REG - Intertek Group Plc - Half-year Report
29/07/2022 07:00
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RNS Number : 2238U Intertek Group PLC 29 July 2022
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2022 HALF YEAR RESULTS ANNOUNCEMENT
29 July 2022
High-Quality Growth Business Delivering Sustainable Value
• Revenue of £1,491.7m; +9.5% at constant rates; +13.2% at actual
rates
• LFL revenue growth of 4.9% at constant rates: Products+ 4.3%;
Trade +5.7%; Resources +6.4%
• Outside China LFL revenue grew 7.1% at constant rates with all
divisions growing at least 7.0%
• Adjusted operating profit of £217.3m, up 4.0% at constant rates
and up 7.7% at actual rates with adjusted operating margin of 14.6% at
constant rates (H1 2021: 15.3%)
• Outside China, double-digit operating profit growth with 20bps
margin accretion at constant rates
• Strong pricing power and disciplined cost management in place to
drive margin accretive revenue growth
• Adjusted diluted EPS of 86.5p: up 6.7% at constant rates and up
10.6% at actual rates
• Robust free cash flow and strong balance sheet with 1.3 net debt
to EBITDA; weighted average interest rate of 2.7%
• Investments in capability, innovations and M&A to seize
attractive ATIC growth opportunities
• Interim dividend payment of 34.2p; unchanged on prior year
• Excellent ROIC of 16.8%, with organic ROIC of 21.4% up 20bps at
constant rates
• Well-positioned to benefit from the growth acceleration in our
end-markets
André Lacroix: Chief Executive Officer statement
"In H1 22, the Group delivered a robust financial performance, demonstrating
the strengths of our High-Quality Growth business model delivering sustainable
growth and value to all stakeholders. Notwithstanding the impact of the
lockdown restrictions in China, the Group delivered at constant rates 9.5%
revenue growth, up 4.9% on a LFL basis, earnings growth of 6.7%, a robust free
cash flow and an excellent ROIC of 16.8%. Outside of China, the Group
benefited from an increased demand for our ATIC solutions with a LFL revenue
growth of 7.1% and delivered double digit operating profit growth with 20bps
margin accretion at constant rates.
Our business in Shanghai has been operating as normal since 1 July and we
expect our China business to deliver good LFL revenue growth in H2. Together
with the accelerating growth in demand we are seeing for our ATIC solutions
outside of China, the Group is well positioned to deliver robust LFL revenue
growth in H2 in each of our Products, Trade and Resources divisions. We
expect the strong performance of the acquisitions we recently made to continue
in the second half and we are pleased to have announced separately today an
agreement to acquire Clean Energy Associates, LLC, a market-leading
independent provider of Quality Assurance in the fast-growing solar energy
sector.
For the full year, we are targeting at constant rates robust LFL revenue
growth with a margin slightly below 2021 reflecting the lockdown restrictions
in China in H1, the expected divisional mix and the investments in growth we
are making. Our disciplined cost management will remain in place and we will
leverage our strong pricing power based on excellent customer relations to
manage the higher than expected inflation in several markets. We expect the
Group to deliver, at constant rates, a robust earnings performance with a
strong free cash flow and an excellent ROIC. Our reported earnings will
reflect expected currency translation benefits between 400bps and 600bps.
The Quality Assurance market will grow faster post Covid-19 as the demand for
Quality Assurance solutions is expanding across all our business lines given
growing stakeholder expectations about quality, safety and sustainability.
Moving forward, we expect the attractive structural growth drivers in our
industry to be augmented by our increase in ATIC customers, a stronger focus
by corporations on safer supply chains, greater corporate investments in
innovation, a step change in sustainability management and disclosures, and
growth opportunities in the World of Energy.
Intertek is a differentiated, High-Quality Growth business, giving our
customers the ATIC advantage to make their businesses stronger. Our leading
ATIC solutions are mission critical for the world to operate safely and the
growth in our end-markets is accelerating. We operate a high-performance
earnings and cash compounder model which has delivered 13% annual Total
Shareholder Returns in the last decade and we will continue to deliver
sustainable growth and value for all.
I would like to thank all my colleagues for their commitment, passion,
innovation, agility and energy, giving Intertek a unique Science-based
Customer Excellence advantage in the global Quality Assurance industry."
Key Adjusted Financials 2022 H1 2021 H1 Change at actual rates Change at constant rates1
Revenue £1,491.7m £1,317.6m 13.2% 9.5%
Like-for-like revenue2 £1,427.3m £1,315.4m 8.5% 4.9%
Operating profit3 £217.3m £201.7m 7.7% 4.0%
Operating margin3 14.6% 15.3% (70bps) (70bps)
Profit before tax3 £203.5m £186.3m 9.2% 5.7%
Diluted earnings per share3 86.5p 78.2p 10.6% 6.7%
Interim dividend per share 34.2p 34.2p -
Cash flow from operations less net capex3 £200.4m £213.9m (6.3%)
Free Cash Flow3 £95.8m £122.6m (21.9%)
Financial net debt4 £859.1m £434.9m 97.5%
Financial net debt / EBITDA3, 4 1.3x 0.7x
ROIC (rolling 12 months) 16.8% 23.4% (660bps) (440bps)
Organic ROIC (rolling 12 months) 21.4% 23.4% (200bps) 20bps
Key Statutory Financials 2022 H1 2021 H1 Change at 1 Constant rates are calculated by translating H1 21 results at H1 22 exchange
rates.
actual rates
2 LFL revenue includes acquisitions following their 12-month anniversary of
ownership and excludes the historical contribution of any business
disposals/closures.
3 Adjusted results are stated before Separately Disclosed Items ('SDIs'), see
note 3 to the Condensed Consolidated Financial Statements.
1,2,3 Reconciliations for these measures are shown in the Presentation of
Results section on page 19.
4 Financial net debt excludes the IFRS 16 lease liability of £331.9m. Total
net debt is £1,191.0m. Reflects prior 12 months' EBITDA for relevant period.
See note 7 on page 35.
Revenue £1,491.7m £1,317.6m 13.2%
Operating profit £197.0m £184.5m 6.8%
Operating margin 13.2% 14.0% (80bps)
Profit before tax £182.8m £169.1m 8.1%
Profit after tax £131.6m £125.1m 5.2%
Diluted earnings per share 75.6p 70.9p 6.6%
Cash flow from operations £167.5m £187.0m (10.4%)
The Directors have approved an interim dividend of 34.2p per share (H1 21:
34.2p) to be paid on 6 October 2022 to shareholders on the register at close
of business on 16 September 2022.
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) 7836 622 683
intertek@dentonsglobaladvisors.com (mailto:intertek@dentonsglobaladvisors.com)
Analysts' Call
A live audiocast for analysts and investors will be held today at 7.45am UK
time; +44 (0) 33 0551 0200 (Link to audiocast). Details can be found at
http://www.intertek.com/investors/ (http://www.intertek.com/investors/)
together with a pdf copy of this report. A recording of the audiocast will be
available later in the day.
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 that brings Quality, Safety and
Sustainability to Life.
Our Science-based Customer Excellence USP and the 24/7 mission critical
Quality Assurance solutions we provide, ensure that our clients 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 (http://www.intertek.com)
Half Year Report 2022
INTERTEK CEO Letter
In H1 22, the Group delivered a robust financial performance, demonstrating
the strengths of our High-Quality Growth business model delivering sustainable
growth and value to all stakeholders. Notwithstanding the impact of the
lockdown restrictions in China, the Group delivered at constant rates 9.5%
revenue growth, up 4.9% on a LFL basis, earnings growth of 6.7%, a robust free
cash flow and an excellent ROIC of 16.8%. Outside of China, the Group
benefited from an increased demand for our ATIC solutions with a LFL revenue
growth of 7.1% and delivered double digit operating profit growth with 20bps
margin accretion at constant rates.
Our business in Shanghai has been operating as normal since 1 July and we
expect our China business to deliver good LFL revenue growth in H2. Together
with the accelerating growth in demand we are seeing for our ATIC solutions
outside of China, the Group is well positioned to deliver robust LFL revenue
growth in H2 in each of our Products, Trade and Resources divisions. We
expect the strong performance of the acquisitions we recently made to continue
in the second half and we are pleased to have announced separately today an
agreement to acquire Clean Energy Associates, LLC, a market-leading
independent provider of Quality Assurance in the fast-growing solar energy
sector.
For the full year, we are targeting at constant rates robust LFL revenue
growth with a margin slightly below 2021 reflecting the lockdown restrictions
in China in H1, the expected divisional mix and the investments in growth we
are making. Our disciplined cost management will remain in place and we will
leverage our strong pricing power based on excellent customer relations to
manage the higher than expected inflation in several markets. We expect the
Group to deliver, at constant rates, a robust earnings performance with a
strong free cash flow and an excellent ROIC. Our reported earnings will
reflect expected currency translation benefits between 400bps and 600bps.
The Quality Assurance market will grow faster post Covid-19 as the demand for
Quality Assurance solutions is expanding across all our business lines given
growing stakeholder expectations about quality, safety and sustainability.
Moving forward, we expect the attractive structural growth drivers in our
industry to be augmented by our increase in ATIC customers, a stronger focus
by corporations on safer supply chains, greater corporate investments in
innovation, a step change in sustainability management and disclosures, and
growth opportunities in the World of Energy.
Intertek is a differentiated, High-Quality Growth business, giving our
customers the ATIC advantage to make their businesses stronger. Our leading
ATIC solutions are mission critical for the world to operate safely and the
growth in our end-markets is accelerating. We operate a high-performance
earnings and cash compounder model which has delivered 13% annual Total
Shareholder Returns in the last decade and we will continue to deliver
sustainable growth and value for all.
I would like to thank all my colleagues for their commitment, passion,
innovation, agility and energy, giving Intertek a unique Science-based
Customer Excellence advantage in the global Quality Assurance industry.
The Quality Assurance market will grow faster post Covid-19
We operate in a highly attractive industry with strong structural growth
drivers that will continue to consistently deliver GDP+ LFL revenue growth in
real terms over the years for our ATIC solutions.
Our Products division that represents 84% of the Group's earnings will benefit
from brand and SKU expansion, faster innovation cycles, increased demand for
smart products and an increased focus of corporations on safety, quality and
sustainability.
Our Trade division that represents 11% of the Group's earnings will benefit
from the development of regional and global trade as well as from an increased
focus on traceability and sustainability.
Our Resources division which represents 5% of the Group's earnings will
benefit from investments in Exploration and Production for traditional Oil and
Gas/Mineral resources and in Renewables to meet the growing demand for energy
globally.
Our Corporate Assurance activities, which are industry agnostic, will remain
our fastest-growing services, given the growing importance of risk-based
Quality Assurance, increased regulation, the increased importance of health,
safety and wellbeing, the growth in People Assurance and investments in supply
intelligence, sustainability and cyber security.
Based on our market research, these attractive structural growth drivers in
our industry will be augmented by the following additional growth drivers:
• an increase in the number of new companies
• companies will invest more to make their operations safer
• investments in innovation will continue to increase
• a step change in the corporate sustainability agenda
• growth in the World of Energy
These five important growth accelerators are agnostic from an economic cycle
perspective and the combination with the strong structural growth drivers is
why the Quality Assurance market will grow faster post Covid-19.
We are extremely well-positioned to seize these exciting growth opportunities
ahead, capitalising on the core strengths of Intertek:
• Science-based Customer Excellence is our USP, giving us excellent
and stable client relationships as well as strong pricing power.
• We operate a powerful portfolio with scale positions in segments
with attractive growth and margin on a sustainable basis.
• Our high-quality compounder earnings model delivers sustainable
value for all.
• We are a very agile company, always looking for continuous
improvements based on our ever-better disciplined performance management and
the 5x5 data advantage we have built over the years.
• We are highly cash generative and, based on our strong balance
sheet, we invest in growth with discipline, targeting the high growth and high
margin spaces.
Higher number of ATIC customers
We are seeing a significant growth in the number of companies globally, given
the easing of regulation to create new businesses, the lower barriers to entry
for any brand with e-commerce capabilities and the increased level of talents
and resources to develop new technology, new products and new services.
Our decentralised Customer 1(st) organisational model has a strong track
record of winning new clients.
This is excellent news for Intertek as it creates the opportunity to win new
customers, given the lack of expertise of these young companies in Quality
Assurance and in global market access.
Corporate Investments in safer supply
Covid-19 is proving a catalyst for many corporations to improve the resilience
of their supply chains. We expect major corrective actions, including:
• better data on what is happening in all parts of the supply chain;
• tighter risk management with razor-sharp business continuity
planning;
• a more diversified portfolio of tier 1/2/3 suppliers;
• a more diversified portfolio of factories with investments in
processes, technology, training, and independent assurance.
Increased focus on innovation
We are already seeing our existing clients realise that, in addition to their
supply chain challenges, they need to invest more in product and service
innovation to meet the changing needs of their customers.
As you would expect, during a major global crisis like Covid-19, consumers'
expectations are changing given their desire to live in a better world.
Corporations need to step up their game in quality, safety, convenience and
value for money to enhance their products and services.
Stronger focus on sustainability
The other major area of investment inside corporations is sustainability,
based on increased customer and other stakeholder expectations as well as the
increased demands from regulators.
Indeed, we are seeing an improved regulatory momentum for sustainability
standards with emerging regulation in addition to what has been put in place
in the last few years.
Companies will have to re-invent the way they manage their sustainability
agenda and importantly will have to place a greater emphasis on independently
verified ESG disclosures to meet the growing expectations of their
stakeholders for progress and transparency.
Growth in the World of Energy
The growth opportunities inside the World of Energy are truly exciting in the
short, medium and long term for our Products, Trade and Resources divisions.
Based on the research we have undertaken in the last few months, here are the
main growth opportunities we see:
• To meet the expected increase in global energy demand, the world
will need a significant increase in energy production in the short, medium and
long term.
• Given the under-investment in traditional Oil and Gas ('O&G')
exploration and production in the last decade and the current lack of scale of
renewables, there will be a significant increase in investment for production
in O&G and in renewables.
• Given the investments and technology required to build renewable
infrastructure, there will be a significant divergence in energy
infrastructure between developed and developing countries.
• The energy mix will evolve significantly in developed economies,
creating additional complexity and risk to manage the just-in-time energy
supply.
• The world will not achieve its Net Zero targets unless there is a
significant step-up of investments to bring renewables to scale, a major
acceleration in both technology and investments to create scale carbon capture
and storage infrastructure.
Investing in innovation to meet the changing needs of our clients
True to our pioneering spirit, and building on our existing strengths, we will
continue to innovate and provide customers with the mission critical solutions
they need. We are investing organically to seize the sustained long-term
growth opportunities in our industry through a disciplined approach to capital
allocation, targeting high-margin and high-growth areas that in turn
accelerate margin accretive revenue growth.
Intertek has been a pioneer in the industry, providing new and innovative
solutions to our clients, capitalising on the Science-based Customer
Excellence and creativity of our organisation.
We have a focused approach to innovation, adopting our proven three-tiered
method: 'Core', building on strengths of existing products and services;
'Adjacent', expanding into fast-growing and high-margin markets; and
'Breakthrough', developing innovative products and services. We have brought
many exciting innovations to market under all these headings.
Recent examples of our Core innovations include Intertek EcoCheck, a
sustainable tourism solution that audits management systems and offers a
Carbon Footprint Calculation, enabling our clients to meet their customers'
requests to demonstrate tangible actions and results to achieve their
sustainability goals.
In our Softlines business, we launched Intertek TOXCLEAR, an innovative
digital chemical management platform for the fashion industry, to deliver
production free of hazardous chemicals. The platform enables brands and their
suppliers to deliver transparency and traceability on chemicals used and build
safer and more sustainable supply chains.
We also added new and enhanced features to our market-leading supply chain
compliance solution, Inlight 2.0, enabling organisations to manage
increasingly complex supply chain risks, empowering them to bring visibility
to the workings of their vendor partners and turn potential disruptions and
compliance irregularities to their competitive advantage.
Our Minerals Global Centre of Excellence in Perth, Western Australia is a key
hub for the minerals and mining industry. This state-of-the-art laboratory
gives our customers access to trusted expertise in mineral testing, inspection
and analysis. We recently installed a third PhotonAssay unit at the centre,
supporting our customers with faster, more accurate and environmentally
friendly analysis of gold. Every sample analysed with PhotonAssay means
reduced CO2 emissions and less hazardous waste compared to the fire assay
method traditionally used for the determination of gold content in ores.
Examples of Adjacent innovations include our industry leading ATIC
Sustainability solutions, Green R&D and Circular Assure, leveraging the
depth of our experience and global network of experts. Green R&D is an
end-to-end Assurance solution that helps companies identify and reduce, at the
R&D stage, the environmental impacts of their products throughout the
value chain. Circular Assure enables companies within the plastics and
polymers industry to optimise the value of recycled materials whilst ensuring
their quality and safety, allowing our clients to demonstrate their commitment
to sustainability.
Our Breakthrough innovations include recently launched Intertek Hydrogen, our
ground-breaking solution in the energy transition space. With our
long-standing history and expertise in the energy industry, the solution
provides our customers with total end-to-end quality, safety and
sustainability solutions for the entire hydrogen industry lifecycle, to make a
safe energy transition.
Other breakthrough innovations include CarbonClear™, the world's first
independent carbon-intensity certification programme; CarbonZero(TM) for
products and services; and SourceClear™, a technology platform that provides
visibility and traceability across the full range of supply chain
relationships.
All these innovations and many more performed exceptionally well in 2022,
underlining how we have created and maintained our industry leadership
position. It is by continuing to invest and innovate that we will further
extend our lead in the years ahead.
Seizing new ATIC growth opportunities through strategic acquisitions
We are also targeting inorganic investments with attractive M&A
opportunities that strengthen our ATIC portfolio in high-margin, high-growth
areas. During the past 12 months we made two important acquisitions: SAI
Global Assurance and JLA Brasil Laboratório de Análises de Alimentos S.A.,
which are both excellent examples of investments in complementary businesses.
We strongly believe in the benefit of scaling up organic and inorganic
investments with a disciplined performance management approach and I am
pleased to report that our teams have made excellent progress leveraging the
investments made in the last few years, as evidenced by our strong return on
capital.
Today we are also pleased to have separately announced an agreement to acquire
Clean Energy Associates ('CEA'), a market-leading independent provider of
Quality Assurance, supply chain traceability and technical services to the
fast-growing solar energy sector. Supported by the long-term structural trends
towards decarbonisation, energy sustainability and security, the solar energy
sector is expected to become the largest source of renewable energy generation
globally by 2030. The acquisition of CEA presents a compelling opportunity to
expand our sustainability service offering in the fast-growing quality
assurance market for solar energy, creating a truly end-to-end service
offering to support customers on their decarbonisation and energy
sustainability journeys.
Giving our clients the ATIC advantage
Intertek's pioneering history, initiated by founding fathers such as Thomas
Edison, has lasted for more than 130 years, and in 2015 we took a major step
for both our company and our industry as a whole.
That is when we redefined the industry by adding Assurance to our Testing,
Inspection and Certification ('TIC') solutions to create ATIC: an end-to-end,
fully integrated portfolio of services that gives clients complete peace of
mind across their operating systems, quality management systems and supply
chains.
We call this Total Quality Assurance ('TQA'), as our clients benefit from risk
mitigation at every stage of their operations.
Our unique ATIC proposition brings to life our commitment to always taking
customer service to the next level. While we recognise that TIC will remain
highly important for our clients, we also understand that it is no longer
sufficient in a world where global trade is exponentially adding complexity to
our clients' supply chains. Introducing Assurance has been an essential step
forward to provide our clients with a superior customer service.
Today, Assurance is at the cutting edge of our value proposition and Intertek
is the only company in the world providing a truly global TQA portfolio,
delivered with precision, pace and passion, and enabling our customers to
power ahead safely.
We truly believe that risk-based Quality Assurance powered by our unique ATIC
solution is the future of our industry.
Sustainability Excellence
Sustainability is central to everything we do at Intertek and as a purpose-led
company it is anchored in our Purpose,
Vision and Values.
We are proud to have been recognised for our leading sustainability
credentials with the highest possible 'AAA' ESG
rating from the world's largest provider of Environmental, Social and
Governance ('ESG') Indexes, MSCI.
Offering innovative sustainability services to our clients is core to our
value proposition and we are committed to
pioneering new solutions that will help our clients.
What our clients are looking for today is systematic, independent end-to-end
assurance on all aspects of their sustainability journey. Intertek Total
Sustainability Assurance ('TSA') is a holistic programme empowering our
customers to achieve sustainability excellence across all aspects of their
business and communicate results with confidence.
TSA is a global programme that leverages our footprint in over 100 countries
and covers all industries. We have built a team of sustainability experts in
every major region, who can help with both a global and local perspective.
Intertek Total Sustainability Assurance is comprised of three parts:
• Intertek Operational Sustainability Solutions
• Intertek ESG Assurance; and
• Intertek Sustainability Certification
Internally, we are focussed on driving sustainability excellence and below are
our 2021 sustainability results which were published at the end of March in
our Annual report:
● Driving a culture of proactive Health & Safety awareness with continuous
improvement in our Total Recordable Incident Rate of 0.51 for 2021.
● Since 2015, we have used the Net Promoter Score ('NPS') process to listen to
our customers; during 2021 we continued to conduct on average 6,000 interviews
each month.
● Improving the environmental performance across our operations is key to our
ambition of aligning our business to reduction targets set by the Paris
Agreement. Operational emissions intensity per employee was 4.35 tCO2e for
2021. Total CO2e emissions (market-based) reduced by 13.3% vs 2020.
● 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 2021 score was 79.9%.
● Our voluntary permanent turnover rate returned to similar levels seen prior to
Covid-19 at 13%.
● We have increased the representation of women in senior management roles by 6%
to 23% since 2017, aiming to achieving better gender balance by 2025.
● Supporting our commitment to the highest standards of integrity and
professional ethics, 94% of eligible employees completed our annual compliance
training.
High performance earnings and cash compounder model
Moving forward, we will continue to deliver sustainable growth and value for
all our stakeholders given our high performance earnings and cash compounder
that has delivered 13% annual TSR in the last decade.
Our USP at Intertek is our Science-based Customer Excellence in quality,
safety and sustainability, giving our c.400,000 clients the ATIC advantage to
strengthen their businesses.
Importantly our superior ATIC customer service gives us strong pricing power.
We believe in continuous improvement and have systemic end-to-end performance
management to drive operational discipline in price, cost and cash.
We operate a high margin, capital light, carbon light and cash generative
earnings model.
Intertek's approach to value creation is based on the compounding effect, year
after year, of margin accretive revenue growth, strong cash generation and
disciplined investment in growth.
Moreover, our earnings model has strong intrinsic defensive characteristics
for three reasons.
First, the ATIC solutions we offer are mission critical for our clients to
make sure that their operations continue to operate safely. Said differently,
we are the Assurance that gives the corporations the peace of mind they need
knowing that they have the right quality, safety and sustainability standards
in place 24/7.
Second, we operate a highly diversified set of revenue streams offering a
broad range of ATIC solutions in 17 industries across more than 100 countries,
to c.400,000 companies.
Thirdly, our USP in the industry is Science-based Customer excellence which
has enabled us to build long lasting client relationships with our customers
based on the ATIC advantage we provide them to build stronger businesses.
2022 Outlook
The lockdown restrictions have had a significant impact in our China business
in the period between March and June, especially in Shanghai, which represents
25% of our China business.
In the month of June, we saw a ramp-up of ATIC activities in line with our
expectations in the Shanghai region and our operations are now back to normal.
We operate an excellent business in China with leading scale positions in most
of the business lines we operate. We are very confident about the outlook for
H2 and we expect our business to deliver a good LFL revenue performance in
line with the pre lockdown period in Jan-February.
Globally, we are seeing an increase in demand for our ATIC solutions in our
Products, Trade and Resources divisions.
Indeed, the LFL revenue growth momentum outside of China has been robust in H1
with 6.8% growth in the Jan-April period and 7.7% growth in the May-June
period at constant rates. This robust LFL revenue growth outside of China is
broad based with Products +7.0%, Trade +7.2% and Resources +7.4%.
We expect to deliver a robust Group LFL revenue performance for the full year,
targeting robust LFL revenue growth in Products, Trade and Resources.
Our acquisitions are performing well and are on track.
We expect the full year margin to be slightly lower than 2021 due to the
impact of Covid-19 in H1 in China, the expected divisional mix effect and the
investments in growth we are making.
In terms of cash generation, we expect to deliver a strong cash flow for the
year, given our day-to-day operational discipline and quality standards.
Our financial guidance for 2022 is that we expect:
· Capital expenditure in the range of £125m-£135m
· Net finance cost of £34m-£38m
· Effective tax rate to remain in the range of 26.5%-27.0%
· Minority interests of between £20m-£22m remains unchanged
· Financial net debt at December 2022 of between £730-£780m (prior to
any material change in FX or M&A)
The average sterling rate since the beginning of the year applied to the full
year results of 2021 would provide an uplift of between 400bps and 600bps at
the revenue and earnings level.
In summary, we expect the Group to deliver at constant rates, a robust
earnings performance in H2 and in the full year.
High-Quality Growth business creating value for all
Intertek is a differentiated, High-Quality Growth business, creating
sustainable growth and value for all stakeholders.
Our leading ATIC solutions are mission critical for the world to operate
safely.
The growth in our end-markets is accelerating given the increased focus on
quality, safety and sustainability.
Our strong market position and strong customer relationships position us well
to seize the exciting growth opportunities ahead.
We operate a high-performance earnings and cash compounder model.
In the last decade we have delivered 13% annual TSR and we will continue to
deliver sustainable growth and value for all.
André Lacroix
Chief Executive Officer
Operating Review
For the six months ended 30 June 2022
To present the performance of the Group in a clear, consistent and comparable
format, certain items are disclosed separately on the face of the income
statement. These items, which are described in the Presentation of Results
section of this report and in note 3, are excluded from the adjusted results.
The figures discussed in this review (extracted from the income statement and
cash flow) are presented before Separately Disclosed Items ('SDIs').
Overview of performance
H1 22 H1 21 Change at actual rates Change at constant rates(1)
£m £m
Revenue 1,491.7 1,317.6 13.2% 9.5%
Like-for-like revenue(2) 1,427.3 1,315.4 8.5% 4.9%
Adjusted Operating profit(3) 217.3 201.7 7.7% 4.0%
Margin(3) 14.6% 15.3% (70) bps (70) bps
Net financing costs(3) (13.8) (15.4) (10.4%) (16.4%)
Income tax expense(3) (54.3) (49.4) 9.9% 6.5%
Adjusted Earnings for the period(3) 149.2 136.9 9.0% 5.4%
Adjusted diluted earnings per share(3) 86.5p 78.2p 10.6% 6.7%
1. Constant rates are calculated by translating H1 21 results at
H1 22 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 Interim Financial Statements on page 33.
Total reported Group revenue increased by 13.2%, a LFL revenue increase of
8.5% at actual rates.
The Group's LFL revenue at constant rates of 4.9% reflected an increase of
4.3% in Products, 5.7% in Trade and 6.4% in Resources.
We delivered operating profits of £217.3m, +4.0% at constant rates and +7.7%
at actual rates.
The Group's adjusted operating margin was 14.6%, a decrease of 70bps from the
prior year at constant exchange rates. Margin decreased in Products by 170bps
and 10bps in Resources, increasing by 90bps in Trade.
The Group's statutory operating profit after SDIs for the period was £197.0m
(H1 21: £184.5m) and margin was 13.2% (H1 21: 14.0%).
Net financing costs
Adjusted net financing costs were £13.8m, comprising £0.8m (H1 21: £0.8m)
of finance income and £14.6m (H1 21: £16.2m) of finance expense. Statutory
net financing costs of £14.2m (H1 21: £15.4m) included £0.4m expense (H1
21: £nil) relating to SDIs.
Tax
The adjusted effective tax rate was 26.7%, an increase of 0.2% on the prior
year (H1 21: 26.5%, FY 21: 26.5%). The tax charge, including the impact of
SDIs, of £51.2m (H1 21: £44.0m), equates to an effective rate of 28.0% (H1
21: 26.0%, FY 21: 25.8%).
Earnings per share
Adjusted diluted earnings per share at actual exchange rates was 10.6% higher
at 86.5p. Diluted earnings per share after SDIs was 75.6p (H1 21: 70.9p) per
share and basic earnings per share after SDIs was 75.9p (H1 21: 71.3p).
Dividend
The Board has approved an interim dividend of 34.2p per share, which is in
line with both prior year (H1 21: 34.2p) and H1 20. The dividend will be
paid on 6 October 2022 to shareholders on the register on 16 September 2022.
Investments
The Group invested £41.1m (H1 21: £40.0m) of organic net capital investment
in laboratory expansions, new technologies and equipment to expand our market
coverage and develop innovative ATIC solutions. The Group did not complete any
acquisitions in the first six months of 2022.
Cash Flow
The Group's cash performance in the period was robust with adjusted free cash
flow of £95.8m (H1 21: £122.6m), driven by strong cash conversion, the
result of disciplined working capital management. Adjusted cash generated from
operations was £238.1m (H1 21: £253.4m). Statutory cash generated from
operations was £234.1m (H1 21: £246.1m).
Financial Position
The Group ended the period in a strong financial position. Financial net debt
was £859.1m, our net debt to EBITDA ratio is 1.3 and our weighted average
interest rate is 2.7%. The undrawn headroom on the Group's existing committed
borrowing facilities at 30 June 2022 was £640.4m.
Operating Review by division
Revenue
Adjusted operating profit
H1 2022 H1 2021 Change Change at H1 2022 H1 2021 Change Change at
£m £m at actual rates constant rates £m £m at actual rates constant rates
Products 951.0 819.5 16.0% 11.5% 183.2 170.9 7.2% 2.3%
Trade 299.6 278.2 7.7% 5.8% 22.7 20.1 12.9% 18.8%
Resources 241.1 219.9 9.6% 6.4% 11.4 10.7 6.5% 4.6%
Group 1,491.7 1,317.6 13.2% 9.5% 217.3 201.7 7.7% 4.0%
Products Divisional Review
H1 2022 H1 2021 Change at actual rates Change at constant rates
£m £m
Revenue 951.0 819.5 16.0% 11.5%
Like-for-like revenue 886.9 817.3 8.5% 4.3%
Adjusted operating profit 183.2 170.9 7.2% 2.3%
Adjusted operating margin 19.3% 20.9% (160bps) (170bps)
Intertek Value Proposition
Our Products-related businesses consist of business lines that are focused on
ensuring the quality and safety of physical components and products, as well
as minimising risk through assessing the operating processes and quality
management systems of our customers.
As a trusted partner to the world's leading retailers, manufacturers and
distributors, the division supports a wide range of industries including
textiles, footwear, toys, hardlines, home appliances, consumer electronics,
information and communication technology, automotive, aerospace, lighting,
building products, industrial and renewable energy products, food and
hospitality, healthcare and beauty, and pharmaceuticals.
Across these industries we provide a wide range of ATIC services, including
laboratory safety, quality and performance testing, second-party supplier
auditing, sustainability analysis, product assurance, vendor compliance,
process performance analysis, facility plant and equipment verification and
third-party certification.
Strategy
Our TQA Value Proposition provides a systemic approach to support the Quality
Assurance efforts of our Products related customers in each of the areas of
their operations. To do this we leverage our global network of accredited
facilities and world leading technical experts to help our clients meet high
quality safety, regulatory and brand standards, develop new products,
materials and technologies and ultimately assist them in getting their
products to market quicker, to continually meet evolving consumer demands.
Innovations
We continue to invest in innovation to deliver a superior customer service in
our Products related businesses:
• With the travel and tourism sector re-opening around the world, we
launched Intertek EcoCheck, a sustainable tourism solution that audits
management systems and offers a Carbon Footprint Calculation that allows our
clients to meet the requests of their customers, by demonstrating tangible
actions and results to achieve their sustainability goals.
• In our Softlines business, we launched Intertek TOXCLEAR, an
innovative digital chemical management platform for the fashion industry, to
deliver production free of hazardous chemicals. The platform enables brands
and their suppliers to deliver transparency and traceability on chemicals used
and build safer and more sustainable supply chains.
• We continue to invest in our industry leading ATIC sustainability
solutions, leveraging the depth of our experience and global network of
experts, and recently launched two new innovative solutions, Green R&D and
Circular Assure, to support our clients as they transition to a more
sustainable world. These solutions allow our customers to enhance the quality,
safety, sustainability and performance of their products whilst meeting their
stakeholders' increasingly demanding environmental expectations.
H1 2022 performance
In H1 22, our Products business delivered a robust performance despite the
lockdown situation in China.
Revenue in our Products business benefitted from a continuing increase in
customer demand and from our acquisitions which enabled us to deliver 11.5%
revenue growth at constant rates.
For the period, our LFL revenue growth globally was 4.3% at constant currency
driven by progress on both volume and price. Outside of China LFL revenue
growth for the period was 7.0% at constant currency.
From a profit standpoint, we delivered operating profit up YoY at constant
currency by 2.3% and ahead 7.2% at actual rates.
Our margin in H1 was 19.3%, 170bps below H1 21 at constant currency, due to
the impact of the lockdown restrictions in China.
• Our Softlines business delivered mid-single digit LFL revenue
growth globally and double digit LFL revenue growth outside of China,
benefitting from growth in e-commerce, investments of our clients in new
collections, growth in risk-based Quality Assurance and increased investment
in end-to-end sustainability.
• Hardlines reported low-single digit LFL revenue growth globally
and low-single digit revenue growth outside of China 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 testing and certification of
medical devices and the increased testing requirements for 5G, our Electrical
& Connected World business delivered low-single digit LFL revenue growth
globally and outside of China.
• Business Assurance delivered double digit LFL revenue growth
globally and outside of China as the business benefited from the increased
investments by our clients to improve the resilience of their supply chains,
the continuous focus on ethical supply, the increased need for sustainability
assurance and the strong growth in our People Assurance segment.
• Our Building & Construction business reported mid-single digit
LFL revenue growth both globally and outside of China. We benefited from the
growing demand for more environmentally friendly and higher quality buildings
and the increased number of infrastructure projects in North America.
• Transportation Technology delivered mid-single digit negative LFL
revenue growth globally and low-single digit LFL revenue growth outside of
China as we saw increased investment in new powertrains to lower CO2/NOx
emissions and in traditional combustion engines to improve fuel efficiency.
• Our Food business registered mid-single digit LFL revenue growth
globally and high-single digit revenue growth outside of China resulting from
increased demand for food safety testing activities and hygiene and safety
audits in factories.
• We saw low-single digit LFL revenue growth globally and mid-single
digit LFL revenue growth outside of China in our Chemicals & Pharma
business. We benefited from an improvement of demand for regulatory assurance
and chemical testing and from the increased R&D investments of the pharma
industry.
Full Year growth outlook
In 2022 we expect our Products division to deliver robust LFL revenue growth
at constant currency.
Mid to long-term growth outlook
Our Products division will benefit from mid to long-term structural growth drivers including product variety, brand and supply chain expansion, product innovation and regulation, the growing demand for quality and sustainability from developed and emerging economies, the acceleration of e-commerce as a sales channel, and the increased corporate focus on risk.
Trade Divisional Review
H1 2022 H1 2021 Change at actual rates Change at constant rates
£m £m
Revenue 299.6 278.2 7.7% 5.8%
Like-for-like revenue 299.3 278.2 7.6% 5.7%
Adjusted operating profit 22.7 20.1 12.9% 18.8%
Adjusted operating margin 7.6% 7.2% 40bps 90bps
Intertek Value Proposition
Our Trade division consists of three global business lines with global and
regional trade flow based on similar mid- to long-term structural growth
drivers:
Our Caleb Brett business provides cargo inspection, analytical assessment,
calibration and related research and technical services to the world's
petroleum and biofuels industries.
Our Government & Trade Services('GTS') business provides inspection
services to governments and regulatory bodies to support trade activities that
help the flow of goods across borders, predominantly in the Middle East,
Africa and South America.
Our AgriWorld business provides analytical and testing services to global
agricultural trading companies and growers.
Strategy
Our TQA Value Proposition assists our Trade related customers in protecting
the value and quality of their products during their custody-transfer, storage
and transportation, globally, 24/7. Our expertise, service innovations and
advanced analytical capabilities allow us to optimise the return on our
customers' cargoes and help them resolve difficult technical challenges. Our
independent product assessments provide peace of mind to our government
clients that the quality of products imported into the country meet their
standards and import processes.
Innovations
We continue to invest in ATIC innovations to deliver a superior customer
service in our Trade related businesses:
• Intertek Tradeable provides trade support and expertise to deliver
a comprehensive portfolio of pre-shipment solutions that enable the validation
of suppliers or manufacturers, as well as production, shipment and goods
handling processes. Our solutions facilitate risk mitigation right across the
international supply chain, and we can tailor bespoke packages to meet our
customers' specific requirements.
• Intertek's Fast-Tek is a customised global trade solution that
delivers expedited certification of shipments to get trade moving faster. It
offers an enhanced Total Quality Assurance experience - as our in-house labs
and inspectors support our customers with Fast-Tek registration, expediting
the inspection and certification process without compromising compliance or
quality, and streamlining their administrative processes while minimising
complexity.
• Intertek Agriworld has partnered with Rice Exchange, the
blockchain enabled digital platform that connects buyers and sellers of rice
across continents, adding trust and lowering risk for all parties involved.
The partnership demonstrates our commitment to the rice industry and means
that Intertek is now available to all Rice Exchange customers to provide
inspection services in relation to their rice trades undertaken on the
platform.
H1 2022 performance
Following a good 2021 organic performance when we benefited from the rebound
of global trade, in H1 2022 our Trade division saw organic growth accelerate
enabling us to deliver good margin accretion.
The higher demand for Energy and Agri products drove LFL revenue growth of
5.7% at constant currency globally and 7.2% outside of China with progress
both on volume and price.
Operating profits increased by 18.8% at constant currency and 12.9% at actual
rates to £22.7m.
Our operating margin of 7.6% was up by 90bps at constant currency.
• Caleb Brett, the global leader in the Crude Oil and Refined
products global trading markets, benefited from improved momentum driven by
increased global mobility and higher testing activities for biofuels with
high-single digit growth LFL revenue growth both globally and outside of
China.
• Our Government & Trade Services business provides
certification services to governments in the Middle East and Africa to
facilitate the import of goods in their markets, based on acceptable quality
and safety standards. We saw high-single digit negative LFL revenue globally
and low-single digit negative LFL revenue growth outside of China as the
benefit from a recovery of supply chain activities in the Middle East and
Africa was more than offset by the termination of two contracts which we did
not renew for profitability reasons.
• AgriWorld provides inspection activities to ensure that the global
food supply chain operates fully and safely. The business reported
double-digit LFL revenue growth globally and outside of China. We continue to
see an increase in demand for inspection activities driven by the strong
growth in the global food industry.
Full Year growth outlook
In 2022 we expect our Trade division to deliver robust LFL revenue growth at
constant currency.
Mid to long-term growth outlook
Our Trade division will continue to benefit from both regional and global
trade-flow growth, as well as the increased customer focus on quality,
quantity controls and supply chain risk management.
Resources Divisional Review
H1 2022 H1 2021 Change at actual rates Change at constant rates
£m £m
Revenue 241.1 219.9 9.6% 6.4%
Like-for-like revenue 241.1 219.9 9.6% 6.4%
Adjusted operating profit 11.4 10.7 6.5% 4.6%
Adjusted operating margin 4.7% 4.9% (20bps) (10bps)
Intertek Value Proposition
Our Resources division consists of two Business lines with similar mid- to
long-term structural growth drivers:
Our Industry Services business uses in-depth knowledge of the oil, gas,
nuclear and power industries to provide a diverse range of TQA solutions to
optimise the use of customers' assets and minimise the risk in their supply
chains. Some of our key services include technical inspection, asset integrity
management, analytical testing and ongoing training services.
Our Minerals business provides a broad range of ATIC service solutions to the
mining and minerals exploration industries, covering the resource supply chain
from exploration and resource development, through to production, shipping and
commercial settlement.
Strategy
Our TQA Value Proposition allows us to help customers gain peace of mind that
their projects will proceed on time and their assets will continue to operate
with a lower risk of technical failure or delay. Our broad range of services
allow us to assist clients in protecting the quantity and quality of their
mined and drilled products, improve safety and reduce commercial risk in the
trading environment.
Innovations
We continue to invest in innovation to deliver a superior customer service in
our Resources related businesses:
• In May we announced our ground-breaking solution in the Energy
transition space, Intertek Hydrogen. With our long-standing history and
expertise in the energy industry, the solution provides our customers with
total end-to-end quality, safety and sustainability solutions for the entire
hydrogen industry lifecycle to make a safe energy transition.
• Intertek Minerals installed a third PhotonAssay unit at the Global
Centre of Excellence in Perth, Australia. This technology supports our
customers with faster, more accurate and environmentally friendly analysis of
gold. Every sample analysed with PhotonAssay means reduced CO2 emissions and
less hazardous waste compared to the traditional fire assay method for the
determination of gold content in ores.
• With Intertek RiskAware's analytical approach to risk-based and
QA/QC inspection data, we help our customers minimise their total cost of
quality by avoiding costly and disruptive delays, incurring significant rework
costs, or experiencing non-compliance issues. Our secure cloud-based solution
identifies quality and safety risks, which helps companies optimise their
inspection programme.
H1 2022 performance
In H1 2022, we have seen a significant increase in demand for our ATIC
solutions.
Our clients are benefiting from the global recovery in the Oil & Gas
industry and higher demand for minerals which enabled us to deliver 6.4% LFL
revenue growth globally and 7.4% outside of China, given our progress on both
volume and price.
Operating profits of £11.4m were up by 4.6% at constant currency or 6.5% at
actual rates.
Operating margins declined by 10bps at constant currency to 4.7% reflecting
our investment in growth in our Australian Minerals business.
• In our Exploration and Production operations, our Capex Inspection
services business delivered mid-single digit LFL revenue growth globally and
outside of China.
• We delivered mid-single digit negative LFL revenue growth in Opex
Maintenance services globally and outside of China as we exited a contract in
North America for profitability reasons.
• The increased demand for testing and inspection activities saw our
Minerals business deliver double-digit LFL revenue growth globally and outside
China.
Full Year growth outlook
We expect our Resources related businesses to deliver a robust LFL revenue
performance at constant currency.
Mid to long-term growth outlook
Our Resources division will grow in the mid to long-term as we benefit from
investments in Energy to meet the demands of the growing population around the
world.
Presentation of Results
For the half year ended 30 June 2022
Adjusted results
To present the performance of the Group in a clear, consistent and comparable
format, certain items are disclosed separately on the face of the income
statement. These items, which are described in the Presentation of Results
section of this report and in note 3, are excluded from the adjusted results.
The figures discussed in this review (extracted from the income statement and
cash flow) are presented before Separately Disclosed Items (SDIs).
Like-for-Like growth
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 H1 21 results at H1 22 exchange rates.
Separately Disclosed Items
SDIs are items which by their nature or size, in the opinion of the Directors,
should be excluded from the adjusted results to provide readers with a clear
and consistent view of the business performance of the Group and its operating
divisions. Reconciliations of the Reported to Adjusted Performance Measures
are given below.
When applicable, these SDIs include amortisation of acquisition intangibles;
impairment of goodwill and other assets; the profit or loss on disposals of
businesses or other significant non-current assets; costs of acquiring and
integrating acquisitions; the cost of any fundamental restructuring; material
claims and settlements; and unrealised market gains/losses on financial
assets/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 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 and the integration of such acquisitions are excluded
from adjusted operating profit to provide useful information regarding the
underlying performance of the Group's operations.
Details of the SDIs for the six months ended 30 June 2022 and the comparative
period are given in note 3 to the Condensed Consolidated Interim Financial
Statements.
Reconciliation of Results to Adjusted Performance Measures (£m) 2022 H1 2022 H1 2022 H1 2021 H1 2021 H1 2021 H1
Results SDIs Adjusted Results SDIs Adjusted
Operating profit 197.0 20.3 217.3 184.5 17.2 201.7
Operating margin 13.2% 1.4% 14.6% 14.0% 1.3% 15.3%
Net financing costs (14.2) 0.4 (13.8) (15.4) - (15.4)
Profit before tax 182.8 20.7 203.5 169.1 17.2 186.3
Income tax expense (51.2) (3.1) (54.3) (44.0) (5.4) (49.4)
Profit for the year 131.6 17.6 149.2 125.1 11.8 136.9
Cash flow from operations 234.1 4.0 238.1 246.1 7.3 253.4
Cash flow from operations less net capex 196.4 4.0 200.4 206.6 7.3 213.9
Free cash flow 91.8 4.0 95.8 115.3 7.3 122.6
Basic earnings per share 75.9p 10.9p 86.8p 71.3p 7.3p 78.6p
Diluted earnings per share 75.6p 10.9p 86.5p 70.9p 7.3p 78.2p
Reconciliation of revenue Six months to 30 June 2022 Six months to 30 June 2021 Change
£m £m %
Reported revenue 1,491.7 1,317.6 13.2%
Less: Acquisitions/disposals/closures (64.4) (2.2)
Like-for-like revenue 1,427.3 1,315.4 8.5%
Impact of foreign exchange movements - 44.9
Like-for-like revenue at constant currency 1,427.3 1,360.3 4.9%
Reconciliation of financial net debt to adjusted EBITDA (£m) 30 June 2022 30 June 2021
Net debt 1,191.0 700.2
IFRS 16 lease liability (331.9) (265.3)
Financial net debt 859.1 434.9
2021 H2 2022 H1 2022 LTM 2020 H2 2021 H1 2021 LTM
Reported operating profit 248.7 197.0 445.7 231.3 184.5 415.8
Depreciation 76.9 77.3 154.2 78.1 73.7 151.8
Amortisation 10.3 9.9 20.2 8.6 8.4 17.0
EBITDA 335.9 284.2 620.1 318.0 266.6 584.6
SDIs 23.5 20.3 43.8 28.2 17.2 45.4
Adjusted EBITDA 359.4 304.5 663.9 346.2 283.8 630.0
Financial net debt / EBITDA 1.3x 0.7x
Constant currency reconciliations Six months to 30 June 2022 Six months to 30 June 2021 Change
£m £m %
Adjusted operating profit at actual rates 217.3 201.7 7.7%
Impact of foreign exchange movements - 7.3
Adjusted operating profit at constant rates 217.3 209.0 4.0%
Adjusted diluted EPS at actual rates 86.5p 78.2p 10.6%
Impact of foreign exchange movements - 2.9p
Adjusted diluted EPS at constant rates 86.5p 81.1p 6.7%
Diluted EPS at actual rates 75.6p 70.9p 6.6%
Impact of foreign exchange movements - 3.1p
Diluted EPS at constant rates 75.6p 74.0p 2.2%
Principal risks and uncertainties
The Board has overall responsibility for the establishment and oversight of
the Group's risk management framework. The Board has an established,
structured approach to risk management, which includes continuously assessing
and monitoring the key risks and uncertainties of the business. Based on this
review, the Board identified the below risks outlined on pages 44 to 49 of the
Group's Annual Report for 2021, which is available from our website
at www.intertek.com (http://www.intertek.com/) :
Operational
• Reputation
• Customer Service
• People Retention
• Macro-economic
• Healthy, safety and wellbeing
• Industry and Competitive Landscape
• IT Systems and Data security
• Coronavirus (Covid-19)
• Contracting
Legal and Regulatory
• Regulatory and Political Landscape
• Business Ethics
• Sustainability
Financial
• Financial Risk
The Board does not consider that there has been any significant change to the
nature of these risks and the key mitigating actions since the publication of
the Group's Annual Report for 2021.
The Business Review and Operating Review by Division include consideration of
the significance of key uncertainties affecting the Group in the remaining six
months of the year.
Management Reports and Trading Updates
Intertek will issue a Trading Update in the fourth quarter of 2022. The 2022
Full Year Results will be announced on 28 February 2023.
Half Year Results
If you require a printed copy of this statement, please contact the Group
Company Secretary. This statement is available on www.intertek.com.
Legal Notice
This Half 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.
Responsibility Statement of the Directors in Respect of the Half Year Report
We confirm that to the best of our knowledge:
· The condensed interim financial statements have been prepared in accordance
with UK adopted International Accounting Standard 34, 'Interim Financial
Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority and gives a true and fair
view of the assets, liabilities, financial position and profit of the Group;
· The interim management report includes a fair review of the information
required by:
a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication
of important events that have occurred during the first six months of the
financial year and their impact on the condensed set of financial statements;
and a description of the principal risks and uncertainties for the remaining
six months of the year; and
b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the entity during that period; and any changes in the related
party transactions described in the last Annual report that could do so.
On behalf of the Board of Intertek Group plc
André Lacroix Jonathan Timmis
Chief Executive Officer Chief Financial Officer
28 July 2022 28 July 2022
Independent review report to Intertek Group plc
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed Intertek Group plc's condensed consolidated interim financial
statements (the "interim financial statements") in the Half Year Report of
Intertek Group plc for the 6 month period ended 30 June 2022 (the "period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
· the Condensed Consolidated Interim Statement of Financial Position as
at 30 June 2022;
· the Condensed Consolidated Interim Income Statement and Condensed
Consolidated Interim Statement of Comprehensive Income for the period then
ended;
· the Condensed Consolidated Interim Statement of Cash Flows for the
period then ended;
· the Condensed Consolidated Interim Statement of Changes in Equity for
the period then ended; and
· the explanatory notes to the interim financial statements.
The interim financial statements included in the Half Year Report of Intertek
Group plc have been prepared in accordance with UK adopted International
Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the Half Year Report and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with this ISRE. However, future events or
conditions may cause the group to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Half Year Report, including the interim financial statements, is the
responsibility of, and has been approved by the directors. The directors are
responsible for preparing the Half Year Report in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority. In preparing the Half Year Report, including the
interim financial statements, the directors are responsible for assessing the
group's ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or to
cease operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the Half Year Report based on our review. Our conclusion,
including our Conclusions relating to going concern, is based on procedures
that are less extensive than audit procedures, as described in the Basis for
conclusion paragraph of this report. This report, including the conclusion,
has been prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We do not, in
giving this conclusion, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
28 July 2022
Condensed Consolidated Interim Income Statement
For the six months ended 30 June 2022
Six months to 30 June 2022 Six months to 30 June 2021 (Unaudited)
(Unaudited)
Notes Adjusted Results Separately Disclosed Items* Total 2022 Adjusted Results Separately Disclosed Items* Total 2021
£m £m £m £m
Revenue 2 1,491.7 - 1,491.7 1,317.6 - 1,317.6
Operating Costs (1,274.4) (20.3) (1,294.7) (1,115.9) (17.2) (1,133.1)
Group operating profit/(loss) 2 217.3 (20.3) 197.0 201.7 (17.2) 184.5
Finance income 0.8 - 0.8 0.8 - 0.8
Finance expense (14.6) (0.4) (15.0) (16.2) - (16.2)
Net financing costs (13.8) (0.4) (14.2) (15.4) - (15.4)
Profit/(loss) before income tax 203.5 (20.7) 182.8 186.3 (17.2) 169.1
Income tax (expense)/credit 4 (54.3) 3.1 (51.2) (49.4) 5.4 (44.0)
Profit/(loss) for the period 2 149.2 (17.6) 131.6 136.9 (11.8) 125.1
Attributable to:
Equity holders of the Company 140.0 (17.6) 122.4 126.7 (11.8) 114.9
Non-controlling interest 9.2 - 9.2 10.2 - 10.2
Profit/(loss) for the period 149.2 (17.6) 131.6 136.9 (11.8) 125.1
Earnings per share
Basic 5 86.8p 75.9p 78.6p 71.3p
Diluted 5 86.5p 75.6p 78.2p 70.9p
Dividends in respect of the period 34.2p 34.2p
* See Note 3
Condensed Consolidated Interim Statement of Comprehensive Income
For the six months ended 30 June 2022
Six months to 30 June 2022 (Unaudited) Six months to 30 June 2021 (Unaudited)
£m £m
Notes
Profit for the period 2 131.6 125.1
Other comprehensive income/(expense)
Remeasurements on defined benefit pension schemes 6 15.7 10.1
Tax on comprehensive income/(expense) items (7.2) 3.0
Items that will never be reclassified to profit or loss 8.5 13.1
Foreign exchange translation differences on foreign operations 183.0 (58.4)
Net exchange (loss)/gain on hedges of net investments in foreign operations (101.6) 19.2
Items that are or may be reclassified subsequently to profit or loss 81.4 (39.2)
Total other comprehensive income/(expense) for the period 89.9 (26.1)
Total comprehensive income for the period 221.5 99.0
Total comprehensive income for the period attributable to:
Equity holders of the company 211.1 91.0
Non-controlling interest 10.4 8.0
Total comprehensive income for the period 221.5 99.0
Condensed Consolidated Interim Statement of Financial Position
As at 30 June 2022
At 30 June 2022 (Unaudited) At 30 June 2021 (Unaudited) At 31 December 2021 (Audited)
£m £m £m
Notes
Assets
Property, plant and equipment 9 688.1 607.2 641.8
Goodwill 8 1,338.7 813.7 1,241.4
Other intangible assets 372.3 258.6 358.5
Long-term trade and other receivables 23.2 - -
Defined benefit pension asset 6 19.2 3.1 5.4
Deferred tax assets 39.9 46.0 39.3
Total non-current assets 2,481.4 1,728.6 2,286.4
Inventories* 17.2 16.9 14.9
Trade and other receivables* 747.1 616.5 661.9
Cash and cash equivalents 7 257.6 197.2 265.9
Current tax receivable 18.5 22.4 20.6
Total current assets 1,040.4 853.0 963.3
Total assets 3,521.8 2,581.6 3,249.7
Liabilities
Interest bearing loans and borrowings 7 (47.5) (114.3) (462.0)
Current taxes payable (57.3) (47.1) (59.1)
Lease liabilities (71.5) (61.1) (63.5)
Trade and other payables* (669.8) (542.9) (667.8)
Provisions* (12.5) (28.9) (13.2)
Total current liabilities (858.6) (794.3) (1,265.6)
Interest bearing loans and borrowings 7 (1,069.2) (517.8) (537.2)
Lease liabilities (260.4) (204.2) (228.8)
Deferred tax liabilities (78.9) (55.6) (67.4)
Defined benefit pension liabilities 6 (1.3) (2.8) (4.0)
Other payables* (33.9) (24.7) (31.9)
Provisions* (0.7) (5.0) (0.5)
Total non-current liabilities (1,444.4) (810.1) (869.8)
Total liabilities (2,303.0) (1,604.4) (2,135.4)
Net assets 1,218.8 977.2 1,114.3
Equity
Share capital 1.6 1.6 1.6
Share premium 257.8 257.8 257.8
Other reserves (22.3) (117.8) (102.5)
Retained earnings 944.6 804.3 925.1
Total equity attributable to equity holders of the Company 1,181.7 945.9 1,082.0
Non-controlling interest 37.1 31.3 32.3
Total equity 1,218.8 977.2 1,114.3
* Working capital of £43.7m (H1 21: £31.6m) comprises the asterisked items
in the above Statement of Financial Position less refundable deposits aged
over 12 months of £nil (H1 21: £0.3m) & IFRS16 Lease Receivable of
£3.7m (H1 21: £nil).
Condensed Consolidated Interim Statement of Changes in Equity
For the six months ended 30 June 2022
Attributable to equity holders of the Company
Other Reserves
Share Capital Share premium Translation reserve Other Retained Earnings Total before non-controlling interest Non-controlling interest Total equity
£m £m £m £m £m £m £m £m
At 1 January 2021 1.6 257.8 (87.2) 6.4 796.4 975.0 28.0 1,003.0
Total comprehensive (expense)/income for the period
Profit - - - - 114.9 114.9 10.2 125.1
Other comprehensive (expense)/income - - (37.0) - 13.1 (23.9) (2.2) (26.1)
Total comprehensive (expense)/income for the period - - (37.0) - 128.0 91.0 8.0 99.0
Transactions with owners of the company recognised directly in equity
Contributions by and distributions to the owners of the company
Dividends paid - - - - (115.5) (115.5) (4.7) (120.2)
Purchase of own shares - - - - (6.4) (6.4) - (6.4)
Tax paid on share awards vested(1) - - - - (6.4) (6.4) - (6.4)
Equity-settled transactions - - - - 8.2 8.2 - 8.2
Total contributions by and distributions to the owners of the company - - - - (120.1) (120.1) (4.7) (124.8)
At 30 June 2021 (unaudited) 1.6 257.8 (124.2) 6.4 804.3 945.9 31.3 977.2
At 1 January 2022 1.6 257.8 (108.9) 6.4 925.1 1,082.0 32.3 1,114.3
Total comprehensive (expense)/income for the period
Profit - - - - 122.4 122.4 9.2 131.6
Other comprehensive (expense)/income - - 80.2 - 8.5 88.7 1.2 89.9
Total comprehensive (expense)/income for the period - - 80.2 - 130.9 211.1 10.4 221.5
Transactions with owners of the company recognised directly in equity
Contributions by and distributions to the owners of the company
Dividends paid - - - - (115.5) (115.5) (5.6) (121.1)
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 - - - - 10.8 10.8 - 10.8
Total contributions by and distributions to the owners of the company - - - - (111.4) (111.4) (5.6) (117.0)
At 30 June 2022 (unaudited) 1.6 257.8 (28.7) 6.4 944.6 1,181.7 37.1 1,218.8
( )
(1) The tax paid on share awards vested is related to settlement of the tax
obligation by the Group via the sale of a portion of the equity-settled
shares.
The £115.5m dividend paid on 17 June 2022 represented a final dividend of
71.6p per ordinary share in respect of the year ended 31 December 2021 which
was approved and paid during the period. The £115.5m dividend paid on 18 June
2021 represented a final dividend of 71.6p per ordinary share in respect of
the year ended 31 December 2020. No ordinary shares were issued in the period
to satisfy the vesting of share awards.
Condensed Consolidated Interim Statement of Cash Flows
For the six months ended 30 June 2022
Six months to 30 June 2022 (Unaudited) Six months to 30 June 2021 (Unaudited)
£m £m
Notes
Cash flows from operating activities
Profit for the period 2 131.6 125.1
Adjustments for:
Depreciation charge 77.3 73.7
Amortisation of software 9.9 8.4
Amortisation of acquisition intangibles 16.5 13.3
Equity-settled transactions 10.8 8.2
Net financing costs 14.2 15.4
Income tax expense 4 51.2 44.0
Profit on disposal of property, plant, equipment and software (0.8) (0.3)
Operating cash flows before changes in working capital and operating 310.7 287.8
provisions
Change in inventories (1.0) (1.7)
Change in trade and other receivables (39.4) (15.0)
Change in trade and other payables (32.9) (21.3)
Change in provisions (1.3) (1.7)
Special contributions into pension schemes 6 (2.0) (2.0)
Cash generated from operations 234.1 246.1
Interest and other finance expense paid (15.8) (13.9)
Income taxes paid (50.8) (45.2)
Net cash flows generated from operating activities* 167.5 187.0
Cash flows from investing activities
Proceeds from sale of property, plant, equipment and software* 3.4 0.5
Interest received* 0.8 0.8
Acquisition of property, plant, equipment, software* 9 (41.1) (40.0)
Net cash flows used in investing activities (36.9) (38.7)
Cash flows from financing activities
Purchase of own shares (2.3) (6.4)
Tax paid on share awards vested (4.4) (6.4)
Drawdown of borrowings 477.9 45.2
Repayment of borrowings (476.5) -
Repayment of lease liabilities* (38.8) (33.0)
Dividends paid to non-controlling interest (5.6) (4.7)
Equity dividends paid (115.5) (115.5)
Net cash flows used in financing activities (165.2) (120.8)
Net (decrease)/increase in cash and cash equivalents 7 (34.6) 27.5
Cash and cash equivalents at 1 January 7 264.0 183.4
Effect of exchange rate fluctuations on cash held 7 12.6 (17.1)
Cash and cash equivalents at end of period 7 242.0 193.8
*Free cash flow of £91.8m (H1 21: £115.3m) comprises the asterisked items in
the above Statement of Cash Flows.
Adjusted cash flow from operations of £238.1m (H1 21: £253.4m) comprises
statutory cash flow from operations of £234.1m (H1 21: £246.1m) before cash
outflows relating to Separately Disclosed Items of £4.0m (H1 21: £7.3m).
Notes to the Condensed Consolidated Interim Financial Statements
1. Basis of Preparation
Reporting entity
Intertek Group plc (the 'Company') is a company incorporated and domiciled in
the United Kingdom. The Condensed Consolidated Interim Financial Statements of
the Company as at and for the six months ended 30 June 2022 comprise the
Company and its subsidiaries (together referred to as the 'Group').
The Consolidated Financial Statements of the Group as at, and for the year
ended, 31 December 2021 are available upon request from the Company's
registered office at 33 Cavendish Square, London, W1G 0PS. An electronic
version is available from the Investors section of the Group website at
www.intertek.com.
Statement of compliance
These Condensed Consolidated Interim Financial Statements for the half-year
reporting period ended 30 June 2022 have been prepared in accordance with the
UK-adopted International Accounting Standards 34, 'Interim Financial
Reporting' ("IAS 34") and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority. They do not
include all of the information required for full annual financial statements
and should be read in conjunction with the Consolidated Financial Statements
of the Group as at and for the year ended 31 December 2021. These Condensed
Consolidated Interim Financial Statements do not comprise statutory accounts
within the meaning of section 434 of the Companies Act 2006.
The Condensed Consolidated Financial Statements have also been prepared in
accordance with the accounting policies set out in the 2021 Annual Report and
have been prepared under the historical cost convention as modified by the
revaluation of certain financial assets and liabilities (including derivative
financial instruments) at fair value.
The comparative figures for the financial year ended 31 December 2021 are the
Company's statutory accounts for that financial year. Those accounts have been
reported on by the Company's auditors and delivered to the Registrar of
Companies. The report of the auditor was (i) unqualified, (ii) did not include
a reference to any matters to which the auditors drew attention by way of
emphasis without qualifying their report, and (iii) did not contain a
statement under section 498(2) or (3) of the Companies Act 2006.
Significant accounting policies
These Condensed Consolidated Interim Financial Statements are unaudited and,
except as described below, have been prepared on the basis of accounting
policies consistent with those applied in the Consolidated Financial
Statements for the year ended 31 December 2021.
There are no significant new accounting standards that are effective for
annual periods beginning on or after 1 January 2022 that have a material
effect on the results of the Group.
Key estimations and uncertainties
The preparation of interim 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. There are no
critical accounting judgements.
In preparing these Condensed Consolidated Interim Financial Statements, the
nature of the significant judgements made by management in applying the
Group's accounting policies and the key sources of estimation were the same as
those that were applied to the Consolidated Financial Statements as at and for
the year ended 31 December 2021. During the six months ended 30 June 2022
management reassessed its estimates and judgements in respect of pensions
(note 6) and impairment (note 8(c)).
Risks and uncertainties
The Operating Review includes consideration of the risks and uncertainties
affecting the Group in the remaining six months of the year.
The Board has reviewed the Group's financial forecasts up to 31 December 2023,
to assess both liquidity requirements and debt covenants. In addition, these
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). The Board remains satisfied with the Group's funding and
liquidity position, with the Group forecasts to remain within its committed
facilities and compliant with debt covenants even following the 30% downside
sensitivity. On the basis of its forecasts to 31 December 2023, both base case
and stressed, and available facilities, the Board has concluded that there are
no material uncertainties over going concern, including no anticipated breach
of covenants, and therefore the going concern basis of preparation continues
to be appropriate.
Foreign exchange
The assets and liabilities of foreign operations, including goodwill 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 expense
Actual Rates Cumulative average rates
Value of £1 30 June 2022 30 June 2021 31 December 2021 H1 22 H1 21 FY 21
US dollar 1.22 1.39 1.35 1.30 1.39 1.38
Euro 1.16 1.16 1.19 1.19 1.15 1.16
Chinese renminbi 8.18 8.97 8.59 8.39 8.99 8.89
Hong Kong dollar 9.56 10.78 10.52 10.15 10.78 10.70
Australian dollar 1.76 1.83 1.86 1.81 1.80 1.83
2. Operating segments
Business analysis
The Group is organised into business lines, which are the Group's operating
segments and are reported to the CEO, the chief operating decision maker.
These operating segments are aggregated into three divisions, which are the
Group's reportable segments, based on similar nature of products and services
and mid- to long-term structural growth drivers. When aggregating operating
segments into the three divisions we have applied judgement over the
similarities of the services provided, the customer-base and the mid- to
long-term structural growth drivers. The costs of the corporate head office
and other costs which are not controlled by the three divisions are allocated
appropriately. A description of the activity in each division is given in the
Operating Review by Division.
The results of the divisions are shown below:
Six months to 30 June 2022 Revenue from external customers Depreciation and software amortisation Adjusted operating profit Separately disclosed items Operating profit
£m £m £m £m £m
Products 951.0 (55.0) 183.2 (16.8) 166.4
Trade 299.6 (21.2) 22.7 (1.4) 21.3
Resources 241.1 (11.0) 11.4 (2.1) 9.3
Total 1,491.7 (87.2) 217.3 (20.3) 197.0
Group operating profit 217.3 (20.3) 197.0
Net financing costs (13.8) (0.4) (14.2)
Profit before income tax 203.5 (20.7) 182.8
Income tax (expense)/credit (54.3) 3.1 (51.2)
Profit for the year 149.2 (17.6) 131.6
Six months to 30 June 2021 Revenue from external customers Depreciation and software amortisation Adjusted operating profit Separately disclosed items Operating profit
£m £m £m £m £m
Products 819.5 (50.7) 170.9 (13.5) 157.4
Trade 278.2 (21.4) 20.1 (0.6) 19.5
Resources 219.9 (10.0) 10.7 (3.1) 7.6
Total 1,317.6 (82.1) 201.7 (17.2) 184.5
Group operating profit 201.7 (17.2) 184.5
Net financing costs (15.4) - (15.4)
Profit before income tax 186.3 (17.2) 169.1
Income tax (expense)/credit (49.4) 5.4 (44.0)
Profit for the year 136.9 (11.8) 125.1
3. Separately Disclosed Items (SDIs)
Six months to 30 June 2022 Six months to 30 June 2021
£m £m
Operating costs
Amortisation of acquisition intangibles (a) (16.5) (13.3)
Acquisition and integration costs (b) (3.8) (3.9)
Total operating costs (20.3) (17.2)
Net financing costs (c) (0.4) -
Total before income tax (20.7) (17.2)
Income tax credit on Separately Disclosed Items (d) 3.1 5.4
Total (17.6) (11.8)
Refer to Presentation of Results section for further details on SDIs.
(a) The amortisation of acquisition intangibles relates to customer
relationships, trade names, technology and non-compete covenants acquired.
(b) Acquisition and integration costs relating to acquisition activity in
the period and integration of prior period acquisitions were £3.8m (H1 21:
£3.9m).
(c) Net financing costs of £0.4 (H1 21: £nil) relates to interest paid
on tax for acquired entities.
(d) Income tax credit on SDIs totalled £3.1m (H1 21: £5.4m) mainly
relating to amortisation of intangible assets.
4. Income tax expense
Income tax expense is recognised based on management's best estimate of the
weighted average annual income tax rate expected for the full financial year
applied to the pre-tax income of the interim period in respect of the adjusted
results. The income tax expense for adjusted results for the six months ended
30 June 2022 is £54.3m (H1 21: £49.4m). The Group's adjusted consolidated
effective tax rate for the six months ended 30 June 2022 is 26.7% (H1 21:
26.5%). The income tax expense for the total results for the six months ended
30 June 2022 is £51.2m (H1 21: £44.0m). The Group's consolidated effective
tax rate for the six months ended 30 June 2022 is 28.0% (H1 21: 26.0%). The
increase is mainly driven by a one-off prior year adjustment debit to
intangible and goodwill deferred tax position at H1 22.
Differences between the estimated adjusted effective rate of 26.7% and the
weighted average notional statutory UK rate of 19.0% include, but are not
limited to, the mix of profits, the effect of tax rates in foreign
jurisdictions, non-deductible expenses, movement in the provision for
uncertain tax positions, withholding tax on intra-group dividends, tax exempt
income and under/over provisions in previous periods.
5. Earnings per share (EPS)
Six months to 30 June 2022 Six months to 30 June 2021
£m £m
Based on the profit for the period:
Profit attributable to ordinary shareholders 122.4 114.9
Separately Disclosed Items after tax (note 3) 17.6 11.8
Adjusted earnings 140.0 126.7
Number of shares (millions):
Basic weighted average number of ordinary shares 161.2 161.2
Potentially dilutive share awards 0.6 0.8
Diluted weighted average number of shares 161.8 162.0
Basic earnings per share 75.9p 71.3p
Potentially dilutive share awards (0.3p) (0.4p)
Diluted earnings per share 75.6p 70.9p
Adjusted basic earnings per share 86.8p 78.6p
Potentially dilutive share awards (0.3p) (0.4p)
Adjusted diluted earnings per share 86.5p 78.2p
6. Pension schemes
During the period, the Group made a special contribution of £2.0m (H1 21:
£2.0m) into The Intertek Pension Scheme in line with a Minimum Funding
Requirement agreement.
The Group obtained updated actuarial valuations to 31 May 2022, the asset and
liability values have been reviewed and have not moved materially in the month
to 30 June 2022. A net actuarial gain before taxation of £15.7m (H1 21:
£10.1m) has been recognised in the consolidated statement of comprehensive
income. The net pension asset stands at £19.2m for the UK pension scheme (31
December 2021: £5.4m) and a net pension liability of £1.3m for the Swiss
pension scheme as at 30 June 2022 (31 December 2021: £4.0m).
7. Analysis of net debt
30 June 2022 30 June 2021 31 December 2021
£m £m £m
Cash and cash equivalents per the Statement of Financial Position 257.6 197.2 265.9
Overdrafts (15.6) (3.4) (1.9)
Cash per the Statement of Cash Flows 242.0 193.8 264.0
The components of net debt are outlined below:
1 January 2022 Cash flow Non-cash adjustments Exchange adjustments 30 June 2022
£m £m £m £m £m
Cash 264.0 (34.6) - 12.6 242.0
Borrowings:
Revolving credit facility US$850m 2027 (65.9) 10.9 - (2.2) (57.2)
Senior notes US$140m 2022 (103.8) 103.0 - 0.8 -
Acquisition facility 'B' AU$264.1m 2022 (141.9) 143.6 - (1.7) -
Acquisition facility 'B' US$290.7m 2022 (215.5) 218.2 - (2.7) -
Senior notes US$160m 2023 (118.6) - - (12.0) (130.6)
Acquisition facility 'A' AU$88.0m 2023 (47.3) - - (2.6) (49.9)
Acquisition facility 'A' US$96.9m 2023 (72.0) - - (7.6) (79.6)
Senior notes US$125m 2024 (92.7) - - (9.9) (102.6)
Senior notes US$120m 2025 (88.8) - - (9.6) (98.4)
Senior notes US$75m 2026 (55.5) - - (6.0) (61.5)
Senior notes US$150m 2027 - (109.4) - (13.7) (123.1)
Senior notes US$165m 2028 - (123.8) - (11.6) (135.4)
Senior notes US$165m 2029 - (123.8) - (11.6) (135.4)
Senior notes US$160m 2030 - (120.1) - (11.2) (131.3)
Other* 4.7 - (0.8) - 3.9
Total borrowings (997.3) (1.4) (0.8) (101.6) (1,101.1)
Total financial net debt (733.3) (36.0) (0.8) (89.0) (859.1)
Lease liability (292.3) 38.8 (58.5) (19.9) (331.9)
Total net debt (1,025.6) 2.8 (59.3) (108.9) (1,191.0)
*Other borrowings include other uncommitted borrowings of £0.8m (1 Jan 2022:
£0.8m) and facility fees of £4.7m (1 Jan 2022: £5.5m).
Total undrawn committed borrowing facilities as at 30 June 2022 were £640.4m
(31 December 2021: £564.2m).
30 June 2022 30 June 2021 31 December 2021
£m £m £m
Borrowings due in less than one year 32.0 110.9 460.1
Borrowings due in one to two years 312.8 28.1 236.4
Borrowings due in two to five years 354.4 435.7 235.3
Borrowings due in over five years 401.9 54.0 65.5
Total borrowings 1,101.1 628.7 997.3
Key Facilities
The Group has a US$850m multi-currency revolving facility which is the Group's
principal facility. Drawings under the facility as at the 30 June 2022 were
£57.2m.
In December 2021 the Group issued US$640m of senior notes that were drawn in
the first half of 2022. The drawings were used to repay both a US$140m senior
note that matured on the 18 January 2022 and Facility 'B' of the US$692m
multi-currency acquisition facility, that consisted of AU$264.1m and
US$290.7m, and was settled on 1 March 2022.
Further details of the Group's borrowing facilities were disclosed in note 14
to the 2021 Annual Report.
Fair Values
The carrying value of interest-bearing loans and borrowings is £1,101.1m. The
fair value, based on the present value of the future principal and interest
cash flows discounted at the market rate at reporting date, was £1,013.5m.
The carrying values of trade and other payables are considered approximate to
their fair values.
The carrying value of derivative assets/liabilities (namely foreign currency
forwards) is equal to their fair value. The fair value of foreign currency
forwards is estimated using present value of future cash flows based on the
forward exchange rates at the balance sheet date. Derivative liabilities of
£0.2m are included within trade and other payables (H1 21: £0.2m derivative
assets included within trade and other receivables).
The fair value of cash and cash equivalents is based on the sterling
equivalent value of the Group's cash balances at the market rate, which at
reporting date was £242.0m. There is no material difference between the
carrying values of trade and other receivables and their fair values, due to
their short-term duration. There is no concentration of credit risk with
respect to trade receivables as the Group has a large number of customers who
are internationally dispersed.
8. Acquisition of new businesses
(a) Acquisitions
The Group completed no acquisitions in the first six months of 2022 (H1 21:
none).
(b) Details of 2021 acquisitions
The Group completed three acquisitions in 2021. Further details of these
acquisitions can be found in note 10 of the 2021 Annual Report. The
provisional fair value adjustments disclosed in note 10 to the 2021 Annual
Report have been updated resulting in an increase in goodwill of £1.1m which
includes a decrease in deferred tax liability of £1.9m.
(c) Impairment
Goodwill generated from past acquisitions has been tested annually as required
by accounting standards. No impairment triggers were identified during the
period and as such no impairment charge was recorded (H1 21: £nil).
(d) Reconciliation of Goodwill
£m
Goodwill at 1 January 2022 1,241.4
Additions -
Fair value adjustments 1.1
Foreign exchange 96.2
Goodwill at 30 June 2022 1,338.7
9. Property, plant, equipment and computer software
(a) Property, plant, equipment additions
During the six months ended 30 June 2022, the Group acquired property, plant
and equipment with a cost of £33.7m (H1 21: £31.2m; year ended 31 December
2021: £77.6m).
During the six months ended 30 June 2022, the Group did not acquire property,
plant and equipment through business combinations (H1 21: £nil; year ended 31
December 2021: £6.1m). At 30 June 2022, the IFRS 16 right of use asset is
£303.9m (H1 21: £243.7m; year ended 31 December 2021: £266.8m).
(b) Computer software additions
During the six months ended 30 June 2022, the Group acquired computer software
with a cost of £7.4m (H1 21: £8.8m; year ended 31 December 2021: £19.4m).
During the six months ended 30 June 2022, the Group did not acquire computer
software through business combinations (H1 21: £nil; year ended 31 December
2021: £5.7m).
(c) Capital Commitments
Contracts for capital expenditure which are not provided in these accounts
amounted to £16.3m (H1 21: £17.6m).
10. Related parties
There are no material changes in related parties or in related party
transactions from those described in the 2021 Annual Report.
11. Subsequent events
In June 2022 the Group signed an agreement to acquire Clean Energy Associates,
with the transaction expected to complete in August 2022 subject to successful
satisfaction of closing conditions.
12. Approval
The Condensed Consolidated Interim Financial Statements were approved by the
Board on 28 July 2022.
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