TIDMITRK
RNS Number : 5447N
Intertek Group PLC
21 May 2020
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TRADING STATEMENT
21 May 2020
Intertek Group plc ("Intertek" or "the Group"), a leading Total
Quality Assurance provider to industries worldwide, today releases
its May Trading Update for the period from 1 January to 30 April
2020 ("period"). All comparative comments in this statement reflect
comparisons with the corresponding period during 2019. The Group's
half year results to 30 June 2020 will be announced on 31 July
2020.
WELL POSITIONED TO NAVIGATE AN UNPRECEDENTED PANDEMIC
-- Responsive to a fast changing environment with organisational focus
on employee safety, customer service, cost control, cash generation
and employee engagement.
-- Uninterrupted customer service to keep the supply chains of our clients
operating safely and launch of industry-leading innovations to meet
the emerging needs of our customers.
-- Resilient trading performance with Revenue of GBP882m, down 4.6% year-on-year
("YoY") both at constant and actual rates, with Like-for-Like ("LfL")
revenue down 4.9% YoY at constant currency: Product -6.6%, Trade -5.9%,
Resources +2.4%.
-- Well diversified revenue streams, high-margin, strong cash generative
earnings model with a track record of sustainable value creation and
a strong balance sheet with year-end net financial debt currently
expected to be in the range of GBP650-700m.
-- Well positioned to benefit from the increased needs of employees,
consumers and governments for Health, Safety and Wellbeing Assurance
solutions, creating additional growth opportunity in the attractive
Global Quality Assurance market.
André Lacroix: Chief Executive Officer statement
"Intertek's high quality business model operates across multiple
sectors of the economy and we have provided uninterrupted customer
service to our 300,000+ clients, ensuring the safe operation of
their supply chains around the world, which is mission-critical for
them. Our high quality earnings model, with its diversified revenue
streams and focus on high margins, results in strong cash
generation and a robust balance sheet, all underpinned by a
disciplined approach to performance management. The Group operates
a progressive dividend policy with a targeted payout ratio of circa
50%. The 2019 final dividend of 71.6p or GBP115m will be paid on 11
June 2020.
Our resilient trading performance over the first four months of
2020 reflects the defensive strengths of our business model.
Revenue of GBP882m was down 4.6% year-on-year at actual rates and
constant rates with a LfL revenue performance down 4.9% YoY at
constant currency.
Notwithstanding the impact of the pandemic, I am confident in
our ability to navigate what will be a challenging 2020. We have
responded quickly to the global changes seen since January 2020 and
have put in place the right measures on health and safety, customer
service, cost controls, cash management and employee engagement.
Nevertheless, it is too early to quantify the impact of Covid-19
and we will provide an update on our full year guidance once we
have more visibility on how and when current lockdown restrictions
around the world will be lifted.
The exciting structural growth drivers in the $250bn Global
Quality Assurance Market pre-Covid-19 have now been joined by a
wide array of new opportunities in many areas. These range from
health, safety and wellbeing-oriented Quality Assurance in the
workplace, public spaces and the home, to the growing demand in the
healthcare sector for PPE, new medical devices and stronger
infrastructure. Further, we are seeing the increasing need for risk
management across supply chains and more robust protection against
online piracy and other cyber threats in a connected world.
A recent example of this is the launch of our truly pioneering
new innovation called Protek, the world's first systemic,
end-to-end Health, Safety and Wellness audit, inspection and
certification assurance program for people, at work in public
spaces and at home. www.intertek.com/protek
We are a strong company with more than 130 years of experience,
driven by a clear purpose with a committed management team to seize
the attractive structural growth opportunities ahead as Quality,
Safety and Sustainability become ever more important to society.
Intertek's purpose is to make the world a better and safer place.
Never has our purpose been more relevant than now."
Revenue Performance
4 months - January to April
2020 2019 Change Change Like-for-Like
GBPm GBPm at at constant at constant
actual (1)
====== ====== ======== ============= ==============
Products 519.9 549.7 (5.4%) (6.1%) (6.6%)
Trade 200.8 216.0 (7.0%) (5.9%) (5.9%)
Resources 160.9 158.6 1.5% 2.4% 2.4%
====== ====== ======== ============= ==============
Group 881.6 924.3 (4.6%) (4.6%) (4.9%)
====== ====== ======== ============= ==============
Note 1: Like-for-Like revenue includes acquisitions following
their 12 month anniversary of ownership and excludes the historical
contribution of any business disposals and closures.
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 SCintertek@fticonsulting.com
Analysts' Call
A live webcast for analysts and investors will be held today at
7.45am UK time; +44 (0) 20 3003 2666 ( Link to webcast ). Details
can be found at http://www.intertek.com/investors/ together with
presentation slides and a pdf copy of this report. A recording will
be available later in the day.
Intertek is a leading Total Quality Assurance provider to
industries worldwide. Our network of more than 1,000 laboratories
and offices 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 is a purpose-led company to Bring Quality, Safety and
Sustainability to Life. We provide 24/7 mission-critical quality
assurance solutions to our clients to ensure that they can operate
with well-functioning supply chains in each of their
operations.
Our Customer Promise is: Intertek Total Quality Assurance
expertise, delivered consistently, with precision, pace and
passion, enabling our customers to power ahead safely.
intertek.com
André Lacroix: Chief Executive Officer update
In a few short weeks, Covid-19 has had a big impact on our lives
and in our communities - nationally and globally. On behalf of
everyone at Intertek, I salute healthcare and frontline workers
around the world for their magnificent response to the global
pandemic we are witnessing. Our own people too, have shown deep
compassion supporting local people around the world to keep their
communities safe.
I lead a business that, at its core, is about bringing Quality,
Safety and Sustainability to life.
It has become clear to all of us that our role at Intertek has
never been more relevant in making the world a better, safer and
more sustainable place. In short, the pandemic has brought to life
as never before the great importance of Intertek's role in
society.
We are, of course, not immune to the impact of the Global
Pandemic. However, I am confident in our ability to navigate what
will be a challenging 2020 for the world and to benefit post
Covid-19 from more attractive growth opportunities as the world
will need more of Intertek's services.
STRENGTHS
We are a strong company operating in an attractive growth
industry, with a track record of consistent value creation.
We are a global leader in the Quality Assurance market operating
with a high-quality business model:
-- We operate a Global Network of well invested State-of-the-Art operations
in 100 + countries run by innovative subject matter experts - a
significant pool of intellectual capital
-- We benefit from diversified revenue streams, both geographically
and across several end-markets verticals in the Products, Trade
and Resources sectors where we operate at scale with market-leadership
positions
-- We provide our clients with a real depth and breadth of our ATIC
Quality Assurance Solutions that will be ever more mission-critical
to society
-- We run a high-performance and passionate organisation, with strong
and engaged talent operating with an Ever-Better mindset
-- We operate a high-margin and strongly cash generative earnings model
following a disciplined capital allocation policy
We entered 2020 with a strong momentum and track record of
consistent performance over the last 5 years. Indeed, between 2014
and 2019 (on an IAS 17 basis):
-- Our revenue has grown by 43%
-- Our operating margin has increased from 15.5% to 17.2%
-- Our adjusted EPS has grown by 60%
-- Our cash generation has more than doubled
-- Our ROIC has progressed from 16.3% to 22.8%
-- Our employee productivity has increased by 21%
The Group operates a progressive dividend policy with a targeted
payout ratio of circa 50%. Intertek ranks 2nd highest in the
FTSE100 in-terms of dividend progression since the IPO in 2002. The
2019 dividend is 105.8p, up YoY by 6.8% and we will pay our final
dividend of 71.6p or GBP115m on 11 June 2020.
The consistent delivery of value for all stakeholders, inspired
by our purpose of Bringing Quality, Safety and Sustainability to
Life, clearly demonstrates the core strengths of Intertek:
-- Our Total Quality Assurance superior customer service
-- Our powerful portfolio
-- Our high-quality compounder earnings model
-- Our passionate customer-centric organisation
-- Our disciplined performance management
RESPONSIVE
We have been very responsive to a fast changing environment and
have established five critical priorities.
Our first priority is health and safety.
The specific Covid-19 HSE policy we have covers the following
areas globally:
1. The use of personal protection equipment, including face masks
2. Hygiene, control and prevention measures
3. Social distancing and restrictions on gatherings
4. The sanitisation of facilities
5. Guidance for visitors to our facilities
6. Guidance for those of our employees who work at client premises
7. Restrictions on international travel
8. Guidance on what to do if you feel unwell
9. Working from home for non-billable employees
10. Health monitoring for employees who are unwell
Our second priority is customer service.
We are a passionate and customer-centric organisation. We always
do everything we can to provide our customers with the best
possible service. What we do every day to make sure the supply
chains of our clients operate safely in all countries is
mission-critical.
The Covid-19 lock down measures have created huge operational
challenges for all of our clients. We have kept all of our
operations open - with the exception of China, Hong Kong and India
for a few weeks - to provide maximum support to our clients during
these very difficult times.
Since day one of the pandemic, we have increased the frequency
of communication with our clients to make sure we understand their
needs quickly. We have rapidly brought to market a range of
innovations to support the new emerging needs of our clients,
innovative customer services across many industries to help our
clients address their operational and supply chain challenges:
-- Remote Video Inspection and Audit enabling our inspectors and
auditors to do their job remotely
-- Priority testing service for life-saving medical equipment
like ventilators leveraging our global leadership
-- End-to-End testing and certifications capacity for protective
clothing and other PPE equipment
-- Increased testing capacity and express service for hand sanitisers and surface disinfectants
-- Support to the Pharma industry for Vaccine development
-- Support to the Oil & Gas industry addressing the Covid-19 related challenges
-- Cyber security audit related to home working conditions
-- Support to various governments in their Covid-19 safety efforts
On 1 May, we launched a truly pioneering new innovation. Our
view, supported by our most recent research, is that Health, Safety
and Wellbeing in the workplace, in public places, on public
transport, and at home is the number one concern for the entire
world.
Indeed, our research found that over 70% of employees do not
want to return to work once restrictions are lifted unless
independently verified health and safety practices are in
place.
91% of respondents agreed that their employer should take extra
measures to protect employees. Yet over half of senior managers
believe that they will struggle to provide an acceptable health and
safety standard for employees when they do return to the
workplace.
Across the consumer industries landscape, only 24% of
respondents feel confident about visiting a bar or restaurant once
restrictions are lifted and only 27% feel confident about visiting
hotels.
56% do not trust cinema and theatre operators to have sufficient
health and safety practices in place to prevent the spread of
Covid-19, with this figure rising to 57% for airlines and 59% for
public transport.
That is why we launched Protek, the world's first
industry-agnostic, end-to-end Health, Safety and Wellbeing Audit,
Inspection, Testing and Certification Assurance program. For
people, at work, in public spaces and at home.
Protek is based on our systemic approach to quality assurance.
It is a comprehensive service offering, providing audits, training
and service solutions across People, Systems & Processes,
Facilities, Materials & Surfaces and Products.
Protek People Assurance provides an on-demand, e-Learning and
certification programme to help our clients deliver essential
employee training on key health and safety topics. Specific
learning and certification solutions include modules on how to use
face masks, gloves and PPE, and courses on food safety, hygiene,
cleaning and prevention.
Our Protek Business Assurance solutions provide an end to end
audit of operating procedures and systems enabling our clients to
demonstrate their commitment to the wellbeing of their employees
and their consumers.
Protek Facilities Assurance offers HSE Audit and Inspection
solutions for all types of facilities, from hotels, restaurants and
retail outlets to schools, transportation hubs and manufacturing
sites where consumers and employees will look for visible safety
verification.
Protek Materials & Surfaces provides complete testing
solutions to ensure spaces, materials and surfaces are safe for
employees and customers in the workplace and public spaces.
The reactions of our clients around the world to Protek has been
very strong, as Protek is very much in line with what the world
needs, right now.
I am tremendously proud of our teams and in addition to the
development and launch of attractive Covid-19 related innovations,
our people have taken the time to support their communities in
Wuhan and around the world.
At Intertek we believe that we are Born to Make the World Ever
Better and our sustainability initiatives are part of our DNA.
Our third overriding priority is margin management.
Over the years, we have built a very disciplined approach to
margin management. We continue to observe our strict controls on
pricing and cost discipline. We have also taken a number of
additional steps to protect our margin during the pandemic. These
include a pause on all recruitment, a delay of six months of the
2020 annual salary increase and furlough activities in the UK,
France and Italy based on the existing government schemes.
We believe that our clients have been facing temporary
disruptions in their operations and all of our margin initiatives
ensure that we have the ability to service our clients fully when
their operations are back to normal.
Fourth is cash management.
All our stringent controls on cash collection remain in place.
We have also conducted a Capex review to delay those investments
that are not time critical, reducing our planned expenditure this
year by around one-third.
In addition, we are running a voluntary salary-deferral scheme
for management, running from March to October.
This involves a 50% deferral for our Board Members and Executive
Vice Presidents, 30% for our Senior Vice Presidents and 20% for
management.
I have been extremely impressed by circa 1,200 individuals'
willingness to support the business at this difficult time.
We have also benefitted from local authorities' tax deferrals,
where available.
Our fifth priority is employee engagement.
With a high proportion of our people working remotely, it has
never been more important to stay connected every day. Our
world-class digital communication platform has been instrumental in
this, enabling us to reach out frequently to everybody in the
organisation. We have our own internal social media channel called
WhatsIn and every day, we feature an Intertek Hero video to
recognise Intertek colleagues who have gone beyond normal
expectations to help their customers and colleagues.
I post a personal audio message on WhatsIn to the whole
organisation on a weekly basis and have daily calls with our
regional teams around the world.
TRADING PERFORMANCE
We have delivered a resilient trading performance in the first
four months of 2020. This demonstrates the strengths of our
business model, our geographic and business line diversity and our
disciplined approach to performance management.
Group revenue in the first four months was GBP882m, down 4.6% at
both constant currency and at actual rates with a resilient LfL
revenue performance of 4.9% below prior year at constant rates.
Our disciplined approach to cost and margin management remains
firmly in place.
We continue to be very focused on cash conversion and
disciplined capital allocation.
Our Product related businesses delivered a resilient revenue
performance of GBP520m, down 6.1% at constant currency with a LfL
revenue performance of 6.6% below prior year. Clearly some
businesses performed better than others, for example Electrical,
Transportation Technologies, Building & Construction and
Business Assurance while understandably some were impacted more
significantly, for instance Softlines and Hardlines.
In our Trade business, we delivered a revenue of GBP201m, with a
resilient LfL revenue performance of 5.9% below prior year at
constant currency. I would like to highlight the strong resilience
of our Agri business in the first four months of the year.
Our resources-related businesses delivered a good trading
performance with a LfL revenue growth of 2.4% at constant currency.
We were extremely pleased with the good LfL growth in Capex
Inspections and robust LfL revenue growth we saw in Minerals.
OUTLOOK
The speed at which the global pandemic has unfolded and the
broad-based nature of the lockdown initiatives in every country
makes it difficult to attempt any precise guidance and it is too
early to quantify the impact of the Coronavirus for 2020.
We will provide an update on our full year guidance once we have
more visibility on when and how the lockdown restrictions will be
lifted around the world.
SUMMARY
Quite simply, our role of bringing quality, safety and
sustainability to life has never been more important. We are
mission-critical to making the world ever-better and
ever-safer.
The global pandemic is demonstrating that the world needs
Intertek more than ever - our insight, our innovation, our
expertise and our passion.
By staying open for business during the pandemic, we have
enabled companies to operate safely, wherever they are.
Of course, we do not yet know how long it will take for all
lockdown measures to be lifted and how long we will have to wait
for a vaccine or a cure. But just consider for a minute how the
pandemic will continue to affect the way people lead their everyday
lives.
How will we know if a home delivery is clean, if we will be safe
in a restaurant, if our children are risk-free at school - if it is
even safe to have a family reunion?
In short, Health, Safety and Wellbeing issues are now the number
one concern for the entire world.
This is not going to go away anytime soon.
So, what does this mean for Intertek?
Before any of us had heard of Covid-19, the global structural
growth drivers in the Quality Assurance space were already very
attractive for Intertek:
-- The Total Quality Assurance market is worth $250bn, yet only 20%
of this market is currently outsourced
-- The global operations of corporations are complex, and this is driving
more demand for end-to-end quality assurance services as companies
increase their focus on systemic operational risk
-- This untapped market potential is really exciting, as this is all
about what companies do not do today and will start doing to improve
the quality, safety and sustainability of their operations.
Now, following the first pandemic to take place in a highly
connected global world, the case for Quality Assurance is even
stronger. It is clear that the need for solutions that make the
world a better and safer place is much greater than anybody had
previously imagined.
The exciting structural growth drivers pre-Covid-19 have now
been joined by a wide array of new Quality Assurance opportunities
in many areas:
-- Health, Safety and Wellbeing-oriented quality assurance in
the workplace, in public spaces and in the home
-- Growing demand in the healthcare sector for PPE, for new
medical devices and stronger infrastructure
-- An increasing need for risk management in the supply chain to
diversify the approach to sourcing
-- A changing corporate environment where working remotely will create new operational risks
-- A changing retail landscape where the growth of e-commerce
will create supply chain management challenges
-- A changing approach to investments and research in the healthcare sector
That world will need us more than ever. Intertek stands to
benefit from all of these opportunities and more. We are truly
mission-critical for success in the entire society post-Covid-19
world.
Products Divisional Review
Our Product related businesses delivered a resilient revenue
performance of GBP520m, down 6.1% at constant currency with a LfL
revenue performance of 6.6% below prior year. We operate a
diversified global portfolio of several end market verticals with
leadership market positions and we benefited from the strong
resilience of several business lines: Electrical & Connected
World, Business Assurance, Building & Construction, Food and
Transportation Technologies.
-- We saw a double-digit decline in LfL revenue in our Softlines business
due to the supply chain disruption in China and India and the temporary
closures of non-food retailers in Western Europe and North America,
which was partially offset by continuous growth in e-commerce and
increased demand for testing protective equipment.
-- Our Hardlines business saw a double-digit negative LfL revenue performance
due to the supply chain disruption in China and the temporary closures
of non-food retailers in Western Europe and North America which
was partially offset by strong growth in e-commerce, good demand
for toys testing and increased demand for the testing of protective
material.
-- We delivered a stable LfL revenue performance in our Electrical
& Connected World business as the negative impact of the supply
chain disruption due to the lockdown measures around the world has
been offset by higher demand for regulatory standards in energy
efficiency, the increased demand for testing and certification of
medical devices, the increased testing requirements for 5G and greater
corporate focus on Cyber security.
-- Our Business Assurance business delivered a resilient LfL revenue
performance with mid-single digit negative revenue performance.
The temporary factory and office closures in several of our markets
has triggered a delay of several audits to later in the year which
was partially offset by the attractive growth in Supply Chain Assurance,
the continuous focus on ethical supply, the increased needs of corporations
for sustainability assurance, the strong growth in our People Assurance
segment and the launch of remote audit solutions.
-- Our Building & Construction business delivered stable LfL revenue.
In the first quarter we delivered good LfL revenue growth in North
America as we continue to benefit from the growing demand for more
environmentally friendly and higher quality building as well as
the strong investments in large infrastructure project, while we
saw a temporary reduction of building and construction activities
in April due to lockdown activities.
-- Our Transportation Technology business delivered stable LfL revenue.
We recorded good LfL revenue growth around the world in the first
quarter based on the continuous investments of our clients in new
powertrains to lower CO2/NOx emissions and increase fuel efficiency
which was partially offset for lower demand for testing in April
due to the lockdown activities in Western Europe and North America.
-- Our Food business delivered a resilient LfL revenue performance
with a mid-single digit decline in revenue. The supply chain disruptions
across several markets impacted the demand for the testing of new
products which was partially offset by the sustained demand for
food safety testing activities to keep food supply chains functioning
during the pandemic and by the increased demand for Hygiene and
Safety audits in factories.
-- We saw double-digit negative revenue in our Chemical & Pharma business.
The lockdown measures have reduced the demand for regulatory assurance
and chemical testing in our operations in North America and Western
Europe. Given the importance of Covid-19, the Pharma industry is
reprioritising their investments, delaying projects for our laboratories.
We are in contact with our clients to support the development of
Covid-19 vaccine.
Mid- to long-term growth outlook
Our Products division will benefit from mid- to long-term
structural growth drivers, including product variety, brand and
supply chain expansion, product innovation and regulation, the
growing demand for quality and sustainability from developed and
emerging economies, the acceleration of e-commerce as a sales
channel, and the increased corporate focus on risk.
Trade Divisional Review
In our Trade business, we delivered a resilient revenue of
GBP201m with a LfL revenue performance of 5.9% below prior year at
constant currency. Our business lines remained open for business
during the pandemic given the mission critical role we play in
society to make sure that the essential global trade activities are
functioning safely and fully.
-- Our Caleb Brett business delivered a resilient LfL revenue performance
with mid-single digit negative revenue. Caleb Brett is the global
leader in the Crude Oil and refined Products global trading markets
with 7,600 employees and 275 operations. Our Caleb Brett operations
remained fully operational 24/7 to support the energy testing and
inspection needs of our clients which were lower than last year
due to a lower level of consumer demand.
-- Our Government & Trade Services business provides certification
services to governments in the Middle East and Africa to facilitate
the import of goods in their markets, based on acceptable quality
and safety standards. We saw a double-digit negative revenue decline
due to the disruption of manufacturing in China in February and
March and the lockdown activities in all countries impacting cross-borders
trade flow.
-- Our Agri World business delivered a stable LfL revenue performance
in the first four months of 2020. We provide inspection activities
globally and we remained open 24/7 during the pandemic to make sure
that the global food supply chain operates fully and safely. Our
stable trading performance was the result of excellent customer
service from our teams notwithstanding the trade flow challenges
linked to the lockdown initiatives.
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
Our resources-related businesses delivered revenue of GBP161m
with good LfL revenue growth of 2.4% at constant currency.
-- We delivered good LfL growth in our Capex Inspection services business
as we benefited from the increased investments of our clients in
exploration and production as well as the win of several new contracts.
-- We saw mid-single digit negative revenue in Opex Maintenance services
as the lockdown initiatives impacted the demand for our inspection
services in the month of March and April.
-- We delivered robust revenue growth in our Minerals business as we
saw increased demand for our gold and iron ore activities in Australia.
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.
Innovation
Intertek operates in an exciting market with attractive
structural growth drivers. With corporations facing increasing
complexity and the need for solutions that make the world a better
and safer place, much greater than anybody had previously imagined,
our approach to innovation is supporting our clients to thrive,
while creating growth opportunities for the Group.
Through the insights generated from our Total Quality Assurance
(TQA) Experts and from our 7,000+ monthly NPS interviews with
customers, Intertek services are mission-critical for our clients
in helping them to address their needs for increased support across
quality, safety and sustainability.
We pursue a 3-tiered approach to innovation: innovation from the
Core; developing new products and services in Adjacent fast-growing
and high-margin markets; and developing new Breakthrough products
and services. Recent examples of our innovations include:
-- Protek, the world's first end-to-end health, safety and
wellness audit, inspection and certification assurance program for
people, at work in public spaces and at home.
Following research undertaken by Intertek, it is clear that
health, safety and wellbeing in the workplace, in public
transportation, public spaces and at home is now the number one
concern for business leaders, employees and consumers. As the world
adjusts to a 'new normal', many in-quarantine traits will become
generally accepted standards as consumers and employees
fundamentally re-think their approach to everyday health, safety
and wellbeing. Based on Intertek's unique, systemic approach to
Quality Assurance, Protek is a comprehensive service offering,
providing audits, training and service solutions across People,
Systems & Processes, Facilities, Materials & Surfaces and
Products.
Protek includes People Assurance, and Intertek Alchemy has just
released a new training course for frontline workers in the food
industry, helping them to recognise Covid-19 symptoms and learn how
to prevent transmission. It also provides a new audit solution
called Posi-Check to help in the Prevention of the Spread of
Infection (POSI). www.intertek.com/protek
-- Remote Video Inspection (RVI) service, a technological
solution driven by our Total Quality Assurance experts, to ensure
business continuity of critical vendor inspection services across
the oil and gas supply chain during the current health and safety
site restrictions.
Through remote live video streaming and smart phone technology,
RVI has enabled our technical experts to be virtually present at
suppliers who had access restrictions in place, thereby enabling
the supply chains of our customers to continue to function and
avoid costly delays to major infrastructure projects, as well as
avoiding lost revenue to Intertek's vendor inspection business.
www.intertek.com/technical-inspection/remote-inspection
-- Priority Testing Service and increased services for critical
care and life sustaining products like ventilators, leveraging our
TQA expertise to support our non-medical clients in developing such
equipment. We partnered with US FDA and UK MHRA to deploy programs
for emergency use.
-- End to End testing and certifications capacity for Protective
Clothing and other PPE equipment, supporting PPE manufacturers to
meet heightened demand from governments, medical organisations and
consumers. We have also applied our TQA expertise to support our
non-PPE manufacturing customers transitioning to producing PPE to
do so safely and meeting the relevant regulations.
-- Increased testing capacity and Express Service for hand
sanitisers and Surface Disinfectants to WHO guidelines, including a
complete set of tests to evaluate best-in-class Ethanol Suppliers
and Label claim testing.
-- Support to the Pharma industry for Vaccine Development,
including repurposing and reformulation of drug products to combat
Covid-19 and contract pharmaceutical and biopharmaceutical
GLP/GCP/GMP laboratory services, supporting drug development and
production. Total Quality Assurance for some of the world's largest
and most innovative pharmaceutical companies.
-- Support to the Oil &Gas ("O&G") industry addressing
the Covid-19 related challenges. Our 130+ years of O&G industry
experience and our remote inspections, data analytics, and
e-reporting solutions across the world are ensuring continuity of
O&G supply chains.
-- Cyber Security Audit related to Home working conditions. With
our comprehensive cyber security portfolio, Intertek is supporting
our customers to manage the cyber risks arising as their employees'
transition to home working. This includes mass remote working
network security penetration testing, critical network and
infrastructure testing, and network resilience testing, increased
requirement for higher bandwidth fixed and wireless infrastructure,
audit and on-site inspections of remote working practices in-home
and security support for acceleration of 5G demand.
-- Support to various Governments in their anti-Covid-19 safety
efforts, including the Singapore Clean Program to ensure
consumer-facing establishments maintain highest hygiene and safety
standards, helping governments in setting-up emergency medical
facilities and collaborating with trade associations to ensure
seamless manufacturing and supply of PPEs and Medical devices.
M&A
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.
In December 2019, the Group acquired Check Safety First (CSF), a
market leading global health, safety, quality and security risk
management business focused on the travel, tourism and hospitality
sectors.
We will continue to look at M&A opportunities in attractive
high-margin and high-growth areas.
Financial Position & 2020 Guidance
At the end of 2019, the Group had a net debt of GBP629m,
equivalent to just 1.0x net debt:EBITDA on an IAS 17 basis, down
from 1.4x in the prior year, and reflecting our continued strong
cash generation.
This debt also has a long duration maturity profile, with the
Company having recently refinanced and extended its Revolving
Credit Facility to US$850m with a syndicate of 8 banks in January
2020 for a 5-year term ending in January 2025.
On 31 December 2019, the Company had undrawn committed borrowing
facilities of c.GBP325m. In addition, the Company has confirmed
that it is in a position to draw down on the Bank of England's
Covid Corporate Financing Facility, should it need to do so.
As the current global health pandemic continues to evolve, it is
too early to quantify the precise impact of Covid-19 and, as a
result, the Company is not in a position to provide precise full
year guidance for revenues or margins at this point.
However, the Company has modelled a range of potential scenarios
and, as outlined above, the Company remains focused on responding
to the opportunities and challenges of Covid-19 and has undertaken
a range of measures to protect its financial performance, invest in
future growth opportunities and ensure the Company preserves its
strong balance sheet.
The Company's current view for 2020, assuming constant currency,
is that we expect:
-- Capital expenditure in the range of GBP90-100m
-- Net Finance Costs of around GBP37-40m (on an IFRS16 basis)
-- Tax rate in the 25.5-26.0% range
-- Minority interests of between GBP19-21m
-- Net financial debt at December 2020 of between GBP650-700m
(prior to any material movements in FX or M&A)
Based on the year-to-date performance and the average FX rate in
the last three months applied for the remainder of the year,
currencies would be neutral both at the revenue and at the earnings
level.
Outlook
As the current global health pandemic continues to rapidly
evolve, it is too early to quantify the impact of Covid-19 and we
will provide an update on our full year guidance once we have more
visibility on how and when current lockdown restrictions around the
world will be lifted.
Looking ahead, it is clear that the exciting structural growth
drivers in the $250bn Global Quality Assurance Market pre-Covid-19
have now been joined by a wide array of new opportunities in many
areas, from safety-oriented Quality Assurance in the workplace,
public space and the home, to the growing demand in the healthcare
sector for PPE, new medical devices and stronger infrastructure,
the increasing need for risk management across supply chains and
more robust protection against online piracy and other cyber
threats in a connected world.
We are uniquely positioned to seize these compelling growth
opportunities and to benefit from the GDP+ LfL revenue growth
prospects in the Quality Assurance Industry in the medium- to
long-term, leveraging our high quality, highly cash-generative
earnings model and innovative ATIC solutions.
-S-
The May 2020 Trading Statement Audiocast CEO Script and
Presentation will be available after the call at
www.intertek.com/investors/
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
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of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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