TIDMITRK
RNS Number : 6843M
Intertek Group PLC
25 May 2022
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TRADING STATEMENT
25 May 2022
Intertek Group plc ("Intertek" or "the Group"), a leading Total
Quality Assurance provider to industries worldwide, today releases
its May Trading Update for the period from 1 January to 30 April
2022 ("period"). All comparative comments in this statement reflect
comparisons with the corresponding period during 2021. The Group's
half year results to 30 June 2022 will be announced on 29 July
2022.
Good start to the year: 4.8%(1) LfL revenue growth and 4.3%(1) growth
from acquisitions
-- January-April revenue of GBP951.3m: +9.1% at constant rates and +11.2% at actual rates
-- Broad-based LfL revenue growth of 4.8% at constant rates:
Products: 4.5%, Trade: 5.2%, Resources: 5.2%
-- Robust 6.8% LfL revenue growth outside of China at constant
rates: Products: 7.0%, Trade: 6.4%, Resources 6.6%
-- SAI and JLA are performing well, delivering GBP39.4m of additional revenue at constant rates
-- Pricing, productivity initiatives and cost control activities
to drive margin accretive revenue growth
-- Day to day cash performance management discipline remains in place to deliver strong FCF
-- On track to deliver in 2022 robust LfL revenue growth at
constant rates with margin progression and strong FCF
André Lacroix: Chief Executive Officer statement
"We had a good start to 2022 with 9.1% revenue growth at
constant currency driven by a mid-single digit LfL revenue growth
performance in Products, Trade and Resources and the strong
contribution from the SAI and JLA acquisitions. We have delivered
6.8% LfL revenue growth at constant currency outside of China which
demonstrates the strengths of our unique Science-Based Customer
Excellence value proposition, providing our clients with the
Intertek ATIC Advantage (Assurance plus Testing, Inspection and
Certification) to enable them to build stronger businesses.
China accounts for 20% of Intertek revenues and since March, the
Covid-19 lockdown restrictions have caused a temporary disruption
to our business on a regional basis. We are planning for our
Chinese business to be back to normal by July 1st, and that trading
will be in line with the good LfL revenue growth we saw in China in
the January-February period.
The Group remains well-positioned to deliver on our guidance for
2022 with robust LfL constant currency revenue growth for both the
Group as a whole and for each of our divisions, further margin
progression at constant currency and strong free cash flow. This
reflects the increase in demand we are seeing for our
industry-leading Total Quality Assurance solutions, the strengths
of our earnings model and our performance management discipline, as
well as the impact of Covid-19 lockdowns in China.
The supply chain disruption being experienced by corporations
across multiple industries in the last two years has made the need
for comprehensive risk-based quality, safety and sustainability
assurance more critical than ever. Companies are investing in
Quality Assurance to build greater resilience and safety, whilst
innovating to deliver new high-quality products and services as
consumer expectations rapidly evolve. The sprint to net zero
emissions also means that corporations are reinventing the way they
reduce their carbon footprints across their operations, adopting a
comprehensive approach to sustainability with independently
verified disclosures.
Thanks to our leading ATIC capability, our market-leading
innovation and expertise, Intertek is uniquely positioned to
benefit from the GDP+ LfL revenue growth prospects in the Quality
Assurance industry. We are investing organically and inorganically
to seize the sustained long-term growth opportunities in our
industry through a disciplined approach to capital allocation.
Our track record of value creation has been based on the
compounding effect, year after year, of margin accretive revenue
growth with strong cash generation and disciplined investments,
delivering sustainable growth in dividends and excellent ROIC. The
growth in our end-markets is accelerating and we are
well-positioned to seize these exciting opportunities, capitalising
on our strong market leadership positions, our Science-based
Customer Excellence USP and our unique ATIC earnings model to
deliver sustainable growth for all stakeholders."
(1)Constant currency
Revenue Performance
4 months - January to April
2022 2021 Change at Change at
GBPm GBPm actual constant
Group
Revenue 951.3 855.4 11.2% 9.1%
LfL revenue 911.5 853.8 6.8% 4.8%
Products
Revenue 602.9 526.8 14.4% 11.5%
LfL revenue 563.3 525.2 7.3% 4.5%
Trade
Revenue 195.1 184.8 5.6% 5.3%
LfL Revenue 194.9 184.8 5.5% 5.2%
Resources
Revenue 153.3 143.8 6.6% 5.2%
LfL revenue 153.3 143.8 6.6% 5.2%
Contacts
For further information, please contact:
Denis Moreau, Investor Relations
Telephone: +44 (0) 20 7396 3415 investor@intertek.com
James Styles, Dentons Global Advisors
Telephone: +44 (0)7510 385 554 intertek@dentonsglobaladvisors.com
Analysts' Call
A live audiocast for analysts and investors will be held today
at 7.45am UK time; +44 (0) 33 0551 0200 . Details can be found at
http://www.intertek.com/investors/ together with a PDF copy of this
report. A recording of the audiocast will be available later in the
day.
Intertek is a leading Total Quality Assurance provider to
industries worldwide.
Our network of more than 1,000 laboratories and offices in more
than 100 countries, delivers innovative and bespoke Assurance,
Testing, Inspection and Certification solutions for our customers'
operations and supply chains. Intertek is a purpose-led company
that brings Quality, Safety and Sustainability to Life. Our
Science-based Customer Excellence USP and the 24/7 mission-critical
Quality Assurance solutions we provide, ensures that our clients
can operate with well-functioning supply chains in each of their
operations.
Our Customer Promise is: Intertek Total Quality Assurance
expertise, delivered consistently, with precision, pace and
passion, enabling our customers to power ahead safely.
Intertek.com
Covid-19 Situation in China
China accounts for 20% of Intertek group revenues. Since March,
the lockdown restrictions introduced by the Chinese government have
caused a temporary disruption to our business on a regional
basis.
In Shenzhen as well as in some other cities, our operations
representing in aggregate about 20% of our China revenues were
closed for one week in the second half of March.
Our Shanghai operations, accounting for 25% of our revenue in
China, have been closed since the beginning of April and are not
expected to reopen until 1 June.
We expect a gradual ramp-up after restarting our operations and
based on our experience, we believe that our Shanghai operations
will lose about half of their June revenue.
We are planning for the Chinese business to be back to normal by
1 July and that trading will be in line with the good LfL revenue
growth we saw in China in the January-February period.
Products Divisional Review
Our Products business benefited from a continuing increase in
customer demand globally for our ATIC solutions and from our
acquisitions reporting revenue of GBP602.9m. We delivered a LfL
revenue growth at constant currency of 4.5% and of 7.0% outside of
China.
-- Our Softlines business delivered mid-single digit LfL revenue
growth globally and double digit LfL revenue growth outside of
China benefitting from growth in e-commerce, investments of our
clients in new collections, growth in risk-based Quality Assurance
and increased investment in end-to-end sustainability.
-- Hardlines reported low-single digit LfL revenue growth
globally and mid-single digit revenue growth outside of China
benefitting from the growth in e-commerce, the increased consumer
demand for home furniture and toys as well as the investments of
our clients in sustainability.
-- With increased ATIC activities driven by greater regulatory
standards in energy efficiency, higher demand for testing and
certification of medical devices and the increased testing
requirements for 5G, our Electrical & Connected World business
delivered low-single digit LfL revenue growth globally and outside
of China.
-- Business Assurance delivered double digit LfL revenue growth
globally and outside of China as the business benefited from the
increased investments by our clients to improve the resilience of
their supply chains, the continuous focus on ethical supply, the
increased need for sustainability assurance and the strong growth
in our People Assurance segment.
-- Our Building & Construction business reported mid-single
digit LfL revenue growth both globally and outside of China. We
benefited from the growing demand for more environmentally friendly
and higher quality buildings and the increased number of
infrastructure projects in North America.
-- Transportation Technology delivered flat LfL revenue globally
and mid-single digit LfL revenue growth outside of China as we saw
increased investment in new powertrains to lower CO2/NOx emissions
and in traditional combustion engines to improve fuel
efficiency.
-- Our Food business registered mid-single digit LfL revenue
growth globally and high-single digit revenue growth outside of
China resulting from increased demand for food safety testing
activities and hygiene and safety audits in factories.
-- We saw mid-single digit LfL revenue growth globally and
outside of China in our Chemicals & Pharma business. We
benefited from an improvement of demand for regulatory assurance
and chemical testing and from the increased R&D investments of
the pharma industry.
Full Year growth outlook
In 2022 we expect our Products division to deliver robust LfL
revenue growth at constant currency.
Mid to long-term growth outlook
Our Products division will benefit from mid to long-term
structural growth drivers including product variety, brand and
supply chain expansion, product innovation and regulation, the
growing demand for quality and sustainability from developed and
emerging economies, the acceleration of e-commerce as a sales
channel, and the increased corporate focus on risk.
Trade Divisional Review
Our Trade division reported revenue of GBP195.1m. The strong
growth in the demand for Energy and Agri products has enabled us to
deliver a LfL revenue growth of 5.2% at constant currency globally
and of 6.4% outside of China.
-- Caleb Brett, the global leader in the Crude Oil and Refined
products global trading markets, benefited from improved momentum
driven by increased global mobility and higher testing activities
for bio-fuels with mid-single digit growth LfL revenue growth
globally and outside of China.
-- Our Government & Trade Services business provides
certification services to governments in the Middle East and Africa
to facilitate the import of goods in their markets, based on
acceptable quality and safety standards. We saw mid-single digit
negative LfL revenue globally and stable LfL revenue outside of
China as we benefitted from a recovery of supply chain activities
in the Middle-East and Africa which was offset by the termination
of two contracts which we did not renew for profitability
reasons.
-- AgriWorld provides inspection activities to ensure that the
global food supply chain operates fully and safely. The business
reported double-digit LfL revenue growth globally and outside of
China. We continue to benefit from an increase in demand for
inspection activities driven by the strong growth in the global
food industry.
Full Year growth outlook
In 2022 we expect our Trade division to deliver robust LfL
revenue growth at constant currency.
Mid to long-term growth outlook
Our Trade division will continue to benefit from both regional
and global trade-flow growth, as well as the increased customer
focus on quality, quantity controls and supply chain risk
management.
Resources Divisional Review
Our clients are benefiting from the global recovery in the oil
and gas sector with increased investments in exploration and
production activities. We delivered revenue of GBP153.3m with a LfL
revenue growth of 5.2% globally and 6.6% outside of China.
-- In our Exploration and Production operations, our Capex
Inspection services business delivered low-single digit LfL revenue
growth globally and outside of China.
-- We delivered mid-single digit negative LfL revenue in Opex
Maintenance services globally and outside of China as we exited a
contract in North America for profitability reasons.
-- The increased demand for testing and inspection activities
saw our Minerals business deliver double-digit LfL revenue growth
globally and outside China.
Full Year growth outlook
We expect our Resources related businesses to deliver a robust
LfL revenue performance at constant currency.
Mid to long-term growth outlook
Our Resources division will grow in the mid to long-term as we
benefit from investments in Energy, to meet the demands of the
growing population around the world.
Innovation
The supply chain disruption experienced in the last two years by
corporations across multiple industries has made the need for
comprehensive risk-based quality, safety and sustainability
assurance more critical than ever.
Companies are investing in Quality Assurance to build greater
resilience and safety, whilst innovating to deliver new
high-quality products and services as consumer expectations rapidly
evolve.
The sprint to net zero emissions also means that corporations
are reinventing the way they reduce their carbon footprints across
their operations, adopting a comprehensive approach to
sustainability with independently verified disclosures.
We continue to invest in innovation to deliver a superior
customer service across our Products, Trade and Resources related
businesses capitalising on our Science-based Customer Excellence
USP.
Intertek is a science-based company at its core, based on a
global network of laboratories operated by customer-facing
technical experts who are dedicated to helping customers to
overcome their risks and challenges in quality, safety and
sustainability by developing unique innovative Total Quality
Assurance solutions to make their businesses stronger.
Some examples of recent innovations demonstrating the foresight
and agility of our teams to provide new solutions to our customers
as they are re-inventing their approach to quality, safety and
sustainability to build much stronger brands and businesses post
Covid-19 are:
-- With the travel and tourism sector re-opening around the
world, we launched Intertek EcoCheck, a sustainable tourism
solution that audits the management systems and offers a Carbon
Footprint Calculation that allows our clients to meet the requests
of their customers by demonstrating tangible actions and results to
meet their sustainability goals.
-- In our Softlines business, we launched Intertek TOXCLEAR, an
innovative digital chemical management platform for the fashion
industry, to deliver production free of hazardous chemicals. The
platform enables brands and their suppliers to deliver transparency
and traceability on chemicals used and build safer and more
sustainable supply chains.
-- In our Trade Business, Intertek Agriworld partnered with Rice
Exchange, the blockchain enabled digital platform that connects
buyers and sellers of rice across continents, adding trust and
lowering risk for all parties involved. The partnership
demonstrates our commitment to the rice industry and means that
Intertek is now available to all Rice Exchange customers to provide
inspection services in relation to their rice trades undertaken on
the platform.
-- Yesterday, we announced our ground-breaking solution in the
Energy transition space, Intertek Hydrogen. With our long-standing
history and expertise in the energy industry, the solution provides
our customers with total end-to-end quality, safety and
sustainability solutions for the entire hydrogen industry lifecycle
to make a safe energy transition.
As we continue to invest in our industry-leading ATIC
Sustainability solutions, by leveraging the depth of our experience
and global network of experts, we recently launched two new
innovative solutions, Green R&D and Circular Assure, to support
our clients as they transition to a more sustainable world. These
solutions allow our customers to enhance the quality, safety,
sustainability and performance of their products whilst meeting
their stakeholders' increasingly demanding environmental
expectations.
-- Intertek Green R&D is an end-to-end Assurance solution that helps
companies identify and reduce the environmental impacts of their
products throughout the value chain at the R&D stage.
-- Intertek Circular Assure is an innovative programme that enables
companies within the plastics and polymers industry to optimise
the value of recycled materials whilst ensuring their quality and
safety, allowing our clients to demonstrate their commitment to
sustainability.
Sustainability
Sustainability is central to everything we do at Intertek and as
a purpose-led company it is anchored in our Purpose,
Vision and Values.
We are proud to have been recognised for our leading
sustainability credentials with the highest possible 'AAA' ESG
rating from the world's largest provider of Environmental,
Social and Governance (ESG) Indexes, MSCI.
Offering innovative sustainability services to our clients is
core to our value proposition and we are committed to
pioneering new solutions that will help our clients, and indeed
the world, Build Back Ever Better.
What our clients are looking for today is systematic,
independent end-to-end assurance on all aspects of their
sustainability journey. Intertek Total Sustainability Assurance
is a holistic programme empowering our customers to achieve
sustainability excellence across all aspects of their business and
communicate results with confidence.
Intertek Total Sustainability Assurance is a global programme,
leveraging our footprint in over 100 countries and
covering all industries. We have built a team of sustainability
experts in every major region, who can help with both a
global and local perspective. Intertek Total Sustainability
Assurance is comprised of three parts:
-- Intertek Operational Sustainability Solutions
-- Intertek ESG Assurance; and
-- Intertek Sustainability Certification
Internally, we are focussed on driving Sustainability Excellence
and below are our 2021 sustainability results which were published
at the end of March in our Annual report:
-- Driving a culture of proactive Health & Safety awareness
with continuous improvement in our Total Recordable Incident Rate
of 0.51 for 2021.
-- Since 2015, we have used the Net Promoter Score ('NPS')
process to listen to our customers; during 2021 we continued to
conduct on average 6,000 interviews each month.
-- Improving the environmental performance across our operations
is key in our ambition to align our business to reduction targets
set by the Paris Agreement. Operational emissions intensity per
employee was 4.35 tCO2e for 2021. Total CO2e emissions
(market-based) reduced by 13.3% vs 2020.
-- We recognise the importance of employee engagement in driving
sustainable performance for all stakeholders, and we measure
employee engagement against our Intertek ATIC Engagement Index. Our
2021 score was 79.9%.
-- Our voluntary permanent turnover rate returned to similar
levels seen prior to Covid-19 at 13%.
-- We have increased the representation of women in senior
management roles by 6% to 23% since 2017 aiming to achieving better
gender balance by 2025.
-- Supporting our commitment to the highest standards of
integrity and professional ethics, 94% of eligible employees
completed our annual compliance training.
M&A
We are investing organically and inorganically to seize the
attractive growth opportunities in the global quality assurance
market and to strengthen our ATIC portfolio in high-margin,
high-growth areas.
Our most recent acquisitions, SAI Global Assurance and JLA
Brasil Laboratório de Análises de Alimentos S.A., are both
excellent examples of investments in complementary businesses. They
have been successfully integrated and are performing well
delivering GBP39.4m of Revenue at CCY in the first four months of
the year.
Our teams have made excellent progress leveraging the
investments made in the last few years as evidenced by our strong
return on capital.
We will continue to look at M&A opportunities in attractive
high-margin and high-growth areas to broaden our ATIC portfolio of
solutions with new services we can offer to our clients and to
expand our regional coverage with our current ATIC portfolio.
With our strong balance sheet, we are well positioned to seize
the attractive external growth opportunities in a highly fragmented
industry.
Outlook 2022
Notwithstanding the fact that the Covid-19 lockdowns in China
since March will impact the Group H1 LfL revenue growth rate and
margin performance, we are reiterating our full year targets and
the Group is well positioned to deliver robust LfL revenue growth
with margin progression at constant currency and strong cash
generation in 2022.
We expect our Products, Trade and Resources divisions to deliver
robust LfL revenue growth at constant currency.
Our guidance for Net Finance cost is GBP34m-GBP38m and our
guidance for Tax rates and Minority Interest remains unchanged.
Regarding currencies, we expect that the average FX rate applied
to the full year results would increase our revenue and earnings by
circa 200 BPS.
Before any material change in FX or M&A, we expect our
Financial Net debt to be between GBP680m-GBP730m at year end.
-ENDS-
The 2022 May Trading Statement Audiocast CEO Script will be
available after the call at www.intertek.com/investors/
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