REG - Intertek Group Plc - Half-year Report
28/07/2023 07:00
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RNS Number : 4829H Intertek Group PLC 28 July 2023
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2023 HALF YEAR RESULTS ANNOUNCEMENT
28 July 2023
Revenue Growth Acceleration, Margin Progression and Higher ROIC
• Revenue of £1,640.0m, +8.3% at constant rates and +9.9% at actual
rates
• LFL revenue growth of +7.1% at constant rates, highest LFL revenue
growth in the last 10 years
• JLA, SAI and CEA acquisitions performing well, and Controle
Analitico integration on track
• Adjusted operating profit of £245.4m, +13.3% at constant rates and
+12.9% at actual rates
• Adjusted operating margin of 15.0%, +70bps at constant rates and
+40bps at actual rates
• Adjusted diluted EPS of 95.2p, +10.6% at constant rates and +10.1%
at actual rates
• Daily cash discipline drives strong growth in operating cash flow of
13.6%
• Robust adjusted free cash flow of £79.6m and a strong balance sheet
with 1.1x net debt to EBITDA
• ROIC of 19.3%, +120bps year on year at constant rates and +260bps at
actual rates
• Interim dividend of 37.7p, +10.1% year on year, providing
sustainable returns to our shareholders
• Cost reduction programme targeting higher annualised savings of
c£19m with £7-8m expected in 2023
• Enhanced segmental disclosure to provide a deeper understanding of
our ATIC structural growth drivers
• 2023 outlook: Mid-single digit LFL revenue growth, margin
progression and strong free cash flow
• AAA Growth Strategy in place to unlock the significant value growth
opportunity ahead
André Lacroix: Chief Executive Officer Statement
"I would like to recognise my colleagues at Intertek for having delivered a
robust financial performance in the first half with LFL revenue growth
acceleration, margin progression, and a higher ROIC. Our LFL revenue growth
momentum is accelerating, given the higher demand for our ATIC solutions and
we have delivered the highest LFL revenue growth in the last 10 years with
7.1% at constant rates based on LFL revenue growth in China of 7.3% and
outside of China of 7.0%. We have made progress on margin which was up YoY by
70bps at constant rates, as we benefitted from our pricing and productivity
initiatives. Our free cash flow was robust, driven by our daily cash
discipline with operating cash flow up 13.6%, resulting in a strong balance
sheet with a net debt to EBITDA of 1.1x. I am pleased that we have announced
this morning a 10.1% increase in the interim dividend.
We expect to deliver a robust performance in 2023, given the increased demand
for our ATIC solutions, the strengths of our portfolio, our superior ATIC
customer service, our productivity and cost initiatives, as well as our daily
cash flow discipline. We expect the Group will deliver mid-single digit LFL
revenue growth at constant currency, with margin progression year on year, and
a strong free cash flow performance.
Our clients are increasing their focus on Risk-based Quality Assurance to
operate with higher standards on quality, safety and sustainability in each
part of their value chain, triggering a higher demand for our ATIC solutions
which are powered by our Science-based Customer Excellence ATIC advantage. We
have made significant progress on our portfolio which is poised for faster
growth given that all of our business lines are expected to benefit from
attractive structural growth.
At our Capital Markets event in London in May, we unveiled our Intertek 30 AAA
Growth Strategy to capitalise on the best-in-class operating platform we have
built and target the areas where we have opportunities to get better. Our
passionate, innovative, and customer-centric organisation is laser-focussed to
take Intertek to greater heights putting our AAA growth strategy in action and
deliver sustainable growth and value for all stakeholders. We are targeting
mid-single digit LFL revenue growth, margin accretion to go back to our 17.5%
peak margin and beyond, and strong cash generation, while pursuing disciplined
investments in attractive growth and margin sectors.
We operate a differentiated, high-quality growth business with excellent
fundamentals and intrinsic defensive characteristics, giving our customers the
Intertek Science-based ATIC advantage to strengthen their businesses. Our
leading ATIC solutions are mission-critical for the world to operate safely
and the growth in our end-markets is accelerating. The implementation of our
Intertek 30 AAA Growth Strategy will capitalise on our high-quality earnings
and cash compounder model to unlock the significant value growth opportunity
ahead"
Key Adjusted Financials 2023 H1 2022 H1 Change at actual rates Change at constant rates1
Revenue £1,640.0m £1,491.7m 9.9% 8.3%
Like-for-like revenue2 £1,621.7m £1,491.7m 8.7% 7.1%
Operating profit3 £245.4m £217.3m 12.9% 13.3%
Operating margin3 15.0% 14.6% 40bps 70bps
Profit before tax3 £223.2m £203.5m 9.7% 10.4%
Diluted earnings per share3 95.2p 86.5p 10.1% 10.6%
Interim dividend per share 37.7p 34.2p 10.1%
Cash generated from operations3 £270.5m £238.1m 13.6%
Free cash flow3 £79.6m £95.8m (16.9%)
Financial net debt4 £791.3m £859.1m (7.9%)
Financial net debt / EBITDA3, 4 1.1x 1.3x
ROIC (rolling 12 months) 19.3% 16.8% 260bps 120bps
Key Statutory Financials 2023 H1 2022 H1 Change at 1 Constant rates are calculated by translating H1 22 results at H1 23 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 20.
4 Financial net debt excludes the IFRS 16 lease liability of £298.2m. Total
net debt is £1,089.5m. Reflects prior 12 months' EBITDA for relevant period.
See note 7 on page 38.
Revenue £1,640.0m £1,491.7m 9.9%
Operating profit £215.0m £197.0m 9.1%
Operating margin 13.1% 13.2% (10bps)
Profit before tax £191.7m £182.8m 4.9%
Profit after tax £142.3m £131.6m 8.1%
Diluted earnings per share 80.4p 75.6p 6.3%
Cash generated from operations £261.6m £234.1m 11.7%
The Directors have approved an interim dividend of 37.7p per share (H1 22:
34.2p) to be paid on 6 October 2023 to shareholders on the register at close
of business on 15 September 2023.
Contacts
For further information, please contact:
Denis Moreau, Investor Relations
Telephone: +44 (0) 20 7396 3415
investor@intertek.com (mailto:investor@intertek.com)
Jonathon Brill/James Styles, Dentons Global Advisors
Telephone: +44 (0) 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)
Intertek CEO Letter
I would like to recognise my colleagues at Intertek for having delivered a
robust financial performance in the first half with LFL revenue growth
acceleration, margin progression, and a higher ROIC confirming the significant
value growth opportunity ahead. Our LFL revenue growth momentum is
accelerating, given the higher demand for our ATIC solutions and we have
delivered the highest LFL revenue growth in the last 10 years with 7.1% at
constant rates based on LFL revenue growth in China of 7.3% and outside of
China of 7.0%. We have made progress on margin which was up YoY by 70bps at
constant rates, as we benefitted from our pricing and productivity
initiatives. Our free cash flow was robust driven by our daily cash discipline
delivering an operating cash flow growth of 13.6%, resulting in a strong
balance sheet with a net debt to EBITDA of 1.1x. I am pleased that we have
announced this morning a 10.1% increase in the interim dividend.
The SAI, JLA and CEA acquisitions that we made to scale up our portfolio in
attractive growth and margin sectors are performing well, in line with our
expectations. Moreover, the integration of our recent acquisition, Controle
Analítico, is making good progress.
We expect to deliver a robust performance in 2023, given the increased demand
for our ATIC solutions, the strengths of our portfolio, our superior customer
service, our productivity and cost initiatives, as well as our daily cash flow
discipline. We expect the Group will deliver mid-single digit LFL revenue
growth at constant currency, with margin progression year on year, and a
strong free cash flow performance.
We announced a cost reduction programme in March that targets productivity
opportunities based on operational streamlining and technology upgrade
initiatives to deliver c. £6-7m savings in 2023 with £15m annualised savings
when the programme is complete.
The execution of cost reduction programme is on track, and we saw a resultant
10bps margin improvement in H1 23.
In H1 we have also identified additional restructuring opportunities which
should deliver an annualised savings of £4m and c. £1m in 2023.
In total, the 2022 and 2023 cost reduction programme should deliver annual
savings of £19m, and we expect savings of £7-8m in 2023 of which £1.7m is
delivered in H1. The total restructuring cost of the programme is £37m.
Strong Value Delivered
A few years ago, we took the decision to reinvent ourselves, making Assurance,
Testing, Inspection and Certification, or ATIC, our Customer Promise. We
rebranded the Company in 2017 and positioned Intertek as Total Quality.
Assured.
Our strategic goal with ATIC was to provide a better-quality Assurance
customer service, given how much global trade had changed in the last 50
years. Today, companies operate in a truly global market, running complex
global multi-sourcing and manufacturing operations, pursuing an omni-channel
approach, when distributing their products and services globally and locally.
In 2016 we were ahead of our time and today our clients agree that our
industry has changed and is now all about Risk-Based Quality Assurance powered
by ATIC. Indeed, all the quality, safety and supply issues companies have
faced pre and during Covid have convinced Boards and executive teams to
increase their focus on systemic risk management across their value chains.
Assurance provides the independent end-to-end data on where the quality,
safety and sustainability risks are in the entire value chain of any company,
while Testing, Inspection and Certification provide the critical independent
quality controls in the high-risk areas of the entire value chain.
We have made strong progress between 2014 and 2022 and have delivered
sustainable growth in revenue, profit, margin and dividend while operating
with a robust balance sheet and delivering strong returns.
Intertek 2014-2022 Value Delivery:
Metric(1) 2014(2) 2022 Change
Revenue £2,093m £3,193m 53%
EBITDA £400.9m £700.6m 75%
Operating profit £324.6m £520.1m 60%
Operating margin 15.5% 16.3% 80bps
Diluted earnings per share 132.1p 211.1p 60%
Dividend 49.1p 105.8p 115%
WC as % Revenue 9.3% (1.5%) (10.8ppts)
Free cash flow £202m £386m 91%
ROIC 16.3% 18.0% 170bps
Net debt/EBITDA 1.6x 1.1x (0.5x)
Note (1): On an adjusted basis, (2) 2014 metrics are on an IAS17 basis
Faster Global Growth for ATIC Solutions
Our industry has always benefitted from attractive growth drivers and in a
post-Covid world everyone wants to build an ever-better world. Based on our
research, corporations will invest more in quality, safety, and
sustainability, accelerating the demand for our ATIC industry-leading
solutions.
Indeed, our customer research shows these attractive structural growth drivers
will be augmented by:
• An increase in new clients
• Higher investments in safer supply
• Higher investments in innovation
• A step change in sustainability
• Higher growth in the World of Energy
We are seeing significant growth in the number of companies globally given the
lower barriers to entry for any brand with e-commerce capabilities. The lack
of Quality Assurance expertise of these young companies is excellent news for
our Global Market Access solutions. Our decentralised Customer 1st
organisation has a strong track record of winning new clients.
Covid has been a catalyst for many corporations to improve the resilience of
their supply chains. We are seeing a significant change of focus within our
clients on how they manage their value chains with:
· Better data on what is happening in all parts of the supply chain
· Tighter risk management with razor-sharp business continuity planning
· A more diversified portfolio strategy with tier 1/2/3 suppliers
· A more diversified portfolio strategy regarding factories
· Investments in processes, technology, training, and independent
assurance
Our superior Assurance offering means we are well positioned to help our
clients reduce the intrinsic risks in their operations.
Our clients have also realised that they need to invest more in product and
service innovation to meet the changing needs of their customers. A recent
survey by Gartner shows that 60% of R&D leaders expect to increase their
R&D investments in 2023. These investments in innovation mean a higher
number of SKUs and a higher number of tests per SKUs - which will be
beneficial for our Testing and Certification solutions.
The other major area of investment inside corporations is of course
sustainability and we are seeing positive momentum with new and emerging
regulation. This means companies will have to re-invent the way they manage
their sustainability agenda with a greater emphasis on independently verified
non-financial disclosures. This is excellent news for our industry leading
Total Sustainability Assurance solutions. Sustainability is the movement of
our time.
The growth opportunities in the World of Energy are truly exciting as the
energy companies are planning higher investments. In 2022, we all witnessed
the concerns reflecting energy security, and everyone agrees that global
energy production capacity is an issue that needs to be addressed quickly to
meet the growing demand for energy today. Given the under-investments in
traditional O&G exploration and production in the last decade and the lack
of scale for Renewables, investment for production in traditional O&G and
in Renewables will increase. This is excellent news for our Caleb Brett and
Moody businesses.
Intertek 30 AAA Growth Strategy
At our Capital Markets event in London on 3rd and 4th May, we unveiled our
Intertek 30 AAA Growth Strategy to capitalise on the best-in-class operating
platform we have built and target the areas where we have opportunities to get
better. Our passionate, innovative, and customer-centric organisation is
energised to take Intertek to greater heights delivering AAA performance for
all stakeholders. We are focussed on delivering value consistently, targeting
mid-single digit LFL revenue growth, margin accretion to go back to our 17.5%
peak margin and beyond, and strong cash generation, while pursuing disciplined
investments in attractive growth and margin sectors.
We have made strong progress between 2014 and 2022 delivering sustainable
growth and value for our stakeholders and we are very excited about the
significant growth value opportunity ahead, capitalising on our
Science‐based Customer Excellence TQA advantage.
Our clients understand the mission‐critical nature of risk‐based quality
assurance to make their businesses stronger operating with higher quality,
safety and sustainability standards. Therefore, we expect the demand for our
ATIC solutions to grow faster post‐Covid.
Our Intertek 30 AAA Growth Strategy is about being the best and creating
significant value for every stakeholder every day.
We want to be the most trusted TQA partner for our customers, the employer of
choice with our employees, to demonstrate sustainability excellence everywhere
in our community and deliver significant growth and value for our
shareholders.
To seize the significant growth value opportunity ahead we will be
laser-focussed on three strategic priorities and three strategic enablers. Our
Strategic Priorities are defined as Science-based Customer Excellence TQA,
Brand Push & Pull and Winning Innovations, and our three strategic
enablers are based on 10X Purpose-based Engagement, Sustainability Excellence
and Margin Accretive Investments. We will both further improve where we are
already strong and address the areas where we can get better.
Our high‐quality portfolio is poised for faster growth:
· The depth and breadth of our ATIC solutions positions us well to
seize the increased corporate needs for Risk‐based Quality Assurance
· All of our global business lines have plans in place to seize the
exciting growth drivers in each of our divisions
· At the local level, our country‐business mix is strong, with the
majority of our revenues exposed to fast growth segments
· Geographically we have the right exposure to the structural growth
opportunities across our global markets
We are improving our segmental disclosures to provide a deeper understanding
of our ATIC growth drivers in our businesses and we now report revenue,
operating profit and margin in five divisions:
· Consumer Products
· Corporate Assurance
· Health and Safety
· Industry and Infrastructure
· World of Energy
Mid-Single Digit LFL Revenue Growth Target in the Medium to Long Term
In terms of LFL revenue growth in the medium to long term, we are targeting
Group mid-single digit LFL revenue growth at CCY with the following
expectations by division:
· Low- to mid‐Single digit in Consumer Products
· High-single digit to double digit in Corporate Assurance
· Mid- to high-single digit in Health and Safety
· Mid- to high-single digit in Industry and Infrastructure
· Low- to mid‐single digit in the World of Energy
Margin Back to 17.5% Peak and Beyond
Margin accretive revenue growth is central to the way we deliver value, and we
are confident that over time we will return to our 17.5% peak margin
performance and go beyond from there. Our confidence is based on three simple
reasons: we have the proven tools and processes in place, we operate with a
span of performance, and we pursue a disciplined accretive portfolio strategy.
Sustainability is the Movement of Our Time
Sustainability is the movement of our time and is central to everything we do
at Intertek, anchored in our Purpose, our Vision, our Values and our Strategy.
Sustainability is important to all stakeholders in society who are
consistently demanding faster progress and greater transparency in
sustainability reporting. Companies everywhere therefore continuously need to
upgrade and reinvent how they manage their sustainability agenda, particularly
with regard to how they disclose their performance.
This is why, under our global Total Sustainability Assurance (TSA) programme,
we provide our clients with proven independent, systemic and end-to-end
assurance on all aspects of their sustainability strategies, activities and
operations.
The TSA programme comprises three elements:
• Intertek Operational Sustainability Solutions
• Intertek ESG Assurance
• Intertek Corporate Sustainability Certification
For ourselves at Intertek, we focus on 10 highly demanding TSA sustainability
standards which are truly end-to-end and systemic.
You can read in detail about our sustainability results in our 2022
Sustainability Report
(https://cdn.intertek.com/ar2022/assets/pdf/Intertek_OAR22-Book2-Sustainability.pdf)
, which included:
· Continuous progress on Health and Safety with a reduction of 7bps in
our Total Recordable Incident Rate vs 2021.
· Since 2015, we have used the Net Promoter Score ('NPS') process to
listen to our customers that has enabled us to improve our customer service
over the years consistently.
· We are driving environmental performance across our operations
through new science-based reduction targets to 2030 as well as site-by-site
action plans. Our rigorous monthly performance management of our net zero
plans against emission reduction targets has delivered total CO2e emissions
(market-based) reductions of 7.8% vs 2021.
· We recognise the importance of employee engagement in driving
sustainable performance for all stakeholders, and we measure employee
engagement against our Intertek ATIC Engagement Index. Our 2022 score was 80.
· Our voluntary permanent employee turnover was at a low rate of 14%.
AAA Intertek Virtuous Economics
To deliver sustainable growth and value we will stay focussed on our AAA
Intertek Virtuous Economics based on the compounding effect year after year of
mid-single digit LFL revenue growth, margin accretive revenue growth, strong
free cash‐flow and disciplined investments in high growth and high margin
sectors.
We believe in the value of accretive disciplined capital allocation and pursue
the following priorities:
· Our first priority is to support organic growth through capital
expenditure and investments in working capital (target c 5% of revenue in
capex).
· The second priority is to deliver sustainable returns for our
shareholders through the payment of progressive dividends and we target a
pay‐out ratio of circa 50%.
· The third priority is to pursue M&A activities that strengthen
our portfolio in attractive growth and margin areas, provided we can deliver
good returns.
· And our fourth priority is to maintain an efficient balance sheet
with flexibility to invest in growth. Our leverage target is 1.3x - 1.8x net
debt to EBITDA with the potential to return excess capital to shareholders
subject to our future requirements and prevailing macro environment.
2023 Outlook
We continue to expect the Group will deliver mid‐single digit LFL revenue
growth at constant currency, with margin progression year‐on‐year and a
strong free cash flow performance.
Our mid‐single digit LFL revenue growth at constant currency will be driven
by the following contribution from our divisions:
· Consumer Products: Low-single digit
· Corporate Assurance: High single-digit
· Health and Safety: Mid-single digit
· Industry and Infrastructure: High-single digit
· World of Energy: High-single digit
Our financial guidance for 2023 is that we expect:
• Capital expenditure in the range of £115‐125m
• Net Finance costs in the £40‐42m range
• Effective Tax Rate in the 25.5%‐26.5% range
• Minority interests of between £22‐23m
• FY23 financial net debt to be in the range of £630‐680m
Sterling has strengthened in the last few months, and we are updating our FY
forex guidance. The last four months' average Sterling at the end of June
would reduce our FY revenue by 250bps and FY Earnings by 400bps.
Significant Value Growth Opportunity Ahead
We have made strong progress in the last eight years and equally, the value
growth opportunity ahead is significant.
The demand for our strong and differentiated ATIC value proposition is
accelerating.
Our Science-based Customer Excellence TQA advantage and our stronger portfolio
at the global and local level positions us well for faster growth.
Our Intertek 30 AAA Growth Strategy will capitalise on the best-in-class
operating platform we have built and target the areas where we have
opportunities to get better.
Our passionate, agile, and high-performance organisation is energised to take
Intertek to greater heights delivering AAA performance for all stakeholders.
We will deliver value consistently, targeting mid-single digit LFL revenue
growth at CCY, margin accretion, and strong cash generation, while pursuing
disciplined investments in attractive growth and margin ATIC spaces.
André Lacroix
Chief Executive Officer
Operating Review
For the six months ended 30 June 2023
To present the performance of the Group in a clear, consistent and comparable
format, certain items are disclosed separately on the face of the income
statement. These items, which are described in the Presentation of Results
section of this report and in note 3, are excluded from the adjusted results.
The figures discussed in this review (extracted from the income statement and
cash flow) are presented before Separately Disclosed Items ('SDIs').
Overview of performance
H1 23 H1 22 Change at actual rates Change at constant rates(1)
£m £m
Revenue 1,640.0 1,491.7 9.9% 8.3%
Like-for-like revenue(2) 1,621.7 1,491.7 8.7% 7.1%
Adjusted operating profit(3) 245.4 217.3 12.9% 13.3%
Margin(3) 15.0% 14.6% 40bps 70bps
Net financing costs(3) (22.2) (13.8) 60.9% 56.2%
Income tax expense(3) (56.8) (54.3) 4.6% 5.4%
Adjusted earnings for the period(3) 166.4 149.2 11.5% 12.2%
Adjusted diluted earnings per share(3) 95.2p 86.5p 10.1% 10.6%
1. Constant rates are calculated by translating H1 22 results at
H1 23 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 35.
Total reported Group revenue increased by 9.9%, a LFL revenue increase of 8.7%
at actual rates.
The Group's LFL revenue at constant rates of 7.1% reflected an increase of
1.1% in Consumer Products, 12.5% in Corporate Assurance, 6.5% in Health and
Safety, 10.5% in Industry and Infrastructure and 8.4% in World of Energy.
We delivered adjusted operating profit of £245.4m, +13.3% at constant rates
and +12.9% at actual rates.
The Group's adjusted operating margin was 15.0%, an increase of 70bps compared
to the prior year at constant exchange rates. Margin increased in Products by
90bps and by 310bps in Resources and decreased by 110bps in Trade.
The Group's statutory operating profit after SDIs for the period was £215.0m
(H1 22: £197.0m) and margin was 13.1% (H1 22: 13.2%).
Net Financing Costs
Adjusted net financing costs were £22.2m (H1 22: £13.8m), comprising £1.7m
(H1 22: £0.8m) of finance income and £23.9m (H1 21: £14.6m) of finance
expense. Statutory net financing costs of £23.3m (H1 22: £14.2m) included
£1.1m expense (H1 22: £0.4m) relating to SDIs.
Tax
The adjusted effective tax rate was 25.5%, a decrease of 1.2% on the prior
year (H1 22: 26.7%, FY 22: 26.3%). The tax charge, including the impact of
SDIs, of £49.4m (H1 22: £51.2m), equates to an effective rate of 25.8% (H1
22: 28.0%, FY 22: 26.9%).
Earnings Per Share
Adjusted diluted earnings per share at actual exchange rates was 10.1% higher
at 95.2p. Diluted earnings per share after SDIs was 80.4p (H1 22: 75.6p) per
share and basic earnings per share after SDIs was 80.8p (H1 22: 75.9p).
Dividend
The Board has approved an interim dividend of 37.7p per share, which is an
increase of 10.1% compared to the prior year (H1 22: 34.2p), reflecting growth
in adjusted diluted earnings per share. The dividend will be paid on 6 October
2023 to shareholders on the register on 15 September 2023.
Investments
The Group invested £51.4m (H1 22: £41.1m) of organic net capital investment
in laboratory expansions, new technologies and equipment to expand our market
coverage and develop innovative ATIC solutions. The Group acquired Controle
Analítico Análises Técnicas Ltda (Controle Analítico), a leading provider
of environmental analysis, with a focus on water testing, based in Brazil, for
a purchase price of £19.1m. Purchase consideration net of cash acquired was
£18.5m. The purchase price includes cash consideration of £15.4m and further
contingent consideration payable of £3.7m. 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 £79.6m (H1 22: £95.8m), driven by strong cash conversion, the result
of disciplined working capital management. Adjusted cash generated from
operations was £270.5m (H1 22: £238.1m). Statutory cash generated from
operations was £261.6m (H1 22: £234.1m).
Financial Position
The Group ended the period in a strong financial position. Financial net debt
was £791.3m (FY 22: £737.9m), our net debt to EBITDA ratio is 1.1 (H1 22:
1.3x) and our weighted average interest rate is 2.9% (H1 22: 2.7%). The
undrawn headroom on the Group's existing committed borrowing facilities at 30
June 2023 was £620.0m (FY 22: £707.3m).
Operating Review by Division
To reflect the value creation drivers identified in the Intertek 30 AAA Growth
Strategy, we have enhanced our segmental disclosures and are reporting our
revenue, operating profit and margin in five divisions: Consumer Products,
Corporate Assurance, Health and Safety, Industry and Infrastructure and World
of Energy.
Revenue
Adjusted operating profit
H1 2023 H1 2022 Change Change at H1 2023 H1 2022 Change Change at
£m £m at actual rates constant rates £m £m at actual rates constant rates
Consumer Products 467.9 462.9 1.1% 1.1% 116.8 123.7 (5.6%) (4.3%)
Corporate Assurance 231.8 204.2 13.5% 12.5% 48.2 36.3 32.8% 31.7%
Health and Safety 156.7 142.4 10.0% 7.9% 16.5 16.4 0.6% 1.2%
Industry and Infrastructure 427.0 375.2 13.8% 10.5% 37.3 26.4 41.3% 36.1%
World of Energy 356.6 307.0 16.2% 13.5% 26.6 14.5 83.4% 87.3%
Group 1,640.0 1,491.7 9.9% 8.3% 245.4 217.3 12.9% 13.3%
Revenue LFL Revenue Adjusted operating profit Adjusted operating margin
H1 23 H1 22 YoY % YoY % H1 23 H1 22 YoY % YoY % H1 23 H1 22 YoY % YoY % H1 23 H1 22 YoY % YoY %
£M £M (actual rates) (constant rates) £M £M (actual rates) (constant rates) £M £M (actual rates) (constant rates) £M £M (actual rates) (constant rates)
Product 1,023.0 951.0 7.6% 5.9% 1,023.0 951.0 7.6% 5.9% 203.5 183.2 11.1% 10.8% 19.9% 19.3% 60bps 90bps
Trade 325.7 299.6 8.7% 6.9% 323.6 299.6 8.0% 6.2% 19.1 22.7 (15.9%) (10.7%) 5.9% 7.6% (170bps) (110bps)
Resources 291.3 241.1 20.8% 19.3% 275.1 241.1 14.1% 12.7% 22.8 11.4 100.0% 98.3% 7.8% 4.7% 310bps 310bps
Group 1,640.0 1,491.7 9.9% 8.3% 1,621.7 1,491.7 8.7% 7.1% 245.4 217.3 12.9% 13.3% 15.0% 14.6% 40bps 70bps
Consumer Products Division
H1 2023 H1 2022 Change at actual rates Change at constant rates
£m
£m
467.9 462.9 1.1% 1.1%
Revenue
Like-for-like revenue 467.9 462.9 1.1% 1.1%
Adjusted operating profit 116.8 123.7 (5.6%) (4.3%)
Adjusted operating margin 25.0% 26.7% (170bps) (140bps)
Intertek Value Proposition
Our Consumer Products division focuses on the ATIC solutions we offer to our
clients to develop and sell better, safer, and more sustainable products to
their own clients. This division was 30% of our revenue in 2022 and includes
the following business lines: Softlines, Hardlines, Electrical/Connected World
and Government and Trade Services.
As a trusted partner to the world's leading retailers, manufacturers and
distributors, the division supports a wide range of industries including
textiles, footwear, toys, hardlines, home appliances, consumer electronics,
information and communication technology, automotive, aerospace, lighting,
building products, industrial and renewable energy products, and healthcare.
Strategy
Our TQA Value Proposition provides a systemic approach to support the Quality
Assurance efforts of our Consumer Products-related customers in each of the
areas of their operations. To do this we leverage our global network of
accredited facilities and world leading technical experts to help our clients
meet high quality safety, regulatory and brand standards, develop new
products, materials and technologies, as well as the import of goods in their
markets, based on acceptable quality and safety standards. Ultimately, we
assist them in getting their products to market quickly and safely, to
continually meet evolving consumer demands.
Innovations
We continue to invest in innovation to deliver a superior customer service in
our Consumer Products-related businesses:
· 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.
· Another innovative launch is designed to help retailers and brands of
soft goods, hard goods and personal protective equipment to understand and
comply with the different regulations in force in different markets across the
world. This is Global Market Access, a one-stop digital knowledge portal,
developed with the aim of increasing compliance for improved consumer safety
and protecting corporate reputations in today's interconnected world.
· Intertek Hydrogen provides total end-to-end quality, safety and
sustainability assurance across the entire hydrogen value chain, from the
early stages of project feasibility & product design, hydrogen production,
delivery and storage to end-use product compliance and certification.
Intertek's Electrical business provides comprehensive testing and
certification of, amongst others, hydrogen re-fueling stations, hydrogen fuel
components and systems, including Dispensing systems, Compression systems.
H1 2023 Performance
In H1 23, our Consumer Products-related business delivered a revenue of
£467.9m, up year on year by 1.1% at CCY and actual rates. We delivered an
operating profit of £116.8m, down 4.3% year on year at CCY and down 5.6% year
on year at actual rates resulting in a margin of 25.0%, down 140bps year on
year at CCY due to the revenue decline within GTS, and the low-single digit
LFL performance in Softlines and Hardlines.
• Our Softlines business delivered low-single digit LFL revenue
growth benefitting from growth in e-commerce, growth in Risk-based Quality
Assurance and increased investments in end-to-end sustainability.
• Hardlines reported low-single digit LFL revenue growth benefitting
from the growth in e-commerce, the increased consumer demand for home
furniture and toys as well as the investments of our clients in
sustainability.
• With increased ATIC activities driven by greater regulatory
standards in energy efficiency, higher demand for medical devices and 5G
investments, our Electrical & Connected World business delivered
mid-single digit LFL revenue growth.
• Our 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 double-digit negative LFL revenue globally as the
growth in supply chain activities of our clients in the Middle East and Africa
was offset by the non-renewal of two contracts last year.
Full Year Growth Outlook
In 2023, we expect our Consumer Products division to deliver low single digit
LFL revenue growth at constant currency.
Mid- to Long-Term Growth Outlook
Our Consumer Products division will benefit from growth in new brands, SKUs
& ecommerce, increased regulation, a greater focus on sustainability,
technology, as well as a growing middle class.
Corporate Assurance Division
H1 2023 H1 2022 Change at actual rates Change at constant rates
£m £m
231.8 204.2 13.5% 12.5%
Revenue
Like-for-like revenue 231.8 204.2 13.5% 12.5%
Adjusted operating profit 48.2 36.3 32.8% 31.7%
Adjusted operating margin 20.8% 17.8% 300bps 300bps
Intertek Value Proposition
Our Corporate Assurance division focuses on the industry agnostic Assurance
solutions we offer to our clients to make their value chains more sustainable
and more resilient end-to-end. This division was 14% of our revenue in 2022
and includes Business Assurance and Assuris.
Strategy
Business Assurance and Assuris are central to our ATIC offering and are some
of the most exciting businesses within Intertek, given the increased focus on
operational risk management within the value chain of every company. Intertek
Business Assurance provides a full range of business process audit and support
services, including accredited third-party management systems auditing and
certification, second-party supplier auditing and supply chain solutions,
sustainability data verification, process performance analysis and training.
Assuris' global network of experts provides a global network of scientists,
engineers, and regulatory specialists to provide support to navigate complex
scientific, regulatory, environmental, health, safety, and quality challenges
throughout the value chain of our clients.
Innovations
We continue to invest in ATIC innovations to deliver a superior customer
service in our Corporate Assurance related businesses:
• Through Intertek Inlight, we provide the technology and expertise
that enables organisations to better understand their supply chain risks and
protect their brand. With our Wisetail online learning platform built in,
suppliers can be trained and upskilled in topics that matter to brands such as
sustainability and compliance related matters.
• We continue to invest in our industry leading ATIC sustainability
solutions, leveraging the depth of our experience and global network of
experts, with two 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 2023 Performance
In H1 23, our Corporate Assurance-related business delivered a LFL revenue
growth of 12.5% at CCY, resulting in revenue of £231.8m, up year on year by
12.5% at CCY and up year on year 13.5% at actual rates. We delivered an
operating profit of £48.2m, up 31.7% year on year at CCY and up 32.8% year on
year at actual with a margin of 20.8%, up 300bps year on year at CCY as we
benefitted from operating leverage and productivity gains.
· Business Assurance delivered double digit LFL revenue growth as
the business saw increased investments by our clients to improve the
resilience of their supply chains, the continuous focus on ethical supply and
the increased need for sustainability assurance.
· The Assuris business delivered mid-single digit LFL revenue
growth as we benefitted from improved demand for our regulatory assurance
solutions and from increased corporate investment in ESG.
Full Year Growth Outlook
In 2023, we expect our Corporate Assurance division to deliver high-single
digit LFL revenue growth at constant currency.
Mid- to Long-Term Growth Outlook
Our Corporate Assurance division will benefit from a greater corporate focus
on sustainability, the need for increased supply chain resilience, enterprise
cyber-security, People Assurance services and regulatory assurance.
Health and Safety Division
H1 2023 H1 2022 Change at actual rates Change at constant rates
£m
£m
156.7 142.4 10.0% 7.9%
Revenue
Like-for-like revenue 154.6 142.4 8.6% 6.5%
Adjusted operating profit 16.5 16.4 0.6% 1.2%
Adjusted operating margin 10.5% 11.5% (100bps) (70bps)
Intertek Value Proposition
Our Health and Safety division focuses on the ATIC solutions we offer to our
clients to make sure we all enjoy a healthier and safer life. This division
was 9% of our revenue in 2022 and includes our AgriWorld, Food, and Chemical
& Pharma business lines.
Strategy
Our TQA value proposition provides our Health and Safety-related customers
with a systemic, end-to-end ATIC offering at every stage of the supply chain.
In an industry with significant structural growth drivers, our science-based
approach supports clients as the sustained demand for food safety testing
activities increases along with higher demand for hygiene and safety audits in
factories. Our longstanding experience and expertise in the Chemicals and
Pharma industries enables clients to mitigate risks associated with product
quality and safety and processes, supporting them with their product
development, regulatory authorisation, chemical testing and production.
Innovations and M&A
We continue to invest in innovation to deliver a superior customer service in
our Health and Safety related businesses:
• Honey crystallisation is a natural phenomenon where honey turns
from liquid state to a semi-solid state. Crystallisation is dependent on the
ratio of the two principal sugars found inside: fructose and glucose. When the
level of glucose increases, it becomes insoluble in the water, and
crystallization will happen. Intertek has developed Crystek, a process to
evaluate the glucose in honey, thus predicting and preventing the
crystallisation of honey.
• Earlier this year Intertek agreed to acquire Controle Analítico
Análises Técnicas Ltda ("Controle Analítico"), a leading provider of
environmental analysis, with a focus on water testing, based in Brazil. The
acquisition of Controle Analítico represents an attractive and complementary
opportunity for Intertek to expand its leading Food and Agri Total Quality
Assurance (TQA) solutions in Brazil by expanding our presence and service
offering in the Environmental testing market.
H1 2023 Performance
In H1 23, our Health and Safety-related business delivered a LFL revenue
growth of 6.5% at CCY, resulting in revenue of £156.7m, up year on year by
7.9% at CCY and up year on year by 10.0% at actual rates. We delivered an
operating profit of £16.5m, up 1.2% year on year at CCY and up 0.6% year on
year at actual rates with a margin of 10.5%, down 70bps year on year at CCY
due to a country-mix effect in AgriWorld and investments in capability in
Chemicals & Pharma.
• AgriWorld provides inspection activities to ensure that the global
food supply chain operates fully and safely. The business reported mid-single
digit LFL revenue growth. We continue to see an increase in demand for
inspection activities driven by sustained growth in the global food industry.
• Our Food business registered high-single digit LFL revenue growth
globally resulting from increased demand for food safety testing activities
and hygiene and safety audits in factories.
• In Chemicals & Pharma we saw mid-single digit LFL revenue
growth globally reflecting improved demand for regulatory assurance and
chemical testing and from the increased R&D investments of the pharma
industry.
Full Year Growth Outlook
In 2023, we expect our Health and Safety division to deliver mid-single digit
LFL revenue growth.
Mid- to Long-Term Growth Outlook
Our Health and Safety division will benefit from the demand for healthier and
more sustainable food to support a growing global population, increased
regulation, and new R&D investments in the pharma industry.
Industry and Infrastructure
H1 202 H1 2022 Change at actual rates Change at constant rates
£m
£m
427.0 375.2 13.8% 10.5%
Revenue
Like-for-like revenue 427.0 375.2 13.8% 10.5%
Adjusted operating profit 37.3 26.4 41.3% 36.1%
Adjusted operating margin 8.7% 7.0% 170bps 160bps
Intertek Value Proposition
Our Industry and Infrastructure division focusses on the ATIC solutions our
clients need to develop and build better, safer and greener infrastructure.
This division was 26% of our revenue in 2022 and includes Industry Services,
Minerals and Building & Construction.
Strategy
Our TQA value proposition helps our customers to mitigate the risks associated
with technical failure or delay, ensuring that their projects proceed on time
and meet the highest quality standards as demand for more environmentally
friendly buildings and infrastructure grows. By helping to improve safety
conditions and reduce commercial risk, our broad range of assurance, testing,
inspection, certification and engineering services allows us to assist clients
in protecting both the quantity and quality of their mined and drilled
products.
Innovations
We continue to invest in innovation to deliver a superior customer service in
our Industry and Infrastructure related businesses:
• Intertek Industry Services is harnessing the power of robotics,
IoT and digital solutions to create an asset management Digital Twin offering,
leveraging Intertek's AWARE software and new data capture solutions.
• Intertek Industry Services has acquired the MiQ methane emission
accreditation for independent certification audits and methane emission
grading which is helping energy producers to drive down their GHG emissions,
especially methane. Some major energy producers also use Intertek innovative
solutions to independently quantify their methane and CO2 emissions from
intentional flaring and venting as well as fugitive leak detection.
H1 2023 Performance
In H1 23, our Industry and Infrastructure-related business delivered a LFL
revenue growth of 10.5% at CCY, resulting in revenue of £427.0m, up year on
year by 10.5% at CCY and up year on year 13.8% at actual rates. We delivered
an operating profit of £37.3m, up 36.1% year on year at CCY and up 41.3% year
on year at actual rates with a margin of 8.7%, up 160bps year on year at CCY
as we benefitted from operating leverage and productivity gains.
· Our Industry Services includes our Capex Inspection services and Opex
Maintenance services. The Capex Inspection business delivered double digit LFL
revenue growth as we benefitted from increased capex investment in traditional
Oil and Gas exploration and production as well as in renewables. With our
clients increasing their maintenance efforts to increase the productivity of
existing production assets, we delivered double digit LFL revenue growth in
Opex Maintenance.
· The continuing high demand for testing and inspection activities
drove double-digit LFL revenue growth in our Minerals business.
· Growing demand for more environmentally friendly buildings and the
increased number of infrastructure projects in North America produced
mid-single digit LFL revenue growth for our Building & Construction
business.
Full Year Growth Outlook
In 2023, we expect our Industry and Infrastructure related businesses to
deliver high-single digit LFL revenue performance at constant currency.
Mid- to Long-Term Growth Outlook
Our Industry and Infrastructure division will grow in the mid to long-term,
benefitting from increased global energy consumption, the transition to
greener energy, population growth, large scale infrastructure investment, and
demand for Greener buildings.
World of Energy Division
H1 2023 H1 2022 Change at actual rates Change at constant rates
£m
£m
356.6 307.0 16.2% 13.5%
Revenue
Like-for-like revenue 340.4 307.0 10.9% 8.4%
Adjusted operating profit 26.6 14.5 83.4% 87.3%
Adjusted operating margin 7.5% 4.7% 280bps 300bps
Intertek Value Proposition
Our World of Energy division focuses on the ATIC solutions we offer to our
clients to develop better and greener fuels as well as renewables. This
division was 21% of our revenue in 2022 and includes Caleb Brett,
Transportation Technologies (TT) and Clean Energy Associates (CEA).
Strategy
Our TQA Value Proposition provides world leading expertise to enable our
clients to benefit from the significant opportunities in the World of Energy.
We do this by providing specialist cargo inspection, analytical assessment,
calibration and related research and technical services to the world's
petroleum and biofuels industries.
We provide rapid testing and validation services to the transportation
industry, leveraging our Transportation Technologies subject matter expertise
that is recognised by leading manufacturers worldwide. We evaluate everything
from automobiles and energy storage to airplanes, and deliver top-tier testing
for emerging markets, such as autonomous and electric/hybrid vehicles.
Our partner firm Clean Energy Associates (CEA) is a market-leading provider of
Quality Assurance (QA), supply-chain traceability and technical services to
the fast-growing solar energy sector. Its leading assurance service offering
includes in-line monitoring that allows clients to oversee the management and
traceability of their supply chains, offering a comprehensive, end-to-end
service to support customers on their decarbonisation and energy
sustainability journeys.
Innovations
We continue to invest in innovation to deliver a superior customer service in
our World of Energy related businesses:
• Intertek Caleb Brett has partnered with Zero Petroleum, a
breakthrough British technology company that makes whole-blend synthetic,
non-biological fuels in a completely fossil free process, using just carbon
dioxide taken from the air and renewable hydrogen made from water. Intertek is
a preferred testing partner and is supporting Zero Petroleum, helping to
accelerate the firm's development of its synthetic fuel that will power the
engines of the future.
• Our EV Centre of Excellence state-of-the-art testing facility in
the UK supports manufacturers to develop next generation electric propulsion
systems, from high-speed motor testing to full vehicle validation
capabilities. Our global network of automotive testing facilities can
support manufacturers and suppliers with a wide portfolio of bespoke solutions
and capabilities, such as engine and hybrid testing, EV fluids, and fuel,
additive and lubricant testing.
H1 2023 performance
In H1 23, our World of Energy-related business delivered a LFL revenue growth
of 8.4% at CCY, resulting in revenue of £356.6m, up year on year by 13.5% at
CCY and up year on year by 16.2% at actual rates. We delivered an operating
profit of £26.6m, up 87.3% year on year at CCY and up 83.4% year on year at
actual rates with a margin of 7.5%, up 300bps year on year at CCY as we
benefitted from operating leverage, productivity gains and portfolio mix.
• Caleb Brett, the global leader in the Crude Oil and Refined
products global trading markets, benefitted from improved momentum driven by
increased global mobility and higher testing activities for biofuels with
double-digit LFL revenue growth.
• Transportation Technologies delivered high-single digit LFL
revenue growth globally driven by increased investment in new powertrains to
lower CO2/NOx emissions and in traditional combustion engines to improve fuel
efficiency.
• Our CEA business delivered an excellent H1, benefitting from the
increased investments in solar panels which is the fastest growing form of
renewable energy.
Full Year Growth Outlook
In 2023, we expect our World of Energy division to deliver high-single digit
LFL revenue growth at constant currency.
Mid- to Long-Term Growth Outlook
The World of Energy division will benefit from increased investment from
energy companies to meet growing demand and consumption of energy from the
growing global population, the scaling up Renewables, increase R&D
investments that OEMs are making in EV/Hybrid vehicles and from the
development greener fuels.
Presentation of Results
For the half year ended 30 June 2023
Adjusted Results
To present the performance of the Group in a clear, consistent and comparable
format, certain items are disclosed separately on the face of the income
statement. These items, which are described in the Presentation of Results
section of this report and in note 3, are excluded from the adjusted results.
The figures discussed in this review (extracted from the income statement and
cash flow) are presented before Separately Disclosed Items (SDIs).
Like-for-Like 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 22 results at H1 23 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 2023 and the comparative
period are given in note 3 to the Condensed Consolidated Interim Financial
Statements.
Reconciliation of Results to Adjusted Performance Measures (£m) 2023 H1 2023 H1 2023 H1 2022 H1 2022 H1 2022 H1
Results SDIs Adjusted Results SDIs Adjusted
Operating profit 215.0 30.4 245.4 197.0 20.3 217.3
Operating margin 13.1% 1.9% 15.0% 13.2% 1.4% 14.6%
Net financing costs (23.3) 1.1 (22.2) (14.2) 0.4 (13.8)
Profit before tax 191.7 31.5 223.2 182.8 20.7 203.5
Income tax expense (49.4) (7.4) (56.8) (51.2) (3.1) (54.3)
Profit for the year 142.3 24.1 166.4 131.6 17.6 149.2
Cash flow from operations 261.6 8.9 270.5 234.1 4.0 238.1
Free cash flow 70.7 8.9 79.6 91.8 4.0 95.8
Basic earnings per share 80.8p 14.9p 95.7p 75.9p 10.9p 86.8p
Diluted earnings per share 80.4p 14.8p 95.2p 75.6p 10.9p 86.5p
Reconciliation of Revenue Six months to 30 June 2023 Six months to 30 June 2022 Change
£m £m %
Reported revenue 1,640.0 1,491.7 9.9%
Less: Acquisitions/disposals/closures (18.3) -
Like-for-like revenue 1,621.7 1,491.7 8.7%
Impact of foreign exchange movements - 22.7
Like-for-like revenue at constant currency 1,621.7 1,514.4 7.1%
Reconciliation of Financial Net Debt to Adjusted EBITDA (£m) 30 June 2023 30 June 2022
Net debt 1,089.5 1,191.0
IFRS 16 lease liability (298.2) (331.9)
Financial net debt 791.3 859.1
2022 H2 2023 H1 2023 LTM 2021 H2 2022 H1 2022 LTM
Reported operating profit 255.4 215.0 470.4 248.7 197.0 445.7
Depreciation 82.9 79.9 162.8 76.9 77.3 154.2
Amortisation 10.4 9.8 20.2 10.3 9.9 20.2
EBITDA 348.7 304.7 653.4 335.9 284.2 620.1
SDIs 47.4 30.4 77.8 23.5 20.3 43.8
Adjusted EBITDA 396.1 335.1 731.2 359.4 304.5 663.9
Financial net debt / EBITDA 1.1x 1.3x
Constant Currency Reconciliations Six months to 30 June 2023 Six months to 30 June 2022 Change
£m £m %
Adjusted operating profit at actual rates 245.4 217.3 12.9%
Impact of foreign exchange movements - -0.8
Adjusted operating profit at constant rates 245.4 216.5 13.3%
Adjusted diluted EPS at actual rates 95.2p 86.5p 10.1%
Impact of foreign exchange movements - -0.4p
Adjusted diluted EPS at constant rates 95.2p 86.1p 10.6%
Diluted EPS at actual rates 80.4p 75.6p 6.3%
Impact of foreign exchange movements - -0.3p
Diluted EPS at constant rates 80.4p 75.3p 6.8%
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 48 of the
Group's Annual Report for 2022, 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
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 2022.
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 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 Colm Deasy
Chief Executive Officer Chief Financial Officer
27 July 2023 27 July 2023
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 2023 (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 2023;
· 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 ("ISRE (UK) 2410"). 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 ISRE (UK) 2410. 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
27 July 2023
Condensed Consolidated Interim Income Statement
For the six months ended 30 June 2023
Six months to 30 June 2023 Six months to 30 June 2022 (Unaudited)
(Unaudited)
Notes Adjusted Results Separately Disclosed Items* Total 2023 Adjusted Results Separately Disclosed Items* Total 2022
£m £m £m £m
Revenue 2 1,640.0 - 1,640.0 1,491.7 - 1,491.7
Operating costs (1,394.6) (30.4) (1,425.0) (1,274.4) (20.3) (1,294.7)
Group operating profit/(loss) 2 245.4 (30.4) 215.0 217.3 (20.3) 197.0
Finance income 1.7 - 1.7 0.8 - 0.8
Finance expense (23.9) (1.1) (25.0) (14.6) (0.4) (15.0)
Net financing costs (22.2) (1.1) (23.3) (13.8) (0.4) (14.2)
Profit/(loss) before income tax 223.2 (31.5) 191.7 203.5 (20.7) 182.8
Income tax (expense)/credit 4 (56.8) 7.4 (49.4) (54.3) 3.1 (51.2)
Profit/(loss) for the period 2 166.4 (24.1) 142.3 149.2 (17.6) 131.6
Attributable to:
Equity holders of the Company 154.4 (24.1) 130.3 140.0 (17.6) 122.4
Non-controlling interest 12.0 - 12.0 9.2 - 9.2
Profit/(loss) for the period 166.4 (24.1) 142.3 149.2 (17.6) 131.6
Earnings per share
Basic 5 95.7p 80.8p 86.8p 75.9p
Diluted 5 95.2p 80.4p 86.5p 75.6p
Dividends in respect of the period 37.7p 34.2p
* See Note 3
Condensed Consolidated Interim Statement of Comprehensive Income
For the six months ended 30 June 2023
Six months to 30 June 2023 (Unaudited) Six months to 30 June 2022 (Unaudited)
£m £m
Notes
Profit for the period 2 142.3 131.6
Other comprehensive income/(expense)
Remeasurements on defined benefit pension schemes 6 2.8 15.7
Tax on comprehensive income/(expense) items 3.9 (7.2)
Items that will never be reclassified to profit or loss 6.7 8.5
Foreign exchange translation differences on foreign operations (125.1) 183.0
Net exchange (loss)/gain on hedges of net investments in foreign operations 52.7 (101.6)
Items that are or may be reclassified subsequently to profit or loss (72.4) 81.4
Total other comprehensive income/(expense) for the period (65.7) 89.9
Total comprehensive income for the period 76.6 221.5
Total comprehensive income for the period attributable to:
Equity holders of the company 64.5 211.1
Non-controlling interest 12.1 10.4
Total comprehensive income for the period 76.6 221.5
Condensed Consolidated Interim Statement of Financial Position
As at 30 June 2023
At 30 June 2023 (Unaudited) At 30 June 2022 (Unaudited) At 31 December 2022
£m £m (Audited)
£m
Notes
Assets
Property, plant and equipment 653.1 688.1 694.4
Goodwill 8 1,368.2 1,338.7 1,418.4
Other intangible assets 334.1 372.3 362.9
Long-term trade and other receivables 19.9 23.2 21.5
Defined benefit pension asset 6 25.2 19.2 21.3
Deferred tax assets 40.4 39.9 45.0
Total non-current assets 2,440.9 2,481.4 2,563.5
Inventories* 17.5 17.2 16.9
Trade and other receivables* 763.2 747.1 726.4
Cash and cash equivalents 7 239.5 257.6 321.6
Current tax receivable 24.1 18.5 31.9
Total current assets 1,044.3 1,040.4 1,096.8
Total assets 3,485.2 3,521.8 3,660.3
Liabilities
Interest bearing loans and borrowings 7 (303.4) (47.5) (262.4)
Current taxes payable (57.6) (57.3) (71.0)
Lease liabilities (66.4) (71.5) (70.6)
Trade and other payables* (682.1) (669.8) (723.2)
Provisions* (16.4) (12.5) (15.8)
Total current liabilities (1,125.9) (858.6) (1,143.0)
Interest bearing loans and borrowings 7 (727.4) (1,069.2) (797.1)
Lease liabilities (231.8) (260.4) (251.6)
Deferred tax liabilities (83.7) (78.9) (99.2)
Defined benefit pension liabilities 6 (2.9) (1.3) (2.2)
Other payables* (30.8) (33.9) (34.6)
Provisions* (17.7) (0.7) (14.6)
Total non-current liabilities (1,094.3) (1,444.4) (1,199.3)
Total liabilities (2,220.2) (2,303.0) (2,342.3)
Net assets 1,265.0 1,218.8 1,318.0
Equity
Share capital 1.6 1.6 1.6
Share premium 257.8 257.8 257.8
Other reserves (113.8) (22.3) (41.3)
Retained earnings 1,084.4 944.6 1,065.9
Total equity attributable to equity holders of the Company 1,230.0 1,181.7 1,284.0
Non-controlling interest 35.0 37.1 34.0
Total equity 1,265.0 1,218.8 1,318.0
* Working capital of £31.4m (H1 22: £43.7m; FY 22: negative £47.8m)
comprises the asterisked items in the above Statement of Financial Position
less IFRS16 Lease Receivable of £2.3m (H1 22: £3.7m; FY 22 £2.9m).
Condensed Consolidated Interim Statement of Changes in Equity
For the six months ended 30 June 2023
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 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
At 1 January 2023 1.6 257.8 (47.7) 6.4 1,065.9 1,284.0 34.0 1,318.0
Total comprehensive (expense)/income for the period
Profit - - - - 130.3 130.3 12.0 142.3
Other comprehensive (expense)/income - - (72.5) - 6.7 (65.8) 0.1 (65.7)
Total comprehensive (expense)/income for the period - - (72.5) - 137.0 64.5 12.1 76.6
Transactions with owners of the company recognised directly in equity
Contributions by and distributions to the owners of the company
Dividends paid - - - - (115.4) (115.4) (11.1) (126.5)
Purchase of own shares - - - - (8.4) (8.4) - (8.4)
Tax paid on share awards vested(1) - - - - (5.6) (5.6) - (5.6)
Equity-settled transactions - - - - 11.0 11.0 - 11.0
Income tax on equity-settled transactions - - - - (0.1) (0.1) - (0.1)
Total contributions by and distributions to the owners of the company - - - - (118.5) (118.5) (11.1) (129.6)
At 30 June 2023 (unaudited) 1.6 257.8 (120.2) 6.4 1,084.4 1,230.0 35.0 1,265.0
( )
(1) The tax paid on share awards vested is related to settlement of the tax
obligation by the Group via the sale of a portion of the equity-settled
shares.
The £115.4m dividend paid on 15 June 2023 represented a final dividend of
71.6p per ordinary share in respect of the year ended 31 December 2022 which
was approved and paid during the period. 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.
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 2023
Six months to 30 June 2023 (Unaudited) Six months to 30 June 2022 (Unaudited)
£m £m
Notes
Cash flows from operating activities
Profit for the period 2 142.3 131.6
Adjustments for:
Depreciation charge 79.9 77.3
Amortisation of software 9.8 9.9
Amortisation of acquisition intangibles 17.2 16.5
Equity-settled transactions 11.0 10.8
Net financing costs 23.3 14.2
Income tax expense 4 49.4 51.2
Profit on disposal of property, plant, equipment and software (0.3) (0.8)
Operating cash flows before changes in working capital and operating 332.6 310.7
provisions
Change in inventories (1.4) (1.0)
Change in trade and other receivables (99.3) (39.4)
Change in trade and other payables 27.3 (32.9)
Change in provisions 2.4 (1.3)
Special contributions into pension schemes 6 - (2.0)
Cash generated from operations 261.6 234.1
Interest and other finance expense paid (48.6) (15.8)
Income taxes paid (56.0) (50.8)
Net cash flows generated from operating activities* 157.0 167.5
Cash flows from investing activities
Proceeds from sale of property, plant, equipment and software* 3.2 3.4
Interest received* 1.7 0.8
Acquisition of subsidiaries, net of cash received (14.8) -
Consideration paid in respect of prior year acquisitions (2.7) -
Acquisition of property, plant, equipment, software* 9 (51.4) (41.1)
Net cash flows used in investing activities (64.0) (36.9)
Cash flows from financing activities
Purchase of own shares (8.4) (2.3)
Tax paid on share awards vested (5.6) (4.4)
Drawdown of borrowings 53.6 477.9
Repayment of borrowings (32.8) (476.5)
Repayment of lease liabilities* (39.8) (38.8)
Dividends paid to non-controlling interest (11.1) (5.6)
Equity dividends paid (115.4) (115.5)
Net cash flows used in financing activities (159.5) (165.2)
Net (decrease)/increase in cash and cash equivalents 7 (66.5) (34.6)
Cash and cash equivalents at 1 January 7 320.7 264.0
Effect of exchange rate fluctuations on cash held 7 (18.7) 12.6
Cash and cash equivalents at end of period 7 235.5 242.0
* Free cash flow of £70.7m (H1 22: £91.8m) comprises the asterisked items in
the above Statement of Cash Flows.
Adjusted cash flow from operations of £270.5 (H1 22: £238.1m) comprises
statutory cash flow from operations of £261.6m (H1 22: £234.1m) before cash
outflows relating to Separately Disclosed Items of £8.9m (H1 22: £4.0m).
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 2023 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 2022 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 (http://www.intertek.com) .
Statement of Compliance
These Condensed Consolidated Interim Financial Statements for the half-year
reporting period ended 30 June 2023 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 2022. 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 2022 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 2022 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 2022.
There are no significant new accounting standards or amendments to accounting
standards that are effective for annual periods beginning on or after 1
January 2023 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 2022. During the six months ended 30 June 2023
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 2024,
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 2024, 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 2023 30 June 2022 31 December 2022 H1 23 H1 22 FY 22
US dollar 1.26 1.22 1.20 1.30 1.30 1.24
Euro 1.16 1.16 1.13 1.14 1.19 1.17
Chinese renminbi 9.16 8.18 8.45 8.56 8.39 8.31
Hong Kong dollar 9.90 9.56 9.37 9.64 10.15 9.68
Australian dollar 1.92 1.76 1.78 1.83 1.81 1.78
2. Operating Segments
Business Analysis
The Group is organised into business lines, which are the Group's operating
segments and are reported to the CEO, the chief operating decision maker.
Since we unveiled our Intertek 30 AAA Growth Strategy to capitalise on the
best-in-class operating platform we have built and target the areas where we
have opportunities to get better, the reporting and performance management
used by the CEO to make operating decisions has changed from the previous
three segments to the Group's new five reportable segments as set out below.
The segment information for earlier periods has been restated to conform to
these changes. Disclosure of the 2023 results under the previous three
operating segments is provided on our website (www.intertek.com/investors).
The business lines within the new divisions demonstrate similar mid- to
long-term structural growth drivers.
When aggregating operating segments into the five reportable segments we have
applied judgement over the similarities of the services provided, the customer
base and the mid- to long-term structural growth drivers. Certain business
lines within those former segments have also been reallocated to better align
to the structural growth drivers of each segment. A description of the
activity in each division and the core business lines which align to the five
reporting segments is given in the Operating Review by Division.
The costs of the corporate head office and other costs which are not
controlled by the five divisions are allocated appropriately.
The results of the divisions are shown below:
Six months to 30 June 2023 Revenue from external customers Depreciation and software amortisation Adjusted operating profit Separately disclosed items Operating profit
£m £m £m £m £m
Consumer Products 467.9 (29.6) 116.8 (4.2) 112.6
Corporate Assurance 231.8 (6.1) 48.2 (11.7) 36.5
Health and Safety 156.7 (11.2) 16.5 (2.4) 14.1
Industry and Infrastructure 427.0 (16.2) 37.3 (5.3) 32.0
World of Energy 356.6 (26.6) 26.6 (6.8) 19.8
Total 1,640.0 (89.7) 245.4 (30.4) 215.0
Group operating profit 245.4 (30.4) 215.0
Net financing costs (22.2) (1.1) (23.3)
Profit before income tax 223.2 (31.5) 191.7
Income tax (expense)/credit (56.8) 7.4 (49.4)
Profit for the year 166.4 (24.1) 142.3
Six months to 30 June 2022 (Represented) Revenue from external customers Depreciation and software amortisation Adjusted operating profit Separately disclosed items Operating profit
£m £m £m £m £m
Consumer Products 462.9 (27.9) 123.7 (2.5) 121.2
Corporate Assurance 204.2 (6.3) 36.3 (9.9) 26.4
Health and Safety 142.4 (10.7) 16.4 (1.6) 14.8
Industry and Infrastructure 375.2 (15.8) 26.4 (4.4) 22.0
World of Energy 307.0 (26.5) 14.5 (1.9) 12.6
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
3. Separately Disclosed Items (SDIs)
Six months to 30 June 2023 Six months to 30 June 2022
£m £m
Operating costs
Amortisation of acquisition intangibles (a) (17.2) (16.5)
Acquisition and integration costs (b) (3.6) (3.8)
Restructuring costs (c) (9.6) -
Total operating costs (30.4) (20.3)
Net financing costs (d) (1.1) (0.4)
Total before income tax (31.5) (20.7)
Income tax credit on Separately Disclosed Items 7.4 3.1
Total (24.1) (17.6)
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 £3.6m (H1 22:
£3.8m).
(c) During 2022, the Group initiated the first year of a cost reduction
programme. In six months to June 2023 costs of £9.6m (H1 22: nil) included
consolidating sites and offices, streamlining headcount, Group-wide technology
upgrades and related asset write-offs.
(d) Net financing costs of £1.1m (H1 22: £0.4m) relates to unwinding of
discount and changes in fair value of contingent consideration in relation to
acquisitions from prior periods.
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 the adjusted results for the six months
ended 30 June 2023 is £56.8m (H1 22: £54.3m). The Group's adjusted
consolidated effective tax rate for the six months ended 30 June 2022 is 25.5%
(H1 22: 26.7%). The income tax expense for the total results for the six
months ended 30 June 2023 is £49.4m (H1 22: £51.2m). The Group's
consolidated effective tax rate for the six months ended 30 June 2023 is 25.8%
(H1 22: 28.0%), the prior year's effective tax rate was mainly driven by a
prior year adjustment debit to intangible and goodwill deferred tax position.
Differences between the consolidated effective tax rate of 25.5% and weighted
average notional statutory UK rate of 23.5% include but are not limited to:
the mix of profits; the effect of tax rates in foreign jurisdictions;
non-deductible expenses; the effect of movements in unrecognised deferred tax
assets; movements in the provision for uncertain tax positions; withholding
tax on intra-group dividends; tax exempt income; and under/over provisions in
previous periods.
On 20 June 2023, Finance (No.2) Act 2023 was substantively enacted in the UK,
introducing a global minimum effective tax rate of 15.0%. The legislation
implements a domestic top-up tax and a multinational top-up tax, effective for
accounting periods starting on or after 31 December 2023. The Group has
applied the exception under IAS 12 to recognising and disclosing information
about deferred tax assets and liabilities related to top-up income taxes.
5. Earnings Per Share (EPS)
Six months to 30 June 2023 Six months to 30 June 2022
£m £m
Based on the profit for the period:
Profit attributable to ordinary shareholders 130.3 122.4
Separately Disclosed Items after tax (note 3) 24.1 17.6
Adjusted earnings 154.4 140.0
Number of shares (millions):
Basic weighted average number of ordinary shares 161.3 161.2
Potentially dilutive share awards 0.8 0.6
Diluted weighted average number of shares 162.1 161.8
Basic earnings per share 80.8p 75.9p
Potentially dilutive share awards (0.4p) (0.3p)
Diluted earnings per share 80.4p 75.6p
Adjusted basic earnings per share 95.7p 86.8p
Potentially dilutive share awards (0.5p) (0.3p)
Adjusted diluted earnings per share 95.2p 86.5p
6. Pension Schemes
A full triennial actuarial valuation for the United Kingdom Scheme was carried
out as at 31 March 2022. Following the results of the assessment of the
triennial actuarial valuation, during the period, the Group made a special
contribution of £nil (H1 22: £2.0m) into the Intertek Pension Scheme in the
United Kingdom.
The Group obtained updated actuarial valuations to 31 May 2023, the asset and
liability values have been reviewed and have not moved materially in the month
to 30 June 2023. A net actuarial gain before taxation of £2.8m (H1 22:
£15.7m) has been recognised in the consolidated statement of comprehensive
income. The net pension asset stands at £25.2m for the UK pension scheme (31
December 2022: £21.3m) and a net pension liability of £2.9m for the Swiss
pension scheme as at 30 June 2023 (31 December 2022: £2.2m).
7. Analysis of Net Debt
30 June 2023 30 June 2022 31 December 2022
£m £m £m
Cash and cash equivalents per the Statement of Financial Position 239.5 257.6 321.6
Overdrafts (4.0) (15.6) (0.9)
Cash per the Statement of Cash Flows 235.5 242.0 320.7
The components of net debt are outlined below:
1 January 2023 Cash flow Non-cash adjustments Exchange adjustments 30 June 2023
£m £m £m £m £m
Cash 320.7 (66.5) - (18.7) 235.5
Borrowings:
Revolving credit facility US$850m 2027 - (53.6) - 1.3 (52.3)
Senior notes US$160m 2023 (133.1) 31.2 - 7.0 (94.9)
Acquisition facility 'A' AU$88.0m 2023 (49.4) - - 3.4 (46.0)
Acquisition facility 'A' US$96.9m 2023 (80.6) - - 4.0 (76.6)
Senior notes US$125m 2024 (104.0) - - 5.1 (98.9)
Senior notes US$120m 2025 (99.8) 1.7 - 3.3 (94.8)
Senior notes US$75m 2026 (62.4) - - 3.0 (59.4)
Senior notes US$150m 2027 (124.8) - - 6.2 (118.6)
Senior notes US$165m 2028 (137.3) - - 6.8 (130.5)
Senior notes US$165m 2029 (137.3) - - 6.8 (130.5)
Senior notes US$160m 2030 (133.1) - - 6.6 (126.5)
Other* 3.2 (0.1) (1.0) 0.1 2.2
Total borrowings (1,058.6) (20.8) (1.0) 53.6 (1,026.8)
Total financial net debt (737.9) (87.3) (1.0) 34.9 (791.3)
Lease liability (322.2) 39.8 (30.1) 14.3 (298.2)
Total net debt (1,060.1) (47.5) (31.1) 49.2 (1,089.5)
*Other borrowings include other uncommitted borrowings of £0.8m (1 Jan 2023:
£0.8m) and facility fees of £3.0m (1 Jan 2023: £4.0m).
Total undrawn committed borrowing facilities as at 30 June 2023 were £620.0m
(31 December 2022: £707.3m).
30 June 2023 30 June 2022 31 December 2022
£m £m £m
Borrowings due in less than one year 299.4 32.0 261.5
Borrowings due in one to two years 46.7 312.8 103.0
Borrowings due in two to five years 423.1 354.4 286.0
Borrowings due in over five years 257.6 401.9 408.1
Total borrowings 1,026.8 1,101.1 1,058.6
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 2023 were
£52.3m.
In February 2023, US$40m Senior notes fell due and were repaid. Subsequent to
the balance sheet date, in July 2023 the Group paid down Acquisition facility
'A' of US$96.9m.
Further details of the Group's borrowing facilities were disclosed in note 14
to the 2022 Annual Report.
Fair Values
The carrying value of interest-bearing loans and borrowings is £1,026.8m. 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 £921.7m. 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
£0.6m are included within trade and other payables (H1 22: £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 £239.5m. 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
On 31 March 2023, the Group acquired Controle Analítico Análises Técnicas
Ltda (Controle Analítico), a leading provider of environmental analysis, with
a focus on water testing, based in Brazil, for a purchase price of £19.1m.
Purchase consideration net of cash acquired was £18.5m. The purchase price
includes cash consideration of £15.4m and a further contingent consideration
payable of £3.7m. The cash outflow in the period associated with this
acquisition was £14.8m.
The acquisition of Controle Analítico represents an attractive and
complementary opportunity for the Group to expand its leading Food and Agri
Total Quality Assurance solutions in Brazil by expanding our presence and
service offering in the Environmental testing market.
Provisional details of the net assets acquired and fair value adjustments are
set out in the following tables. These analyses are provisional and amendments
may be made to these figures in the 12 months following the date of
acquisition.
Fair value to Group on acquisition
£m
Property, plant and equipment 1.2
Goodwill 13.3
Other intangible assets 5.6
Trade and other receivables 1.1
Trade and other payables (0.5)
Provisions for liabilities and charges (0.3)
Deferred tax liabilities (1.9)
Net assets acquired 18.5
(b) Prior Period Acquisitions
£2.7m (H1 22: £nil) was paid during the period in respect of prior period
acquisitions.
(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 22: £nil).
The total carrying amount of goodwill by CGU is as follows, which is also used
for the assessment of the Group's
impairment review. In order to reflect the change to Group strategy described
in Note 2, and consequential changes to the monitoring of goodwill by
management, the number of CGUs to which goodwill is allocated has been
increased from 12 to 17. This change has had no impact on the carrying values
of goodwill, which are set out below:
30 June 2023 31 December 2022
(re-presented)
£'m £'m
Industry Services 10.9 11.5
Exploration and Production 4.1 4.3
Business Assurance 681.5 720.0
Food 40.9 40.4
AgriWorld 17.1 3.5
Caleb Brett 42.5 43.3
Sustainability 15.9 14.7
Government & Trade Services 0.8 0.8
Minerals 36.4 38.8
Softlines 6.1 6.2
Hardlines 4.5 4.5
Electrical & Connected World 89.3 93.4
Transportation Technologies 44.8 46.9
Building & Construction 226.4 238.2
Chemicals & Pharma 76.7 78.7
Assuris 5.4 5.5
CEA 64.9 67.7
Net Book value * 1,368.2 1,418.4
*All goodwill is recorded in local currency. Additions during the period are
converted at the exchange rate on the date of the transaction and the goodwill
at the end of the period is stated at the closing exchange rates.
(d) Reconciliation of Goodwill
£m
Goodwill at 1 January 2023 1,418.4
Additions 13.3
Fair value adjustments 0.4
Foreign exchange (63.9)
Goodwill at 30 June 2023 1,368.2
£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
(e) Impact of Acquisitions on the Group Results
The revenue and profit for the period for the period from 1 January 2023 to
the date of acquisition and the impact on the Group's revenue and profit for
the period from the date of acquisition to 30 June 2023 were not significant.
9. Property, Plant, Equipment and Computer Software
(a) Property, Plant, Equipment Additions
During the six months ended 30 June 2023, the Group acquired property, plant
and equipment with a cost of £41.2m (H1 22: £33.7m; year ended 31 December
2022: £96.1m).
During the six months ended 30 June 2023, the Group acquired £1.2m of
property, plant and equipment through business combinations (H1 22: £nil;
year ended 31 December 2022: £0.1m). At 30 June 2023, the IFRS 16 right of
use asset is £275.5m (H1 22: £303.9m; year ended 31 December 2022:
£297.6m).
(b) Computer Software Additions
During the six months ended 30 June 2023, the Group acquired computer software
with a cost of £10.2m (H1 22: £7.4m; year ended 31 December 2022: £20.4m).
During the six months ended 30 June 2023, the Group did not acquire computer
software through business combinations (H1 22: £nil; year ended 31 December
2022: £nil).
(c) Capital Commitments
Contracts for capital expenditure which are not provided in these accounts
amounted to £15.1m (H1 22: £16.3m).
10. Related Parties
There are no material changes in related parties or in related party
transactions from those described in the 2022 Annual Report.
11. Subsequent Events
There are no post balance sheet events to report.
12. Approval
The Condensed Consolidated Interim Financial Statements were approved by the
Board on 27 July 2023.
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