REG - Intertek Group Plc - Trading Statement

IntertekAnnouncement

25/05/2022 08:31

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220525:nRSY6843Ma&default-theme=true

RNS Number : 6843M  Intertek Group PLC  25 May 2022

For a printer friendly version of this announcement, please click on the link below:

http://www.rns-pdf.londonstockexchange.com/rns/6843M_1-2022-5-24.pdf (http://www.rns-pdf.londonstockexchange.com/rns/6843M_1-2022-5-24.pdf)

 

TRADING STATEMENT

25 May 2022

Intertek Group plc ("Intertek" or "the Group"), a leading Total Quality Assurance provider to industries worldwide, today releases its May Trading Update for the period from 1 January to 30 April 2022 ("period"). All comparative comments in this statement reflect comparisons with the corresponding period during 2021. The Group's half year results to 30 June 2022 will be announced on 29 July 2022.

 

 Good start to the year: 4.8%(1) LfL revenue growth and 4.3%(1) growth from
 acquisitions

 

•     January-April revenue of £951.3m: +9.1% at constant rates and
+11.2% at actual rates

•     Broad-based LfL revenue growth of 4.8% at constant rates:
Products: 4.5%, Trade: 5.2%, Resources: 5.2%

•     Robust 6.8% LfL revenue growth outside of China at constant rates:
Products: 7.0%, Trade: 6.4%, Resources 6.6%

•     SAI and JLA are performing well, delivering £39.4m of additional
revenue at constant rates

•     Pricing, productivity initiatives and cost control activities to
drive margin accretive revenue growth

•     Day to day cash performance management discipline remains in place
to deliver strong FCF

•     On track to deliver in 2022 robust LfL revenue growth at constant
rates with margin progression and strong FCF

 

 André Lacroix: Chief Executive Officer statement

"We had a good start to 2022 with 9.1% revenue growth at constant currency
driven by a mid-single digit LfL revenue growth performance in Products, Trade
and Resources and the strong contribution from the SAI and JLA acquisitions.
 We have delivered 6.8% LfL revenue growth at constant currency outside of
China which demonstrates the strengths of our unique Science-Based Customer
Excellence value proposition, providing our clients with the Intertek ATIC
Advantage (Assurance plus Testing, Inspection and Certification) to enable
them to build stronger businesses.

China accounts for 20% of Intertek revenues and since March, the Covid-19
lockdown restrictions have caused a temporary disruption to our business on a
regional basis. We are planning for our Chinese business to be back to normal
by July 1st, and that trading will be in line with the good LfL revenue growth
we saw in China in the January-February period.

The Group remains well-positioned to deliver on our guidance for 2022 with
robust LfL constant currency revenue growth for both the Group as a whole and
for each of our divisions, further margin progression at constant currency and
strong free cash flow.  This reflects the increase in demand we are seeing
for our industry-leading Total Quality Assurance solutions, the strengths of
our earnings model and our performance management discipline, as well as the
impact of Covid-19 lockdowns in China.

The supply chain disruption being experienced by corporations across multiple
industries in the last two years 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 reinventing the way they reduce
their carbon footprints across their operations, adopting a comprehensive
approach to sustainability with independently verified disclosures.

Thanks to our leading ATIC capability, our market-leading innovation and
expertise, Intertek is uniquely positioned to benefit from the GDP+ LfL
revenue growth prospects in the Quality Assurance industry.  We are investing
organically and inorganically to seize the sustained long-term growth
opportunities in our industry through a disciplined approach to capital
allocation.

Our track record of value creation has been based on the compounding effect,
year after year, of margin accretive revenue growth with strong cash
generation and disciplined investments, delivering sustainable growth in
dividends and excellent ROIC. The growth in our end-markets is accelerating
and we are well-positioned to seize these exciting opportunities, capitalising
on our strong market leadership positions, our Science-based Customer
Excellence USP and our unique ATIC earnings model to deliver sustainable
growth for all stakeholders."

¹Constant currency

 Revenue Performance
              4 months - January to April
              2022     2021     Change at actual  Change at constant

              £m       £m
 Group
 Revenue      951.3    855.4    11.2%             9.1%
 LfL revenue  911.5    853.8    6.8%              4.8%
 Products
 Revenue      602.9    526.8    14.4%             11.5%
 LfL revenue  563.3    525.2    7.3%              4.5%
 Trade
 Revenue      195.1    184.8    5.6%              5.3%
 LfL Revenue  194.9    184.8    5.5%              5.2%
 Resources
 Revenue      153.3    143.8    6.6%              5.2%
 LfL revenue  153.3    143.8    6.6%              5.2%

 

Contacts

For further information, please contact:

Denis Moreau, Investor Relations

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

 

James Styles, Dentons Global Advisors

Telephone:         +44 (0)7510 385 554
intertek@dentonsglobaladvisors.com (mailto:intertek@dentonsglobaladvisors.com)

 

Analysts' Call

A live audiocast for analysts and investors will be held today at 7.45am UK
time; +44 (0) 33 0551 0200. 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, ensures 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)

 

 Covid-19 Situation in China

 

China accounts for 20% of Intertek group revenues.  Since March, the lockdown
restrictions introduced by the Chinese government have caused a temporary
disruption to our business on a regional basis.

 

In Shenzhen as well as in some other cities, our operations representing in
aggregate about 20% of our China revenues were closed for one week in the
second half of March.

 

Our Shanghai operations, accounting for 25% of our revenue in China, have been
closed since the beginning of April and are not expected to reopen until 1
June.

 

We expect a gradual ramp-up after restarting our operations and based on our
experience, we believe that our Shanghai operations will lose about half of
their June revenue.

 

We are planning for the Chinese business to be back to normal by 1 July and
that trading will be in line with the good LfL revenue growth we saw in China
in the January-February period.

 

 

 Products Divisional Review

 

Our Products business benefited from a continuing increase in customer demand
globally for our ATIC solutions and from our acquisitions reporting revenue of
£602.9m. We delivered a LfL revenue growth at constant currency of 4.5% and
of 7.0% outside of China.

•     Our Softlines business delivered mid-single digit LfL revenue
growth globally and double digit LfL revenue growth outside of China
benefitting from growth in e-commerce, investments of our clients in new
collections, growth in risk-based Quality Assurance and increased investment
in end-to-end sustainability.

 

•     Hardlines reported low-single digit LfL revenue growth globally
and mid-single digit revenue growth outside of China benefitting from the
growth in e-commerce, the increased consumer demand for home furniture and
toys as well as the investments of our clients in sustainability.

 

•     With increased ATIC activities driven by greater regulatory
standards in energy efficiency, higher demand for testing and certification of
medical devices and the increased testing requirements for 5G, our Electrical
& Connected World business delivered low-single digit LfL revenue growth
globally and outside of China.

 

•     Business Assurance delivered double digit LfL revenue growth
globally and outside of China as the business benefited from the increased
investments by our clients to improve the resilience of their supply chains,
the continuous focus on ethical supply, the increased need for sustainability
assurance and the strong growth in our People Assurance segment.

 

•     Our Building & Construction business reported mid-single digit
LfL revenue growth both globally and outside of China. We benefited from the
growing demand for more environmentally friendly and higher quality buildings
and the increased number of infrastructure projects in North America.

 

•     Transportation Technology delivered flat LfL revenue globally and
mid-single digit LfL revenue growth outside of China as we saw increased
investment in new powertrains to lower CO2/NOx emissions and in traditional
combustion engines to improve fuel efficiency.

 

•     Our Food business registered mid-single digit LfL revenue growth
globally and high-single digit revenue growth outside of China resulting from
increased demand for food safety testing activities and hygiene and safety
audits in factories.

 

•     We saw mid-single digit LfL revenue growth globally and outside of
China in our Chemicals & Pharma business. We benefited from an improvement
of demand for regulatory assurance and chemical testing and from the increased
R&D investments of the pharma industry.

Full Year growth outlook

In 2022 we expect our Products division to deliver robust LfL revenue growth
at constant currency.

Mid to long-term growth outlook

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

 Trade Divisional Review

 

 

Our Trade division reported revenue of £195.1m.  The strong growth in the
demand for Energy and Agri products has enabled us to deliver a LfL revenue
growth of 5.2% at constant currency globally and of 6.4% outside of China.

•     Caleb Brett, the global leader in the Crude Oil and Refined
products global trading markets, benefited from improved momentum driven by
increased global mobility and higher testing activities for bio-fuels with
mid-single digit growth LfL revenue growth globally and outside of China.

 

•     Our Government & Trade Services business provides
certification services to governments in the Middle East and Africa to
facilitate the import of goods in their markets, based on acceptable quality
and safety standards. We saw mid-single digit negative LfL revenue globally
and stable LfL revenue outside of China as we benefitted from a recovery of
supply chain activities in the Middle-East and Africa which was offset by the
termination of two contracts which we did not renew for profitability reasons.

 

•     AgriWorld provides inspection activities to ensure that the global
food supply chain operates fully and safely. The business reported
double-digit LfL revenue growth globally and outside of China. We continue to
benefit from an increase in demand for inspection activities driven by the
strong growth in the global food industry.

Full Year growth outlook

In 2022 we expect our Trade division to deliver robust LfL revenue growth at
constant currency.

 

Mid to long-term growth outlook

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

 

 Resources Divisional Review

 

Our clients are benefiting from the global recovery in the oil and gas sector
with increased investments in exploration and production activities.  We
delivered revenue of £153.3m with a LfL revenue growth of 5.2% globally and
6.6% outside of China.

•     In our Exploration and Production operations, our Capex Inspection
services business delivered low-single digit LfL revenue growth globally and
outside of China.

 

•     We delivered mid-single digit negative LfL revenue in Opex
Maintenance services globally and outside of China as we exited a contract in
North America for profitability reasons.

 

•     The increased demand for testing and inspection activities saw our
Minerals business deliver double-digit LfL revenue growth globally and outside
China.

 

Full Year growth outlook

We expect our Resources related businesses to deliver a robust LfL revenue
performance at constant currency.

Mid to long-term growth outlook

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

 

 

 Innovation

The supply chain disruption experienced in the last two years 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 reinventing
the way they reduce their carbon footprints across their operations, adopting
a comprehensive approach to sustainability with independently verified
disclosures.

We continue to invest in innovation to deliver a superior customer service
across our Products, Trade and Resources related businesses capitalising on
our Science-based Customer Excellence USP.

Intertek is a science-based company at its core, based on a global network of
laboratories operated by customer-facing technical experts who are dedicated
to helping customers to overcome their risks and challenges in quality, safety
and sustainability by developing unique innovative Total Quality Assurance
solutions to make their businesses stronger.

Some examples of recent innovations demonstrating the foresight and agility of
our teams to provide new solutions to our customers as they are re-inventing
their approach to quality, safety and sustainability to build much stronger
brands and businesses post Covid-19 are:

•     With the travel and tourism sector re-opening around the world, we
launched Intertek EcoCheck, a sustainable tourism solution that audits the
management systems and offers a Carbon Footprint Calculation that allows our
clients to meet the requests of their customers by demonstrating tangible
actions and results to meet their sustainability goals.

 

•     In our Softlines business, we launched Intertek TOXCLEAR, an
innovative digital chemical management platform for the fashion industry, to
deliver production free of hazardous chemicals. The platform enables brands
and their suppliers to deliver transparency and traceability on chemicals used
and build safer and more sustainable supply chains.

 

•     In our Trade Business, Intertek Agriworld partnered with Rice
Exchange, the blockchain enabled digital platform that connects buyers and
sellers of rice across continents, adding trust and lowering risk for all
parties involved. The partnership demonstrates our commitment to the rice
industry and means that Intertek is now available to all Rice Exchange
customers to provide inspection services in relation to their rice trades
undertaken on the platform.

 

•     Yesterday, we announced our ground-breaking solution in the Energy
transition space, Intertek Hydrogen. With our long-standing history and
expertise in the energy industry, the solution provides our customers with
total end-to-end quality, safety and sustainability solutions for the entire
hydrogen industry lifecycle to make a safe energy transition.

As we continue to invest in our industry-leading ATIC Sustainability
solutions, by leveraging the depth of our experience and global network of
experts, we recently launched two new innovative solutions, Green R&D and
Circular Assure, to support our clients as they transition to a more
sustainable world. These solutions allow our customers to enhance the quality,
safety, sustainability and performance of their products whilst meeting their
stakeholders' increasingly demanding environmental expectations.

 ·   Intertek Green R&D is an end-to-end Assurance solution that helps
     companies identify and reduce the environmental impacts of their products
     throughout the value chain at the R&D stage.
 ·   Intertek Circular Assure is an innovative programme that enables companies
     within the plastics and polymers industry to optimise the value of recycled
     materials whilst ensuring their quality and safety, allowing our clients to
     demonstrate their commitment to sustainability.

 

 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.

 

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. Intertek Total Sustainability Assurance is 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 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. Intertek Total Sustainability Assurance is
comprised of three parts:

 

•     Intertek Operational Sustainability Solutions

•     Intertek ESG Assurance; and

•     Intertek Sustainability Certification

 

Internally, we are focussed on driving Sustainability Excellence and below are
our 2021 sustainability results which were published at the end of March in
our Annual report:

 

•     Driving a culture of proactive Health & Safety awareness with
continuous improvement in our Total Recordable Incident Rate of 0.51 for 2021.

 

•     Since 2015, we have used the Net Promoter Score ('NPS') process to
listen to our customers; during 2021 we continued to conduct on average 6,000
interviews each month.

 

•     Improving the environmental performance across our operations is
key in our ambition to align our business to reduction targets set by the
Paris Agreement. Operational emissions intensity per employee was 4.35 tCO2e
for 2021. Total CO2e emissions (market-based) reduced by 13.3% vs 2020.

 

•     We recognise the importance of employee engagement in driving
sustainable performance for all stakeholders, and we measure employee
engagement against our Intertek ATIC Engagement Index.  Our 2021 score was
79.9%.

 

•     Our voluntary permanent turnover rate returned to similar levels
seen prior to Covid-19 at 13%.

 

•     We have increased the representation of women in senior management
roles by 6% to 23% since 2017 aiming to achieving better gender balance by
2025.

 

•     Supporting our commitment to the highest standards of integrity
and professional ethics, 94% of eligible employees completed our annual
compliance training.

 

 M&A

 

We are investing organically and inorganically to seize the attractive growth
opportunities in the global quality assurance market and to strengthen our
ATIC portfolio in high-margin, high-growth areas.

 

Our most recent acquisitions, SAI Global Assurance and JLA Brasil Laboratório
de Análises de Alimentos S.A., are both excellent examples of investments in
complementary businesses.  They have been successfully integrated and are
performing well delivering £39.4m of Revenue at CCY in the first four months
of the year.

 

Our teams have made excellent progress leveraging the investments made in the
last few years as evidenced by our strong return on capital.

 

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.

 

With our strong balance sheet, we are well positioned to seize the attractive
external growth opportunities in a highly fragmented industry.

 

 Outlook 2022

Notwithstanding the fact that the Covid-19 lockdowns in China since March will
impact the Group H1 LfL revenue growth rate and margin performance, we are
reiterating our full year targets and the Group is well positioned to deliver
robust LfL revenue growth with margin progression at constant currency and
strong cash generation in 2022.

We expect our Products, Trade and Resources divisions to deliver robust LfL
revenue growth at constant currency.

Our guidance for Net Finance cost is £34m-£38m and our guidance for Tax
rates and Minority Interest remains unchanged.

Regarding currencies, we expect that the average FX rate applied to the full
year results would increase our revenue and earnings by circa 200 BPS.

Before any material change in FX or M&A, we expect our Financial Net debt
to be between £680m-£730m at year end.

 

-ENDS-

 

The 2022 May Trading Statement Audiocast CEO Script will be available after
the call at www.intertek.com/investors/

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  TSTBZLLLLELFBBX