TIDMITRK
RNS Number : 7704E
Intertek Group PLC
03 March 2020
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2019 FULL YEAR RESULTS ANNOUNCEMENT
3 MARCH 2020
Revenue Acceleration, Robust EPS Growth, Strong Cash and Higher ROIC
2019 Year Highlights (IAS 17 basis)
-- Revenue of GBP2,987m: +4.8% at constant currency rates, +6.6% at actual rates
-- Organic revenue growth of +3.3% at constant rates: Products
+2.3%, Trade +4.1%, Resources +5.7%
-- 1.5% revenue growth from acquisitions in attractive growth and margin sectors
-- Adjusted operating margin of 17.2%: +10bps at constant rates,
in-line with prior year at actual rates
-- Adjusted operating profit of GBP513.3m: +5.2% at constant rates, +6.5% at actual rates
-- Adjusted diluted EPS of 211.7p: +5.2% at constant rates, +6.8% at actual rates
-- Free cash flow of GBP380.0m, +8.4% year-on-year driven by strong cash conversion
-- Full year dividend per share of 105.8p, an increase of 6.8%
-- ROIC of 22.8%, up 220bps at actual rates, up 150bps at constant rates
A video outlining the Full Year Results is available on the
Group's website - http://www.intertek.com/
IFRS 16 reporting
IFRS 16 was adopted on 1 January 2019 for our statutory
reporting, without restating prior year figures. As a result, the
discussion of our operating results is on an IAS 17 basis for all
periods presented, unless otherwise stated. Under IFRS 16, the
Group delivered adjusted operating profit of GBP524.2m, generating
a margin of 17.5% and adjusted diluted EPS of 212.5p. Statutory
operating profit was GBP485.8m and statutory diluted EPS was
192.6p.
André Lacroix: Chief Executive Officer statement
"In 2019, the Group has delivered revenue of GBP2,987m, up 6.6%
year--on--year at actual rates and 4.8% at constant rates, driven
by broad--based organic growth of 3.3% at constant rates, by the
contribution of the acquisitions we made recently in attractive
growth and margin sectors and by a 180bps benefit due to foreign
exchange translation. We have made continued progress on margin,
profitability and free cash flow, with a record margin of 17.2% up
10bps at constant rates, EPS growth of 6.8% and a cash conversion
of 127%. In-line with our dividend policy, that targets a payout
ratio of circa 50%, we have announced a full year dividend of
105.8p, an increase of 6.8%.
2019 is the fifth consecutive year of revenue, EPS and cash
progression which is a testament to our strong operating platform
enabling the group to deliver sustainable value creation for all
stakeholders. In the last five years we have made significant
progress both on strategy and performance and we are extremely well
positioned to seize the exciting growth opportunities ahead
capitalising on the core strengths of Intertek: Our Total Quality
Assurance (TQA) superior customer service, our powerful portfolio,
our high margin and highly cash generative earnings model, our
passionate customer-centric organisation and our disciplined
performance management.
Prior to the outbreak of the Novel Coronavirus, we were
targeting the Group to deliver continuous progress in 2020 with
broad based good organic revenue growth at constant currency, good
organic growth in Products and Trade and robust growth in
Resources, moderate margin progression and strong cash conversion.
However, Intertek is not immune to the impact of the Novel
Coronavirus and our 2020 performance will be affected by the
temporary disruption to the supply chains of our clients in China
and any impact it might have on global trade activities. It is too
early to quantify the impact of the Novel Coronavirus.
The $250 billion global Quality Assurance industry has
attractive structural growth prospects driven by an increased focus
of corporations on risk management, investments of our clients to
improve the safety and wellness of their employees, global trade
flows, global demand for energy, expanding regulations, more
complex sourcing and distribution operations, technological
innovations, government investments in large infrastructure
projects, and increased consumer demand for higher quality and more
sustainable products.
Our purpose to bring quality, safety and sustainability to life
is truly meaningful to our clients given the increased complexity
in their operations. We are benefiting from higher demand from our
customers for our industry-leading TQA solutions that provides
leading Assurance, Testing, Inspection and Certification (ATIC)
services that are mission-critical to our customers across multiple
industries through our global network of subject-matter experts and
over 1,000 state-of-the-art facilities in over 100 countries."
Key Adjusted 2019 2018 Change at actual Change at constant 2019
Financials IAS 17(1) IAS 17(1) rates rates(2) IFRS 16 (1)
IAS 17 IAS 17
Revenue GBP2,987.0m GBP2,801.2m 6.6% 4.8% GBP2,987.0m
============ ============ ====================== ====================== =============
Organic revenue(3) GBP2,925.6m GBP2,782.9m 5.1% 3.3% GBP2,925.6m
============ ============ ====================== ====================== =============
EBITDA(4) GBP616.5m GBP570.5m 8.1% 6.5% GBP695.7m
============ ============ ====================== ====================== =============
EBITDA margin(4) 20.6% 20.4% 20bps 30bps 23.3%
============ ============ ====================== ====================== =============
Operating profit(4) GBP513.3m GBP481.8m 6.5% 5.2% GBP524.2m
============ ============ ====================== ====================== =============
Operating margin(4) 17.2% 17.2% - 10bps 17.5%
============ ============ ====================== ====================== =============
Profit before tax(4) GBP483.0m GBP456.5m 5.9% 4.6% GBP484.8m
============ ============ ====================== ====================== =============
Diluted earnings per
share(4) 211.7p 198.3p 6.8% 5.2% 212.5p
============ ============ ====================== ====================== =============
Dividend per share 105.8p 99.1 6.8% - 105.8p
============ ============ ====================== ====================== =============
Return On Invested
Capital(4) 22.8% 20.6% +220bps +150bps 23.7%
============ ============ ====================== ====================== =============
Key Statutory Financials(1) 2019 2018 Change at actual rates 2019
IAS 17(1) IAS 17(1) IAS 17 IFRS 16 (1)
Revenue GBP2,987.0m GBP2,801.2m 6.6% GBP2,987.0m
============ ============ ======================= =============
Operating profit GBP474.9m GBP436.2m 8.9% GBP485.8m
============ ============ ======================= =============
Operating margin 15.9% 15.6% 30bps 16.3%
============ ============ ======================= =============
Profit before tax GBP443.3m GBP404.5m 9.6% GBP445.1m
============ ============ ======================= =============
Profit after tax GBP332.2m GBP305.2m 8.8% GBP333.6m
============ ============ ======================= =============
Diluted earnings per share 191.8p 174.7p 9.8% 192.6p
============ ============ ======================= =============
1. Following the adoption of IF RS 16 Leases o n 1 January 2019,
the Group ' s statutory results for the twelve months ended 31
December 2019 are on an IFRS 16 basis, whereas the statutory
results for the twelve months ended 31 December 2018 are on an IAS
17 basis as previously reported. For comparability, we have also
presented the Group's results for the twelve months ended 31
December 2019 on an IAS 17 basis and the associated growth rates
are on this basis. Additional detail is provided in notes 1 and 10
of this release.
2. Constant currency is calculated by translating 2018 results at 2019 exchange rates.
3. Organic revenue growth excludes the impact of acquisitions and disposals in 2018 and 2019.
4. Adjusted results are stated before Separately Disclosed Items
( ' SDIs ' ), see note 3 to the Condensed Consolidated Financial
Statements. A reconciliation between reported and adjusted measures
is shown in the Presentation of Results section.
The Directors will propose a final dividend of 71.6p per share
(2018: 67.2p) at the Annual General Meeting on 21 May 2020, to be
paid on 11 June 2020 to shareholders on the register at close of
business on 22 May 2020 .
Contacts
For further information, please contact:
Denis Moreau, Investor Relations
Telephone: +44 (0) 20 7396 3415 investor@intertek.com
Jonathon Brill, FTI Consulting
Telephone: +44 (0) 20 3727 1000 intertek @fti consulting .com
Analysts' Call
A live audiocast for analysts and investors for the 2019 Full
Year Results will be held today at 8.00 a.m.. Details can be found
at http://www.intertek.com/investors/ together with presentation
slides and a pdf copy of this report. A recording of the audiocast
will be available later in the day.
Sustainability Report
The Sustainability Report for the year ended 31 December 2019
will be available on the Company's website at www.intertek.com on
23 March 2020.
Intertek is a leading Total Quality Assurance provider to
industries worldwide.
Our network of more than 1,000 laboratories and offices and
46,000 people in more than 100 countries, delivers innovative and
bespoke Assurance, Testing, Inspection and Certification solutions
for our customers' operations and supply chains.
Intertek Total Quality Assurance expertise, delivered
consistently, with precision, pace and passion, enabling our
customers to power ahead safely.
FULL YEAR REPORT 2019
CEO Review
In 2019, the Group has delivered revenue of GBP2,987m, up 6.6%
year-on-year at actual rates and 4.8% at constant rates, driven by
broad-based organic growth of 3.3% at constant rates, by the
contribution of the acquisitions we made recently in attractive
growth and margin sectors and by a 180bps benefit due to foreign
exchange translation. We have made continued progress on margin,
profitability and free cash flow, with a record margin of 17.2% up
10bps at constant rates, EPS growth of 6.8% and a cash conversion
of 127%. In-line with our dividend policy, that targets a payout
ratio of circa 50%, we have announced a full year dividend of
105.8p, an increase of 6.8%. In 2019, the Group's statutory profit
was GBP333.6m.
2019 is the fifth consecutive year of revenue, EPS and cash
progression which is a testament to our strong operating platform
enabling the Group to deliver sustainable value creation for all
stakeholders. In the last five years we have made significant
progress both on strategy and performance and we are extremely well
positioned to seize the exciting growth opportunities ahead
capitalising on the core strengths of Intertek: Our Total Quality
Assurance (TQA) superior customer service, our powerful portfolio,
our high margin and highly cash generative earnings model, our
passionate customer-centric organisation and our disciplined
performance management.
Prior to the outbreak of the Novel Coronavirus, we were
targeting the Group to deliver continuous progress in 2020 with
broad based good organic revenue growth at constant currency, good
organic growth in Products and Trade and robust growth in
Resources, moderate margin progression and strong cash conversion.
However, Intertek is not immune to the impact of the Novel
Coronavirus and our 2020 performance will be affected by the
temporary disruption to the supply chains of our clients and any
impact it might have on global trade activities. It is too early to
quantify the impact of the Novel Coronavirus.
The $250 billion global Quality Assurance industry has
attractive structural growth prospects driven by an increased focus
of corporations on risk management, investments of our clients to
improve the safety and wellness of their employees, global trade
flows, global demand for energy, expanding regulations, more
complex sourcing and distribution operations, technological
innovations, government investments in large infrastructure
projects, and increased consumer demand for higher quality and more
sustainable products.
Our purpose to bring quality, safety and sustainability to life
is truly meaningful to our clients given the increased complexity
in their operations. We are benefiting from higher demand from our
customers for our industry-leading TQA solutions that provides
leading Assurance, Testing, Inspection and Certification services
that are mission-critical to our customers across multiple
industries through our global network of subject-matter experts and
over 1,000 state-of-the-art facilities in over 100 countries.
Attractive opportunities for growth
The total value of the global quality assurance market is, we
estimate, $250 billion of which 'only' $50 billion is currently
outsourced. That means there is an opportunity to capture a share
of the $200 billion that is currently managed in-house.
Companies are certainly doing far more today to improve quality
and safety than they were even five years ago, but there is much
that needs to be done to establish a robust, reliable, end-to-end
TQA approach that reduces risk. That is what we offer to our
clients, leveraging our broad service portfolio, our technical
expertise, our global laboratory network, and our passionate
customer-centric colleagues to allow corporations to concentrate on
their core value-generating activities.
We see four growth opportunities.
First, we will be looking to leverage the growth opportunities
presented by our existing customers. We aim to increase customer
account penetration, both within the services we already provide to
each individual organisation and by cross-selling between the
various components of our integrated ATIC offering.
Second, we will continue to leverage our global portfolio of
industry leading solutions to win new customer relationships with
new and fast growing local, regional and global companies.
Third, as companies see the value in our TQA approach, there
will also be tremendous growth potential in convincing corporations
that currently conduct this work in-house to outsource their
quality assurance requirements to us.
Fourth, our industry is highly fragmented and we will look at
seizing the right M&A opportunities to enable us to expand our
geographic coverage where needed, providing access to a new kind of
offering and strengthening our existing operations. Our highly
cash-generative earnings model and strong balance sheet provides
the flexibility to accelerate organic growth with value enhancing
acquisitions.
Intertek Total Quality Assurance
Intertek has been the pioneer of our industry across the world
for 130 years. We have a proven track record of innovating and
anticipating the growing needs of our clients, constantly evolving
and improving our customer proposition to meet their changing
needs. Importantly, this entrepreneurial spirit among our people is
a fundamental aspect of our differentiated '5x5' strategy for
growth.
In identifying that for corporations to deliver sustainable
performance, our customers need to take a risk-based approach to
quality assurance across their entire supply and distribution
chain, we evolved our service offering beyond Testing, Inspection
and Certification of our clients' physical components, products and
assets to also assist them with the reliability of their operating
processes and quality management systems; Assurance is at the
cutting edge of our value proposition.
Further, Intertek has continued to lead the industry as we
expanded our Assurance services into People Assurance. In a world
of increasingly complex supply chains and distribution channels,
employees are key in driving operational excellence in multi-site
organisations and we identified that there is a growing demand for
bespoke People Assurance solutions to monitor and efficiently close
critical skills gaps amongst frontline employees.
Today, our truly systemic, end-to-end Assurance, Testing,
Inspection and Certification services enable our clients to operate
safely and with complete peace of mind. This is what we call
Intertek Total Quality Assurance.
Intertek's differentiated TQA value proposition is set to
continue to lead the industry and sustain our growth trajectory in
the years ahead.
Our high-quality earnings model
Our high margin and strongly cash-generative earnings model is
underpinned by the delivery of our TQA Value Proposition.
The Intertek earnings model is to provide ATIC solutions with
superior customer service levels to businesses in the three
economic sectors of 'Products', 'Trade' and 'Resources' across more
than 100 countries. These sectors provide the framework of our
high-quality earnings model, and each benefit from their own set of
structural growth drivers.
We operate a capital light business model which, combined with
our entrepreneurial culture, enables us to react quickly to new
growth opportunities.
At the Group level, in the medium- to long-term we expect to
deliver GDP+ organic revenue growth that is margin- accretive and
strongly cash-generative. This will enable us to allocate our
resources in a disciplined fashion, to create further value via
carefully selected capital expenditure and M&A investments in
high-margin and high-growth areas that in turn feed further
accelerated margin accretive revenue growth.
The Products sector, which currently delivers 78% of our profit,
comprises Softlines, Hardlines, Electrical & Connected World,
Building & Construction, Chemicals & Pharma, Transportation
Technologies, Food, and Business Assurance. We see the sector as
continuing to benefit from corporations' growing investments in
quality and innovation and anticipate continuing growth in response
to rising consumer demand and a higher regulatory burden.
Specifically, we see two key growth drivers for Intertek in this
sector:
-- growth in stock-keeping units ('SKUs') or brands, driven by
increasing numbers of products worldwide, shorter product
life-cycles and the rise of e-commerce. Consider the speed of
product development over the last 30 years in the mobile phone
sector, as companies have competed for consumer attention through
investments in technology, innovation, variety and brand
development; and
-- growth in the number of tests that need to be taken for each
SKU or brand, driven by rising regulatory standards, concerns for
safety, demand for higher quality and continuous innovation.
We expect our Products sector to continue growing faster than
GDP as our ATIC services support customers in their determination
to:
-- innovate ahead of their competitors;
-- maintain or improve quality while expanding their supply chains;
-- meet more demanding regulatory standards;
-- raise the sustainability standards of their products and processes;
-- sharpen their risk-management focus; and
-- protect their reputations.
Our second key business sector is Trade, which comprises Caleb
Brett, AgriWorld and Government & Trade Services (GTS) and
accounts for 16% of our profit. By drawing on our services,
particularly in the inspection area, companies have the assurance
of knowing that their cargoes comply with all relevant regulations
and quality standards.
Our Trade business will continue to benefit from ongoing growth
in global trade and the development of stronger regional trade in
Asia, the Indian Ocean, the Mediterranean and the Americas. We
expect this growth to be at a rate similar to global GDP through
the cycle, driven by the increase in global population and demand
from emerging markets that are causing cargo tonnage, shipping
numbers and trading routes to grow.
In Resources, our third business sector which contributed 6% of
our profit, and consists of our Industry Services and Minerals
businesses, we anticipate long-term growth driven by increasing
demand for global energy to support GDP and population growth, but
we recognise this is a cyclical business that is currently in the
challenging part of the cycle.
We offer both Capex and Opex Services, helping companies to
invest in new capacity and operating existing facilities.
We will also see continued expansion in the different types of
energy consumed, with an increasing role for renewables in driving
sustainability, carbon reduction and cleanliness of supply.
Our differentiated strategy for growth
Our earnings model supports our '5x5' differentiated strategy
for growth, which aims to move the centre of gravity of the Group
towards high-growth, high-margin areas in our industry. This
strategy comprises five strategic priorities and five strategic
enablers, targeted at the achievement of five corporate goals that
help us measure progress.
Our five medium- to long-term corporate goals are:
-- Fully engaged employees working in a safe environment.
-- Superior customer service in Assurance, Testing, Inspection and Certification.
-- Margin-accretive revenue growth based on GDP+ organic growth.
-- Strong cash conversion from operations.
-- Accretive, disciplined capital-allocation policy.
Our five strategic priorities are:
-- A differentiated brand proposition that positions Intertek as
the market-leading provider of Quality Assurance services.
-- Delivering superior service with our TQA Value Proposition,
building customer loyalty and attracting new customers.
-- An effective sales strategy that develops our business by
attracting new clients and growing account penetration with
existing customers, through increasing the focus on the systematic
cross selling of our ATIC solutions.
-- Operating a growth- and margin-accretive portfolio strategy,
that delivers focused growth among the business lines, countries
and services with good growth and margin prospects.
-- Delivering operational excellence in every operation to drive productivity.
The five enablers that will support the execution of our
strategy are:
-- Our entrepreneurial spirit and decentralised organisation which underpins
our customer-centric culture.
-- Disciplined performance management, driving margin-accretive revenue
growth with strong cash conversion and strong returns on capital.
-- Superior technology, increasing productivity and adding value to our
customers.
-- Engaging our people through the appropriate reward strategy and investing
in the right capabilities to support our growth agenda.
-- Achieving sustainable growth for customers, employees, shareholders,
suppliers and communities and ensuring we have the right balance between
performance and sustainability.
Focused portfolio strategy
Pursuing a growth- and margin-accretive portfolio is one of our
five strategic priorities. When managing our day-to-day performance
and allocating our capital and people resources, we will pursue a
three-tier portfolio strategy:
First, we will focus on our large businesses with good growth
and margin prospects. These areas of focus are:
-- at the Business Line level: Softlines, Hardlines, Electrical
& Connected World, Caleb Brett and Government & Trade
Services; and
-- at the Geographic level: North America and Greater China.
Second, we will invest in the fast-growing businesses with good
margin prospects where the focus areas are:
-- at the Business Line level: Business Assurance, AgriWorld,
Building & Construction, Transportation Technology and Food;
and
-- at the Geographic level: South Asia, South East Asia, South America, Middle East and Africa.
Third, we will focus on improving the performance:
-- at the Business Line level: Industry Services and Minerals; and
-- at the Geographic level: Europe and Australasia.
Accretive disciplined capital allocation
In our view, to deliver shareholder returns on a consistent
basis, the right formula is sustainable earnings growth with
accretive disciplined allocation of capital.
We pursue an accretive disciplined approach to capital
allocation, which enables us to reinvest our growing earnings and
create long-term value and sustainable shareholder returns.
The first priority when it comes to capital allocation is
investment to support organic growth. In the medium- to long-term,
we will invest circa 5% of revenue in capital expenditure.
The second priority is to deliver sustainable returns for our
shareholders through the payment of progressive dividends with a
dividend payout ratio of circa 50% of earnings.
The third priority for capital is M&A activity to strengthen
our portfolio in the right growth areas, provided we can deliver
good returns. This means focusing on those existing business lines
or countries with good growth and margin prospects, where we have
leading market positions, or entering new exciting growth areas, be
that geographically or for services.
The fourth priority is to maintain an efficient balance sheet
that gives us the flexibility to invest in growth with a financial
net debt to EBITDA ratio of 1.3 to 1.8 times on an IFRS 16 basis
(equivalent to 1.5 to 2.0 times on an IAS 17 basis).
Well positioned moving forward
We believe that the strength of our results demonstrates the
attractive nature of our industry, Intertek's high-quality earnings
model and the effectiveness of our '5x5' differentiated strategy
for growth.
We are confident about the structural growth prospects in the
global Quality Assurance market.
Moving forward, we are well positioned to seize these attractive
growth opportunities, underpinned by the increased complexities of
corporate supply chains and the associated challenges of
maintaining a high level of quality assurance end-to-end.
We are moving the Group's centre of gravity towards our
industry's most attractive growth and margin areas with a
disciplined approach to performance management and capital
allocation.
We are on track on our 'good-to-great' journey, making progress
on both performance and strategy and I am excited about the Group's
growth prospects ahead, both organically and inorganically.
Andr é Lacroix
Chief Executive Officer
Operating Review
For the year ended 31 December 2019
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 ' ) and on an
IAS 17 basis for both 2019 and 2018 unless otherwise stated.
Overview of Performance
2019 2018 Change at Change at constant 2019
IAS 17(1) IAS 17(1) actual rates rates(2) IFRS 16(1)
GBPm GBPm IAS 17 IAS 17 GBPm
Revenue 2,987.0 2,801.2 6.6% 4.8% 2,987.0
Organic revenue(3) 2,925.6 2,782.9 5.1% 3.3% 2,925.6
Operating profit(4) 513.3 481.8 6.5% 5.2 % 524.2
Margin(4) 17.2% 17.2% 0bps 10bps 17.5%
Net financing costs(4) (30.3) (25.3) (19.6%) (18.9%) (39.4)
Income tax expense(4) (118.4) (112.8) (4.9%) (3.6%) (118.8)
Earnings for the period(4) 364.6 343.7 6.1% 4.7% 366.0
Diluted earnings per
share(4) 211.7p 198.3p 6.8% 5.2% 212.5p
=========== =========== ============== =========================== ============
1. Following the adoption of IFRS 16 Leases on 1 January 2019, the Group's
results for the twelve months ended 31 December 2019 are on an IFRS
16 basis, whereas the results for the twelve months ended 31 December
2018 are on an IAS 17 basis as previously reported. For comparability,
we have also presented the Group's results for the twelve months
ended 31 December 2019 on an IAS 17 basis and the associated growth
rates are on this basis. Additional detail is provided in notes 1
and 10 of this release.
2. Constant currency is calculated by translating 2018 results at 2019
exchange rates.
3. Organic revenue growth excludes the impact of acquisitions and disposals
in 2018 and 2019.
4. Adjusted results are stated before SDIs, see note 3 to the Condensed
Consolidated Financial Statements.
Total reported Group revenue growth was 6.6%, with growth of
1.5% contributed by acquisitions, organic revenue of 3.3% and an
increase of 180bps from foreign exchange where sterling appreciated
against most of the Group ' s trading currencies.
The Group's organic revenue at constant rates reflected a
broad-based organic growth of 2.3% in Products, 4.1% in Trade and
5.7% in Resources.
We delivered an adjusted operating profit of GBP513.3m, up 5.2%
at constant exchange rates year-on-year and up 6.5% at actual
rates, driven by a broad-based operating profit growth at constant
currency of 5.7% in Products and 16.0% in Resources, while the
operating profit for our Trade division was flat. On an IFRS 16
basis, operating profit was GBP524.2m.
The Group remains very focused on cost and margin management.
The adjusted operating margin was 17.2%, an increase of 10bps from
the prior year at constant exchange rates as we benefited from
positive operating leverage, margin accretive divisional mix, our
portfolio review and margin-accretive acquisitions. We delivered
margin accretion in both Products +20bps and Resources +50bps at
constant currency, while Trade margin reduced by 60bps at constant
currency. On an IFRS 16 basis, adjusted operating margin was
17.5%.
Consistent with the disclosure in our FY19 Annual Report, we
continue to make progress with the implementation of our business
unit portfolio review, part of our '5x5' strategy announced in
March 2016. In-line with this, a GBP13.3m restructuring cost has
been recognised in SDIs in the period, which impacted 13 business
units in the 2019, taking the total programme to 89.
The Group's operating profit after SDIs for the period was
GBP474.9m (2018: GBP436.2m). On an IFRS 16 basis the Group's
statutory operating profit for the period was GBP485.8m.
Net financing costs
Net financing costs were GBP30.3m (2018: GBP25.3m), an increase
of GBP5.0m on 2018. This comprised GBP1.2m (2018: GBP1.8m) of
finance income and GBP31.5m (2018: GBP27.1m) of finance
expense.
On an IFRS 16 basis, the statutory net financing costs were
GBP40.7m in 2019.
Tax
The Group adjusted effective tax rate was 24.5%, broadly stable
with the prior year (2018: 24.7%). The tax charge, including the
impact of SDIs, of GBP111.1m (2018: GBP99.3m), equates to an
effective rate of 25.1% (2018: 24.5%).
On an IFRS 16 basis the statutory tax charge of GBP111.5m
equates to an effective rate of 25.1% and the tax rate on adjusted
results is 24.5%.
Earnings per share
Adjusted diluted earnings per share at actual exchange rates was
6.8% higher at 211.7p. Diluted earnings per share after SDIs was
191.8p (2018: 174.7p) and basic earnings per share after SDIs was
193.7p (2018: 176.8p).
On an IFRS 16 basis, adjusted diluted earnings per share was
212.5p, statutory diluted earnings per share was 192.6p and
statutory basic earnings per share was 194.5p.
Dividend
In line with our dividend policy of a targeted payout ratio of
circa 50%, the Board recommends a full year dividend of 105.8p per
share, an increase of 6.8%. This recommendation reflects the Group
' s earnings progression, strong financial position and the Board '
s confidence in the Group ' s structural growth drivers into the
future.
The full year dividend of 105.8p represents a total cost of
GBP170.8m or 50% of adjusted profit attributable to shareholders of
the Group for 2019 (2018: GBP159.9m and 50%). The dividend is
covered 2.0 times by earnings (2018: 2.0 times), based on adjusted
diluted earnings per share divided by dividend per share.
Portfolio activities
In March 2016, the Group announced its '5x5' differentiated
strategy for growth, with the aim to move the centre of gravity of
the Group towards high-growth, high-margin areas in its industry,
which included two strategic priorities relevant to the operational
structure of the business:
-- To operate a portfolio that delivers focused growth amongst the business
lines, countries and services, including a strategic review of underperforming
business units.
-- To deliver operational excellence in every operation to drive productivity,
including re-engineering of unnecessary processes and layers.
During the year, the Group has continued to implement certain
non-recurring action plans identified through the portfolio review
in specific country and/or Business Line combinations, consistent
with the '5x5' strategy, and after four years we are now moving
into the final year of our portfolio review. In line with this, a
GBP13.3m restructuring charge has been recognised in SDIs in the
year, which impacted 13 business units in the year, taking the
total programme to 89. These activities included the termination of
certain Business Lines in some countries; the closure and
consolidation of business line locations in certain countries; the
re-organisation of various management structures either in-country,
in-region or in global business lines.
Restructuring charges are included in the SDIs, in instances
where they have been specifically identified as part of the
portfolio review and are non-recurring , in contrast to
restructuring costs for ongoing standard cost efficiency and
cost-saving opportunities, which are incurred within adjusted
results.
Separately Disclosed Items ( ' SDIs')
A number of items are separately disclosed in the financial
statements as exclusion of these items provides readers with a
clear and consistent presentation of the underlying operating
performance of the Group ' s business. Reconciliations of the
statutory to adjusted measures are 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 fixed assets;
costs of acquiring and integrating acquisitions; the cost of any
fundamental restructuring of a business; material claims and
settlements; significant recycling of amounts from equity to the
income statement; and unrealised market or fair value gains or
losses on financial assets or liabilities, including contingent
consideration.
Adjusted operating profit excludes the amortisation of acquired
intangible assets, primarily customer relationships, as we do not
believe that the amortisation charge in the Income Statement
provides useful information about the cash costs of running our
business as these assets will be supported and maintained by the
ongoing marketing and promotional expenditure, which is already
reflected in operating costs. Amortisation of software, however, is
included in adjusted operating profit as it is similar in nature to
other capital expenditure. The costs of any restructuring are
excluded from adjusted operating profit where they represent
fundamental changes in individual operations around the Group as a
result of the portfolio activities discussed above and are not
expected to recur in those operations. The profit and loss on
disposals of businesses or other significant assets and the costs
associated with successful, active or aborted acquisitions are
excluded from adjusted operating profit in order to provide useful
information regarding the underlying performance of the Group ' s
operations.
The SDIs charge for 2019 comprises amortisation of acquisition
intangibles of GBP29.1m (2018: GBP24.6m); acquisition costs
relating to successful, active or aborted acquisitions of GBP1.6m
(2018: GBP8.5m); restructuring costs (as described above) of
GBP13.3m (2018: GBP13.6m); gain on disposal of subsidiaries and
associates of GBP1.8m (2018: GBP1.1m); a credit for material claims
and settlements of GBP4.6m (2018: GBPnil); and an equalisation
adjustment of GBP0.8m (2018: GBPnil) due to a High Court ruling
over the calculation of the guaranteed minimum pension.
Details of the SDIs for the twelve months ended 31 December 2019
and the comparative period are given in note 3 to the Condensed
Consolidated Financial Statements.
Acquisitions and investments
Intertek is well positioned to seize the attractive external
growth opportunities in a very fragmented industry, and we continue
to make progress with our M&A strategy.
The Group completed one (2018: four) acquisition in the year
with a 2019 cash consideration of GBP17.1m, net of cash acquired of
GBP0.9m.
In December 2019, the Group acquired Check Safety First Limited,
a market leading global health, safety, quality and security risk
management business focused on the travel, tourism and hospitality
sectors.
The Group also invested GBP116.8m (2018: GBP113.2m) organically
in laboratory expansions, new technologies and equipment and other
facilities. This investment represented 3.9% of revenue (2018:
4.0%).
Cash flow
The Group ' s cash performance was strong with free cash flow of
GBP380.0m (2018: GBP 350.6m), driven by disciplined working capital
management and strong cash conversion. Adjusted cash flow from
operations was GBP651.8m (2018: GBP602.9m). Cash generated from
operations was GBP636.5m (2018: GBP580.9m).
On an IFRS 16 basis, free cash flow was GBP380.0m, adjusted cash
generated from operations was GBP730.6m, statutory cash generated
from operations was GBP715.3m and statutory net cash flows
generated from operating activities was GBP562.8m. Free cash flow
is defined under the consolidated statement of cashflows and in
note 10 and reflects the adoption of IFRS 16.
Financial position
The Group ended the period in a strong financial position. Net
debt was GBP629.4m, a decrease of GBP148.8m on 31 December 2018,
reflecting the Group ' s strong operating cash generation in the
year.
On an IFRS 16 basis, net debt was GBP875.4 m including the
impact of the lease liability.
Outlook
We have delivered five years of consecutive progress on revenue,
margin, EPS and cash, exiting 2019 with improved organic growth
momentum and well positioned to continue to deliver sustained value
creation for all stakeholders.
Prior to the outbreak of the Novel Coronavirus, we were
targeting the Group to deliver continuous progress in 2020 with
broad based good organic growth across the Group (at constant
currency), based on good organic growth in Products and Trade and
robust growth in Resources, moderate margin progression and strong
cash conversion.
As outlined in our regular Customer Updates since 3 February
2020, Intertek has taken a broad range of actions in relation to
Novel Coronavirus focused on our two key priorities: the health and
safety of our employees and the mitigation of disruption to client
customer service, both in mainland China, Hong Kong and Asia more
broadly.
https://www.intertek.com/about/update-on-novel-coronavirus/
However, Intertek is not immune to the impact of the Novel
Coronavirus and our 2020 performance will be affected by the
temporary disruption to the supply chains of our clients and any
impact it might have on global trade activities. It is too early to
quantify the impact of the Novel Coronavirus and we will provide an
update at a later stage once we have more visibility on the full
resumption of the supply chain.
We will continue to work closely with our customers to mitigate
the potential risks caused by the Novel Coronavirus and to ensure
that we protect the business continuity of our customers'
operations. We will also continue to update our clients on a
regular basis on our websites.
Looking further ahead, the global Quality Assurance market will
benefit from attractive growth prospects driven by an increased
focus of corporations on risk management, global trade flows,
global demand for energy, expanding regulations, more complex
sourcing and distribution operations, technological innovations,
government investments in large infrastructure projects, and
increased consumer demand for higher quality and more sustainable
products.
We provide our customers with a TQA differentiated Value
Proposition based on the depth and breadth of our technical
expertise, our global network of over 1,000 state-of-the-art
facilities in over 100 countries, our industry leading Assurance,
Testing, Inspection and Certification solutions, and our
customer-centric culture fueled by our passionate colleagues around
the world.
We continue to be uniquely positioned to benefit from the GDP+
organic revenue growth prospects in the Quality Assurance Industry
in the medium- to long-term, leveraging our high quality and highly
cash-generative earnings model.
Operating Review by Division
Revenue Adjusted operating profit
2019 2018 Change Change at 2019 2018 Change Change at 2019
GBPm GBPm at actual constant IAS 17 IAS 17 at actual constant IFRS 16
rates rates GBPm GBPm rates rates GBPm
IAS 17 IAS 17
Products 1,796.7 1,680.2 6.9% 4.6% 398.6 371.0 7.4% 5.7% 405.4
Trade 679.4 642.1 5.8% 4.5% 83.5 83.4 0.1% (0.2)% 86.6
Resources 510.9 478.9 6.7% 5.7% 31.2 27.4 13.9% 16.0% 32.2
======== ======== ========== ========== ======== ======== =========== ========== =========
Group 2,987.0 2,801.2 6.6% 4.8% 513.3 481.8 6.5% 5.2% 524.2
======== ======== ========== ========== ======== ======== =========== ========== =========
A review of the adjusted results of each division in the twelve
months ended 31 December 2019 compared to the twelve months ended
31 December 2018 is set out on the following pages. Revenue,
operating profit and growth rates are presented at actual exchange
rates. In addition, both total and organic growth at constant
exchange rates are presented. Organic growth figures are calculated
by excluding the results of acquisitions and disposals made
since
1 January 2018. Operating profit and operating margin are stated
before Separately Disclosed Items. Statutory profit numbers are
shown in note 2.
All comments below reflect adjusted results and growth rates at
constant currency, unless otherwise stated.
Products Divisional Review
2019 2018 Change at Change at 2019
IAS 17 IAS 17 actual rates constant rates IFRS 16
GBPm GBPm IAS 17 IAS 17 GBPm
======== ==============
Revenue 1,796.7 1,680.2 6.9% 4.6 % 1,796.7
Organic revenue 1,743.4 1,667.5 4.6% 2.3% 1,743.4
Adjusted operating
profit 398.6 371.0 7.4% 5.7% 405.4
Adjusted operating
margin 22.2% 22.1% 10bps 20bps 22.6%
======== ======== ============== ================ =========
Intertek Value Proposition
Our Products-related businesses consist of business lines that
are focused on ensuring the quality and safety of physical
components and products, as well as minimising risk through
assessing the operating processes and quality management systems of
our customers.
As a trusted partner to the world ' s leading retailers,
manufacturers and distributors, the division supports a wide range
of industries including textiles, footwear, toys, hardlines, home
appliances, consumer electronics, information and communication
technology, automotive, aerospace, lighting, building products,
industrial and renewable energy products, food and hospitality,
healthcare and beauty, and pharmaceuticals.
Across these industries we provide a wide range of ATIC services
including, laboratory safety, quality and performance testing,
second-party supplier auditing, sustainability analysis, product
assurance, vendor compliance, process performance analysis,
facility plant and equipment verification and third-party
certification.
Strategy
Our TQA Value Proposition provides a systemic approach to
support the Quality Assurance efforts of our Products related
customers in each of the areas of their operations. To do this we
leverage our global network of accredited facilities and world
leading technical experts to help our clients meet high quality
safety, regulatory and brand standards, develop new products,
materials and technologies and ultimately assist them in getting
their products to market quicker, in order to continually meet
evolving consumer demands.
Innovations
We continue to invest in innovation to deliver a superior
customer service in our Products related businesses:
Cyber Assured
-- Connected World Innovation: Intertek's unique Cyber Assured program
offers continuous, real time vulnerability monitoring and a certification
mark to give consumers an unprecedented level of confidence in the
security of their IoT devices.
-- Customer Benefit: With Cyber Assured, customers are assured to benefit
from the highest level of cyber protection over the lifetime of
their products.
Intertek High Performance Mark
-- Softlines Innovation: Intertek's proprietary High Performance Mark
sets the standard for assuring product claims and quality of premium
and high-tech textile products in the fast-growing Athleisure market.
-- Customer Benefit: Our customers are able to differentiate their
athleisure offering, giving consumers the peace-of-mind that their
purchase is safe, of high quality and that the high-performance
claims made are validated and certified.
Pioneering Product Sustainability Certification
-- Business Assurance Innovation: As part of our Operational Sustainability
Services, Intertek is building on our existing comprehensive suite
of Product Sustainability Certifications, with new certifications
for Recycled Content, Reduced Resources, Carbon Footprinting and
Biodegradability.
-- Customer Benefit: With independent verification of the sustainability
of their products, our customers can effectively manage increasing
scrutiny from all stakeholders and ever more stringent regulatory
requirements.
2019 performance
In 2019, our Products business delivered a robust performance
with continuous margin accretive revenue growth.
Our revenue growth at constant rates was 4.6% and our organic
revenue growth was 2.3%, driven by broad-based revenue growth
across business lines and geographies. We delivered robust
operating profit of GBP398.6m, up 5.7% at constant currency
enabling us to deliver a margin of 22.2%, up 20bps versus last year
as we benefited from positive operating leverage and disciplined
cos t management.
-- Our Softlines business reported an organic growth performance slightly
below last year. We are benefiting from the investments we have
made to support the expansion of our customers into new markets,
seizing the exciting growth opportunities in the footwear sector
and continuing to leverage the strong demand from our customers
for chemical testing. However, the lack of visibility around the
outcome of negotiations on tariffs has resulted in a delay in the
launch of new products in the second half.
-- Our Hardlines and Toy business continues to take advantage of our
strong global account relationships, the expansion of our customers'
supply chains into new markets and our innovative technology for
factory inspections. We delivered solid organic revenue growth performance
across our main markets of Greater China, India and Vietnam.
-- We delivered good organic revenue growth in our Electrical & Connected
World business driven by higher regulatory standards in energy efficiency
and by the increased demand for wireless devices and cybersecurity.
-- Our Business Assurance business delivered good organic revenue growth
as we continue to benefit from the increased focus of corporations
on risk management, resulting in strong growth in supply chain audits
and increased consumer and government focus on ethical and sustainable
supply.
-- Driven by the growing demand for more environmentally friendly and
higher quality buildings and infrastructure in the US market, our
Building & Construction business reported good organic revenue growth.
-- Our Transportation Technologies business delivered robust organic
revenue growth as we capitalise on our clients' investments in new
powertrains to lower emissions and increase fuel efficiency.
-- We continue to benefit from the increased focus of corporations
on food safety and delivered good organic revenue growth in our
Food business.
-- We delivered an organic revenue performance slightly below last
year in our Chemicals & Pharma business due to a base line effect
in 2018 driven by the 1 June 2018 REACH registration deadline.
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
2019 2018 Change at Change at 2019
IAS 17 IAS 17 actual rates constant rates IFRS 16
GBPm GBPm IAS 17 IAS 17 GBPm
======== ==============
Revenue 679.4 642.1 5.8% 4.5% 679.4
Organic revenue 671.3 636.5 5.5% 4.1% 671.3
Adjusted operating
profit 83.5 83.4 0.1% (0.2)% 86.6
Adjusted operating
margin 12.3% 13.0% (70)bps (60)bps 12.7%
======== ======== ============== ================ =========
Intertek Value Proposition
Our Trade division consists of three Global Business Lines with
global and regional trade flow based on similar mid- to long-term
structural growth drivers:
Our Caleb Brett business provides cargo inspection, analytical
assessment, calibration and related research and technical services
to the world ' s petroleum and biofuels industries.
Our Government & Trade Services ( ' GTS ' ) business
provides inspection services to governments and regulatory bodies
to support trade activities that help the flow of goods across
borders, predominantly in the Middle East, Africa and South
America.
Our AgriWorld business provides analytical and testing services
to global agricultural trading companies and growers.
Strategy
Our TQA Value Proposition assists our Trade related customers in
protecting the value and quality of their products during their
custody-transfer, storage and transportation, globally, 24/7. Our
expertise, service innovations and advanced analytical capabilities
allow us to optimise the return on our customers' cargoes and help
them resolve difficult technical challenges. Our independent
product assessments provide peace-of-mind to our government clients
that the quality of products imported into the country meet their
standards and import processes.
Innovations
We continue to invest in ATIC innovations to deliver a superior
customer service in our Trade related businesses:
Intertek Beerlab
-- AgriWorld Innovation: Through our remote sample submission mechanism,
craft brewers now have access to state-of-the-art lab equipment
and Intertek TQA expertise.
-- Customer Benefit: QA in the craft brewing industry is typically
performed via taste and smell. Now for the first time, craft brewers
can rapidly identify quality issues, resulting in waste reduction
and ingredient optimisation for a more efficient brewing process.
Inflow for IMO2020 Compliance
-- Caleb Brett Innovation: We combine near-infrared scanners and our
market leading proprietary InFlow technology to look outside the
usual fuel analysis parameters to identify unexpected issues with
oil quality and compatibility.
-- Customer Benefit: Our solution allows our shipping customers to
mitigate the risks arising from the changes they have made to their
fuel to comply with the IMO2020 emissions regulations.
QR Codes for Report Authentication
-- Caleb Brett Innovation: Intertek Caleb Brett has introduced tech-augmented
reports, with QR codes providing indisputable evidence of authenticity.
-- Customer Benefit: Our new tech-augmented approach reinforces our
customers' confidence in the authenticity of our QA reports and
by extension the Quality, Safety and Sustainability of the products
and operations they assure.
2019 performance
Our Trade related businesses benefited from an acceleration in
revenue momentum with 4.5% growth and 4.1% organic revenue growth
at constant rates, driven by broad-based revenue growth across
business lines and geographies. We delivered a stable operating
profit of GBP83.5m, enabling us to deliver an operating margin of
12.3%, down 60bps versus last year driven by a portfolio mix effect
within GTS and challenging trading conditions within Caleb Brett in
North America and Northern Europe.
-- Our Caleb Brett business reported good organic revenue growth, reflecting
the structural growth drivers in the Crude Oil and Refined Product
global trading market.
-- Our Government & Trade Services business delivered double-digit
organic revenue growth driven by growth from existing contracts
and the benefits of new contracts.
-- Our AgriWorld business delivered good organic revenue growth driven
by a broad-based growth performance across our global inspection
businesses.
Mid- to long-term growth outlook
Our Trade division will continue to benefit from 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
2019 2018 Change at Change at 2019
IAS 17 IAS 17 actual rates constant rates IFRS 16
GBPm GBPm IAS 17 IAS 17 GBPm
======== ==============
Revenue 510.9 478.9 6.7% 5.7% 510.9
Organic revenue 510.9 478.9 6.7% 5.7% 510.9
Adjusted operating
profit 31.2 27.4 13.9% 16.0% 32.2
Adjusted operating
margin 6.1% 5.7% 40bps 50bps 6.3%
======== ======== ============== ================ =========
Intertek Value Proposition
Our Resources division consists of two Business Lines with
similar mid- to long-term structural growth drivers:
Our Industry Services business uses in-depth knowledge of the
oil, gas, nuclear and power industries to provide a diverse range
of TQA solutions to optimise the use of customers' assets and
minimise the risk in their supply chains. Some of our key services
include technical inspection, asset integrity management,
analytical testing and ongoing training services.
Our Minerals business provides a broad range of ATIC service
solutions to the mining and minerals exploration industries,
covering the resource supply chain from exploration and resource
development, through to production, shipping and commercial
settlement.
Strategy
Our TQA Value Proposition allows us to help customers gain peace
of mind that their projects will proceed on time and their assets
will continue to operate with a lower risk of technical failure or
delay. Our broad range of services allow us to assist clients in
protecting the quantity and quality of their mined and drilled
products, improve safety and reduce commercial risk in the trading
environment.
Innovations
We continue to invest in innovation to deliver a superior
customer service in our Resources related businesses:
Risk Aware
-- Industry Services Innovation: Intertek is leveraging our wealth
of supply chain data to drive predictive analytics, supporting our
customers to develop more efficient quaility assurance plans as
they perform due diligence on potential equipment purchases.
-- Customer Benefit: Our equipment-purchasing customers are now able
to efficiently target higher risk areas more effectively.
Windlife
-- Industry Services Innovation: Windlife, our state-of-the-art wind
turbine management platform, is built on Intertek's proprietary
algorithms, giving real-time asset data through a fully customizable
web portal.
-- Customer Benefit: Our customers are leveraging Windlife's prediction
and visualization capabilities to monitor and optimise the performance
and useful life of their wind assets.
Rock Chip Imagery for AI Analysis
-- Minerals Innovation: Our Minerals TQA experts are using cutting
edge technology to deliver rapid, high-quality and consistent minerals
imagery to feed AI-powered mineral modelling systems.
-- Customer Benefit: With consistent, high quality images, our customers
can estimate geological features with unprecedented accuracy, reducing
the need for field geologists, driving efficiency and safety in
their mining operations
2019 performance
We benefited from an improved revenue momentum with margin
accretion in our Resources related businesses. We reported robust
organic revenue growth, up year-on-year by 5.7% at constant rates
and we delivered an operating profit of GBP31.2m, which was up
year-on-year by 16.0% enabling us to deliver a margin of 6.1%, up
year-on-year by 50bps.
-- We delivered robust organic revenue growth in our Capex Inspection
Services business which benefited from the increased investment
of our customers in exploration and production activity as well
as the wins of new clients in several geographies. The demand for
Opex Maintenance Services remained stable.
-- We benefited from robust organic revenue growth in our Minerals
business driven by stronger demand for testing and inspection across
most geographies.
Mid- to long-term growth outlook
Our Resources division will grow in the medium- to long-term as
we benefit from investments in Exploration and Production of Oil,
Renewable Energies and Minerals, to meet the demand of the growing
population around the world.
Presentation of Results
For the year ended 31 December 2019
Adjusted Results
In order 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 Separately
Disclosed Items ( ' SDIs ' ) which are described below and in note
3 are excluded from the adjusted results. The figures discussed in
this review (extracted from the income statement and cash flow
statement) are presented before SDIs , except where stated.
Organic growth
Organic measures are used in order to present the Group ' s
results excluding the effects of acquisitions and disposals since 1
January 2018.
To improve the understanding of the Group's organic growth
performance, moving forward we will adopt a "like-for-like revenue"
definition for organic revenue. "Like-for-like revenue" will
include acquisitions following their 12-month anniversary of
ownership and remove the historical contribution of any business
disposals / closures. The following table shows a proforma
breakdown of 2019 growth performance on a "like-for-like revenue"
basis.
Like-for-like
revenue growth 4 months 4 months 10 months
at constant rates - - -
January July to January
to April H1 2019 October to October FY 2019
% % % % %
Products(1) 2.6% 2.1% 2.8% 2.4% 2.5%
Trade 5.3% 5.1% 3.7% 4.5% 4.2%
Resources 3.3% 3.9% 8.0% 5.6% 6.0%
Group 3.3% 3.1% 3.9% 3.4% 3.5%
=========== ======== ========== ============= ========
1. Excluding the impact of the Alchemy related IFRS 3 (Business
Combinations) deferred revenue haircut transitional impact.
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 2018 results at
2019 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 statutory 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 fixed assets;
costs of acquiring and integrating acquisitions ; the cost of
fundamental restructuring of a business; material claims and
settlements; significant recycling of amounts from equity to the
income statement; unrealised market or fair value gains or losses
on financial assets or liabilities, including contingent
consideration; and cost adjustments as a result of legislative
changes.
Adjusted operating profit excludes the amortisation of acquired
intangible assets, primarily customer relationships, as we do not
believe that the amortisation charge in the income statement
provides useful information about the cash costs of running our
business as these assets will be supported and maintained by the
ongoing marketing and promotional expenditure, which is already
reflected in operating costs. Amortisation of software, however, is
included in adjusted operating profit as it is similar in nature to
other capital expenditure.
The costs of restructuring are excluded from adjusted operating
profit where they represent fundamental changes in individual
operations around the Group as a result of the portfolio activities
discussed above and are not expected to recur in those operations.
The profit and loss on disposals of businesses or other significant
assets and the costs associated with successful, active or aborted
acquisitions are excluded from adjusted operating profit in order
to provide useful information regarding the underlying performance
of the Group ' s operations.
Details of the SDIs for the twelve months ended 31 December 2019
and the comparative period are given in note 3 to the Condensed
Consolidated Financial Statements.
Reconciliation of Statutory(1) 2019 2019 2019 Adjusted 2018 Reported 2018 2018 Adjusted
to Adjusted Performance Results SDIs IAS 17(1) IAS 17 SDIs IAS 17
Measures (GBPm) IAS 17(1) IAS 17(1) IAS 17
Operating profit 474.9 38.4 513.3 436.2 45.6 481.8
=========== =========== ============== ============== ======== ==============
Operating margin (%) 16.0% 1.2% 17.2% 15.6% 1.6% 17.2%
=========== =========== ============== ============== ======== ==============
Net financing costs (31.6) 1.3 (30.3) (31.7) 6.4 (25.3)
=========== =========== ============== ============== ======== ==============
Profit before tax 443.3 39.7 483.0 404.5 52.0 456.5
=========== =========== ============== ============== ======== ==============
Income tax expense (111.1) (7.3) (118.4) (99.3) (13.5) (112.8)
=========== =========== ============== ============== ======== ==============
Profit for the year 332.2 32.4 364.6 305.2 38.5 343.7
=========== =========== ============== ============== ======== ==============
Cash flow from operations 636.5 15.3 651.8 580.9 22.0 602.9
=========== =========== ============== ============== ======== ==============
Basic earnings per
share (p) 193.7p 20.1p 213.8p 176.8p 23.9p 200.7p
=========== =========== ============== ============== ======== ==============
Diluted earnings per
share (p) 191.8p 19.9p 211.7p 174.7p 23.6p 198.3p
=========== =========== ============== ============== ======== ==============
Reconciliation of Statutory 2019 Reported 2019 2019 Adjusted 2018 Reported 2018 2018 Adjusted
to Adjusted Performance IFRS 16(1) SDIs IFRS 16(1) IAS 17 SDIs IAS 17
Measures (GBPm) IFRS 16(1) IAS 17
Operating profit 485.8 38.4 524.2 436.2 45.6 481.8
============== ============ ============== ============== ======== ==============
Operating margin (%) 16.3% 1.2% 17.5% 15.6% 1.6% 17.2%
============== ============ ============== ============== ======== ==============
Net financing costs (40.7) 1.3 (39.4) (31.7) 6.4 (25.3)
============== ============ ============== ============== ======== ==============
Profit before tax 445.1 39.7 484.8 404.5 52.0 456.5
============== ============ ============== ============== ======== ==============
Income tax expense (111.5) (7.3) (118.8) (99.3) (13.5) (112.8)
============== ============ ============== ============== ======== ==============
Profit for the year 333.6 32.4 366.0 305.2 38.5 343.7
============== ============ ============== ============== ======== ==============
Cash flow from operations 715.3 15.3 730.6 580.9 22.0 602.9
============== ============ ============== ============== ======== ==============
Basic earnings per
share (p) 194.5p 20.1p 214.6p 176.8p 23.9p 200.7p
============== ============ ============== ============== ======== ==============
Diluted earnings per
share (p) 192.6p 19.9p 212.5p 174.7p 23.6p 198.3p
============== ============ ============== ============== ======== ==============
1. Following the adoption of IFRS 16 Leases on 1 January 2019,
the Group's results for the twelve months ended 31 December 2019
are on an IFRS 16 basis, whereas the results for the twelve months
ended 31 December 2018 are on an IAS 17 basis as previously
reported. For comparability, we have also presented the Group's
results for the twelve months ended 31 December 2019 on an IAS 17
basis and the associated growth rates are on this basis. Additional
detail is provided in notes 1 and 1 0 of this release.
Full Year Report
If you require a printed copy of this statement, please contact
the Group Company Secretary. This statement is available on http://
www.intertek.com .
Legal Notice
This Full Year Report and announcement contain certain forward-looking
statements with respect to the financial condition, results, operations
and business of Intertek Group plc. These statements and forecasts involve
risk and uncertainty because they relate to events and depend upon circumstances
that will occur in the future. There are a number of factors that could
cause actual results or developments to differ materially from those
expressed or implied by these forward-looking statements and forecasts.
Nothing in this announcement should be construed as a profit forecast.
Past performance cannot be relied upon as a guide to future performance.
Condensed Consolidated Income Statement
For the year ended 31 December 2019
2019 2018
IFRS 16 IAS 17
Adjusted Separately Disclosed Total Adjusted Separately Disclosed Total
Results Items* 2019 results Items* 2018
Notes GBPm GBPm GBPm GBPm GBPm GBPm
===================== ===== ========= ===================== ========= ========= ===================== =========
Revenue 2 2,987.0 - 2,987.0 2,801.2 - 2,801.2
Operating costs (2,462.8) (38.4) (2,501.2) (2,319.4) (45.6) (2,365.0)
===================== ===== ========= ===================== ========= ========= ===================== =========
Group operating
profit/(loss) 2 524.2 (38.4) 485.8 481.8 (45.6) 436.2
===================== ===== ========= ===================== ========= ========= ===================== =========
Finance income 1.2 - 1.2 1.8 - 1.8
Finance expense (40.6) (1.3) (41.9) (27.1) (6.4) (33.5)
===================== ===== ========= ===================== ========= ========= ===================== =========
Net financing costs (39.4) (1.3) (40.7) (25.3) (6.4) (31.7)
===================== ===== ========= ===================== ========= ========= ===================== =========
Profit/(loss) before
income tax 484.8 (39.7) 445.1 456.5 (52.0) 404.5
Income tax
(expense)/credit 2 (118.8) 7.3 (111.5) (112.8) 13.5 (99.3)
===================== ===== ========= ===================== ========= ========= ===================== =========
Profit/(loss) for the
period 2 366.0 (32.4) 333.6 343.7 (38.5) 305.2
===================== ===== ========= ===================== ========= ========= ===================== =========
Attributable to:
Equity holders of the
Company 345.5 (32.4) 313.1 322.9 (38.5) 284.4
Non-controlling
interest 20.5 - 20.5 20.8 - 20.8
===================== ===== ========= ===================== ========= ========= ===================== =========
Profit/(loss) for the
period 366.0 (32.4) 333.6 343.7 (38.5) 305.2
===================== ===== ========= ===================== ========= ========= ===================== =========
Earnings per share
===================== ===== ========= ===================== ========= ========= ===================== =========
Basic 4 214.6p 194.5p 200.7p 176.8p
===================== ===== ========= ===================== ========= ========= ===================== =========
Diluted 4 212.5p 192.6p 198.3p 174.7p
===================== ===== ========= ===================== ========= ========= =====================
Dividends in respect of
the period 105.8p 99.1p
============================ ========= ===================== ========= ========= ===================== =========
* See note 3.
Condensed Consolidated Statement of Comprehensive Income
For the year ended 31 December 2019
2019 2018
IFRS 16 IAS 17
Notes GBPm GBPm
Profit for the period 2 333.6 305.2
============================================================================ ===== ======== =======
Other comprehensive income
Remeasurements on defined benefit pension schemes (3.2) (0.8)
Tax on items that will never be reclassified subsequently to profit or loss 0.2 (0.5)
Items that will never be reclassified to profit or loss (3.0) (1.3)
Foreign exchange translation differences of foreign operations (72.4) 45.3
Net exchange gain/(loss) on hedges of net investments in foreign operations 31.2 (32.6)
Gain on fair value of cash flow hedges 0.7 1.1
Items that are or may be reclassified subsequently to profit or loss (40.5) 13.8
============================================================================ ===== ======== =======
Total other comprehensive income for the period (43.5) 12.5
============================================================================ ===== ======== =======
Total comprehensive income for the period 290.1 317.7
============================================================================ ===== ======== =======
Total comprehensive income for the period attributable to:
Equity holders of the Company 271.8 299.7
Non-controlling interest 18.3 18.0
============================================================================ ===== ======== =======
Total comprehensive income for the period 290.1 317.7
============================================================================ ===== ======== =======
Condensed Consolidated Statement of Financial Position
For the year ended 31 December 2019
2019 2018
IFRS 16 IAS 17
Notes GBPm GBPm
Assets
Property, plant and equipment 9 644.2 441.2
Goodwill 8 859.8 874.9
Other intangible assets 302.4 329.5
Investments in associates - 0.3
Deferred tax assets 51.9 58.4
===================================================== ====== ========== ==========
Total non-current assets 1,858.3 1,704.3
===================================================== ====== ========== ==========
Inventories* 19.2 18.3
Trade and other receivables* 685.0 684.4
Cash and cash equivalents 7 227.4 206.9
Current tax receivable 28.5 19.7
===================================================== ====== ========== ==========
Total current assets 960.1 929.3
===================================================== ====== ========== ==========
Total assets 2,818.4 2,633.6
===================================================== ====== ========== ==========
Liabilities
Interest bearing loans and borrowings 7 (238.9) (138.3)
Current taxes payable (57.2) (62.5)
Lease liabilities 10 (61.7) -
Trade and other payables* (518.0) (515.1)
Provisions* (24.2) (26.8)
===================================================== ====== ========== ==========
Total current liabilities (900.0) (742.7)
===================================================== ====== ========== ==========
Interest bearing loans and borrowings 7 (617.9) (846.8)
Lease liabilities 10 (184.3) -
Deferred tax liabilities (68.2) (80.8)
Net pension liabilities 5 (13.4) (12.5)
Other payables* (29.2) (26.5)
Provisions* (20.1) (16.0)
===================================================== ====== ========== ==========
Total non-current liabilities (933.1) (982.6)
===================================================== ====== ========== ==========
Total liabilities (1,833.1) (1,725.3)
===================================================== ====== ========== ==========
Net assets 985.3 908.3
===================================================== ====== ========== ==========
Equity
Share capital 1.6 1.6
Share premium 257.8 257.8
Other reserves (31.2) 7.1
Retained earnings 727.7 607.5
===================================================== ====== ========== ==========
Total attributable to equity holders of the Company 955.9 874.0
Non-controlling interest 29.4 34.3
===================================================== ====== ========== ==========
Total equity 985.3 908.3
===================================================== ====== ========== ==========
Working capital of GBP100.7m (2018: GBP109.7m) comprises the
asterisked items in the above statement of financial position less
refundable deposits aged over 12 months of GBP12.0m (2018:
GBP8.6m).
Condensed Consolidated Statement of Changes in Equity
For the year ended 31 December 2019
Attributable to equity holders of the Company
======================================================================
Other Reserves
====================
Share Share Translation Other Retained Total before Non-controlling Total
capital premium reserve earnings non-controlling interest equity
interest
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January
2018 1.6 257.8 (13.8) 4.3 459.8 709.7 34.5 744.2
Total
comprehensive
income for the
year
Profit - - - - 284.4 284.4 20.8 305.2
Other
comprehensive
income - - 15.5 1.1 (1.3) 15.3 (2.8) 12.5
Total
comprehensive
income for the
year - - 15.5 1.1 283.1 299.7 18.0 317.7
================= ======== ========= ============ ====== ========= ================ ================ =========
Transactions with owners
of the company recognised
directly in equity
Contributions by and
distributions to the
owners of the company
Dividends paid - - - - (128.3) (128.3) (18.2) (146.5)
Adjustments - - - - - - - -
arising from
changes in
non-controlling
interest
Issue of share - - - - - - - -
capital
Purchase of own
shares - - - - (16.7) (16.7) - (16.7)
Tax paid on
share awards
vested* - - - - (9.9) (9.9) - (9.9)
Equity-settled
transactions - - - - 20.9 20.9 - 20.9
Income tax on
equity-settled
transactions - - - - (1.4) (1.4) - (1.4)
Total
contributions
by and
distributions
to the owners
of the company - - - - (135.4) (135.4) (18.2) (153.6)
================= ======== ========= ============ ====== ========= ================ ================ =========
At 31 December
2018 1.6 257.8 1.7 5.4 607.5 874.0 34.3 908.3
================= ======== ========= ============ ====== ========= ================ ================ =========
At 31 December
2018 1.6 257.8 1.7 5.4 607.5 874.0 34.3 908.3
Adoption of IFRS
16 Leases - - - - (19.0) (19.0) - (19.0)
IFRIC 23
Uncertainty
over income tax
treatments - - - - ( 0 .2) ( 0 .2) - ( 0 .2)
At 1 January
2019 1.6 257.8 1.7 5.4 588.3 854.8 34.3 889.1
Total
comprehensive
income
/(expense) for
the year
Profit - - - - 313.1 313.1 20.5 333.6
Other
comprehensive
(expense)/
income - - (39.0) 0.7 (3.0) (41.3) (2.2) (43.5)
Total c
omprehensive
(expense)/
income for the
year - - (39.0) 0.7 310.1 271.8 18.3 290.1
================= ======== ========= ============ ====== ========= ================ ================ =========
Transactions with owners
of the company recognised
directly in equity
Contributions by and
distributions to the
owners of the company
Dividends paid** - - - - (163.2) (163.2) (19.1) (182.3)
Adjustments
arising from
changes in
non-controlling
interest - - - - 4.1 4.1 (4.1) -
Purchase of own
shares - - - - (23.1) (23.1) - (23.1)
Tax paid on
share awards
vested* - - - - (11.6) (11.6) - (11.6)
Equity-settled
transactions - - - - 21.9 21.9 - 21.9
Income tax on
equity-settled
transactions - - - - 1.2 1.2 - 1.2
Total
contributions
by and
distributions
to the owners
of the company - - - - (170.7) (170.7) (23.2) (193.9)
================= ======== ========= ============ ====== ========= ================ ================ =========
At 31 December
2019 1.6 257.8 (37.3) 6.1 727.7 955.9 29.4 985.3
================= ======== ========= ============ ====== ========= ================ ================ =========
* The tax paid on share awards vested is related to settlement
of the tax obligation on behalf of employees by the Group via the
sale of a portion of the equity-settled shares.
** A dividend of GBP108.2m paid on 4 June 2019 represented the
final dividend of 67.2p per ordinary share in respect of the year
ended 31 December 2018. An interim dividend of GBP55.0m paid on 11
October 2019 represented the interim dividend of 34.2p per ordinary
share in respect of the year ended 31 December 2019.
Condensed Consolidated Statement of Cash Flows
For the year ended 31 December 2019
2019 2018
IFRS 16 IAS 17
Notes GBPm GBPm
Cash flows from operating activities
Profit for the year 2 333.6 305.2
Adjustments for:
Depreciation charge 156.2 76.2
Amortisation of software 15.3 12.5
Amortisation of acquisition intangibles 29.1 24.6
Equity-settled transactions 21.9 20.9
Net financing costs 40.7 31.7
Income tax expense 2 111.5 99.3
Profit on disposal of subsidiary /associate (1.8) (1.1)
( Profit )/ loss on disposal of property, plant, equipment and software (0.9) 0.4
================================================================================= ====== ======== ========
Operating cash flows before changes in working capital and operating provisions 705.6 569.7
Change in inventories (1.5) 1.0
Change in trade and other receivables (25.6) (16.0)
Change in trade and other payables 40.7 35.2
Change in provisions (1.9) (7.0)
Special contributions into pension schemes (2.0) (2.0)
================================================================================= ====== ======== ========
Cash generated from operations 715.3 580.9
Interest and other finance expense paid (40.7) (29.3)
Income taxes paid (111.8) (93.1)
================================================================================= ====== ======== ========
Net cash flows generated from operating activities * 562.8 458.5
================================================================================= ====== ======== ========
Cash flows from investing activities
Proceeds from sale of property, plant, equipment and software * 2.5 3.5
Interest received * 1.2 1.8
Acquisition of subsidiaries, net of cash acquired 8 (16.9) (387.9)
Consideration (paid)/received in respect of prior year acquisitions 8 (0.6) 0.1
Sale of associate 2.1 -
Acquisition of property, plant, equipment and software * 9 (116.8) (113.2)
================================================================================= ====== ======== ========
Net cash flows used in investing activities (128.5) (495.7)
================================================================================= ====== ======== ========
Cash flows from financing activities
Purchase of own shares (23.1) (16.7)
Tax paid on share awards vested (11.6) (9.9)
Drawdown of borrowings 110.0 341.4
Repayment of borrowings (221.3) (75.9)
Repayment of lease liabilities * (69.7) -
Purchase of non-controlling interest (5.2) -
Dividends paid to non-controlling interest (19.1) (18.2)
Equity dividends paid (163.2) (128.3)
================================================================================= ====== ======== ========
Net cash flows ( used in )/generated from financing activities (403.2) 92.4
================================================================================= ====== ======== ========
Net increase in cash and cash equivalents 7 31.1 55.2
Cash and cash equivalents at 1 January 7 203.2 135.9
Exchange adjustments 7 (21.3) 12.1
Cash and cash equivalents at 31 December 7 213.0 203.2
================================================================================= ====== ======== ========
Adjusted cash flow from operations of GBP730.6m (2018:
GBP602.9m) comprises statutory cash generated from operations of
GBP715.3m (2018: GBP580.9m) before cash outflows relating to
Separately Disclosed Items of GBP15.3m (2018: GBP22.0m). Free cash
flow of GBP380.0m (2018: GBP350.6m) comprises the asterisked items
in the above statement of cash flows.
1 Basis of preparation
Reporting entity
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31 December 2019
and 2018 but is derived from the 2019 accounts. A full copy of the
2019 Annual Report will be available online at www.intertek.com in
April 2020. Statutory accounts for 2018 have been delivered to the
Registrar of Companies, and those for 2019 will be delivered in due
course. The auditors have reported on those accounts; their reports
were (i) unqualified, (ii) did not include references to any
matters to which the auditors drew attention by way of emphasis
without qualifying their reports and (iii) did not contain
statements under Sections 498(2) or 498(3) of the Companies Act
2006.
The preparation of the financial statements requires management
to make estimates and assumptions that affect the reported amount
of revenues, expenses, assets and liabilities at the date of the
financial statements. If in the future such estimates and
assumptions, which are based on management ' s best judgement at
the date of the financial statements, deviate from the actual
circumstances, the original estimates and assumptions will be
modified as appropriate in the year in which the circumstances
change.
Significant new accounting policies
IFRS 16 Leases came into effect on 1 January 2019. During the
year ended 31 December 2018, management completed a data collection
exercise to determine the quantitative impact of IFRS 16 on the
Group ' s net assets and income statement as a result of IFRS 16
coming into effect from 1 January 2019.
The adoption of IFRS 16 on 1 January 2019 had the following
effect on the Group:
Total assets Total liabilities Net assets
GBPm GBPm GBPm
31 December 2018 2,633.6 (1,725.3) 908.3
============= ================== ===========
Impact of IFRS 16 244.1 (269.9) (25.8)
============= ================== ===========
Deferred tax impact 6.8 - 6.8
============= ================== ===========
1 January 2019 2,884.5 (1,995.2) 889.3
============= ================== ===========
The Group has applied the modified retrospective approach, where
the cumulative effect of applying IFRS 16 is recognised in retained
earnings with no restatement to prior years. The majority of leases
were recognised under modified retrospective B on transition,
whereby the right-of-use asset was equal to the lease liability at
1 January 2019, being the present value of the remaining future
minimum lease payments at the date of initial application,
including any early termination or extension options if they were
deemed reasonably certain to be adopted. For certain leases the
'modified retrospective A' approach was applied, whereby the
right-of-use asset recognised at 1 January 2019 is equal to the
right-of-use asset had IFRS 16 been applied since the beginning of
the lease.
For new leases entered into after 1 January 2019, the
right-of-use asset is measured initially at cost and includes the
amount of initial measurement of the lease liability, any initial
direct costs incurred including advance lease payments and an
estimate of the dismantling, removal and restoration costs required
in the terms of the lease.
Where leases have a non-lease component that is separately
identifiable, this has been excluded from the right-of-use asset
and the cost taken to the income statement.
Depreciation is charged to the consolidated income statement to
depreciate the right-of-use asset from the commencement date to the
earlier of the end of the useful life of the right-of-use asset or
the end of the lease term. The lease term shall include the period
of an extension option where it is reasonably certain that the
option will be exercised.
The lease liability is measured at the present value of the
future lease payments, including variable lease payments that
depend on an index, discounted using the incremental borrowing rate
( " IBR" ). The IBR rates are updated biannually and are applied to
new leases.
Finance charges are recognised in the consolidated income
statement over the period of the lease.
The impact on the Group ' s primary statements is disclosed in
note 10. The impact of IFRS 16 to the key financial measures is
summarised below.
Adjusted Results 2019 IAS 17 Impact IFRS 16 Commentary
EBITDA 616.5 79.2 695.7 No operating lease expense under IFRS 16
======= ======= ======== ===============================================================
Operating profit 513.3 10.9 524.2 Net effect on operating profit is GBP10.9m in 2019
======= ======= ======== ===============================================================
Net finance costs (30.3) (9.1) (39.4) IFRS 16 lease i nterest expense
======= ======= ======== ===============================================================
Profit before tax 483.0 1.8 484.8 Net effect on PBT is a GBP1.8m increase
======= ======= ======== ===============================================================
Net debt 629.4 246.0 875.4 Notional long-term loan created on application of IFRS 16
which increases net debt
======= ======= ======== ===============================================================
Adjusted free cash flow 395.3 - 395.3 No impact on free cash flow as lease cash payments are
unaffected
======= ======= ======== ===============================================================
The Group has elected to adopt two exemptions proposed by the
standard. The Group has not recognised right-of-use assets and
lease liabilities for short term leases (less than 12 months
duration) and low value assets (usually less than GBP 4,000).
The Group applied the practical expedient available under IFRS
16 to recognise leases ending within twelve months of the
transition date as a short-term lease at the date of
transition.
The Group has applied the practical expedient within the
standard whereby IFRS 16 has been applied to contracts that were
previously identified as leases when applying IAS 17 Leases and
IFRIC 4 Determining whether an Arrangement Contains a Lease .
The comparative results are displayed under IAS 17 and the Group
recognised most of its leases as operating leases. Payments made
under operating leases are recognised in the income statement on a
straight-line basis over the expected term of the lease. Lease
incentives are recognised in the income statement as an integral
part of the total lease expense over the term of the lease.
The Group has adopted IFRIC 23 Uncertainty over Income Tax
Treatments effective 1 January 2019. The interpretation clarifies
the application of the recognition and measurement requirements in
IAS 12 Income Taxes when there is uncertainty over income tax
treatment. Current tax liabilities increased by GBP 0.2m as a
result of the implementation of IFRIC 23, with a corresponding
decrease of GBP 0.2m to opening retained earnings.
Risks and uncertainties
The Board has reviewed forecasts, including forecasts adjusted
for significantly worse economic conditions, and remains satisfied
with the Group ' s funding and liquidity position. On the basis of
its forecasts, both base case and stressed, and available
facilities, the Board has concluded that 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
Value of GBP1 Actual rates Cumulative average rates
2019 2018 2019 2018
=================== ============= ========== ============= ============
US dollar 1.31 1.26 1.28 1.34
Euro 1.17 1.11 1.14 1.13
Chinese renminbi 9.17 8.69 8.82 8.84
Hong Kong dollar 10.18 9.90 10.00 10.47
Australian dollar 1.87 1.80 1.84 1.79
=================== ============= ========== ============= ============
2 Operating Segments
Business analysis
The Group is organised into business lines which are the Group's
operating segments. These operating segments are aggregated into
three divisions, which are the Group's reportable segments. These
three divisions, each of which offers services to different
industries are: Products, Trade and Resources. The costs of the
corporate head office and other costs which are not controlled by
the three divisions are allocated in an appropriate manner. These
divisions are the basis on which the Group reports its primary
segment information. A description of the activity in each division
is given in the Operating Review by Division. The results of the
divisions are shown below:
For the year ended 31 December 2019
IFRS 16 Revenue from Depreciation and Adjusted Separately Operating profit
external software operating profit Disclosed Items
customers amortisation
GBPm GBPm GBPm GBPm GBPm
Products 1,796.7 (105.2) 405.4 (23.9) 381.5
Trade 679.4 (44.6) 86.6 (4.6) 82.0
Resources 510.9 (21.7) 32.2 (9.9) 22.3
Group total 2,987.0 (171.5) 524.2 (38.4) 485.8
=================== ================== ================== ================== ================== =================
Group operating
profit 524.2 (38.4) 485.8
Net financing
costs (39.4) (1.3) (40.7)
=================== ================== ================== ================== ================== =================
Profit before
income tax 484.8 (39.7) 445.1
Income tax expense (118.8) 7.3 (111.5)
Profit for the
year 366.0 (32.4) 333.6
=================== ================== ================== ================== ================== =================
IAS 17 Revenue from Depreciation and Adjusted Separately Operating profit
external software operating profit Disclosed Items
customers amortisation
GBPm GBPm GBPm GBPm GBPm
Products 1,796.7 (66.7) 398.6 (23.9) 374.7
Trade 679.4 (23.9) 83.5 (4.6) 78.9
Resources 510.9 (12.6) 31.2 (9.9) 21.3
Group total 2,987.0 (103.2) 513.3 (38.4) 474.9
=================== ================== ================== ================== ================== =================
Group operating
profit 513.3 (38.4) 474.9
Net financing
costs (30.3) (1.3) (31.6)
=================== ================== ================== ================== ================== =================
Profit before
income tax 483.0 (39.7) 443.3
Income tax expense (118.4) 7.3 (111.1)
Profit for the
year 364.6 (32.4) 332.2
=================== ================== ================== ================== ================== =================
For the year ended 31 December 2018
I AS 17 Revenue from Depreciation and Adjusted Separately Operating profit
external software operating profit Disclosed Items
customers amortisation
GBPm GBPm GBPm GBPm GBPm
Products 1,680.2 (58.6) 371.0 (26.5) 344.5
Trade 642.1 (19.2) 83.4 (5.1) 78.3
Resources 478.9 (10.9) 27.4 (14.0) 13.4
Group total 2,801.2 (88.7) 481.8 (45.6) 436.2
=================== ================== ================== ================== ================== =================
Group operating
profit 481.8 (45.6) 436.2
Net financing
costs (25.3) (6.4) (31.7)
=================== ================== ================== ================== ================== =================
Profit before
income tax 4 5 6.5 (52.0) 404.5
Income tax expense (112.8) 13.5 (99.3)
Profit for the
year 343.7 (38.5) 305.2
=================== ================== ================== ================== ================== =================
3 Separately Disclosed Items
2019 2018
GBPm GBPm
================================================= ===== ======= =======
Operating costs
Amortisation of acquisition intangibles (a) (29.1) (24.6)
Acquisition costs (b) (1.6) (8.5)
Restructuring costs (c) (13.3) (13.6)
Gain on disposal of businesses (d) 1.8 1.1
Material claims and settlements (e) 4.6 -
Guaranteed minimum pension equalisation (f) (0.8) -
================================================= ===== ======= =======
Total operating costs (38.4) (45.6)
Net financing costs (g) (1.3) (6.4)
================================================= ===== ======= =======
Total before income tax (39.7) (52.0)
Income tax credit on Separately Disclosed Items 7.3 13.5
Total (32.4) (38.5)
======================================================== ======= =======
(a) Of the amortisation of acquisition intangibles in the current year,
GBP8.7m (2018: GBP3.6m) relates to the customer relationships, trade
names, technology and non-compete covenants acquired with the purchase
of Alchemy Investment Holdings, Inc ( " Alchemy ") in 2018.
(b) Acquisition costs comprise GBP1.2m (2018: GBP8.5m) for transaction
costs in respect of successful, active and aborted acquisitions in
the current year, and GBP0.4m in respect of prior years' acquisitions
(2018: GBPnil).
(c) During the year, the Group has implemented various fundamental restructuring
activities, consistent with the Group ' s 5x5 strategy. These portfolio
review activities included site consolidations, closure of non-core
business units, re-engineering of underperforming businesses and
the delayering of management structures.
(d) GBP1.8m of small non-core businesses were disposed of in 2019 (2018:
GBP1.1m).
(e) Material claims and settlements relate to commercial claims that
are separately disclosable due to their size.
(f) GBP0.8m has been recorded as past service cost under the defined
benefit scheme - see note 5 for further information.
(g) Net financing costs of GBP1.3m (2018: GBP6.4m) relate to the change
in fair value of contingent consideration and the unwinding of discount
on put options related to acquisitions.
4 Earnings per share
2019 2018 2019
IAS 17 IAS 17 IFRS 16
GBPm GBPm GBPm
Based on the profit for the year:
================================================== ======= ======= ========
Profit attributable to ordinary shareholders 311.8 284.4 313.1
Separately Disclosed Items after tax (note 3) 32.4 38.5 32.4
Adjusted earnings 344.2 322.9 345.5
================================================== ======= ======= ========
Number of shares (millions):
Basic weighted average number of ordinary shares 161 .0 160.9 161 .0
Potentially dilutive share awards 1.6 1.9 1.6
Diluted weighted average number of shares 162.6 162.8 162.6
================================================== ======= ======= ========
Basic earnings per share 193.7p 176.8p 194.5p
Potentially dilutive share awards (1.9)p (2.1)p (1.9)p
Diluted earnings per share 191.8p 174.7p 192.6p
================================================== ======= ======= ========
Adjusted basic earnings per share 213.8p 200.7p 214.6p
Potentially dilutive share awards (2.1)p (2.4)p (2.1)p
Adjusted diluted earnings per share 211.7p 198.3p 212.5p
================================================== ======= ======= ========
5 Pension schemes
During the year, the Group made a special cash contribution of
GBP2.0m (2018: GBP 2.0m) into The Intertek Pension Scheme in line
with a Minimum Funding Requirement agreement.
The significant actuarial assumptions used in the valuation of
the Group ' s material defined benefit pension schemes as at 31
December 2019 have been reviewed. The discount and inflation rates
used to value the pension liabilities, as well as the updated asset
valuations and the net pension liabilities, have not moved
materially since 31 December 2018. In addition to the special
contribution, a net actuarial loss before taxation of GBP3.2m
(2018: GBP 0.8m) has been recognised in the consolidated statement
of comprehensive income. The net pension liability stands at
GBP13.4m at 31 December 2019 (2018: GBP12.5m).
The expense recognised in the consolidated income statement for
the Group ' s material defined benefit pension schemes consists of
interest on the obligation for employee benefits and the expected
return on scheme assets. The Group recognised a net expense of GBP
0.2m in the year (2018: GBP0.4m).
The Group has noted the recent High Court ruling regarding
guaranteed minimum pension liabilities and GBP0.8m has been
recorded as a past service cost under the defined benefit scheme.
This cost is excluded from adjusted results.
In June 2019, the Group recorded a pension curtailment gain of
GBP5.8m (2018: GBP 5.4m). The 2019 gain relates to the closure of
the Hong Kong defined benefit scheme.
6 Equity-settled transactions
During the year, the Group recognised an expense of GBP 21.9m in
respect of the share awards made in 2016, 2017, 2018 and 2019. For
2018, the charge was GBP 20.9m in respect of the share awards made
in 2015, 2016, 2017 and 2018. Under the 2011 Long Term Incentive
Plan in 2019, Deferred Share Awards granted had an average fair
value of 4,523p and LTIP Share Awards EPS element and TRS element
had average fair values of 4,508p and 2,122p respectively. Under
the Deferred Share Plan in 2019, Deferred Share Awards granted had
an average fair value of 4,590p.
Under the 2011 Long-Term Incentive Plan, 303,942 Deferred Share
Awards (2018: 308,885) and 369,529 LTIP Share Awards (2018:
338,386) were granted during the period and, under the Deferred
Share Plan, 24,806 Deferred Share Awards (2018: 103,086) were
granted during the year.
7 Analysis of net debt
2019 2018
GBPm GBPm
=================================================================== ======= ======
Cash and cash equivalents per the statement of financial position 227.4 206.9
Overdrafts (14.4) (3.7)
Cash per the statement of cash flows 213.0 203.2
=================================================================== ======= ======
The components of net debt are outlined below:
31 December IFRS 16 1 January Cash flow Non-cash Exchange 31 December
2018 transition 2019 movements adjustments 2019
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Cash 203.2 - 203.2 31.1 - (21.3) 213.0
============== ============= ============= ============== ========== ============= ============= ==============
Borrowings:
Revolving
credit
facility
US$800m 2021 (384.8) - (384.8) 90.0 - 9.3 (285.5)
Senior notes
US$20m 2019 (15.8) - (15.8) 15.5 - 0.3 -
Senior notes
US$150m 2020 (118.6) - (118.6) - - 3.9 (114.7)
Senior notes
US$15m 2021 (11.8) - (11.8) - - 0.3 (11.5)
Senior notes
US$140m 2022 (110.7) - (110.7) - - 3.7 (107.0)
Senior notes
US$40m 2023 (31.6) - (31.6) - - 1.0 (30.6)
Senior notes
US$125m 2024 (98.9) - (98.9) - - 3.3 (95.6)
Senior notes
US$40m 2025 (31.7) - (31.7) - - 1.1 (30.6)
Senior notes
US$75m 2026 (59.3) - (59.3) - - 1.9 (57.4)
Other* (118.2) - (118.2) 5.8 ( 0.8 ) 3.7 (109.5)
Total
borrowings (981.4) - (981.4) 111.3 ( 0.8 ) 28.5 (842.4)
============== ============= ============= ============== ========== ============= ============= ==============
Total
financial
net debt (778.2) - (778.2) 142.4 ( 0.8 ) 7.2 (629.4)
============== ============= ============= ============== ========== ============= ============= ==============
Lease
liability
(IFRS 16) - (269.9) (269.9) 69.7 (52.8) 7.0 (246.0)
============== ============= ============= ============== ========== ============= ============= ==============
Total net
debt (778.2) (269.9) (1,048.1) 212.1 (5 3.6 ) 14.2 (875.4)
============== ============= ============= ============== ========== ============= ============= ==============
* Includes other uncommitted borrowings of GBP110.0m and
facility fees of GBP0.7m (2018: GBP0.9m).
2019 2018
GBPm GBPm
Borrowings due in less than one year 224.5 134.6
Borrowings due in one to two years 296.9 118.2
Borrowings due in two to five years 233.1 538.9
Borrowings due in over five years 87.9 189.7
Total borrowings 842.4 981.4
====================================== ====== ======
Description of borrowings
Total undrawn committed borrowing facilities as at 31 December
2019 were GBP326.2m (2018: GBP247.9m).
US$800m revolving credit facility
The Group ' s principal bank facility comprises a US$800m
multi-currency revolving credit facility. In July 2016, US$672m of
the facility was extended to July 2021. Advances under the facility
bear interest at a rate equal to LIBOR, or their local currency
equivalent, plus a margin, depending on the Group ' s leverage.
Drawings under this facility at 31 December 2019 were GBP285.5m
(2018: GBP 384.8m). In January 2020, the US$800m revolving credit
facility was refinanced with a US$850m revolving credit facility
maturing in 2025.
Private placement bonds
In December 2010 the Group issued US$250m of senior notes. These
notes were issued in two tranches with US$100m repaid on 15
December 2017 at a fixed annual interest rate of 3.2% and US$150m
repayable on 15 December 2020 at a fixed annual interest rate of
3.91%.
In October 2011 the Group issued US$265m of senior notes. These
notes were issued in three tranches with US$20m repaid on 18
January 2019 at a fixed annual interest rate of 3.0%, US$140m
repayable on 18 January 2022 at a fixed annual interest rate of
3.75% and US$105m repayable on 18 January 2024 at a fixed annual
interest rate of 3.85%.
In February 2013 the Group issued US$80m of senior notes. These
notes were issued in two tranches with US$40m repayable on 14
February 2023 at a fixed annual interest rate of 3.10% and US$40m
repayable on 14 February 2025 at a fixed annual interest rate of
3.25%.
In July 2014 the Group issued US$110m of senior notes. These
notes were issued in four tranches with US$15m repayable on 31 July
2021 at a fixed annual interest rate of 3.37%, US$20m repayable on
31 July 2024 at a fixed annual interest rate of 3.86%, US$60m
repayable on 31 October 2026 at a fixed annual interest rate of
4.05% and US$15m repayable on 31 December 2026 at a fixed annual interest rate of 4.10%.
8 Acquisition of businesses
(a) Acquisitions
The total cash consideration paid for the acquisitions in the
year was GBP17.1m (2018: GBP 387.9m), of which GBP 0.2m was paid in
January 2020, net of cash and debt acquired of GBP0.9m (2018: GBP
5.6m), with further contingent consideration payable of GBP3.0m
(2018: GBP 0.7m). The estimated total purchase price net of cash
and debt acquired was GBP20.1m.
On 13 December 2019, the Group acquired Check Safety First
Limited ("CSF"), a market leading global health, safety, quality
and security risk management business focused on the travel,
tourism and hospitality sectors, for an estimated purchase price of
GBP21.0m, (GBP20.1m net of cash acquired) generating goodwill of
GBP19.3m.
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.
Check Safety First Limited Book value prior Provisional f Fair value to Group
to acquisition air value adjustments on acquisition
=============================
GBPm GBPm GBPm
============================= ================= ======================= ====================
Property, plant and
equipment 0.6 - 0.6
Goodwill 0.9 18.4 19.3
Other intangible assets 0.4 - 0.4
Trade and other receivables 1.8 - 1.8
Trade and other payables (1.0) (0.6) (1.6)
Provisions for liabilities
and charges (0.4) - (0.4)
Net assets acquired 2.3 17.8 20.1
============================= ================= ======================= ====================
Cash outflow (net of
cash acquired) 17.1
Contingent consideration 3.0
Total consideration 20.1
============================= ================= ======================= ====================
The total goodwill arising on acquisitions made during 2019 was
GBP19.3m, none of which is expected to be deductible for tax
purposes. Goodwill in respect of 2018 acquisitions decreased by
GBP7.3m. The goodwill arising represents the value of the assembled
workforce and the benefits the Company expects to gain from
increasing its presence in the relevant sectors in which the
acquired businesses operate.
(b) Acquisitions of non-controlling interests
In 2019, the Group acquired the remaining shares in a
non-controlling interest for cash consideration of GBP5.2m (2018:
GBPnil).
(c) Acquisitions subsequent to the balance sheet date
There were no acquisitions subsequent to the balance sheet
date.
(d) Prior period acquisitions
GBP0.6m (2018: GBP0.1m received) was paid during the year in
respect of prior period acquisitions.
(e) Impact of acquisitions on the Group results
The Group made one acquisition during December 2019 and no
amounts were recognised in the Group income statement during the
year.
( f ) Details of 2018 acquisitions
Full details of acquisitions made in the year ended 31 December
2018 are disclosed in note 10 to the Annual Report for 2018. The
provisional fair value adjustments disclosed in note 10 to the
Annual Report 2018 have been updated resulting in a decrease in
goodwill of GBP7.3m and an increase in the deferred tax asset of
GBP10.2m.
(g) Impairment
Past acquisitions generated goodwill, which has been tested
annually as required by accounting standards. No impairment was
required; however due to the prevailing market conditions, this
will be kept under review.
(h) Reconciliation of goodwill
GBPm
================================ =======
Goodwill at 1 January 2019 874.9
Additions 19.3
Disposals (0.2)
Foreign exchange and transfers (34.2)
Goodwill at 31 December 2019 859.8
================================ =======
9 Property, plant, equipment and software
During the year ended 31 December 2019, the Group acquired fixed
assets with a cost of GBP116.8m (2018: GBP 113.2m). In addition,
the Group acquired fixed assets of GBP0.6m (2018: GBP 5.0m) through
business combinations (note 8).
10 Impact on application of IFRS 16
Consolidated Income Statement - IAS 17 Basis
2019 2018
Separately Separately
Adjusted Disclosed Adjusted Disclosed
Results Items * Total 2019 Results Items * Total 201 8
IAS 17 IAS 17 IAS 17 IAS 17 IAS 17 IAS 17
Notes GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 2 2,987.0 - 2,987.0 2,801.2 - 2,801.2
Operating costs (2,473.7) (38.4) (2,512.1) (2,319.4) (45.6) (2,365.0)
Group operating
profit/(loss) 2 513.3 (38.4) 474.9 481.8 (45.6) 436.2
================== ====== ============== ============== =========== =============== ============== ============
Finance income 1.2 - 1.2 1.8 - 1.8
Finance expense (31.5) (1.3) (32.8) (27.1) (6.4) (33.5)
================== ====== ============== ============== =========== =============== ============== ============
Net financing
costs (30.3) (1.3) (31.6) (25.3) (6.4) (31.7)
================== ====== ============== ============== =========== =============== ============== ============
Profit/(loss)
before income
tax 483.0 (39.7) 443.3 456.5 (52.0) 404.5
Income tax
(expense)/credit 2 (118.4) 7.3 (111.1) (112.8) 13.5 (99.3)
================== ====== ============== ============== =========== =============== ============== ============
Profit/(loss) for
the period 2 364.6 (32.4) 332.2 343.7 (38.5) 305.2
================== ====== ============== ============== =========== =============== ============== ============
Attributable to:
Equity holders of
the Company 344.2 (32.4) 311.8 322.9 (38.5) 284.4
Non-controlling
interest 20.4 - 20.4 20.8 - 20.8
================== ====== ============== ============== =========== =============== ============== ============
Profit/(loss) for
the period 364.6 (32.4) 332.2 343.7 (38.5) 305.2
================== ====== ============== ============== =========== =============== ============== ============
Earnings per
share
Basic 4 213.8p 193.7p 200.7p 176.8p
================== ====== ============== ============== =========== =============== ============== ============
Diluted 4 211.7p 191.8p 198.3p 174.7p
================== ====== ============== ============== =========== =============== ============== ============
Dividends in
respect of the
period 105.8p 99.1p
================== ====== ============== ============== =========== =============== ============== ============
* See note 3.
Consolidated Income Statement - IFRS 16 Impact
For the year ended 31 December 2019
Adjusted Adjusted Statutory Statutory
Results IFRS 16 Results Results IFRS 16 Results
IAS 17 Impact IFRS 16 IAS 17 Impact IFRS 16
Notes GBPm GBPm GBPm GBPm GBPm GBPm
================= ====== ============= ============== ============= ============= ============== ==============
Revenue 2 2,987.0 - 2,987.0 2,987.0 - 2,987.0
Operating costs (2,473.7) 10.9 (2,462.8) (2,512.1) 10.9 (2,501.2)
================= ====== ============= ============== ============= ============= ============== ==============
Group operating
profit 2 513.3 10.9 524.2 474.9 10.9 485.8
================= ====== ============= ============== ============= ============= ============== ==============
Finance income 1.2 - 1.2 1.2 - 1.2
Finance expense (31.5) (9.1) (40.6) (32.8) (9.1) (41.9)
Net financing
costs (30.3) (9.1) (39.4) (31.6) (9.1) (40.7)
================= ====== ============= ============== ============= ============= ============== ==============
Profit before
income tax 483.0 1.8 484.8 443.3 1.8 445.1
Income tax
expense 2 (118.4) (0.4) (118.8) (111.1) (0.4) (111.5)
================= ====== ============= ============== ============= ============= ============== ==============
Profit for the
period 2 364.6 1.4 366.0 332.2 1.4 333.6
================= ====== ============= ============== ============= ============= ============== ==============
Attributable to:
Equity holders
of the Company 344.2 1.3 345.5 311.8 1.3 313.1
Non-controlling
interest 20.4 0.1 20.5 20.4 0.1 20.5
================= ====== ============= ============== ============= ============= ============== ==============
Profit for the
period 364.6 1.4 366.0 332.2 1.4 333.6
================= ====== ============= ============== ============= ============= ============== ==============
Earnings per
share
Basic 4 213.8p 0.8p 214.6p 193.7p 0.8p 194.5p
================= ====== ============= ============== ============= ============= ============== ==============
Diluted 4 211.7p 0.8p 212.5p 191.8p 0.8p 192.6p
================= ====== ============= ============== ============= ============= ============== ==============
Dividends in
respect of the
period 105.8p - 105.8p
================= ====== ============= ============== ============= ============= ============== ==============
Consolidated Statement of Comprehensive Income - IAS 17
Basis
2019 2018
IAS 17 IAS 17
Notes GBPm GBPm
Profit for the period 2 332.2 305.2
============================================================================= ====== ======== ========
Other comprehensive (expense)/income
Remeasurements on defined benefit pension schemes (3.2) (0.8)
Tax on items that will never be reclassified subsequently to profit or loss 0.2 (0.5)
Items that will never be reclassified to profit or loss (3.0) (1.3)
Foreign exchange translation differences of foreign operations (73.1) 45.3
Net exchange gain/(loss) on hedges of net investments in foreign operations 31.2 (32.6)
Gain on fair value of cash flow hedges 0.7 1.1
Items that are or may be reclassified subsequently to profit or loss (41.2) 13.8
Total other comprehensive (expense)/income for the period (44.2) 12.5
Total comprehensive income for the period 288.0 317.7
Total comprehensive income for the period attributable to:
Equity holders of the Company 269.4 299.7
Non-controlling interest 18.6 18.0
Total comprehensive income for the period 288.0 317.7
Consolidated Statement of Comprehensive Income - IFRS 16
Impact
2019 2019
IAS 17 IFRS 16 Impact IFRS 16
Notes GBPm GBPm GBPm
Profit for the period 2 332.2 1.4 333.6
======= ==============
Other comprehensive (expense)/income
Remeasurements on defined benefit pension schemes (3.2) - (3.2)
Tax on items that will never be reclassified subsequently to profit or loss 0.2 - 0.2
Items that will never be reclassified to profit or loss (3.0) - (3.0)
Foreign exchange translation differences of foreign operations (73.1) 0.7 (72.4)
Net exchange gain on hedges of net investments in foreign operations 31.2 - 31.2
Gain on fair value of cash flow hedges 0.7 - 0.7
Items that are or may be reclassified subsequently to profit or loss (41.2) 0.7 (40.5)
Total other comprehensive (expense ) /income for the period (44.2) 0.7 (43.5)
======= ==============
Total comprehensive income for the period 288.0 2.1 290.1
======= ==============
Total comprehensive income for the period attributable to:
Equity holders of the Company 269.4 2.4 271.8
Non-controlling interest 18.6 (0.3) 18.3
Total comprehensive income for the period 288.0 2.1 290.1
Consolidated Statement of Financial Position - IAS 17 Basis
2019 2018
IAS 17 IAS 17
Notes GBPm GBPm
Assets
Property, plant and equipment 9 421.8 441.2
Goodwill 8 859.8 874.9
Other intangible assets 302.4 329.5
Investments in associates - 0.3
Deferred tax assets 45.6 58.4
Total non-current assets 1,629.6 1,704.3
Inventories* 19.2 18.3
Trade and other receivables* 685.0 684.4
Cash and cash equivalents 7 227.4 206.9
Current tax receivable 28.5 19.7
Total current assets 960.1 929.3
Total assets 2,589.7 2,633.6
Liabilities
Interest bearing loans and borrowings 7 (238.9) (138.3)
Current taxes payable (57.2) (62.5)
Trade and other payables* (518.4) (515.1)
Provisions* (24.2) (26.8)
Total current liabilities (838.7) (742.7)
Interest bearing loans and borrowings 7 (617.9) (846.8)
Deferred tax liabilities (68.2) (80.8)
Net pension liabilities 5 (13.4) (12.5)
Other payables* (29.2) (26.5)
Provisions* (20.1) (16.0)
Total non-current liabilities (748.8) (982.6)
Total liabilities (1,587.5) (1,725.3)
Net assets 1,002.2 908.3
Equity
Share capital 1.6 1.6
Share premium 257.8 257.8
Other reserves (32.3) 7.1
Retained earnings 745.4 607.5
Total attributable to equity holders of the Company 972.5 874.0
Non-controlling interest 29.7 34.3
Total equity 1,002.2 908.3
Working capital of GBP100.3m (2018: GBP109.7m) comprises the
asterisked items in the above statement of financial position less
refundable deposits aged over 12 months of GBP12.0m (2018:
GBP8.6m).
Consolidated Statement of Financial Position - IFRS 16
Impact
2019 2019
IAS 17 IFRS 16 Impact IFRS 16
Notes GBPm GBPm GBPm
Assets
Property, plant and equipment 9 421.8 222.4 644.2
Goodwill 8 859.8 - 859.8
Other intangible assets 302.4 - 302.4
Deferred tax assets 45.6 6.3 51.9
Total non-current assets 1,629.6 228.7 1,858.3
Inventories 19.2 - 19.2
Trade and other receivables 685.0 - 685.0
Cash and cash equivalents 7 227.4 - 227.4
Current tax receivable 28.5 - 28.5
Total current assets 960.1 - 960.1
Total assets 2,589.7 228.7 2,818.4
Liabilities
Interest bearing loans and borrowings 7 (238.9) - (238.9)
Current taxes payable (57.2) - (57.2)
Lease liabilities - (61.7) (61.7)
Trade and other payables (518.4) 0.4 (518.0)
Provisions (24.2) - (24.2)
Total current liabilities (838.7) (61.3) (900.0)
Interest bearing loans and borrowings 7 (617.9) - (617.9)
Lease liabilities - (184.3) (184.3)
Deferred tax liabilities (68.2) - (68.2)
Net pension liabilities 5 (13.4) - (13.4)
Other payables (29.2) - (29.2)
Provisions (20.1) - (20.1)
Total non-current liabilities (748.8) (184.3) (933.1)
Total liabilities (1,587.5) (245.6) (1,833.1)
Net assets 1,002.2 (16.9) 985.3
Equity
Share capital 1.6 - 1.6
Share premium 257.8 - 257.8
Other reserves (32.3) 1.1 (31.2)
Retained earnings 745.4 (17.7) 727.7
Total attributable to equity holders of the Company 972.5 (16.6) 955.9
Non-controlling interest 29.7 (0.3) 29.4
Total equity 1,002.2 (16.9) 985.3
Consolidated Statement of Cash Flows - IAS 17 Basis
2019 2018
IAS IAS
17 17
Notes GBPm GBPm
Cash flows from operating activities
Profit for the period 2 332.2 305.2
Adjustments for:
Depreciation charge 87.9 76.2
Amortisation of software 15.3 12.5
Amortisation of acquisition intangibles 29.1 24.6
Equity-settled transactions 21.9 20.9
Net financing costs 31.6 31.7
Income tax expense 2 111.1 99.3
Profit on disposal of subsidiary/ associate (1.8) (1.1)
( Profit )/loss on disposal of property, plant, equipment
and software (0.9) 0.4
Operating cash flows before changes in working capital
and operating provisions 626.4 569.7
Change in inventories (1.5) 1.0
Change in trade and other receivables (25.6) (16.0)
Change in trade and other payables 41.1 35.2
Change in provisions (1.9) (7.0)
Special contributions into pension schemes (2.0) (2.0)
Cash generated from operations 636.5 580.9
Interest and other finance expense paid (31.6) (29.3)
Income taxes paid (111.8) (93.1)
Net cash flows generated from operating activities* 493.1 458.5
Cash flows from investing activities
Proceeds from sale of property, plant, equipment and
software* 2.5 3.5
Interest received* 1.2 1.8
Acquisition of subsidiaries, net of cash acquired 8 (16.9) (387.9)
Consideration ( paid )/received in respect of prior
year acquisitions 8 (0.6) 0.1
Sale of an associate 2.1 -
Acquisition of property, plant, equipment, software* 9 (116.8) (113.2)
Net cash flows used in investing activities (128.5) (495.7)
Cash flows from financing activities
Purchase of own shares (23.1) (16.7)
Tax paid on share awards vested (11.6) (9.9)
Drawdown of borrowings 110.0 341.4
Repayment of borrowings (221.3) (75.9)
Purchase of non-controlling interest (5.2) -
Dividends paid to non-controlling interest (19.1) (18.2)
Equity dividends paid (163.2) (128.3)
Net cash flows ( used in )/generated from financing
activities (333.5) 92.4
Net increase in cash and cash equivalents 7 31.1 55.2
Cash and cash equivalents at 1 January 7 203.2 135.9
Effect of exchange rate fluctuations on cash held 7 (21.3) 12.1
Cash and cash equivalents at end of period 7 213.0 203.2
Adjusted cash flow from operations of GBP651.8m (2018:
GBP602.9m) comprises statutory cash generated from operations of
GBP636.5m (2018: GBP580.9m) before cash outflows relating to
Separately Disclosed Items of GBP15.3m (2018: GBP22.0m). Free cash
flow of GBP380.0m (2018: GBP350.6m) comprises the asterisked items
in the above statement of cash flows.
Consolidated Statement of Cash Flows - IFRS 16 Impact
2019 2019
IAS IFRS IFRS
17 16 Impact 16
Notes GBPm GBPm GBPm
Cash flows from operating activities
Profit for the period 2 332.2 1.4 333.6
Adjustments for:
Depreciation charge 87.9 68.3 156.2
Amortisation of software 15.3 - 15.3
Amortisation of acquisition intangibles 29.1 - 29.1
Equity-settled transactions 21.9 - 21.9
Net financing costs 31.6 9.1 40.7
Income tax expense 2 111.1 0.4 111.5
Profit on disposal of associate (1.8) - (1.8)
Profit on disposal of property, plant, equipment
and software (0.9) - (0.9)
Operating cash flows before changes in working
capital and operating provisions 626.4 79.2 705.6
Change in inventories (1.5) - (1.5)
Change in trade and other receivables (25.6) - (25.6)
Change in trade and other payables 41.1 (0.4) 40.7
Change in provisions (1.9) - (1.9)
Special contributions into pension schemes (2.0) - (2.0)
Cash generated from operations 636.5 78.8 715.3
Interest and other finance expense paid (31.6) (9.1) (40.7)
Income taxes paid (111.8) - (111.8)
Net cash flows generated from operating activities 493.1 69.7 562.8
Cash flows from investing activities
Proceeds from sale of property, plant, equipment
and software 2.5 - 2.5
Interest received 1.2 - 1.2
Acquisition of subsidiaries, net of cash acquired 8 (16.9) - (16.9)
Consideration paid in respect of prior year acquisitions 8 (0.6) - (0.6)
Sale of an associate 2.1 - 2.1
Acquisition of property, plant, equipment, software 9 (116.8) - (116.8)
Net cash flows used in investing activities (128.5) - (128.5)
Cash flows from financing activities
Purchase of own shares (23.1) - (23.1)
Tax paid on share awards vested (11.6) - (11.6)
Drawdown of borrowings 110.0 - 110.0
Repayment of borrowings (221.3) - (221.3)
Repayment of lease liability - (69.7) (69.7)
Purchase of non-controlling interest (5.2) - (5.2)
Dividends paid to non-controlling interest (19.1) - (19.1)
Equity dividends paid (163.2) - (163.2)
( 403.2
Net cash flows used in financing activities (333.5) (69.7) )
Net increase in cash and cash equivalents 7 31.1 - 31.1
Cash and cash equivalents at 1 January 7 203.2 - 203.2
Effect of exchange rate fluctuations on cash held 7 (21.3) - (21.3)
Cash and cash equivalents at end of period 7 213.0 - 213.0
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
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END
FR UUOARROUORUR
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