REG - Intertek Group Plc - Final Results
05/03/2024 07:15
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RNS Number : 5502F Intertek Group PLC 05 March 2024
2023 FULL YEAR RESULTS ANNOUNCEMENT
5 March 2024
Strong 2023 Performance in Revenue, Margin, EPS, Cash and ROIC
• Revenue of £3,328.7m, +7.1% at constant currency and +4.3% at
actual rates
• Highest LFL revenue growth in the last 10 years with 6.2% LFL
revenue growth at constant currency
• LFL of 8.2% in Corporate Assurance, Health and Safety, Industry and
Infrastructure, and World of Energy combined; Consumer Products LFL of 1.3%
• JLA, SAI and CEA acquisitions performing well, and Controle
Analítico and PlayerLync integrations on track
• Acquisition of Base Met Labs to expand our Minerals ATIC offering in
attractive growth and margin markets
• Adjusted operating profit of £551.1m, +10.9% at constant currency
and +6.0% at actual rates
• Adjusted operating margin of 16.6%, +60bps at constant currency and
+30bps at actual rates
• Adjusted diluted EPS of 223.0p, +11.0% at constant currency and
+5.6% at actual rates
• Daily cash discipline delivers an all-time high operating cash flow
of £749.0m with cash conversion of 122%
• Strong balance sheet; net debt reduced by £127m to £611m, and
leverage ratio improved to 0.8x
• ROIC of 20.5%, +250bps year-on-year at constant currency and at
actual rates
• Cost reduction programme delivered savings of £13m in 2023 and
£10m expected in 2024
• Proven high quality compounding model; On track to deliver our
medium-term margin target of 17.5%+
• Robust 2024 outlook: Mid-single digit LFL at constant currency,
margin progression and strong cash flow
• Full Year dividend of 111.7p up 5.6% year-on-year; increasing
targeted dividend payout to circa 65% from 2024
A FY results video is available on our website:
https://www.intertek.com/investors/2023-full-year-results-video/
(https://www.intertek.com/investors/2023-full-year-results-video/)
André Lacroix: Chief Executive Officer statement
"I would like to recognise all my colleagues for their unwavering support
enabling us to deliver a strong 2023 performance in revenue growth, margin,
EPS, cash and ROIC. Our revenue grew by 7.1% at constant currency driven by a
LFL revenue growth of 6.2%, the highest in the last 10 years, and the
contribution of our acquisitions. Our systemic performance management drove
strong profit conversion with margins rising 60bps at constant currency,
driving EPS growth of 11.0% at constant currency. Cash conversion at 122% was
excellent. We have delivered our highest ever cash from operations of £749m
resulting in our net debt declining by £127m to £611m. We have a strong
balance sheet giving us the ability to invest in growth. ROIC increased by
250bps to 20.5%.
Our clients are increasing their focus on Risk-based Quality Assurance to
operate with higher standards on quality, safety and sustainability in each
part of their value chain, triggering a higher demand for our ATIC solutions
which are powered by our Science-based Customer Excellence ATIC Advantage.
Over the last nine years, from 2014-2023, we have delivered a CAGR of 5.3%,
6.1% and 6.0% for revenue, operating profit and EPS, notwithstanding the
impact of Covid. In May 2023, we unveiled our Intertek AAA differentiated
growth strategy
(https://www.intertek.com/investors/capital-markets-event-presentations/) to
capitalise on the best-in-class operating platform we have built and target
the areas where we have opportunities to get better. Our highly engaged,
customer-centric organisation is laser-focused to take Intertek to greater
heights putting our AAA strategy in action and continuing to deliver
sustainable growth and value for all stakeholders.
Based on our positive momentum, we expect the Group will deliver a robust
performance in 2024 with mid-single digit LFL revenue growth at constant
currency, margin progression and a strong cash flow performance. We are on
track to get back to our peak margin of 17.5% and beyond in the medium-term,
capitalising on the revenue growth acceleration we are seeing for our ATIC
solutions, our disciplined performance management and our investments in high
growth and high margin segments.
We believe in the value of accretive disciplined capital allocation. In
recognition of our highly cash generative earnings model, our strong financial
position, the Board's confidence in the attractive long-term growth prospects
for the Group and its ability to fund continued growth investments, we are
increasing our targeted dividend payout ratio to circa 65% of earnings from
2024."
Key Adjusted Financials 2023 2022 Change at actual rates Change at constant rates(1)
Revenue £3,328.7m £3,192.9m 4.3% 7.1%
Like-for-like revenue(2) £3,300.9m £3,192.9m 3.4% 6.2%
Operating profit(3) £551.1m £520.1m 6.0% 10.9%
Operating margin(3) 16.6% 16.3% 30bps 60bps
Profit before tax(3) £507.2m £488.2m 3.9% 9.2%
Diluted earnings per share(3) 223.0p 211.1p 5.6% 11.0%
Dividend per share 111.7p 105.8p 5.6%
Cash flow from operations less net capex(3) £643.6m £609.7m 5.6%
Adjusted Free Cash Flow(3) £378.4m £386.3m (2.0%)
Financial net debt(4) £610.6m £737.9m (17.3%)
Financial net debt / EBITDA(3, 4) 0.8x 1.1x
ROIC(5) 20.5% 18.0%
Key Statutory Financials 2023 2022 Change at actual rates (1) Constant rates are calculated by translating 2022 results at 2023 exchange
rates.
Revenue £3,328.7m £3,192.9m 4.3% (2) LFL revenue includes acquisitions following their 12-month anniversary of
ownership and excludes the historical contribution of any business
disposals/closures.
(3) Adjusted results are stated before Separately Disclosed Items ('SDIs'),
see note 3 to the Condensed Consolidated Financial Statements.
(1,2,3) Reconciliations for these measures are shown in the Presentation of
Results section on page 24.
(4) Financial net debt excludes the IFRS 16 lease liability of £307.8m. Total
net debt is £918.4m. See note 6 on page 36.
(5) ROIC is defined as adjusted profit after tax divided by invested capital.
Operating profit £486.2m £452.4m 7.5%
Operating margin 14.6% 14.2% 40bps
Profit before tax £422.3m £419.8m 0.6%
Profit after tax £318.1m £306.8m 3.7%
Diluted earnings per share 183.4p 178.4p 2.8%
Cash generated from operations £725.9m £704.1m 3.1%
The Directors will propose a final dividend of 74.0p per share (2022: 71.6p)
at the Annual General Meeting on 24 May 2024, to be paid on 21 June 2024 to
shareholders on the register at close of business on 31 May 2024.
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 (mailto:intertek@dentonsglobaladvisors.com)
Analysts' Call
A live audiocast for analysts and investors will be held today at 10am.
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 2023 will be available on the Company's
website www.intertek.com (http://www.intertek.com/) on 22 March 2024.
Intertek is a leading Total Quality Assurance provider to industries
worldwide.
Our network of more than 1,000 laboratories and offices in more than 100
countries, delivers innovative and bespoke Assurance, Testing, Inspection and
Certification solutions for our customers' operations and supply chains.
Intertek is a purpose-led company to Bring Quality, Safety and Sustainability
to Life. We provide 24/7 mission-critical quality assurance solutions to our
clients to ensure that they can operate with well-functioning supply chains in
each of their operations.
Our Customer Promise is: Intertek Total Quality Assurance expertise, delivered
consistently, with precision, pace and passion, enabling our customers to
power ahead safely.
intertek.com
Intertek CEO Letter
I would like to recognise all my colleagues for their unwavering support
enabling us to deliver a strong 2023 performance in revenue growth, margin,
EPS, cash and ROIC. Our revenue grew by 7.1% at constant currency driven by a
LFL revenue growth of 6.2%, the highest in the last 10 years, and the
contribution of our acquisitions. Our systemic performance management drove
strong profit conversion with margins rising 60bps at constant currency,
driving EPS growth of 11.0% at constant currency. Cash conversion at 122% was
excellent. We have delivered our highest ever cash from operations of £749m
resulting in our net debt declining by £127m to £611m. We have a strong
balance sheet giving us the ability to invest in growth. ROIC increased by
250bps to 20.5%.
Our clients are increasing their focus on Risk-based Quality Assurance to
operate with higher standards on quality, safety and sustainability in each
part of their value chain, triggering a higher demand for our ATIC solutions
which are powered by our Science-based Customer Excellence ATIC Advantage.
Over the last nine years, from 2014-2023, we have delivered a CAGR of 5.3%,
6.1% and 6.0% for revenue, operating profit and EPS, notwithstanding the
impact of Covid. In May 2023, we unveiled our Intertek AAA differentiated
growth strategy
(https://www.intertek.com/investors/capital-markets-event-presentations/) to
capitalise on the best-in-class operating platform we have built and target
the areas where we have opportunities to get better. Our highly engaged,
customer-centric organisation is laser-focused to take Intertek to greater
heights putting our AAA strategy in action and continuing to deliver
sustainable growth and value for all stakeholders.
Based on our positive momentum, we expect the Group will deliver a robust
performance in 2024 with mid-single digit LFL revenue growth at constant
currency, margin progression and a strong cash flow performance. We are on
track to get back to our peak margin of 17.5% and beyond in the medium-term,
capitalising on the revenue growth acceleration we are seeing for our ATIC
solutions, our disciplined performance management and our investments in high
growth and high margin segments.
We believe in the value of accretive disciplined capital allocation. In
recognition of our highly cash generative earnings model, our strong financial
position, the Board's confidence in the attractive long-term growth prospects
for the Group and its ability to fund continued growth investments, we are
increasing our targeted dividend payout ratio to circa 65% of earnings from
2024.
Strong Value Delivered
In 2015, we took the decision to reinvent ourselves, making Assurance,
Testing, Inspection and Certification, or ATIC, our Customer Promise and we
rebranded Intertek as Total Quality. Assured.
Our strategic goal with ATIC is to provide a better-quality Assurance customer
service, given how much global trade had changed in the last 50 years. Today,
companies operate in a truly global market, running complex global
multi-sourcing and manufacturing operations, pursuing an omni-channel
approach, when distributing their products and services globally and locally.
When we did this, we were ahead of our time and our clients agree that our
industry has changed and is now all about Risk-Based Quality Assurance powered
by ATIC. Assurance provides the independent end-to-end data on where the
quality, safety and sustainability risks are in the entire value chain of any
company, while Testing, Inspection and Certification provide the critical
independent quality controls in the high-risk areas of supply chains.
We have made strong progress between 2014 and 2023 notwithstanding the impact
of Covid and have delivered sustainable growth and value for all stakeholders
with the following achievements:
• Revenue growth of 59%, CAGR of 5.3%
• Ebitda growth of 81.2%, CAGR of 6.8%
• Operating margin increase of 110bps
• Cash generated from operations growth of 85.5%, CAGR 7.1%
• ROIC improvement of 420bps
Metric(1) 2014(2) 2023 Change CAGR
Revenue £2,093m £3,329m 59.0% 5.3%
EBITDA £400.9m £726.4m 81.2% 6.8%
Operating profit £324.6m £551.1m 69.8% 6.1%
Operating margin 15.5% 16.6% 110bps 12bps
Diluted earnings per share 132.1p 223.0p 68.8% 6.0%
Dividend 49.1p 111.7p 127.5% 9.6%
WC as % Revenue 9.3% (2.4%) (1,170bps) n/a
Cash generated from ops £403.7m £749.0m 85.5% 7.1%
ROIC 16.3% 20.5% 420bps 47bps
Note (1): On an adjusted basis, (2) 2014 metrics are on an IAS17 basis
Faster Global Growth for ATIC Solutions
Our industry has always benefitted from attractive growth drivers and now more
than ever everyone wants to build an ever-better world which means that
corporations will invest more in quality, safety and sustainability,
accelerating the demand for our ATIC industry-leading solutions.
Indeed, our customer research shows the well-known attractive structural
growth drivers in the Risk-based Quality Assurance industry will be augmented
by:
• Higher investments in safer supply
• Higher investments in innovation
• A step change in sustainability
• Higher growth in the World of Energy
• An increase in new clients
Covid-19 has been a catalyst for many corporations to improve the resilience
of their supply chains. We are seeing a significant change of focus within our
clients on how they manage their value chains with:
· Better data on what is happening in all parts of the supply chain
· Tighter risk management with razor-sharp business continuity planning
· A more diversified portfolio strategy with tier 1/2/3 suppliers
· A more diversified portfolio strategy regarding factories
· Investments in processes, technology, training, and independent
assurance
Our superior Assurance offering means we are well positioned to help our
clients reduce the intrinsic risks in their operations.
Our clients have also realised that they need to invest more in product and
service innovation to meet the changing needs of their customers. A recent
survey by Capgemini shows that 67% of R&D leaders expect to increase their
R&D investments in 2023. These investments in innovation mean a higher
number of SKUs and a higher number of tests per SKUs - which will be
beneficial for our Testing and Certification solutions.
The other major area of investment inside corporations is of course
sustainability and we are seeing positive momentum with new and emerging
regulation. This means companies will have to re-invent the way they manage
their sustainability agenda with a greater emphasis on independently verified
non-financial disclosures. This is excellent news for our industry leading
Total Sustainability Assurance solutions. Sustainability is the movement of
our time.
The growth opportunities in the World of Energy are truly exciting as the
energy companies are planning higher investments. In 2022 and 2023, we all
witnessed the concerns reflecting energy security, and everyone agrees that
global energy production capacity is an issue that needs to be addressed
quickly to meet the growing demand for energy today. Given the
under-investments in traditional O&G exploration and production in the
last decade and the lack of scale for Renewables, investment for production in
traditional O&G and in Renewables will increase. This is excellent news
for our Caleb Brett and Moody businesses.
We are seeing significant growth in the number of companies globally given the
lower barriers to entry for any brand with e-commerce capabilities. The lack
of Quality Assurance expertise of these young companies is excellent news for
our Global Market Access solutions. Our decentralised Customer 1(st)
organisation has a strong track record of winning new clients.
Intertek AAA Differentiated Growth Strategy
At our Capital Markets event in London last year, we unveiled our Intertek AAA
Differentiated Growth Strategy to capitalise on the best-in-class operating
platform we have built and target the areas where we have opportunities to get
better. Our passionate, innovative, and customer-centric organisation is
energised to take Intertek to greater heights delivering AAA performance for
all stakeholders. We are focused on delivering value consistently, targeting
mid-single digit LFL revenue growth, margin accretion to get back to our 17.5%
peak margin and beyond, and strong cash generation, while pursuing disciplined
investments in attractive growth and margin sectors.
We have made strong progress between 2015 and 2023 delivering sustainable
growth and value for our stakeholders and we are very excited about the
significant growth value opportunity ahead, capitalising on our
Science‐based Customer Excellence TQA advantage.
Our clients understand the mission‐critical nature of Risk‐based Quality
Assurance to make their businesses stronger, operating with higher quality,
safety and sustainability standards. Therefore, we expect the demand for our
ATIC solutions to accelerate post‐Covid.
Our Intertek AAA Differentiated Growth Strategy is about being the best and
creating significant value for every stakeholder every day.
We want to be the most trusted TQA partner for our customers, the employer of
choice with our employees, to demonstrate sustainability excellence everywhere
in our community and deliver significant growth and value for our
shareholders.
To seize the significant growth value opportunity ahead we will be
laser-focused on three strategic priorities and three strategic enablers. Our
Strategic Priorities are defined as Science-based Customer Excellence TQA,
Brand Push & Pull and Winning Innovations, and our three strategic
enablers are based on 10X Purpose-based Engagement, Sustainability Excellence
and Margin Accretive Investments. We will both further improve where we are
already strong and address the areas where we can get better.
Our high‐quality portfolio is poised for faster growth:
• The depth and breadth of our ATIC solutions positions us well to
seize the increased corporate needs for Risk‐based Quality Assurance
• All of our global business lines have plans in place to seize the
exciting growth drivers in each of our divisions
• At the local level, our country‐business mix is strong, with the
majority of our revenues exposed to fast growth segments
• Geographically we have the right exposure to the structural growth
opportunities across our global markets
We have improved our segmental disclosures to provide a deeper understanding
of our ATIC growth drivers in our businesses and we now report revenue,
operating profit and margin in five divisions:
· Consumer Products
· Corporate Assurance
· Health and Safety
· Industry and Infrastructure
· World of Energy
Mid-Single Digit LFL Revenue Growth Target
In terms of LFL revenue growth in the medium to long term, we are targeting
Group mid-single digit LFL revenue growth at constant currency with the
following expectations by division:
· Low- to mid‐single digit in Consumer Products
· High-single digit to double digit in Corporate Assurance
· Mid- to high-single digit in Health and Safety
· Mid- to high-single digit in Industry and Infrastructure
· Low- to mid‐single digit in the World of Energy
Margin Target of 17.5%+
Margin accretive revenue growth is central to the way we deliver value, and we
are confident that over time we will deliver our medium-term margin target of
17.5%+. Our confidence is based on three simple reasons: we have the proven
tools and processes in place, we operate with a span of performance giving us
significant benchmarking opportunity, and we pursue a disciplined accretive
portfolio strategy.
We announced a cost reduction programme last year that targets productivity
opportunities based on operational streamlining and technology upgrade
initiatives. Our cost reduction programme has delivered £13m of savings in
2023, slightly more than our expectation for £7-8m. We expect the programme
to deliver £10m additional savings in 2024.
We have also implemented some price increases and we will continue to do so in
2024.
Accretive Disciplined Capital Allocation
We believe in the value of accretive disciplined capital allocation and pursue
the following priorities:
• Our first priority is to support organic growth through capital
expenditure and investments in working capital (target c5% of revenue in
capex).
• The second priority is to deliver sustainable returns for our
shareholders through the payment of progressive dividends and we have
announced today that we are increasing our targeted dividend payout to circa
65% of earnings from 2024 in recognition of our highly cash generative
earnings model, our strong financial position and the Board's confidence in
the attractive long-term growth prospects for the Group and its ability to
fund continued growth investments.
• The third priority is to pursue M&A activities that strengthen
our portfolio in attractive growth and margin areas, provided we can deliver
good returns.
• And our fourth priority is to maintain an efficient balance sheet
with flexibility to invest in growth. Our leverage target is 1.3x - 1.8x net
debt to EBITDA with the potential to return excess capital to shareholders
subject to our future requirements and prevailing macro environment.
The recent SAI, JLA and CEA acquisitions to scale up our portfolio in
attractive growth and margin sectors are performing well, in line with our
expectations.
Moreover, the integration of the recent acquisitions we made Controle
Analítico and PlayerLync are on track.
We continue to be selective in our M&A approach, focusing on growth and
margin accretive investment opportunities and yesterday we announced the
acquisition of Base Metallurgical Laboratories, a leading provider of
metallurgical testing services for the Minerals sector based in North America
reinforcing and expanding Intertek's ATIC offering in the Minerals Industry.
In addition to M&A, we have continued to strengthen our value proposition
by launching several industry-leading margin accretive innovations.
Sustainability Excellence
Sustainability is the movement of our time and is central to everything we do
at Intertek, anchored in our Purpose, our Vision, our Values and our Strategy.
Sustainability is important to all stakeholders in society who are
consistently demanding faster progress and greater transparency in
sustainability reporting. Companies therefore continuously need to upgrade and
reinvent how they manage their sustainability agenda, particularly with
regards to how they disclose their non-financial performance.
This is why, under our global Total Sustainability Assurance (TSA) programme,
we provide our clients with proven independent, systemic and end-to-end
assurance on all aspects of their sustainability strategies, activities and
operations.
The TSA programme comprises three elements:
• Intertek Operational Sustainability Solutions
• Intertek ESG Assurance
• Intertek Corporate Sustainability Certification
For ourselves at Intertek, we focus on 10 highly demanding TSA sustainability
standards which are truly end-to-end and systemic. In 2023 we made progress:
• Levels of Hazard Observations increased, reflecting greater levels
of activity across our sites as well as greater awareness and reporting of
Health and Safety overall.
• Since 2015, we have used the Net Promoter Score ('NPS') process to
listen to our customers that has enabled us to improve our customer service
over the years consistently.
• We are driving environmental performance across our operations
through science-based reduction targets to 2030. Our rigorous monthly
performance management of climate-related action plans delivered operational
market-based emissions reductions of 11% against 2022 and 37% against our base
year 2019.
• In 2023, our GHG emissions reduction targets were validated by the
SBTi.
• We recognise the importance of employee engagement in driving
sustainable performance for all stakeholders, and we measure employee
engagement against our Intertek ATIC Engagement Index. Our 2023 score was 87
(2022: 80).
• Our voluntary permanent employee turnover improved to a low rate
of 12.3% (2022: 14%).
Outlook 2024
Based on our positive momentum, we expect that the Group will deliver a robust
performance in 2024 with mid-single digit LFL revenue growth at constant
currency, margin progression and a strong free cash flow performance.
Our mid‐single digit LFL revenue growth at constant currency will be driven
by the following contribution from our divisions:
• Consumer Products: Low- to Mid-single digit
• Corporate Assurance: High-single digit
• Health and Safety: Mid-single digit
• Industry and Infrastructure: High-single digit
• World of Energy: Mid-single digit
Our financial guidance for 2024 is that we expect:
• Capital expenditure in the range of £135-145m
• Net finance costs in the £41-43m range
• Effective tax rate in the 25-26% range
• Minority interests of between £23-24m
• Targeted dividend payout ratio to circa 65% from 2024 Interims
• FY24 financial net debt to be in the range of £510-560m
The average sterling exchange rate in the last three months applied to the
full year results of 2023 would reduce our FY revenue and earnings level by
circa 150bps.
Significant Value Growth Opportunity Ahead
We have made strong progress in the last eight years and equally, the value
growth opportunity ahead is significant.
The demand for our strong and differentiated ATIC value proposition is
accelerating.
Our Science-based Customer Excellence TQA advantage and our stronger portfolio
at the global and local level positions us well for faster growth.
Our Intertek AAA Differentiated Growth Strategy will capitalise on the
best-in-class operating platform we have built and target the areas where we
have opportunities to get better.
Our passionate, agile, and high-performance organisation is energised to take
Intertek to greater heights delivering AAA performance for all stakeholders.
We will deliver value consistently, targeting mid-single digit LFL revenue
growth at constant currency, margin accretion, and strong cash generation,
while pursuing disciplined investments in attractive growth and margin ATIC
spaces.
André Lacroix
Chief Executive Officer
Operating Review
For the year ended 31 December 2023
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
2023 2022 Change at actual Change at constant
£m £m rates rates1
Revenue 3,328.7 3,192.9 4.3% 7.1%
Like-for-like revenue2 3,300.9 3,192.9 3.4% 6.2%
Adjusted Operating profit3 551.1 520.1 6.0% 10.9%
Margin3 16.6% 16.3% 30bps 60bps
Net financing costs3 (43.9) (31.9) 37.6% 34.1%
Income tax expense3 (124.8) (128.4) (2.8%) 2.2%
Adjusted Earnings for the period3 361.7 341.8 5.8% 11.2%
Adjusted diluted earnings per share3 223.0p 211.1p 5.6% 11.0%
1. Constant rates are calculated by translating 2022 results at 2023
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 4.3%, with 0.9% growth contributed
by acquisitions, a LFL revenue increase of 6.2% and a decrease of 280bps from
foreign exchange reflecting sterling appreciation against most of the Group's
trading currencies.
The Group's LFL revenue at constant currency consisted of an increase of 1.3%
in Consumer Products, 9.0% in Corporate Assurance, 7.0% in Health and Safety,
7.9% in Industry and Infrastructure and 8.7% in World of Energy.
We delivered adjusted operating profit of £551.1m, up 10.9% at constant
currency and 6.0% at actual rates.
The Group's adjusted operating margin was 16.6%, an increase of 60bps from the
prior year at constant exchange rates and 30bps at actual rates.
Net Financing Costs
Adjusted net financing costs were £43.9m, an increase of £12.0m on 2022
resulting from a combination of higher interest expenses and the impact of
foreign exchange rates. This comprised £3.8m (2022: £2.2m) of finance income
and
£47.7m (2022: £34.1m) of finance expense.
Tax
The adjusted effective tax rate was 24.6%, a decrease of 1.7% on the prior
year (2022: 26.3%). The tax charge, including the impact of SDIs, of £104.2m
(2022: £113.0m), equates to an effective rate of 24.7% (2022: 26.9%), the
decrease mainly driven by the geographical mix of profits.
Earnings per share
Adjusted diluted earnings per share at actual exchange rates was 5.6% higher
at 223.0p (2022: 211.1p). Diluted earnings per share after SDIs was 183.4p
(2022: 178.4p) per share and basic earnings per share after SDIs was 184.4p
(2022: 179.2p).
Dividend
Reflecting the Group's strong cash generation in 2023, the Board recommends a
full year dividend of 111.7p per share, a year-on-year increase of 5.6%.
The full year dividend of 111.7p equates to a total cost of £181.2m or 50% of
adjusted profit attributable to shareholders of the Group for 2023 (2022:
£170.6m and 50%). The dividend is covered 2.0 times by earnings (2022: 2.0
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 2023 comprises amortisation of acquisition intangibles of
£34.2m (2022: £34.8m); acquisition and integration costs relating to
successful, active, or aborted acquisitions of £8.3m (2022: £5.5m); and
restructuring costs of £22.4m (2022: £27.4m).
Details of the SDIs for the twelve months ended 31 December 2023 and the
comparative period are given in note 3 to the Condensed Consolidated Financial
Statements.
Acquisitions and investments
The Group completed two acquisitions in the year (2022: one) with
consideration paid of £40.5m (2022: £65.9m), net of cash acquired of £3.1m
(2022: £13.4m), and further contingent consideration payable of £3.7m.
In March 2023, the Group acquired Controle Analítico Análises Técnicas Ltda
(Controle Analítico), a leading provider of environmental analysis, with a
focus on water testing, based in Brazil.
In August 2023, the Group acquired PlayerLync Holdings, Inc. (PlayerLync), a
leading SaaS-based platform, based in the USA.
The Group invested £116.9m (2022: £116.5m) organically in laboratory
expansions, new technologies and equipment and other facilities. This
investment represented 3.5% of revenue (2022: 3.6%).
Cash flow
The Group's cash performance was strong with free cash flow of £378.4m (2022:
£386.3m), driven by strong cash conversion, the result of disciplined working
capital management. Adjusted cash flow from operations was £749.0m (2022:
£722.0m). Statutory cash flow from operations was £725.9m (2022: £704.1m).
Net cash flows generated from operating activities were £535.0m (2022:
£559.9m), following higher interest and income taxes paid during the year.
Financial position
The Group ended the period in a strong financial position. Financial net debt
was £610.6m, a decrease of £127.3m on 31 December 2022, primarily reflecting
strong cash generation in the business. The undrawn headroom on the Group's
existing committed borrowing facilities at 31 December 2023 was £664.3m
(2022: £707.3m) and cash and cash equivalents were £298.6m (2022: £320.7m),
representing significant total liquidity.
In December 2023, the Group issued EUR€185m of senior notes. The notes were
issued in three tranches with EUR€120m payable on 21 December 2026 at a
fixed annual interest rate of 3.94%, EUR€25m repayable on 21 December 2027
at a fixed annual interest rate of 3.89% and EUR€40m repayable on 21
December 2028 at a fixed annual interest rate of 3.88%.
Total net debt, including the impact of the IFRS 16 lease liability, was
£918.4m (2022: £1,060.1m).
Our financial guidance for 2024 is that we expect:
• Capital expenditure in the range of £135-145m
• Net finance costs of around £41-43m
• Effective tax rate in the 25-26% range
• Minority interests of between £23m and £24m
• Financial net debt at December 2024 of between £510-560m (prior
to any material movements in FX or M&A).
Operating Review by Division
To reflect the value creation drivers identified in the Intertek AAA Growth
Strategy, we have enhanced our segmental disclosures and are reporting our
revenue, operating profit and margin in five divisions: Consumer Products,
Corporate Assurance, Health and Safety, Industry and Infrastructure and World
of Energy.
Revenue Adjusted operating profit
2023 2022 Change at actual rates Change at constant rates 2023 2022 Change at actual rates Change at constant rates
£m £m £m £m
Consumer Products 935.8 964.2 (2.9%) 1.3% 246.8 268.5 (8.1%) (2.6%)
Corporate Assurance 477.5 450.0 6.1% 9.5% 109.4 95.5 14.6% 19.2%
Health and Safety 326.3 302.3 7.9% 9.1% 43.2 40.7 6.1% 9.4%
Industry and Infrastructure 860.5 814.4 5.7% 7.9% 86.1 71.9 19.7% 22.0%
World of Energy 728.6 662.0 10.1% 11.7% 65.6 43.5 50.8% 57.3%
Group 3,328.7 3,192.9 4.3% 7.1% 551.1 520.1 6.0% 10.9%
Revenue LFL Revenue Adjusted operating profit Adjusted operating margin
2023 2022 YoY % YoY % 2023 2022 YoY % YoY % 2023 2022 YoY % YoY % 2023 2022 YoY % YoY %
£M £M (actual rates) (constant rates) £M £M (actual rates) (constant rates) £M £M (actual rates) (constant rates) £M £M (actual rates) (constant rates)
Product 2,072.0 2,024.3 2.4% 5.2% 2,070.0 2,024.3 2.3% 5.0% 447.9 426.9 4.9% 9.5% 21.6% 21.1% 50bps 80bps
Trade 664.0 635.6 4.5% 6.8% 657.5 635.6 3.4% 5.8% 49.6 57.9 (14.3%) (7.6%) 7.5% 9.1% (160bps) (110bps)
Resources 592.7 533.0 11.2% 14.7% 573.4 533.0 7.6% 11.0% 53.6 35.3 51.8% 56.3% 9.0% 6.6% 240bps 240bps
Group 3,328.7 3,192.9 4.3% 7.1% 3,300.9 3,192.9 3.4% 6.2% 551.1 520.1 6.0% 10.9% 16.6% 16.3% 30bps 60bps
Consumer Products Division
2023 2022 Change at actual rates Change at constant rates
£m
£m
935.8 964.2 (2.9%) 1.3%
Revenue
Like-for-like revenue 935.8 964.2 (2.9%) 1.3%
Adjusted operating profit 246.8 268.5 (8.1%) (2.6%)
Adjusted operating margin 26.4% 27.8% (140bps) (100bps)
Intertek Value Proposition
Our Consumer Products division focuses on the ATIC solutions we offer to our
clients to develop and sell better, safer, and more sustainable products to
their own clients. This division was 28% of our revenue in 2023 and includes
the following business lines: Softlines, Hardlines, Electrical/Connected World
and Government and Trade Services (GTS).
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, and healthcare.
Strategy
Our TQA Value Proposition provides a systemic approach to support the Quality
Assurance efforts of our Consumer 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, as well as the import of goods in their
markets, based on acceptable quality and safety standards. Ultimately, we
assist them in getting their products to market quickly and safely, to
continually meet evolving consumer demands.
Innovations
We continue to invest in innovation to deliver a superior customer service in our Consumer Products-related businesses:
Global Market Access
24/7 access to curated and up-to-date compliance information
What it is: Global Market Access is a one-stop digital knowledge portal,
developed to increase regulatory compliance for improved consumer safety and
to protect corporate reputations. Covering 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 - it helps retailers and
manufacturers comply with the regulations in force in different markets across
the world.
Customer benefit: This self-help portal enables compliance and quality
managers to obtain up-to-date regulatory, testing and recall information
tailored to their needs - all in one place, with just a few clicks, instantly.
Currently, we offer four e-services on the portal, including Regulatory Sheet,
Test Plan, Recall Summary and Gap Analysis, all helping our customers bring
their products to global markets more quickly.
Mestre Battery Xcellence Centre
Supporting sustainable transport and energy solutions worldwide
What it is: Our new Battery Xcellence Centre in Mestre, Italy, features the
latest technologies for testing battery and energy storage systems, along with
unrivalled industry expertise. With equipment including battery cyclers,
climatic and salt-spray chambers, anti-fire containers and an altitude test
chamber, the centre meets the testing needs for transportation and storage
safety, functional safety, and performance for a wide range of cells and
battery packs. This state-of-the-art facility in Italy joins our global
network of specialist centres strategically located in key markets including
the USA, China, Taiwan, India, Hong Kong and Europe.
Customer benefit: On the road to net zero, energy storage is increasingly
critical, and this new facility helps customers in Italy and the South Europe
region navigate the rapidly evolving regulatory environment for batteries and
battery-operated products. Our Italian team will support businesses across a
range of sectors - including automotive, transportation, energy and consumer
goods - in taking their products from design to compliance evaluation and
global market access.
Hydrogen Assurance
Expert advisory and assurance solutions for hydrogen-based projects
What it is: Our Hydrogen Assurance platform provides quality, safety and
sustainability assurance across the entire hydrogen value chain, from the
early stages of project feasibility and product design, through hydrogen
production, delivery and storage, to end-use product compliance and
certification. This includes comprehensive testing and certification of
hydrogen refuelling stations and dispensing and compression systems.
Customer benefit: The platform gives our customers access to leading hydrogen
expertise and engineering resources. Its design services help bring products
to market, while electrolyser bankability services ensure projects are
financially viable and sustainable. Combining these with guidance on
regulatory and compliance requirements, Hydrogen Assurance supports the safe
and successful development and execution of hydrogen-based projects.
FY 2023 Performance
In 2023, our Consumer Products-related business reported revenue of £935.8m,
up year-on-year by 1.3% at constant rates but down 2.9% at actual rates. We
delivered operating profit of £246.8m, 2.6% lower year-on-year at constant
currency and down 8.1% year-on-year at actual rates. Margin was 26.4%, down
100bps year-on-year at constant currency, the decrease attributable to the
revenue decline in GTS, and the low-single digit LFL performance in Softlines
and Hardlines.
· Our Softlines business delivered low-single digit LFL revenue growth
benefitting from growth in e-commerce, growth in Risk-based Quality Assurance
and increased investments in end-to-end sustainability.
· Hardlines reported stable LFL revenue benefitting from the growth in
e-commerce, the increased consumer demand for home furniture and toys as well
as the investments of our clients in sustainability.
· With increased ATIC activities driven by greater regulatory standards
in energy efficiency, higher demand for medical devices and 5G investments,
our Electrical & Connected World business delivered mid-single digit LFL
revenue growth.
· Our GTS business provides certification services to governments in
the Middle East and Africa to facilitate the import of goods in their markets,
based on acceptable quality and safety standards. We saw double-digit negative
LFL revenue growth globally as the expansion in the supply chain activities of
our clients in the Middle East and Africa was offset by the impact of the
non-renewal of two contracts in 2022.
2024 growth outlook
In 2024, we expect our Consumer Products division to deliver low- to
mid-single digit LFL revenue growth at constant currency.
Medium- to long-term growth outlook
Our Consumer Products division will benefit from growth in new brands, SKUs
& e-commerce, increased regulation, a greater focus on sustainability,
technology, as well as a growing middle class. We expect low- to mid-single
LFL revenue growth in the medium term at constant currency.
Corporate Assurance Division
2023 2022 Change at actual rates Change at constant rates
£m £m
477.5 450.0 6.1% 9.5%
Revenue
Like-for-like revenue 475.5 450.0 5.7% 9.0%
Adjusted operating profit 109.4 95.5 14.6% 19.2%
Adjusted operating margin 22.9% 21.2% 170bps 190bps
Intertek Value Proposition
Our Corporate Assurance division focuses on the industry agnostic assurance
solutions we offer to our clients to make their value chains more sustainable
and more resilient end-to-end. This division was 14% of our revenue in 2023
and includes Business Assurance and Assuris.
Strategy
Business Assurance and Assuris are central to our ATIC offering and are some
of the most exciting businesses within Intertek, given the increased focus on
operational risk management within the value chain of every company. Intertek
Business Assurance provides a full range of business process audit and support
services, including accredited third-party management systems auditing and
certification, second-party supplier auditing and supply chain solutions,
sustainability data verification, process performance analysis and training.
Assuris' global network of experts provides a global network of scientists,
engineers, and regulatory specialists to provide support to navigate complex
scientific, regulatory, environmental, health, safety, and quality challenges
throughout the value chain of our clients.
Innovations and M&A
We continue to invest in ATIC innovations to deliver a superior customer
service in our Corporate Assurance related businesses:
Intertek Inlight
Enhancing supply chain risk management and brand protection
What it is: Intertek Inlight is a comprehensive platform designed to help
organisations gain a deeper understanding of their supply chain risks and
sustainability. Leveraging Intertek's status as having the largest network of
compliance auditors worldwide, Inlight offers a customisable assurance
platform. It utilises data from over 100,000 annual audits and integrates
Intertek's real-time risk analysis capabilities.
Customer benefit: The platform provides reliable information about suppliers'
capabilities and compliance levels, coupled with tools for the early detection
of potential risks. This functionality enables companies to develop a clear
visibility and transparency of their supply chains, create detailed risk
profiles for their suppliers, and make more informed decisions. Inlight is an
invaluable tool for businesses aiming to protect their brand integrity,
ensuring that they are working with compliant and sustainable suppliers. By
offering insights into supply chain dynamics, Inlight empowers companies to
navigate complex global supply networks with confidence and foresight.
Green R&D
Balancing sustainability, safety and quality
What it is: Green R&D is a science-driven solution that offers
comprehensive insights into product development, focusing on safety, quality
and sustainability. It encompasses detailed performance testing, analysis,
regulatory compliance and environmental assessments, providing a holistic view
of a product's journey.
Customer benefit: The key benefit for customers lies in the growing demand for
eco-friendly products. Today's consumers are increasingly conscious about the
environmental impact of their purchases. Green R&D services enable
companies to respond to this shift by ensuring their products are developed
with minimal environmental impact. This approach helps companies mitigate
risks and protect their brand reputation by achieving an optimal balance
between product quality, safety and performance, while adhering to
environmental standards. It offers a strategic advantage in a marketplace
where ecological considerations are becoming increasingly pivotal.
PlayerLync
Enhancing our People Assurance offering
What it is: PlayerLync is a leading SaaS-based platform which combines mobile
content management, operational and compliance support in a single native app.
In 2023, the platform became part of Intertek's People Assurance business,
building on our earlier pioneering acquisition of Alchemy/Wisetail by adding
robust mobile content management, communication and offline synchronisation
capabilities.
Customer benefit: With approximately 80% of the global workforce operating in
deskless roles today, the demand for bespoke People Assurance solutions and
mobile-based learning delivered at the point of need continues to grow, driven
by increasing regulation and heightened end-customer expectations.
Software-based technology solutions that offer mobile training, learning and
development content are therefore becoming ever more important, and the
combination of Wisetail and PlayerLync is exceptionally well-placed to meet
those needs.
2023 Performance
In 2023, our Corporate Assurance-related business delivered revenue of
£477.5m, up year-on-year by 9.5% at constant currency and 6.1% at actual
rates. LFL revenue growth was 9.0% at constant currency. Operating profit was
£109.4m, up 19.2% year-on-year at constant currency and up 14.6% at actual
rates with a margin of 22.9%, 190bps higher year-on-year at constant currency,
as we benefitted from operating leverage and productivity gains.
· Business Assurance delivered double-digit LFL revenue growth as the
business saw increased investments by our clients to improve the resilience of
their supply chains, the continuous focus on ethical supply and the increased
need for sustainability assurance.
· The Assuris business delivered stable LFL revenue as we benefitted
from improved demand for our regulatory assurance solutions and from increased
corporate investments in ESG.
2024 growth outlook
In 2024, we expect our Corporate Assurance division to deliver high-single
digit LFL revenue growth at constant currency.
Medium- to long-term growth outlook
Our Corporate Assurance division will benefit from a greater corporate focus
on sustainability, the need for increased supply chain resilience, enterprise
cyber-security, People Assurance services and regulatory assurance. We expect
high-single to double digit LFL revenue growth in the medium term at constant
currency.
Health and Safety Division
2023 2022 Change at actual rates Change at constant rates
£m
£m
326.3 302.3 7.9% 9.1%
Revenue
Like-for-like revenue 319.9 302.3 5.8% 7.0%
Adjusted operating profit 43.2 40.7 6.1% 9.4%
Adjusted operating margin 13.2% 13.5% (30bps) -
Intertek Value Proposition
Our Health and Safety division focuses on the ATIC solutions we offer to our
clients to make sure we all enjoy a healthier and safer life. This division
was 10% of our revenue in 2023 and includes our AgriWorld, Food, and Chemical
& Pharma business lines.
Strategy
Our TQA value proposition provides our Health and Safety-related customers
with a systemic, end-to-end ATIC offering at every stage of the supply chain.
In an industry with significant structural growth drivers, our science-based
approach supports clients as the sustained demand for food safety testing
activities increases along with higher demand for hygiene and safety audits in
factories. Our longstanding experience and expertise in the Chemicals and
Pharma industries enables clients to mitigate risks associated with product
quality and safety and processes, supporting them with their product
development, regulatory authorisation, chemical testing and production.
Innovations and M&A
We continue to invest in innovation to deliver a superior customer service in
our Health and Safety related businesses:
Intertek and World Coffee Research
Enhancing Arabica coffee research through collaborative partnership
What it is: Our AgriTech team is collaborating with World Coffee Research
('WCR'), a leading non-profit organisation focused on improving the future of
the coffee industry. We are contributing to WCR's innovative open-access
database, which contains crucial genetic information on Arabica coffee. Our
role involves providing specialised training in sampling techniques,
performing DNA extraction, offering genotyping services and delivering
comprehensive technical support.
Customer benefit: This collaboration offers significant benefits to the coffee
community, including researchers, farmers and industry professionals. The
availability of a centralised and accessible genetic database is set to
transform the field of coffee research. It simplifies the process of
identifying and authenticating coffee varieties, leading to substantial cost
reductions. Our partnership with WCR not only aids in advancing agricultural
technology but also helps in lowering quality control expenses, thereby
contributing to the cultivation of higher-quality coffee plants. This
initiative represents a major step forward in ensuring the sustainability and
quality of the coffee industry.
Crystek
Innovating to predict and prevent honey crystallisation
What it is: Crystek, developed by Intertek, provides services to evaluate and
estimate a honey sample's tendency to crystallise, as well as to advise on and
improve the quality of the honey and its production.
Customer benefit: Honey crystallisation is a natural phenomenon where honey
turns from liquid to a semi-solid state. The start of this natural process
depends on the honey's characteristics and the production process. Intertek
has developed a physical instrument that can be used to understand which part
- characteristics or production - has the biggest impact on crystallisation,
with experts available to support on-site or remotely. Intertek is one of the
world-leading experts in the analysis of honey and hive products. The
combination of Crystek and our unique expertise allows us to help
manufacturers develop the best process to prevent crystallisation from taking
place.
Controle Analítico
Intertek enhances presence in attractive environmental testing market
What it is: Controle Analítico is a leading provider of environmental
analysis, with a focus on drinking and waste water, soil, and waste testing,
based in Brazil. With heightened societal awareness around environmental
health and sustainability, and population growth placing greater demand on
critical infrastructure, broadening access to sanitation and clean water
services has become increasingly important for stakeholders around the world.
Customer benefit: In Brazil, legislation aimed at providing at least 99% of
the population with safe drinking water and 90% of all in-country households
with sanitation services by the year 2033 is expected to require approximately
US$128 billion of investment this decade. The acquisition of Controle
Analítico in April 2023 complemented Intertek's leading Food and Agri Total
Quality Assurance solutions in Brazil, expanding our presence and providing a
wider and much-needed service offering in the Environmental testing market.
2023 Performance
In 2023, our Health and Safety-related business reported revenue of £326.3m,
up year-on-year by 9.1% at constant currency and by 7.9% at actual rates. LFL
revenue growth was 7.0% at constant currency. Operating profit of £43.2m was
up 9.4% year-on-year at constant currency and 6.1% at actual rates. Due to
country-mix effect in AgriWorld and investments in capability in Chemicals
& Pharma, margin of 13.2% was flat year-on-year at constant currency.
· 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. We continue to see an increase in demand for
inspection activities driven by sustained growth in the global food industry.
· Our Food business registered high-single digit LFL revenue growth
globally resulting from increased demand for food safety testing activities
and hygiene and safety audits in factories.
· In Chemicals and Pharma we saw high-single digit LFL revenue growth
globally reflecting improved demand for regulatory assurance and chemical
testing and from the increased R&D investments of the pharma industry.
2024 growth outlook
In 2024, we expect our Health and Safety division to deliver mid-single digit
LFL revenue growth.
Medium- to long-term growth outlook
Our Health and Safety division will benefit from the demand for healthier and
more sustainable food to support a growing global population, increased
regulation, and new R&D investments in the pharma industry. We expect
mid- to high-single digit LFL revenue growth in the medium term at constant
currency.
Industry and Infrastructure Division
2023 2022 Change at actual rates Change at constant rates
£m
£m
860.5 814.4 5.7% 7.9%
Revenue
Like-for-like revenue 860.5 814.4 5.7% 7.9%
Adjusted operating profit 86.1 71.9 19.7% 22.0%
Adjusted operating margin 10.0% 8.8% 120bps 110bps
Intertek Value Proposition
Our Industry and Infrastructure division focusses on the ATIC solutions our
clients need to develop and build better, safer and greener infrastructure.
This division was 26% of our revenue in 2023 and includes Industry Services,
Minerals and Building & Construction.
Strategy
Our TQA value proposition helps our customers to mitigate the risks associated
with technical failure or delay, ensuring that their projects proceed on time
and meet the highest quality standards as demand for more environmentally
friendly buildings and infrastructure grows. By helping to improve safety
conditions and reduce commercial risk, our broad range of assurance, testing,
inspection, certification and engineering services allows us to assist clients
in protecting both the quantity and quality of their mined and drilled
products.
Innovations
We continue to invest in innovation to deliver a superior customer service in
our Industry and Infrastructure related businesses:
Intertek Aware
Improving the safety, efficiency and performance of complex equipment
What it is: Developed through Intertek Industry Services, Intertek Aware is a
Digital Twin offering which integrates data from IoT sensors, robotic feedback
and powerful software, fuelled by analytics, to create an accurate visual
replica of your industrial world. The software empowers energy asset owners
and operators to improve reliability, increase safety, estimate remaining
useful life and manage inspection data, as well as helps to reduce costs.
Customer benefit: Aware harnesses online and offline data to fuel smarter
decisions on operations, maintenance, outages and inspections. The software
helps to avoid forced outages, visualises problem areas and tracks risk-based
inspections, failures and repairs. It also helps to meet code compliance
requirements with faster, standardised documentation.
MiQ
Helping energy producers minimise methane emissions
What it is: MiQ is a leading certification standard for methane emissions. As
an accredited MiQ auditor, Intertek independently certifies natural gas
extraction and production facilities (onshore and offshore), using data-led
grading to identify gas with higher or lower emissions. To provide a grade for
a producer or facility, we evaluate methane intensity, company practices and
monitoring technology.
Customer benefit: While reducing greenhouse gas emissions focuses on CO(2),
there is increasing awareness that methane is 80 times more potent in its
first 20 years, so reducing it can have a much greater immediate effect on
managing climate change. By providing grades that enable producers to
differentiate their natural gas, MiQ certification promotes incentives for
cutting methane emissions.
PhotonAssay
Enhancing efficiency and sustainability in West African gold testing
What it is: PhotonAssay is a revolutionary analytical technique, heralding a
new era of speed, accuracy and safety in gold analysis. We have introduced the
technology at our minerals laboratory in Tarkwa, Ghana, which is central to
our decades-long support for the West African mining industry. Unlike
traditional methods, PhotonAssay employs high-intensity X-rays to excite gold
atoms, producing unique gamma-ray signatures, which are then measured to
determine gold content.
Customer benefit: The innovative technology delivers accurate results in a
fraction of the time taken by conventional methods. It also significantly
reduces the use of hazardous chemicals, minimising the environmental impact of
testing procedures. The PhotonAssay unit's ability to deliver rapid, accurate
and environmentally conscious results will assist to improve the
sustainability of our clients' operations and contribute to the region's
overall economic growth.
Intertek Moody
Leveraging a legacy of engineering-based excellence
What it is: The Moody legacy is synonymous with engineering-based technical
assurance. Building on a more than 100-year history, that foundational
heritage of experience and expertise was reignited with the return of the
Intertek Moody brand. Bringing back the brand not only harnesses its
industry-leading recognition and honours one of Intertek's founding pioneers,
but also reinforces the strength and stability forged by the storied Moody
legacy that still drives our global expertise, pioneering industry innovations
and local presence.
Customer benefit: As industries strive to meet growing global energy and
infrastructure demands, the need for quality, safety and reliability is
paramount. Delivering in-depth expertise and local knowledge on a global
scale, Intertek Moody has a history of being where our customers need us,
across the entire supply chain and all stages of a project's life cycle. Our
first-class proactive and valued solutions, such as inspection, expediting and
project management assistance help reduce risks, increase quality, optimise
efficiency and improve safety.
2023 Performance
In 2023, our Industry & Infrastructure-related business delivered revenue
of £860.5m, up 7.9% at constant currency and up 5.7% at actual rates.
Operating profit of £86.1m was up 22.0% year-on-year at constant currency and
up 19.7% year-on-year at actual rates. Margin improved by 110bps
year-on-year at constant currency to 10.0% as we benefitted from operating
leverage and productivity gains.
· Industry Services includes our Capex Inspection services and Opex
Maintenance services and delivered double-digit LFL revenue growth as we
benefitted from increased capex investment in traditional Oil and Gas
exploration and production as well as in renewables.
· The continuing high demand for testing and inspection activities
drove high-single digit LFL revenue growth in our Minerals business.
· Growing demand for more environmentally friendly buildings and the
increased number of infrastructure projects in North America produced
mid-single digit LFL revenue growth for our Building & Construction
business.
2024 growth outlook
In 2024, we expect our Industry and Infrastructure division to deliver
high-single digit LFL revenue growth at constant currency.
Medium- to long-term growth outlook
The Industry and Infrastructure division will benefit from increased
investment from energy companies to meet growing demand and consumption of
energy from the growing global population, the scaling up of Renewables,
increase R&D investments that OEMs are making in EV/Hybrid vehicles and
from the development of greener fuels. We expect mid- to high-single digit
LFL revenue growth in the medium term at constant currency.
World of Energy Division
2023 2022 Change at actual rates Change at constant rates
£m
£m
728.6 662.0 10.1% 11.7%
Revenue
Like-for-like revenue 709.2 662.0 7.1% 8.7%
Adjusted operating profit 65.6 43.5 50.8% 57.3%
Adjusted operating margin 9.0% 6.6% 240bps 260bps
Intertek Value Proposition
Our World of Energy division focuses on the ATIC solutions we offer to our
clients to develop better and greener fuels as well as renewables. This
division was 22% of our revenue in 2023 and includes Caleb Brett,
Transportation Technologies (TT) and Clean Energy Associates (CEA).
Strategy
Our TQA Value Proposition provides world leading expertise to enable our
clients to benefit from the significant opportunities in the World of Energy.
We do this by providing specialist cargo inspection, analytical assessment,
calibration and related research and technical services to the world's
petroleum and biofuels industries.
We provide rapid testing and validation services to the transportation
industry, leveraging our Transportation Technologies subject matter expertise
that is recognised by leading manufacturers worldwide. We evaluate everything
from automobiles and energy storage to airplanes, and deliver top-tier testing
for emerging markets, such as autonomous and electric/hybrid vehicles.
Our partner firm Clean Energy Associates (CEA) is a market-leading provider of
Quality Assurance (QA), supply-chain traceability and technical services to
the fast-growing solar energy sector. Its leading assurance service offering
includes in-line monitoring that allows clients to oversee the management and
traceability of their supply chains, offering a comprehensive, end-to-end
service to support customers on their decarbonisation and energy
sustainability journeys.
Innovations
We continue to invest in innovation to deliver a superior customer service in
our World of Energy related businesses:
Intertek and Zero Petroleum
Pioneering the future of synthetic, carbon-neutral fuels
What it is: Intertek is collaborating with Zero Petroleum, an innovative
energy company at the forefront of developing synthetic, carbon-neutral
alternatives to traditional fossil fuels. Our role is vital in this
partnership, as we are responsible for thoroughly assessing the composition
and emissions of these synthetic fuels and verifying their compliance with
stringent industry standards and regulatory requirements.
Benefits: The overall benefits of Zero synthetic fuels are substantial in the
context of the global energy transition. These efuels, uniquely created from
air and water, offer potentially unlimited scale and represent a significant
advancement in moving towards cleaner, more sustainable energy sources.
Designed to directly replace conventional petroleum-based fuels, they are
applicable across various sectors, including transportation, aviation and
agriculture. A key advantage of Zero synthetic fuels is their compatibility
with existing engines, allowing for seamless integration without the necessity
for any modifications or adaptations. This compatibility underscores the
potential of Zero synthetic fuels to significantly contribute to reducing
carbon emissions and advancing environmental sustainability.
Electrification Centre of Excellence
Supporting the move towards electric mobility
What it is: Strategically located near Detroit in the epicentre of the
automotive industry, our Electrification Centre of Excellence in Plymouth,
Michigan, offers some of the most extensive testing capabilities in North
America for electric vehicle batteries and supply equipment. Through
science-based Total Quality Assurance solutions, this facility plays a crucial
role in supporting manufacturers in the transition to greener transport.
Customer benefit: With sales of electric vehicles growing rapidly, our
Electrification Centre of Excellence helps meet the automotive industry's
increasing need for regulatory support and safety and validation testing. As
electrification technologies continue to advance, the facility will support
the safety, performance and functionality of electric vehicles, battery packs,
charging systems and their related components.
2023 performance
In 2023, our World of Energy-related business delivered revenue of £728.6m,
up year-on-year by 11.7% at constant currency and 10.1% at actual rates. LFL
revenue growth was 8.7% at constant currency. Operating profit of £65.6m was
up 57.3% at constant currency and 50.8% at actual rates with margin improving
by 260bps at constant currency to 9.0%, as we benefitted from operating
leverage, productivity gains and portfolio mix.
• Caleb Brett, the global leader in the Crude Oil and Refined
products global trading markets, benefitted from improved momentum driven by
increased global mobility and higher testing activities for biofuels with
high-single digit LFL revenue growth.
• Transportation Technologies delivered mid-single digit LFL revenue
growth globally driven by increased investment in new powertrains to lower
CO(2)/NOx emissions and in traditional combustion engines to improve fuel
efficiency.
• Our CEA business delivered double digit LFL revenue growth,
benefiting from the increased investments in solar panels which is the fastest
growing form of renewable energy.
2024 growth outlook
In 2024, we expect our World of Energy division to deliver mid-single digit
LFL revenue growth at constant currency.
Medium- to long-term growth outlook
The World of Energy division will benefit from increased investment from
energy companies to meet growing demand and consumption of energy from the
growing global population, the scaling up Renewables, increase R&D
investments that OEMs are making in EV/Hybrid vehicles and from the
development greener fuels. We expect low- to mid-single digit LFL revenue
growth in the medium term at constant currency.
Presentation of Results
For the year ended 31 December 2023
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 2022 results at 2023 exchange rates.
Separately Disclosed Items
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.
Details of the SDIs for the twelve months ended 31 December 2023 and the
comparative period are given in note 3 to the Condensed Consolidated Financial
Statements.
Reconciliation of Results to Adjusted Performance Measures (£m)
2023 2023 2023 2022 2022 2022
Reported SDIs Adjusted Reported SDIs Adjusted
Operating profit 486.2 64.9 551.1 452.4 67.7 520.1
Operating margin 14.6% 2.0% 16.6% 14.2% 2.1% 16.3%
Net financing costs (63.9) 20.0 (43.9) (32.6) 0.7 (31.9)
Profit before tax 422.3 84.9 507.2 419.8 68.4 488.2
Income tax expense (104.2) (20.6) (124.8) (113.0) (15.4) (128.4)
Profit for the year 318.1 64.3 382.4 306.8 53.0 359.8
Cash flow from operations 725.9 23.1 749.0 704.1 17.9 722.0
Cash flow from operations less net capex 619.4 23.1 642.5 591.8 17.9 609.7
Free cash flow 355.3 23.1 378.4 368.4 17.9 386.3
Basic earnings per share 184.4p 39.8p 224.2p 179.2p 32.8p 212.0p
Diluted earnings per share 183.4p 39.6p 223.0p 178.4p 32.7p 211.1p
2023 2022 Change
Reconciliation of revenue £m £m %
Reported revenue 3,328.7 3,192.9 4.3
Less: Acquisitions / disposals / closures (27.8) -
Like-for-like revenue 3,300.9 3,192.9 3.4
Impact of foreign exchange movements - (83.9)
Like-for-like revenue at constant currency 3,300.9 3,109.0 6.2
Reconciliation of financial net debt for adjusted EBITDA (£m)
2023 2022
Net debt (918.4) (1,060.1)
IFRS 16 lease liability 307.8 322.2
Financial net debt (610.6) (737.9)
Reported operating profit 486.2 452.4
Depreciation 156.0 160.2
Amortisation 19.3 20.3
EBITDA 661.5 632.9
SDIs 64.9 67.7
Adjusted EBITDA 726.4 700.6
Financial net debt / adjusted EBITDA 0.8x 1.1x
2023 2022 Change
Constant currency reconciliations £m £m %
Adjusted operating profit at actual rates 551.1 520.1 6.0
Impact of foreign exchange movements - (23.1)
Adjusted operating profit at constant rates 551.1 497.0 10.9
Adjusted diluted EPS at actual rates 223.0p 211.1p 5.6
Impact of foreign exchange movements - (10.2)p
Adjusted diluted EPS at constant rates 223.0p 200.9p 11.0
Diluted EPS at actual rates 183.4p 178.4p 2.8
Impact of foreign exchange movements - (10.5)p
Diluted EPS at constant rates 183.4p 167.9p 9.2
Full Year Report
If you require a printed copy of this statement, please contact the Group
Company Secretary. This statement is also 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 2023
2023 2022
Separately Disclosed Separately Disclosed
Adjusted Results Items* Total 2023 Adjusted results Items* Total 2022
Notes £m £m £m £m £m £m
Revenue 2 3,328.7 - 3,328.7 3,192.9 - 3,192.9
Operating costs (2,777.6) (64.9) (2,842.5) (2,672.8) (67.7) (2,740.5)
Group operating profit/(loss) 2 551.1 (64.9) 486.2 520.1 (67.7) 452.4
Finance income 3.8 - 3.8 2.2 - 2.2
Finance expense (47.7) (20.0) (67.7) (34.1) (0.7) (34.8)
Net financing costs (43.9) (20.0) (63.9) (31.9) (0.7) (32.6)
Profit/(loss) before income tax 507.2 (84.9) 422.3 488.2 (68.4) 419.8
Income tax (expense)/credit (124.8) 20.6 (104.2) (128.4) 15.4 (113.0)
Profit/(loss) for the year 2 382.4 (64.3) 318.1 359.8 (53.0) 306.8
Attributable to:
Equity holders of the Company 361.7 (64.3) 297.4 341.8 (53.0) 288.8
Non-controlling interest 20.7 - 20.7 18.0 - 18.0
Profit/(loss) for the year 382.4 (64.3) 318.1 359.8 (53.0) 306.8
Earnings per share
Basic 4 224.2p 184.4p 212.0p 179.2p
Diluted 4 223.0p 183.4p 211.1p 178.4p
Dividends in respect of the year 111.7p 105.8p
* See note 3.
Condensed Consolidated Statement of Comprehensive Income
For the year ended 31 December 2023
2023 2022
Notes £m £m
Profit for the year 2 318.1 306.8
Other comprehensive (expense)/income
Remeasurements on defined benefit pension schemes 5 (2.6) 17.4
Tax on comprehensive income/(expense) items 3.0 (4.3)
Items that will never be reclassified to profit or loss 0.4 13.1
Foreign exchange translation differences of foreign operations (147.1) 181.5
Net exchange gain/(loss) on hedges of net investments in foreign operations 58.8 (120.0)
Loss on fair value of cash flow hedges (0.1) -
Items that are or may be reclassified subsequently to profit or loss (88.4) 61.5
Total other comprehensive (expense)/income for the year (88.0) 74.6
Total comprehensive income for the year 230.1 381.4
Total comprehensive income for the period attributable to:
Equity holders of the Company 211.6 363.1
Non-controlling interest 18.5 18.3
Total comprehensive income for the year 230.1 381.4
Condensed Consolidated Statement of Financial Position
As at 31 December 2023
2023 2022
£m £m
Notes
Assets
Property, plant and equipment 8 669.6 694.4
Goodwill 7 1,385.8 1,418.4
Other intangible assets 330.9 362.9
Trade and other receivables 21.8 21.5
Defined benefit pension asset 5 21.8 21.3
Deferred tax assets 36.4 45.0
Total non-current assets 2,466.3 2,563.5
Inventories* 17.2 16.9
Trade and other receivables* 725.1 726.4
Cash and cash equivalents 6 299.3 321.6
Current tax receivable 30.0 31.9
Total current assets 1,071.6 1,096.8
Total assets 3,537.9 3,660.3
Liabilities
Interest bearing loans and borrowings 6 (97.5) (262.4)
Current taxes payable (60.5) (71.0)
Lease liabilities (69.9) (70.6)
Trade and other payables* (735.6) (723.2)
Provisions* (18.0) (15.8)
Total current liabilities (981.5) (1,143.0)
Interest bearing loans and borrowings 6 (812.4) (797.1)
Lease liabilities (237.9) (251.6)
Deferred tax liabilities (75.3) (99.2)
Defined benefit pension liabilities 5 (4.8) (2.2)
Other payables* (30.1) (34.6)
Provisions* (35.8) (14.6)
Total non-current liabilities (1,196.3) (1,199.3)
Total liabilities (2,177.8) (2,342.3)
Net assets 1,360.1 1,318.0
Equity
Share capital 1.6 1.6
Share premium 257.8 257.8
Other reserves (127.5) (41.3)
Retained earnings 1,191.5 1,065.9
Total equity attributable to equity holders of the Company 1,323.4 1,284.0
Non-controlling interest 36.7 34.0
Total equity 1,360.1 1,318.0
* Working capital of negative £78.8m (2022: negative £47.8m) comprises the
asterisked items in the above Statement of Financial Position less IFRS16
lease receivable of £1.6m (2022: £2.9m).
Condensed Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
Attributable to equity holders of the Company
Other Reserves
Share capital Share premium Translation Other Retained earnings Total before Non- controlling interest Total equity
reserve non- controlling interest
£m £m £m £m £m £m £m £m
At 1 January 2022 1.6 257.8 (108.9) 6.4 925.1 1,082.0 32.3 1,114.3
Total comprehensive income/(expense)
for the period
Profit - - - - 288.8 288.8 18.0 306.8
Other comprehensive income - - 61.2 - 13.1 74.3 0.3 74.6
Total comprehensive income
for the year - - 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
IFRS16 effects of deferred tax rate - - - - (1.3) (1.3) - (1.3)
Change
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
At 1 January 2023 1.6 257.8 (47.7) 6.4 1,065.9 1,284.0 34.0 1,318.0
Total comprehensive (expense)/income
for the period
Profit - - - - 297.4 297.4 20.7 318.1
Other comprehensive (expense)/income - - (86.1) (0.1) 0.4 (85.8) (2.2) (88.0)
Total comprehensive (expense)/income
for the year - - (86.1) (0.1) 297.8 211.6 18.5 230.1
Transactions with owners of the
company recognised directly in equity
Contributions by and distributions to the
owners of the company
Dividends paid - - - - (176.3) (176.3) (15.1) (191.4)
Adjustment arising from changes in non- - - - - - - (0.7) (0.7)
controlling interest
Purchase of own shares - - - - (11.6) (11.6) - (11.6)
Tax paid on share awards vested(1) - - - - (5.6) (5.6) - (5.6)
Equity-settled transactions - - - - 21.2 21.2 - 21.2
Income tax on equity-settled transactions - - - - 0.1 0.1 - 0.1
Total contributions by and distributions to the owners of the company
- - - - (172.2) (172.2) (15.8) (188.0)
At 31 December 2023 1.6 257.8 (133.8) 6.3 1,191.5 1,323.4 36.7 1,360.1
(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 15 June 2023 represented a final dividend of
71.6p per ordinary share in respect of the year ended 31 December 2022. 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. 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 2023
2023 2022
Notes £m £m
Cash flows from operating activities
Profit for the year 2 318.1 306.8
Adjustments for:
Depreciation charge 156.0 160.2
Amortisation of software 19.3 20.3
Amortisation of acquisition intangibles 34.2 34.8
Impairment of goodwill and other assets 2.6 15.3
Equity-settled transactions 21.2 17.5
Net financing costs 63.9 32.6
Income tax expense 104.2 113.0
Profit on disposal of property, plant, equipment and software (3.2) (0.4)
Operating cash flows before changes in working capital and operating 716.3 700.1
Provisions
Change in inventories (1.2) (0.8)
Change in trade and other receivables (41.2) (54.3)
Change in trade and other payables 47.7 61.1
Change in provisions 4.3 -
Special contributions into pension schemes - (2.0)
Cash generated from operations 725.9 704.1
Interest and other finance expense paid (71.9) (37.5)
Income taxes paid (119.0) (106.7)
Net cash flows generated from operating activities* 535.0 559.9
Cash flows from investing activities
Proceeds from sale of property, plant, equipment and software* 11.5 4.2
Interest received* 3.5 2.2
Acquisition of subsidiaries, net of cash received (40.5) (63.2)
Consideration paid in respect of prior year acquisitions (2.7) -
Acquisition of property, plant, equipment, software* 8 (116.9) (116.5)
Net cash flows used in investing activities (145.1) (173.3)
Cash flows from financing activities
Purchase of own shares (11.6) (2.3)
Tax paid on share awards vested (5.6) (4.4)
Drawdown of borrowings 160.5 477.2
Repayment of borrowings (249.6) (536.8)
Repayment of lease liabilities* (77.8) (81.4)
Purchase of non-controlling interest (0.7) -
Dividends paid to non-controlling interest (15.1) (16.6)
Equity dividends paid (176.3) (170.6)
Net cash flows generated from/(used in) financing activities (376.2) (334.9)
Net increase in cash and cash equivalents 6 13.7 51.7
Cash and cash equivalents at 1 January 6 320.7 264.0
Effect of exchange rate fluctuations on cash held 6 (35.8) 5.0
Cash and cash equivalents at 31 December 6 298.6 320.7
* Free cash flow of £355.3m (2022: £368.4m) comprises the asterisked items
in the above Statement of Cash Flows.
Adjusted cash flow from operations of £749.0m (2022: £722.0m) comprises
statutory cash generated from operations of £725.9m (2022: £704.1m) before
cash outflows relating to Separately Disclosed Items of £23.1m (2022:
£17.9m).
Notes to the Condensed Consolidated Financial Statements
1. Basis of preparation
Reporting entity
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 December 2023 and 2022 but is
derived from the 2023 accounts. A full copy of the 2023 Annual Report and
Accounts will be available online at www.intertek.com
(http://www.intertek.com/) in March 2024. Statutory accounts for 2022 have
been delivered to the Registrar of Companies, and those for 2023 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.
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); and
· 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.
The Board has reviewed the Group's financial forecasts up to 31 December 2025
to assess both liquidity requirements and debt covenants.
In addition, the Group's financial forecasts for 2024 and 2025, 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 2023 was £664.3m (2022: £707.3m). The maturity of our borrowing
facilities is disclosed in Note 14 of the financial statements with repayment
of two senior notes totalling US$125m required by 31 December 2024. 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 2025, both base case and severe
yet plausible 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 2023 2022 2023 2022
US dollar 1.28 1.20 1.24 1.24
Euro 1.15 1.13 1.15 1.17
Chinese renminbi 9.14 8.45 8.81 8.31
Hong Kong dollar 10.00 9.37 9.71 9.68
Australian dollar 1.87 1.78 1.87 1.78
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 five segments, 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 five segments 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 five segments are allocated
appropriately. A description of the activity in each segment is given in the
Operating Review by Division.
The results of the segments are shown below:
For the year ended 31 December 2023 Revenue from Depreciation and Adjusted operating
external customers software amortisation profit
£m £m £m
Separately Operating
Disclosed Items profit
£m £m
Consumer Products 935.8 (55.4) 246.8 (15.1) 231.7
Corporate Assurance 477.5 (14.0) 109.4 (26.2) 83.2
Health and Safety 326.3 (21.7) 43.2 (4.9) 38.3
Industry and Infrastructure 860.5 (32.3) 86.1 (9.5) 76.6
World of Energy 728.6 (51.9) 65.6 (9.2) 56.4
Total 3,328.7 (175.3) 551.1 (64.9) 486.2
Group operating profit 551.1 (64.9) 486.2
Net financing costs (43.9) (20.0) (63.9)
Profit before income tax 507.2 (84.9) 422.3
Income tax (expense)/credit (124.8) 20.6 (104.2)
Profit for the year 382.4 (64.3) 318.1
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
Consumer Products 964.2 (58.0) 268.5 (11.0) 257.5
Corporate Assurance 450.0 (12.1) 95.5 (26.4) 69.1
Health and Safety 302.3 (22.2) 40.7 (6.2) 34.5
Industry and Infrastructure 814.4 (33.6) 71.9 (11.9) 60.0
World of Energy 662.0 (54.6) 43.5 (12.2) 31.3
Total 3,192.9 (180.5) 520.1 (67.7) 452.4
Group operating profit 520.1 (67.7) 452.4
Net financing costs (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
3. Separately Disclosed Items (SDIs)
2023 2022
£m £m
Operating costs
Amortisation of acquisition intangibles (a) (34.2) (34.8)
Acquisition and integration costs (b) (8.3) (5.5)
Restructuring costs (c) (22.4) (27.4)
Total operating costs (64.9) (67.7)
Net financing costs (d) (20.0) (0.7)
Total before income tax (84.9) (68.4)
Income tax credit on Separately Disclosed Items (e) 20.6 15.4
Total (64.3) (53.0)
Refer to the Presentation of Results section for further details on SDIs
(a) Of the amortisation of acquisition intangibles in the current period,
£0.4m relates to the customer relationships acquired with the purchase of
Controle Analítico Análises Técnicas Ltda and £0.3m relates to the
customer relationships, trade names and technology acquired with the purchased
of PlayerLync Holdings, Inc. in 2023.
(b) Acquisition and integration costs comprise £4.7m (2022: £1.8m) for
transaction and integration costs in respect of successful, active and aborted
acquisitions in the current year, and £3.6m in respect of prior-years'
acquisitions (2022: £3.7m).
(c) During 2022, the Group initiated the first year of a cost reduction
programme. In 2023, costs of £22.4m (2022: £27.4m) were associated with
operational streamlining which included consolidating sites and offices,
streamlining headcount and related asset write-offs.
(d) Net financing costs of £20.0m (2022: £0.7) relate to the unwinding of
discount and changes in the fair value of contingent consideration in relation
to acquisitions. The increase in fair value of contingent consideration
predominantly relates to the CEA acquisition made in 2022, with strong EBITDA
performance during the year driving an increase in the expected amount payable
in 2024.
(e) Income tax Credit on SDIs totalled £20.6m (2022: £15.4m) mainly
relating to deferred tax impact of the movement in amortisation on
intangibles.
4. Earnings per share (EPS)
2023 2022
£m £m
Based on the profit for the year:
Profit attributable to ordinary shareholders 297.4 288.8
Separately Disclosed Items after tax (note 3) 64.3 53.0
Adjusted earnings 361.7 341.8
Number of shares (millions):
Basic weighted average number of ordinary shares 161.3 161.2
Potentially dilutive share awards 0.9 0.7
Diluted weighted average number of shares 162.2 161.9
Basic earnings per share 184.4p 179.2p
Potentially dilutive share awards (1.0p) (0.8p)
Diluted earnings per share 183.4p 178.4p
Adjusted basic earnings per share 224.2p 212.0p
Potentially dilutive share awards (1.2p) (0.9p)
Adjusted diluted earnings per share 223.0p 211.1p
5. Pension schemes
The significant actuarial assumptions used in the valuation of the Group's
material defined benefit pension schemes as at 31 December 2023 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 2022. A net actuarial
loss before taxation of £2.6m (2022: £17.4m gain) has been recognised in the
consolidated statement of comprehensive income. The net pension asset stands
at £21.8m for the UK pension scheme (2022: £21.3m) and a net pension
liability of £4.8m for the Swiss pension scheme as at 31 December 2023 (2022:
£2.2m).
The total expense recognised in the consolidated income statement for the
Group's material defined benefit pension schemes of £0.2m (2022: £1.8m)
includes the current service cost and administration expenses of £1.2m (2022:
£1.9m) recognised in operating profit, and net pension interest income of
£1.0m (2022: £0.1m) recognised in net financing costs.
6. Analysis of net debt
2023 2022
£m £m
Cash and cash equivalents per the statement of financial position 299.3 321.6
Overdrafts (0.7) (0.9)
Cash per the statement of cash flows 298.6 320.7
The components of net debt are outlined below:
1 January Cash flow Non-cash adjustments Exchange adjustments 31 December
2023 £m £m 2023
£m £m £m
Cash 320.7 13.7 - (35.8) 298.6
Borrowings:
Revolving credit facility US$850m 2027 - 2.2 - (2.2) -
Senior notes US$160m 2023 (133.1) 125.2 - 8.0 -
Acquisition facility 'A' AU$88.0m 2023 (49.4) 44.9 - 4.5 -
Acquisition facility 'A' US$96.9m 2023 (80.6) 75.1 - 5.5 -
Senior notes US$125m 2024 (104.0) - - 6.3 (97.7)
Senior notes US$120m 2025 (99.8) 2.2 - 3.8 (93.8)
Senior notes US$75m 2026 (62.4) - - 3.8 (58.6)
Senior notes US$150m 2027 (124.8) - - 7.6 (117.2)
Senior notes US$165m 2028 (137.3) - - 8.2 (129.1)
Senior notes US$165m 2029 (137.3) - - 8.3 (129.0)
Senior notes US$160m 2030 (133.1) - - 8.1 (125.0)
Senior notes EUR€120m 2026 - (104.1) - - (104.1)
Senior notes EUR€25m 2027 - (21.7) - - (21.7)
Senior notes EUR€400m 2028 - (34.7) - - (34.7)
Other* 3.2 - (1.6) - 1.6
Total borrowings (1,058.6) 89.1 (1.6) 61.9 (909.2)
Total financial net debt (737.9) 102.8 (1.6) 26.1 (610.6)
Lease liability (322.2) 77.8 (78.3) 14.9 (307.8)
Total net debt (1,060.1) 180.6 (79.9) 41.0 (918.4)
* Other includes uncommitted borrowings of £0.8m (2021: £0.8m) and facility
fees of £2.4m (2022: £4.0m).
2023 2022
£m £m
Borrowings due in less than one year 96.8 261.5
Borrowings due in one to two years 93.2 103.0
Borrowings due in two to five years 464.6 286.0
Borrowings due in over five years 254.6 408.1
Total borrowings 909.2 1,058.6
Description of borrowings
Total undrawn committed borrowing facilities as at 31 December 2023 were
£664.3m (2022: £707.3m).
Key facilities
US$850m revolving credit facility
The Group has a US$850m multi-currency revolving credit facility, which is the
Group's principal facility and in December 2021 was extended from 2026 to
2027. Advances under the facility bear interest at a rate equal to relevant
risk-free rate, or their local currency equivalents, plus a margin, depending
on the Group's financial leverage. Drawings under this facility at 31 December
2023 were £nil (2022: £nil).
US$692m Acquisition facility
In May 2021 the Group agreed a US$692m multi-currency acquisition facility to
finance the acquisition of SAI Global with £357.4m repaid in March 2022 and
the balance of £130.0m repaid in September 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 2023 were £nil (2022: £130.0m).
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%, funded from the
existing revolving credit facility.
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%.
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 repaid 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. These notes were
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 15 March 2028 at a fixed
annual interest rate of 2.33%, US$165m repayable on 15 March 2029 at a
fixed annual interest rate of 2.47% and US$160m repayable on 15 March 2030 at
a fixed annual interest rate of 2.54%.
In December 2023 the Group issued EUR€185m of senior notes. These notes were
issued in three tranches with EUR€120m repayable on 21 December 2026 at a
fixed annual interest rate of 3.94%, EUR€25m repayable on 21 December 2027
at a fixed annual interest rate of 3.89% and EUR€40m repayable on 21
December 2028 at a fixed annual interest rate of 3.88%.
7. Acquisition of businesses
(a) Acquisitions
The Group completed two acquisitions in 2023 (2022: one).
On 31 March 2023, the Group acquired Controle Analítico Análises Técnicas
Ltda (Controle Analítico), a leading provider of environmental analysis based
in Brazil, for a purchase price of £18.8m (£18.3m net of cash acquired),
generating goodwill of £13.2m.
On 9 August 2023, the Group acquired PlayerLync Holdings, Inc. (PlayerLync), a
leading SaaS- based platform based in the USA, for a purchase price of £28.5m
(£25.9m net of cash acquired), generating goodwill of £17.0m.
(b) Prior period acquisitions
£2.7m (2022: £nil) was paid during the period in respect of prior period
acquisitions.
(c) Details of 2022 acquisitions
One acquisition was made during 2022. Full details of the acquisition made in
the year ended 31 December 2022 are disclosed in note 10 to the Annual Report.
(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 (2022: nil).
(e) Reconciliation of goodwill
£m
Goodwill at 1 January 2023 1,418.4
Additions 30.2
Transfers 0.3
Foreign exchange (63.1)
Goodwill at 31 December 2023 1,385.8
8. Property, plant, equipment and software
Additions
During the year, the Group acquired fixed assets with a cost of £181.5m
(2022: £197.9m). The Group acquired £2.2m of fixed assets through business
combinations (2022: £0.1m). At 31 December 2023, the IFRS 16 right of use
asset is £286.6m (2022: £297.6m).
9. Subsequent events
On 18 January 2024, funded from the existing revolving facility, a $105m
senior note at a fixed annual interest rate of 3.85% was repaid.
During February 2024, following a review of the United Kingdom pension
Scheme's investment strategy and funding level, the Trustee approved changes
to the Scheme's asset allocation by class, as described in note 16 of the 2023
Annual Report and Accounts.
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