TIDMITRK
RNS Number : 5485I
Intertek Group PLC
27 November 2018
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TRADING STATEMENT
27 November 2018
Intertek Group plc ("Intertek" or "the Group"), a leading Total
Quality Assurance provider to industries worldwide, today releases
its November Trading Update for the period from 1 January to 31
October 2018 ("period"). All comparative comments in this statement
reflect comparisons with the corresponding period during 2017. The
Group's full year results to 31 December 2018 will be announced on
5 March 2019.
Broad-Based Organic Revenue Growth Acceleration
-- Group revenue: GBP2,315.7m, up 4.8% at constant rates and 0.5% at actual rates
-- Broad-based organic revenue growth acceleration across the Group at constant rates:
YTD H1 July-Oct
- Group +3.8% +3.4% +4.5%
- Products +5.9% +5.7% +6.1%
- Trade +1.5% +0.7% +2.8%
- Resources +0.1% (0.7%) +1.2%
-- Continuing operational discipline on margin and cash management
-- Alchemy acquisition integrating well, expanding our fast growing Assurance business
-- On track to deliver 2018 targets
André Lacroix: Chief Executive Officer statement
"Intertek is going from strength to strength, making consistent
progress on strategy and performance. We are on track to deliver
our 2018 targets of good organic revenue growth at constant rates
with moderate group margin progression and strong cash
conversion.
We are benefiting from higher demand from our customers for
Intertek global Total Quality Assurance solutions in our Products,
Trade and Resources sectors. In the last 4 months we have seen
broad-based revenue growth acceleration with 4.5% organic revenue
growth at constant rates with continuing robust performance in our
Products sector and performance improvement in Trade and Resources.
The recent acquisitions in high margin and high growth areas
performed well.
The $250 billion global quality assurance industry has
attractive structural growth prospects driven by an increased focus
of corporations on risk management, global trade flows, global
demand for energy, expanding regulations, more complex sourcing and
distribution operations, technological innovations, government
investments in large infrastructure projects, and increased
consumer demand for higher quality and more sustainable
products.
We are uniquely positioned to seize these exciting growth
opportunities thanks to our Total Quality Assurance differentiated
value proposition. We provide our clients with a superior customer
service based on the depth and breadth of our technical expertise,
our global network of over 1,000 state-of-the-art facilities in
over 100 countries, our industry leading Assurance, Testing,
Inspection and Certification solutions, and our customer centric
culture fuelled by our passionate colleagues around the world.
We operate a high quality business model with scale positions in
attractive end-markets and a strongly cash generative earnings
model. Our '5x5' differentiated strategy for growth will continue
to move the centre of gravity of our portfolio towards the
attractive growth and margin opportunities in the industry based on
a disciplined approach to revenue, margin, portfolio and cash
performance management, and an accretive disciplined capital
allocation to deliver sustainable returns for our
shareholders."
Revenue Performance
10 months - January to October 4 months - July to October
2018 2017 Change Change 2018 2017 Change Change
GBPm GBPm at actual at constant GBPm GBPm at at constant
actual
======== ======== =========== ============= ====== ====== ======== =============
Group
Revenue 2,315.7 2,304.2 0.5% 4.8% 968.0 932.4 3.8% 6.1%
======== ======== =========== ============= ====== ====== ======== =============
Organic revenue 2,290.3 2,300.9 (0.5%) 3.8% 950.9 930.3 2.2% 4.5%
======== ======== =========== ============= ====== ====== ======== =============
Products
Revenue 1,392.5 1,349.6 3.2% 7.2% 586.9 550.9 6.5% 8.3%
======== ======== =========== ============= ====== ====== ======== =============
Organic revenue 1,371.3 1,346.3 1.9% 5.9% 572.5 548.8 4.3% 6.1%
======== ======== =========== ============= ====== ====== ======== =============
Trade
Revenue 529.0 542.2 (2.4%) 2.3% 218.5 216.4 1.0% 4.0%
======== ======== =========== ============= ====== ====== ======== =============
Organic revenue 524.8 542.2 (3.2%) 1.5% 215.8 216.4 (0.3%) 2.8%
======== ======== =========== ============= ====== ====== ======== =============
Resources
Revenue 394.2 412.4 (4.4%) 0.1% 162.6 165.1 (1.5%) 1.2%
======== ======== =========== ============= ====== ====== ======== =============
Organic revenue 394.2 412.4 (4.4%) 0.1% 162.6 165.1 (1.5%) 1.2%
======== ======== =========== ============= ====== ====== ======== =============
Products Divisional Review
Our Products business delivered an excellent performance with an
organic revenue growth at constant rates of 5.9% on a YTD basis,
driven by broad-based growth across business lines and
geographies:
-- Our Softlines business reported solid organic growth
performance. We are leveraging the investments we have made to
support the expansion of our customers in new markets and seize the
exciting growth opportunities in the footwear sector. We continue
to benefit from strong demand from our customers for chemical
testing as well as from a greater number of brands and SKUs.
-- Our Hardlines and Toy business continues to take advantage of
our strong global account relationships, the expansion of our
customers' supply chains into new markets and our innovative
technology for factory inspections. We delivered good organic
revenue growth performance across our main markets of China, Hong
Kong, India and Vietnam.
-- We delivered robust organic revenue growth in our Electrical
& Network Assurance business driven by higher regulatory
standards in energy efficiency and by the increased demand for
wireless devices and cy.
-- Our Business Assurance business delivered strong organic
revenue growth as we continue to benefit from the increased focus
of corporations on risk management, resulting in strong growth in
Supply Chain Audits and increased consumer and government focus on
ethical and sustainable supply.
-- Driven by the growing demand for more environmentally
friendly and higher quality buildings and infrastructure in the US
market, our Building & Construction business reported robust
organic revenue growth.
-- We continue to benefit from the increased focus of
corporations on food safety and delivered robust organic revenue
growth in our Food business.
-- We delivered robust organic revenue growth in our Chemicals
& Pharma business as we continue to leverage the structural
growth opportunities in the healthcare markets in both developed
and emerging economies and we benefited from the increased focus on
product safety and traceability.
-- Our Transportation Technologies business delivered
double-digit organic revenue growth as we capitalize on our
clients' investments in new powertrains to lower emissions and
increase fuel efficiency.
Full Year growth outlook
The full year outlook for our Products division remains
unchanged and we continue to expect to deliver robust organic
revenue growth at constant currency.
Mid- to long- term growth outlook
Our Products division will benefit from mid to long-term
structural growth drivers including product variety, brand and
supply chain expansion, product innovation and regulation, the
growing demand for quality and sustainability from developed and
emerging economies, the acceleration of e-commerce as a sales
channel, and the increased corporate focus on risk.
Trade Divisional Review
Our Trade related businesses delivered on a YTD basis an organic
revenue growth of 1.5% at constant rates, with an acceleration of
organic growth momentum in the last 4 months in our Caleb Brett and
GTS businesses:
-- Our Cargo/AA business, newly rebranded Caleb Brett, reported
solid organic revenue growth on a YTD basis, reflecting the
structural growth drivers in the Crude Oil and Refined Product
global trading market.
-- Benefiting from new contracts, our Government & Trade
Services business delivered robust organic revenue growth.
-- Our AgriWorld business delivered an organic revenue below
last year on a YTD basis due to lower export activities in a few
markets that benefited from strong trading activity in 2017.
Full Year growth outlook
The full year outlook for our Trade division remains unchanged
and we continue to expect to deliver good organic revenue growth at
constant currency.
Mid to long- term growth outlook
Our Trade division will continue to benefit from both regional
and global trade-flow growth, as well as the increased customer
focus on quality, quantity controls and supply chain risk
management.
Resources Divisional Review
Our Resource-related business delivered a stable revenue on a
YTD basis with improved performance in the last 4 months in our
Capex Inspection services and Minerals:
-- On a YTD basis, the revenue from Capex Inspection Services
was lower than last year and our Opex Maintenance Services
continued to benefit from stable volume in a price competitive
environment.
-- Accelerating the trend seen in 2017, we saw robust growth in
demand for testing activities in the Minerals business on a YTD
basis.
Full Year growth outlook
Overall, we expect our Resources related businesses to deliver a
stable revenue performance at constant currency.
Mid to long- term growth outlook
Our Resources division will grow in the mid to long-term as we
benefit from investments in Exploration and Production of Oil and
Minerals, to meet the demands of the growing population around the
world.
M&A
Intertek is well positioned to seize the attractive external
growth opportunities in a very fragmented industry and we continue
to make progress with our M&A strategy. In addition, the Group
entered into an exclusive agreement with the Certified Automotive
Parts Association (CAPA) in March 2018, to operate their automotive
certification programme.
The acquisitions made recently in attractive growth and margin
sectors are performing well:
-- In March 2018, the Group acquired Aldo Abela Surveys, a
leading provider of quality and quantity cargo inspection services,
based in Malta.
-- In April 2018, the Group acquired Proasem, a leading provider
of laboratory testing, inspection, metrology and training services,
based in Colombia.
-- In June 2018, the Group acquired NTA Monitor, a leading
network security and assurance services provider based in the UK
and Malaysia.
-- The group announced on 21 August that it had completed its
acquisition of Alchemy Investment Holdings, an industry leader in
People Assurance solutions for the food industry.
Intertek's growth in Assurance services has predominantly been
focussed on assuring the quality of clients' systems and operating
procedures. Alchemy provides us with the opportunity to expand and
broaden our Assurance offering towards the assurance of employee
skills across our clients' organisations.
Alchemy is a high-quality business with scalable solutions that
can be rolled out across many different industries and geographies.
This will further accelerate the growth momentum of our high margin
and capital light Assurance Business.
Alchemy has a strong growth track record and operates a highly
attractive business model: high growth, high margin, strong
cash-conversion, capital-light and scalable.
Intertek expects the acquisition to deliver attractive returns
to shareholders and to be EPS accretive on a Billings basis in the
first full year after acquisition.
At the time of the acquisition we provided a 5 Year Guidance as
follows:
-- 20% growth p.a. in Billings/revenues going forward
-- >30% IFRS EBITDA margin by year 5
-- >25% IFRS EBIT margin by year 5
-- Strong cash conversion; negative working capital
-- ROIC > Group WACC by year 5
Due to its subscription-based revenue model, which provides good
revenue visibility, Alchemy manages its business on a Billings
basis. As outlined at the time of the announcement and in
accordance with IFRS3 we will revalue the Alchemy deferred revenue
balance at the point of acquisition. This will result in an
acquisition accounting revenue adjustment when we report 2018/2019
IFRS revenue and we expect Achemy's contribution to the 2018 group
revenue to be c.GBP11m.
Investment & Financial Position
Our year end net debt guidance is unchanged GBP800-850m,
assuming no further acquisitions and no significant forex changes.
The strength of Intertek's balance sheet will enable the Group to
seize attractive growth opportunities ahead and continue to deliver
strong shareholder returns.
Outlook
The Group remains on track to deliver its 2018 target of good
organic revenue growth with moderate margin progression at constant
currency and strong cash conversion.
We expect our Products related businesses to deliver robust
organic revenue growth, our Trade related businesses to report
solid organic revenue growth performance, and our Resources related
businesses to deliver a stable organic revenue performance. We will
continue to benefit from the acquisitions made since January
2017.
Looking further ahead, the global Quality Assurance market will
benefit from attractive growth prospects driven by an increased
focus of corporations on risk management, global trade flows,
global demand for energy, expanding regulations, more complex
sourcing and distribution operations, technological innovations,
government investments in large infrastructure projects, and
increased consumer demand for higher quality and more sustainable
products.
We provide our customers with a Total Quality Assurance
differentiated value proposition based on the depth and breadth of
our technical expertise, our global network of over 1,000
state-of-the-art facilities in over 100 countries, our industry
leading Assurance, Testing, Inspection and Certification solutions,
and our customer centric culture fueled by our passionate
colleagues around the world.
We continue to be uniquely positioned to benefit from the GDP+
organic revenue growth prospects in the Quality Assurance Industry
in the medium to long term, leveraging our high quality and highly
cash generative earnings model.
-ENDS-
Contacts
For further information, please contact:
Denis Moreau, Investor Relations
Telephone: +44 (0) 20 7396 3415 investor@intertek.com
Jonathon Brill, FTI Consulting
Telephone: +44 (0) 20 3727 1000 intertek@fticonsulting.com
Analysts' Call
A live audiocast for analysts and investors will be held today
at 7.45am. Details can be found at
http://www.intertek.com/investors/ together with a pdf copy of this
report. A recording of the audiocast will be available later in the
day.
Intertek is a leading Total Quality Assurance provider to
industries worldwide.
Our network of more than 1,000 laboratories and offices and over
43,000 people in more than 100 countries, delivers innovative and
bespoke Assurance, Testing, Inspection and Certification solutions
for our customers' operations and supply chains.
Intertek Total Quality Assurance expertise, delivered
consistently, with precision, pace and passion, enabling our
customers to power ahead safely.
intertek.com
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END
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