TIDMITRK
RNS Number : 4126A
Intertek Group PLC
24 May 2023
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TRADING STATEMENT
24 May 2023
Intertek Group plc ("Intertek" or "the Group"), a leading Total
Quality Assurance provider to industries worldwide, today releases
its May Trading Update for the period from 1 January to 30 April
2023 ("period"). All comparative comments in this statement reflect
comparisons with the corresponding period during 2022. The Group's
half year results to 30 June 2023 will be announced on 28 July
2023.
Demand acceleration for Intertek ATIC solutions delivers 6.5% LFL revenue
growth(1)
-- January-April revenue of GBP1,059.6m: up 7.6% at CCY and 11.4% at actual rates
-- LFL revenue growth of 6.5% at CCY with Products 5.5%, Trade 5.2% and Resources 12.5%
-- Good business recovery in China with 7.5% LFL revenue growth at CCY
-- Continuous progress on pricing, productivity and cost
initiatives to deliver margin progression
-- Disciplined day to day cash management in place to drive strong cash performance
-- Strong balance sheet and accretive capital allocation policy to invest in growth
-- Confirming 2023 outlook: Mid-single digit LFL revenue growth
at CCY, margin accretion and strong cash
-- Intertek 30 AAA growth strategy in place to unlock the
significant value growth opportunity ahead
André Lacroix: Chief Executive Officer statement
" We have had a good start to 2023 as we benefitted from the
increased demand for our ATIC solutions delivering 6.5% LFL revenue
growth at constant currency. This was broad based with Products up
by 5.5%, Trade ahead 5.2% and Resources grew 12.5%. We have also
seen a broad based geographic performance including a strong
rebound of our China business post Chinese New Year as both the
export and domestic market benefitted from the lift of the Covid-19
restrictions at the beginning of the year.
For 2023, we continue to expect to deliver mid-single digit LFL
revenue growth at constant currency driven by mid-single digit LFL
revenue growth in Products and Trade and high-single digit revenue
growth in Resources. We continue to make progress on our margin and
cash priorities and are on track to deliver our 2023 guidance.
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, triggering a
higher demand for our ATIC solutions which are powered by our
Science- based Customer Excellence Total Quality Assurance
advantage. We have made significant progress on our portfolio which
is poised for faster growth at the global level given that all
business lines are expected to benefit from attractive structural
growth and at the local level given our strong business line
portfolio.
At our Capital Markets event in London on 3(rd) and 4(th) May,
we unveiled our Intertek 30 AAA 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 focussed on delivering value consistently,
targeting mid-single digit LFL revenue growth, margin accretion to
go back to our 17.5% peak margin and beyond, and strong cash
generation, while pursuing disciplined investments in attractive
growth and margin sectors.
We operate a differentiated, high-quality growth business with
excellent fundamentals and intrinsic defensive characteristics,
giving our customers the Intertek Science-based Total Quality
Assurance advantage to strengthen their businesses. Our leading
ATIC solutions are mission-critical for the world to operate safely
and the growth in our end-markets is accelerating. The
implementation of our Intertek 30 AAA growth strategy will
capitalise on our high-quality earnings and cash compounder model
to unlock the significant value growth opportunity ahead"
1. At CCY
Revenue Performance
4 months - January to April
----------------------------------------------
2023 2022 Change at Change at
GBPm GBPm actual constant
----------- --------- ---------- ----------
Group
Revenue 1,059.6 951.3 11.4% 7.6%
----------- --------- ---------- ----------
LFL revenue 1,049.4 951.3 10.3% 6.5%
----------- --------- ---------- ----------
Products
Revenue 658.1 602.9 9.2% 5.5%
----------- --------- ---------- ----------
LFL revenue 658.1 602.9 9.2% 5.5%
----------- --------- ---------- ----------
Trade
R evenue 212.5 195.1 8.9% 5.2%
----------- --------- ---------- ----------
LFL Revenue 212.5 195.1 8.9% 5.2%
----------- --------- ---------- ----------
Resources
Revenue 189.0 153.3 23.3% 18.9%
----------- --------- ---------- ----------
LFL revenue 178.8 153.3 16.6% 12.5%
----------- --------- ---------- ----------
Contacts
For further information, please contact:
Denis Moreau, Investor Relations
Telephone: +44 (0) 20 7396 3415 investor@intertek.com
Jonathon Brill/James Styles, Dentons Global Advisors
Telephone: +44 (0)7510 385 554 intertek@dentonsglobaladvisors.com
Analysts' Call
A call for analysts and investors will be held today at 7.45am
UK time; +44 (0) 33 0551 0200 (webcast). Details can be found at
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 Total Quality Assurance expertise, delivered consistently, with
precision, pace and passion, enabling our customers to power ahead safely.
intertek.com
Products Divisional Review
Our Products business benefitted from a continuing increase in
customer demand globally for our ATIC solutions reporting revenue
of GBP658.1m, up year on year by 9.2% at actual rates and by 5.5%
at constant currency.
We delivered a LFL revenue growth at constant currency of
5.5%:
-- Our Softlines business delivered low-single digit LFL revenue
growth benefitting from growth in e-commerce, growth in risk-based
Quality Assurance and increased investments in end-to-end
sustainability.
-- Hardlines reported low-single digit LFL revenue growth
benefitting from the growth in e-commerce, the increased consumer
demand for home furniture and toys as well as the investments of
our clients in sustainability.
-- With increased ATIC activities driven by greater regulatory
standards in energy efficiency, higher demand for medical devices
and 5G investments, our Electrical & Connected World business
delivered low-single digit LFL revenue growth.
-- Business Assurance delivered double digit LFL revenue growth
as the business saw increased investments by our clients to improve
the resilience of their supply chains, the continuous focus on
ethical supply and the increased need for sustainability
assurance.
-- Growing demand for more environmentally friendly buildings
and the increased number of infrastructure projects in North
America produced mid-single digit LFL revenue growth for our
Building & Construction business.
-- Transportation Technologies delivered low-single digit LFL
revenue growth globally driven by increased investment in new
powertrains to lower CO2/NOx emissions and in traditional
combustion engines to improve fuel efficiency.
-- Our Food business registered mid-single digit LFL revenue
growth globally resulting from increased demand for food safety
testing activities and hygiene and safety audits in factories.
-- We saw low-single digit LFL revenue growth globally
reflecting improved demand for regulatory assurance and chemical
testing and from the increased R&D investments of the pharma
industry.
Full Year growth outlook
We expect our Products division to deliver mid-single digit LFL
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 division benefitted from increased global trade
activities and reported revenue of GBP212.5m up year on year by
8.9% at actual rates and by 5.2% at constant currency.
The strong growth in the demand for Energy and Agri products has
enabled us to deliver a LFL revenue growth of 5.2% 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 growth LFL revenue growth.
-- Our Government & 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. We saw double-digit
negative LFL revenue globally as the growth in supply chain
activities of our clients in the Middle East and Africa was offset
by the non-renewal of two contracts last year.
-- AgriWorld provides inspection activities to ensure that the
global food supply chain operates fully and safely. The business
reported low single-digit LFL revenue growth. We continue to see an
increase in demand for inspection activities driven by sustained
growth in the global food industry.
Full Year growth outlook
We expect our Trade division to deliver mid-single digit LFL
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 Resources division is benefitting from the investments that
we have undertaken in recent years, as well as from more
investments by our clients to increase energy production capacity
globally enabling us to report revenue of GBP189m, up 23.3% year on
year at actual rates and 18.9% at constant currency.
We delivered a LFL revenue growth of 12.5% at constant currency
benefitting from the exciting growth opportunities in the World of
Energy and strong growth in Minerals:
-- Our Capex Inspection services business delivered double digit
LFL revenue growth as we benefitted from increased capex investment
in traditional Oil and Gas exploration and production as well as in
renewables.
-- With our clients increasing their maintenance efforts to
increase the productivity of existing production assets, we
delivered double digit LFL revenue growth in Opex Maintenance.
-- The continuing high demand for testing and inspection
activities drove double-digit LFL revenue growth in our Minerals
business.
Full Year growth outlook
We expect our Resources related businesses to deliver a
high-single digit LFL revenue growth 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 energy, to meet the demands of the
growing population around the world.
China update
The re-opening of China in January was welcomed by all of our
clients, both in the export and domestic markets and post Chinese
New Year we saw a rebound in manufacturing and trading activities
that provided a real benefit to our local operations.
This is reflected in the performance in our China business: in
January/February, revenue growth was flat, accelerating in the
March/April period to double-digit LFL revenue growth, which was
broad-based with all business lines benefitting from the re-opening
of the economy.
Overall, in the first four months our China business delivered
LFL revenue growth of 7.5% at constant currency. This is a good
start for our China business which will be a significant
contributor to the Group's performance in 2023 given the base-line
effect caused by the Covid disruptions in Q2 and Q4 last year.
Innovation
True to our pioneering spirit, we continue to innovate to meet
the emerging needs of our customers.
We are constantly learning from our customers, using their
extensive feedback to help us deliver ever better solutions to
their evolving requirements.
We believe that successful innovation starts with investing in
the insight advantage, which means having a deep understanding of
what our customers need and want. Through our NPS programme, we
carry out 5,400 customer interviews every month. With the ability
to access world-class customer intelligence site-by-site from
anywhere across our global network, we have a continuous stream of
data that enables us to build on our insights and use this to
develop new ATIC solutions.
Recently, for example, we launched a new certification mark that
aims to give consumers transparency regarding the claims made by
the manufacturers and marketers of vegan foods. This is a timely
introduction given the exponential global growth in the number of
consumers who are exploring a plant-based diet as part of a
healthier lifestyle with a reduced environmental impact.
Sustainability-related innovations include Intertek EcoCheck, a
tourism solution that audits management systems and provides a
carbon footprint calculation and ToxClear that supports the
development of more sustainable supply chains in the fashion
industry by providing transparency and traceability on the
chemicals used in manufacturing.
Another innovative new launch is designed to help retailers and
brands of soft goods, hard goods and personal protective equipment
to understand and comply with the different regulations in force in
different markets across the world. This is Global Market Access, a
one-stop digital knowledge portal, developed with the aim of
increasing compliance for improved consumer safety and protecting
corporate reputations in today's interconnected world.
Sustainability
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 everywhere therefore
continuously need to upgrade and reinvent how they manage their
sustainability agenda, particularly with regard to how they
disclose their 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 ourselves at Intertek, we focus on 10 highly demanding TSA
sustainability standards which are truly end-to-end and
systemic.
You can read in detail about our sustainability results in our
2022 Sustainability Report, which included:
-- Continuous progress on Health and Safety with a reduction of
7bps in our Total Recordable Incident Rate vs 2021.
-- Since 2015, we have used the Net Promoter Score ('NPS')
process to listen to our customers that has enabled us to improve
our customer service over the years consistently.
-- We are driving environmental performance across our
operations through new science-based reduction targets to 2030 as
well as site-by-site action plans. Our rigorous monthly performance
management of our net zero plans against emission reduction targets
has delivered total CO2e emissions (market-based) reductions of
7.8% vs 2021.
-- We recognise the importance of employee engagement in driving
sustainable performance for all stakeholders, and we measure
employee engagement against our Intertek ATIC Engagement Index. Our
2022 score was 80.
-- Our voluntary permanent employee turnover was at a low rate of 14%.
M&A
We are investing inorganically to seize the attractive growth
opportunities in the global Quality Assurance market and to
strengthen our ATIC portfolio in high-margin, high-growth
areas.
In April, we announced the acquisition of Controle Analítico
Análises Técnicas Ltda ("Controle Analítico"), a leading provider
of environmental analysis, with a focus on water testing. Based in
São Paulo, Brazil, the highly accredited business provides an
attractive and complementary opportunity to expand our leading Food
and Agri TQA solutions in Brazil by expanding our presence and
service offering in the environmental testing market, specialising
in water, effluents, waste and soil & sediments analysis.
Other recent acquisitions, SAI Global Assurance, 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
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.
Outlook 2023
We continue to expect the Group will deliver mid-single digit
LFL revenue growth at constant currency, with margin progression
year-on-year in H1 and H2, and a strong free cash flow
performance.
Our mid-single digit LFL revenue growth at constant currency
will be driven by mid-single digit LFL revenue growth in Products
and Trade while we expect high-single digit revenue growth in
Resources.
Our financial guidance for 2023 is that we expect:
-- Capital expenditure in the range of GBP115-125m
-- Net Finance costs in the GBP40-44 m range
-- Effective Tax Rate in the 25.5%-26.5% range
-- Minority interests of between GBP21.5-22.5m
-- FY23 financial net debt to be in the range of GBP630-680m
Sterling has strengthened in the last few months and we are
updating our FY forex guidance. The last four months' average
Sterling at the end of April would reduce our FY revenue by
50bps and FY Earnings by 150bps.
Significant value growth opportunity ahead
We have made strong progress in the last eight years, 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 Total Quality
Assurance advantage. Our clients understand the mission-critical
nature of risk-based quality assurance to make their businesses
stronger and we expect the demand for our ATIC solutions will grow
faster post-Covid.
On 3 May 2023, at our Capital Markets event in London, we
announced our Intertek 30 AAA growth strategy to unlock the
significant value growth opportunity ahead.
True to our high performance 10X Culture, our Intertek AAA
growth strategy is about being the best and creating significant
value for every stakeholder, all the time.
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-focussed 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 opportunities arising from 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 are improving our segmental disclosures to better reflect the
growth drivers in our businesses and starting from the Group's 2023
half year results we will report revenue, operating profit and
margin in five divisions:
-- Consumer Products
-- Corporate Assurance
-- Health and Safety
-- Industry and Infrastructure
-- World of Energy
In terms of LFL revenue growth 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 accretive revenue growth is central to the way we deliver
value, and we are confident that over time we will return to our
17.5% peak margin performance and go beyond from there. Our
confidence is based on three simple reasons: we have the proven
tools and processes in place, we operate with a span of
performance, and we pursue a disciplined accretive portfolio
strategy.
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
circa 5% of turnover in capex).
-- The second priority is to deliver sustainable returns for our
shareholders through the payment of progressive dividends and we
target a pay-out ratio of circa 50%.
-- 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
1.3 - 1.8 net debt to EBITDA with the potential to return excess
capital to shareholders subject to our future requirements and
prevailing macro environment.
-ENDS-
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