REG - Intertek Group Plc - Trading Statement

IntertekAnnouncement

24/11/2021 07:00

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RNS Number : 3382T  Intertek Group PLC  24 November 2021

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TRADING STATEMENT

24 November 2021

Intertek Group plc ("Intertek" or "the Group"), a leading Total Quality Assurance provider to industries worldwide, today releases its November Trading Update for the period from 1 January to 31 October 2021 ("period"). All comparative comments in this statement reflect comparisons with the corresponding period during 2020. The Group's full year results to 31 December 2021 will be announced on 1 March 2022.

 

 Strong Progress in H2 - On Track to Deliver FY Targets

 

·    6.7%¹ revenue growth in July-October, 4.8%¹ in July/August, 8.5%¹
in September/October

·    July-October LfL revenue growth 5.0%¹; trading days adjusted LfL
revenue growth 6.2%¹

·    All Divisions delivered LfL revenue growth, Products 5.5%¹, Trade
3.7%¹, Resources 4.7%¹

·    SAI and JLA acquisitions are performing well in revenue, margin and
cash

·    Operational leverage and productivity management delivering an
improved margin in H2 versus H1

·    Day to day performance management discipline delivering a strong cash
performance in H2

·    On track to deliver robust LfL revenue growth¹, year on year margin
progression and strong free cash flow

 

 André Lacroix: Chief Executive Officer statement

"The Group has made strong progress in the second half of the year, delivering
total revenue growth of 6.7% at constant currency in the July - October
period, driven by a robust like-for-like revenue performance and the benefits
of acquisitions we recently made, while benefiting from positive momentum on
margin and cash.

Looking to the full year, we are on track to deliver robust like-for-like
revenue growth at constant currency, year on year margin progression and a
strong free cash flow performance, notwithstanding the lockdown restrictions
still in place across some of our global markets and the supply chain
challenges that our clients are facing.

Moving forward, all stakeholders in society expect governments and
corporations to build back a better world with a sharper focus on end-to-end
Quality Assurance. The Covid-19 global pandemic has made the case for Total
Quality Assurance clearer and stronger for our clients and we expect the $250
billion global Quality Assurance market to grow faster post-Covid.

The supply chain disruption being experienced by corporations across multiple
industries has made the need for comprehensive risk-based quality, safety and
sustainability assurance more critical than ever. Companies are investing in
Quality Assurance to build greater resilience and safety, whilst innovating to
deliver new high-quality products and services as consumer expectations
rapidly evolve. The sprint to Net Zero emissions also means that corporations
are having to reinvent the way they reduce their carbon footprints across the
entirety of their operations, through verified disclosures, transparency and
greater accountability.

Thanks to our leading ATIC (Assurance, Testing, Inspection and Certification)
capability and expertise, innovation and insight, Intertek is uniquely
positioned to seize the highly attractive growth opportunities and to benefit
from the GDP+, like-for-like revenue growth prospects in the Quality Assurance
industry in the medium- to long-term, leveraging our purpose-led role as a
force for good in society.

We are investing organically and inorganically to seize the sustained
long-term growth opportunities in our industry through a disciplined approach
to capital allocation and performance management, targeting high-margin and
high-growth areas that in turn accelerate margin accretive revenue growth. The
acquisitions earlier this year of SAI Global Assurance and JLA are performing
well with both businesses delivering strong margin growth and strengthening
our existing operations."

¹Constant currency

 

 Revenue Performance
                        10 months - January to October                            4 months - July to October
                        2021      2020      Change at actual  Change at constant  2021     2020     Change at  Change at constant

                        £m        £m                                              £m       £m       actual
 Group
 Revenue                2,279.1   2,271.6   0.3%              5.6%                961.5    941.0    2.2%       6.7%
 Like-for-like revenue  2,257.7   2,253.9   0.2%              5.4%                940.1    935.0    0.5%       5.0%
 Products
 Revenue                1,432.0   1,389.9   3.0%              8.3%                612.5    589.5    3.9%       8.3%
 Like-for-like revenue  1,410.9   1,374.1   2.7%              7.9%                591.4    584.2    1.2%       5.5%
 Trade
 Revenue                472.4     492.1     (4.0%)            1.9%                194.2    197.5    (1.7%)     3.5%
 Like-for-like revenue  472.1     490.8     (3.8%)            2.2%                193.9    196.8    (1.5%)     3.7%
 Resources
 Revenue                374.7     389.6     (3.8%)            0.7%                154.8    154.0    0.5%       4.6%
 Like-for-like revenue  374.7     389.0     (3.7%)            0.9%                154.8    154.0    0.5%       4.7%

 

Contacts

For further information, please contact:

Denis Moreau, Investor Relations

Telephone:         +44 (0) 20 7396 3415
investor@intertek.com (mailto:investor@intertek.com)

 

Ed Bridges, FTI Consulting LLP

Telephone:         +44 (0) 20 3727 1000
scintertek@fticonsulting.com (mailto:scintertek@fticonsulting.com)

 

Analysts' Call

A live audiocast for analysts and investors will be held today at 7.45am UK
time; +44 (0) 33 0551 0200 (Link to audiocast
(https://broadcaster-audience.mediaplatform.com/#/event/6176a356d5d8ee038ba1f2a0/registration)
). 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 to Bring Quality, Safety and Sustainability
to Life. We provide 24/7 mission-critical quality assurance solutions to our
clients to ensure that they can operate with well-functioning supply chains in
each of their operations.

Our Customer Promise is: Intertek Total Quality Assurance expertise, delivered
consistently, with precision, pace and passion, enabling our customers to
power ahead safely.

intertek.com (http://www.intertek.com)

 

 Products Divisional Review

 

In the last four months, our Products business delivered a LfL revenue growth
of 5.5% at constant rates, resulting in a YTD LfL revenue growth of 7.9%.

 

·    In the July-October period, our Softlines business delivered a
mid-single digit LfL revenue growth, resulting in a double-digit growth in LfL
revenue on a YTD basis. Our global Softlines business benefited from
continuous growth in e-commerce, increased demand for testing protective
equipment and the reduction in the lockdown activities in some of our markets
while we continue to see store closures in Western Europe and North America.
 

 

·    Our Hardlines business delivered a high-single digit LfL revenue
growth in the four-month period July-October, resulting in a double-digit YTD
growth in LfL revenue. Our Hardlines business benefited from continuous growth
in e-commerce, increased consumer demand for home furniture and toys as well
as from the reduction in the lockdown activities in some of our markets, while
closures of stores in Western Europe and North America continued.

 

·    Our Electrical & Connected World business delivered mid-single
LfL revenue growth in the July-October period resulting in a high-single digit
LfL revenue performance YTD. Our Electrical and Connected World business
benefited from an increased level of ATIC activities driven by increased
regulatory standards in energy efficiency, the higher demand for testing and
certification of medical devices, the increased testing requirements for 5G
and greater corporate focus on Cyber security.

 

·    Our Business Assurance business delivered a high-single digit LfL
revenue growth in the July-October period resulting in double-digit LfL
revenue growth on a YTD basis. The reduction of lockdown activities has driven
a rebound in the number of ISO audits in some of our operations, while we
continue to benefit from the attractive growth in supply chain assurance, the
continuous focus on ethical supply, the increased needs of corporations for
sustainability assurance and the strong growth in our People Assurance
segment.

 

·    Our Building & Construction business delivered stable revenue in
the last four months, resulting in low-single digit LfL revenue reduction on a
YTD basis. We continue to benefit from the growing demand for more
environmentally friendly and higher quality buildings while large
infrastructure projects continue to be below last year.

 

·    Our Transportation Technology business delivered a high-single digit
LfL revenue growth in the last four-month period to October, resulting in
stable YTD LfL revenue. Following the lower demand for testing activities we
saw in Western Europe and North America in H1, we saw in July-October
increased investments of our clients in new powertrains to lower CO2/NOx
emissions and increase fuel efficiency.

 

·    Our Food business delivered a high-single digit LfL revenue growth in
the last four months resulting in a double-digit LfL revenue growth YTD. We
are benefiting from the resumption of the supply operations from our clients
in most markets, from the sustained demand for food safety testing activities
and the increased demand for hygiene and safety audits in factories.

 

·    In the last four months, we saw double-digit LfL revenue growth in
our Chemical & Pharma business, resulting in double-digit LfL growth in
revenue on YTD basis. We benefited from an improvement of demand for
regulatory assurance and chemical testing in some of our operations in North
America and Western Europe and from the increased R&D investments of the
pharma industry.

 

Full Year growth outlook

The full year outlook for our Products division remains unchanged and we
continue to expect to deliver robust organic revenue growth at constant
currency.

 

Mid to long- term growth outlook

Our Products division will benefit from mid to long-term structural growth
drivers including product variety, brand and supply chain expansion, product
innovation and regulation, the growing demand for quality and sustainability
from developed and emerging economies, the acceleration of e-commerce as a
sales channel, and the increased corporate focus on risk.

 Trade Divisional Review

 

In the last four months, our Trade business delivered a LfL revenue growth of
3.7% at constant rates, resulting in a YTD LfL revenue growth of 2.2%.

 

·    Our Caleb Brett business, the global leader in the Crude Oil and
refined Products global trading markets, benefited from an improved momentum
driven by an increase in global mobility in the four month period July-October
with a mid-single digit growth in LfL revenue, resulting in stable LfL revenue
on a YTD basis.

 

·    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 stable LfL revenue in the four month period to October, resulting in a
mid-single digit revenue growth YTD.

 

·    Our AgriWorld business delivered double-digit LfL revenue growth in
the last four months resulting in double-digit LfL revenue growth YTD. We
continue to benefit from an increase in demand for inspection activities
driven by the strong growth in the global food industry. AgriWorld provides
inspection activities to ensure that the global food supply chain operates
fully and safely.

 

Full Year growth outlook

The full year outlook for our Trade division remains unchanged and we continue
to expect to deliver good organic revenue growth at constant currency.

 

Mid to long- term growth outlook

Our Trade division will continue to benefit from both regional and global
trade-flow growth, as well as the increased customer focus on quality,
quantity controls and supply chain risk management.

 

 Resources Divisional Review

 

In the last four months, our Resources business delivered a LfL revenue growth
of 4.7% at constant rates, resulting in a YTD LfL revenue growth of 0.9%.

 

·    In our Exploration and Production operations, our Capex Inspection
services business delivered stable LfL revenue in the last four months,
resulting in a low-single digit LfL revenue reduction on a YTD basis.

 

·    We delivered mid-single digit LfL revenue growth in Opex Maintenance
services in the four-month period to October, resulting in low-single digit
LfL revenue growth YTD.

 

·    We delivered double-digit LfL revenue growth in our Minerals business
in the four month period to October resulting in high-single digit YTD revenue
growth, as we saw increased demand for testing and inspection activities.

 

Full Year growth outlook

Overall, we continue to expect our Resources related businesses to deliver a
good revenue performance at constant currency.

Mid to long- term growth outlook

Our Resources division will grow in the mid to long-term as we benefit from
investments in Energy, to meet the demands of the growing population around
the world.

 

 Innovation

 

Increasing corporate complexity is presenting opportunities to us to
accelerate our growth in high-growth, high-margin sectors by seizing the
industry evolution towards risk-based Quality Assurance and delivering
pioneering solutions to our customers. We have a focused approach to
innovation using a three-tiered method: 'Core', building on strengths of
existing products and services; 'Adjacent', expanding into fast-growing and
high-margin markets; and 'Breakthrough', developing innovative products and
services.

 

Examples of 'Core' innovations

·    The launch of POSI-CHECK, part of our Protek™ offering, which
focuses on health, hygiene, safety and risk management. Protek POSI-CHECK is
an audit solution to help in the Prevention of the Spread of Infection
('POSI') in restaurants, supermarkets, schools and other facilities.

·    We added new and enhanced features to our market-leading supply chain
compliance solution Inlight 2.0, enabling organisations to manage increasingly
complex supply chain risks. The platform enables organisations to bring
visibility to the workings of their vendor partners and turn potential
disruptions and compliance irregularities to their competitive advantage with
captured market share and operational efficiencies.

·    Recently opened in Perth, Western Australia, our new Minerals Global
Centre of Excellence is located in a key hub for the minerals and mining
industry. With over 500 employees, this state-of-the-art laboratory gives our
customers access to trusted expertise in mineral testing, inspection and
analysis. The new facility was established to inspire innovation and
sustainability across the minerals supply chain, with advanced technology,
automation and robotics.

Examples of 'Adjacent' innovations

·    Our Intertek Maison Centre of Excellence in Italy, the new innovative
experiential space 'where science meets luxury' and brings together -
virtually and face-to-face - forward-thinking fashion brands, industry
leaders, academics and textile industry experts to collaborate and to take
bold new ideas and turn them into reality.

·    At the beginning of the year, we launched an actionable data mining
SaaS platform WindAware, a data intelligence solution that helps wind asset
owners and operators make informed and real-time decisions to optimize
performance and maximize their asset life cycle.

·    Tomorrow, 25 November, we will formally open our new Electric Vehicle
Centre of Excellence for high voltage EV propulsion systems in Milton Keynes,
UK.  The state-of-the-art testing centre will further enhance Intertek's
offering for customers in the automotive sector, powered by the latest
innovative technology, helping manufacturers accelerate their equipment and
systems capabilities in the fast-developing world of electric and hybrid
vehicles.

 

Examples of 'Breakthrough' innovations

·    CarbonClear™, the world's first independent carbon-intensity
certification programme, and SourceClear™, a new technology platform that
provides visibility and traceability across the full range of supply chain
relationships.

·    In April 2021, we announced the launch of Intertek CarbonZero, our
new independent carbon neutral certification for products and services and
have issued the first Intertek CarbonZero Verified certification to Lundin
Energy, representing the world's first certified carbon neutral oil trade.

 

 Sustainability

 

Sustainability is central to everything we do at Intertek and as a purpose-led
company it is anchored in our Purpose, Vision and Values.

We are proud to have been recognised for our leading sustainability
credentials with the highest possible 'AAA' ESG rating from the world's
largest provider of Environmental, Social and Governance (ESG) Indexes,
MSCI.  The MSCI ESG Ratings assessment provides external validation for the
incredible work that our colleagues do every day to support our clients with
their own sustainability agendas, as well as being focused on sustainability
excellence in every operation internally.

We were proud to win the Gold Award for our 2020 Sustainability Report in the
'Best CSR/ESG report' category at the 2021 Corporate and Financial Awards.

We recently announced our participation in the LEAF (Lowering Emissions by
Accelerating Forest Finance) Coalition, furthering our commitment to a
Net-Zero future. LEAF is a new public-private initiative designed to
accelerate climate action by providing results-based finance to countries
committed to protecting their tropical forests.

Offering innovative sustainability services to our clients is core to our
value proposition and we are committed to pioneering new solutions that will
help our clients, and indeed the world, Build Back Ever Better.

What our clients are looking for today is systematic, independent end-to-end
assurance on all aspects of their sustainability journey. Our answer is
Intertek Total Sustainability Assurance, a holistic programme empowering our
customers to achieve sustainability excellence across all aspects of their
business and communicate results with confidence.

 

Intertek Total Sustainability Assurance is comprised of three parts:

·    Intertek Operational Sustainability Solutions

·    Intertek ESG Assurance; and

·    Intertek Sustainability Certification

 

Intertek Total Sustainability Assurance is a global programme, leveraging our
footprint in over 100 countries and covering all industries. We have built a
team of sustainability experts in every major region, who can help with both a
global and local perspective. Thought leadership and innovation is what sets
us apart.

Intertek Operational Sustainability Solutions

Operational Sustainability Solutions are designed to help our customers
achieve sustainability excellence in all parts of their operations, across
supply chain. We have a large and broad portfolio of industry-specific and
industry-agnostic solutions which we are continuously evolving.

Recently launched breakthrough innovations include CarbonClear, CarbonZero and
SourceClear.  SourceClear is a digital supply chain platform that helps
organisations track sustainable material claims across all stages of the trade
and production supply chain.  We provide independent certification of product
sustainability claims against accredited Textile Exchange Standards, enabling
our customers to make sustainability commitments with confidence.

 

Intertek ESG Assurance

With Intertek's leading ESG Assurance programme, we support our clients on all
aspects of their ESG reporting journey and non-financial data needs, from
strategy setting to report preparation and providing independent verification
of sustainability disclosures and reporting. This allows our customers to
communicate with their stakeholders with total peace of mind on all aspects of
their ESG journey.

The trend towards independent ESG Assurance is unstoppable, in our view and
our clients appreciate the unique sustainability and industry insights we
bring, leveraging our heritage as a Total Quality Assurance provider to
industries worldwide.

Intertek Sustainability Certification

Launched in 2019, Intertek Total Sustainability Assurance ("TSA") is the
world's first independently verified corporate sustainability audit and
certification programme based on the ten standards that we believe define a
truly sustainable organisation. They go beyond the criteria that are commonly
looked at by ESG rating agencies to include other factors that stakeholders
and investors should consider, including business resilience, risk appetite,
enterprise security and sustainability of growth and earnings. Our TSA
approach uses our ten standards to evaluate our clients' sustainability from a
company strategy and corporate governance perspective.

Our unrivalled expertise in Total Quality Assurance ('TQA') providing
assurance solutions across all points of our clients' operations - means we
are uniquely positioned to support the needs of our clients in operating
sustainably.

Today, the expectations of all stakeholders - employees, customers, consumers,
investors, suppliers, communities and wider society, governments and
regulators - continue to rise.

All stakeholders are demanding that corporations demonstrate their commitment
to sustainability with clear goals, robust action plans and transparent
reporting - and we continue to innovate with our sustainability solutions to
help our clients to deliver on this agenda.

 

 M&A

We are investing organically and inorganically to seize the attractive growth
opportunities in the global quality assurance market which we expect to grow
faster in the post-Covid world, as companies have realised that they need to
increase their investments to reduce the quality, safety and sustainability
risks in their supply chains.

With its strong balance sheet, Intertek is well positioned to seize the
attractive external growth opportunities in a highly fragmented industry and
we continue to make progress with our M&A strategy.

On 7 September 2021, we completed the A$855m acquisition of SAI Global
Assurance, which expands our global industry leading assurance offering and
enables us to seize the attractive growth opportunities in the high margin and
capital light assurance market.

SAI Global Assurance further strengthens our Assurance offering by providing
additional scale, enhanced geographic coverage and new capabilities. We are
benefitting post acquisition from a stronger market position in Australia, the
USA, Canada, the UK and China, and an expanded service capability in the Food,
AgriWorld, Quick Service Restaurants, Sustainability and Global Market Access
sectors.

On 19 July 2021, Intertek acquired JLA Brasil Laboratório de Análises de
Alimentos S.A. ("JLA"), a market-leading independent provider of Food, Agri
and Environmental testing solutions based in Brazil. The acquisition of JLA
presents a compelling opportunity to enter the fast growing and highly
attractive food testing sector in Brazil, which is one of the largest markets
globally in terms of agri-food and beverage production value.

Established in 1990, JLA serves as a trusted partner to approximately 800
customers including some of the world's leading Fast Moving Consumer Goods
(FMCG) companies, providing a range of microbiological, chemical testing and
inspection services from its laboratories and sample collection points in Sao
Paulo State.

Both acquisitions are performing well since becoming part of the Group,
delivering a strong margin ahead of the Group average.

We will continue to look at M&A opportunities in attractive high-margin
and high-growth areas to broaden our ATIC portfolio of solutions with new
services we can offer to our clients and to expand our regional coverage with
our current ATIC portfolio.

 Outlook 2021

We are confident that the Group will deliver robust like-for-like revenue
growth at constant currency in 2021, notwithstanding the lockdown restrictions
in some of our global markets and the supply chain challenges that our clients
are facing.

We continue to expect our Products division to deliver robust like-for-like
revenue growth, with Trade and Resources both expected to report good
like-for-like revenue growth.

We continue to expect to deliver margin progression year on year and a strong
free cash flow performance.

Before any material change in FX rates or M&A, we expect our financial net
debt to be between £835-£885m at year end.

 Looking Ahead

Society has changed. We are in the 'new normal' and are observing new trends
and behaviours and demands for products and services that didn't exist prior
to the pandemic. Consumers want more sustainable products, supply chain
simplicity, visibility and traceability of goods, new solutions for hygiene,
health and wellbeing, as well as lower carbon emissions. Employers are being
tasked with developing and providing new tech and virtual remote-working
solutions.

The world needs Intertek more than ever, with the unrivalled expertise of our
people, our focus on delivering risk-based Total Quality Assurance solutions,
and our proven track record of innovating and anticipating the growing needs
of our clients as the world around them grows more complex. We provide mission
critical ATIC solutions to enable the world's supply chains to operate fully
and safely, given the increased expectations from all stakeholders to live in
a better and safer society.

Our track record illustrates the heightened relevance of our purpose, the
underlying strength of our strategy and the resilience of our high-quality and
cash-generative compounder earnings model.

Looking ahead, we are well positioned to benefit from the growth acceleration
in Quality Assurance given the excellent relationships we have with our
clients, who are investing more into their quality assurance activities, our
portfolio of strong ATIC solutions offering risk-based quality assurance to
our customers, and the investments we are making, both in innovations and
acquisitions, in the high-margin and high-growth sectors of our industry.

 

 

-ENDS-

 

The 2021 November Trading Statement Audiocast CEO Script will be available
after the call at www.intertek.com/investors/

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