REG - Intertek Group Plc - Final Results
28/02/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230228:nRSb2181Ra&default-theme=true
RNS Number : 2181R Intertek Group PLC 28 February 2023
For a printer friendly version of this announcement, please click on the link
below:
http://www.rns-pdf.londonstockexchange.com/rns/2181R_1-2023-2-27.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/2181R_1-2023-2-27.pdf)
2022 FULL YEAR RESULTS ANNOUNCEMENT
28 February 2023
Robust performance in 2022
• Revenue of £3,193m; +8.2% at constant rates; +14.6% at actual rates
• LFL revenue growth of 4.9% at constant rates: Products +3.9%; Trade
+5.6%; Resources +7.9%
• Outside China LFL revenue grew 6.5% at constant rates: Products
5.5%, Trade 7%, Resources 8.5%
• Recent acquisitions JLA, SAI and CEA performing well, contributing
£153.0m of margin accretive revenue in 2022
• Adjusted operating profit of £520m, up 3.8% at constant rates and
up 9.7% at actual rates
• Robust adjusted operating margin of 16.3%, 70bps lower at constant
and actual rates; H2 margin of 17.8%
• Adjusted diluted EPS of 211.1p: up 4.6% at constant rates and up
10.6% at actual rates
• Adjusted free cash flow of £386m and a strong balance sheet with
1.1x net debt to EBITDA
• ROIC of 18.0%, up year-on-year by 20bps at constant rates and down
20bps at actual rates
• Sustainable returns to shareholders with full year dividend of
105.8p and dividend cover back to 2.0
• Cost reduction programme (£27m in SDIs) to streamline operations
and deliver annual savings of £15m
• 2023 outlook: Mid-single digit LFL revenue growth, margin
progression and strong free cash flow
A FY results video is available on our website
https://www.intertek.com/investors/2022-full-year-results-video/
(https://www.intertek.com/investors/2022-full-year-results-video/)
André Lacroix: Chief Executive Officer statement
"I would like to recognise all my colleagues for their commitment, passion and
agility as 2022 marks another year of consistent value delivery with revenue
and earnings in-line with expectations, demonstrating the strengths of our
differentiated TQA value proposition, our Science-based Customer Excellence
giving our clients the ATIC advantage, our unique end-to-end performance
management approach and our high-quality growth earnings model.
We have a group of excellent businesses globally which performed well across
2022. In China, however, the Covid-related lock-down restrictions and
consequent revenue headwinds faced in March-June did have an impact on our
performance, as did the high level of Covid-related sickness we experienced in
November-December, all of which have also impacted Group margins.
Post Covid-19, the Quality Assurance market will grow faster as the demand for
Quality Assurance solutions is expanding across all our business lines given
the increasing stakeholder expectations in quality, safety and sustainability.
Moving forward, we expect the attractive structural growth drivers in our
industry to be augmented by an expansion in ATIC customers, a stronger focus
by corporations on safer supply chains, greater corporate investments in
innovation, a step change in sustainability management and reporting with
independently verified disclosures, and significant growth opportunities in
the World of Energy.
We are entering 2023 with confidence given the re-opening of China, which has
been operating with normal staffing levels since the beginning of the year,
the increased demand for our ATIC solutions, the strengths of our portfolio,
our strong pricing power, our productivity and cost initiatives, as well as
our cash flow discipline. We expect the Group will deliver mid-single digit
LFL revenue growth at constant currency, with margin progression year-on-year,
and a strong free cash flow performance.
We operate a differentiated, high-quality growth business with excellent
fundamentals and intrinsic defensive characteristics, giving our customers the
Intertek Science-based Total Quality Assurance advantage to strengthen their
businesses. Our leading ATIC solutions are mission-critical for the world to
operate safely and the growth in our end-markets is accelerating. We operate a
high-performance earnings and cash compounder model which has generated 8%
annual Total Shareholder Returns since 2012. We are well-positioned to
deliver sustainable growth and value for all stakeholders in the short, medium
and long term."
---
Key Adjusted Financials 2022 2021 Change at actual rates Change at constant rates1
Revenue £3,192.9m £2,786.3m 14.6% 8.2%
Like-for-like revenue2 £3,067.4m £2,761.0m 11.1% 4.9%
Operating profit3 £520.1m £473.9m 9.7% 3.8%
Operating margin3 16.3% 17.0% (70bps) (70bps)
Profit before tax3 £488.2m £445.5m 9.6% 3.9%
Diluted earnings per share3 211.1p 190.8p 10.6% 4.6%
Dividend per share 105.8p 105.8p -
Cash flow from operations less net capex3 £609.7m £599.7m 1.7%
Free Cash Flow3 £386.3m £401.8m (3.9%)
Financial net debt4 £737.9m £733.3m 0.6%
Financial net debt / EBITDA3, 4 1.1 1.1
ROIC 18.0% 18.2%
Key Statutory Financials 2022 2021 Change at actual rates (1) Constant rates are calculated by translating 2021 results at 2022 exchange
rates.
Revenue £3,192.9m £2,786.3m 14.6% (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 22.
(4) Financial net debt excludes the IFRS 16 lease liability of £322.2m. Total
net debt is £1,060.1m. Reflects prior 12 months' EBITDA for relevant period.
See note 6 on page 34.
Operating profit £452.4m £433.2m 4.4%
Operating margin 14.2% 15.5% (130bps)
Profit before tax £419.8m £413.4m 1.5%
Profit after tax £306.8m £306.7m -
Diluted earnings per share 178.4p 177.9p 0.3%
Net cash flows generated from operating activities £559.9m £550.2m 1.8%
The Directors will propose a final dividend of 71.6p per share (2021: 71.6p)
at the Annual General Meeting on 24 May 2023, to be paid on 15 June 2023 to
shareholders on the register at close of business on 26 May 2023.
Contacts
For further information, please contact:
Denis Moreau, Investor Relations
Telephone: +44 (0) 20 7396 3415 investor@intertek.com
(mailto:investor@intertek.com)
Jonathon Brill/James Styles, Dentons Global Advisors
Telephone: +44 (0)7510 385 554
intertek@dentonsglobaladvisors.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 2022 will be available on the Company's
website www.intertek.com (http://www.intertek.com/) on 21 March 2023.
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
The Science-based Customer Excellence Advantage
At Intertek we work together to make the world a better and safer place for
everybody, delivering on our vision of being the world's most trusted partner
for Quality Assurance.
What our people do every day is amazing, delivering on our purpose of bringing
quality, safety and sustainability to life, not just for our 400,000+ clients
in more than 100 countries worldwide, but also for their many millions of
customers and stakeholders.
During the year, we continued to innovate and provide customers with the
mission-critical solutions they need through our unique Assurance, Testing,
Inspection and Certification (ATIC) service offering.
As a world leading Total Quality Assurance (TQA) provider, we enable global
and local businesses to overcome the complex quality, safety and
sustainability challenges they face to give them the peace of mind they need
to focus on their growth agenda.
Our superior customer service is based on our 'Science-based Customer
Excellence' approach that we have built up over many years, based on three
essential components:
· The first is about our science-based technical expertise. It's our
industry-leading processes and technology that ultimately enable us to build
the world's best intellectual property (IP) for delivering superior
customer-focused TQA solutions.
· The second is about science-based continuous improvement. Our
commitment to the principles of science-based continuous improvement means we
always go back to the data. We do this to ensure the solutions we offer are
invariably based on the best possible research, knowledge and understanding.
· The third is about science-based innovation. We continuously apply
superior data-driven insights when creating and delivering end-to-end
solutions for our clients. As a result, we can draw on our strong data-science
advantage that ensures we deliver the best and most effective insights into
how and where to improve their businesses.
Our Science-based Customer Excellence approach is enabling us to build
long-lasting and ever-closer relationships with our clients. This gives our
clients the ATIC advantage that empowers them to make their businesses ever
stronger, ever more resilient and ever more sustainable.
Ultimately, this is what continues to make us a quality leader in the highly
attractive $250-billion global Quality Assurance market.
Results in 2022
I would like to recognise all my colleagues for their commitment, passion and
agility as 2022 marks another year of consistent value delivery with revenue
and earnings in-line with expectations, demonstrating the strengths of our
differentiated TQA value proposition, our Science-based Customer Excellence
giving our clients the ATIC advantage, our unique end-to-end performance
management approach and our high-quality growth earnings model.
We have a group of excellent businesses globally which performed well across
2022. In China, however, the Covid-related lock-down restrictions and
consequent revenue headwinds faced in March-June did have an impact on our
performance, as did the high level of Covid-related sickness we experienced in
November-December, all of which have also impacted Group margins.
We have delivered a robust performance in 2022 with:
• Group revenue up 8% at constant rates and nearly 15% at actual
rates
• LFL revenue growth of 4.9% at constant rates
• Adjusted operating profit up 4% at constant rates and nearly 10%
at actual rates
• Robust adjusted operating margin of 16.3%
• Adjusted diluted EPS growth of 4.6% at constant rates and 10.6% at
actual rates
• Statutory operating profit after SDI up 4.4% at actual rates
• Progress on ROIC at constant rates
• Unchanged full year dividend at 105.8p
Post Covid-19, the Quality Assurance market will grow faster as the demand for
Quality Assurance solutions is expanding across all our business lines given
the increasing stakeholder expectations in quality, safety and sustainability.
Moving forward, we expect the attractive structural growth drivers in our
industry to be augmented by an expansion in ATIC customers, a stronger focus
by corporations on safer supply chains, greater corporate investments in
innovation, a step change in sustainability management and reporting with
independently verified disclosures, and significant growth opportunities in
the World of Energy.
We are entering 2023 with confidence given the re-opening of China, which has
been operating with normal staffing levels since the beginning of the year,
the increased demand for our ATIC solutions, the strengths of our portfolio,
our strong pricing power, our productivity and cost initiatives, as well as
our cash flow discipline. We expect the Group will deliver mid-single digit
LFL revenue growth at constant currency, with margin progression year-on-year,
and a strong free cash flow performance.
We operate a differentiated, high-quality growth business with excellent
fundamentals and intrinsic defensive characteristics, giving our customers the
Intertek Science-based Total Quality Assurance advantage to strengthen their
businesses. Our leading ATIC solutions are mission-critical for the world to
operate safely and the growth in our end-markets is accelerating. We operate a
high-performance earnings and cash compounder model which has generated 8%
annual Total Shareholder Returns since 2012. We are well-positioned to
deliver sustainable growth and value for all stakeholders in the short, medium
and long term.
Exciting growth opportunities ahead
The Quality Assurance market is growing faster post Covid-19 as the demand for
Quality Assurance solutions is expanding across all our business lines given
the growing stakeholder expectations in quality, safety and sustainability.
This is making the case for our unique risk-based Quality Assurance solutions
stronger.
Moving forward, we expect the attractive structural growth drivers in our
industry to be augmented by an increase in ATIC customers, a stronger focus by
corporations on safer supply chains, greater corporate investments in
innovation, a step change in sustainability management and reporting with
independently verified disclosures, and exciting growth opportunities in the
World of Energy.
Sustainability at the heart of everything we do
Sustainability is the movement of our time and is central to everything we do
at Intertek, anchored in our strategy, our Purpose, our Vision and our Values.
Sustainability is important to all stakeholders in society who are
consistently demanding faster progress and greater transparency in
sustainability reporting. Companies everywhere therefore continuously need to
upgrade and reinvent how they manage their sustainability agenda, particularly
with regard to how they disclose their performance.
This is why, under our global Total Sustainability Assurance (TSA) programme,
we provide our clients with proven independent, systemic and end-to-end
assurance on all aspects of their sustainability strategies, activities and
operations.
The TSA programme comprises three elements:
• Intertek Operational Sustainability Solutions
• Intertek ESG Assurance
• Intertek Corporate Sustainability Certification
Sustainability Excellence at Intertek
For ourselves at Intertek, we focus on 10 highly demanding TSA sustainability
standards which are truly end-to-end and systemic. You can read in detail
about our sustainability results in our 2022 Sustainability Report, which
included:
• Continuous progress on Health and Safety with a reduction of 7bps in
our Total Recordable Incident Rate vs 2021
• Since 2015, we have used the Net Promoter Score ('NPS') process to
listen to our customers and conduct on average 5,400 interviews each month
which has enabled us to improve our customer service over the years
consistently
• We are driving environmental performance across our operations
through new science-based reduction targets to 2030 as well as site-by-site
action plans. Our rigorous monthly performance management of our net zero
plans against emission reduction targets has delivered total CO(2)e emissions
(market-based) reductions of 7.8% vs 2021
• We recognise the importance of employee engagement in driving
sustainable performance for all stakeholders, and we measure employee
engagement against our Intertek ATIC Engagement Index. Our 2022 score was 80
• Our voluntary permanent employee turnover was at a low rate of 14%
Implementing our 5x5 differentiated strategy for growth
Intertek has a proven 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 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 growth with customer-led innovation
True to our pioneering spirit, throughout the year, we continued to innovate
to meet the emerging needs of our customers.
We are constantly learning from our customers, using their extensive feedback
to help us deliver ever better solutions to their evolving requirements.
We believe that successful innovation starts with investing in the insight
advantage, which means having a deep understanding of what our customers need
and want. Through our NPS programme, we carry out 5,400 customer interviews
every month. With the ability to access world-class customer intelligence
site-by-site from anywhere across our global network, we have a continuous
stream of data that enables us to build on our insights and use this to
develop new ATIC solutions.
In September, for example, we launched a new certification mark that aims to
give consumers transparency regarding the claims made by the manufacturers and
marketers of vegan foods. This is a timely introduction given the exponential
global growth in the number of consumers who are exploring a plant-based diet
as part of a healthier lifestyle with a reduced environmental impact.
Further examples of sustainability-related innovation include the launch of
Intertek EcoCheck, a tourism solution that audits management systems and
provides a carbon footprint calculation. This enables our clients to
demonstrate tangible action to reach their carbon targets.
ToxClear, meanwhile, supports the development of more sustainable supply
chains in the fashion industry by enabling brands and suppliers to achieve
transparency and traceability on the chemicals used in manufacturing.
Another innovative new launch is designed to help retailers and brands of soft
goods, hard goods and personal protective equipment to understand and comply
with the different regulations in force in different markets across the world.
This is Global Market Access, a one-stop digital knowledge portal, developed
with the aim of increasing compliance for improved consumer safety and
protecting corporate reputations in today's interconnected world.
Among many other initiatives and highlights, we also celebrated the first
anniversary of our innovative Minerals Global Centre of Excellence in Perth,
Australia. This pioneering facility aims to help mining and exploration
companies produce the future-focused commodities that are becoming
increasingly essential in enabling a more sustainable world.
One of the world's largest and most advanced minerals laboratories, the
Centre's achievements to date are already impressive. These include processing
more than 3 million samples, including 1 million PhotonAssay™ samples to
facilitate the faster and more environmentally friendly analysis of gold. This
work alone has eliminated 625 tonnes of hazardous lead waste and reduced C0₂
emissions by 460 tonnes. I applaud the team at the site for its work on
helping customers achieve greater innovation, efficiency, sustainability and
safety.
Other enhancements to existing solutions included the creation of new and
improved features for our Inlight solution, which enables organisations to
manage increasingly complex risks in the supply chain.
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.
Our acquisition of Clean Energy Associates ('CEA'), a market-leading provider
of Quality Assurance (QA), supply-chain traceability and technical services to
the fast-growing solar energy sector, illustrates this clearly. The long-term,
structural trend towards decarbonisation, energy sustainability and security
means the solar energy sector is on track to be the world's largest source of
renewable energy-generation by 2030. The CEA acquisition empowers the
expansion of our sustainability service offering in the fast-growing QA market
for the sector.
Two of our previous acquisitions - of SAI Global Assurance and JLA Brasil
Laboratório de Alimentos S.A. - have also both proven during the year to be
excellent examples of complementary businesses.
Collectively, these three businesses, all recently integrated into the Group,
delivered £153.0m of margin accretive revenue during the financial year.
People at the heart of our purpose-led culture
Across the organisation, our people are excited about the opportunity we have
to deliver on our core purpose of bringing quality, safety and sustainability
to life. This attitude and passion is at the heart of our culture, and our
determination to be the agents of positive change around the world is evident
in everything we do.
We have a highly disciplined approach to performance management, and this
powers our operational excellence and continuous improvement. Our commitment
to excellence involves the constant measurement of our progress against a
range of operational metrics, using data intelligence to continuously gauge
and understand our customer-service levels and turnaround times.
This approach, along with our unwavering focus on quality at every site, is
crucial to our ability to deliver constant improvement, underpinning our
operational and Health and Safety excellence to ensure that our customers
always receive a superior service.
Ultimately, of course, our ability to do this comes down to the energy and
commitment of our 43,500 people across the world. These science-based
individuals and teams, all highly technically skilled, constantly strive to go
beyond what our clients expect of them.
I believe that our performance over the last three years of extreme disruption
underlines the importance of our people's unwavering commitment to giving our
clients the peace of mind they seek, in turn giving us the right to call
Intertek 'an amazing force for good' in the world.
Science-based Customer Excellence for an ever better world
We are a high-quality growth business delivering value for all stakeholders,
with excellent fundamentals in customer service, ATIC demand, margin
management, capital allocation discipline, and operating culture.
We are well positioned to continue to deliver sustainable growth and value for
all our stakeholders.
Intertek's approach to value creation is based on the compounding effect, year
after year, of margin accretive revenue growth, strong cash generation and
disciplined investment in growth. This approach has delivered 8% annual Total
Shareholder Return since 2012.
We provide a superior customer service with our ATIC solutions and
Science-based Customer Excellence - in terms of technical expertise,
continuous improvement and innovation - is our competitive advantage. We
measure our customer service with circa 5,400 interviews a month and work
continuously at becoming ever better with both process improvements and
industry-leading innovations. That's why we operate with a very high customer
retention.
From an ATIC demand standpoint, stakeholders' expectations in a post Covid-19
world in terms of quality, safety and sustainability are higher, making the
case for our risk-based Quality Assurance solutions stronger. That's why we
expect the higher demand for our ATIC solutions to drive a higher organic
growth post Covid-19.
Margin accretive revenue growth is central to the way we deliver value. It
starts with our portfolio that targets organic and inorganic investments in
attractive growth and margin sectors. We have established over the years a
continuous improvement performance approach at every layer of the organisation
to control costs and drive productivity improvement. That's why we expect
margin progress moving forward.
Our strong focus on cash management has stepped up our free cash flow
performance over the years enabling us to invest in growth, reward our
shareholders with a progressive dividend policy targeting a 50% pay-out and
operate with a strong balance sheet giving us the firepower to invest in
M&A. This is what we mean by disciplined capital allocation.
At Intertek, we are purpose-led and we are all passionate about making the
world a better place, bringing quality, safety and sustainability to life. We
are a growth-oriented company attracting, developing and retaining the best
talents in the industry.
We operate a differentiated, high-energy, people-centric culture focussed on
delivering sustainable value for all stakeholders: Science-based Customer
Excellence for an ever better world.
André Lacroix
Chief Executive Officer
Operating Review
For the year ended 31 December 2022
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
2022 2021 Change at actual Change at constant
£m £m rates rates1
Revenue 3,192.9 2,786.3 14.6% 8.2%
Like-for-like revenue2 3,067.4 2,761.0 11.1% 4.9%
Adjusted Operating profit3 520.1 473.9 9.7% 3.8%
Margin3 16.3% 17.0% (70bps) (70bps)
(31.9) (28.4) (12.3%) (3.2%)
Net financing costs3
Income tax expense3 (128.4) (118.0) (8.8%) (3.0%)
Adjusted Earnings for the period3 359.8 327.5 9.9% 4.2%
Adjusted diluted earnings per share3 211.1p 190.8p 10.6% 4.6%
1. Constant rates are calculated by translating 2021 results at 2022
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 14.6%, with 3.3% growth contributed
by acquisitions, a LFL revenue increase of 4.9% and an increase of 640bps from
foreign exchange reflecting sterling depreciation against most of the Group's
trading currencies.
The Group's LFL revenue at constant rates consisted of an increase of 3.9% in
Products, 5.6% in Trade and 7.9% in Resources.
We delivered an adjusted operating profit performance of £520.1m, up 3.8% at
constant rates and 9.7% at actual rates.
The Group's adjusted operating margin was 16.3%, a decrease of 70bps from the
prior year at constant exchange rates. Margin declined in Products by 180bps
and increased in Trade by 70bps and Resources by 180bps at constant rates.
The Group's statutory operating profit after SDIs for the period was £452.4m
(2021: £433.2m), down 1.3% at constant rates, and margin was 14.2% (2021:
15.5%).
Net Financing Costs
Adjusted net financing costs were £31.9m, a increase of £3.5m on 2021
resulting from a combination of higher interest expense and the impact of
foreign exchange rates. This comprised £2.2m (2021: £1.5m) of finance income
and
£34.1m (2021: £29.9m) of finance expense. Statutory net financing costs of
£32.6m included £0.7m cost (2021:
£8.6m income) relating to SDIs.
Tax
The adjusted effective tax rate was 26.3%, a decrease of 0.2% on the prior
year (2021: 26.5%). The tax charge, including the impact of SDIs, of £113.0m
(2020: £106.7m), equates to an effective rate of 26.9% (2020: 25.8%), the
increase mainly driven by a non-taxable credit relating to a SDI item in 2021.
Earnings per share
Adjusted diluted earnings per share at actual exchange rates was 10.6% higher
at 211.1p (2021: 190.8p). Diluted earnings per share after SDIs was 178.4p
(2021: 177.9p) per share and basic earnings per share after SDIs was 179.2p
(2021: 178.7p).
Dividend
Reflecting the Group's strong cash generation in 2022, 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 50% of
adjusted profit attributable to shareholders of the Group for 2022 (2021:
£170.6m and 55%). The dividend is covered 2.0 times by earnings (2021: 1.8
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; the costs
of any significant strategic projects; 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 associated with our cost reduction programme
are excluded from adjusted operating profit where they represent changes
associated with operational streamlining, technology upgrades or related asset
write-offs and are costs that are not expected to reoccur. The cost reduction
programme is expected to last up to five years. 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 in order to provide useful information
regarding the underlying performance of the Group's operations.
The SDIs charge for 2022 comprises amortisation of acquisition intangibles of
£34.8m (2021: £29.3m); acquisition and integration costs relating to
successful, active, or aborted acquisitions of £5.5m (2021: £11.4m); and
restructuring costs of £27.4m (2021: £nil).
Details of the SDIs for the twelve months ended 31 December 2022 and the
comparative period are given in note 3 to the Condensed Consolidated Financial
Statements.
Acquisitions and investments
The Group completed one acquisition in the year (2021: three) with consideration paid of £63.2m (2021: £480.9m), net of cash acquired of £13.4m (2021: £15.8m).
In July 2022, the Group acquired Clean Energy Associates, LLC ('CEA'), a
market-leading independent provider of quality assurance, supply chain
traceability and technical services to the fast-growing solar energy and
energy storage sectors.
The Group invested £116.5m (2021: £97.1m) organically in laboratory
expansions, new technologies and equipment and other facilities. This
investment represented 3.6% of revenue (2021: 3.5%).
Cash flow
The Group's cash performance was strong with free cash flow of £368.4m (2021:
£385.2m), driven by strong cash conversion, the result of disciplined working
capital management. Adjusted cash flow from operations was £722.0m (2021:
£695.8m). Statutory cash flow from operations was £704.1m (2021: £679.2m).
Financial position
The Group ended the period in a strong financial position. Financial net debt
was £737.9m, an increase of £4.6m on 31 December 2021, primarily reflecting
cash generation in the business more than offset by the impact of foreign
exchange on gross financial debt. The undrawn headroom on the Group's existing
committed borrowing facilities at 31 December 2022 was £707.3m and cash and
cash equivalents were £320.7m, increasing total liquidity by £199.8m
compared to 2021.
In January and March 2022, the Group drew down the US$640m of senior notes,
issued in December 2021 in four tranches with fixed annual interest rates of
2.24%-2.54% and repayable between 2027 and 2030. The proceeds were used to
repay $140m of US Senior Notes that fell due in January 2022 and SAI
Acquisition Facility 'B' of AU$264.1 m and US$290.7m.
Total net debt, including the impact of the IFRS 16 lease liability, was
£1,060.1m (2021: £1,025.6m).
Outlook
We are entering 2023 with confidence given the re-opening of China, which has
been operating with normal staffing levels since the beginning of the year,
the increased demand for our ATIC solutions, the strengths of our portfolio,
our strong pricing power, our productivity and cost initiatives as well as our
cash flow discipline. We are announcing this morning a cost reduction
programme that targets productivity opportunities. We have incurred £27m of
restructuring costs in 2022 to reduce our cost base in 2023, delivering a 2023
benefit of £6-7m and annual savings of £15m when the programme is complete.
We expect the Group will deliver mid-single digit LFL revenue growth at
constant currency, with margin progression year-on-year, and a strong free
cash flow performance.
Our financial guidance for 2023 is that we expect
• Capital expenditure in the range of £115-125m
• Net finance costs of around £40-45m
• Effective tax rate in the 26.5-27.5% range
• Minority interests of between £21.5-22.5m, translation forex to be
neutral at the revenue and earnings level
• Financial net debt at December 2023 of between £630-680m (prior to
any material movements in FX or M&A).
Operating Review by Division
Revenue Adjusted operating profit
2022 2021 Change Change at constant 2022 2021 Change Change at constant
£m £m at actual rates £m £m at actual rates
rates rates
Products 2,024.3 1,755.3 15.3% 8.5% 426.9 399.7 6.8% -
Trade 635.6 575.4 10.5% 5.6% 57.9 51.6 12.2% 14.0%
Resources 533.0 455.6 17.0% 10.3% 35.3 22.6 56.2% 50.9%
Group 3,192.9 2,786.3 14.6% 8.2% 520.1 473.9 9.7% 3.8%
Products Divisional Review
2022 2021 Change at actual rates Change at constant rates
£m £m
2,024.3 1,755.3 15.3% 8.5%
Revenue
Like-for-like revenue 1,910.7 1,730.0 10.4% 3.9%
Adjusted operating profit 426.9 399.7 6.8% -
Adjusted operating margin 21.1% 22.8% (170bps) (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, 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 - managing complex supply chains
What it is: Through Intertek Inlight™, we provide the technology and expertise that enables organisations to better understand their supply chain risks and protect their brand. With our Wisetail online learning platform built in, it offers them enhanced analytics to manage their complex global supply chains and make real-time supplier decisions.
Customer benefit: Inlight is a cost-effective solution for global companies who require trusted information about the identities, capabilities and compliance of their supplier partners. It allows users more flexibility and customisation in their supply chain programmes, and offers live dashboards of suppliers' performance, trends, risks and opportunities, as well as training.
EcoCheck - scientific approach to sustainability
What it is: EcoCheck is a unique "green" certification scheme in the travel, tourism, and hospitality sectors that looks at our customers' complete environmental credentials. It takes a scientific and systemic approach to sustainability by employing a series of checkpoints, with criteria informed by the UN Global Compact 10 Principles that advance the UN Sustainable Development Goals.
Customer benefit: Our customers' guests can take comfort from the EcoCheck certificate that their stay was sustainable. It offers guests reassurance that their chosen travel operators are actively working to increase their own sustainability through robust analyses, tourism-specific solutions, comparative benchmarking, and an emphasis on actionable results.
Protek - clean air and healthy indoor environments
What it is: Protek Facility Health Management helps our customers take a comprehensive, practical, and customised approach to the design and operation of indoor environments. The product's services include the assessment of unique risks and opportunities, alongside efficacy and validation testing that gives confidence to both our customers and their stakeholders.
Customer benefit: With organisations facing increased demand for indoor environments that support health and wellness, they need our science-based approach that will reduce the risks of pathogen transmission and enhance their buildings' air quality and comfort. Our bespoke solutions help them to mitigate risk, and increase employee and customer trust, satisfaction, and loyalty.
SourceClear - a bespoke solution to support our customers' sustainability goals
What it is: SourceClear™ was developed to support our customers' sustainability journey, while fulfilling the demands of today's consumers. It manages and certifies product and materials data and business transactions throughout their supply chain, providing traceability and independent validation of product sustainability claims, enabling accurate and verified labelling of their products.
Customer benefit: Through SourceClear™ companies of all sizes can demonstrate that their products and brands are environmentally friendly, socially responsible, and have a positive impact on society. It will manage the end-to-end process for scope certificates and transaction certificates against the Textile Exchange's Recycled Claim Standard and Global Recycled Standard.
Global Market Access - 24/7 access to curated and up to date compliance information
What it is: We have developed the Global Market Access portal to support our customers by providing a convenient one stop knowledge database to help them bring their products to global markets with speed. The portal covers more than 180 consumer product types for 40 different markets - from soft goods such as apparel, and textiles, to hard goods such as cookware and furniture.
Customer benefit: Our self-help Global Market Access portal allows compliance and quality managers to get all the regulatory, testing, and recall information they need in one place instantly with just a few simple clicks. Currently, we offer four e-Services on the portal, including Regulatory Sheet, Test Plan, Recall Summary and Gap Analysis, to expediate global market access for consumer products.
ToxClear - delivering safer, cleaner and more sustainable fashion supply chains
What it is: ToxClear is an innovative digital chemical management platform for the fashion industry, which enables our customers to detox their supply chains. Its end-to-end Total Chemical Assurance solutions help them to reduce hazardous chemicals used in the input, process, and output stages of their operations, and offer transparency across their production and chemical usage.
Customer benefit: ToxClear connects with ZDHC Gateway, a Chemical Module for real-time ZDHC Manufacturing Restricted Substances List (MRSL) conformance data mapping and generation of ZDHC Performance 'InCheck' Reports. These reports provide total traceability and transparency of chemicals used across complex supply chains. This gives clients full visibility of their chemical inventories to evaluate conformance with the ZDHC MRSL to help them achieve zero discharge of hazardous chemicals.
CircularAssure - helping the polymer/plastics sector move towards a circular economy
What it is: CircularAssure is an innovative programme of assurance, testing and certification services which can be applied across the recycled plastic value chain from waste collectors and recycling companies to polymer producers and brands. It enables them to optimise the value of recycled materials and products within the plastics/polymer circular economy while maintaining quality and safety.
Customer benefit: By adopting CircularAssure, chemical recycling companies can use our inline chemical analysis technology to boost process efficiencies; polymer producers can assess new recycled materials; waste collectors and mechanical recycling companies can use our insight-enabling testing to improve profitability; and brands can demonstrate the levels of recycled content in their products through our recycled content certification.
Green R&D Assurance Solutions - striking the right balance
What it is: The demand for eco-friendly products has increased significantly as consumers want to ensure that the products they are purchasing have been created with minimal impact to the environment. Intertek Green R&D is an integrated solution that ensures the sustainability, quality and safety attributes of a product are optimised throughout its lifecycle.
Customer benefit: Green R&D is a bespoke science-based solution designed to provide customers with a holistic view of their product development - offering safety, quality, and performance testing and analysis, regulatory assessment and end-to-end environmental assessment. These services help companies mitigate risk and protect their brands through striking the right balance between quality, safety, and performance attributes.
2022 performance
Our Products division delivered a good performance overall.
We delivered a good LFL revenue growth of 3.9% at constant rates
notwithstanding the impact of Covid in Q2 and November/December in China, the
supply chain disruption in the automotive industry and the slow-down in new
product development in Softlines and Hardlines in Q4. Outside of China our LFL
revenue growth was 5.5% at constant rates.
Our operating profit of £426.9m was flat at constant rates and up 6.8% at
actual rates versus 2021, resulting in an operating margin of 21.1%. This is
180 basis points at constant rates lower compared to 2021 when we benefitted
from unusually high government subsidies, and in 2022 we were impacted by the
Covid-19 disruptions in China and inflationary pressure in North America,
Europe and Australia.
• In H2 2022 our Softlines business delivered low-single digit LFL
revenue growth, resulting in a mid-single digit growth in LFL revenue for the
year. The business benefitted 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 stable LFL revenue growth in H2 and
low-single digit growth in LFL revenue in 2022. Hardlines saw 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 low-single
digit LFL revenue growth in the second half to register low-single digit LFL
revenue growth for the year. This reflects 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 double-digit LFL revenue
growth for the second half and 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 mid-single digit
LFL revenue growth in H2 and mid-single digit 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 2021.
• Our Transportation Technology business saw double-digit negative LFL
revenue growth in H2 2022 and high 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 mid-single digit LFL revenue growth in
the second half and for the full year. We are benefitting 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 low-single digit LFL revenue growth in the second half and
for the year in our Chemical & Pharma business. We benefitted 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.
2023 growth outlook
In 2023, we expect our Products division to deliver a good 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
2022 2021 Change at actual rates Change at constant rates
£m £m
635.6 575.4 10.5% 5.6%
Revenue
Like-for-like revenue 635.2 575.4 10.4% 5.6%
Adjusted operating profit 57.9 51.6 12.2% 14.0%
Adjusted operating margin 9.1% 9.0% 10bps 70bps
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:
Inview - advanced remote auditing and inspection services
What it is: Intertek Inview(TM) is our remote inspection solution that helps organisations conduct faster and more efficient inspections. During an Inview inspection, an Intertek expert will conduct the inspection remotely via live video using a hand-held device allowing them to follow the same rigorous quality procedures as those performed by our on-site inspectors for pre-shipment and commercial inspections of goods and shipments.
Customer benefit: Inview has been updated to provide even more information from each audit. The inclusion of automated carbon footprint metrics and other new features ensures that an audit conducted with Inview now delivers more analytical value and information to facilitate the reduction of a company's carbon footprint and help our customers in their ESG journey.
Tradeable - Ground-level trade support and expertise
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.
AgriWorld - Rapid Onsite Testing of Grains and Cereals
What it is: Key to Intertek AgriWorld's end-to-end risk-based Quality Assurance solutions are the various services connecting agricultural supply chains to facilitate sustainable trade. This includes Rapid Onsite Testing of Grains and Cereals where the implementation of the latest technological testing methods provides results to customers within minutes, allowing stakeholders to make informed decisions fast. These tests are performed all along the value chain on important quality and safety parameters such as Protein, Fat Content, Moisture, Aflatoxins and others.
Customer benefit: Our service solution promotes the sustainability of agricultural supply chains, as customers are able to maintain full traceability, reduce food loss and waste, and make informed decisions in real time. The visibility into quality and safety provided by rapid testing and delivery of results helps to prevent cargo degradation whilst optimising quality segmentation.
2022 performance
Our Trade division delivered a mid-single digit LFL revenue growth of 5.6% at
constant rates as we benefitted from the increased demand for Inspection and
Testing in Energy and Agri products. Outside of China our LFL revenue growth
was 7.0% at constant rates.
We delivered an operating profit of £57.9m, 14.0% higher at constant rates
and 12.2% at actual rates compared to 2021. This resulted in an operating
margin of 9.1%, up by 70bps at constant rates versus 2021 despite
higher-than-expected inflation in several markets.
• Caleb Brett, the global leader in the Crude Oil and refined Products
global trading markets, benefitted from improved momentum driven by increased
global mobility with high-single digit LFL revenue growth in the second half
and for the full year.
• Our Government & Trade Services business provides certification
services to governments in the Middle East, Africa and South America to
facilitate the import of goods in their markets, based on acceptable quality
and safety standards. This business saw double-digit negative growth in LFL
revenue in H2 and the full year due to the termination of two contracts for
profitability reasons.
• AgriWorld provides inspection activities to ensure that the global
food supply chain operates fully and safely. The business reported mid-single
digit LFL revenue growth for the second half and high-single digit LFL revenue
growth for the full year. We continue to benefit from an increase in demand
for inspection activities driven by the strong growth in the global food
industry.
2023 growth outlook
In 2023, we expect our Trade division to deliver good 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
2022 2021 Change at actual rates Change at constant rates
£m £m
533.0 455.6 17.0% 10.3%
Revenue
Like-for-like revenue 521.5 455.6 14.5% 7.9%
Adjusted operating profit 35.3 22.6 56.2% 50.9%
Adjusted operating margin 6.6% 5.0% 160bps 180bps
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:
Intertek Hydrogen - end-to-end quality, safety and sustainability solutions for the Hydrogen industry
What it is: Hydrogen is increasingly viewed as a leading energy transition fuel providing a way to decarbonize industries and support greater efficiency within renewable energy sectors. Intertek Hydrogen provides customers an innovative, end-to-end ATIC platform that provides a trusted and single-source partnership for support and guidance along every stage of the hydrogen value chain. In addition, it gives the hydrogen industry access to our extensive global network of trusted experts, risk-mitigating technical services, and global end-to-end risk-based quality, safety and sustainability solutions.
Customer benefit: As the global hydrogen industry expands and develops, the safety and regulatory challenges facing commercialisation of this technology is becoming more critical for our customers. Intertek Hydrogen helps them advance the sector, successfully develop and execute hydrogen-based projects, and create viable ecosystems. It also helps them overcome the safety challenges and navigate the sector's increasingly complex regulatory requirements.
RiskAware - partnership with Venture Global
What it is: As a leader in global inspection services, our people gather and analyse hundreds of data points from quality assurance and quality control non-conformance reports, inspection and testing results, as well as health, safety and environment reports. With RiskAware, our customers are able to establish more efficient and cost-effective Quality, Health, Safety and Environment ('QHSE') programmes that address areas of higher risk to help reduce the cost of quality.
Customer benefit: Our customer, Venture Global, chose Intertek due to our global reach, quality reporting tools, and experience in vendor and site quality inspection. They have achieved facility start-up ahead of schedule, in part, due to our thorough inspections and utilisation of RiskAware. On the Calcassieu Pass project, we deployed our RiskAware processes and reporting tools. This helped ensure on-schedule equipment deliveries and installations.
PipeAware - working across multiple vendor locations in four different countries
What it is: Intertek PipeAware is an innovative digital solution combining pipeline traceability with inspection data to give valuable, real-time insight on pipeline quality and compliance. It offers pipeline owners and operators traceability and easy access to the inspection, testing and material data needed to make informed decisions that ensure pipelines operate safely and efficiently.
Customer benefit: Working with a major oil company on a project that involves laying more than 300 miles of pipe, PipeAware offers cost-effective and faster access to critical data, which is all stored securely in one location. The data includes all inspection observations on individual pipe joints, including dents, stencil or marking errors, coating repairs, and bevel damage.
2022 performance
Our Resources division delivered a robust LFL revenue growth of 7.9% at
constant rates driven by the increased Capex investments of our energy clients
in traditional Oil & Gas and renewables as well as by the higher demand in
Minerals. Outside of China our LFL revenue growth was 8.5% at constant rates.
Revenue of £533.0m was up 17.0% at actual rates and 10.3% at constant rates.
We delivered an adjusted operating profit of £35.3m, 51% higher at constant
rates and up 56% at actual rates. Our adjusted operating margin of 6.6% was
180 basis points higher at constant rates despite the higher-than-expected
inflation in several markets.
• In Exploration and Production operations, our Capex Inspection
services business delivered high-single digit LFL revenue growth in both the
second half and full year.
• We delivered low-single digit negative LFL revenue growth in Opex
Maintenance services in H2 2022, resulting in a low-single digit negative LFL
revenue growth in 2022.
• Increased demand for testing and inspection activities saw our
Minerals business deliver double-digit LFL revenue growth in the second half
and for the full year.
2023 growth outlook
In 2023, we expect our Resources division to deliver a robust revenue growth
at constant currency.
Mid to long- term growth outlook
Our Resources division will grow in the mid to long-term as we benefit from
investments in energy to meet the demands of the growing population around the
world.
Presentation of Results
For the year ended 31 December 2022
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.
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 2021 results at 2022 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 associated with our cost reduction programme
are excluded from adjusted operating profit where they represent changes
associated with operational streamlining, technology upgrades or related asset
write-offs and are costs that are not expected to reoccur. The restructuring
programme is expected to last up to five years. The treatment as SDI is
consistent with the disclosure of costs for similar restructuring and
strategic programmes previously undertaken. 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 2022 and the
comparative period are given in note 3 to the Condensed Consolidated Financial
Statements.
Reconciliation of Results to Adjusted Performance Measures (£m)
2022 2022 2022 2021 2021 2021
Reported SDIs Adjusted Reported SDIs Adjusted
Operating profit 452.4 67.7 520.1 433.2 40.7 473.9
Operating margin 14.2% 2.1% 16.3% 15.5% 1.5% 17.0%
Net financing costs (32.6) 0.7 (31.9) (19.8) (8.6) (28.4)
Profit before tax 419.8 68.4 488.2 413.4 32.1 445.5
Income tax expense (113.0) (15.4) (128.4) (106.7) (11.3) (118.0)
Profit for the year 306.8 53.0 359.8 306.7 20.8 327.5
Cash flow from operations 704.1 17.9 722.0 679.2 16.6 695.8
Cash flow from operations less net capex 591.8 17.9 609.7 583.1 16.6 599.7
Free cash flow 368.4 17.9 386.3 385.2 16.6 401.8
Basic earnings per share 179.2p 32.8p 212.0p 178.7p 12.9p 191.6p
Diluted earnings per share 178.4p 32.7p 211.1p 177.9p 12.9p 190.8p
2022 2021 Change
Reconciliation of revenue £m £m %
Reported revenue 3,192.9 2,786.3 14.6
Less: Acquisitions / disposals / closures / rebates (125.5) (25.3)
Like-for-like revenue 3,067.4 2,761.0 11.1
Impact of foreign exchange movements - 163.5
Like-for-like revenue at constant currency 3,067.4 2,924.5 4.9
Reconciliation of financial net debt to adjusted EBITDA (£m)
2022 2021
Net debt (1,060.1) (1,025.6)
IFRS 16 lease liability 322.2 292.3
Financial net debt (737.9) (733.3)
Reported operating profit 452.4 433.2
Depreciation 160.2 150.6
Amortisation 20.3 18.7
EBITDA 632.9 602.5
SDIs 67.7 40.7
Adjusted EBITDA 700.6 643.2
Financial net debt / adjusted EBITDA 1.1x 1.1x
2022 2021 Change
Constant currency reconciliations £m £m %
Adjusted operating profit at actual rates 520.1 473.9 9.7
Impact of foreign exchange movements - 27.0
Adjusted operating profit at constant rates 520.1 500.9 3.8
Adjusted diluted EPS at actual rates 211.1p 190.8p 10.6
Impact of foreign exchange movements - 11.1p
Adjusted diluted EPS at constant rates 211.1p 201.9p 4.6
Diluted EPS at actual rates 178.4p 177.9p 0.3
Impact of foreign exchange movements - 11.0p
Diluted EPS at constant rates 178.4p 188.9p (5.6)
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
(http://www.intertek.com/) . (http://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 2022
2022 2021
Separately Disclosed Separately Disclosed
Adjusted Results Items* Total 2022 Adjusted results Items* Total 2021
Notes £m £m £m £m £m £m
Revenue 2 3,192.9 - 3,192.9 2,786.3 - 2,786.3
Operating costs (2,672.8) (67.7) (2,740.5) (2,312.4) (40.7) (2,353.1)
Group operating profit/(loss) 2 520.1 (67.7) 452.4 473.9 (40.7) 433.2
Finance income 2.2 - 2.2 1.5 - 1.5
Finance expense (34.1) (0.7) (34.8) (29.9) 8.6 (21.3)
Net financing (costs)/income (31.9) (0.7) (32.6) (28.4) 8.6 (19.8)
Profit/(loss) before income tax 488.2 (68.4) 419.8 445.5 (32.1) 413.4
Income tax (expense)/credit (128.4) 15.4 (113.0) (118.0) 11.3 (106.7)
Profit/(loss) for the period 2 359.8 (53.0) 306.8 327.5 (20.8) 306.7
Attributable to:
Equity holders of the Company 341.8 (53.0) 288.8 308.9 (20.8) 288.1
Non-controlling interest 18.0 - 18.0 18.6 - 18.6
Profit/(loss) for the period 359.8 (53.0) 306.8 327.5 (20.8) 306.7
Earnings per share
Basic 4 212.0p 179.2p 191.6p 178.7p
Diluted 4 211.1p 178.4p 190.8p 177.9p
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 2022
2022 2021
Notes £m £m
Profit for the period 2 306.8 306.7
Other comprehensive income/(expense)
Remeasurements on defined benefit pension schemes 5 17.4 11.5
Tax on comprehensive income/(expense) items (4.3) (0.5)
Items that will never be reclassified to profit or loss 13.1 11.0
Foreign exchange translation differences of foreign operations 181.5 (24.7)
Net exchange gain on hedges of net investments in foreign operations (120.0) 4.0
Gain on fair value of cash flow hedges - -
Items that are or may be reclassified subsequently to profit or loss 61.5 (20.7)
Total other comprehensive expense for the period 74.6 (9.7)
Total comprehensive income for the period 381.4 297.0
Total comprehensive income for the period attributable to:
Equity holders of the Company 363.1 277.4
Non-controlling interest 18.3 19.6
Total comprehensive income for the period 381.4 297.0
Condensed Consolidated Statement of Financial Position
As at 31 December 2022
2022 2021
£m £m
Notes
Assets
Property, plant and equipment 8 694.4 641.8
Goodwill 7 1,418.4 1,241.4
Other intangible assets 362.9 358.5
Trade and other receivables 21.5 -
Defined benefit pension asset 5 21.3 5.4
Deferred tax assets 45.0 39.3
Total non-current assets 2,563.5 2,286.4
16.9 14.9
Inventories*
Trade and other receivables* 726.4 661.9
Cash and cash equivalents 6 321.6 265.9
Current tax receivable 31.9 20.6
Total current assets 1,096.8 963.3
Total assets 3,660.3 3,249.7
Liabilities
Interest bearing loans and borrowings 6 (262.4) (462.0)
Current taxes payable (71.0) (59.1)
Lease liabilities (70.6) (63.5)
Trade and other payables* (723.2) (667.8)
Provisions* (15.8) (13.2)
Total current liabilities (1,143.0) (1,265.6)
Interest bearing loans and borrowings (797.1) (537.2)
6
Lease liabilities (251.6) (228.8)
Deferred tax liabilities (99.2) (67.4)
Defined benefit pension liabilities 5 (2.2) (4.0)
Other payables* (34.6) (31.9)
Provisions* (14.6) (0.5)
Total non-current liabilities (1,199.3) (869.8)
Total liabilities (2,342.3) (2,135.4)
Net assets 1,318.0 1,114.3
Equity
Share capital 1.6 1.6
Share premium 257.8 257.8
Other reserves (41.3) (102.5)
Retained earnings 1,065.9 925.1
Total equity attributable to equity holders of the Company 1,284.0 1,082.0
Non-controlling interest 34.0 32.3
Total equity 1,318.0 1,114.3
* Working capital of negative £47.8m (2021: negative £43.3m) comprises the
asterisked items in the above Statement of Financial Position less refundable
deposits aged over 12 months of £nil (2021: £6.7m) and IFRS16 Lease
Receivable of £2.9m (2021: £nil).
Condensed Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
Attributable to equity holders of the Company
Other Reserves
Total before
non- controlling interest Non- controlling interest
Share capital Share premium Translation Retained earnings
reserve Other Total equity
£m £m £m £m £m £m £m £m
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 - - (21.7) - 299.1 277.4 19.6 297.0
for the period
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- - - - - - - 1.7 1.7
controlling interest
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
IFRS16 effects of deferred tax rate - - - - (0.3) (0.3) - (0.3)
Change
Total contributions by and distributions - - - - (170.4) (170.4) (15.3) (185.7)
to the owners of the company
At 31 December 2021 1.6 257.8 (108.9) 6.4 925.1 1,082.0 32.3 1,114.3
At 1 January 2022 1.6 257.8 (108.9) 6.4 925.1 1,082.0 32.3 1,114.3
Total comprehensive (expense)/income
for the period
Profit - - - - 288.8 288.8 18.0 306.8
Other comprehensive (expense)/income - - 61.2 - 13.1 74.3 0.3 74.6
Total comprehensive (expense)/income
for the period - - 61.2 - 301.9 363.1 18.3 381.4
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) (16.6) (187.2)
Adjustment arising from changes in non- - - - - - - - -
controlling interest
Purchase of own shares - - - - (2.3) (2.3) - (2.3)
Tax paid on share awards vested(1) - - - - (4.4) (4.4) - (4.4)
Equity-settled transactions - - - - 17.5 17.5 - 17.5
Income tax on equity-settled transactions - - - - (1.3) (1.3) - (1.3)
Total contributions by and distributions to the owners of the company
- - - - (161.1) (161.1) (16.6) (177.7)
At 31 December 2022 1.6 257.8 (47.7) 6.4 1,065.9 1,284.0 34.0 1,318.0
(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 17 June 2022 represented a final dividend of
71.6p per ordinary share in respect of the year ended 31 December 2021. The
£115.5m dividend paid on 18 June 2021 represented a final dividend of 71.6p
per ordinary share in respect of the year ended 31 December 2020. 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 2022
2022 2021
Notes £m £m
Cash flows from operating activities
Profit for the period 2 306.8 306.7
Adjustments for:
Depreciation charge 160.2 150.6
Amortisation of software 20.3 18.7
Amortisation of acquisition intangibles 34.8 29.3
Impairment of goodwill and other assets 15.3 -
Equity-settled transactions 17.5 18.6
Net financing costs 32.6 19.8
Income tax expense 113.0 106.7
Loss/(Profit) on disposal of property, plant, equipment and software (0.4) 0.1
Operating cash flows before changes in working capital and operating 700.1 650.5
Provisions
Change in inventories (0.8) 0.6
Change in trade and other receivables (54.3) (29.2)
Change in trade and other payables 61.1 62.0
Change in provisions - (2.7)
Special contributions into pension schemes (2.0) (2.0)
Cash generated from operations 704.1 679.2
Interest and other finance expense paid (37.5) (27.0)
Income taxes paid (106.7) (102.0)
Net cash flows generated from operating activities* 559.9 550.2
Cash flows from investing activities
Proceeds from sale of property, plant, equipment and software* 4.2 1.0
Interest received* 2.2 1.5
Acquisition of subsidiaries, net of cash received (63.2) (480.9)
Consideration paid in respect of prior year acquisitions - (10.9)
Acquisition of property, plant, equipment, software* 8 (116.5) (97.1)
Net cash flows used in investing activities (173.3) (586.4)
Cash flows from financing activities
Purchase of own shares (2.3) (11.4)
Tax paid on share awards vested (4.4) (6.7)
Drawdown of borrowings 477.2 471.3
Repayment of borrowings (536.8) (72.4)
Repayment of lease liabilities* (81.4) (70.4)
Dividends paid to non-controlling interest (16.6) (17.0)
Equity dividends paid (170.6) (170.6)
Net cash flows generated from/(used in) financing activities (334.9) 122.8
Net increase/(decrease) in cash and cash equivalents 6 51.7 86.6
Cash and cash equivalents at 1 January 6 264.0 183.4
Effect of exchange rate fluctuations on cash held 6 5.0 (6.0)
Cash and cash equivalents at 31 December 6 320.7 264.0
* Free cash flow of £368.4m (2021: £385.2m) comprises the asterisked items
in the above Statement of Cash Flows.
Adjusted cash flow from operations of £722.0m (2021: £695.8m) comprises
statutory cash generated from operations of £704.1m (2021: £679.2m) before
cash outflows relating to Separately Disclosed Items of £17.9m (2021:
£16.6m).
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 2022 and 2021 but is
derived from the 2022 accounts. A full copy of the 2022 Annual Report will be
available online at www.intertek.com (http://www.intertek.com/) in March 2023.
Statutory accounts for 2021 have been delivered to the Registrar of Companies,
and those for 2022 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 2022 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 was made. The impact on net finance costs for the year ending 31
December 2021 was 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 2023 and 2024, 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 2022 was £707.3m (2021: £564.2m). The maturity of our borrowing
facilities is disclosed in Note 14 of the financial statements with repayment
of Acquisition facility 'A' (AU$88.0m and US$96.9m) and US$160m of senior
notes required by 31 December 2023. Our models forecast these to be repaid
using existing facilities. 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 2024, 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 operations
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 2022 2021 2022 2021
US dollar 1.20 1.35 1.24 1.38
Euro 1.13 1.19 1.17 1.16
Chinese renminbi 8.45 8.59 8.31 8.89
Hong Kong dollar 9.37 10.52 9.68 10.70
Australian dollar 1.78 1.86 1.78 1.83
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 2022 Revenue from Depreciation and Adjusted operating
external customers software amortisation profit
£m £m £m
Separately Operating
Disclosed Items profit
£m £m
Products 2,024.3 (113.5) 426.9 (50.4) 376.5
Trade 635.6 (43.4) 57.9 (8.6) 49.3
Resources 533.0 (23.6) 35.3 (8.7) 26.6
Total 3,192.9 (180.5) 520.1 (67.7) 452.4
Group operating profit 520.1 (67.7) 452.4
Net financing (costs)/income (31.9) (0.7) (32.6)
Profit before income tax 488.2 (68.4) 419.8
Income tax (expense)/credit (128.4) 15.4 (113.0)
Profit for the year 359.8 (53.0) 306.8
For the year ended 31 December 2021 Revenue from Depreciation and Adjusted operating
external customers software amortisation profit
£m £m £m
Separately Operating
Disclosed Items profit
£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
3. Separately Disclosed Items (SDIs)
2022 2021
£m £m
Operating costs
Amortisation of acquisition intangibles (a) (34.8) (29.3)
Restructuring costs (b) (27.4) -
Acquisition and integration costs (c) (5.5) (11.4)
Total operating costs (67.7) (40.7)
Net financing (cost)/income (d) (0.7) 8.6
Total before income tax (68.4) (32.1)
Income tax credit on Separately Disclosed Items (e) 15.4 11.3
Total (53.0) (20.8)
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 £27.4m were incurred in the period (2021: £nil)
following the commencement of a cost reduction programme. These costs were
associated with operational streamlining which included simplification of our
sites/operations/services through removing layers/headcount, Group-wide
technology upgrades and £15.3m for related asset write-offs.
(c) Acquisition and Integration costs relating to acquisition activity in
the period and integration of prior period acquisitions were £5.5m (2021:
£11.4m).
(d) Net financing cost of £0.7m (2021: £8.6m income) relates to the change
in fair value of contingent consideration in relation to acquisitions from
prior periods.
(e) Income tax Credit on SDIs totalled £15.4m (2021: £11.3m) mainly
relating to deferred tax impact of the movement in amortisation on
intangibles.
4. Earnings per share (EPS)
2022 2021
£m £m
Based on the profit for the period:
Profit attributable to ordinary shareholders 286.0 288.1
Separately Disclosed Items after tax (note 3) 55.8 20.8
Adjusted earnings 341.8 308.9
Number of shares (millions):
Basic weighted average number of ordinary shares 161.2 161.2
Potentially dilutive share awards 0.7 0.7
Diluted weighted average number of shares 161.9 161.9
Basic earnings per share 179.2p 178.7p
Potentially dilutive share awards (0.8p) (0.8p)
Diluted earnings per share 178.4p 177.9p
Adjusted basic earnings per share 212.0p 191.6p
Potentially dilutive share awards (0.9p) (0.8p)
Adjusted diluted earnings per share 211.1p 190.8p
5. Pension schemes
During the year, the Group made a special cash contribution of £2.0m (2021:
£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 2022 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 2021. In addition to
the special contribution, a net actuarial gain before taxation of £17.4m
(2021: £11.5m gain) has been recognised in the consolidated statement of
comprehensive income. The net pension asset stands at £21.3m for the UK
pension scheme (2021: £5.4m) and a net pension liability of £2.2m for the
Swiss pension scheme as at 31 December 2022 (2021: £4.0m).
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 income of
£0.1m in the year (2021: £0.1m).
6. Analysis of net debt
2022 2021
£m £m
Cash and cash equivalents per the Statement of Financial Position 321.6 265.9
Overdrafts (0.9) (1.9)
Cash per the Statement of Cash Flows 320.7 264.0
The components of net debt are outlined below:
1 January Cash flow Non-cash adjustments Exchange adjustments 31 December
2021 £m £m 2022
£m £m £m
Cash 264.0 51.7 - 5.0 320.7
Borrowings:
Revolving credit facility US$850m 2027 (65.9) 71.9 - (6.0) -
Senior notes US$140m 2022 (103.8) 103.0 - 0.8 -
Acquisition facility 'B' AU$264.1m 2022 (141.9) 143.7 - (1.8) -
Acquisition facility 'B' US$290.7m 2022 (215.5) 218.2 - (2.7) -
Senior notes US$160m 2023 (118.6) (0.1) - (14.4) (133.1)
Acquisition facility 'A' AU$88.0m 2023 (47.3) - - (2.1) (49.4)
Acquisition facility 'A' US$96.9m 2023 (72.0) 0.2 - (8.8) (80.6)
Senior notes US$125m 2024 (92.7) - - (11.3) (104.0)
Senior notes US$120m 2025 (88.8) (0.2) - (10.8) (99.8)
Senior notes US$75m 2026 (55.5) (0.1) - (6.8) (62.4)
Senior notes US$150m 2027 - (109.4) - (15.4) (124.8)
Senior notes US$165m 2028 - (123.8) - (13.5) (137.3)
Senior notes US$165m 2029 - (123.8) - (13.5) (137.3)
Senior notes US$160m 2030 - (120.0) - (13.1) (133.1)
Other* 4.7 - (1.5) - 3.2
Total borrowings (997.3) 59.6 (1.5) (119.4) (1,058.6)
Total financial net debt (733.3) 111.3 (1.5) (114.4) (737.9)
Lease liability (292.3) 81.4 (92.4) (18.9) (322.2)
Total net debt (1,025.6) 192.7 (93.9) (133.3) (1,060.1)
* Other includes uncommitted borrowings of £0.8m (2021: £0.8m) and facility
fees of £4.0m (2021: £5.5m).
2022 2021
£m £m
Borrowings due in less than one year 261.5 460.1
Borrowings due in one to two years 103.0 236.4
Borrowings due in two to five years 286.0 235.3
Borrowings due in over five years 408.1 65.5
Total borrowings 1,058.6 997.3
Description of borrowings
Total undrawn committed borrowing facilities as at 31 December 2022 were
£707.3m (2021: £564.2m).
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 advances under the facility bear interest at a
rate equal to relevant risk-free rate for the borrowing currency plus a
margin, depending on the Group's financial leverage. The facility was undrawn
at 31 December 2022 (2021: £65.9m).
US$692m Acquisition facility
In May 2021 the Group agreed a US$692m multi-currency acquisition facility to
finance the acquisition of SAI Global. £357.4m was repaid in March 2022 and
the balance of £130.0m is 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 2022 were £130.0m (2021: £476.7m).
Private placement bonds
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 repaid 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%. The repayment on 14 February 2023 was
funded from the existing revolving credit facility.
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 were 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 one acquisition in 2022 (2021: three).
On 1 August 2022 the Group acquired Clean Energy Associates LLC ('CEA') a
market-leading independent provider of quality assurance, supply chain
traceability and technical services to the fast-growing solar energy and
energy storage sectors with a headquarters in the USA and an operation based
in China. Purchase consideration net of cash acquired was US$96.1m (£78.8m).
The purchase price includes cash consideration of £79.3m and a further
contingent consideration payable of £12.9m. Goodwill of £66.6m was generated
in this purchase. The acquisition of CEA 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. CEA will strengthen Intertek's assurance offering by creating a
truly end-to-end value proposition in the solar energy value chain for
customers globally.
(b) Prior period acquisitions
£nil (2021: £10.9m) was paid during the period in respect of prior period
acquisitions.
(c) Details of 2021 acquisitions
Three acquisitions were made during the year ended 31 December 2021.
(d) Impairment
Goodwill generated from past acquisitions has been tested annually as required
by accounting standards. No impairments were identified during the period and
as such no impairment charge was recorded (2021: nil).
(e) Reconciliation of goodwill
£m
Goodwill at 1 January 2022 1,241.4
Additions 66.6
Transfers 5.8
Foreign exchange 104.6
Goodwill at 31 December 2022 1,418.4
8. Property, plant, equipment and software
Additions
During the year, the Group acquired fixed assets with a cost of £116.5m
(2021: £97.1m). The Group acquired £0.1m of fixed assets through business
combinations (2021: £6.1m). At 31 December 2022, the IFRS 16 right of use
asset is £297.6m (2021: £266.8m).
9. Subsequent events
On 14 February 2023, funded from the existing revolving credit facility, a
US$40m senior note at a fixed annual interest rate of 3.10% was repaid.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR UWOAROOUUURRRecent news on Intertek
See all newsREG - Intertek Group Plc - Total Voting Rights
AnnouncementREG - Intertek Group Plc - Transaction in Own Shares
AnnouncementREG - Intertek Group Plc - Transaction in Own Shares
AnnouncementREG - Intertek Group Plc - Transaction in Own Shares
AnnouncementREG - Intertek Group Plc - Transaction in Own Shares
Announcement