REG - Intertek Group Plc - Final Results
01/03/2022 07:00
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RNS Number : 1143D Intertek Group PLC 01 March 2022
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2021 FULL YEAR RESULTS ANNOUNCEMENT
1 March 2022
Strong Progress in Revenue, Margin, Earnings and Cash
• Revenue of £2,786.3m: +6.5% at constant rates and +1.6% at
actual rates
• Robust LfL revenue growth of 5.6% at constant rates: Products:
+7.6%, Trade: +3.0%, Resources +1.7%
• Broad-based LfL revenue growth and record operating profit and
margin in H2
• Double-digit adjusted operating profit growth of +15.4% at
constant rates and +10.8% at actual rates
• Strong adjusted operating margin of 17.0%: +130bps at constant
rates and +140bps at actual rates
• Double-digit adjusted diluted EPS growth of +16.8% at constant
rates and +11.6% at actual rates
• Strong cash conversion delivers free cash flow of £402m;
financial net debt of £733m, 1.1x adjusted EBITDA
• 18.2% ROIC with organic ROIC of 24.4% up 350bps at constant
rates
• Sustainable returns to shareholders with FY21 dividend of 105.8p
in line with 2019 and 2020
• Well positioned to seize the exciting growth opportunities ahead
with industry leading ATIC services
• 2022 outlook: Robust LfL revenue growth at constant rates,
margin progression and strong free cash flow
A FY results video is available on our website
http://www.intertek.com/investors/2021-full-year-results-video
(http://www.intertek.com/investors/2021-full-year-results-video)
André Lacroix: Chief Executive Officer statement
"I would like to thank all of my colleagues at Intertek for their outstanding
contribution that has enabled us to make strong progress in 2021 in revenue,
margin, earnings and cash. 2021 marked another year that demonstrated the
strengths of our differentiated ATIC value proposition, the Science-based
Customer Excellence of our organisation, our unique performance management
approach and the quality of our earnings model, delivering sustainable value
for all stakeholders: customers, employees, suppliers, shareholders,
regulators and our communities.
Group revenue was £2,786m up 6.5% at constant rates driven by a robust LfL
revenue growth of 5.6% and by the benefits of the acquisitions recently made.
Operating profit grew by over 15% to £474m with margins increasing to 17%.
Our free cash flow performance was excellent, driven by further improvements
in working capital providing the Group with a strong balance sheet and the
flexibility to invest in growth. Our ROIC was strong at 18.2% with an
excellent organic ROIC of 24.4%, up 350bps year on year at constant rates. We
continue to deliver sustainable returns to our shareholders, and we have
announced a full year dividend for 2021 of 105.8p in line with 2019 and 2020.
We enter 2022 with confidence given the strong progress made in 2021 and we
are targeting robust LfL revenue growth at constant currency, year-on-year
margin progression and strong free cash flow, notwithstanding the supply chain
challenges faced by clients in some of our markets.
The supply chain disruption being experienced by corporations across multiple
industries has made the need for comprehensive risk-based quality, safety and
sustainability assurance more critical than ever. Companies are investing in
Quality Assurance to build greater resilience and safety, whilst innovating to
deliver new high-quality products and services as consumer expectations
rapidly evolve. The sprint to net zero emissions also means that corporations
are reinventing the way they reduce their carbon footprints across their
operations, adopting a comprehensive approach to sustainability with
independently verified greater disclosures.
Thanks to our leading ATIC capability, innovation and expertise, Intertek is
uniquely positioned to benefit from the GDP+ like-for-like revenue growth
prospects in the Quality Assurance industry. We are investing organically
and inorganically to seize the sustained long-term growth opportunities in our
industry through a disciplined approach to capital allocation.
The Covid-19 pandemic has made the case for Total Quality Assurance clearer
and stronger for our clients and we expect the $250 billion global Quality
Assurance market to grow faster post-Covid. Moving forward, all stakeholders
in society expect governments and corporations to build back a better world
with a sharper focus on end-to-end Quality Assurance."
Key Adjusted Financials 2021 2020 Change at actual rates Change at constant rates1
Revenue £2,786.3m £2,741.7m 1.6% 6.5%
Like-for-like revenue2 £2,744.0m £2,721.6m 0.8% 5.6%
Operating profit3 £473.9m £427.7m 10.8% 15.4%
Operating margin3 17.0% 15.6% 140bps 130bps
Profit before tax3 £445.5m £392.8m 13.4% 18.7%
Diluted earnings per share3 190.8p 170.9p 11.6% 16.8%
Dividend per share 105.8p 105.8p -
Cash flow from operations less net capex3 £599.7m £632.9m (5.2%)
Free Cash Flow3 £401.8m £435.6m (7.8%)
Financial net debt4 £733.3m £419.9m 74.6%
Financial net debt / EBITDA3, 4 1.1 0.7
ROIC 18.2% 21.6%
Organic ROIC(5) 24.4% 21.6%
Key Statutory Financials 2021 2020 Change at 1 Constant rates are calculated by translating 2020 results at 2021 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 24.
4 Financial net debt excludes the IFRS 16 lease liability of £292.3m. Total
net debt is £1,025.6m. Reflects prior 12 months' EBITDA for relevant period.
See note 6 on page 36.
5 Organic ROIC excludes the impact of acquisitions following their 12-month
anniversary of ownership.
Revenue £2,786.3m £2,741.7m 1.6%
Operating profit £433.2m £378.2m 14.5%
Operating margin 15.5% 13.8% 170bps
Profit before tax £413.4m £343.9m 20.2%
Profit after tax £306.7m £262.6m 16.8%
Diluted earnings per share 177.9p 152.4p 16.7%
Net cash flows generated from operating activities
£550.2m £558.8m (1.5%)
The Directors will propose a final dividend of 71.6p per share (2020: 71.6p)
at the Annual General Meeting on 25 May 2022, to be paid on 17 June 2022 to
shareholders on the register at close of business on 27 May 2022.
Contacts
For further information, please contact:
Denis Moreau, Investor Relations
Telephone: +44 (0) 20 7396 3415
investor@intertek.com (mailto:investor@intertek.com)
Ed Bridges, FTI Consulting
Telephone: +44 (0) 20 3727 1000
scintertek@fticonsulting.com (mailto:scintertek@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/
(http://www.intertek.com/investors/) together with presentation slides and a
pdf copy of this report. A recording of the audiocast will be available
later in the day.
Annual Report
The Annual Report comprising the Strategic, Sustainability and Financial
Reports for the year ended 31 December 2021 will be available on the Company's
website www.intertek.com (http://www.intertek.com) on 18 March 2022.
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
Intertek CEO Letter
As I reflect on the significant disruption that Covid-19 has created for
everyone on the planet, I deeply recognise and value the role we play at
Intertek in every part of society.
We are a purpose-led force for good at the forefront of one of the world's
most critical and exciting industries, bringing quality, safety and
sustainability to life in more than 100 countries.
Covid-19 will be remembered as a tragedy for the world, changing life for
millions of people, and it is my view that when the history books are written,
Covid-19 will be remembered as much more than a global pandemic.
Indeed, Covid-19 has also caused the greatest dislocation of the global supply
chain since the 1970s, demonstrating that the world was operating with
significant intrinsic risks inside corporations and in our health services,
making the need for risk-based Quality Assurance more critical than ever
moving forward.
That is why Covid-19 has been a profound catalyst for change in all parts of
society and all stakeholders realise that going back to the way the world
operated pre-Covid-19 is just not good enough.
Everyone understands the need to build back an ever better world with higher
quality, safety and sustainability standards, which of course is creating
exciting growth opportunities for Intertek, whose purpose is to make the world
an ever better and ever safer place.
As you will have heard, corporations across the globe have faced immense
disruption to their supply chains during 2020 and 2021. I am pleased to report
that our clients have had the peace of mind of being able to operate safely,
knowing that they could count on 24/7 support from our 44,000 Total Quality
Assurance ('TQA') experts across our global network of over 1,000
laboratories.
Throughout 2020 and 2021, our science-based, highly technically skilled
individuals and teams have been acting in our customers' best interests with
precision, pace and passion, going above and beyond our clients' expectations,
delivering our customer promise: "Total Quality Assurance expertise delivered
consistently with precision, pace and passion, enabling our customers to power
ahead safely".
It is our people's unwavering commitment that has driven our continued strong
performance throughout the pandemic and the associated economic downturn. Our
strong performance during this period has demonstrated the importance of our
role and the mission-critical services we provide for companies everywhere.
And it is thanks to the Science-based Customer Excellence of our people that
we continue to be the global leader in risk-based Quality Assurance in one of
the world's most exciting industries, the very attractive $250 billion Quality
Assurance market.
Intertek people are the driving force behind our industry leading scale
positions in our various end-markets, our subject matter expertise, providing
excellence in everything we do, all of which will enable us to give our
clients the peace of mind they need from a quality, safety and sustainability
standpoint.
It is our people who give us the right to call Intertek 'an amazing force for
good'. And I want to show in my 2021 CEO letter and wider report what this
means in practice for ourselves, for our clients, for the world as a whole and
for generations to come.
Strong progress in 2021
"I would like to thank all of my colleagues at Intertek for their outstanding
contribution that has enabled us to make strong progress in 2021 in revenue,
margin, earnings and cash. 2021 marked another year that demonstrated the
strengths of our differentiated ATIC value proposition, the Science-based
Customer Excellence of our organisation, our unique performance management
approach and the quality of our earnings model, delivering sustainable value
for all stakeholders: customers, employees, suppliers, shareholders,
regulators and our communities.
Group revenue was £2,786m up 6.5% at constant rates driven by a robust LfL
revenue growth of 5.6% and by the benefits of the acquisitions recently made.
Operating profit grew by over 15% to £474m with margins increasing to 17%.
Our free cash flow performance was excellent, with strong cash conversion
driven by further improvements in working capital. This provides the Group
with a strong balance sheet and the flexibility to invest in growth. Our
ROIC was strong at 18.2% with an excellent organic ROIC of 24.4%, up 350bps
year-on-year at constant rates. We continue to deliver sustainable returns to
our shareholders and we have announced a full year dividend of 105.8p in-line
with 2019 and 2020 enabling the Company to rebuild its dividends cover towards
2x.
We enter 2022 with confidence given the strong progress made in 2021 and we
are targeting robust LfL revenue growth at constant currency, further margin
progression and strong free cash flow, notwithstanding the supply chain
challenges faced by clients in some of our markets.
The supply chain disruption being experienced by corporations across multiple
industries has made the need for comprehensive risk-based quality, safety and
sustainability assurance more critical than ever. Companies are investing in
Quality Assurance to build greater resilience and safety, whilst innovating to
deliver new high-quality products and services as consumer expectations
rapidly evolve. The sprint to net zero emissions also means that corporations
are reinventing the way they reduce their carbon footprints across their
operations, adopting a comprehensive approach to sustainability with
independently verified greater disclosures.
The Covid-19 pandemic has made the case for Total Quality Assurance clearer
and stronger for our clients and we expect the $250 billion global Quality
Assurance market to grow faster post-Covid. Moving forward, all stakeholders
in society expect governments and corporations to build back a better world
with a sharper focus on end-to-end Quality Assurance.
Thanks to our leading ATIC capability and expertise, innovation and insight,
Intertek is uniquely positioned to benefit from the GDP+ like-for-like revenue
growth prospects in the Quality Assurance industry. We are investing
organically and inorganically to seize the sustained long-term growth
opportunities in our industry through a disciplined approach to capital
allocation.
Stronger demand for ATIC solutions moving forward
Intertek is a science-based company at its core, based on a global network of
laboratories operated by customer-facing technical experts who are dedicated
to helping customers use our innovations to overcome their risks and
challenges in quality, safety and sustainability. Our science-based expertise
has never been more relevant than today - and it is set to become more so in
the years ahead as the lingering impact of the pandemic drives accelerating
growth in demand for our ATIC services.
There is no doubt in my mind that Covid-19 will be remembered as the greatest
dislocation of the global supply chain since the 1970s, creating significant
challenges for businesses, governments and consumers across the world. Its
impacts included major issues such as the lack of PPE and medical devices
during phase 1 of the pandemic, a shortage of components and raw materials in
multiple industries across multiple markets, and the significant disruption of
global trade and delayed availability of some products and services hindering
the rebound of the global economy.
These factors resulted in many impacts, from empty shelves in supermarkets and
'out of stock' notices in e-commerce across many product categories to labour
shortages in certain sectors of the economy. These in turn have placed
inflationary pressure on wages and a lack of synchronisation between demand
and supply in the world's energy markets, creating a shortage of electricity
in several countries and putting inflationary pressure on energy costs.
The disruption we are seeing in the global supply chain springs from the
compounding effect of three factors. First came a rapid fall in demand in Q2
2020, triggering cost reductions in major sectors and causing lower stock
levels and a reduced workforce. This was followed by a strong recovery in
global demand in Q4 2020 and H1 2021 for many product categories, running well
ahead of expectations that had just been lowered. These factors were
compounded by a lack of business intelligence inside corporations, restricting
their ability to read the global trade rebound early and start ordering and
hiring on time.
At Intertek, we are supporting our 400,000 customers as they work to
synchronise their sourcing, production and logistics activities to get their
supply chains back to normal and service their clients. The supply chain
disruption within our clients' eco-systems is highly complex and everybody is
working hard but it will take time before the global supply chain is back to
normal. I met many of our customers in 2021 who share a common learning from
this significant disruption to the global supply chain: they have been
operating with substantial intrinsic risks in their supply chains without the
right data, processes and independent assurance.
That's why we expect our clients to increase their investments in three key
areas:
1. RESILIENT SUPPLY CHAINS
Covid-19 is proving a catalyst for many corporations to improve the resilience
of their supply chains and the major corrective actions our clients are
putting in place include:
· 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 of suppliers across all tiers;
· A more diversified portfolio of factories, including on-shoring to
both enhance supply chain resilience and reduce the carbon footprint of their
operations; and
· Investments in processes, technology and training to improve their
supply chain capabilities.
2. PRODUCT AND SERVICE INNOVATION
We are seeing our clients realise that they need to invest more in product and
service innovation to meet the changing needs of their consumers. As a result
of the pandemic, corporations have seen consumer expectations change rapidly
as they target a brighter, better future.
As a result, corporations need to step up their game in quality, safety,
sustainability, convenience and value for money to enhance their products and
services.
3. SUSTAINABILITY
The sprint to net zero emissions is real, forcing corporations to reinvent how
they reduce their carbon footprint across their operational footprint, and how
they communicate their progress towards net zero with independently verified
carbon-emission claims disclosures that assure transparency and greater
accountability.
Our clients' additional investments in these three areas of their
quality-assurance activities to build greater resilience, sustainability and
safety will deliver additional growth opportunities for Intertek.
All stakeholders in society expect governments and corporations to build back
a better world with a sharper focus on end-to-end Quality Assurance, and we
expect the $250 billion global Quality Assurance market to grow faster
post-Covid-19.
In short, the world of Quality Assurance, our unique TQA position within it
and our emphasis on quality, safety and sustainability, is set to become more
exciting than ever, as companies everywhere gear up to meet the needs and
expectations of their stakeholders, outperform the competition and attract new
customers and investment.
Sustainability is the movement of our time
I shared with you in my previous CEO letters why sustainability had become the
movement of our time, and recent events have pushed ESG issues ever more
firmly into the spotlight.
At Intertek, we live by the same values that our wide range of sustainability
services enable our clients to embrace. For example, we are committed to
reaching net zero by 2050, and sustainability is at the heart of our 5x5
differentiated strategy for growth, realising sustainability means much more
than achieving net zero.
For Intertek, doing business the right way with a systemic approach is the
only way to deliver our corporate goals and create sustainable value for all
stakeholders. We are therefore committed to leading by example with our own
sustainability excellence agenda, implemented in every operation.
We are proud to have been recognised for our leading sustainability
credentials with the highest possible 'A'AA ESG rating from MSCI, the world's
largest provider of ESG indexes. This provides external validation for the
incredible work that our colleagues do every day to support our clients with
their own sustainability agendas, as well as being focused on sustainability
excellence in our own operations.
We were also humbled to win the Gold Award in the Best CSR/ESG Report category
at the 2021 Corporate and Financial Awards.
This year, we are taking our Annual Report and Accounts to the next level,
producing a report with three distinct sections: Strategic, Sustainability
(incorporating Governance) and Financial. This is true to our belief that
transparency creates accountability which is what the world needs to be a
better place for all future generations.
During the year, we were proud to announce our participation in the LEAF
(Lowering Emissions by Accelerating Forest Finance) Coalition, furthering our
commitment to a net zero future. LEAF is a new public-private initiative
designed to accelerate climate action by providing results-based finance to
countries committed to protecting their tropical forests.
We made progress in 2021 in terms of reducing our carbon emissions as you will
read in the Sustainability Report and moving forward, we will include yearly
carbon emissions reduction targets in short-term incentives for all of our
employees.
Our sustainability targets go beyond net zero and we have set targets for the
entire organisation in the areas of customers satisfaction, diversity &
inclusion, health and safety, compliance, employee turnover and engagement.
Supporting our clients' sustainability agendas
Our clients understand that they have to focus on operational and corporate
sustainability matters, and they are asking us to deliver comprehensive
solutions that address both aspects. With Intertek Total Sustainability
Assurance, we deliver the independent end-to-end assurance our clients need on
all aspects of their sustainability journey, helping them achieve
sustainability excellence across all aspects of their business.
Intertek Total Sustainability Assurance is a holistic programme that leverages
our footprint in more than 100 countries and covers all industries. Our teams
of sustainability experts in every major region, whose expertise combines
global and local perspectives, are committed to the thought leadership and
innovation that set us apart in three distinctive sustainability assurance
areas:
1. Intertek Operational Sustainability Solutions
These are designed to help our customers achieve sustainability excellence in
all parts of their operations, including across the supply chain. Our broad
portfolio of industry-specific and industry-agnostic solutions is continuously
evolving, and recent breakthrough innovations include CarbonClear™,
CarbonZero™ and SourceClear™.
2. Intertek ESG Assurance
With this programme, we support our clients on all aspects of their ESG
reporting journey and non-financial data needs. Support ranges from strategy
setting to preparing reports and providing independent verification of
sustainability disclosures and reporting. This allows our customers to
communicate with total confidence with their stakeholders on all aspects of
their ESG journey.
3. Intertek Corporate Sustainability Certification
Intertek Corporate Sustainability Certification is the world's first
independently verified corporate sustainability audit and certification
programme based on the 10 standards that we believe define a truly sustainable
organisation from a company strategy and corporate governance perspective.
They go beyond the criteria that are commonly looked at by ESG rating agencies
to include other factors that stakeholders and investors should consider,
including business resilience, risk appetite and enterprise security.
Implementing our 5x5 differentiated strategy for growth
Intertek has the track record of delivering sustainable value creation for all
stakeholders which is testament to the strength of our 5x5 differentiated
strategy for growth and our commitment to the kaizen principles of continuous
improvement.
Our 5x5 differentiated strategy continued to inform our operational priorities
in the face of the pandemic and is still doing so as we learn to live with the
ongoing impacts of Covid-19.
It is based on five strategic priorities, which are deliverable through five
strategic enablers, and is designed to help us achieve five goals:
· Fully engaged employees working in a safe environment;
· Superior customer services across all our Assurance, Testing,
Inspection and Certification solutions;
· Margin-accretive revenue growth based on GDP+ organic growth;
· Strong cash conversion from our operations; and
· An accretive, disciplined capital-allocation policy.
Our strategic priorities - through which we will sustain and further extend
our global leadership position - are:
· Differentiated brand proposition, positioning us as leader of the
global TQA market;
· Superior customer service, making us the most trusted and respected
TQA partner;
· Effective sales strategy, continuously improving our margin-accretive
revenue growth;
· Growth and margin-accretive portfolio, prioritising investments with
high-growth and high-margin prospects; and
· Operational excellence: our 'Ever Better' approach continuously
improves efficiency and productivity.
The fact that we have consistently and demonstrably delivered against all
these priorities reflects the power of our five strategic enablers:
· Living our customer-centric culture;
· Disciplined performance management;
· Superior technology;
· Energising our people; and
· Delivering sustainable results.
Investing in innovation to meet the changing needs of our clients
True to our pioneering spirit, and building on our existing strengths, we will
continue to innovate and provide customers with the mission-critical solutions
they need. We are investing organically and inorganically to seize the
sustained long-term growth opportunities in our industry through a disciplined
approach to capital allocation, targeting high-margin and high-growth areas
that in turn accelerate margin-accretive revenue growth.
Intertek has been a pioneer in the industry, providing new innovative
solutions to our clients capitalising on the Science-based Customer Excellence
and the creativity of our organisation.
Our focused approach to innovation uses our proven three-tiered method:
'core', building on strengths of existing products and services; 'adjacent',
expanding into fast-growing and high-margin markets; and 'breakthrough',
developing innovative products and services.
We have brought many innovations to market under all these headings. Examples
of core innovations include Facility Health Management ('FHM'), part of our
Protek™ offering, which focuses on health, hygiene, safety and risk
management. Protek FHM's science-based audit helps our customers reduce the
risks of pathogen transmission and enhances their buildings' air quality,
controls costs and risks, and increases employee and customer comfort.
We also added new and enhanced features to our market-leading supply chain
compliance solution Inlight 2.0, that enables organisations to manage
increasingly complex supply chain risks, empowering them to bring visibility
to the workings of their vendor partners and turn potential disruptions and
compliance irregularities to their competitive advantage.
In August we opened our new Minerals Global Centre of Excellence in Perth,
Western Australia as a key hub for the minerals and mining industry. With more
than 500 employees, this state-of-the-art laboratory gives our customers
access to trusted sustainability expertise in mineral testing, inspection and
analysis.
Examples of adjacent innovations include WindAware, an actionable data-mining
SaaS platform launched at the beginning of the year. This data intelligence
solution helps wind asset owners and operators make informed decisions in real
time to optimise performance and maximise their asset lifecycle.
In November, we formally opened our new Electric Vehicle Centre of Excellence
for high-voltage EV propulsion systems in Milton Keynes, UK. This
state-of-the-art testing centre will further enhance our offering to
automotive companies in the fast-developing world of electric and hybrid
vehicles.
Examples of breakthrough innovations include CarbonClear™, the world's first
independent carbon-intensity certification programme, and SourceClear™, a
new technology platform that provides visibility and traceability across the
full range of supply chain relationships.
In April, we announced the launch of Intertek CarbonZero™, our new
independent carbon-neutral certification for products and services. We
subsequently issued the first Intertek CarbonZero™ Verified certification to
Lundin Energy, representing the world's first certified carbon-neutral oil
trade.
All these innovations and many more performed exceptionally well in 2021,
underlining how we have created and maintained our leadership position. And it
is by continuing to invest and innovate that we will further extend our lead
in the years ahead.
Seizing new ATIC growth opportunities through strategic acquisitions
We are also targeting inorganic investments with attractive M&A
opportunities that strengthen our ATIC portfolio in high-margin, high-growth
areas. During the year we made two important acquisitions: SAI Global
Assurance and JLA Brasil Laboratório de Análises de Alimentos S.A., which
are excellent examples of investments in complementary businesses.
SAI Global Assurance is a highly complementary, capital-light and high-margin
Quality Assurance business. It adds strongly to our existing strengths in
industries like Food, Quick-Service Restaurants ('QSR') and Forestry and
expands our business in Australia, USA, Canada and China. In addition, it
has an excellent Standards business, which will help our clients traverse a
fast-changing and increasingly complex regulatory environment.
JLA expands our existing Food and Agri Assurance capabilities into the
attractive food-testing market in Brazil, which is one of the world's largest
agri-food exporters.
We strongly believe in the benefit of scaling up organic and inorganic
investments with a disciplined performance management approach and I am
pleased to report that in 2021 our teams have made excellent progress
leveraging the investments made in the last few years as evidenced by our
strong return on capital.
Giving our clients the ATIC advantage
Intertek's pioneering history, which was initiated by founding fathers such as
Thomas Edison, has lasted for more than 130 years. But it was only recently,
in 2015, that we took a major step for both our company and our industry as a
whole.
That is when we redefined the industry as we added Assurance to our Testing,
Inspection and Certification ('TIC') solutions to create ATIC; an end-to-end,
fully integrated portfolio of services that gives clients complete peace of
mind across their operating systems, quality-management systems and supply
chains.
We call this Total Quality Assurance ('TQA'), as our clients benefit from
risk-mitigation at every stage of their operations.
Our unique ATIC proposition brings to life our commitment to always taking
customer service to the next level. While we recognise that TIC will remain
very important for our clients moving forward, we also understand that it is
no longer sufficient in a world where global trade was exponentially adding
complexity to our clients' supply chains. Introducing Assurance was therefore
an essential step forward to provide our clients with a superior customer
service.
Today, Assurance is at the cutting edge of our value proposition and Intertek
is the only company in the world providing a truly global TQA portfolio,
delivered with precision pace and passion, and enabling our customers to power
ahead safely.
We are proud of having provided our clients with our TQA approach since 2016
as we have helped them build stronger
businesses and importantly given them the ATIC advantage they need to operate
safely.
We truly believe that risk-based Quality Assurance powered by our unique ATIC
solution is the future of our industry.
Building Back Ever Better in our communities
Each of our operations is part of a local ecosystem and I want to close my
yearly letter with what we did in 2021 to take our community work to the next
level and ultimately make the world ever better.
During the year, we launched the #BBEB platform, bbeb.com, with the intention
of creating "a truly Glo-cal community-based movement to help people in their
local community space to inspire friends, family and public institutions to
Build Back an Ever Better world".
This is what the BBEB charter says: "BBEB is the place that makes it easy for
anyone to be active on our platform, inspiring them to build back ever better
by making step by step sustainable progress in the community, have a voice, to
launch ideas that can make the world better, no matter how big or small. It
could be anything from organising a beach clean or litter pick, creating a new
recycling scheme, supporting clean energy, urban regeneration, helping others
in need and much more. The important thing is that it's simply a better way
forward".
Today, our multilingual site carries thousands of powerful stories posted by
individuals across the world, highlighting inspirational initiatives from
individuals, groups, communities, organisations and companies, all with the
ambition of creating positive change by demonstrating what can be achieved
with the right determination, focus and energy.
Since its launch at the end of March, our BBEB community digital space has
been a big success.
An amazing force for good
We are a purpose-led business, in which our 44,000 colleagues are united by
their shared belief in the urgent need to make the world an ever better and
ever safer place for everybody.
We are in the early stages of a 'new normal' and are observing new trends and
behaviours, as well as demand for products and services that didn't exist
prior to the pandemic. Consumers want more sustainable products, supply chain
simplicity, visibility and traceability of goods, new solutions for hygiene,
health and wellbeing, as well as lower carbon emissions.
Our clients equally recognise that they need us more than ever before in the
face of this increasing consumer and regulatory demand to deliver products and
services that are better, safer and more sustainable than anything that has
gone before.
Moving forward, I therefore expect the global market for our ATIC services to
grow faster than ever before.
As the global leader in risk-based Quality Assurance we are well positioned to
benefit from our clients' increased investments in Total Quality Assurance to
make their businesses stronger.
Our USP is our Science-based Customer Excellence in quality, safety and
sustainability that enables us to provide our 400,000 clients with our leading
ATIC solutions in Products, Trade and Resources in more than 100 countries.
We are deeply committed to our sustainability agenda and we will continue
delivering sustainable value for all our stakeholders; customers, employees,
suppliers, shareholders, regulators and our communities.
We can proudly say that Intertek is an amazing force for good.
André Lacroix
Chief Executive Officer
Operating Review
For the year ended 31 December 2021
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
2021 2020 Change at actual Change at constant
£m £m rates rates1
Revenue 2,786.3 2,741.7 1.6% 6.5%
Like-for-like revenue2 2,744.0 2,721.6 0.8% 5.6%
Adjusted Operating profit3 473.9 427.7 10.8% 15.4%
Margin3 17.0% 15.6% 140bps 130bps
(28.4) (34.9) 18.6% 19.1%
Net financing costs3
Income tax expense3 (118.0) (100.2) (17.8%) (23.3%)
Adjusted Earnings for the period3 327.5 292.6 11.9% 17.1%
Adjusted diluted earnings per share3 190.8p 170.9p 11.6% 16.8%
1. Constant rates are calculated by translating 2020 results at
2021 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 Financial Statements.
Total reported Group revenue increased by 1.6%, with 0.9% growth contributed
by acquisitions, a LfL revenue increase of 5.6% and a decrease of 490bps from
foreign exchange reflecting sterling appreciation against most of the Group's
trading currencies.
The Group's LfL revenue at constant rates consisted of an increase of 7.6% in
Products, 3.0% in Trade and 1.7% in Resources.
We delivered an adjusted operating profit performance of £473.9m, up 15.4% at
constant rates and 10.8% at actual rates.
The Group's adjusted operating margin was 17.0%, an increase of 130bps from
the prior year at constant exchange rates. Margin increased in Products by
180bps, Trade by 110bps and declined in Resources by 120bps at constant rates.
The Group's statutory operating profit after SDIs for the period was £433.2m (2020: £378.2m), up 19.6% at constant
rates, and margin was 15.5% (2020: 13.8%).
Net Financing Costs
Adjusted
net financing costs were £28.4m, a decrease of £6.5m on 2020
resulting from a combination of lower interest expense and the impact
of foreign exchange rates. This comprised £1.5m (2020: £1.1m) of finance
income and £29.9m (2020: £36.0m) of finance expense. Statutory net
financing costs of £19.8m included £8.6m income (2020: £0.6m) relating to
SDIs.
Tax
The adjusted effective tax rate was 26.5%, an increase of 1.0% on the prior year (2020: 25.5%). The tax charge, including
the impact of SDIs, of £106.7m (2020: £81.3m), equates to an effective rate
of 25.8% (2020: 23.6%), the increase mainly driven by a prior year credit in
2020.
Earnings per share
Adjusted diluted earnings per share at actual exchange rates was 11.6% higher
at 190.8p (2020: 170.9p). Diluted earnings per share after SDIs was 177.9p
(2020: 152.4p) per share and basic earnings per share after SDIs was 178.7p
(2020: 153.6p).
Dividend
Reflecting the Group's strong cash generation in 2021, the Board recommends a
full year dividend of 105.8p per share, in-line with prior year.
The full year dividend of 105.8p equates to a total cost of £170.6m or 55% of
adjusted profit attributable to shareholders of the Group for 2021 (2020:
£170.8m and 62%). The dividend is covered 1.8 times by earnings (2020: 1.6
times), based on adjusted diluted earnings per share divided by dividend
per share.
Separately Disclosed Items ('SDIs')
A number of items are separately disclosed in the financial statements as
exclusion of these items provides readers with a clear and consistent
presentation of the underlying operating performance of the Group's business.
Reconciliations of the statutory to adjusted measures are provided in the
Presentation of Results section.
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 fixed assets; costs of acquiring and
integrating acquisitions; the cost of any fundamental restructuring of a
business; material claims and settlements; and unrealised market or fair value
gains or losses on financial assets or 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 costs of any restructuring are excluded from adjusted
operating profit where they represent fundamental changes in individual
operations around
the Group as a result of the portfolio activities discussed above and are not expected to recur in those operations. The
profit and loss on disposals of businesses or other significant assets and the
costs associated with successful, active, or aborted acquisitions are
excluded from adjusted operating profit in order to provide useful information
regarding the underlying performance of the Group's operations.
The SDIs charge for 2021 comprises amortisation of acquisition intangibles of £29.3m (2020: £28.1m); acquisition
and integration costs relating to successful, active, or aborted acquisitions
of £11.4m (2020: £2.4m); and restructuring costs of £nil (2020: £19.0m).
Details of the SDIs for the twelve months ended 31 December 2021 and the comparative period are given in note 3 to
the Condensed Consolidated Financial Statements.
Acquisitions and investments
The Group completed two main acquisitions in the year (2020: none) with
consideration paid of £480.9m (2020: nil), net of cash acquired of £15.8m
(2020: nil).
In July 2021, the Group acquired JLA Brasil Laboratório de Análises de
Alimentos S.A. ('JLA'), a market-leading independent provider of Food, Agri
and Environmental testing solutions based in Brazil.
In September 2021, the Group acquired SAI Global Assurance ('SAI'), a leading
provider of Assurance services, including management systems certification and
second party audits across a wide variety of end markets to more than 60,000
customers in c.130 countries.
The Group invested £97.1m (2020: £79.8m) organically in laboratory
expansions, new technologies and equipment and other facilities. This
investment represented 3.5% of revenue (2020: 2.9%).
Cash flow
The Group's cash performance was strong with free cash flow of £385.2m (2020:
£415.7m), driven by strong cash conversion, the result of disciplined working
capital management. Adjusted cash flow from operations was £695.8m (2020:
£705.1m). Statutory cash flow from operations was £679.2m (2020: £685.2m).
Financial position
The Group ended the period in a strong financial position. Financial net debt
was £733.3m, an increase of £313.4m on 31 December 2020, primarily
reflecting the acquisition of SAI in September and related financing. The
undrawn headroom on the Group's existing committed borrowing facilities at 31
December 2021 was £564.2m.
In December 2021, the Group issued US$640m of senior notes in four tranches
with fixed annual interest rates of 2.24%-2.54%, for drawdown in January and
March 2022 and repayable between 2027 and 2030.
Total net debt, including the impact of the IFRS 16 lease liability, was
£1,025.6m (2020: £644.1m).
Outlook
Given our well diversified revenue streams across industries and geographies
and the strong progress we have made in H2 21, we enter 2022 with
confidence. Notwithstanding the supply chain challenges that our clients are
facing in some of our markets, we expect the Group will deliver robust LfL
growth at constant currencies with margin progression year on year and a
strong free cash flow performance.
Our financial guidance for 2022 is that we expect:
· Capital expenditure in the range of £135m-£145m
· Net Finance Costs of around £35m-£39m
· Effective tax rate in the 26.5-27.0% range
· Minority interests of between £20m-£22m
· Financial net debt at December 2021 of between £640m-£690m (prior
to any material movements in FX or M&A).
Operating Review by Division
Revenue Adjusted operating profit
2021 2020 Change Change at 2021 2020 Change Change at
£m £m at actual rates constant rates £m £m at actual rates constant rates
Products 1,755.3 1,681.6 4.4% 9.1% 399.7 351.6 13.7% 18.0%
Trade 575.4 592.6 (2.9%) 2.8% 51.6 47.1 9.6% 17.3%
Resources 455.6 467.5 (2.5%) 1.6% 22.6 29.0 (22.1%) (18.7%)
Group 2,786.3 2,741.7 1.6% 6.5% 473.9 427.7 10.8% 15.4%
Products Divisional Review
2021 2020 Change at actual rates Change at constant rates
£m £m
1,755.3 1,681.6 4.4% 9.1%
Revenue
Like-for-like revenue 1,713.4 1,663.6 3.0% 7.6%
Adjusted operating profit 399.7 351.6 13.7% 18.0%
Adjusted operating margin 22.8% 20.9% 190bps 180bps
Intertek Value Proposition
Our Products-related businesses consist of business lines that are focused on ensuring the quality and safety of physical
components and products, as well as minimising risk through assessing the
operating processes and quality management systems of our customers.
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, food and hospitality, healthcare and beauty, and pharmaceuticals.
Across these industries we provide a wide range of ATIC services including,
laboratory safety, quality and performance testing, second-party supplier
auditing, sustainability analysis, product assurance, vendor compliance,
process performance analysis, facility plant and equipment verification and
third-party certification.
Strategy
Our TQA Value Proposition provides a systemic approach to support the Quality
Assurance efforts of our 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, develop new products,
materials and technologies and ultimately assist them in getting their
products to market quicker, in order to continually meet evolving consumer
demands.
Innovations
We continue to invest in innovation to deliver a superior customer service in
our Products related businesses:
Inlight 2.0
What it is: First launched in 2017, Intertek Inlight(TM) provides the
technology and expertise which enables organisations to better understand
their supply chain risks and protect their brand.
With the integration of Intertek's Wisetail solution, a dynamic online
learning platform, Inlight 2.0 adds new and enhanced analytical improvement to
its market-leading supply chain compliance solution, offering organisations
enhanced analytics to meet the needs of the evolving complexity of the global
supply chain, allowing for increased product advancements, adaptive planning
and continual improvement. Inlight 2.0 alongside Wisetail allows organisations
to make real-time supplier decisions and drive vendor training based on
corrective action plan outputs.
Customer benefit: Inlight 2.0 is a cost-effective solution for global
companies who require trusted information about the identities, capabilities
and compliance of their supplier partners. Inlight 2.0 allows users more
flexibility and customisation in their unique supply chain programmes,
including live dashboards of their suppliers' performance, trends, risks and
opportunities, as well as training.
AccessCheck
What it is: As global leaders in systems and services for brand quality,
standards management and related risk management, Intertek Cristal launched
AccessCheck - an assessment protocol which provides independent verification
of the degree to which hotels, restaurants, and other participants in the
travel, tourism, and hospitality industry meet the accessibility needs of
those living with disabilities.
Customer benefit: Our team of experts help clients strengthen their brand by
ensuring consistency of quality, standards and risk management in everything
they do. AccessCheck ensures that clients have a detailed policy in place to
address the issues relating to disabled access. That means making sure all
areas of their buildings are accessible, that entry points and reception areas
are welcoming for guests with a disability, and that suitable facilities for
all guests are available. Through the programme, we also evaluate all aspects
of our clients' building designs, advise on the safe evacuation of guests with
specific disabilities, and offer disability awareness training.
SourceClear
What it is: Intertek SourceClear™ helps organisations track sustainable
material claims throughout all stages of trade and production in their supply
chain. Our experts provide independent certification of facilities and
materials claims and manage the end-to-end process for scope and transaction
certificates against Textile Exchange standards including the Recycled Claim
Standard, Global Recycled Standard and Organic Content Standard; as well as
the Global Organic Textile Standard, the world's leading processing standard
for organic fibre textiles.
Customer benefit: Brands and retailers can confidently demonstrate
sustainability commitments through the independent certification of material
claims and accurate labelling of products. SourceClear™ enables transparency
and assurance that organisations are taking proactive measures to be more
sustainable, through responsible sourcing of preferred raw materials that
minimise environmental impacts and promote environmental and social good
practices in the value chain.
Intertek Protek
Protek facility health solutions - clean air and healthy indoor environments
What it is: Protek Facility Health Management (FHM) takes a comprehensive,
practical, and customised approach to the design and operation of indoor
environments. Our services include the assessment of unique risks and
opportunities, plus efficacy and validation testing that gives confidence to
both our customers and their stakeholders.
Customer benefit: With raised awareness of the indoor environmental quality
due to the Covid-19 pandemic, and organisations' needs to protect their
people, our science-based approach helps our customers reduce the risks of
pathogen transmission and enhance their buildings' air quality. The bespoke
solutions we provide enable health and wellness enhancements across their
facilities, mitigate risk, and increase employee and customer comfort and
loyalty.
New Electric Vehicle Testing Centre of Excellence
What it is: As we accelerate at a rapid pace into a more sustainable future,
the automotive industry has a critical role to play in the energy transition
the world needs. Our new award-winning, state-of-the-art Electric Vehicle
Centre of Excellence, opened in November 2021 in Milton Keynes, UK, offers
leading automotive manufacturers a unique technology, innovation and
experience centre with industry-leading, end-to-end Assurance, Testing,
Inspection and Certification (ATIC) services that are purpose-built for the
global transition to zero emission vehicles.
Customer benefit: Electric Vehicles offer huge opportunities as part of the
'Green Revolution' for jobs and growth, cleaner air, improved public health
and enhanced mobility solutions. At our new facility, clients will be able to
access world-class technical expertise, pioneering innovation and leading
services in one location - meeting their increasing need for fast, bespoke,
expert testing services and rapid results that will help them address the
effects of climate change.
2021 performance
Our Products business delivered a strong performance in 2021 in LfL revenue, operating profit and margin with all three measures ahead of 2019.
Revenue of £1,755.3m was up 9.1% at constant rates and 4.4% at actual rates. Adjusted operating profit was £399.7m, up 18.0% at constant rates and 13.7% at actual rates. Our adjusted operating margin of 22.8% was up 180 basis points ahead of 2020 at constant rates and up 190 basis points at actual rates.
• In H2 2021 our Softlines business delivered mid-single digit LfL revenue
growth, resulting in a double-digit growth in LfL revenue for the year. The
business benefited from continuous growth in e-commerce, increased demand for
testing protective equipment and the reduction in the lockdown activities in
some of our markets although we continue to see store closures in Western
Europe and North America.
• Our Hardlines business reported high-single digit LfL revenue growth in H2 and
double-digit growth in LfL revenue in 2021. Hardlines benefited from further
growth in e-commerce, increased consumer demand for home furniture and toys as
well as from the reduction in the lockdown activities in some markets more
than offsetting continuing closures of stores in Western Europe and North
America.
• Our Electrical & Connected World business delivered mid-single digit LfL
revenue growth in the second half to register high-single digit LfL revenue
growth for the year benefitting from increased ATIC activities driven by
greater regulatory standards in energy efficiency, the higher demand for
testing and certification of medical devices, the increased testing
requirements for 5G and greater corporate focus on cyber security.
• Our Business Assurance business delivered high-single digit LfL revenue growth
for the second half resulting in double-digit LfL revenue growth for the full
year. The reduction of lockdown activities has driven a rebound in the number
of ISO audits in some of our operations, while we continue to benefit from the
attractive growth in supply chain assurance, the continuous focus on ethical
supply, the increased needs of corporations for sustainability assurance and
the strong growth in our People Assurance segment.
• Our Building & Construction business reported low-single digit revenue
growth in H2 and stable LfL revenue for the year. We continue to benefit
from the growing demand for more environmentally friendly and higher quality
buildings, but the number of large infrastructure projects continues to be
below 2020.
• Our Transportation Technology business delivered mid-single digit LfL revenue
growth in H2 2021 but low single-digit negative LfL revenue for the year.
Following the lower demand for testing activities in Western Europe and North
America, the second half saw increased investment by our clients in new
powertrains to lower CO2/NOx emissions and improve fuel efficiency.
• Our Food business registered high-single digit LfL revenue growth in the
second half and double-digit LfL revenue growth for the year. We are
benefiting from the resumption of client supply operations in most markets,
from the sustained demand for food safety testing activities and the higher
demand for hygiene and safety audits in factories.
• We saw double-digit LfL revenue growth in the second half and for the year in
our Chemical & Pharma business. We benefited from an improvement of demand
for regulatory assurance and chemical testing in some of our operations in
North America and Western Europe and from the increased R&D investments of
the pharma industry.
2022 growth outlook
In 2022 we expect our Products division to deliver robust 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
2021 2020 Change at actual rates Change at constant rates
£m £m
575.4 592.6 (2.9%) 2.8%
Revenue
Like-for-like revenue 575.0 591.1 (2.7%) 3.0%
Adjusted operating profit 51.6 47.1 9.6% 17.3%
Adjusted operating margin 9.0% 7.9% 110bps 110bps
Intertek Value Proposition
Our Trade division consists of three Global Business Lines with global and
regional trade flow based on similar mid- to long-term structural growth
drivers:
Our Caleb Brett business provides cargo inspection, analytical assessment,
calibration and related research and technical services to the world's
petroleum and biofuels industries.
Our Government & Trade Services ('GTS') business provides inspection
services to governments and regulatory bodies to support trade activities that
help the flow of goods across borders, predominantly in the Middle East,
Africa and South America.
Our AgriWorld business provides analytical and testing services to global
agricultural trading companies and growers.
Strategy
Our TQA Value Proposition assists our Trade related customers in protecting
the value and quality of their products during their custody-transfer, storage
and transportation, globally, 24/7. Our expertise, service innovations and
advanced analytical capabilities allow us to optimise the return on our
customers' cargoes and help them resolve
difficult technical challenges. Our independent product assessments provide peace-of-mind to our government clients
that the quality of products imported into the country meet their standards
and import processes.
Innovations
We continue to invest in ATIC innovations to deliver a superior customer
service in our Trade related businesses:
Tradeable
What it is: Intertek Tradeable provides trade support and expertise to deliver
a comprehensive portfolio of pre-shipment solutions that enable the validation
of suppliers or manufacturers, as well as production, shipment and goods
handling processes. Our solutions facilitate risk mitigation right across the
international supply chain, and we can tailor bespoke packages to meet our
customers' specific requirements.
Customer benefit: Tradeable helps our customers protect their reputation and
brand, enhances their quality control throughout the production process,
minimises shipment delays and reduces the need for re-work, which empowers
them to manage their supply chain risks better. We deliver the ground-level
trade support and expertise they need to trade with confidence in an ever more
complex and challenging trading environment.
Fast-Tek
What it is: Intertek's Fast-Tek is a customised global trade solution that
delivers expedited certification of shipments to get trade moving faster. It
offers an enhanced Total Quality Assurance experience - as our in-house labs
and inspectors support our customers with Fast-Tek registration, expediting
the inspection and certification process without compromising compliance or
quality, and streamlining their administrative processes while minimising
complexity.
Customer benefit: Fast-Tek enables our clients to move their goods through
their supply chains more quickly, and can help to reduce overheads, both in
the administrative burden and the associated costs of certification. Our
global Fast-Tek customers are also provided with a dedicated key account
manager who ensures that their operations run smoothly and efficiently at all
times and can tailor bespoke solutions to meet their specific shipping needs.
This has proved invaluable to our key customers in the current market where
fast turnaround times and flexibility are critical.
Enhancing transparency and traceability for the Rice Exchange
What it is: Intertek AgriWorld has agreed a new service partnership with the
Rice Exchange, the blockchain enabled digital platform that connects buyers
and sellers of rice across continents, adding trust and lowering risk for all
parties involved. The partnership demonstrates our commitment to the rice
industry and means that Intertek is now available to all Rice Exchange
customers to provide inspection services in relation to their rice trades
undertaken on the platform.
Customer benefit: Rice Exchange users who rely on Intertek's services benefit
from total transparency of transactional quality of rice inspected along the
entire value chain. Alongside inspection, customers are able to select from
our full range of services, ensuring Total Quality Assurance and thus
mitigating risks of rejection at final sales stage. The platform allows
engagement from farmer/producer through to the end buyer, a global view of the
value chain which previously was limited to larger international traders only.
This not only permits direct engagement with all stakeholders but also
empowers the farmers/producers by affording them the opportunity to sell at
market related rates.
2021 performance
Our Trade business delivered a good performance in revenue, operating profit
and margin with LfL revenue growth accelerating in the second half.
Revenue of £575.4m was up 2.8% at constant rates and down 2.9% at actual
rates. We delivered an adjusted operating profit of £51.6m up 17.3% at
constant rates and 9.6% at actual rates. Our adjusted operating margin of 9.0%
was up 110 basis points at constant and actual rates.
• Caleb Brett, the global leader in the Crude Oil and refined
Products global trading markets, benefited from improved momentum driven by
increased global mobility with mid-single digit growth in second half LfL
revenue, resulting in low-single digit LfL revenue growth for the full year.
• 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 low-single digit negative growth in LfL revenue
in H2 due to supply chain disruptions in some of our markets resulting in
low-single digit LfL revenue growth for the year.
• AgriWorld provides inspection activities to ensure that the global
food supply chain operates fully and safely. The business reported
double-digit LfL revenue growth for both the second half and the year. We
continue to benefit from an increase in demand for inspection activities
driven by the strong growth in the global food industry.
2022 growth outlook
In 2022 we expect our Trade division to deliver robust 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
2021 2020 Change at actual rates Change at constant rates
£m £m
455.6 467.5 (2.5%) 1.6%
Revenue
Like-for-like revenue 455.6 466.9 (2.4%) 1.7%
Adjusted operating profit 22.6 29.0 (22.1%) (18.7%)
Adjusted operating margin 5.0% 6.2% (120bps) (120bps)
Intertek Value Proposition
Our Resources division consists of two Business Lines with similar mid- to
long-term structural growth drivers:
Our Industry Services business uses in-depth knowledge of the oil, gas,
nuclear and power industries to provide a diverse range of TQA solutions to
optimise the use of customers' assets and minimise the risk in their supply
chains. Some of our key services include technical inspection, asset integrity
management, analytical testing and ongoing training services.
Our Minerals business provides a broad range of ATIC service solutions to the
mining and minerals exploration industries, covering the resource supply chain
from exploration and resource development, through to production, shipping and
commercial settlement.
Strategy
Our TQA Value Proposition allows us to help customers gain peace of mind that
their projects will proceed on time and their assets will continue to operate
with a lower risk of technical failure or delay. Our broad range of services
allow us to assist clients in protecting the quantity and quality of their mined and drilled products, improve safety and
reduce commercial risk in the trading environment.
Innovations
We continue to invest in innovation to deliver a superior customer service in
our Resources related businesses:
RiskAware
What it is: With Intertek RiskAware's analytical approach to risk-based and
QA/QC inspection data, we help our customers minimise their total cost of
quality by avoiding costly and disruptive delays, incurring significant rework
costs, or experiencing non-compliance issues. Our secure cloud-based solution
identifies quality and safety risks, which helps companies optimise their
inspection programme.
Customer benefit: By using risk-based data analytics to pin-point risky areas
within their inspection programme, our customers can optimise their supply
chain strategy. Risks such as component failure, delayed production
opportunity costs, and project cost escalation due to delays caused by the
late arrival of equipment, can all be mitigated through robust and proactive
quality control programmes. This is complemented by the vendor surveillance
activities we offer and overall assessment and monitoring of the supply chain.
WindAware
What it is: Managing the life of a wind turbine generator is a constant
challenge. Operators need a tool that provides organised, readily available
integrity data. Intertek developed WindAware, a cloud-based software solution
to help owners and operators manage their asset and Operations &
Maintenance ('OM') data, maintain reliability and safety, and minimise costly
equipment failures.
Customer benefit: WindAware allows users to efficiently track, trend and
report components' inspection, service, repair, replacement, and failure
history, from construction to decommissioning. Utilising this information,
gathered via a mobile device, helps wind farm owners make fast cost-effective
real-time decisions, optimising asset performance and life, and reducing risk.
New state-of-the-art Minerals Global Centre of Excellence
What it is: Our new Minerals Global Centre of Excellence, located in Perth,
Western Australia, is a key global center for the minerals and mining
industry. It is the largest and most technologically advanced Intertek
Minerals laboratory in the world, and consolidates the Perth operations into a
20,000m(2), multi-service facility. With more than 500 Intertek colleagues,
powered by the latest pioneering technology, it delivers a broad range of
Assurance, Testing, Inspection and Certification (ATIC) services to the
industry.
Customer benefit: Sustainability is mission critical to the future of our
mining industry. Responsibly sourced minerals today will form the building
blocks of a cleaner, greener, more sustainable tomorrow. Our new facility was
established to support customers across the minerals supply chain by providing
innovative and sustainable solutions. With the expansion of our laboratories,
increased instrumentation and new robotic automated systems, we now have the
capability to analyse over 2.5 million samples for our customers per year.
2021 performance
Our Resources division delivered a solid revenue performance with a LfL
revenue acceleration in H2.
Revenue of £455.6m was up 1.6% at constant rates but down 2.5% at actual
rates. We delivered an adjusted operating profit of £22.6m, 18.7% lower at
constant rates and down 22.1% on actual rates. Our adjusted operating margin
of 5.0% was 120 basis points lower at both constant and actual rates.
• In our Exploration and Production operations, our Capex Inspection services
business delivered stable LfL revenue in H2 21, but low single-digit negative
LfL revenue for the year.
• We delivered mid-single digit LfL revenue growth in Opex Maintenance services
in H2 2021, resulting in a low single-digit LfL revenue growth in 2021.
• Increased demand for testing and inspection activities saw our Minerals
business deliver double-digit LfL revenue growth in the second half resulting
in high-single digit LfL revenue growth in the year.
2022 growth outlook
We expect our Resources related businesses to deliver a good LfL 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 Energy, to meet the demands of the growing population around
the world.
Presentation of Results
For the year ended 31 December 2021
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 revenue
LfL revenue includes acquisitions following their 12-month anniversary of
ownership and excludes the historical contribution of any business disposals
and closures. 2020 LfL revenue has been adjusted to present certain rebates
net within revenue to permit comparability period to period where 2021 LfL
revenue is also presented net of all rebates.
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 2020 results at 2021 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 fixed assets, costs related to acquisition
activity, the cost of any fundamental restructuring of a business, material
claims and settlements and unrealised market gains/losses on financial
assets/liabilities.
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 costs of any restructuring as part of our '5x5'
differentiated strategy for growth are excluded from adjusted operating profit
where they represent fundamental changes in individual operations around the
Group, and are not expected to recur in those operations. 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 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 twelve months ended 31 December 2021 and the
comparative period are given in note 3 to the Condensed Consolidated Financial
Statements.
Reconciliation of Results to Adjusted Performance Measures (£m) 2021 2021 2021 Adjusted 2020 Reported 2020 2020 Adjusted
SDIs
SDIs
Results
Operating profit 433.2 40.7 473.9 378.2 49.5 427.7
Operating margin 15.5% 1.5% 17.0% 13.8% 1.8% 15.6%
Net financing costs (19.8) (8.6) (28.4) (34.3) (0.6) (34.9)
Profit before tax 413.4 32.1 445.5 343.9 48.9 392.8
Income tax expense (106.7) (11.3) (118.0) (81.3) (18.9) (100.2)
Profit for the year 306.7 20.8 327.5 262.6 30.0 292.6
Cash flow from operations 679.2 16.6 695.8 685.2 19.9 705.1
Cash flow from operations less net capex 583.1 16.6 599.7 613.0 19.9 632.9
Free cash flow 385.2 16.6 401.8 415.7 19.9 435.6
Basic earnings per share 178.7p 12.9p 191.6p 153.6p 18.6p 172.2p
Diluted earnings per share 177.9p 12.9p 190.8p 152.4p 18.5p 170.9p
Reconciliation of revenue 2021 2020 Change
£m
£m
%
Reported revenue 2,786.3 2,741.7 1.6
Less: Acquisitions / disposals / closures / rebates (42.3) (20.1)
Like-for-like revenue 2,744.0 2,721.6 0.8
Impact of foreign exchange movements - (123.4)
Like-for-like revenue at constant currency 2,744.0 2,598.2 5.6
Reconciliation of financial net debt to adjusted EBITDA (£m) 2021 2020
Net debt (1,025.6) (644.1)
IFRS 16 lease liability 292.3 224.2
Financial net debt (733.3) (419.9)
Reported operating profit 433.2 378.2
Depreciation 150.6 156.6
Amortisation 18.7 17.4
EBITDA 602.5 552.2
SDIs 40.7 49.5
Adjusted EBITDA 643.2 601.7
Financial net debt / EBITDA 1.1x 0.7x
Constant currency reconciliations 2021 2020 Change
£m
£m
%
Adjusted operating profit at actual rates 473.9 427.7 10.8
Impact of foreign exchange movements - (17.2)
Adjusted operating profit at constant rates 473.9 410.5 15.4
Adjusted diluted EPS at actual rates 190.8p 170.9p 11.6
Impact of foreign exchange movements - (7.6p)
Adjusted diluted EPS at constant rates 190.8p 163.3p 16.8
Diluted EPS at actual rates 177.9p 152.4p 16.7
Impact of foreign exchange movements - (7.1p)
Diluted EPS at constant rates 177.9p 145.3p 22.4
Full Year Report
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 Full 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.
Condensed Consolidated Income Statement
For the year ended 31 December 2021
2021 2020
Adjusted Separately Disclosed Items* Total Adjusted Separately Disclosed Items* Total
Results 2021 results 2020
Notes £m £m £m £m £m £m
Revenue 2 2,786.3 - 2,786.3 2,741.7 - 2,741.7
Operating costs( ) (2,312.4) (40.7) (2,353.1) (2,314.0) (49.5) (2,363.5)
Group operating profit/(loss)( ) 2 473.9 (40.7) 433.2 427.7 (49.5) 378.2
Finance income( ) 1.5 - 1.5 1.1 - 1.1
Finance expense( ) (29.9) 8.6 (21.3) (36.0) 0.6 (35.4)
Net financing (costs)/income( ) (28.4) 8.6 (19.8) (34.9) 0.6 (34.3)
Profit/(loss) before income tax( ) 445.5 (32.1) 413.4 392.8 (48.9) 343.9
Income tax (expense)/credit( ) (118.0) 11.3 (106.7) (100.2) 18.9 (81.3)
Profit/(loss) for the period( ) 2 327.5 (20.8) 306.7 292.6 (30.0) 262.6
Attributable to:
Equity holders of the Company 308.9 (20.8) 288.1 277.3 (30.0) 247.3
Non-controlling interest( ) 18.6 - 18.6 15.3 - 15.3
Profit/(loss) for the period( ) 327.5 (20.8) 306.7 292.6 (30.0) 262.6
Earnings per share
Basic 4 191.6p 178.7p 172.2p 153.6p
Diluted 4 190.8p 177.9p 170.9p 152.4p
105.8p 105.8p
Dividends in respect of the period
* See note 3.
Condensed Consolidated Statement of Comprehensive Income
For the year ended 31 December 2021
2021 2020
Notes £m £m
Profit for the period( ) 2 306.7 262.6
Other comprehensive income/(expense)
Remeasurements on defined benefit pension schemes( ) 5 11.5 0.8
Tax on comprehensive income/(expense) items( ) (0.5) (3.1)
Items that will never be reclassified to profit or loss( ) 11.0 (2.3)
Foreign exchange translation differences of foreign operations( ) (24.7) (53.9)
Net exchange gain on hedges of net investments in foreign operations( ) 4.0 3.7
Gain on fair value of cash flow hedges( ) - 0.3
Items that are or may be reclassified subsequently to profit or loss( ) (20.7) (49.9)
Total other comprehensive expense for the period( ) (9.7) (52.2)
Total comprehensive income for the period( ) 297.0 210.4
Total comprehensive income for the period attributable to:( )
Equity holders of the Company( ) 277.4 195.4
Non-controlling interest( ) 19.6 15.0
Total comprehensive income for the period( ) 297.0 210.4
Condensed Consolidated Statement of Financial Position
As at 31 December 2021
2021 2020
£m £m
Notes
Assets
Property, plant and equipment( ) 8 641.8 585.8
Goodwill( ) 7 1,241.4 835.9
Other intangible assets( ) 358.5 279.7
Defined benefit pension asset 5 5.4 -
Deferred tax assets( ) 39.3 48.6
Total non-current assets 2,286.4 1,750.0
Inventories*( ) 14.9 15.5
Trade and other receivables*( ) 661.9 621.2
Cash and cash equivalents( ) 6 265.9 203.9
.
Current tax receivable( ) 20.6 24.5
Total current assets( ) 963.3 865.1
Total assets( ) 3,249.7 2,615.1
Liabilities
Interest bearing loans and borrowings( ) 6 (462.0) (31.0)
Current taxes payable( ) (59.1) (53.8)
Lease liabilities (63.5) (61.4)
Trade and other payables*( ) (667.8) (576.2)
Provisions*( ) (13.2) (28.8)
Total current liabilities( ) (1,265.6) (751.2)
Interest bearing loans and borrowings( ) 6 (537.2) (592.8)
Lease liabilities (228.8) (162.8)
Deferred tax liabilities( ) (67.4) (59.7)
Defined benefit pension liabilities( ) 5 (4.0) (12.1)
Other payables*( ) (31.9) (26.1)
Provisions*( ) (0.5) (7.4)
Total non-current liabilities( ) (869.8) (860.9)
Total liabilities( ) (2,135.4) (1,612.1)
Net assets 1,114.3 1,003.0
Equity
Share capital( ) 1.6 1.6
Share premium 257.8 257.8
Other reserves( ) (102.5) (80.8)
Retained earnings( ) 925.1 796.4
Total equity attributable to equity holders of the Company 1,082.0 975.0
Non-controlling interest 32.3 28.0
Total equity 1,114.3 1,003.0
* Working capital of negative £43.3m (2020: negative £4.0m) comprises the
asterisked items in the above Statement of Financial Position less refundable
deposits aged over 12 months of £6.7m (2020: £2.2m).
Condensed Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
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 2020 1.6 257.8 (37.3) 6.1 727.7 955.9 29.4 985.3
Total comprehensive (expense)/income for the period
Profit - - - - 247.3 247.3 15.3 262.6
Other comprehensive (expense)/income - - (49.9) 0.3 (2.3) (51.9) (0.3) (52.2)
Total comprehensive (expense)/income for the period - - (49.9) 0.3 245.0 195.4 15.0 210.4
Transactions with owners of the company recognised directly in equity
Contributions by and distributions to the owners of the company
Dividends paid - - - - (170.4) (170.4) (18.6) (189.0)
Adjustment arising from changes in non-controlling interest - - - - (2.2) (2.2) 2.2 -
Purchase of own shares - - - - (12.2) (12.2) - (12.2)
Tax paid on share awards vested(1) - - - - (8.5) (8.5) - (8.5)
Equity-settled transactions - - - - 17.7 17.7 - 17.7
IFRS16 effects of deferred tax rate change - - - - (0.7) (0.7) - (0.7)
Total contributions by and distributions to the owners of the company - - - - (176.3) (176.3) (16.4) (192.7)
At 31 December 2020 1.6 257.8 (87.2) 6.4 796.4 975.0 28.0 1,003.0
At 1 January 2021 1.6 257.8 (87.2) 6.4 796.4 975.0 28.0 1,003.0
Total comprehensive (expense)/income for the period
Profit - - - - 288.1 288.1 18.6 306.7
Other comprehensive (expense)/income - - (21.7) - 11.0 (10.7) 1.0 (9.7)
Total comprehensive (expense)/income for the period - - (21.7) - 299.1 277.4 19.6 297.0
Transactions with owners of the company recognised directly in equity
Contributions by and distributions to the owners of the company
Dividends paid - - - - (170.6) (170.6) (17.0) (187.6)
Adjustment arising from changes in non-controlling interest - - - - - - 1.7 1.7
Purchase of own shares - - - - (11.4) (11.4) - (11.4)
Tax paid on share awards vested(1) - - - - (6.7) (6.7) - (6.7)
Equity-settled transactions - - - - 18.6 18.6 - 18.6
Income tax on equity-settled transactions - - - - (0.3) (0.3) - (0.3)
Total contributions by and distributions to the owners of the company - - - - (170.4) (170.4) (15.3) (185.7)
At 31 December 2021 1.6 257.8 (108.9) 6.4 925.1 1,082.0 32.3 1,114.3
(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 £115.5m dividend paid on 11 June 2021 represented a final dividend of
71.6p per ordinary share in respect of the year ended 31 December 2020. The
£115.3m dividend paid on 11 June 2020 represented a final dividend of 71.6p
per ordinary share in respect of the year ended 31 December 2019. No
ordinary shares were issued in the period to satisfy the vesting of share
awards.
Condensed Consolidated Statement of Cash Flows
For the year ended 31 December 2021
( ) 2021 2020
( )
Notes £m £m
Cash flows from operating activities
Profit for the period 2 306.7 262.6
Adjustments for:
Depreciation charge 150.6 156.6
Amortisation of software 18.7 17.4
Amortisation of acquisition intangibles 29.3 28.1
Equity-settled transactions 18.6 17.7
Net financing costs 19.8 34.3
Income tax expense 106.7 81.3
Loss/(Profit) on disposal of property, plant, equipment and software 0.1 (0.9)
Operating cash flows before changes in working capital and operating 650.5 597.1
provisions
Change in inventories 0.6 3.5
Change in trade and other receivables (29.2) 52.9
Change in trade and other payables 62.0 36.8
Change in provisions (2.7) (3.1)
Special contributions into pension schemes (2.0) (2.0)
Cash generated from operations 679.2 685.2
Interest and other finance expense paid (27.0) (34.8)
Income taxes paid (102.0) (91.6)
Net cash flows generated from operating activities* 550.2 558.8
Cash flows from investing activities
Proceeds from sale of property, plant, equipment and software* 1.0 7.6
Interest received* 1.5 1.1
Acquisition of subsidiaries, net of cash received (480.9) -
Consideration paid in respect of prior year acquisitions (10.9) (0.5)
Acquisition of property, plant, equipment, software* 8 (97.1) (79.8)
Net cash flows used in investing activities (586.4) (71.6)
Cash flows from financing activities
Purchase of own shares (11.4) (12.2)
Tax paid on share awards vested (6.7) (8.5)
Drawdown of borrowings 471.3 279.9
Repayment of borrowings (72.4) (507.1)
Repayment of lease liabilities* (70.4) (72.0)
Dividends paid to non-controlling interest (17.0) (18.6)
Equity dividends paid (170.6) (170.4)
Net cash flows generated from/(used in) financing activities 122.8 (508.9)
Net increase/(decrease) in cash and cash equivalents 6 86.6 (21.7)
Cash and cash equivalents at 1 January 6 183.4 213.0
Effect of exchange rate fluctuations on cash held 6 (6.0) (7.9)
Cash and cash equivalents at 31 December 6 264.0 183.4
* Free cash flow of £385.2m (2020: £415.7m) comprises the asterisked items
in the above Statement of Cash Flows.
Adjusted cash flow from operations of £695.8m (2020: £705.1m) comprises
statutory cash generated from operations of £679.2m (2020: £685.2m) before
cash outflows relating to Separately Disclosed Items of £16.6m (2020:
£19.9m).
Notes to the Condensed Consolidated Financial Statements
1. Basis of preparation
Reporting entity
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 December 2021 and 2020 but is
derived from the 2021 accounts. A full copy of the 2021 Annual Report will be
available online at www.intertek.com in March 2022. Statutory accounts for
2020 have been delivered to the Registrar of Companies, and those for 2021
will be delivered in due course. The auditors have reported on those accounts;
their reports were (i) unqualified, (ii) did not include references to any
matters to which the auditors drew attention by way of emphasis without
qualifying their reports and (iii) did not contain statements under Sections
498(2) or 498(3) of the Companies Act 2006.
The preparation of the financial statements requires management to make
estimates and assumptions that affect the reported amount of revenues,
expenses, assets and liabilities at the date of the financial statements. If
in the future such estimates and assumptions, which are based on management's
best judgement at the date of the financial statements, deviate from the
actual circumstances, the original estimates and assumptions will be modified
as appropriate in the year in which the circumstances change.
Significant accounting policies
There are no significant new accounting standards that have a material effect
on the results of the Group. The Interest Rate Benchmark Reform, which does
not impact on the Group's hedging instruments, is assessed further in note 14
in the 2021 Annual Report and Accounts.
In 2021 the Group changed its accounting policy to include finance expenses on
tax balances within interest expense. The impact of this change on the opening
Balance Sheet of the prior year income statement is not material and no
restatement has been made. The impact on net finance costs for the year ending
31 December 2021 is an increased expense of £4.2m with a corresponding
increase in tax liabilities.
Key Estimations and Uncertainties
The preparation of 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.
In preparing these Condensed Consolidated Financial Statements, the key
sources of estimation were impacted with levels of estimation uncertainty in
relation to assumptions used in:
· impairment assessments (e.g. cash flow projections, long-term
growth, discount rate);
· employee post-retirement benefit obligations.
Risks and uncertainties
The Group has a broad customer base across its multiple business lines and in
its different geographic regions and is supported by a robust balance sheet
and strong operational cash flows.
In addition, the Group's financial forecasts for 2022 and 2023, and the
related liquidity position and forecast compliance with debt covenants, 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). In addition, reverse stress testing has also been
applied to the model which represents a significant decline in cashflows
compared with the 30% downside sensitivity. Such a scenario is considered to
be remote. The Board remains satisfied with the Group's funding and liquidity
position, with the Group forecast to remain within its committed facilities
and compliant with debt covenants even following the 30% downside sensitivity.
The sensitivity modelling excludes additional mitigating actions (e.g.
dividend cash payments, non-essential overheads and non-committed capital
expenditure) that are within management control and could be initiated if
deemed required.
The undrawn headroom on the Group's committed borrowing facilities at 31
December 2021 was £564.2m (2020: £494.0m). The maturity of our borrowing
facilities is disclosed in Note 14 of the financial statements with repayment
of the Acquisition facilities and US$300m of senior notes required by 31
December 2023. Our models forecast these to be repaid using existing
facilities, including US$640m senior notes facility committed for issue in
December 2021 but which was not available for partial draw down until January
2022, with the remainder available for drawdown in March 2022. Full details of
the Group's borrowing facilities and maturity profile are outlined in note 14
of the Annual Report and Accounts.
On the basis of its forecasts to 31 December 2023, both base case and
downside, 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 and fair
value adjustments 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 expenses
Actual Rates Cumulative average rates
Value of £1 2021 2020 2021 2020
US dollar 1.35 1.35 1.38 1.28
Euro 1.19 1.10 1.16 1.13
Chinese renminbi 8.59 8.81 8.89 8.88
Hong Kong dollar 10.52 10.47 10.70 9.96
Australian dollar 1.86 1.78 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 three divisions, which are the
Group's reportable segments, based on similar nature of products and services
and mid- to long-term structural growth drivers. When aggregating operating
segments into the three divisions 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 three divisions are allocated
appropriately. A description of the activity in each division is given in the
Operating Review by Division.
The results of the divisions are shown below:
For the year ended 31 December 2021 Revenue from external customers Depreciation and software amortisation Adjusted operating profit Separately Disclosed Items Operating profit
£m £m £m £m £m
Products 1,755.3 (106.3) 399.7 (34.3) 365.4
Trade 575.4 (43.7) 51.6 (1.4) 50.2
Resources 455.6 (19.3) 22.6 (5.0) 17.6
Total 2,786.3 (169.3) 473.9 (40.7) 433.2
Group operating profit 473.9 (40.7) 433.2
Net financing (costs)/income (28.4) 8.6 (19.8)
Profit before income tax 445.5 (32.1) 413.4
Income tax (expense)/credit (118.0) 11.3 (106.7)
Profit for the year 327.5 (20.8) 306.7
For the year ended 31 December 2020 Revenue from external customers Depreciation and software amortisation Adjusted operating profit
£m £m £m Separately Disclosed Items Operating profit
£m £m
Products 1,681.6 (108.1) 351.6 (32.1) 319.5
Trade 592.6 (45.1) 47.1 (5.0) 42.1
Resources 467.5 (20.8) 29.0 (12.4) 16.6
Total 2,741.7 (174.0) 427.7 (49.5) 378.2
Group operating profit 427.7 (49.5) 378.2
Net financing (costs)/income (34.9) 0.6 (34.3)
Profit before income tax 392.8 (48.9) 343.9
Income tax (expense)/credit (100.2) 18.9 (81.3)
Profit for the year 292.6 (30.0) 262.6
3. Separately Disclosed Items (SDIs)
2021 2020
£m £m
Operating costs
Amortisation of acquisition intangibles (a) (29.3) (28.1)
Restructuring costs (b) - (19.0)
Acquisition and integration costs (c) (11.4) (2.4)
Total operating costs (40.7) (49.5)
Net financing income (d) 8.6 0.6
Total before income tax (32.1) (48.9)
Income tax credit on Separately Disclosed Items (e) 11.3 18.9
Total (20.8) (30.0)
Refer to the Presentation of Results section for further details on SDIs
(a) The amortisation of acquisition intangibles relates to the customer
relationships, trade names, technology and non-compete covenants acquired.
(b) Restructuring costs of £nil were incurred in the period (2020: £19.0m)
following 2020 being the final year of various fundamental restructuring
activities, resulting from the implementation of the new Group structure and
corporate 5x5 strategy announced in 2016. These activities included site
consolidations, closure of non-core business units, re-engineering of
underperforming businesses and delayering of management structures.
(c) Acquisition and Integration costs relating to acquisition activity in
the period and integration of prior period acquisitions were £11.4m (2020:
£2.4m).
(d) Net financing income of £8.6m (2020: £0.6m) relates to the release of
contingent consideration due to terms not being met in relation to
acquisitions from prior periods.
(e) Income tax Credit on SDIs totalled £11.3m (2020: £18.9m) mainly
relating to deferred tax impact of the movement in amortisation on
intangibles.
4. Earnings per share (EPS)
2021 2020
£m £m
Based on the profit for the period:
Profit attributable to ordinary shareholders 288.1 247.3
Separately Disclosed Items after tax (note 3) 20.8 30.0
Adjusted earnings 308.9 277.3
Number of shares (millions):
Basic weighted average number of ordinary shares 161.2 161.0
Potentially dilutive share awards 0.7 1.3
Diluted weighted average number of shares 161.9 162.3
Basic earnings per share 178.7p 153.6p
Potentially dilutive share awards (0.8p) (1.2p)
Diluted earnings per share 177.9p 152.4p
Adjusted basic earnings per share 191.6p 172.2p
Potentially dilutive share awards (0.8p) (1.3p)
Adjusted diluted earnings per share 190.8p 170.9p
5. Pension schemes
During the year, the Group made a special cash contribution of £2.0m (2020:
£2.0m) into The Intertek Pension Scheme in line with a Minimum Funding
Requirement agreement.
The significant actuarial assumptions used in the valuation of the Group's
material defined benefit pension schemes as at 31 December 2021 have been
reviewed. The discount and inflation rates used to value the pension
liabilities, as well as the updated asset valuations and the net pension
liabilities, have not moved materially since 31 December 2020. In addition
to the special contribution, a net actuarial gain before taxation of £11.5m
(2020: £0.8m gain) has been recognised in the consolidated statement of
comprehensive income. The net pension asset stands at £1.4m at 31 December
2021 (2020: £12.1m liability).
The expense recognised in the consolidated income statement for the Group's
material defined benefit pension schemes consists of interest on the
obligation for employee benefits and the expected return on scheme assets. The
Group recognised a net expense of £0.1m in the year (2020: £0.2m).
6. Analysis of net debt
2021 2020
£m £m
Cash and cash equivalents per the Statement of Financial Position 265.9 203.9
Overdrafts (1.9) (20.5)
Cash per the Statement of Cash Flows 264.0 183.4
The components of net debt are outlined below:
1 January Cash flow Non-cash adjustments Exchange adjustments 31 December 2021
2021 £m £m £m
£m £m
Cash 183.4 86.6 - (6.0) 264.0
Borrowings:
Revolving credit facility US$850m 2027 (135.5) 61.5 - 8.1 (65.9)
Senior notes US$15m 2021 (11.1) 10.9 - 0.2 -
Senior notes US$140m 2022 (103.7) - - (0.1) (103.8)
Acquisition facility 'B' AU$264.1m 2022 - (142.0) - 0.1 (141.9)
Acquisition facility 'B' US$290.7m 2022 - (210.9) - (4.6) (215.5)
Senior notes US$160m 2023 (118.5) - - (0.1) (118.6)
Acquisition facility 'A' AU$88.0m 2023 - (47.3) - - (47.3)
Acquisition facility 'A' US$96.9m 2023 - (70.3) - (1.7) (72.0)
Senior notes US$125m 2024 (92.6) - - (0.1) (92.7)
Senior notes US$120m 2025 (88.8) - - - (88.8)
Senior notes US$75m 2026 (55.5) - - - (55.5)
Other* 2.4 (0.8) 3.1 - 4.7
Total borrowings (603.3) (398.9) 3.1 1.8 (997.3)
Total financial net debt (419.9) (312.3) 3.1 (4.2) (733.3)
Lease liability (224.2) 70.4 (142.4) 3.9 (292.3)
Total net debt (644.1) (241.9) (139.3) (0.3) (1,025.6)
* Other includes uncommitted borrowings of £0.8m and facility fees of £5.5m
(2020: £2.4m).
2021 2020
£m £m
Borrowings due in less than one year 460.1 10.5
Borrowings due in one to two years 236.4 103.0
Borrowings due in two to five years 235.3 434.3
Borrowings due in over five years 65.5 55.5
Total borrowings 997.3 603.3
Description of borrowings
Total undrawn committed borrowing facilities as at 31 December 2021 were
£564.2m (2020: £494.0m).
Key facilities
US$850m revolving credit facility
The Group has a US$850m multi-currency revolving credit facility, which is the
Group's principal facility and in December 2021 was extended from 2026 to
2027. The impact of this was a transfer of £65.9m from borrowings due to be
repaid between two and five years to borrowings due to be repaid over five
years.
Advances under the facility bear interest at a rate equal to a risk-free rate,
or their local currency equivalent, plus a margin, depending on the Group's
financial leverage. Drawings under this facility at 31 December 2021 were
£65.9m (2020: £135.5m).
US$692m Acquisition facility
In May 2021 the Group agreed a US$692m multi-currency acquisition facility to
finance the acquisition of SAI Global with £357.4m to be repaid in March 2022
and the balance of £119.3m repayable in 2023. Advances under the facility
bear interest at a rate equal to USD LIBOR or AUD BBSW, plus a margin.
Drawings under this facility at 31 December 2021 were £476.7m (2020: Nil).
Private placement bonds
In December 2010 the Group issued US$150m of senior notes repaid on 15
December 2020 at a fixed annual interest rate of 3.91%.
In October 2011 the Group issued US$140m of senior notes repaid on 18 January
2022 at a fixed annual interest rate of 3.75% and US$105m repayable on 18
January 2024 at a fixed annual interest rate of 3.85%.
In February 2013 the Group issued US$80m of senior notes. These notes were
issued in two tranches with US$40m repayable on 14 February 2023 at a fixed
annual interest rate of 3.10% and US$40m repayable on 14 February 2025 at a
fixed annual interest rate of 3.25%.
In July 2014 the Group issued US$110m of senior notes. These notes were issued
in four tranches with US$15m repaid on 31 July 2021 at a fixed annual interest
rate of 3.37%, US$20m repayable on 31 July 2024 at a fixed annual interest
rate of 3.86%, US$60m repayable on 31 October 2026 at a fixed annual interest
rate of 4.05% and US$15m repayable on 31 December 2026 at a fixed annual
interest rate of 4.10%.
In December 2020 the Group issued US$200m of senior notes. These notes were
issued in two tranches with US$120m repayable on 2 December 2023 at a fixed
annual interest rate of 1.97% and US$80m repayable on 2 December 2025 at a
fixed annual interest rate of 2.08%.
In December 2021 the Group issued US$640m of senior notes that will be drawn
during 2022. The note was issued in four tranches with US$150m repayable on 13
January 2027 at a fixed annual interest rate of 2.24%, US$165m repayable on
15th March 2028 at a fixed annual interest rate of 2.33%, US$165m repayable on
15th March 2029 at a fixed annual interest rate of 2.47% and US$160m repayable
on 15th March 2030 at a fixed annual interest rate of 2.54%.
7. Acquisition of businesses
(a) Acquisitions
The Group completed three acquisitions in 2021 (2020: none).
On 7 September 2021 the Group acquired 100% of SAI Global Assurance ('SAI'), a
leading provider of assurance services based predominantly in Australia, for a
purchase price of AU$868.9m (£450.1m net of cash acquired) generating
goodwill of £388.4m. The Assurance division provides audit, inspection and
certification services and is similar to our existing Business Assurance line.
The Standards division aggregates and distributes standards via its online
platform. The acquisition of SAI is in line with our 5x5 strategy, which aims
to further strengthen our Total Quality Assurance value proposition and expand
our presence in attractive markets with long-term growth opportunities. SAI
will strengthen Intertek's assurance offering by providing enhanced scale, as
well as complementary geographic coverage - SAI are a market leader in
Australia, have scale presence in the US, Canada, and UK, and have a
fast-growing business in China - as well as new assurance capabilities in a
number of high-growth, safety-critical segments including food safety and QSR.
On 1 July 2021 the Group acquired the trade and assets of Apras Sicea France
('ASF'), a specialist in inspection and testing of petroleum, petrochemical
and related products, for a purchase price of EUR0.6m (£0.5m net of cash
acquired) generating goodwill of £0.4m.
On 19 July 2021 the Group acquired 100% of JLA Brasil Laboratório de
Análises de Alimentos S.A. ('JLA'), a market leading independent provider of
Food, Agri and Environmental testing solutions, for a purchase price of
BRL218.3m (£30.4m net of cash acquired) generating goodwill of £24.5m.
(b) Prior period acquisitions
£10.9m (2020: £0.5m) was paid during the period in respect of prior period
acquisitions.
(c) Details of 2020 acquisitions
No acquisitions were made during the year ended 31 December 2020.
(d) 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 (2020: nil).
(e) Reconciliation of goodwill
£m
Goodwill at 1 January 2021 835.9
Additions 413.3
Foreign exchange (7.8)
Goodwill at 31 December 2021 1,241.4
8. Property, plant, equipment and software
Additions
During the year, the Group acquired fixed assets with a cost of £97.1m (2020:
£79.8m). The Group acquired £6.1m of fixed assets through business
combinations (2020: £nil). At 31 December 2021, the IFRS 16 right of use
asset is £266.8m (2020: £202.3m).
9. Subsequent events
On 13 January 2022 a US$150m senior note was drawn following the issuance of
US$640m of private placement bonds in December 2021.
On 24 February 2022 the Group gave notice to prepay US$482.2m of the US$692m
Acquisition Facility on 1 March 2022, utilising funds to be drawn from the
USPP notes issued in December 2021.
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