TRADING
STATEMENT
24 May 2024
Strong start to the year with
faster LFL revenue
growth1 of 7.0%
•
Jan-April revenue of £1,080.8m, growth of 7.5% at
constant currency and 2.0% at actual rates
•
Broad-based LFL
revenue growth1
of
7.0%: 6.2% in Consumer Products,
7.6% in Corporate Assurance, 9.9% in Health and Safety, 4.2% in
Industry and Infrastructure and 9.4% in World of Energy
•
Margin
progression driven by pricing,
operating leverage, cost controls and productivity
improvements
•
Cash management delivering strong free cash flow
•
Continued
investment in organic and inorganic
opportunities
•
Recent acquisitions in attractive growth and
margin segments performing well
• Reconfirming 2024
outlook: Mid-single digit LFL
revenue growth1, margin
progression and
strong free cash flow
•
Intertek AAA
growth strategy execution on track
to unlock the significant value growth opportunity ahead
André Lacroix: Chief
Executive Officer statement
"We have had a strong start to 2024,
delivering broad-based 7.0% LFL revenue
growth1, driven by a strong
recovery in Consumer Products, whilst Corporate Assurance, Health
and Safety, Industry and Infrastructure and World of Energy
continue to benefit from increased demand for our ATIC solutions.
Recent acquisitions are performing well, benefitting from the
scale-up opportunities within our global network, and we continue
to invest in organic and inorganic opportunities in high-growth and
high-margin segments.
I would like to recognise my
colleagues for their passion, commitment and innovation, enabling
us to deliver a strong performance in the first four months of the
year, providing sustainable growth and value for all stakeholders.
We have delivered faster LFL revenue growth, slightly ahead of our
expectations and we have seen robust margin progression driven by
our pricing initiatives, operating leverage linked to growth,
disciplined cost approach and productivity improvements. Our free
cash flow was strong which, combined with our robust balance sheet,
enables us to invest in growth and accelerate
performance.
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 ATIC Advantage. In May 2023, we unveiled
our Intertek AAA differentiated growth strategy
to capitalise on the best-in-class operating
platform we have built and to target 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 as we continue to
deliver sustainable growth and value for all
stakeholders.
Based on our strong start to the
year, we reconfirm our guidance for 2024. We expect the Group will
deliver a robust performance with mid-single digit LFL revenue
growth at constant currency, margin progression and a strong cash
flow performance. We are well positioned to get back to our peak
margin of 17.5% and beyond in the medium-term, capitalising on 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."
1. At constant
currency
Revenue Performance
|
|
4 months - January to
April
|
2024
£m
|
2023
£m
|
Change
at
actual
rates
|
Change
at
constant
currency
|
Group
|
Revenue
|
1,080.8
|
1,059.6
|
2.0%
|
7.5%
|
LFL revenue
|
1,074.1
|
1,057.9
|
1.5%
|
7.0%
|
Consumer Products
|
Revenue
|
298.7
|
300.3
|
(0.5%)
|
6.0%
|
LFL revenue
|
297.6
|
298.6
|
(0.3%)
|
6.2%
|
Corporate Assurance
|
Revenue
|
153.7
|
148.9
|
3.2%
|
8.9%
|
LFL Revenue
|
152.0
|
148.9
|
2.1%
|
7.6%
|
Health and Safety
|
Revenue
|
108.1
|
99.9
|
8.2%
|
13.0%
|
LFL revenue
|
105.2
|
99.9
|
5.3%
|
9.9%
|
Industry and
Infrastructure
|
Revenue
|
274.2
|
275.8
|
(0.6%)
|
4.6%
|
LFL revenue
|
273.2
|
275.8
|
(0.9%)
|
4.2%
|
World of Energy
|
Revenue
|
246.1
|
234.7
|
4.9%
|
9.4%
|
LFL revenue
|
246.1
|
234.7
|
4.9%
|
9.4%
|
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. 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 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
|
Consumer Products
Division
In the four-month
period to the end of April 2024, our Consumer Products-related
business delivered LFL revenue of £297.6m up year-on-year by 6.2%
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 & 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 now 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
In the four-month
period to the end of April 2024, our Corporate Assurance-related
business delivered LFL revenue of £152.0m, 7.6% higher 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
In the four-month
period to the end of April 2024, our Health and Safety-related
business reported LFL revenue of £105.2m, an increase of 9.9% at
constant currency.
· AgriWorld provides inspection activities to
ensure that the global food supply chain operates fully and safely.
The business reported double-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 now 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
In the four-month
period to the end of April 2024, our Industry and
Infrastructure-related business grew LFL revenue by 4.2% at
constant currency to £273.2m.
· 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 benefit from growing demand for
more environmentally friendly buildings and the increased number of
infrastructure projects in our Building & Construction business
in North America, which delivered low-single digit revenue
growth.
2024 growth
outlook
We now expect our
Industry and Infrastructure division to deliver mid-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,
increase 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.
In the four-month
period to the end of April 2024, our World of Energy-related
business reported LFL revenue of £246.1m, up year-on-year by
9.4%.
· 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 double-digit LFL revenue
growth in the period.
· Transportation Technologies delivered a
mid-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 now 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, increase
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.
True to our pioneering
spirit, we continue to lead the industry and innovate to meet the
emerging needs of our customers with winning ATIC
solutions.
We are constantly
learning from our customers, using extensive feedback they provide
us with every month with our extensive NPS research programme to
help deliver ever better solutions for 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. 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.
In our Consumer
Products division, we announced in March our strategic partnership
with Trace
For Good with the launch of a
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.
In Corporate
Assurance, Green R&D
is a science-driven innovation that
offers our customers comprehensive insights into product
development, focusing on safety, quality and sustainability. The
solution encompasses detailed performance testing, analysis,
regulatory compliance and environmental assessments, providing a
holistic view of a product's journey enabling companies to ensure
their products are developed with minimal environmental
impact.
In the Health and
Safety division, we developed the Intertek Crystek
solution for the growing Honey
industry. Crystek provides services to evaluate and estimate a
honey sample's tendency to crystallise, as well as key insights on
improving the quality of honey and its production. Intertek
is one of the world-leading experts in the analysis of honey and
hive products.
In Industry and
Infrastructure, Intertek innovations are improving the safety,
efficiency and performance of complex equipment.
Intertek
Aware is a 'Digital Twin'
offering which integrates data from IoT sensors, robotic feedback
and powerful software, fueled by analytics, to create an accurate
visual replica of industrial equipment. The software empowers
energy asset owners and operators to improve reliability, increase
safety, estimate remaining useful life and manage inspection data,
as well as helps to reduce costs.
Our World of Energy
division focuses on the ATIC solutions we offer to our clients to
develop renewables, as well as better and greener fuels. Intertek
is investing in Sustainable Aviation
Fuels solutions, supporting
clients with a vast array of services from fuel chemistry to
certification, biofuels refineries construction to green hydrogen
feedstock production, as well as material corrosion analysis to
feedstock traceability. These solutions are supporting the
transition from traditional fossil fuels to carbon neutral
alternatives, while ensuring credibility of decarbonisation
efforts.
All of these
developments reflect the commitment we share at Intertek to drive
continuous innovation which powers new growth opportunities and
helps to make our world a safer, more sustainable, and amazing
place.
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.
In 2023 we made
progress on our Sustainability Excellence agenda:
• Levels of Hazard Observations increased,
reflecting greater levels of activity across our sites as well as
greater awareness and reporting of Health and Safety
overall.
• 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 science-based reduction targets to 2030. Our
rigorous monthly performance management of climate-related action
plans delivered operational market-based emissions reductions of
11% against 2022 and 37% against our base year 2019.
• In 2023, our GHG emissions reduction targets
were validated by the SBTi. Through the validation of scope 1,
scope 2 and scope 3 targets, the SBTi found Intertek to be in line
with the ambition to limit global temperature increases to 1.5°C
above pre-industrial levels. This achievement serves to reconfirm
Intertek's commitment to sustainable growth and acknowledges the
Group's ongoing efforts to limit the effects of climate change as
part of the Race to Zero.
• 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 2023 score was 87 (2022:
80).
•
Our voluntary permanent employee turnover
improved to a low rate of 12.3% (2022: 14%).
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.
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.
Our recent 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, 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, 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,
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.
Given our strong start
to the year, we expect that the Group will deliver a robust
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: Mid-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 to circa 65% from
2024 Interims
• 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 200bps and 300bps respectively.
Significant value growth
opportunity ahead
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 ATIC Advantage.
Over the
last nine years, from 2014-2023, we have delivered a CAGR of 5.3%,
6.1% and 6.0% for revenue, operating profit and EPS,
notwithstanding the impact of Covid. In May 2023, 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 highly
engaged, customer-centric organisation is laser-focused to take
Intertek to greater heights, and the execution of our AAA strategy
is on track as we continue to deliver sustainable growth and value
for all stakeholders.
True to our high
performance 10X Culture, our Intertek AAA differentiated 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-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 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 local portfolio 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
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. 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 focused on our 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 65%.
• 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 good to great
journey continues to unlock the significant value growth
opportunity ahead.
-ENDS-