people, our
customers, our regulators, our suppliers, our communities and our
shareholders.
Read more about Intertek's Sustainability Excellence programme and progress in
our 2023 Sustainability Report.
(https://cdn.intertek.com/www-intertek-com/media/investors/2024/ar/pdf/Intertek-Sustainability-Report-2023.pdf)
Outlook 2024
We enter the second half of 2024 with confidence, and we expect that the Group
will deliver a strong performance in 2024 with mid-single digit LFL revenue
growth at constant currency, margin progression and a strong free cash flow
performance.
Our mid‐single digit LFL revenue growth at constant currency will be driven
by the following contribution from our divisions:
• Consumer Products: Mid-single digit
• Corporate Assurance: High-single digit
• Health and Safety: High-single digit
• Industry and Infrastructure: Low-single digit
• World of Energy: High-single digit
Our financial guidance for 2024 is that we expect:
• Capital expenditure in the range of £135-145m
• Net finance costs in the £41-43m range
• Effective tax rate in the 25-26% range
• Minority interests of between £23-24m
• Targeted dividend payout ratio of circa 65%
• FY24 financial net debt to be in the range of £510-560m
The average sterling exchange rate in the last three months applied to the
full year results of 2023 would reduce our FY revenue and earnings growth by
circa 300bps and 400bps respectively.
Significant Value Growth Opportunity Ahead
We have made strong progress in the last eight years and equally, the value
growth opportunity ahead is significant.
The demand for our strong and differentiated ATIC value proposition is
accelerating.
Our Science-based Customer Excellence TQA advantage and our stronger portfolio
at the global and local level positions us well for faster growth.
Our Intertek AAA Differentiated Growth Strategy will capitalise on the
best-in-class operating platform we have built and target the areas where we
have opportunities to get better.
Our passionate, agile, and high-performance organisation is energised to take
Intertek to greater heights delivering AAA performance for all stakeholders.
We will deliver value consistently, targeting mid-single digit LFL revenue
growth at constant currency, 17.5%+ margin, and strong cash generation, while
pursuing disciplined investments in attractive growth and margin ATIC spaces.
André Lacroix
Chief Executive Officer
Operating Review
For the six months ended 30 June 2024
To present the performance of the Group in a clear, consistent and comparable
format, certain items are disclosed separately on the face of the income
statement. These items, which are described in the Presentation of Results
section of this report and in note 3, are excluded from the adjusted results.
The figures discussed in this review (extracted from the income statement and
cash flow) are presented before Separately Disclosed Items ('SDIs').
Overview of performance
H1 24 H1 23 Change at actual rates Change at constant rates(1)
£m £m
Revenue 1,669.5 1,640.0 1.8% 6.6%
Like-for-like revenue(2) 1,659.6 1,637.5 1.3% 6.1%
Adjusted operating profit(3) 265.1 245.4 8.0% 14.2%
Adjusted operating margin(3) 15.9% 15.0% 90bps 110bps
Adjusted net financing costs(3) (22.5) (22.2) 1.4% (3.8%)
Adjusted income tax expense(3) (60.7) (56.8) 6.9% 14.0%
Adjusted earnings for the period(3) 181.9 166.4 9.3% 17.0%
Adjusted diluted earnings per share(3) 104.9p 95.2p 10.2% 17.5%
1. Constant rates are calculated by translating H1 23 results at
H1 24 exchange rates.
2. LFL revenue includes acquisitions following their 12-month
anniversary of ownership and excludes the historical contribution of any
business disposals/closures.
3. Adjusted results are stated before SDIs, see note 3 to the
Condensed Consolidated Interim Financial Statements on page 34.
Total reported Group revenue increased by 1.8%, a LFL revenue increase of 1.3%
at actual rates.
The Group's LFL revenue at constant rates of 6.1% reflected an increase of
6.0% in Consumer Products, 8.3% in Corporate Assurance, 8.5% in Health and
Safety, 2.2% in Industry and Infrastructure and 8.3% in World of Energy.
We delivered an adjusted operating profit of £265.1m, +14.2% at constant
rates and +8.0% at actual rates.
The Group's adjusted operating margin was 15.9%, an increase of 110bps
compared to the prior year at constant exchange rates.
The Group's statutory operating profit after SDIs for the period was £232.4m
(H1 23: £215.0m) and margin was 13.9% (H1 23: 13.1%).
Net Financing Costs
Adjusted net financing costs were £22.5m (H1 23: £22.2m), comprising £1.0m
(H1 23: £1.7m) of finance income and £23.5m (H1 23: £23.9m) of finance
expense. Statutory net financing costs of £26.2m (H1 23: £23.3m) included
£3.7m expense (H1 23: £1.1m) relating to SDIs, predominantly driven by
changes in the fair value of contingent consideration related to acquisitions.
Tax
The adjusted effective tax rate was 25.0%, a decrease of 0.5% on the prior
year (H1 23: 25.5%, FY 23: 24.6%). The tax charge, including the impact of
SDIs, of £52.9m (H1 23: £49.4m), equates to an effective rate of 25.7% (H1
23: 25.8%, FY 23: 24.7%).
Earnings Per Share
Adjusted diluted earnings per share at actual exchange rates was 10.2% higher
at 104.9p. Diluted earnings per share after SDIs was 87.2p (H1 23: 80.4p) per
share and basic earnings per share after SDIs was 87.8p (H1 23: 80.8p).
Dividend
The Board has approved an interim dividend of 53.9p per share, which is an
increase of 43.0% compared to the prior year (H1 23: 37.7p), reflecting growth
in adjusted diluted earnings per share and the implementation of our new
dividend policy based on a payout ratio of circa 65% of earnings. The dividend
will be paid on 8 October 2024 to shareholders on the register on 13 September
2024.
Investments
The Group invested £55.6m (H1 23: £51.4m) of organic net capital investment
in laboratory expansions, new technologies and equipment to expand our market
coverage and develop innovative ATIC solutions.
On 1 March 2024, the Group acquired Base Metallurgical Laboratories Ltd. and
Base Met Labs US Ltd. (jointly "Base Met Labs"), a leading provider of
metallurgical testing services for the Minerals sector based in North America,
for a purchase price of £23.7m. Purchase consideration net of cash acquired
was £23.4m. The purchase price includes cash consideration of £14.7m,
further contingent consideration payable of £7.8m and deferred consideration
of £0.9m. The cash outflow in the period associated with this acquisition was
£14.7m.
In H1 2023, the Group acquired Controle Analítico Análises Técnicas Ltda
(Controle Analítico), a leading provider of environmental analysis, with a
focus on water testing, based in Brazil, for a purchase price of £19.1m.
Purchase consideration net of cash acquired was £18.5m. The purchase price
includes cash consideration of £15.4m and further contingent consideration
payable of £3.7m.
Cash Flow
The Group's cash performance in the period was strong, with adjusted free cash
flow of £90.6m (H1 23: £79.6m), driven by excellent cash conversion, the
result of disciplined working capital management. Adjusted cash generated from
operations was £267.4m (H1 23: £270.5m). Statutory cash generated from
operations was £260.3m (H1 23: £261.6m).
Financial Position
The Group ended the period in a strong financial position. Financial net debt
was £708.2m (H1 23: £791.3m), our net debt to EBITDA ratio is 1.0x (H1 23:
1.1x) and our weighted average interest rate is 3.1% (H1 23: 2.9%). The
undrawn headroom on the Group's existing committed borrowing facilities at 30
June 2024 was £443.2m (FY 23: £664.3m).
Consumer Products Division
H1 2024 H1 2023 Change at actual rates Change at constant rates
£m
£m
Revenue 467.9 467.9 0.0% 5.7%
Like-for-like revenue 466.6 465.4 0.3% 6.0%
Adjusted operating profit 122.8 116.8 5.1% 11.7%
Adjusted operating margin 26.2% 25.0% 120bps 140bps
Intertek Value Proposition
Our Consumer Products division focuses on the ATIC solutions we offer to our
clients to develop and sell better, safer, and more sustainable products to
their own clients. This division was 28% of our revenue in 2023 and includes
the following business lines: Softlines, Hardlines, Electrical/Connected World
and Government and Trade Services (GTS).
As a trusted partner to the world's leading retailers, manufacturers and
distributors, the division supports a wide range of industries including
textiles, footwear, toys, hardlines, home appliances, consumer electronics,
information and communication technology, automotive, aerospace, lighting,
building products, industrial and renewable energy products, and healthcare.
Strategy
Our TQA Value Proposition provides a systemic approach to support the Quality
Assurance efforts of our Consumer Products-related customers in each of the
areas of their operations. To do this we leverage our global network of
accredited facilities and world leading technical experts to help our clients
meet high quality, safety, regulatory and brand standards, and develop new
products, materials and technologies, as well as the import of goods in their
markets, based on acceptable quality and safety standards. Ultimately, we
assist them in getting their products to market quickly and safely, to
continually meet evolving consumer demands.
Innovations
We continue to invest in innovation to deliver a superior customer service in
our Consumer Products-related businesses:
· We announced our strategic partnership with Trace For Good with the
launch of an SaaS platform designed to improve traceability and sustainability
in complex supply chains, especially in the textile industry. The platform
helps brands to effectively manage and communicate the environmental and
social impacts of their products.
· We continue to invest in building new functionality into our ToxClear
solution, the one-stop digital sustainable chemical management platform that
helps brands and their suppliers detox their supply chains faster. New
features include a product-agnostic chemical risk assessment module, which
enables customers to gain visibility into the chemicals used and assess their
risks against hazardous chemical lists, such as PFAS (OECD), PFAS (EPA), and
REACH SVHC.
· Intertek recently launched iCare, an innovative digital platform that
helps our clients to manage the testing processes from start to finish. Driven
by increasing regulatory scrutiny and heightened consumer expectations, there
is growing demand among customers in the ATIC space for bespoke, end-to-end
solutions that can improve transparency and traceability around the processing
and testing of lab samples. iCare enables our customers around the world to
submit test requests, view reports and analytics online and connect with our
in-house teams of experts in just a few clicks, allowing greater transparency
for our customers regarding their samples and the testing process.
H1 2024 Performance
In H1 24, our Consumer Products-related business delivered a revenue of
£467.9m, up year on year by 5.7% at constant currency and flat at actual
rates. We delivered an adjusted operating profit of £122.8m, up 11.7% year on
year at constant currency and up 5.1% year on year at actual rates resulting
in an adjusted operating margin of 26.2%, up 140bps year on year at constant
currency.
· Our Softlines business delivered high-single-digit LFL revenue growth
in the period, benefitting from additional ATIC investments from our clients
in e-commerce and sustainability, as well as an increased focus on new
products.
· Hardlines reported mid-single digit LFL revenue growth in the period
benefitting from ATIC investments by our clients in e-commerce and
sustainability, as well as new product development in both the toy and
furniture segments.
· With increased ATIC activities driven by greater regulatory standards
in energy efficiency, more demand for medical devices and 5G investments, our
Electrical & Connected World business delivered high-single digit LFL
revenue growth in the period.
· Our Government and Trade Services business provides certification
services to governments in the Middle East and Africa to facilitate the import
of goods in their markets, based on acceptable quality and safety standards.
The business reported LFL revenue slightly below last year.
2024 growth outlook
Based on the strong start to the year, we expect our Consumer Products
division to deliver mid-single digit LFL revenue growth at constant currency.
Mid to long-term growth outlook
Our Consumer Products division will benefit from growth in new brands, SKUs
& ecommerce, increased regulation, a greater focus on sustainability and
technology, as well as a growing middle class. Our mid to long-term guidance
for Consumer Products is low to mid-single digit LFL revenue growth at
constant currency.
Corporate Assurance Division
H1 2024 H1 2023 Change at actual rates Change at constant rates
£m £m
242.1 231.8 4.4% 9.4%
Revenue
Like-for-like revenue 239.6 231.8 3.4% 8.3%
Adjusted operating profit 52.3 48.2 8.5% 14.4%
Adjusted operating margin 21.6% 20.8% 80bps 90bps
Intertek Value Proposition
Our Corporate Assurance division focuses on the industry agnostic assurance
solutions we offer to our clients to make their value chains more sustainable
and more resilient end-to-end. This division was 14% of our revenue in 2023
and includes Business Assurance and Assuris.
Strategy
Business Assurance and Assuris are central to our ATIC offering and are some
of the most exciting businesses within Intertek, given the increased focus on
operational risk management within the value chain of every company. Intertek
Business Assurance provides a full range of business process audit and support
services, including accredited third-party management systems auditing and
certification, second-party supplier auditing and supply chain solutions,
sustainability data verification, process performance analysis and training.
Assuris' global network of experts provides a global network of scientists,
engineers, and regulatory specialists to provide support to navigate complex
scientific, regulatory, environmental, health, safety, and quality challenges
throughout the value chain of our clients.
Innovations and M&A
We continue to invest in ATIC innovations to deliver a superior customer
service in our Corporate Assurance related businesses:
• Through Intertek Inlight, we provide the technology and expertise
that enables organisations to better understand their supply chain risks and
protect their brand. With our Wisetail online learning platform built in,
suppliers can be trained and upskilled in topics that matter to brands such as
sustainability and compliance related matters.
• We continue to invest in our industry leading ATIC sustainability
solutions, leveraging the depth of our experience and global network of
experts, with two innovative solutions, Green R&D and CircularAssure, to
support our clients as they transition to a more sustainable world. These
solutions allow our customers to enhance the quality, safety, sustainability
and performance of their products whilst meeting their stakeholders'
increasingly demanding environmental expectations.
• Intertek strengthened its People Assurance offering with the
acquisition in August 2023 of PlayerLync, a leading mobile workforce
enablement platform. For businesses with large frontline workforces, including
within the restaurant, hospitality and retail industries, delivering intuitive
technology-enabled training, learning and development content to employees via
mobile devices is mission critical. PlayerLync's unique value proposition
addresses the critical gaps that currently exist for corporates in meeting the
demands of a fast-evolving workforce, harnessing its innovative, tech-enabled
mobile management platform to connect deskless and mobile workers to
high-quality, engaging content.
H1 2024 Performance
In H1 24, our Corporate Assurance-related business reported revenue of
£242.1m, LFL revenue growth of 8.3% at constant currency and up year on year
by 9.4% at constant currency and 4.4% at actual rates. We delivered adjusted
operating profit of £52.3m, up 14.4% year on year at constant currency and up
8.5% year on year at actual rates with an adjusted operating margin of 21.6%,
an increase of 90bps year on year at constant currency.
· Business Assurance delivered high-single digit LFL revenue growth in
the period driven by increased investments by our clients to improve the
resilience of their supply chains, the continuous corporate focus on ethical
supply and the greater need for sustainability assurance.
· The Assuris business reported mid-single digit LFL revenue growth as
we continue to benefit from improved demand for our regulatory assurance
solutions and from increased corporate investment in ESG.
2024 growth outlook
We continue to expect our Corporate Assurance division to deliver high-single
digit LFL revenue growth at constant currency.
Medium- to long-term growth outlook
Our Corporate Assurance division will benefit from a greater corporate focus
on sustainability, the need for increased supply chain resilience, enterprise
cyber-security, People Assurance services and regulatory assurance. Our mid to
long-term guidance for Corporate Assurance is high-single digit to
double-digit LFL revenue growth at constant currency.
Health and Safety Division
H1 2024 H1 2023 Change at actual rates Change at constant rates
£m
£m
166.8 156.7 6.4% 11.0%
Revenue
Like-for-like revenue 163.1 156.7 4.1% 8.5%
Adjusted operating profit 20.3 16.5 23.0% 26.9%
Adjusted operating margin 12.2% 10.5% 170bps 160bps
Intertek Value Proposition
Our Health and Safety division focuses on the ATIC solutions we offer to our
clients to make sure we all enjoy a healthier and safer life. This division
was 10% of our revenue in 2023 and includes our AgriWorld, Food, and Chemicals
& Pharma business lines.
Strategy
Our TQA value proposition provides our Health and Safety-related customers
with a systemic, end-to-end ATIC offering at every stage of the supply chain.
In an industry with significant structural growth drivers, our science-based
approach supports clients as the sustained demand for food safety testing
activities increases along with higher demand for hygiene and safety audits in
factories. Our longstanding experience and expertise in the Chemicals and
Pharma industries enables clients to mitigate risks associated with product
quality and safety and processes, supporting them with their product
development, regulatory authorisation, chemical testing and production.
Innovations and M&A
We continue to invest in innovation to deliver a superior customer service in
our Health and Safety related businesses:
• Honey crystallisation is a natural phenomenon where honey turns
from liquid state to a semi-solid state. Crystallisation is dependent on the
ratio of the two principal sugars found inside: fructose and glucose. When the
level of glucose increases, it becomes insoluble in the water, and
crystallization will happen. Intertek has developed Crystek, a process to
evaluate the glucose in honey, thus predicting and preventing the
crystallisation of honey.
• Acquisitions in Brazil of providers of food and environmental
testing services, Controle Analítico, represent entry into high-growth
testing markets in an attractive region. Controle Analitico complements our
leading Food and Agri Total Quality Assurance solutions in Brazil by expanding
our presence and service offering in the environmental testing market.
H1 2024 Performance
In H1 24, our Health and Safety-related business delivered a LFL revenue
growth of 8.5% at constant currency, and we delivered revenue of £166.8m
which is a year on year increase of 11.0% at constant currency and 6.4% at
actual rates. Adjusted operating profit was £20.3m, up 26.9% year on year at
constant currency and up 23.0% at actual rates. Adjusted operating margin
was 12.2%, up 160bps year on year at constant currency.
· AgriWorld provides inspection activities to ensure that the global
food supply chain operates fully and safely. The business reported high-single
digit LFL revenue growth as we continue to see an increase in demand for
inspection activities driven by sustained growth in the global food industry.
· Our Food business registered double-digit LFL revenue growth in the
period as we continue to benefit from higher demand for food safety testing
activities as well as hygiene and safety audits in factories.
· In Chemicals & Pharma we saw high-single digit LFL revenue growth
reflecting improved demand for regulatory assurance and chemical testing and
from the increased R&D investments of the pharma industry.
2024 growth outlook
Based on the strong start to the year, we expect our Health and Safety
division to deliver high-single digit LFL revenue growth.
Medium- to long-term growth outlook
Our Health and Safety division will benefit from the demand for healthier and
more sustainable food to support a growing, global population, increased
regulation, and new R&D investments in the pharma industry. Our mid to
long-term guidance for our Health and Safety division is mid to high-single
digit LFL revenue growth at constant currency.
Industry and Infrastructure Division
H1 2024 H1 2023 Change at actual rates Change at constant rates
£m
£m
420.5 427.0 (1.5%) 2.8%
Revenue
Like-for-like revenue 418.1 427.0 (2.1%) 2.2%
Adjusted operating profit 36.8 37.3 (1.3%) 4.0%
Adjusted operating margin 8.8% 8.7% 10bps 10bps
Intertek Value Proposition
Our Industry and Infrastructure division focuses on the ATIC solutions our
clients need to develop and build better, safer and greener infrastructure.
This division was 26% of our revenue in 2023 and includes Industry Services,
Minerals and Building & Construction.
Strategy
Our TQA value proposition helps our customers to mitigate the risks associated
with technical failure or delay, ensuring that their projects proceed on time
and meet the highest quality standards as demand for more environmentally
friendly buildings and infrastructure grows. By helping to improve safety
conditions and reduce commercial risk, our broad range of assurance, testing,
inspection, certification and engineering services allows us to assist clients
in protecting both the quantity and quality of their mined and drilled
products.
Innovations
We continue to invest in innovation to deliver a superior customer service in
our Industry and Infrastructure-related businesses:
• Intertek Industry Services is harnessing the power of robotics,
IoT and digital solutions to create a cutting-edge Digital Twin offering -
Intertek Aware. The software provides energy asset managers and operators with
all the tools they need to improve safety, increase reliability, and better
manage inspection data, while also helping them to reduce costs.
• We renewed the Metoc brand, bringing with it 40 years of
pioneering expertise in helping energy and water companies to navigate
complex, sustainability-focused projects. Intertek Metoc's consultants,
scientists, engineers, researchers and project managers operate at the
critical nexus where engineering designs meet environmental constraints,
working to ensure that projects around the world remain safe, economical and
sustainable at every stage.
• Intertek acquired Base Met Labs in 2024, a leading provider of
metallurgical testing services for the Minerals sector based in North America.
Founded in 2014 and operating from laboratories in Kamloops, British Columbia,
and Tucson, Arizona, Base Met Labs' specialist focus on metallurgy
capabilities complements Intertek Minerals' existing strengths in
geochemistry, mine site laboratories and trade inspection, creating attractive
commercial synergies within Intertek's high-quality service portfolio. Base
Met Labs helps clients optimise mineral processing operations and maximise
resource potential.
H1 2024 Performance
Our Industry and Infrastructure-related business reported LFL revenue growth
of 2.2% at constant currency and we delivered revenue of £420.5m in H1 24, up
year on year by 2.8% at constant currency but down 1.5% at actual rates.
Adjusted operating profit of £36.8m, was up 4.0% at constant currency and
down 1.3% year on year at actual rates. Adjusted operating margin was 8.8%,
up year on year 10bps at constant currency.
· Industry Services, which includes our Capex Inspection services and
Opex Maintenance services, delivered mid-single digit revenue growth as we
benefitted from increased capex investment in traditional Oil and Gas
exploration and production as well as in renewables.
· The continuing high demand for testing and inspection activities
drove mid-single digit LFL revenue growth in our Minerals business.
· We continue to see growing demand for more environmentally friendly
buildings and the increased number of infrastructure projects in our Building
& Construction business in North America, which delivered a stable LFL
revenue performance.
2024 growth outlook
We now expect our Industry and Infrastructure division to deliver low-single
digit LFL revenue growth at constant currency.
Medium- to long-term growth outlook
Our Industry and Infrastructure division will benefit from increased
investment from energy companies to meet growing demand and consumption of
energy from the growing global population, the scaling up of renewables,
increased R&D investments that OEMs are making in EV/hybrid vehicles and
from the development of greener fuels. We expect mid to high-single digit LFL
revenue growth in the medium-term at constant currency.
World of Energy Division
H1 2024 H1 2023 Change at actual rates Change at constant rates
£m
£m
372.2 356.6 4.4% 8.3%
Revenue
Like-for-like revenue 372.2 356.6 4.4% 8.3%
Adjusted operating profit 32.9 26.6 23.7% 31.1%
Adjusted operating margin 8.8% 7.5% 130bps 150bps
Intertek Value Proposition
Our World of Energy division focuses on the ATIC solutions we offer to our
clients to develop better and greener fuels as well as renewables. This
division was 22% of our revenue in 2023 and includes Caleb Brett,
Transportation Technologies (TT) and Clean Energy Associates (CEA).
Strategy
Our TQA Value Proposition provides world leading expertise to enable our
clients to benefit from the significant opportunities in the World of Energy.
We do this by providing specialist cargo inspection, analytical assessment,
calibration and related research and technical services to the world's
petroleum and biofuels industries.
We provide rapid testing and validation services to the transportation
industry, leveraging our Transportation Technologies subject matter expertise
that is recognised by leading manufacturers worldwide. We evaluate everything
from automobiles and energy storage to airplanes, and deliver top tier testing
for emerging markets, such as autonomous and electric/hybrid vehicles.
Clean Energy Associates (CEA) is a market-leading provider of Quality
Assurance (QA), supply-chain traceability and technical services to the
fast-growing solar energy sector. Its leading assurance service offering
includes in-line monitoring that allows clients to oversee the management and
traceability of their supply chains, offering a comprehensive, end-to-end
service to support customers on their decarbonisation and energy
sustainability journeys.
Innovations
We continue to invest in innovation to deliver a superior customer service in
our World of Energy related businesses:
• Intertek Caleb Brett has partnered with Zero Petroleum, a
breakthrough British technology company that makes whole-blend synthetic,
non-biological fuels in a completely fossil free process, using just carbon
dioxide taken from the air and renewable hydrogen made from water. Intertek is
a preferred testing partner and is supporting Zero Petroleum, helping to
accelerate the firm's development of its synthetic fuel that will power the
engines of the future.
• Our EV Centre of Excellence state-of-the-art testing facility in
the UK supports manufacturers to develop next generation electric propulsion
systems, from high-speed motor testing to full vehicle validation
capabilities. Our global network of automotive testing facilities can support
manufacturers and suppliers with a wide portfolio of bespoke solutions and
capabilities, such as engine and hybrid testing, EV fluids, and fuel,
additive and lubricant testing.
• We recently opened our latest Intertek Caleb Brett Centre of
Excellence laboratory in O'ahu, Hawaii, dedicated to ensuring the highest
standards of quality assurance and consumer confidence in jet fuel. The
laboratory is outfitted with state-of-the-art technology to conduct
comprehensive testing of jet fuel, aligning with the stringent ASTM D1655
specification, a global standard for quality. The laboratory plays a pivotal
role in certifying jet fuel quality, maintaining essential high standards for
the aviation sector.
H1 2024 performance
H1 24 saw our World of Energy-related business report revenue of £372.2m, a
LFL revenue increase of 8.3% at constant currency and year on year growth of
8.3% at constant currency and 4.4% at actual rates. Adjusted operating profit
was £32.9m, up 31.1% year on year at constant currency and 23.7% at actual
rates. Adjusted operating margin of 8.8% is ahead 150bps year on year at
constant currency.
· Caleb Brett, the global leader in the Crude Oil and Refined products
global trading markets, benefitted from improved momentum driven by increased
global mobility and higher testing activities for biofuels with high-single
digit LFL revenue growth in the period.
· Transportation Technologies delivered a low-single digit LFL revenue
growth in the period driven by increased investment in new powertrains to
lower CO2/NOx emissions and in traditional combustion engines to improve fuel
efficiency.
· Our CEA business continued to benefit from the increased investments
in solar panels, which is the fastest growing form of renewable energy, and
delivered double-digit LFL revenue growth in the period.
2024 growth outlook
Based on the strong start to the year, we expect our World of Energy division
to deliver high-single digit LFL revenue growth at constant currency.
Medium- to long-term growth outlook
Our World of Energy division will benefit from increased investment from
energy companies to meet growing demand and consumption of energy from the
growing global population, the scaling up of renewables, increased R&D
investments that OEMs are making in EV/hybrid vehicles and from the
development of greener fuels. Our mid to long-term LFL guidance at constant
currency for the World of Energy division is low to mid-single digit revenue
growth.
Presentation of Results
For the half year ended 30 June 2024
Adjusted Results
To present the performance of the Group in a clear, consistent and comparable
format, certain items are disclosed separately on the face of the income
statement. These items, which are described in the Presentation of Results
section of this report and in note 3, are excluded from the adjusted results.
The figures discussed in this review (extracted from the income statement and
cash flow) are presented before Separately Disclosed Items (SDIs).
Like-for-Like Growth
LFL revenue includes acquisitions following their 12-month anniversary of
ownership and excludes the historical contribution of any business disposals
and closures.
Constant Exchange Rates
In order to remove the impact of currency translation from our growth figures
we present revenue and profit growth at constant exchange rates. This is
calculated by translating H1 23 results at H1 24 exchange rates.
Separately Disclosed Items
SDIs are items which by their nature or size, in the opinion of the Directors,
should be excluded from the adjusted results to provide readers with a clear
and consistent view of the business performance of the Group and its operating
divisions. Reconciliations of the Reported to Adjusted Performance Measures
are given below.
When applicable, these SDIs include amortisation of acquisition intangibles;
impairment of goodwill and other assets; the profit or loss on disposals of
businesses or other significant non-current assets; costs of acquiring and
integrating acquisitions; the cost of any fundamental restructuring;
significant claims and settlements; and unrealised market gains/losses on
financial assets/liabilities, including contingent consideration.
Adjusted operating profit excludes the amortisation of acquired intangible
assets, primarily customer relationships, as we do not believe that the
amortisation charge in the Income Statement provides useful information about
the cash costs of running our business as these assets will be supported and
maintained by the ongoing marketing and promotional expenditure, which is
already reflected in operating costs. Amortisation of software, however, is
included in adjusted operating profit as it is similar in nature to other
capital expenditure.
The impairment of goodwill and other assets that by their nature or size are
not expected to recur; the profit and loss on disposals of businesses or other
significant assets; and the costs associated with successful, active or
aborted acquisitions and the integration of such acquisitions are excluded
from adjusted operating profit to provide useful information regarding the
underlying performance of the Group's operations.
Details of the SDIs for the six months ended 30 June 2024 and the comparative
period are given in note 3 to the Condensed Consolidated Interim Financial
Statements.
Reconciliation of Results to Adjusted Performance Measures (£m) 2024 H1 2024 H1 2024 H1 2023 H1 2023 H1 2023 H1
Results SDIs Adjusted Results SDIs Adjusted
Operating profit 232.4 32.7 265.1 215.0 30.4 245.4
Operating margin 13.9% 2.0% 15.9% 13.1% 1.9% 15.0%
Net financing costs (26.2) 3.7 (22.5) (23.3) 1.1 (22.2)
Profit before tax 206.2 36.4 242.6 191.7 31.5 223.2
Income tax expense (52.9) (7.8) (60.7) (49.4) (7.4) (56.8)
Profit for the year 153.3 28.6 181.9 142.3 24.1 166.4
Cash flow from operations 260.3 7.1 267.4 261.6 8.9 270.5
Free cash flow 83.5 7.1 90.6 70.7 8.9 79.6
Basic earnings per share 87.8p 17.8p 105.6p 80.8p 14.9p 95.7p
Diluted earnings per share 87.2p 17.7p 104.9p 80.4p 14.8p 95.2p
Reconciliation of Revenue Six months to 30 June 2024 Six months to 30 June 2023 Change
£m £m %
Reported revenue 1,669.5 1,640.0 1.8%
Less: Acquisitions/disposals/closures (9.9) (2.5)
Like-for-like revenue 1,659.6 1,637.5 1.3%
Impact of foreign exchange movements - (73.1)
Like-for-like revenue at constant currency 1,659.6 1,564.4 6.1%
Reconciliation of Financial Net Debt to Adjusted EBITDA (£m) 30 June 2024 30 June 2023
Net debt 1,002.8 1,089.5
IFRS 16 lease liability (294.6) (298.2)
Financial net debt 708.2 791.3
2023 H2 2024 H1 2024 LTM 2022 H2 2023 H1 2023 LTM
Reported operating profit 271.2 232.4 503.6 255.4 215.0 470.4
Depreciation 76.1 70.8 146.9 82.9 79.9 162.8
Amortisation 9.5 9.3 18.8 10.4 9.8 20.2
EBITDA 356.8 312.5 669.3 348.7 304.7 653.4
SDIs 34.5 32.7 67.2 47.4 30.4 77.8
Adjusted EBITDA 391.3 345.2 736.5 396.1 335.1 731.2
Financial net debt / EBITDA 1.0x 1.1x
Constant Currency Reconciliations Six months to 30 June 2024 Six months to 30 June 2023 Change
£m £m %
Adjusted operating profit at actual rates 265.1 245.4 8.0%
Impact of foreign exchange movements - (13.3)
Adjusted operating profit at constant rates 265.1 232.1 14.2%
Adjusted diluted EPS at actual rates 104.9p 95.2p 10.2%
Impact of foreign exchange movements - (5.9p)
Adjusted diluted EPS at constant rates 104.9p 89.3p 17.5%
Diluted EPS at actual rates 87.2p 80.4p 8.5%
Impact of foreign exchange movements - (6.9p)
Diluted EPS at constant rates 87.2p 73.5p 18.6%
Principal Risks and Uncertainties
The Board has overall responsibility for the establishment and oversight of
the Group's risk management framework. The Board has an established,
structured approach to risk management, which includes continuously assessing
and monitoring the key risks and uncertainties of the business. Based on this
review, the Board identified the below risks outlined on pages 52 to 57 of the
Group's Annual Report for 2023, which is available from our website
at www.intertek.com (http://www.intertek.com/) :
Operational
• Reputation
• Customer service
• People retention
• Macro-economic
• Health, safety and wellbeing
• Industry and competitive landscape
• IT systems and data security
• Contracting
Legal and Regulatory
• Regulatory and political Landscape
• Business ethics
Financial
• Financial risk
The Board does not consider that there has been any significant change to the
nature of these risks and the key mitigating actions since the publication of
the Group's Annual Report for 2023.
The Business Review and Operating Review include consideration of the
significance of key uncertainties affecting the Group in the remaining six
months of the year.
Management Reports and Trading Updates
Intertek will issue a Trading Update in the fourth quarter of 2024.
Half Year Results
If you require a printed copy of this statement, please contact the Group
Company Secretary. This statement is available on www.intertek.com.
Legal Notice
This Half Year Report and announcement contain 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
announcement should be construed as a profit forecast. Past performance cannot
be relied upon as a guide to future performance.
Responsibility Statement of the Directors in Respect of the Half Year Report
We confirm that to the best of our knowledge:
· The condensed interim financial statements have been prepared in accordance
with UK adopted International Accounting Standard 34, 'Interim Financial
Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority and gives a true and fair
view of the assets, liabilities, financial position and profit of the Group;
· The interim management report includes a fair review of the information
required by:
a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication
of important events that have occurred during the first six months of the
financial year and their impact on the condensed set of financial statements;
and a description of the principal risks and uncertainties for the remaining
six months of the year; and
b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the entity during that period; and any changes in the related
party transactions described in the last Annual report that could do so.
On behalf of the Board of Intertek Group plc
André Lacroix Colm Deasy
Chief Executive Officer Chief Financial Officer
1 August 2024 1 August 2024
Independent Review Report to Intertek Group plc
Report on the Condensed Consolidated Interim Financial Statements
Our Conclusion
We have reviewed Intertek Group plc's condensed consolidated interim financial
statements (the "interim financial statements") in the 2024 Half Year Results
Announcement of Intertek Group plc for the 6 month period ended 30 June 2024
(the "period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
· the Condensed Consolidated Interim Statement of Financial Position as
at 30 June 2024;
· the Condensed Consolidated Interim Income Statement and the Condensed
Consolidated Interim Statement of Comprehensive Income for the period then
ended;
· the Condensed Consolidated Interim Statement of Cash Flows for the
period then ended;
· the Condensed Consolidated Interim Statement of Changes in Equity for
the period then ended; and
· the explanatory notes to the interim financial statements.
The interim financial statements included in the 2024 Half Year Results
Announcement of Intertek Group plc have been prepared in accordance with UK
adopted International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the 2024 Half Year Results
Announcement and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the interim financial
statements.
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410. However, future events
or conditions may cause the group to cease to continue as a going concern.
Responsibilities for the Interim Financial Statements and the Review
Our Responsibilities and Those of the Directors
The 2024 Half Year Results Announcement, including the interim financial
statements, is the responsibility of, and has been approved by the directors.
The directors are responsible for preparing the 2024 Half Year Results
Announcement in accordance with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority. In preparing
the 2024 Half Year Results Announcement, including the interim financial
statements, the directors are responsible for assessing the group's ability to
continue as a going concern, disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or to cease operations, or have
no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the 2024 Half Year Results Announcement based on our review. Our
conclusion, including our Conclusions relating to going concern, is based on
procedures that are less extensive than audit procedures, as described in the
Basis for conclusion paragraph of this report. This report, including the
conclusion, has been prepared for and only for the company for the purpose of
complying with the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into
whose hands it may come save where expressly agreed by our prior consent in
writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
1 August 2024
Condensed Consolidated Interim Income Statement
For the six months ended 30 June 2024
Six months to 30 June 2024 Six months to 30 June 2023 (Unaudited)
(Unaudited)
Notes Adjusted Results Separately Disclosed Items* Total 2024 Adjusted Results Separately Disclosed Items* Total 2023
£m £m £m £m
Revenue 2 1,669.5 - 1,669.5 1,640.0 - 1,640.0
Operating costs (1,404.4) (32.7) (1,437.1) (1,394.6) (30.4) (1,425.0)
Group operating profit/(loss) 2 265.1 (32.7) 232.4 245.4 (30.4) 215.0
Finance income 1.0 - 1.0 1.7 - 1.7
Finance expense (23.5) (3.7) (27.2) (23.9) (1.1) (25.0)
Net financing costs (22.5) (3.7) (26.2) (22.2) (1.1) (23.3)
Profit/(loss) before income tax 242.6 (36.4) 206.2 223.2 (31.5) 191.7
Income tax (expense)/credit 4 (60.7) 7.8 (52.9) (56.8) 7.4 (49.4)
Profit/(loss) for the period 2 181.9 (28.6) 153.3 166.4 (24.1) 142.3
Attributable to:
Equity holders of the Company 170.2 (28.6) 141.6 154.4 (24.1) 130.3
Non-controlling interest 11.7 - 11.7 12.0 - 12.0
Profit/(loss) for the period 181.9 (28.6) 153.3 166.4 (24.1) 142.3
Earnings per share
Basic 5 105.6p 87.8p 95.7p 80.8p
Diluted 5 104.9p 87.2p 95.2p 80.4p
Dividends in respect of the period 53.9p 37.7p
* See Note 3
Condensed Consolidated Interim Statement of Comprehensive Income
For the six months ended 30 June 2024
Six months to 30 June 2024 (Unaudited) Six months to 30 June 2023 (Unaudited)
£m £m
Notes
Profit for the period 2 153.3 142.3
Other comprehensive income
Remeasurements on defined benefit pension schemes 6 1.2 2.8
Tax on comprehensive income items 1.6 3.9
Items that will never be reclassified to profit or loss 2.8 6.7
Foreign exchange translation differences on foreign operations (18.2) (125.1)
Net exchange (loss)/gain on hedges of net investments in foreign operations (6.3) 52.7
Gain/(loss) on fair value of cash flow hedges 0.5 -
Items that are or may be reclassified subsequently to profit or loss (24.0) (72.4)
Total other comprehensive expense for the period (21.2) (65.7)
Total comprehensive income for the period 132.1 76.6
Total comprehensive income for the period attributable to:
Equity holders of the company 115.5 64.5
Non-controlling interest 16.6 12.1
Total comprehensive income for the period 132.1 76.6
Condensed Consolidated Interim Statement of Financial Position
As at 30 June 2024
At 30 June 2024 (Unaudited) At 30 June 2023 (Unaudited) At 31 December 2023
£m £m (Audited)
£m
Notes
Assets
Property, plant and equipment 663.1 653.1 669.6
Goodwill 8 1,395.0 1,368.2 1,385.8
Other intangible assets 324.5 334.1 330.9
Trade and other receivables 18.5 19.9 21.8
Defined benefit pension asset 6 21.9 25.2 21.8
Deferred tax assets 31.9 40.4 36.4
Total non-current assets 2,454.9 2,440.9 2,466.3
Inventories* 18.4 17.5 17.2
Trade and other receivables* 781.2 763.2 725.1
Cash and cash equivalents 7 355.9 239.5 299.3
Current tax receivable 26.4 24.1 30.0
Total current assets 1,181.9 1,044.3 1,071.6
Total assets 3,636.8 3,485.2 3,537.9
Liabilities
Interest bearing loans and borrowings 7 (47.8) (303.4) (97.5)
Current taxes payable (53.4) (57.6) (60.5)
Lease liabilities (68.6) (66.4) (69.9)
Trade and other payables* (698.9) (682.1) (735.6)
Provisions* (62.8) (16.4) (18.0)
Total current liabilities (931.5) (1,125.9) (981.5)
Interest bearing loans and borrowings 7 (1,016.3) (727.4) (812.4)
Lease liabilities (226.0) (231.8) (237.9)
Deferred tax liabilities (66.0) (83.7) (75.3)
Defined benefit pension liabilities 6 (2.7) (2.9) (4.8)
Trade and other payables* (31.7) (30.8) (30.1)
Provisions* (9.5) (17.7) (35.8)
Total non-current liabilities (1,352.2) (1,094.3) (1,196.3)
Total liabilities (2,283.7) (2,220.2) (2,177.8)
Net assets 1,353.1 1,265.0 1,360.1
Equity
Share capital 1.6 1.6 1.6
Share premium 257.8 257.8 257.8
Other reserves (156.4) (113.8) (127.5)
Retained earnings 1,205.6 1,084.4 1,191.5
Total equity attributable to equity holders of the Company 1,308.6 1,230.0 1,323.4
Non-controlling interest 44.5 35.0 36.7
Total equity 1,353.1 1,265.0 1,360.1
* Working capital of negative £4.2m (H1 23: £31.4m; FY 23: negative £78.8m)
comprises the asterisked items in the above Statement of Financial Position
less IFRS16 Lease Receivable of £0.9m (H1 23: £2.3m; FY 23 £1.6m).
Condensed Consolidated Interim Statement of Changes in Equity
For the six months ended 30 June 2024
Attributable to equity holders of the Company
Other Reserves
Share Capital Share premium Translation reserve Other Retained Earnings Total before non-controlling interest Non-controlling interest Total equity
£m £m £m £m £m £m £m £m
At 1 January 2023 1.6 257.8 (47.7) 6.4 1,065.9 1,284.0 34.0 1,318.0
Total comprehensive (expense)/income for the period
Profit - - - - 130.3 130.3 12.0 142.3
Other comprehensive (expense)/income - - (72.5) - 6.7 (65.8) 0.1 (65.7)
Total comprehensive (expense)/income for the period - - (72.5) - 137.0 64.5 12.1 76.6
Transactions with owners of the company recognised directly in equity
Contributions by and distributions to the owners of the company
Dividends paid - - - - (115.4) (115.4) (11.1) (126.5)
Purchase of own shares - - - - (8.4) (8.4) - (8.4)
Tax paid on share awards vested(1) - - - - (5.6) (5.6) - (5.6)
Equity-settled transactions - - - - 11.0 11.0 - 11.0
Income tax on equity-settled transactions - - - - (0.1) (0.1) - (0.1)
Total contributions by and distributions to the owners of the company - - - - (118.5) (118.5) (11.1) (129.6)
At 30 June 2023 (unaudited) 1.6 257.8 (120.2) 6.4 1,084.4 1,230.0 35.0 1,265.0
At 1 January 2024 1.6 257.8 (133.8) 6.3 1,191.5 1,323.4 36.7 1,360.1
Total comprehensive (expense)/income for the period
Profit - - - - 141.6 141.6 11.7 153.3
Other comprehensive (expense)/income - - (29.4) 0.5 2.8 (26.1) 4.9 (21.2)
Total comprehensive (expense)/income for the period - - (29.4) 0.5 144.4 115.5 16.6 132.1
Transactions with owners of the company recognised directly in equity
Contributions by and distributions to the owners of the company
Dividends paid - - - - (119.3) (119.3) (8.8) (128.1)
Purchase of own shares - - - - (15.7) (15.7) - (15.7)
Tax paid on share awards vested(1) - - - - (7.4) (7.4) - (7.4)
Equity-settled transactions - - - - 12.1 12.1 - 12.1
Income tax on equity-settled transactions - - - - - - - -
Total contributions by and distributions to the owners of the company - - - - (130.3) (130.3) (8.8) (139.1)
At 30 June 2024 (unaudited) 1.6 257.8 (163.2) 6.8 1,205.6 1,308.6 44.5 1,353.1
( )
(1) The tax paid on share awards vested is related to settlement of the tax
obligation by the Group via the sale of a portion of the equity-settled
shares.
The £119.3m dividend paid on 21 June 2024 represented a final dividend of
74.0p per ordinary share in respect of the year ended 31 December 2023 which
was approved and paid during the period. The £115.4m dividend paid on 15 June
2023 represented a final dividend of 71.6p per ordinary share in respect of
the year ended 31 December 2022 which was approved and paid during the period.
No ordinary shares were issued in the period to satisfy the vesting of share
awards.
Condensed Consolidated Interim Statement of Cash Flows
For the six months ended 30 June 2024
Six months to 30 June 2024 (Unaudited) Six months to 30 June 2023 (Unaudited)
£m £m
Notes
Cash flows from operating activities
Profit for the period 2 153.3 142.3
Adjustments for:
Depreciation charge 70.8 79.9
Amortisation of software 9.3 9.8
Amortisation of acquisition intangibles 16.4 17.2
Equity-settled transactions 12.1 11.0
Net financing costs 26.2 23.3
Income tax expense 4 52.9 49.4
Profit on disposal of property, plant, equipment and software - (0.3)
Operating cash flows before changes in working capital and operating 341.0 332.6
provisions
Change in inventories (1.3) (1.4)
Change in trade and other receivables (60.4) (99.3)
Change in trade and other payables (25.1) 27.3
Change in provisions 6.1 2.4
Cash generated from operations 260.3 261.6
Interest and other finance expense paid (27.6) (48.6)
Income taxes paid (59.1) (56.0)
Net cash flows generated from operating activities* 173.6 157.0
Cash flows from investing activities
Proceeds from sale of property, plant, equipment and software* 0.7 3.2
Interest received* 1.2 1.7
Acquisition of subsidiaries, net of cash received (14.7) (14.8)
Consideration paid in respect of prior year acquisitions - (2.7)
Acquisition of property, plant, equipment, software* 9 (55.6) (51.4)
Net cash flows used in investing activities (68.4) (64.0)
Cash flows from financing activities
Purchase of own shares (15.7) (8.4)
Tax paid on share awards vested (7.4) (5.6)
Drawdown of borrowings 228.8 53.6
Repayment of borrowings (82.6) (32.8)
Repayment of lease liabilities* (36.4) (39.8)
Dividends paid to non-controlling interest (8.8) (11.1)
Equity dividends paid (119.3) (115.4)
Net cash flows used in financing activities (41.4) (159.5)
Net increase/(decrease) in cash and cash equivalents 63.8 (66.5)
Cash and cash equivalents at 1 January 7 298.6 320.7
Effect of exchange rate fluctuations on cash held 7 (7.5) (18.7)
Cash and cash equivalents at end of period 7 354.9 235.5
* Free cash flow of £83.5m (H1 23: £70.7m) comprises the asterisked items in
the above Statement of Cash Flows.
Adjusted cash flow from operations of £267.4m (H1 23: £270.5m) comprises
statutory cash flow from operations of £260.3m (H1 23: £261.6m) before cash
outflows relating to Separately Disclosed Items of £7.1m (H1 23: £8.9m).
Notes to the Condensed Consolidated Interim Financial Statements
1. Basis of Preparation
Reporting Entity
Intertek Group plc (the 'Company') is a company incorporated and domiciled in
the United Kingdom. The Condensed Consolidated Interim Financial Statements of
the Company as at and for the six months ended 30 June 2024 comprise the
Company and its subsidiaries (together referred to as the 'Group').
The Consolidated Financial Statements of the Group as at, and for the year
ended, 31 December 2023 are available upon request from the Company's
registered office at 33 Cavendish Square, London, W1G 0PS. An electronic
version is available from the Investors section of the Group website at
www.intertek.com (http://www.intertek.com) .
Statement of Compliance
These Condensed Consolidated Interim Financial Statements for the half-year
reporting period ended 30 June 2024 have been prepared in accordance with the
UK-adopted International Accounting Standards 34, 'Interim Financial
Reporting' ("IAS 34") and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority. They do not
include all of the information required for full annual financial statements
and should be read in conjunction with the Consolidated Financial Statements
of the Group as at and for the year ended 31 December 2023. These Condensed
Consolidated Interim Financial Statements do not comprise statutory accounts
within the meaning of section 434 of the Companies Act 2006.
The Condensed Consolidated Financial Statements have also been prepared in
accordance with the accounting policies set out in the 2023 Annual Report and
have been prepared under the historical cost convention as modified by the
revaluation of certain financial assets and liabilities (including derivative
financial instruments) at fair value.
The comparative figures for the financial year ended 31 December 2023 are the
Company's statutory accounts for that financial year. Those accounts have been
reported on by the Company's auditors and delivered to the Registrar of
Companies. The report of the auditor was (i) unqualified, (ii) did not include
a reference to any matters to which the auditors drew attention by way of
emphasis without qualifying their report, and (iii) did not contain a
statement under section 498(2) or (3) of the Companies Act 2006.
Significant Accounting Policies
These Condensed Consolidated Interim Financial Statements are unaudited and,
except as described below, have been prepared on the basis of accounting
policies consistent with those applied in the Consolidated Financial
Statements for the year ended 31 December 2023.
There are no significant new accounting standards or amendments to accounting
standards that are effective for annual periods beginning on or after 1
January 2024 that have a material effect on the results of the Group.
Key Estimations and Uncertainties
The preparation of interim financial statements requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities, income
and expense. Actual results may differ from these estimates. There are no
critical accounting judgements.
In preparing these Condensed Consolidated Interim Financial Statements, the
nature of the significant judgements made by management in applying the
Group's accounting policies and the key sources of estimation were the same as
those that were applied to the Consolidated Financial Statements as at and for
the year ended 31 December 2023. During the six months ended 30 June 2024
management reassessed its estimates and judgements in respect of pensions
(note 6) and impairment (note 8(c)).
Risks and Uncertainties
The Operating Review includes consideration of the risks and uncertainties
affecting the Group in the remaining six months of the year.
The Board has reviewed the Group's financial forecasts up to 31 December 2025,
to assess both liquidity requirements and debt covenants. In addition, these
have been sensitised for a severe yet plausible decline in economic conditions
(including an illustrative sensitivity scenario of a reduction of 30% to the
base profit forecasts and the corresponding impact to cash flow forecasts in
each of these years). The Board remains satisfied with the Group's funding and
liquidity position, with the Group forecasts to remain within its committed
facilities and compliant with debt covenants even following the 30% downside
sensitivity. On the basis of its forecasts to 31 December 2025, both base case
and stressed, and available facilities, the Board has concluded that there are
no material uncertainties over going concern, including no anticipated breach
of covenants, and therefore the going concern basis of preparation continues
to be appropriate.
Foreign Exchange
The assets and liabilities of foreign operations, including goodwill arising
on acquisition, are translated to sterling at foreign exchange rates ruling at
the reporting date. The income and expenses of foreign operations are
translated into sterling at cumulative average rates of exchange during the
year.
The most significant currencies for the Group were translated at the following
exchange rates:
Assets and Liabilities Income and expense
Actual Rates Cumulative average rates
Value of £1 30 June 2024 30 June 2023 31 December 2023 H1 24 H1 23 FY 23
US dollar 1.26 1.26 1.28 1.27 1.23 1.24
Euro 1.18 1.16 1.15 1.17 1.14 1.15
Chinese renminbi 9.18 9.16 9.14 9.13 8.56 8.81
Hong Kong dollar 9.86 9.90 10.00 9.89 9.64 9.71
Australian dollar 1.90 1.92 1.87 1.92 1.83 1.87
2. Operating Segments
Business Analysis
The Group is organised into business lines, which are the Group's operating
segments and are reported to the CEO, the chief operating decision maker.
These operating segments are aggregated into five segments, which are the
Group's reportable segments, based on the similar nature of products and
services and the mid- to long-term structural growth drivers. When aggregating
operating segments into the five reportable segments we have applied judgement
over the similarities of the services provided, the customer base and the mid-
to long-term structural growth drivers. The costs of the corporate head office
and other costs which are not controlled by the five segments are allocated
appropriately. A description of the activity in each segment is given in the
Operating Review.
The results of the divisions are shown below:
Six months to 30 June 2024 Revenue from external customers Depreciation and software amortisation Adjusted operating profit Separately disclosed items Operating profit
£m £m £m £m £m
Consumer Products 467.9 (25.3) 122.8 (9.3) 113.5
Corporate Assurance 242.1 (6.1) 52.3 (10.7) 41.6
Health and Safety 166.8 (10.3) 20.3 (2.2) 18.1
Industry and Infrastructure 420.5 (15.0) 36.8 (8.8) 28.0
World of Energy 372.2 (23.4) 32.9 (1.7) 31.2
Total 1,669.5 (80.1) 265.1 (32.7) 232.4
Group operating profit 265.1 (32.7) 232.4
Net financing costs (22.5) (3.7) (26.2)
Profit before income tax 242.6 (36.4) 206.2
Income tax (expense)/credit (60.7) 7.8 (52.9)
Profit for the year 181.9 (28.6) 153.3
Six months to 30 June 2023 Revenue from external customers Depreciation and software amortisation Adjusted operating profit Separately disclosed items Operating profit
£m £m £m £m £m
Consumer Products 467.9 (29.6) 116.8 (4.2) 112.6
Corporate Assurance 231.8 (6.1) 48.2 (11.7) 36.5
Health and Safety 156.7 (11.2) 16.5 (2.4) 14.1
Industry and Infrastructure 427.0 (16.2) 37.3 (5.3) 32.0
World of Energy 356.6 (26.6) 26.6 (6.8) 19.8
Total 1,640.0 (89.7) 245.4 (30.4) 215.0
Group operating profit 245.4 (30.4) 215.0
Net financing costs (22.2) (1.1) (23.3)
Profit before income tax 223.2 (31.5) 191.7
Income tax (expense)/credit (56.8) 7.4 (49.4)
Profit for the year 166.4 (24.1) 142.3
3. Separately Disclosed Items (SDIs)
Six months to 30 June 2024 Six months to 30 June 2023
£m £m
Operating costs
Amortisation of acquisition intangibles (a) (16.4) (17.2)
Acquisition and integration costs (b) (1.8) (3.6)
Restructuring costs (c) (10.6) (9.6)
Significant claims and settlements (d) (3.9) -
Total operating costs (32.7) (30.4)
Net financing costs (e) (3.7) (1.1)
Total before income tax (36.4) (31.5)
Income tax credit on Separately Disclosed Items 7.8 7.4
Total (28.6) (24.1)
Refer to Presentation of Results section for further details on SDIs.
(a) The amortisation of acquisition intangibles relates to customer
relationships, trade names, technology and non-compete covenants acquired.
(b) Acquisition and integration costs relating to acquisition activity in
the period and integration of prior period acquisitions were £1.8m (H1 23:
£3.6m).
(c) During 2022, the Group initiated the first year of a cost reduction
programme. In six months to June 2024 costs of £10.6m (H1 23: £9.6m)
included consolidating sites and offices, streamlining headcount, Group-wide
technology upgrades and related asset write-offs.
(d) Significant claims and settlements relate to commercial claims that are
separately disclosable due to their size and nature.
(e) Net financing costs of £3.7m (H1 23: £1.1m) relates to unwinding of
discount and changes in fair value of contingent consideration in relation to
acquisitions from prior periods.
4. Income Tax Expense
Income tax expense is recognised based on management's best estimate of the
weighted average annual income tax rate expected for the full financial year
applied to the pre-tax income of the interim period in respect of the adjusted
results. The income tax expense for the adjusted results for the six months
ended 30 June 2024 is £60.7m (H1 23: £56.8m). The Group's adjusted
consolidated effective tax rate for the six months ended 30 June 2024 is 25.0%
(H1 23: 25.5%). The income tax expense for the total results for the six
months ended 30 June 2024 is £52.9m (H1 23: £49.4m). The Group's
consolidated effective tax rate for the six months ended 30 June 2024 is 25.7%
(H1 23: 25.8%).
There is no difference between the consolidated effective tax rate of 25.0%
and the notional statutory UK rate of 25.0% but there are a number of
differences which net to zero net impact. These items include: the mix of
profits; the effect of tax rates in foreign jurisdictions; non-deductible
expenses; the effect of movements in unrecognised deferred tax assets;
movements in the provision for uncertain tax positions; withholding tax on
intra-group dividends; tax exempt income; and under/over provisions in
previous periods.
On 20 June 2023, Finance (No.2) Act 2023 was substantively enacted in the UK,
introducing a global minimum effective tax rate of 15%. The legislation
implements a domestic top-up tax and a multinational top-up tax which applies
to Intertek for the financial year ending 31 December 2024 onwards. Based on
our forecast profits for the year end 31 December 2024, most territories in
which the Group operates are expected to qualify for one of the safe harbour
exemptions. Where this is not the case, the incremental tax arising under
Pillar Two is not expected to be material. The Group continues to monitor the
release of additional guidance and legislation including outside of the UK.
Intertek has applied the exception under IAS 12 to recognising and disclosing
information about deferred tax assets and liabilities related to top-up income
taxes.
5. Earnings Per Share (EPS)
Six months to 30 June 2024 Six months to 30 June 2023
£m £m
Based on the profit for the period:
Profit attributable to ordinary shareholders 141.6 130.3
Separately Disclosed Items after tax (note 3) 28.6 24.1
Adjusted earnings 170.2 154.4
Number of shares (millions):
Basic weighted average number of ordinary shares 161.2 161.3
Potentially dilutive share awards 1.1 0.8
Diluted weighted average number of shares 162.3 162.1
Basic earnings per share 87.8p 80.8p
Potentially dilutive share awards (0.6p) (0.4p)
Diluted earnings per share 87.2p 80.4p
Adjusted basic earnings per share 105.6p 95.7p
Potentially dilutive share awards (0.7p) (0.5p)
Adjusted diluted earnings per share 104.9p 95.2p
6. Pension Schemes
A full triennial actuarial valuation for the United Kingdom Scheme was carried
out as at 31 March 2022.
The Group obtained updated actuarial valuations to 31 May 2024, the asset and
liability values have been reviewed and have not moved materially in the month
to 30 June 2024. A net actuarial gain before taxation of £1.2m (H1 23:
£2.8m) has been recognised in the consolidated statement of comprehensive
income. The net pension asset stands at £21.9m for the UK pension scheme (31
December 2023: £21.8m) and a net pension liability of £2.7m for the Swiss
pension scheme as at 30 June 2024 (31 December 2023: £4.8m).
7. Analysis of Net Debt
30 June 2024 30 June 2023 31 December 2023
£m £m £m
Cash and cash equivalents per the Statement of Financial Position 355.9 239.5 299.3
Overdrafts (1.0) (4.0) (0.7)
Cash per the Statement of Cash Flows 354.9 235.5 298.6
The components of net debt are outlined below:
1 January 2024 Cash flow Non-cash adjustments Exchange adjustments 30 June 2024
£m £m £m £m £m
Cash 298.6 63.8 - (7.5) 354.9
Borrowings:
Revolving credit facility US$850m 2027 - (228.8) - (1.5) (230.3)
Senior notes US$125m 2024 (97.7) 82.6 - (0.7) (15.8)
Senior notes US$120m 2025 (93.8) - - (1.3) (95.1)
Senior notes US$75m 2026 (58.6) - - (0.8) (59.4)
Senior notes US$150m 2027 (117.2) - - (1.6) (118.8)
Senior notes US$165m 2028 (129.0) - - (1.8) (130.8)
Senior notes US$165m 2029 (129.0) - - (1.8) (130.8)
Senior notes US$160m 2030 (125.0) - - (1.7) (126.7)
Senior notes EUR€120m 2026 (104.1) - - 2.6 (101.5)
Senior notes EUR€25m 2027 (21.7) - - 0.5 (21.2)
Senior notes EUR€40m 2028 (34.7) - - 0.8 (33.9)
Other* 1.6 - (0.4) - 1.2
Total borrowings (909.2) (146.2) (0.4) (7.3) (1,063.1)
Total financial net debt (610.6) (82.4) (0.4) (14.8) (708.2)
Lease liability (307.8) 36.4 (25.7) 2.5 (294.6)
Total net debt (918.4) (46.0) (26.1) (12.3) (1,002.8)
*Other borrowings include other uncommitted borrowings of £0.8m (1 Jan 2024:
£0.8m) and facility fees of £2.0m (1 Jan 2024: £2.4m).
Total undrawn committed borrowing facilities as at 30 June 2024 were £443.2m
(31 December 2023: £664.3m).
30 June 2024 30 June 2023 31 December 2023
£m £m £m
Borrowings due in less than one year 46.8 299.4 96.8
Borrowings due in one to two years 62.8 46.7 93.2
Borrowings due in two to five years 826.2 423.1 464.6
Borrowings due in over five years 127.3 257.6 254.6
Total borrowings 1,063.1 1,026.8 909.2
Key Facilities
The Group has a US$850m multi-currency revolving facility which is the Group's
principal facility. Drawings under the facility as at the 30 June 2024 were
£230.3m.
In February 2024, US$105m Senior notes fell due and were repaid. Subsequent to
the balance sheet date, in July 2024, US$20m Senior notes were repaid.
Further details of the Group's borrowing facilities were disclosed in note 14
to the 2023 Annual Report.
Fair Values
The carrying value of interest-bearing loans and borrowings is £1,063.1m. The
fair value, based on the present value of the future principal and interest
cash flows discounted at the market rate at reporting date, was £967.8m. The
carrying values of trade and other payables are considered approximate to
their fair values.
The carrying value of derivative assets/liabilities (namely foreign currency
forwards and cross currency interest rate swaps) is equal to their fair value.
The fair value of foreign currency forwards is estimated using present value
of future cash flows based on the forward exchange rates at the balance sheet
date. Derivative liabilities of £0.5m are included within trade and other
payables (H1 23: £0.6m derivative liabilities included within trade and other
payables).
The cross currency interest rate swaps designated in hedge relationships are
disclosed within other payables in the statement of financial position.
Derivative liabilities of £0.3m are included within trade and other payables
(H1 23: nil).
The fair value of cash and cash equivalents is based on the sterling
equivalent value of the Group's cash balances at the market rate, which at
reporting date was £355.9m. There is no material difference between the
carrying values of trade and other receivables and their fair values, due to
their short-term duration. There is no concentration of credit risk with
respect to trade receivables as the Group has a large number of customers who
are internationally dispersed.
8. Acquisition of New Businesses
(a) Acquisitions
On 1 March 2024, the Group acquired a 60% controlling interest in Base
Metallurgical Laboratories Ltd. and Base Met Labs US Ltd. (jointly "Base Met
Labs"), a leading provider of metallurgical testing services for the Minerals
sector based in North America, for a purchase price of £23.7m. Purchase
consideration net of cash acquired was £23.4m. The purchase price includes
cash consideration of £14.7m, further contingent consideration payable of
£7.8m and deferred consideration of £0.9m. The cash outflow in the period
associated with this acquisition was £14.7m.
The acquisition of Base Met Labs will expand Intertek's industry leading ATIC
offering in the Minerals industry, growing its geographic footprint into North
America. Base Met Labs metallurgy capabilities are complementary to Intertek's
existing strengths in geochemistry, mine site laboratories and trade
inspection, creating synergies across the Intertek ATIC Minerals project
cycle.
Provisional details of the net assets acquired and fair value adjustments are
set out in the following tables. These analyses are provisional and amendments
may be made to these figures in the 12 months following the date of
acquisition.
Fair value to Group on acquisition
£m
Property, plant and equipment 2.9
Goodwill 15.6
Other intangible assets 7.0
Trade and other receivables 1.4
Trade and other payables (1.6)
Provisions for liabilities and charges -
Deferred tax liabilities (1.9)
Net assets acquired 23.4
(b) Prior Period Acquisitions
£nil (H1 23: £2.7m) was paid during the period in respect of prior period
acquisitions.
(c) Impairment
Goodwill generated from past acquisitions has been tested annually as required
by accounting standards. No impairment triggers were identified during the
period and as such no impairment charge was recorded (H1 23: £nil).
(d) Reconciliation of Goodwill
£m
Goodwill at 1 January 2024 1,385.8
Additions 15.6
Fair value adjustments (2.1)
Foreign exchange (4.3)
Goodwill at 30 June 2024 1,395.0
£m
Goodwill at 1 January 2023 1,418.4
Additions 13.3
Fair value adjustments 0.4
Foreign exchange (63.9)
Goodwill at 30 June 2023 1,368.2
(e) Impact of Acquisitions on the Group Results
The revenue and profit for the period for the period from 1 January 2024 to
the date of acquisition and the impact on the Group's revenue and profit for
the period from the date of acquisition to 30 June 2024 were not significant.
9. Property, Plant, Equipment and Computer Software
(a) Property, Plant, Equipment Additions
During the six months ended 30 June 2024, the Group acquired property, plant
and equipment with a cost of £44.0m (H1 23: £41.2m; year ended 31 December
2023: £93.0m).
During the six months ended 30 June 2024, the Group acquired £1.5m of
property, plant and equipment through business combinations (H1 23: £1.2m;
year ended 31 December 2023: £2.2m). At 30 June 2024, the IFRS 16 right of
use asset is £271.4m (H1 23: £275.5m; year ended 31 December 2023:
£286.6m).
(b) Computer Software Additions
During the six months ended 30 June 2024, the Group acquired computer software
with a cost of £11.6m (H1 23: £10.2m; year ended 31 December 2023: £23.9m).
During the six months ended 30 June 2024, the Group did not acquire computer
software through business combinations (H1 23: £nil; year ended 31 December
2023: £nil).
(c) Capital Commitments
Contracts for capital expenditure which are not provided in these accounts
amounted to £19.4m (H1 23: £15.1m).
10. Related Parties
There are no material changes in related parties or in related party
transactions from those described in the 2023 Annual Report.
11. Subsequent Events
There are no post balance sheet events to report.
12. Approval
The Condensed Consolidated Interim Financial Statements were approved by the
Board on 1 August 2024.
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