TIDMITRK
RNS Number : 2471G
Intertek Group PLC
24 November 2020
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TRADING STATEMENT
24 November 2020
Intertek Group plc ("Intertek" or "the Group"), a leading Total
Quality Assurance provider to industries worldwide, today releases
its November Trading Update for the period from 1 January to 31
October 2020 ("period"). All comparative comments in this statement
reflect comparisons with the corresponding period during 2019. The
Group's full year results to 31 December 2020 will be announced on
2 March 2021.
Revenue Rebound in Products and Trade Globally
-- Increased ATIC activities supporting our clients to resume
their operations with leading TQA(1) innovative solutions
-- Revenue rebound in the July-October period in Products and
Trade in all regions, 93% of Group earnings(2)
-- Sequential Margin progress in H2 driven by productivity gains
from improved revenues and disciplined performance management
-- Strong free cash flow, disciplined capital investments in
high growth and high margin segments and sustainable returns to
shareholders with dividend payments of GBP170m in 2020 (final 2019
and interim 2020)
-- High quality and cash generative earnings model with a strong
balance sheet: on track to deliver a resilient FY 2020 financial
performance with a net debt(3) of GBP570-590m, lower than 2019
-- Strongly positioned for growth with increased corporate and
society needs for quality, safety and sustainability Assurance
solutions
Like for Like ("LfL") year-on-year revenue growth at constant
rates
% of Group Jan-April May-June 2020 July-Oct 2020 YTD 2020
earnings(2) 2020
=========== ============== =========== ============== ============== =========
Group 100% (4.9%) (13.4%) (6.3%) (7.3%)
============== =========== ============== ============== =========
Products 81% (6.6%) (12.4%) (4.0%) (6.8%)
Trade 12% (5.9%) (18.1%) (10.1%) (10.2%)
Resources 7% 2.4% (10.7%) (9.6%) (5.2%)
-------------- ----------- -------------- -------------- ---------
André Lacroix: Chief Executive Officer statement
"In the second half of the year, we have benefited from a
rebound in Assurance, Testing, Inspection and Certification
activities in all regions and we are on track to deliver a
resilient full year 2020 financial performance, with sequential
margin progress in H2, a year-end net debt of GBP570-590m, lower
than 2019, demonstrating the strength of our high quality and
highly cash generative earnings model despite an unprecedented
global pandemic.
With our leading and innovative Total Quality Assurance
solutions, we are supporting our clients to resume their operations
as they benefit from an easing of lockdown restrictions in most of
their markets. In the last four months, we saw a strong revenue
rebound in our Products and Trade divisions, which together
represent 93% of the Group's earnings(2) , while trading conditions
remain challenging in the Resources sector.
We are making good progress on margin, based on productivity
gains resulting from sequential revenue increases and our
disciplined approach to performance management. Our operational
focus on cash is delivering strong free cash flow and we continue
to take a disciplined approach to capital allocation, investing in
high growth and high margin sectors, as well as implementing our
progressive dividend policy.
I am very proud of the energy, agility and innovation of our
colleagues around the world that has enabled us to navigate a
difficult 2020 with the appropriate measures on health and safety,
customer service, cost controls, cash management and employee
engagement. My sincere thanks to all of my colleagues.
All of us at Intertek are truly energised by the Quality
Assurance growth opportunities moving forward as the Covid-19
global pandemic has made the case for Total Quality Assurance
clearer and stronger for our clients. Indeed, the exciting
structural growth drivers in the $250 billion global Quality
Assurance Market pre-Covid-19, now include a wide array of new
opportunities in many areas, including more outsourcing
opportunities. These opportunities to help foster a better and
safer world for all post-Covid-19 are compelling, and range
from:
-- Safer, more diversified supply chains with greater
traceability, improved intelligence and increased resilience
-- A lower carbon economy, stay-local lifestyles, more remote
working, distance learning and online shopping
-- Better personal safety, higher health, hygiene and wellbeing
standards and greater investment in healthcare
That is why we have invested in attractive growth segments and
rapidly brought to market a range of innovations to support the
emerging needs of our clients to help them address their
operational and supply chain challenges. From the launch of Protek,
the world's first industry-agnostic end-to-end Health, Safety and
Wellbeing assurance program, to CarbonClear, the world's first
assurance program that certifies the upstream carbon intensity per
barrel of oil, our passionate commitment to innovation is what
enables us to deliver sustainable shareholder value through the
cycle.
With our industry leading ATIC capability and expertise,
innovation and insight, Intertek is uniquely positioned to seize
the compelling growth opportunities and to benefit from the GDP+,
like-for-like revenue growth prospects in the Quality Assurance
Industry in the medium to long-term. In short, the pandemic has
brought to life as never before the importance of Intertek's
purpose-led role in society. "
(1)Total Quality Assurance (2)Based on H1 2020 operating profit
(3) Financial net debt, prior to any material movements in FX or
M&A
Revenue Performance
=============
10 months - January to October 4 months - July to October
2020 2019 Change Change 2020 201 9 Change Change
GBPm GBPm at actual at constant GBPm GBPm at at constant
actual
======== ======== =========== ============= ======== ========== ========= =============
Group
Revenue 2,271.6 2,487.5 (8.7%) (7.2%) 941.0 1,044.9 (9.9%) (6.2%)
Like-for-like
revenue 2,266.3 2,484.5 (8.8%) (7.3%) 939.6 1,043.6 (10.0%) (6.3%)
======== ======== =========== ============= ======== ========== ========= =============
Products
---------------------------------------------------------------------------------------------------------------
Revenue 1,389.9 1,499.7 (7.3%) (6.6%) 589.5 632.9 (6.9%) (3.9%)
Like-for-like
revenue 1,385.0 1,498.0 (7.5%) (6.8%) 588.1 632.1 (7.0%) (4.0%)
======== ======== =========== ============= ======== ========== ========= =============
Trade
---------------------------------------------------------------------------------------------------------------
Revenue 492.1 565.9 (13.0%) (10.2%) 197.5 233.2 (15.3%) (10.1%)
Like-for-like
revenue 492.1 565.9 (13.0%) (10.2%) 197.5 233.2 (15.3%) (10.1%)
--------------- -------- -------- ----------- ------------- -------- ---------- --------- -------------
Resources
Revenue 389.6 421.9 (7.7%) (5.3%) 154.0 178.8 (13.9%) (9.8%)
Like-for-like
revenue 389.2 420.6 (7.5%) (5.2%) 154.0 178.3 (13.6%) (9.6%)
======== ======== =========== ============= ======== ========== ========= =============
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 audiocast for analysts and investors will be held today
at 7.45am UK time; +44 (0) 20 3003 2666 ( Link to audiocast ).
Details can be found at http://www.intertek.com/investors/ together
with a pdf copy of this report. A recording of the audiocast will
be available later in the day.
Intertek is a leading Total Quality Assurance provider to
industries worldwide. Our network of more than 1,000 laboratories
and offices and over 44,000 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.
intertek.com
Products Divisional Review
In the last four months, our Products business delivered a LfL
revenue decline of 4.0% at constant rates, a strong improvement
compared to the LfL revenue decline of 12.4% in the May-June
period, resulting in a YTD LfL revenue decline of 6.8%. The strong
revenue momentum improvement in the last four months was driven by
a rebound in ATIC activities across most of our business lines:
Softlines, Hardlines, Electrical and Connected World, Business
Assurance, Food and Chemicals & Pharma.
-- In the July-October period, our Softlines business delivered
a mid-single digit decline in LfL revenue, resulting in a double
digit decline in LfL revenue on a YTD basis. In the last four
months, our global Softlines business benefited from continuous
growth in ecommerce, increased demand for testing protective
equipment and the reduction in the lockdown restrictions in some of
our markets. However, our performance was impacted by continued
store closures in Western Europe and North America and some
retailers delaying the launch of new products due to the disruption
of their supply chains in the first half of the year.
-- Our Hardlines business saw improved momentum in the four
month period July-October with a low single digit decline in LfL
revenue, resulting in a high single digit decline in LfL revenue on
a YTD basis. In the last four months, our Hardlines business
benefited from continuous growth in e-commerce, increased consumer
demand for home furniture and toys and the easing of lockdown
restrictions in some of our markets, while closures of stores in
Western Europe and North America continued.
-- Our Electrical & Connected World business delivered good
LfL revenue growth in the July-October period resulting in a stable
LfL revenue performance on a YTD basis. In the last four months,
our Electrical and Connected World business saw an increased level
of ATIC activities driven by increased demand for higher regulatory
standards in energy efficiency, the strong growth in testing and
certification of medical devices, the increased testing
requirements for 5G and a greater corporate focus on Cyber
security.
-- Our Business Assurance business delivered a stable LfL
revenue performance in the July-October period resulting in a
mid-single digit decline in LfL revenue on a YTD basis. The easing
of lockdown restrictions in the last four months has driven a
rebound in the number of ISO audits in some of our operations,
while we continue to benefit from attractive growth in supply chain
assurance, the continuous focus on ethical supply, the increased
needs of corporations for sustainability assurance and the strong
growth in our People Assurance segment.
-- Our Building & Construction business delivered a
mid-single digit LfL revenue decline in the last four months,
resulting in a low single digit LfL revenue decline on a YTD basis.
We continue to benefit from the growing demand for more
environmentally friendly and higher quality buildings, as well as
strong investments in large infrastructure projects, although the
temporary reduction of building and construction activities we saw
in Q2 due to lockdown restrictions in some of our North America
markets continued in the July-October period.
-- Our Transportation Technologies business delivered a double
digit LfL revenue decline in the four month period to October,
resulting in a double digit negative LFL revenue on a YTD basis.
The lower demand for testing activities we saw in Western Europe
and North America in Q2 continued in the July-October period which
was partially offset by the continued investments of our clients in
new powertrains to lower CO2/NOx emissions and increase fuel
efficiency.
-- Our Food business delivered a good LfL revenue growth
performance in the last four months resulting in a stable LfL
revenue performance on a YTD basis. In the last four months, we
benefited from the resumption of the supply operations of our
clients in most markets, from sustained demand for food safety
testing activities and increased demand for hygiene and safety
audits in factories, hospitality and retail locations.
-- In the last four months, we saw a high single digit LfL
decline in revenue in our Chemicals & Pharma business,
resulting in a double digit LfL decline in revenue on a YTD basis.
In the last four months, we saw an improvement in demand for
regulatory assurance and chemical testing in some of our operations
in North America and Western Europe while, given the importance of
Covid-19, the Pharma industry continues to reprioritise their
R&D investments, delaying testing projects for our
laboratories.
Full Year growth outlook
In 2020, we expect to deliver a mid-single digit decline in LfL
revenue at constant currency in our Products division.
Mid- to long- term growth outlook
Our Products division will benefit from mid- to long-term
structural growth drivers, including brand and SKU expansion, a
faster innovation cycle, increased focus on safety, performance
& quality, demands for smart products, a higher demand for
healthy and sustainably sourced products, and the growth of the
middle class within emerging markets.
Trade Divisional Review
In the last four months, our Trade business delivered a LfL
revenue decline of 10.1% at constant rates, a strong improvement
compared to the LfL revenue decline of 18.1% in the May-June
period, resulting in a YTD LfL decline in revenue of 10.2%. This
strong improvement in revenue momentum in the last four months was
driven by a rebound in ATIC activities in Caleb Brett and
AgriWorld.
-- Our Caleb Brett business saw improved momentum in the four
month period July-October with a high single digit decline in LfL
revenue, resulting in a high single digit LfL revenue decline on a
YTD basis. In the last four months, our Caleb Brett business
benefited from an improvement of global mobility and a rebound of
the global economy in Q3. Caleb Brett is the global leader in the
Crude Oil and refined Products global trading markets with 7,600
employees and 275 operations.
-- Our Government & Trade Services business provides
certification services to governments in the Middle East and Africa
to facilitate the import of goods into their markets, based on
acceptable quality and safety standards. We saw a double digit
decline in LfL revenue in the four month period to October and on a
YTD basis, due to the disruption of manufacturing in China in Q1
and the lockdown activities in the Middle East and Africa impacting
cross-border trade flows in both Q2 and Q3.
-- Our AgriWorld business delivered robust LfL revenue growth in
the last four months resulting in solid LfL revenue growth on a YTD
basis. Following a stable performance in H1 2020, we saw an
increase in demand for inspection activities driven by an easing of
the lockdown restrictions in most of our markets. AgriWorld
provides inspection activities to ensure that the global food
supply chain operates fully and safely.
Full Year growth outlook
In 2020, we expect our Trade division to deliver a high single
digit decline in revenue at constant currency.
Mid- to long- term growth outlook
Our Trade division will continue to benefit from population
growth and social mobility, GDP growth, the development of regional
trade, improvements in transport infrastructure, the increased need
for end-to-end traceability and the increased focus on Operational
Sustainability.
Resources Divisional Review
In the last four months, our Resources business delivered a LfL
revenue decline of 9.6% at constant rates, broadly in-line with the
LfL revenue decline of 10.7% in the May-June period, resulting in a
YTD LfL revenue decline of 5.2%.
-- In the last four months we saw a reduction in Exploration and
Production investments by our clients in some of our markets such
that our Capex Inspection services business delivered a high single
digit negative LfL revenue performance in the last four months,
resulting in a low single digit LfL revenue decline on a YTD
basis.
-- We saw a double digit negative revenue performance in Opex
Maintenance services in the four month period to October, as well
in H1 2020, as the lockdown restrictions and the cost saving
initiatives of our clients have impacted the demand for our
inspection services.
-- We delivered robust revenue growth in our Minerals business
in both the four month period to October and on a YTD basis, as we
saw increased demand for testing and inspection activities.
Full Year growth outlook
In 2020, we expect our Resources division to deliver a
mid-single digit decline in revenue at constant currency.
Mid- to long- term growth outlook
Our Resources division will grow in the medium- to long-term as
we benefit from population growth and social mobility, investment
in Exploration & Production, Storage and Transportation, Total
Energy and diversified portfolios, accelerated transition to
renewable energies, increased focus on Operational Sustainability,
and digital supply chain management.
Innovation
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
and the changing world around us. Importantly, this entrepreneurial
spirit among our people is a fundamental aspect of our
differentiated '5x5' strategy for growth.
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 and it is this approach which has
ideally placed us to support our clients in recent months.
Since day one of the pandemic, we have focused on both our
defensive and offensive initiatives, increasing the frequency of
communication with our clients to make sure we quickly understand
their needs. We have rapidly brought to market a range of
innovations to support the emerging needs of our clients, along
with innovative customer services across many industries to help
our clients address their operational and supply chain
challenges.
In our Products business, we launched a truly pioneering
innovation called Protek, the world's first industry-agnostic,
end-to-end health, safety and wellbeing assurance programme for
people, workplaces and public spaces, offering audits, training,
inspection, verification and certification solutions.
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. Based on Intertek's unique approach to total quality, Protek
safeguards people, systems and processes, facilities, materials and
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. For example, earlier this year the CEO of Club
Med, specialists in luxury all-inclusive holidays, posted a
personal "welcome back" video message to its guests, reassuring
them of the health and safety measures which have been implemented
at their resorts by Intertek's Protek solution.
Intertek InLight 2.0 adds new and enhanced features to our
unique market-leading supply chain compliance solution, enabling
organisations to manage increasingly complex supply chain risks.
With the support of InLight 2.0, customers can turn potential
disruptions and compliance irregularities to their competitive
advantage with captured market share and operational
efficiencies.
Our Alchemy Playbook app, which can be used on any mobile
device, makes it incredibly easy to deliver consistent and accurate
training, while helping clients to optimise their resources and
increase productivity.
As more industries undergo profound shifts at an even faster
pace, the need for creative solutions underpinned by research,
design and quality assurance expertise, has never been more
relevant. Our Maison Centre of Excellence in Italy, our new
innovative experiential space where science meets luxury, will
bring together - virtually or face-to-face - forward-thinking
fashion brands, industry leaders, academics and a host of textile
industry participants to collaborate and to take bold new ideas and
turn them into reality.
In our Trade business, where speed is of the essence, Intertek
Inview is our unique remote auditing and inspection solution, which
connects clients in real-time via a live video stream to our team
of technical experts. And we have developed Fast Tek, a
comprehensive Trade solution for our key global accounts, providing
expedited certification enabling clients to move their goods more
quickly through global supply chains.
Our Caleb Brett business, which provides cargo inspection,
analytical assessment, calibration and related research and
technical services to the world's petroleum and biofuels
industries, has joined VAKT, an innovative post trade management
platform. We have increased the availability of our Remote Video
Inspection solution for our oil and gas customers to ensure
business continuity of critical vendor inspection services during
the current health and safety site restrictions.
Our clients will also benefit from our state-of-the-art fuel
testing technology as environmental regulations become more
demanding, with Caleb Brett's new Cetane Rating Engine, the only
one of its kind in China for determining and certifying the
ignition quality of diesel fuel.
In our Resources business, in a ground-breaking development for
the Oil & Gas industry, we recently launched CarbonClear, the
world's first assurance program that certifies the upstream carbon
intensity per barrel of oil. Bringing unique and independent
clarity on the carbon impact of cradle-to-gate operations across
all aspects of Oil & Gas exploration and production,
CarbonClear provides producers with continuous opportunities to
reduce their carbon emissions and participate in the transition to
a low carbon economy.
As the contribution of alternative energy sources increases, we
have also developed an end-to-end assurance solution dedicated to
offshore windfarm projects, supporting with site selection and
characterisation, feasibility studies, survey and installation
oversight, environmental impact assessments and scoping studies,
metocean assessments, and risk management for a variety of offshore
developments.
Our Minerals team has also developed a unique batching method to
considerably speed up the X-Ray diffraction assessments of iron
ores by processing the ores with set phases and a pre-set
refinement strategy, delivering faster and more cost-effective
results for our customers.
These exciting innovations are in addition to the many services
we have developed rapidly in response to the pandemic:
-- Priority testing service for life-saving medical equipment
like ventilators, leveraging our global leadership
-- End-to-end testing and certification 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 solution related to home working conditions
-- Support to various governments in their Covid-19 safety efforts
M&A
We continue to look at M&A opportunities in attractive
high-margin and high-growth areas.
With its strong balance sheet, 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.
Outlook
Despite an unprecedented global pandemic, the resilience of our
results demonstrates the attractive nature of our industry,
Intertek's high quality and highly cash generative earnings model,
as well as the effectiveness of our '5x5' differentiated strategy
for growth.
We are on track to deliver a resilient FY 2020 performance, with
a mid-single digit LfL revenue decline at constant rates, a margin
reduction YoY, and a net debt of GBP570-590m, lower than 2019
(before any M&A and any significant movement in currencies).
Based on the actual currency figures for the first 10 months of the
year and the current spot rate for the remainder of the year, the
average sterling rate applied to the full year results of 2019,
would provide circa a 150 basis point reduction at both the revenue
and operating profit level.
We are confident about the structural growth prospects in the
global Quality Assurance market, which have become even more
compelling over recent months as health, safety, wellbeing and
sustainability grow in importance for companies and individuals
alike.
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.
-ENDS-
The 2020 November Trading Statement Audiocast CEO Script will be
available after the call at www.intertek.com/investors/
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