TIDMITRK
RNS Number : 4829H
Intertek Group PLC
28 July 2023
For a PDF version of this announcement, please click on the link
below:
http://www.rns-pdf.londonstockexchange.com/rns/4829H_1-2023-7-27.pdf
2023 HALF YEAR RESULTS ANNOUNCEMENT
28 July 2023
Revenue Growth Acceleration, Margin Progression and Higher ROIC
-- Revenue of GBP1,640.0m, +8.3% at constant rates and +9.9% at actual rates
-- LFL revenue growth of +7.1% at constant rates, highest LFL
revenue growth in the last 10 years
-- JLA, SAI and CEA acquisitions performing well, and Controle Analitico integration on track
-- Adjusted operating profit of GBP245.4m, +13.3% at constant rates and +12.9% at actual rates
-- Adjusted operating margin of 15.0%, +70bps at constant rates and +40bps at actual rates
-- Adjusted diluted EPS of 95.2p, +10.6% at constant rates and +10.1% at actual rates
-- Daily cash discipline drives strong growth in operating cash flow of 13.6%
-- Robust adjusted free cash flow of GBP79.6m and a strong
balance sheet with 1.1x net debt to EBITDA
-- ROIC of 19.3%, +120bps year on year at constant rates and +260bps at actual rates
-- Interim dividend of 37.7p, +10.1% year on year, providing
sustainable returns to our shareholders
-- Cost reduction programme targeting higher annualised savings
of cGBP19m with GBP7-8m expected in 2023
-- Enhanced segmental disclosure to provide a deeper
understanding of our ATIC structural growth drivers
-- 2023 outlook: Mid-single digit LFL revenue growth, margin
progression and strong free cash flow
-- AAA Growth Strategy in place to unlock the significant value growth opportunity ahead
André Lacroix: Chief Executive Officer Statement
"I would like to recognise my colleagues at Intertek for having
delivered a robust financial performance in the first half with LFL
revenue growth acceleration, margin progression, and a higher ROIC.
Our LFL revenue growth momentum is accelerating, given the higher
demand for our ATIC solutions and we have delivered the highest LFL
revenue growth in the last 10 years with 7.1% at constant rates
based on LFL revenue growth in China of 7.3% and outside of China
of 7.0%. We have made progress on margin which was up YoY by 70bps
at constant rates, as we benefitted from our pricing and
productivity initiatives. Our free cash flow was robust, driven by
our daily cash discipline with operating cash flow up 13.6%,
resulting in a strong balance sheet with a net debt to EBITDA of
1.1x. I am pleased that we have announced this morning a 10.1%
increase in the interim dividend.
We expect to deliver a robust performance in 2023, given the
increased demand for our ATIC solutions, the strengths of our
portfolio, our superior ATIC customer service, our productivity and
cost initiatives, as well as our daily cash flow discipline. We
expect the Group will deliver mid-single digit LFL revenue growth
at constant currency, with margin progression year on year, and a
strong free cash flow performance.
Our clients are increasing their focus on Risk-based Quality
Assurance to operate with higher standards on quality, safety and
sustainability in each part of their value chain, triggering a
higher demand for our ATIC solutions which are powered by our
Science-based Customer Excellence ATIC advantage. We have made
significant progress on our portfolio which is poised for faster
growth given that all of our business lines are expected to benefit
from attractive structural growth.
At our Capital Markets event in London in May, we unveiled our
Intertek 30 AAA Growth Strategy to capitalise on the best-in-class
operating platform we have built and target the areas where we have
opportunities to get better. Our passionate, innovative, and
customer-centric organisation is laser-focussed to take Intertek to
greater heights putting our AAA growth strategy in action and
deliver sustainable growth and value for all stakeholders. We are
targeting mid-single digit LFL revenue growth, margin accretion to
go back to our 17.5% peak margin and beyond, and strong cash
generation, while pursuing disciplined investments in attractive
growth and margin sectors.
We operate a differentiated, high-quality growth business with
excellent fundamentals and intrinsic defensive characteristics,
giving our customers the Intertek Science-based ATIC advantage to
strengthen their businesses. Our leading ATIC solutions are
mission-critical for the world to operate safely and the growth in
our end-markets is accelerating. The implementation of our Intertek
30 AAA Growth Strategy will capitalise on our high-quality earnings
and cash compounder model to unlock the significant value growth
opportunity ahead"
Change Change at
at actual constant rates
Key Adjusted Financials 2023 H1 2022 H1 rates 1
============== ============== ===============
Revenue GBP1,640.0m GBP1,491.7m 9.9% 8.3%
=========================== ============== ============== =============== ===================
Like-for-like revenue
2 GBP1,621.7m GBP1,491.7m 8.7% 7.1%
=========================== ============== ============== =============== ===================
Operating profit 3 GBP245.4m GBP217.3m 12.9% 13.3%
=========================== ============== ============== =============== ===================
Operating margin 3 15.0% 14.6% 40bps 70bps
=========================== ============== ============== =============== ===================
Profit before tax 3 GBP223.2m GBP203.5m 9.7% 10.4%
=========================== ============== ============== =============== ===================
Diluted earnings per
share 3 95.2p 86.5p 10.1% 10.6%
=========================== ============== ============== =============== ===================
Interim dividend per
share 37.7p 34.2p 10.1%
=========================== ============== ============== =============== -------------------
Cash generated from
operations 3 GBP270.5m GBP238.1m 13.6%
=========================== ============== ============== =============== -------------------
Free cash flow 3 GBP79.6m GBP95.8m (16.9%)
=========================== ============== ============== =============== -------------------
Financial net debt 4 GBP791.3m GBP859.1m (7.9%)
=========================== ============== ============== =============== -------------------
Financial net debt /
EBITDA 3, 4 1.1x 1.3x
=========================== ============== ============== ====================================
ROIC (rolling 12 months) 19.3% 16.8% 260bps 120bps
=========================== ============== ============== =============== ===================
Key Statutory Financials 2023 H1 2022 H1 Change 1 Constant rates are
at calculated by translating
actual H1 22 results at H1 23
rates exchange rates.
2 LFL revenue includes
acquisitions following
their 12-month anniversary
of ownership and excludes
the historical contribution
of any business disposals/closures.
3 Adjusted results are
stated before Separately
Disclosed Items ('SDIs'),
see note 3 to the Condensed
Consolidated Financial
Statements.
1,2,3 Reconciliations
for these measures are
shown in the Presentation
of Results section on
page 20.
4 Financial net debt
excludes the IFRS 16
lease liability of GBP298.2m.
Total net debt is GBP1,089.5m.
Reflects prior 12 months'
EBITDA for relevant period.
See note 7 on page 38.
=========== =========== =======
Revenue GBP1,640.0m GBP1,491.7m 9.9%
=========================== =========== =========== =======
Operating profit GBP215.0m GBP197.0m 9.1%
=========================== =========== =========== =======
Operating margin 13.1% 13.2% (10bps)
=========================== =========== =========== =======
Profit before tax GBP191.7m GBP182.8m 4.9%
=========================== =========== =========== =======
Profit after tax GBP142.3m GBP131.6m 8.1%
=========================== =========== =========== =======
Diluted earnings per
share 80.4p 75.6p 6.3%
=========================== =========== =========== =======
Cash generated from
operations GBP261.6m GBP234.1m 11.7%
=========================== =========== =========== =======
The Directors have approved an interim dividend of 37.7p per
share (H1 22: 34.2p) to be paid on 6 October 2023 to shareholders
on the register at close of business on 15 September 2023.
Contacts
For further information, please contact:
Denis Moreau, Investor Relations
Telephone: +44 (0) 20 7396 3415 investor@intertek.com
Jonathon Brill/James Styles, Dentons Global Advisors
Telephone: +44 (0) 7836 622 683 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 ( 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 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, ensure 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
Intertek CEO Letter
I would like to recognise my colleagues at Intertek for having
delivered a robust financial performance in the first half with LFL
revenue growth acceleration, margin progression, and a higher ROIC
confirming the significant value growth opportunity ahead. Our LFL
revenue growth momentum is accelerating, given the higher demand
for our ATIC solutions and we have delivered the highest LFL
revenue growth in the last 10 years with 7.1% at constant rates
based on LFL revenue growth in China of 7.3% and outside of China
of 7.0%. We have made progress on margin which was up YoY by 70bps
at constant rates, as we benefitted from our pricing and
productivity initiatives. Our free cash flow was robust driven by
our daily cash discipline delivering an operating cash flow growth
of 13.6%, resulting in a strong balance sheet with a net debt to
EBITDA of 1.1x. I am pleased that we have announced this morning a
10.1% increase in the interim dividend.
The SAI, JLA and CEA acquisitions that we made to scale up our
portfolio in attractive growth and margin sectors are performing
well, in line with our expectations. Moreover, the integration of
our recent acquisition, Controle Analítico, is making good
progress.
We expect to deliver a robust performance in 2023, given the
increased demand for our ATIC solutions, the strengths of our
portfolio, our superior customer service, our productivity and cost
initiatives, as well as our daily cash flow discipline. We expect
the Group will deliver mid-single digit LFL revenue growth at
constant currency, with margin progression year on year, and a
strong free cash flow performance.
We announced a cost reduction programme in March that targets
productivity opportunities based on operational streamlining and
technology upgrade initiatives to deliver c. GBP6-7m savings in
2023 with GBP15m annualised savings when the programme is
complete.
The execution of cost reduction programme is on track, and we
saw a resultant 10bps margin improvement in H1 23.
In H1 we have also identified additional restructuring
opportunities which should deliver an annualised savings of GBP4m
and c. GBP1m in 2023.
In total, the 2022 and 2023 cost reduction programme should
deliver annual savings of GBP19m, and we expect savings of GBP7-8m
in 2023 of which GBP1.7m is delivered in H1. The total
restructuring cost of the programme is GBP37m.
Strong Value Delivered
A few years ago, we took the decision to reinvent ourselves,
making Assurance, Testing, Inspection and Certification, or ATIC,
our Customer Promise. We rebranded the Company in 2017 and
positioned Intertek as Total Quality. Assured.
Our strategic goal with ATIC was to provide a better-quality
Assurance customer service, given how much global trade had changed
in the last 50 years. Today, companies operate in a truly global
market, r unning complex global multi-sourcing and manufacturing
operations, pursuing an omni-channel approach, when distributing
their products and services globally and locally.
In 2016 we were ahead of our time and today our clients agree
that our industry has changed and is now all about Risk-Based
Quality Assurance powered by ATIC. Indeed, all the quality, safety
and supply issues companies have faced pre and during Covid have
convinced Boards and executive teams to increase their focus on
systemic risk management across their value chains.
Assurance provides the independent end-to-end data on where the
quality, safety and sustainability risks are in the entire value
chain of any company, while Testing, Inspection and Certification
provide the critical independent quality controls in the high-risk
areas of the entire value chain.
We have made strong progress between 2014 and 2022 and have
delivered sustainable growth in revenue, profit, margin and
dividend while operating with a robust balance sheet and delivering
strong returns.
Intertek 2014-2022 Value Delivery:
Metric(1) 2014(2) 2022 Change
Revenue GBP2,093m GBP3,193m 53%
---------- ---------- -----------
EBITDA GBP400.9m GBP700.6m 75%
---------- ---------- -----------
Operating
profit GBP324.6m GBP520.1m 60%
---------- ---------- -----------
Operating
margin 15.5% 16.3% 80bps
---------- ---------- -----------
Diluted earnings
per share 132.1p 211.1p 60%
---------- ---------- -----------
Dividend 49.1p 105.8p 115%
---------- ---------- -----------
WC as % Revenue 9.3% (1.5%) (10.8ppts)
---------- ---------- -----------
Free cash
flow GBP202m GBP386m 91%
---------- ---------- -----------
ROIC 16.3% 18.0% 170bps
---------- ---------- -----------
Net debt/EBITDA 1.6x 1.1x (0.5x)
---------- ---------- -----------
Note (1): On an adjusted basis, (2) 2014 metrics are on an IAS17
basis
Faster Global Growth for ATIC Solutions
Our industry has always benefitted from attractive growth
drivers and in a post-Covid world everyone wants to build an
ever-better world. Based on our research, corporations will invest
more in quality, safety, and sustainability, accelerating the
demand for our ATIC industry-leading solutions.
Indeed, our customer research shows these attractive structural
growth drivers will be augmented by:
-- An increase in new clients
-- Higher investments in safer supply
-- Higher investments in innovation
-- A step change in sustainability
-- Higher growth in the World of Energy
We are seeing significant growth in the number of companies
globally given the lower barriers to entry for any brand with
e-commerce capabilities. The lack of Quality Assurance expertise of
these young companies is excellent news for our Global Market
Access solutions. Our decentralised Customer 1st organisation has a
strong track record of winning new clients.
Covid has been a catalyst for many corporations to improve the
resilience of their supply chains. We are seeing a significant
change of focus within our clients on how they manage their value
chains with:
-- Better data on what is happening in all parts of the supply chain
-- Tighter risk management with razor-sharp business continuity planning
-- A more diversified portfolio strategy with tier 1/2/3 suppliers
-- A more diversified portfolio strategy regarding factories
-- Investments in processes, technology, training, and independent assurance
Our superior Assurance offering means we are well positioned to
help our clients reduce the intrinsic risks in their
operations.
Our clients have also realised that they need to invest more in
product and service innovation to meet the changing needs of their
customers. A recent survey by Gartner shows that 60% of R&D
leaders expect to increase their R&D investments in 2023. These
investments in innovation mean a higher number of SKUs and a higher
number of tests per SKUs - which will be beneficial for our Testing
and Certification solutions.
The other major area of investment inside corporations is of
course sustainability and we are seeing positive momentum with new
and emerging regulation. This means companies will have to
re-invent the way they manage their sustainability agenda with a
greater emphasis on independently verified non-financial
disclosures. This is excellent news for our industry leading Total
Sustainability Assurance solutions. Sustainability is the movement
of our time.
The growth opportunities in the World of Energy are truly
exciting as the energy companies are planning higher investments.
In 2022, we all witnessed the concerns reflecting energy security,
and everyone agrees that global energy production capacity is an
issue that needs to be addressed quickly to meet the growing demand
for energy today. Given the under-investments in traditional
O&G exploration and production in the last decade and the lack
of scale for Renewables, investment for production in traditional
O&G and in Renewables will increase. This is excellent news for
our Caleb Brett and Moody businesses.
Intertek 30 AAA Growth Strategy
At our Capital Markets event in London on 3rd and 4th May, we
unveiled our Intertek 30 AAA Growth Strategy to capitalise on the
best-in-class operating platform we have built and target the areas
where we have opportunities to get better. Our passionate,
innovative, and customer-centric organisation is energised to take
Intertek to greater heights delivering AAA performance for all
stakeholders. We are focussed on delivering value consistently,
targeting mid-single digit LFL revenue growth, margin accretion to
go back to our 17.5% peak margin and beyond, and strong cash
generation, while pursuing disciplined investments in attractive
growth and margin sectors.
We have made strong progress between 2014 and 2022 delivering
sustainable growth and value for our stakeholders and we are very
excited about the significant growth value opportunity ahead,
capitalising on our Science--based Customer Excellence TQA
advantage.
Our clients understand the mission--critical nature of
risk--based quality assurance to make their businesses stronger
operating with higher quality, safety and sustainability standards.
Therefore, we expect the demand for our ATIC solutions to grow
faster post--Covid.
Our Intertek 30 AAA Growth Strategy is about being the best and
creating significant value for every stakeholder every day.
We want to be the most trusted TQA partner for our customers,
the employer of choice with our employees, to demonstrate
sustainability excellence everywhere in our community and deliver
significant growth and value for our shareholders.
To seize the significant growth value opportunity ahead we will
be laser-focussed on three strategic priorities and three strategic
enablers. Our Strategic Priorities are defined as Science-based
Customer Excellence TQA, Brand Push & Pull and Winning
Innovations, and our three strategic enablers are based on 10X
Purpose-based Engagement, Sustainability Excellence and Margin
Accretive Investments. We will both further improve where we are
already strong and address the areas where we can get better.
Our high--quality portfolio is poised for faster growth:
-- The depth and breadth of our ATIC solutions positions us well
to seize the increased corporate needs for Risk--based Quality
Assurance
-- All of our global business lines have plans in place to seize
the exciting growth drivers in each of our divisions
-- At the local level, our country--business mix is strong, with
the majority of our revenues exposed to fast growth segments
-- Geographically we have the right exposure to the structural
growth opportunities across our global markets
We are improving our segmental disclosures to provide a deeper
understanding of our ATIC growth drivers in our businesses and we
now report revenue, operating profit and margin in five
divisions:
-- Consumer Products
-- Corporate Assurance
-- Health and Safety
-- Industry and Infrastructure
-- World of Energy
Mid-Single Digit LFL Revenue Growth Target in the Medium to Long
Term
In terms of LFL revenue growth in the medium to long term, we
are targeting Group mid-single digit LFL revenue growth at CCY with
the following expectations by division:
-- Low- to mid--Single digit in Consumer Products
-- High-single digit to double digit in Corporate Assurance
-- Mid- to high-single digit in Health and Safety
-- Mid- to high-single digit in Industry and Infrastructure
-- Low- to mid--single digit in the World of Energy
Margin Back to 17.5% Peak and Beyond
Margin accretive revenue growth is central to the way we deliver
value, and we are confident that over time we will return to our
17.5% peak margin performance and go beyond from there. Our
confidence is based on three simple reasons: we have the proven
tools and processes in place, we operate with a span of
performance, and we pursue a disciplined accretive portfolio
strategy.
Sustainability is the Movement of Our Time
Sustainability is the movement of our time and is central to
everything we do at Intertek, anchored in our Purpose, our Vision,
our Values and our Strategy.
Sustainability is important to all stakeholders in society who
are consistently demanding faster progress and greater transparency
in sustainability reporting. Companies everywhere therefore
continuously need to upgrade and reinvent how they manage their
sustainability agenda, particularly with regard to how they
disclose their performance.
This is why, under our global Total Sustainability Assurance
(TSA) programme, we provide our clients with proven independent,
systemic and end-to-end assurance on all aspects of their
sustainability strategies, activities and operations.
The TSA programme comprises three elements:
-- Intertek Operational Sustainability Solutions
-- Intertek ESG Assurance
-- Intertek Corporate Sustainability Certification
For ourselves at Intertek, we focus on 10 highly demanding TSA
sustainability standards which are truly end-to-end and
systemic.
You can read in detail about our sustainability results in our
2022 Sustainability Report , which included:
-- Continuous progress on Health and Safety with a reduction of
7bps in our Total Recordable Incident Rate vs 2021.
-- Since 2015, we have used the Net Promoter Score ('NPS')
process to listen to our customers that has enabled us to improve
our customer service over the years consistently.
-- We are driving environmental performance across our
operations through new science-based reduction targets to 2030 as
well as site-by-site action plans. Our rigorous monthly performance
management of our net zero plans against emission reduction targets
has delivered total CO2e emissions (market-based) reductions of
7.8% vs 2021.
-- 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
2022 score was 80.
-- Our voluntary permanent employee turnover was at a low rate of 14%.
AAA Intertek Virtuous Economics
To deliver sustainable growth and value we will stay focussed on
our AAA Intertek Virtuous Economics based on the compounding effect
year after year of mid-single digit LFL revenue growth, margin
accretive revenue growth, strong free cash--flow and disciplined
investments in high growth and high margin sectors.
We believe in the value of accretive disciplined capital
allocation and pursue the following priorities:
-- Our first priority is to support organic growth through
capital expenditure and investments in working capital (target c 5%
of revenue in capex).
-- The second priority is to deliver sustainable returns for our
shareholders through the payment of progressive dividends and we
target a pay--out ratio of circa 50%.
-- The third priority is to pursue M&A activities that
strengthen our portfolio in attractive growth and margin areas,
provided we can deliver good returns.
-- And our fourth priority is to maintain an efficient balance
sheet with flexibility to invest in growth. Our leverage target is
1.3x - 1.8x net debt to EBITDA with the potential to return excess
capital to shareholders subject to our future requirements and
prevailing macro environment.
2023 Outlook
We continue to expect the Group will deliver mid--single digit
LFL revenue growth at constant currency, with margin progression
year--on--year and a strong free cash flow performance.
Our mid--single digit LFL revenue growth at constant currency
will be driven by the following contribution from our
divisions:
-- Consumer Products: Low-single digit
-- Corporate Assurance: High single-digit
-- Health and Safety: Mid-single digit
-- Industry and Infrastructure: High-single digit
-- World of Energy: High-single digit
Our financial guidance for 2023 is that we expect:
-- Capital expenditure in the range of GBP115--125m
-- Net Finance costs in the GBP40--42m range
-- Effective Tax Rate in the 25.5%--26.5% range
-- Minority interests of between GBP22--23m
-- FY23 financial net debt to be in the range of GBP630--680m
Sterling has strengthened in the last few months, and we are
updating our FY forex guidance. The last four months' average
Sterling at the end of June would reduce our FY revenue by 250bps
and FY Earnings by 400bps.
Significant Value Growth Opportunity Ahead
We have made strong progress in the last eight years and
equally, the value growth opportunity ahead is significant.
The demand for our strong and differentiated ATIC value
proposition is accelerating.
Our Science-based Customer Excellence TQA advantage and our
stronger portfolio at the global and local level positions us well
for faster growth.
Our Intertek 30 AAA Growth Strategy will capitalise on the
best-in-class operating platform we have built and target the areas
where we have opportunities to get better.
Our passionate, agile, and high-performance organisation is
energised to take Intertek to greater heights delivering AAA
performance for all stakeholders.
We will deliver value consistently, targeting mid-single digit
LFL revenue growth at CCY, margin accretion, and strong cash
generation, while pursuing disciplined investments in attractive
growth and margin ATIC spaces.
André Lacroix
Chief Executive Officer
Operating Review
For the six months ended 30 June 2023
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').
Overview of performance
H1 23 H1 22 Change at Change at
GBPm GBPm actual rates constant
rates(1)
Revenue 1,640.0 1,491.7 9.9% 8.3%
--------------------------- -------- -------- -------------- ----------
Like-for-like revenue(2) 1,621.7 1,491.7 8.7% 7.1%
--------------------------- -------- -------- -------------- ----------
Adjusted operating
profit(3) 245.4 217.3 12.9% 13.3%
--------------------------- -------- -------- -------------- ----------
Margin(3) 15.0% 14.6% 40bps 70bps
--------------------------- -------- -------- -------------- ----------
Net financing costs(3) (22.2) (13.8) 60.9% 56.2%
--------------------------- -------- -------- -------------- ----------
Income tax expense(3) (56.8) (54.3) 4.6% 5.4%
--------------------------- -------- -------- -------------- ----------
Adjusted earnings
for the period(3) 166.4 149.2 11.5% 12.2%
--------------------------- -------- -------- -------------- ----------
Adjusted diluted
earnings per share(3) 95.2p 86.5p 10.1% 10.6%
======== ======== ============== ==========
1. Constant rates are calculated by translating H1 22 results at H1 23 exchange rates.
2. LFL revenue includes acquisitions following their 12-month
anniversary of ownership and excludes the historical contribution
of any business disposals/closures .
3. Adjusted results are stated before SDIs, see note 3 to the
Condensed Consolidated Interim Financial Statements on page 35.
Total reported Group revenue increased by 9.9%, a LFL revenue
increase of 8.7% at actual rates.
The Group's LFL revenue at constant rates of 7.1% reflected an
increase of 1.1% in Consumer Products, 12.5% in Corporate
Assurance, 6.5% in Health and Safety, 10.5% in Industry and
Infrastructure and 8.4% in World of Energy.
We delivered adjusted operating profit of GBP245.4m, +13.3% at
constant rates and +12.9% at actual rates.
The Group's adjusted operating margin was 15.0%, an increase of
70bps compared to the prior year at constant exchange rates. Margin
increased in Products by 90bps and by 310bps in Resources and
decreased by 110bps in Trade.
The Group's statutory operating profit after SDIs for the period
was GBP215.0m (H1 22: GBP197.0m) and margin was 13.1% (H1 22:
13.2%).
Net Financing Costs
Adjusted net financing costs were GBP22.2m (H1 22: GBP13.8m),
comprising GBP1.7m (H1 22: GBP0.8m) of finance income and GBP23.9m
(H1 21: GBP14.6m) of finance expense. Statutory net financing costs
of GBP23.3m (H1 22: GBP14.2m) included GBP1.1m expense (H1 22:
GBP0.4m) relating to SDIs.
Tax
The adjusted effective tax rate was 25.5%, a decrease of 1.2% on
the prior year (H1 22: 26.7%, FY 22: 26.3%). The tax charge,
including the impact of SDIs, of GBP49.4m (H1 22: GBP51.2m),
equates to an effective rate of 25.8% (H1 22: 28.0%, FY 22:
26.9%).
Earnings Per Share
Adjusted diluted earnings per share at actual exchange rates was
10.1% higher at 95.2p. Diluted earnings per share after SDIs was
80.4p (H1 22: 75.6p) per share and basic earnings per share after
SDIs was 80.8p (H1 22: 75.9p).
Dividend
The Board has approved an interim dividend of 37.7p per share,
which is an increase of 10.1% compared to the prior year (H1 22:
34.2p), reflecting growth in adjusted diluted earnings per share.
The dividend will be paid on 6 October 2023 to shareholders on the
register on 15 September 2023.
Investments
The Group invested GBP51.4m (H1 22: GBP41.1m) of organic net
capital investment in laboratory expansions, new technologies and
equipment to expand our market coverage and develop innovative ATIC
solutions. The Group acquired Controle Analítico Análises Técnicas
Ltda (Controle Analítico), a leading provider of environmental
analysis, with a focus on water testing, based in Brazil, for a
purchase price of GBP19.1m. Purchase consideration net of cash
acquired was GBP18.5m. The purchase price includes cash
consideration of GBP15.4m and further contingent consideration
payable of GBP3.7m. The Group did not complete any acquisitions in
the first six months of 2022.
Cash Flow
The Group's cash performance in the period was robust with
adjusted free cash flow of GBP79.6m (H1 22: GBP95.8m), driven by
strong cash conversion, the result of disciplined working capital
management. Adjusted cash generated from operations was GBP270.5m
(H1 22: GBP238.1m). Statutory cash generated from operations was
GBP261.6m (H1 22: GBP234.1m).
Financial Position
The Group ended the period in a strong financial position.
Financial net debt was GBP791.3m (FY 22: GBP737.9m), our net debt
to EBITDA ratio is 1.1 (H1 22: 1.3x) and our weighted average
interest rate is 2.9% (H1 22: 2.7%). The undrawn headroom on the
Group's existing committed borrowing facilities at 30 June 2023 was
GBP620.0m (FY 22: GBP707.3m).
Operating Review by Division
To reflect the value creation drivers identified in the Intertek
30 AAA Growth Strategy, we have enhanced our segmental disclosures
and are reporting our revenue, operating profit and margin in five
divisions: Consumer Products, Corporate Assurance, Health and
Safety, Industry and Infrastructure and World of Energy.
Revenue Adjusted operating profit
======================
H1 2023 H1 2022 Change Change H1 2023 H1 2022 Change Change
at at
GBPm GBPm at actual constant GBPm GBPm at actual constant
rates rates rates rates
------- ------- --------- -------- ------- ------- --------- --------
Consumer Products 467.9 462.9 1.1% 1.1% 116.8 123.7 (5.6%) (4.3%)
Corporate Assurance 231.8 204.2 13.5% 12.5% 48.2 36.3 32.8% 31.7%
Health and Safety 156.7 142.4 10.0% 7.9% 16.5 16.4 0.6% 1.2%
Industry and
Infrastructure 427.0 375.2 13.8% 10.5% 37.3 26.4 41.3% 36.1%
356.
World of Energy 6 307.0 16.2% 13.5% 26.6 14.5 83.4% 87.3%
======= ======= ========= ======== ======= ======= ========= ========
Group 1,640.0 1,491.7 9.9% 8.3% 245.4 217.3 12.9% 13.3%
======= ======= ========= ======== ======= ======= ========= ========
Adjusted operating Adjusted operating
Revenue LFL Revenue profit margin
----------
H1 H1 YoY YoY H1 H1 YoY YoY H1 H1 YoY YoY H1 H1 YoY YoY
23 22 % % 23 22 % % 23 22 % % 23 22 % %
GBPM GBPM (actual (constant GBPM GBPM (actual (constant GBPM GBPM (actual (constant GBPM GBPM (actual (constant
rates) rates) rates) rates) rates) rates) rates) rates)
------- ------- ------- --------- ------- ------- ------- --------- ----- ----- ------- --------- ----- ----- -------- ---------
Product 1,023.0 951.0 7.6% 5.9% 1,023.0 951.0 7.6% 5.9% 203.5 183.2 11.1% 10.8% 19.9% 19.3% 60bps 90bps
Trade 325.7 299.6 8.7% 6.9% 323.6 299.6 8.0% 6.2% 19.1 22.7 (15.9%) (10.7%) 5.9% 7.6% (170bps) (110bps)
Resources 291.3 241.1 20.8% 19.3% 275.1 241.1 14.1% 12.7% 22.8 11.4 100.0% 98.3% 7.8% 4.7% 310bps 310bps
Group 1,640.0 1,491.7 9.9% 8.3% 1,621.7 1,491.7 8.7% 7.1% 245.4 217.3 12.9% 13.3% 15.0% 14.6% 40bps 70bps
------- ------- ------- --------- ------- ------- ------- --------- ----- ----- ------- --------- ----- ----- -------- ---------
Consumer Products Division
H1 2023 H1 2022 Change Change at
GBPm GBPm at actual constant
rates rates
------- ------- -------------
Revenue 467.9 462.9 1.1% 1.1%
Like-for-like
revenue 467.9 462.9 1.1% 1.1%
Adjusted operating
profit 116.8 123.7 (5.6%) (4.3%)
Adjusted operating
margin 25.0% 26.7% (170bps) (140bps)
------- ------- ------------- -----------------
Intertek Value Proposition
Our Consumer Products division focuses on the ATIC solu ti ons
we offer to our clients to develop and sell be tt er, safer, and
more sustainable products to their own clients. This division was
30% of our revenue in 2022 and includes the following business
lines: So ft lines, Hardlines, Electrical/Connected World and
Government and Trade Services.
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, and healthcare.
Strategy
Our TQA Value Proposition provides a systemic approach to
support the Quality Assurance efforts of our Consumer
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, as well as the import of
goods in their markets, based on acceptable quality and safety
standards. U ltimately, we assist them in getting their products to
market quickly and safely, to continually meet evolving consumer
demands.
Innovations
We continue to invest in innovation to deliver a superior
customer service in our Consumer Products-related businesses:
-- 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.
-- Another innovative launch is designed to help retailers and
brands of soft goods, hard goods and personal protective equipment
to understand and comply with the different regulations in force in
different markets across the world. This is Global Market Access, a
one-stop digital knowledge portal, developed with the aim of
increasing compliance for improved consumer safety and protecting
corporate reputations in today's interconnected world.
-- Intertek Hydrogen provides total end-to-end quality, safety
and sustainability assurance across the entire hydrogen value
chain, from the early stages of project feasibility & product
design, hydrogen production, delivery and storage to end-use
product compliance and certification. Intertek's Electrical
business provides comprehensive testing and certification of,
amongst others, hydrogen re-fueling stations, hydrogen fuel
components and systems, including Dispensing systems, Compression
systems.
H1 2023 Performance
In H1 23, our Consumer Products-related business delivered a
revenue of GBP467.9m, up year on year by 1.1% at CCY and actual
rates. We delivered an operating profit of GBP116.8m, down 4.3%
year on year at CCY and down 5.6% year on year at actual rates
resulting in a margin of 25.0%, down 140bps year on year at CCY due
to the revenue decline within GTS, and the low-single digit LFL
performance in Softlines and Hardlines.
-- Our Softlines business delivered low-single digit LFL revenue
growth benefitting from growth in e-commerce, growth in Risk-based
Quality Assurance and increased investments in end-to-end
sustainability.
-- Hardlines reported low-single digit LFL revenue growth
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 medical devices
and 5G investments, our Electrical & Connected World business
delivered mid-single digit LFL revenue growth.
-- 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 double-digit
negative LFL revenue globally as the growth in supply chain
activities of our clients in the Middle East and Africa was offset
by the non-renewal of two contracts last year.
Full Year Growth Outlook
In 2023, we expect our Consumer Products division to deliver low
single digit LFL revenue growth at constant currency.
Mid- to Long-Term Growth Outlook
Our Consumer Products division will benefit from growth in new
brands, SKUs & ecommerce , increased regulation , a greater
focus on sustainability , technology , as well as a growing middle
class.
Corporate Assurance Division
H1 2023 H1 2022 Change Change at
GBPm GBPm at actual constant
rates rates
------- ------- -------------
Revenue 231.8 204.2 13.5% 12.5%
Like-for-like
revenue 231.8 204.2 13.5% 12.5%
Adjusted operating
profit 48.2 36.3 32.8% 31.7%
Adjusted operating
margin 20.8% 17.8% 300bps 300bps
------- ------- ------------- -----------------
Intertek Value Proposition
Our Corporate Assurance division focuses on the industry agnos
ti c Assurance solu ti ons we offer to our clients to make their
value chains more sustainable and more resilient end-to-end. This
division was 14% of our revenue in 2022 and includes Business
Assurance and Assuris.
Strategy
Business Assurance and Assuris are central to our ATIC offering
and are some of the most exciting businesses within Intertek, given
the increased focus on operational risk management within the value
chain of every company. Intertek Business Assurance provides a full
range of business process audit and support services, including
accredited third-party management systems auditing and
certification, second-party supplier auditing and supply chain
solutions, sustainability data verification, process performance
analysis and training. Assuris' global network of experts provides
a global network of scientists, engineers, and regulatory
specialists to provide support to navigate complex scientific,
regulatory, environmental, health, safety, and quality challenges
throughout the value chain of our clients.
Innovations
We continue to invest in ATIC innovations to deliver a superior
customer service in our Corporate Assurance related businesses:
-- Through Intertek Inlight, we provide the technology and
expertise that enables organisations to better understand their
supply chain risks and protect their brand. With our Wisetail
online learning platform built in, suppliers can be trained and
upskilled in topics that matter to brands such as sustainability
and compliance related matters.
-- We continue to invest in our industry leading ATIC
sustainability solutions, leveraging the depth of our experience
and global network of experts, with two 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.
H1 2023 Performance
In H1 23, our Corporate Assurance-related business delivered a
LFL revenue growth of 12.5% at CCY, resulting in revenue of
GBP231.8m, up year on year by 12.5% at CCY and up year on year
13.5% at actual rates. We delivered an operating profit of
GBP48.2m, up 31.7% year on year at CCY and up 32.8% year on year at
actual with a margin of 20.8%, up 300bps year on year at CCY as we
benefitted from operating leverage and productivity gains.
-- Business Assurance delivered double digit LFL revenue growth
as the business saw increased investments by our clients to improve
the resilience of their supply chains, the continuous focus on
ethical supply and the increased need for sustainability
assurance.
-- The Assuris business delivered mid-single digit LFL revenue
growth as we benefitted from improved demand for our regulatory
assurance solutions and from increased corporate investment in
ESG.
Full Year Growth Outlook
In 2023, we expect our Corporate Assurance division to deliver
high-single digit LFL revenue growth at constant currency.
Mid- to Long-Term Growth Outlook
Our Corporate Assurance division will benefit from a greater
corporate focus on sustainability, the need for increased supply
chain resilience, enterprise cyber-security, People Assurance
services and regulatory assurance.
Health and Safety Division
H1 2023 H1 2022 Change Change at
GBPm GBPm at actual constant
rates rates
------- ------- -------------
Revenue 156.7 142.4 10.0% 7.9%
Like-for-like
revenue 154.6 142.4 8.6% 6.5%
Adjusted operating
profit 16.5 16.4 0.6% 1.2%
Adjusted operating
margin 10. 5% 11.5% (100bps) (70bps)
------- ------- ------------- -----------------
Intertek Value Proposition
Our Health and Safety division focuses on the ATIC solutions we
offer to our clients to make sure we all enjoy a healthier and
safer life. This division was 9% of our revenue in 2022 and
includes our AgriWorld, Food, and Chemical & Pharma business
lines.
Strategy
Our TQA value proposition provides our Health and Safety-related
customers with a systemic, end-to-end ATIC offering at every stage
of the supply chain. In an industry with significant structural
growth drivers, our science-based approach supports clients as the
sustained demand for food safety testing activities increases along
with higher demand for hygiene and safety audits in factories. Our
longstanding experience and expertise in the Chemicals and Pharma
industries enables clients to mitigate risks associated with
product quality and safety and processes, supporting them with
their product development, regulatory authorisation, chemical
testing and production.
Innovations and M&A
We continue to invest in innovation to deliver a superior
customer service in our Health and Safety related businesses:
-- Honey crystallisation is a natural phenomenon where honey
turns from liquid state to a semi-solid state. Crystallisation is
dependent on the ratio of the two principal sugars found inside:
fructose and glucose. When the level of glucose increases, it
becomes insoluble in the water, and crystallization will happen.
Intertek has developed Crystek, a process to evaluate the glucose
in honey, thus predicting and preventing the crystallisation of
honey.
-- Earlier this year Intertek agreed to acquire Controle
Analítico Análises Técnicas Ltda ("Controle Analítico"), a leading
provider of environmental analysis, with a focus on water testing,
based in Brazil. The acquisition of Controle Analítico represents
an attractive and complementary opportunity for Intertek to expand
its leading Food and Agri Total Quality Assurance (TQA) solutions
in Brazil by expanding our presence and service offering in the
Environmental testing market.
H1 2023 Performance
In H1 23, our Health and Safety-related business delivered a LFL
revenue growth of 6.5% at CCY, resulting in revenue of GBP156.7m,
up year on year by 7.9% at CCY and up year on year by 10.0% at
actual rates. We delivered an operating profit of GBP16.5m, up 1.2%
year on year at CCY and up 0.6% year on year at actual rates with a
margin of 10.5%, down 70bps year on year at CCY due to a
country-mix effect in AgriWorld and investments in capability in
Chemicals & Pharma.
-- AgriWorld provides inspection activities to ensure that the
global food supply chain operates fully and safely. The business
reported mid-single digit LFL revenue growth. We continue to see an
increase in demand for inspection activities driven by sustained
growth in the global food industry.
-- Our Food business registered high-single digit LFL revenue
growth globally resulting from increased demand for food safety
testing activities and hygiene and safety audits in factories.
-- In Chemicals & Pharma we saw mid-single digit LFL revenue
growth globally reflecting improved demand for regulatory assurance
and chemical testing and from the increased R&D investments of
the pharma industry.
Full Year Growth Outlook
In 2023, we expect our Health and Safety division to deliver
mid-single digit LFL revenue growth.
Mid- to Long-Term Growth Outlook
Our Health and Safety division will benefit from the demand for
healthier and more sustainable food to support a growing global
population, increased regulation, and new R&D investments in
the pharma industry.
Industry and Infrastructure
H1 202 H1 2022 Change Change at
GBPm GBPm at actual constant
rates rates
------ ------- -------------
Revenue 427.0 375.2 13.8% 10.5%
Like-for-like
revenue 427.0 375.2 13.8% 10.5%
Adjusted operating
profit 37.3 26.4 41.3% 36.1%
Adjusted operating
margin 8.7% 7.0% 170bps 160bps
------ ------- ------------- -----------------
Intertek Value Proposition
Our Industry and Infrastructure division focusses on the ATIC
solu ti ons our clients need to develop and build be tt er, safer
and greener infrastructure. This division was 26% of our revenue in
2022 and includes Industry Services, Minerals and Building &
Construction.
Strategy
Our TQA value proposition helps our customers to mitigate the
risks associated with technical failure or delay, ensuring that
their projects proceed on time and meet the highest quality
standards as demand for more environmentally friendly buildings and
infrastructure grows. By helping to improve safety conditions and
reduce commercial risk, our broad range of assurance, testing,
inspection, certification and engineering services allows us to
assist clients in protecting both the quantity and quality of their
mined and drilled products.
Innovations
We continue to invest in innovation to deliver a superior
customer service in our Industry and Infrastructure related
businesses:
-- Intertek Industry Services is harnessing the power of
robotics, IoT and digital solutions to create an asset management
Digital Twin offering, leveraging Intertek's AWARE software and new
data capture solutions.
-- Intertek Industry Services has acquired the MiQ methane
emission accreditation for independent certification audits and
methane emission grading which is helping energy producers to drive
down their GHG emissions, especially methane. Some major energy
producers also use Intertek innovative solutions to independently
quantify their methane and CO2 emissions from intentional flaring
and venting as well as fugitive leak detection.
H1 2023 Performance
In H1 23, our Industry and Infrastructure-related business
delivered a LFL revenue growth of 10.5% at CCY, resulting in
revenue of GBP427.0m, up year on year by 10.5% at CCY and up year
on year 13.8% at actual rates. We delivered an operating profit of
GBP37.3m, up 36.1% year on year at CCY and up 41.3% year on year at
actual rates with a margin of 8.7%, up 160bps year on year at CCY
as we benefitted from operating leverage and productivity
gains.
-- Our Industry Services includes our Capex Inspection services
and Opex Maintenance services. The Capex Inspection business
delivered double digit LFL revenue growth as we benefitted from
increased capex investment in traditional Oil and Gas exploration
and production as well as in renewables. With our clients
increasing their maintenance efforts to increase the productivity
of existing production assets, we delivered double digit LFL
revenue growth in Opex Maintenance.
-- The continuing high demand for testing and inspection
activities drove double-digit LFL revenue growth in our Minerals
business.
-- Growing demand for more environmentally friendly buildings
and the increased number of infrastructure projects in North
America produced mid-single digit LFL revenue growth for our
Building & Construction business.
Full Year Growth Outlook
In 2023, we expect our Industry and Infrastructure related
businesses to deliver high-single digit LFL revenue performance at
constant currency.
Mid- to Long-Term Growth Outlook
Our Industry and Infrastructure division will grow in the mid to
long-term, benefitting from increased global energy consumption,
the transition to greener energy, population growth, large scale
infrastructure investment, and demand for Greener buildings.
World of Energy Division
H1 2023 H1 2022 Change Change at
GBPm GBPm at actual constant
rates rates
------- ------- -------------
Revenue 356.6 307.0 16.2% 13.5%
Like-for-like
revenue 340.4 307.0 10.9% 8.4%
Adjusted operating
profit 26.6 14.5 83.4% 87.3%
Adjusted operating
margin 7.5% 4.7% 280bps 300bps
------- ------- ------------- -----------------
Intertek Value Proposition
Our World of Energy division focuses on the ATIC solu ti ons we
offer to our clients to develop be tt er and greener fuels as well
as renewables. This division was 21% of our revenue in 2022 and
includes Caleb Bre tt , Transportation Technologies (TT) and Clean
Energy Associates (CEA).
Strategy
Our TQA Value Proposition provides world leading expertise to
enable our clients to benefit from the significant opportunities in
the World of Energy. We do this by providing specialist cargo
inspection, analytical assessment, calibration and related research
and technical services to the world's petroleum and biofuels
industries.
We provide rapid testing and validation services to the
transportation industry, leveraging our Transportation Technologies
subject matter expertise that is recognised by leading
manufacturers worldwide. We evaluate everything from automobiles
and energy storage to airplanes, and deliver top-tier testing for
emerging markets, such as autonomous and electric/hybrid
vehicles.
Our partner firm Clean Energy Associates (CEA) is a
market-leading provider of Quality Assurance (QA), supply-chain
traceability and technical services to the fast-growing solar
energy sector. Its leading assurance service offering includes
in-line monitoring that allows clients to oversee the management
and traceability of their supply chains, offering a comprehensive,
end-to-end service to support customers on their decarbonisation
and energy sustainability journeys.
Innovations
We continue to invest in innovation to deliver a superior
customer service in our World of Energy related businesses:
-- Intertek Caleb Brett has partnered with Zero Petroleum, a
breakthrough British technology company that makes whole-blend
synthetic, non-biological fuels in a completely fossil free
process, using just carbon dioxide taken from the air and renewable
hydrogen made from water. Intertek is a preferred testing partner
and is supporting Zero Petroleum, helping to accelerate the firm's
development of its synthetic fuel that will power the engines of
the future.
-- Our EV Centre of Excellence state-of-the-art testing facility
in the UK supports manufacturers to develop next generation
electric propulsion systems, from high-speed motor testing to full
vehicle validation capabilities. Our global network of automotive
testing facilities can support manufacturers and suppliers with a
wide portfolio of bespoke solutions and capabilities, such as
engine and hybrid testing, EV fluids, and fuel, additive and
lubricant testing.
H1 2023 performance
In H1 23, our World of Energy-related business delivered a LFL
revenue growth of 8.4% at CCY, resulting in revenue of GBP356.6m,
up year on year by 13.5% at CCY and up year on year by 16.2% at
actual rates. We delivered an operating profit of GBP26.6m, up
87.3% year on year at CCY and up 83.4% year on year at actual rates
with a margin of 7.5%, up 300bps year on year at CCY as we
benefitted from operating leverage, productivity gains and
portfolio mix.
-- Caleb Brett, the global leader in the Crude Oil and Refined
products global trading markets, benefitted from improved momentum
driven by increased global mobility and higher testing activities
for biofuels with double-digit LFL revenue growth.
-- Transportation Technologies delivered high-single digit LFL
revenue growth globally driven by increased investment in new
powertrains to lower CO2/NOx emissions and in traditional
combustion engines to improve fuel efficiency.
-- Our CEA business delivered an excellent H1, benefitting from
the increased investments in solar panels which is the fastest
growing form of renewable energy.
Full Year Growth Outlook
In 2023, we expect our World of Energy division to deliver
high-single digit LFL revenue growth at constant currency.
Mid- to Long-Term Growth Outlook
The World of Energy division will benefit from increased
investment from energy companies to meet growing demand and
consumption of energy from the growing global population, the
scaling up Renewables, increase R&D investments that OEMs are
making in EV/Hybrid vehicles and from the development greener
fuels.
Presentation of Results
For the half year ended 30 June 2023
Adjusted Results
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).
Like-for-Like Growth
LFL revenue includes acquisitions following their 12-month
anniversary of ownership and excludes the historical contribution
of any business disposals and closures.
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 H1 22 results at
H1 23 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 Reported 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 non-current
assets; costs of acquiring and integrating acquisitions; the cost
of any fundamental restructuring; material claims and settlements;
and unrealised market gains/losses on financial assets/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 impairment of goodwill and other assets that by their nature
or size are not expected to recur; the profit and loss on disposals
of businesses or other significant assets; and the costs associated
with successful, active or aborted acquisitions and the integration
of such acquisitions are excluded from adjusted operating profit to
provide useful information regarding the underlying performance of
the Group's operations.
Details of the SDIs for the six months ended 30 June 2023 and
the comparative period are given in note 3 to the Condensed
Consolidated Interim Financial Statements.
Reconciliation of 2023 2023 2023 2022 2022 2022
Results to Adjusted H1 H1 H1 H1 H1 H1
Performance Measures Results SDIs Adjusted Results SDIs Adjusted
(GBPm)
=========================== ========= ====== ========== ========= ====== ==========
Operating profit 215.0 30.4 245.4 197.0 20.3 217.3
--------- ------ ---------- --------- ------ ----------
Operating margin 13.1% 1.9% 15.0% 13.2% 1.4% 14.6%
--------- ------ ---------- --------- ------ ----------
Net financing costs (23.3) 1.1 (22.2) (14.2) 0.4 (13.8)
--------- ------ ---------- --------- ------ ----------
Profit before tax 191.7 31.5 223.2 182.8 20.7 203.5
--------- ------ ---------- --------- ------ ----------
Income tax expense (49.4) (7.4) (56.8) (51.2) (3.1) (54.3)
--------- ------ ---------- --------- ------ ----------
Profit for the year 142.3 24.1 166.4 131.6 17.6 149.2
--------- ------ ---------- --------- ------ ----------
Cash flow from operations 261.6 8.9 270.5 234.1 4.0 238.1
--------- ------ ---------- --------- ------ ----------
Free cash flow 70.7 8.9 79.6 91.8 4.0 95.8
--------- ------ ---------- --------- ------ ----------
Basic earnings per
share 80.8p 14.9p 95.7p 75.9p 10.9p 86.8p
--------- ------ ---------- --------- ------ ----------
Diluted earnings per
share 80.4p 14.8p 95.2p 75.6p 10.9p 86.5p
--------- ------ ---------- --------- ------ ----------
Reconciliation Six Six Change
of Revenue months months %
to 30 to 30
June June
2023 2022
GBPm GBPm
Reported revenue 1,640.0 1,491.7 9.9%
-------- -------- -------
Less: Acquisitions/disposals/closures (18.3) -
-------- -------- -------
Like-for-like
revenue 1,621.7 1,491.7 8.7%
-------- -------- -------
Impact of foreign
exchange movements - 22.7
-------- -------- -------
Like-for-like
revenue at constant
currency 1,621.7 1,514.4 7.1%
-------- -------- -------
Reconciliation of 30 June 30 June
Financial Net Debt 2023 2022
to Adjusted EBITDA
(GBPm)
Net debt 1,089.5 1,191.0
------ ------ -------- -------- ------ --------
IFRS 16 lease liability (298.2) (331.9)
------ ------ -------- -------- ------ --------
Financial net debt 791.3 859.1
------ ------ -------- -------- ------ --------
2022 2023 2023 2021 H2 2022 2022
H2 H1 LTM H1 LTM
------ ------ -------- -------- ------ --------
Reported operating
profit 255.4 215.0 470.4 248.7 197.0 445.7
------ ------ -------- -------- ------ --------
Depreciation 82.9 79.9 162.8 76.9 77.3 154.2
------ ------ -------- -------- ------ --------
Amortisation 10.4 9.8 20.2 10.3 9.9 20.2
------ ------ -------- -------- ------ --------
EBITDA 348.7 304.7 653.4 335.9 284.2 620.1
------ ------ -------- -------- ------ --------
SDIs 47.4 30.4 77.8 23.5 20.3 43.8
------ ------ -------- -------- ------ --------
Adjusted EBITDA 396.1 335.1 731.2 359.4 304.5 663.9
------ ------ -------- -------- ------ --------
Financial net debt
/ EBITDA 1.1x 1.3x
------ ------ -------- -------- ------ --------
Constant Currency Reconciliations Six months Six months Change
to 30 to 30 %
June 2023 June 2022
GBPm GBPm
Adjusted operating profit
at actual rates 245.4 217.3 12.9%
----------- ----------- -------
Impact of foreign exchange
movements - -0.8
----------- ----------- -------
Adjusted operating profit
at constant rates 245.4 216.5 13.3%
----------- ----------- -------
Adjusted diluted EPS at
actual rates 95.2p 86.5p 10.1%
----------- ----------- -------
Impact of foreign exchange
movements - -0.4p
----------- ----------- -------
Adjusted diluted EPS at
constant rates 95.2p 86.1p 10.6%
----------- ----------- -------
Diluted EPS at actual rates 80.4p 75.6p 6.3%
----------- ----------- -------
Impact of foreign exchange
movements - -0.3p
----------- ----------- -------
Diluted EPS at constant
rates 80.4p 75.3p 6.8%
----------- ----------- -------
Principal Risks and Uncertainties
The Board has overall responsibility for the establishment and
oversight of the Group's risk management framework. The Board has
an established, structured approach to risk management, which
includes continuously assessing and monitoring the key risks and
uncertainties of the business. Based on this review, the Board
identified the below risks outlined on pages 44 to 48 of the
Group's Annual Report for 2022, which is available
from our website at www.intertek.com :
Operational
-- Reputation
-- Customer Service
-- People Retention
-- Macro-economic
-- Healthy, safety and wellbeing
-- Industry and Competitive Landscape
-- IT Systems and Data security
-- Coronavirus (Covid-19)
-- Contracting
Legal and Regulatory
-- Regulatory and Political Landscape
-- Business Ethics
Financial
-- Financial Risk
The Board does not consider that there has been any significant
change to the nature of these risks and the key mitigating actions
since the publication of the Group's Annual Report for 2022.
The Business Review and Operating Review by Division include
consideration of the significance of key uncertainties affecting
the Group in the remaining six months of the year.
Management Reports and Trading Updates
Intertek will issue a Trading Update in the fourth quarter of
2023.
Half Year Results
If you require a printed copy of this statement, please contact
the Group Company Secretary. This statement is available on
www.intertek.com .
Legal Notice
This Half 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.
Responsibility Statement of the Directors in Respect of the Half
Year Report
We confirm that to the best of our knowledge:
-- The condensed interim financial statements have been prepared
in accordance with UK adopted International Accounting Standard 34,
'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority and gives a true and fair view of the assets,
liabilities, financial position and profit of the Group;
-- The interim management report includes a fair review of the
information required by:
a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first
six months of the financial year and their impact on the condensed
set of financial statements; and a description of the principal
risks and uncertainties for the remaining six months of the year;
and
b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last Annual report that could do so.
On behalf of the Board of Intertek Group plc
André Lacroix Colm Deasy
Chief Executive Officer Chief Financial Officer
27 July 2023 27 July 2023
Independent Review Report to Intertek Group plc
Report on the Condensed Consolidated Interim Financial
Statements
Our Conclusion
We have reviewed Intertek Group plc's condensed consolidated
interim financial statements (the "interim financial statements")
in the Half Year Report of Intertek Group plc for the 6 month
period ended 30 June 2023 (the "period").
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority.
The interim financial statements comprise:
-- the Condensed Consolidated Interim Statement of Financial Position as at 30 June 2023;
-- the Condensed Consolidated Interim Income Statement and
Condensed Consolidated Interim Statement of Comprehensive Income
for the period then ended;
-- the Condensed Consolidated Interim Statement of Cash Flows for the period then ended;
-- the Condensed Consolidated Interim Statement of Changes in
Equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the Half Year
Report of Intertek Group plc have been prepared in accordance with
UK adopted International Accounting Standard 34, 'Interim Financial
Reporting' and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, 'Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity' issued by the Financial Reporting Council for use in the
United Kingdom ("ISRE (UK) 2410"). A review of interim financial
information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the Half Year
Report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on
the review procedures performed in accordance with ISRE (UK) 2410.
However, future events or conditions may cause the group to cease
to continue as a going concern.
Responsibilities for the Interim Financial Statements and the
Review
Our Responsibilities and Those of the Directors
The Half Year Report, including the interim financial
statements, is the responsibility of, and has been approved by the
directors. The directors are responsible for preparing the Half
Year Report in accordance with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority. In preparing the Half Year Report, including the
interim financial statements, the directors are responsible for
assessing the group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors
either intend to liquidate the group or to cease operations, or
have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim
financial statements in the Half Year Report based on our review.
Our conclusion, including our Conclusions relating to going
concern, is based on procedures that are less extensive than audit
procedures, as described in the Basis for conclusion paragraph of
this report. This report, including the conclusion, has been
prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority and for no other
purpose. We do not, in giving this conclusion, accept or assume
responsibility for any other purpose or to any other person to whom
this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
27 July 2023
Condensed Consolidated Interim Income Statement
For the six months ended 30 June 2023
Six months to 30 June Six months to 30
2023 June 2022 (Unaudited)
(Unaudited)
Notes Adjusted Separately Total Adjusted Separately Total
Results Disclosed 2023 Results Disclosed 2022
GBPm Items* GBPm Items*
GBPm GBPm
----------------------------- ------ ----------- ----------- ---------- ---------- ----------- ----------
Revenue 2 1,640.0 - 1,640.0 1,491.7 - 1,491.7
------ ----------- ----------- ---------- ---------- ----------- ----------
Operating costs (1,394.6) (30.4) (1,425.0) (1,274.4) (20.3) (1,294.7)
============================= ====== =========== =========== ========== ========== =========== ==========
Group operating
profit/(loss) 2 245.4 (30.4) 215.0 217.3 (20.3) 197.0
============================= ====== =========== =========== ========== ========== =========== ==========
Finance income 1.7 - 1.7 0.8 - 0.8
------ ----------- ----------- ---------- ---------- ----------- ----------
Finance expense (23.9) (1.1) (25.0) (14.6) (0.4) (15.0)
============================= ====== =========== =========== ========== ========== =========== ==========
Net financing costs (22.2) (1.1) (23.3) (13.8) (0.4) (14.2)
============================= ====== =========== =========== ========== ========== =========== ==========
Profit/(loss) before
income tax 223.2 (31.5) 191.7 203.5 (20.7) 182.8
------ ----------- ----------- ---------- ---------- ----------- ----------
Income tax (expense)/credit 4 (56.8) 7.4 (49.4) (54.3) 3.1 (51.2)
============================= ====== =========== =========== ========== ========== =========== ==========
Profit/(loss) for
the period 2 166.4 (24.1) 142.3 149.2 (17.6) 131.6
============================= ====== =========== =========== ========== ========== =========== ==========
Attributable to:
------ ----------- ----------- ---------- ---------- ----------- ----------
Equity holders of
the Company 154.4 (24.1) 130.3 140.0 (17.6) 122.4
------ ----------- ----------- ---------- ---------- ----------- ----------
Non-controlling
interest 12.0 - 12.0 9.2 - 9.2
============================= ====== =========== =========== ========== ========== =========== ==========
Profit/(loss) for
the period 166.4 (24.1) 142.3 149.2 (17.6) 131.6
============================= ====== =========== =========== ========== ========== =========== ==========
Earnings per share
============================= ====== =========== =========== ========== ========== =========== ==========
Basic 5 95.7p 80.8p 86.8p 75.9p
============================= ====== =========== =========== ========== ========== =========== ==========
Diluted 5 95.2p 80.4p 86.5p 75.6p
============================= ====== =========== =========== ========== ========== =========== ==========
Dividends in respect
of the period 37.7p 34.2p
============================= ====== =========== =========== ========== ========== =========== ==========
* See Note 3
Condensed Consolidated Interim Statement of Comprehensive
Income
For the six months ended 30 June 2023
Six months Six months
to 30 to 30
June 2023 June 2022
(Unaudited) (Unaudited)
Notes GBPm GBPm
------------- -------------
Profit for the period 2 142.3 131.6
-------------------------------------------- -------- ------------- -------------
Other comprehensive income/(expense)
-------- ------------- -------------
Remeasurements on defined benefit pension
schemes 6 2.8 15.7
-------- ------------- -------------
Tax on comprehensive income/(expense)
items 3.9 (7.2)
-------------------------------------------- -------- ------------- -------------
Items that will never be reclassified
to profit or loss 6.7 8.5
-------- ------------- -------------
Foreign exchange translation differences
on foreign operations (125.1) 183.0
-------- ------------- -------------
Net exchange (loss)/gain on hedges of
net investments in foreign operations 52.7 (101.6)
============================================ ======== ============= =============
Items that are or may be reclassified
subsequently to profit or loss (72.4) 81.4
-------------------------------------------- -------- ------------- -------------
Total other comprehensive income/(expense)
for the period (65.7) 89.9
-------------------------------------------- -------- ------------- -------------
Total comprehensive income for the period 76.6 221.5
============================================ ======== ============= =============
Total comprehensive income for the period
attributable to:
-------- ------------- -------------
Equity holders of the company 64.5 211.1
-------- ------------- -------------
Non-controlling interest 12.1 10.4
-------------------------------------------- -------- ------------- -------------
Total comprehensive income for the period 76.6 221.5
============================================ ======== ============= =============
Condensed Consolidated Interim Statement of Financial
Position
As at 30 June 2023
At 30 At 30 At 31
June 2023 June 2022 December
(Unaudited) (Unaudited) 2022
GBPm GBPm (Audited)
GBPm
Notes
------------- ------------- ------------
Assets
======================================= ======== ============= ============= ============
Property, plant and equipment 653.1 688.1 694.4
-------- ------------- ------------- ------------
Goodwill 8 1,368.2 1,338.7 1,418.4
-------- ------------- ------------- ------------
Other intangible assets 334.1 372.3 362.9
======================================= ======== ============= ============= ============
Long-term trade and other receivables 19.9 23.2 21.5
======================================= ======== ============= ============= ============
Defined benefit pension asset 6 25.2 19.2 21.3
-------- ------------- ------------- ------------
Deferred tax assets 40.4 39.9 45.0
--------------------------------------- -------- ------------- ------------- ------------
Total non-current assets 2,440.9 2,481.4 2,563.5
--------------------------------------- -------- ------------- ------------- ------------
Inventories* 17.5 17.2 16.9
======================================= ======== ============= ============= ============
Trade and other receivables* 763.2 747.1 726.4
======================================= ======== ============= ============= ============
Cash and cash equivalents 7 239.5 257.6 321.6
======================================= ======== ============= ============= ============
Current tax receivable 24.1 18.5 31.9
--------------------------------------- -------- ------------- ------------- ------------
Total current assets 1,044.3 1,040.4 1,096.8
--------------------------------------- -------- ------------- ------------- ------------
Total assets 3,485.2 3,521.8 3,660.3
--------------------------------------- -------- ------------- ------------- ------------
Liabilities
-------- ------------- ------------- ------------
Interest bearing loans and borrowings 7 (303.4) (47.5) (262.4)
======================================= ======== ============= ============= ============
Current taxes payable (57.6) (57.3) (71.0)
======================================= ======== ============= ============= ============
Lease liabilities (66.4) (71.5) (70.6)
======================================= ======== ============= ============= ============
Trade and other payables* (682.1) (669.8) (723.2)
======================================= ======== ============= ============= ============
Provisions* (16.4) (12.5) (15.8)
--------------------------------------- -------- ------------- ------------- ------------
Total current liabilities (1,125.9) (858.6) (1,143.0)
--------------------------------------- -------- ------------- ------------- ------------
Interest bearing loans and borrowings 7 (727.4) (1,069.2) (797.1)
======================================= ======== ============= ============= ============
Lease liabilities (231.8) (260.4) (251.6)
======================================= ======== ============= ============= ============
Deferred tax liabilities (83.7) (78.9) (99.2)
======================================= ======== ============= ============= ============
Defined benefit pension liabilities 6 (2.9) (1.3) (2.2)
======================================= ======== ============= ============= ============
Other payables* (30.8) (33.9) (34.6)
======================================= ======== ============= ============= ============
Provisions* (17.7) (0.7) (14.6)
--------------------------------------- -------- ------------- ------------- ------------
Total non-current liabilities (1,094.3) (1,444.4) (1,199.3)
--------------------------------------- -------- ------------- ------------- ------------
Total liabilities (2,220.2) (2,303.0) (2,342.3)
--------------------------------------- -------- ------------- ------------- ------------
Net assets 1,265.0 1,218.8 1,318.0
======================================= ======== ============= ============= ============
Equity
======================================= ======== ============= ============= ============
Share capital 1.6 1.6 1.6
======================================= ======== ============= ============= ============
Share premium 257.8 257.8 257.8
======================================= ======== ============= ============= ============
Other reserves (113.8) (22.3) (41.3)
======================================= ======== ============= ============= ============
Retained earnings 1,084.4 944.6 1,065.9
--------------------------------------- -------- ------------- ------------- ------------
Total equity attributable to
equity holders of the Company 1,230.0 1,181.7 1,284.0
======================================= ======== ============= ============= ============
Non-controlling interest 35.0 37.1 34.0
--------------------------------------- -------- ------------- ------------- ------------
Total equity 1,265.0 1,218.8 1,318.0
======================================= ======== ============= ============= ============
* Working capital of GBP31.4m (H1 22: GBP43.7m; FY 22: negative
GBP47.8m) comprises the asterisked items in the above Statement of
Financial Position less IFRS16 Lease Receivable of GBP2.3m (H1 22:
GBP3.7m; FY 22 GBP2.9m).
Condensed Consolidated Interim Statement of Changes in
Equity
For the six months ended 30 June 2023
Attributable to equity holders of the
Company
Other Reserves
Share Share Translation Other Retained Total Non-controlling Total
Capital premium reserve Earnings before interest equity
non-controlling
interest
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ -------- --------- ------------ ------ --------- ---------------- ---------------- --------
At 1 January 2022 1.6 257.8 (108.9) 6.4 925.1 1,082.0 32.3 1,114.3
-------- --------- ------------ ------ --------- ---------------- ---------------- --------
Total
comprehensive
(expense)/income
for
the period
================== ======== ========= ============ ====== ========= ================ ================ ========
Profit - - - - 122.4 122.4 9.2 131.6
================== ======== ========= ============ ====== ========= ================ ================ ========
Other
comprehensive
(expense)/income - - 80.2 - 8.5 88.7 1.2 89.9
------------------ -------- --------- ------------ ------ --------- ---------------- ---------------- --------
Total
comprehensive
(expense)/income
for
the period - - 80.2 - 130.9 211.1 10.4 221.5
------------------ -------- --------- ------------ ------ --------- ---------------- ---------------- --------
Transactions with
owners of the
company
recognised
directly
in equity
-------- --------- ------------ ------ --------- ---------------- ---------------- --------
Contributions by
and distributions
to the owners of
the
company
-------- --------- ------------ ------ --------- ---------------- ---------------- --------
Dividends paid - - - - (115.5) (115.5) (5.6) (121.1)
-------- --------- ------------ ------ --------- ---------------- ---------------- --------
Purchase of own
shares - - - - (2.3) (2.3) - (2.3)
-------- --------- ------------ ------ --------- ---------------- ---------------- --------
Tax paid on share
awards vested(1) - - - - (4.4) (4.4) - (4.4)
-------- --------- ------------ ------ --------- ---------------- ---------------- --------
Equity-settled
transactions - - - - 10.8 10.8 - 10.8
================== ======== ========= ============ ====== ========= ================ ================ ========
Total
contributions
by and
distributions
to the owners of
the
company - - - - (111.4) (111.4) (5.6) (117.0)
------------------ -------- --------- ------------ ------ --------- ---------------- ---------------- --------
At 30 June 2022
(unaudited) 1.6 257.8 (28.7) 6.4 944.6 1,181.7 37.1 1,218.8
================== ======== ========= ============ ====== ========= ================ ================ ========
At 1 January 2023 1.6 257.8 (47.7) 6.4 1,065.9 1,284.0 34.0 1,318.0
-------- --------- ------------ ------ --------- ---------------- ---------------- --------
Total
comprehensive
(expense)/income
for
the period
-------- --------- ------------ ------ --------- ---------------- ---------------- --------
Profit - - - - 130.3 130.3 12.0 142.3
-------- --------- ------------ ------ --------- ---------------- ---------------- --------
Other
comprehensive
(expense)/income - - (72.5) - 6.7 (65.8) 0.1 (65.7)
------------------ -------- --------- ------------ ------ --------- ---------------- ---------------- --------
Total
comprehensive
(expense)/income
for
the period - - (72.5) - 137.0 64.5 12.1 76.6
------------------ -------- --------- ------------ ------ --------- ---------------- ---------------- --------
Transactions with
owners of the
company
recognised
directly
in equity
-------- --------- ------------ ------ --------- ---------------- ---------------- --------
Contributions by
and distributions
to the owners of
the
company
-------- --------- ------------ ------ --------- ---------------- ---------------- --------
Dividends paid - - - - (115.4) (115.4) (11.1) (126.5)
-------- --------- ------------ ------ --------- ---------------- ---------------- --------
Purchase of own
shares - - - - (8.4) (8.4) - (8.4)
-------- --------- ------------ ------ --------- ---------------- ---------------- --------
Tax paid on share
awards vested(1) - - - - (5.6) (5.6) - (5.6)
-------- --------- ------------ ------ --------- ---------------- ---------------- --------
Equity-settled
transactions - - - - 11.0 11.0 - 11.0
-------- --------- ------------ ------ --------- ---------------- ---------------- --------
Income tax on
equity-settled
transactions - - - - (0.1) (0.1) - (0.1)
------------------ -------- --------- ------------ ------ --------- ---------------- ---------------- --------
Total
contributions
by and
distributions
to the owners of
the
company - - - - (118.5) (118.5) (11.1) (129.6)
------------------ -------- --------- ------------ ------ --------- ---------------- ---------------- --------
At 30 June 2023
(unaudited) 1.6 257.8 (120.2) 6.4 1,084.4 1,230.0 35.0 1,265.0
================== ======== ========= ============ ====== ========= ================ ================ ========
(1) The tax paid on share awards vested is related to settlement
of the tax obligation by the Group via the sale of a portion of the
equity-settled shares.
The GBP115.4m dividend paid on 15 June 2023 represented a final
dividend of 71.6p per ordinary share in respect of the year ended
31 December 2022 which was approved and paid during the period. The
GBP115.5m dividend paid on 17 June 2022 represented a final
dividend of 71.6p per ordinary share in respect of the year ended
31 December 2021 which was approved and paid during the period. No
ordinary shares were issued in the period to satisfy the vesting of
share awards.
Condensed Consolidated Interim Statement of Cash Flows
For the six months ended 30 June 2023
Six Six
months months
to to
Notes 30 30
June June
2023 2022
(Unaudited) (Unaudited)
GBPm GBPm
-------- -------------
Cash flows from operating activities
============================================== ======== ============= =============
Profit for the period 2 142.3 131.6
-------- ------------- -------------
Adjustments for:
-------- ------------- -------------
Depreciation charge 79.9 77.3
============================================== ======== ============= =============
Amortisation of software 9.8 9.9
============================================== ======== ============= =============
Amortisation of acquisition intangibles 17.2 16.5
============================================== ======== ============= =============
Equity-settled transactions 11.0 10.8
============================================== ======== ============= =============
Net financing costs 23.3 14.2
============================================== ======== ============= =============
Income tax expense 4 49.4 51.2
============================================== ======== ============= =============
Profit on disposal of property, plant,
equipment and software (0.3) (0.8)
---------------------------------------------- -------- ------------- -------------
Operating cash flows before changes
in working capital and operating provisions 332.6 310.7
---------------------------------------------- -------- ------------- -------------
Change in inventories (1.4) (1.0)
============================================== ======== ============= =============
Change in trade and other receivables (99.3) (39.4)
============================================== ======== ============= =============
Change in trade and other payables 27.3 (32.9)
============================================== ======== ============= =============
Change in provisions 2.4 (1.3)
============================================== ======== ============= =============
Special contributions into pension
schemes 6 - (2.0)
---------------------------------------------- -------- ------------- -------------
Cash generated from operations 261.6 234.1
---------------------------------------------- -------- ------------- -------------
Interest and other finance expense
paid (48.6) (15.8)
============================================== ======== ============= =============
Income taxes paid (56.0) (50.8)
---------------------------------------------- -------- ------------- -------------
Net cash flows generated from operating
activities* 157.0 167.5
---------------------------------------------- -------- ------------- -------------
Cash flows from investing activities
============================================== ======== ============= =============
Proceeds from sale of property, plant,
equipment and software* 3.2 3.4
============================================== ======== ============= =============
Interest received* 1.7 0.8
============================================== ======== ============= =============
Acquisition of subsidiaries, net of (14.8) -
cash received
============================================== ======== ============= =============
Consideration paid in respect of prior (2.7) -
year acquisitions
============================================== ======== ============= =============
Acquisition of property, plant, equipment,
software* 9 (51.4) (41.1)
---------------------------------------------- -------- ------------- -------------
Net cash flows used in investing activities (64.0) (36.9)
---------------------------------------------- -------- ------------- -------------
Cash flows from financing activities
============================================== ======== ============= =============
Purchase of own shares (8.4) (2.3)
============================================== ======== ============= =============
Tax paid on share awards vested (5.6) (4.4)
============================================== ======== ============= =============
Drawdown of borrowings 53.6 477.9
============================================== ======== ============= =============
Repayment of borrowings (32.8) (476.5)
============================================== ======== ============= =============
Repayment of lease liabilities* (39.8) (38.8)
============================================== ======== ============= =============
Dividends paid to non-controlling
interest (11.1) (5.6)
============================================== ======== ============= =============
Equity dividends paid (115.4) (115.5)
---------------------------------------------- -------- ------------- -------------
Net cash flows used in financing activities (159.5) (165.2)
---------------------------------------------- -------- ------------- -------------
Net (decrease)/increase in cash and
cash equivalents 7 (66.5) (34.6)
---------------------------------------------- -------- ------------- -------------
Cash and cash equivalents at 1 January 7 320.7 264.0
============================================== ======== ============= =============
Effect of exchange rate fluctuations
on cash held 7 (18.7) 12.6
---------------------------------------------- -------- ------------- -------------
Cash and cash equivalents at end of
period 7 235.5 242.0
============================================== ======== ============= =============
* Free cash flow of GBP70.7m (H1 22: GBP91.8m) comprises the
asterisked items in the above Statement of Cash Flows.
Adjusted cash flow from operations of GBP270.5 (H1 22:
GBP238.1m) comprises statutory cash flow from operations of
GBP261.6m (H1 22: GBP234.1m) before cash outflows relating to
Separately Disclosed Items of GBP8.9m (H1 22: GBP4.0m).
Notes to the Condensed Consolidated Interim Financial
Statements
1. Basis of Preparation
Reporting Entity
Intertek Group plc (the 'Company') is a company incorporated and
domiciled in the United Kingdom. The Condensed Consolidated Interim
Financial Statements of the Company as at and for the six months
ended 30 June 2023 comprise the Company and its subsidiaries
(together referred to as the 'Group').
The Consolidated Financial Statements of the Group as at, and
for the year ended, 31 December 2022 are available upon request
from the Company's registered office at 33 Cavendish Square,
London, W1G 0PS. An electronic version is available from the
Investors section of the Group website at www.intertek.com .
Statement of Compliance
These Condensed Consolidated Interim Financial Statements for
the half-year reporting period ended 30 June 2023 have been
prepared in accordance with the UK-adopted International Accounting
Standards 34, 'Interim Financial Reporting' ("IAS 34") and the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority. They do not include all of
the information required for full annual financial statements and
should be read in conjunction with the Consolidated Financial
Statements of the Group as at and for the year ended 31 December
2022. These Condensed Consolidated Interim Financial Statements do
not comprise statutory accounts within the meaning of section 434
of the Companies Act 2006.
The Condensed Consolidated Financial Statements have also been
prepared in accordance with the accounting policies set out in the
2022 Annual Report and have been prepared under the historical cost
convention as modified by the revaluation of certain financial
assets and liabilities (including derivative financial instruments)
at fair value.
The comparative figures for the financial year ended 31 December
2022 are the Company's statutory accounts for that financial year.
Those accounts have been reported on by the Company's auditors and
delivered to the Registrar of Companies. The report of the auditor
was (i) unqualified, (ii) did not include a reference to any
matters to which the auditors drew attention by way of emphasis
without qualifying their report, and (iii) did not contain a
statement under section 498(2) or (3) of the Companies Act
2006.
Significant Accounting Policies
These Condensed Consolidated Interim Financial Statements are
unaudited and, except as described below, have been prepared on the
basis of accounting policies consistent with those applied in the
Consolidated Financial Statements for the year ended 31 December
2022.
There are no significant new accounting standards or amendments
to accounting standards that are effective for annual periods
beginning on or after 1 January 2023 that have a material effect on
the results of the Group.
Key Estimations and Uncertainties
The preparation of interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates. There are no critical
accounting judgements.
In preparing these Condensed Consolidated Interim Financial
Statements, the nature of the significant judgements made by
management in applying the Group's accounting policies and the key
sources of estimation were the same as those that were applied to
the Consolidated Financial Statements as at and for the year ended
31 December 2022. During the six months ended 30 June 2023
management reassessed its estimates and judgements in respect of
pensions (note 6) and impairment (note 8(c)).
Risks and Uncertainties
The Operating Review includes consideration of the risks and
uncertainties affecting the Group in the remaining six months of
the year.
The Board has reviewed the Group's financial forecasts up to 31
December 2024, to assess both liquidity requirements and debt
covenants. In addition, these have been sensitised for a severe yet
plausible decline in economic conditions (including an illustrative
sensitivity scenario of a reduction of 30% to the base profit
forecasts and the corresponding impact to cash flow forecasts in
each of these years). The Board remains satisfied with the Group's
funding and liquidity position, with the Group forecasts to remain
within its committed facilities and compliant with debt covenants
even following the 30% downside sensitivity. On the basis of its
forecasts to 31 December 2024, both base case and stressed, and
available facilities, the Board has concluded that there are no
material uncertainties over going concern, including no anticipated
breach of covenants, and therefore 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
Actual Rates Cumulative average rates
Value of GBP1 30 June 30 June 31 December H1 23 H1 22 FY 22
2023 2022 2022
--------------- -------- -------- ------------ --------- -------- --------
US
dollar 1.26 1.22 1.20 1.30 1.30 1.24
Euro 1.16 1.16 1.13 1.14 1.19 1.17
Chinese
renminbi 9.16 8.18 8.45 8.56 8.39 8.31
Hong
Kong
dollar 9.90 9.56 9.37 9.64 10.15 9.68
Australian
dollar 1.92 1.76 1.78 1.83 1.81 1.78
2. Operating Segments
Business Analysis
The Group is organised into business lines, which are the
Group's operating segments and are reported to the CEO, the chief
operating decision maker.
Since we unveiled our Intertek 30 AAA Growth Strategy to
capitalise on the best-in-class operating platform we have built
and target the areas where we have opportunities to get better, the
reporting and performance management used by the CEO to make
operating decisions has changed from the previous three segments to
the Group's new five reportable segments as set out below. The
segment information for earlier periods has been restated to
conform to these changes. Disclosure of the 2023 results under the
previous three operating segments is provided on our website
(www.intertek.com/investors). The business lines within the new
divisions demonstrate similar mid- to long-term structural growth
drivers.
When aggregating operating segments into the five reportable
segments we have applied judgement over the similarities of the
services provided, the customer base and the mid- to long-term
structural growth drivers. Certain business lines within those
former segments have also been reallocated to better align to the
structural growth drivers of each segment. A description of the
activity in each division and the core business lines which align
to the five reporting segments is given in the Operating Review by
Division.
The costs of the corporate head office and other costs which are
not controlled by the five divisions are allocated
appropriately.
The results of the divisions are shown below:
Six months to 30 June Revenue Depreciation Adjusted Separately Operating
2023 from external and software operating disclosed profit
customers amortisation profit items GBPm
GBPm GBPm GBPm GBPm
--------------- -------------- ----------- -----------
Consumer Products 467.9 (29.6) 116.8 (4.2) 112.6
--------------- -------------- ----------- ----------- ----------
Corporate Assurance 231.8 (6.1) 48.2 (11.7) 36.5
--------------- -------------- ----------- ----------- ----------
Health and Safety 156.7 (11.2) 16.5 (2.4) 14.1
--------------- -------------- ----------- ----------- ----------
Industry and Infrastructure 427.0 (16.2) 37.3 (5.3) 32.0
--------------- -------------- ----------- ----------- ----------
World of Energy 356.6 (26.6) 26.6 (6.8) 19.8
----------------------------- --------------- -------------- ----------- ----------- ----------
Total 1,640.0 (89.7) 245.4 (30.4) 215.0
----------------------------- --------------- -------------- ----------- ----------- ----------
Group operating profit 245.4 (30.4) 215.0
--------------- -------------- ----------- ----------- ----------
Net financing costs (22.2) (1.1) (23.3)
----------------------------- --------------- -------------- ----------- ----------- ----------
Profit before income
tax 223.2 (31.5) 191.7
--------------- -------------- ----------- ----------- ----------
Income tax (expense)/credit (56.8) 7.4 (49.4)
----------------------------- --------------- -------------- ----------- ----------- ----------
Profit for the year 166.4 (24.1) 142.3
----------------------------- --------------- -------------- ----------- ----------- ----------
Six months to 30 June Revenue Depreciation Adjusted Separately Operating
2022 (Represented) from external and software operating disclosed profit
customers amortisation profit items GBPm
GBPm GBPm GBPm GBPm
--------------- -------------- ----------- -----------
Consumer Products 462.9 (27.9) 123.7 (2.5) 121.2
--------------- -------------- ----------- ----------- ----------
Corporate Assurance 204.2 (6.3) 36.3 (9.9) 26.4
--------------- -------------- ----------- ----------- ----------
Health and Safety 142.4 (10.7) 16.4 (1.6) 14.8
--------------- -------------- ----------- ----------- ----------
Industry and Infrastructure 375.2 (15.8) 26.4 (4.4) 22.0
--------------- -------------- ----------- ----------- ----------
World of Energy 307.0 (26.5) 14.5 (1.9) 12.6
----------------------------- --------------- -------------- ----------- ----------- ----------
Total 1,491.7 (87.2) 217.3 (20.3) 197.0
----------------------------- --------------- -------------- ----------- ----------- ----------
Group operating profit 217.3 (20.3) 197.0
--------------- -------------- ----------- ----------- ----------
Net financing costs (13.8) (0.4) (14.2)
----------------------------- --------------- -------------- ----------- ----------- ----------
Profit before income
tax 203.5 (20.7) 182.8
--------------- -------------- ----------- ----------- ----------
Income tax (expense)/credit (54.3) 3.1 (51.2)
----------------------------- --------------- -------------- ----------- ----------- ----------
Profit for the year 149.2 (17.6) 131.6
----------------------------- --------------- -------------- ----------- ----------- ----------
3. Separately Disclosed Items (SDIs)
Six months Six months
to 30 June to 30 June
2023 2022
GBPm GBPm
----- ------------
Operating costs
----- ------------ ------------
Amortisation of acquisition intangibles (a) (17.2) (16.5)
----- ------------ ------------
Acquisition and integration costs (b) (3.6) (3.8)
----- ------------ ------------
Restructuring costs (c) (9.6) -
------------------------------------------- ----- ------------ ------------
Total operating costs (30.4) (20.3)
------------ ------------
Net financing costs (d) (1.1) (0.4)
------------------------------------------- ----- ------------ ------------
Total before income tax (31.5) (20.7)
------------ ------------
Income tax credit on Separately Disclosed
Items 7.4 3.1
-------------------------------------------------- ------------ ------------
Total (24.1) (17.6)
-------------------------------------------------- ------------ ------------
Refer to Presentation of Results section for further details on
SDIs.
(a) The amortisation of acquisition intangibles relates to
customer relationships, trade names, technology and non-compete
covenants acquired.
(b) Acquisition and integration costs relating to acquisition
activity in the period and integration of prior period acquisitions
were GBP3.6m (H1 22: GBP3.8m).
(c) During 2022, the Group initiated the first year of a cost
reduction programme. In six months to June 2023 costs of GBP9.6m
(H1 22 : nil) included consolidating sites and offices,
streamlining headcount, Group-wide technology upgrades and related
asset write-offs.
(d) Net financing costs of GBP1.1m (H1 22: GBP0.4m) relates to
unwinding of discount and changes in fair value of contingent
consideration in relation to acquisitions from prior periods.
4. Income Tax Expense
Income tax expense is recognised based on management's best
estimate of the weighted average annual income tax rate expected
for the full financial year applied to the pre-tax income of the
interim period in respect of the adjusted results. The income tax
expense for the adjusted results for the six months ended 30 June
2023 is GBP56.8m (H1 22: GBP54.3m). The Group's adjusted
consolidated effective tax rate for the six months ended 30 June
2022 is 25.5% (H1 22: 26.7%). The income tax expense for the total
results for the six months ended 30 June 2023 is GBP49.4m (H1 22:
GBP51.2m). The Group's consolidated effective tax rate for the six
months ended 30 June 2023 is 25.8% (H1 22: 28.0%), the prior year's
effective tax rate was mainly driven by a prior year adjustment
debit to intangible and goodwill deferred tax position.
Differences between the consolidated effective tax rate of 25.5%
and weighted average notional statutory UK rate of 23.5% include
but are not limited to: the mix of profits; the effect of tax rates
in foreign jurisdictions; non-deductible expenses; the effect of
movements in unrecognised deferred tax assets; movements in the
provision for uncertain tax positions; withholding tax on
intra-group dividends; tax exempt income; and under/over provisions
in previous periods.
On 20 June 2023, Finance (No.2) Act 2023 was substantively
enacted in the UK, introducing a global minimum effective tax rate
of 15.0%. The legislation implements a domestic top-up tax and a
multinational top-up tax, effective for accounting periods starting
on or after 31 December 2023. The Group has applied the exception
under IAS 12 to recognising and disclosing information about
deferred tax assets and liabilities related to top-up income
taxes.
5. Earnings Per Share (EPS)
Six months Six months
to 30 June to 30 June
2023 2022
GBPm GBPm
------------
Based on the profit for the period:
------------ ------------
Profit attributable to ordinary shareholders 130.3 122.4
------------ ------------
Separately Disclosed Items after tax (note
3) 24.1 17.6
---------------------------------------------- ------------ ------------
Adjusted earnings 154.4 140.0
---------------------------------------------- ------------ ------------
Number of shares (millions):
------------ ------------
Basic weighted average number of ordinary
shares 161.3 161.2
------------ ------------
Potentially dilutive share awards 0.8 0.6
---------------------------------------------- ------------ ------------
Diluted weighted average number of shares 162.1 161.8
---------------------------------------------- ------------ ------------
Basic earnings per share 80.8p 75.9p
------------ ------------
Potentially dilutive share awards (0.4p) (0.3p)
---------------------------------------------- ------------ ------------
Diluted earnings per share 80.4p 75.6p
---------------------------------------------- ------------ ------------
Adjusted basic earnings per share 95.7p 86.8p
------------ ------------
Potentially dilutive share awards (0.5p) (0.3p)
---------------------------------------------- ------------ ------------
Adjusted diluted earnings per share 95.2p 86.5p
---------------------------------------------- ------------ ------------
6. Pension Schemes
A full triennial actuarial valuation for the United Kingdom
Scheme was carried out as at 31 March 2022. Following the results
of the assessment of the triennial actuarial valuation, during the
period, the Group made a special contribution of GBPnil (H1 22:
GBP2.0m) into the Intertek Pension Scheme in the United
Kingdom.
The Group obtained updated actuarial valuations to 31 May 2023,
the asset and liability values have been reviewed and have not
moved materially in the month to 30 June 2023. A net actuarial gain
before taxation of GBP2.8m (H1 22: GBP15.7m) has been recognised in
the consolidated statement of comprehensive income. The net pension
asset stands at GBP25.2m for the UK pension scheme (31 December
2022: GBP21.3m) and a net pension liability of GBP2.9m for the
Swiss pension scheme as at 30 June 2023 (31 December 2022:
GBP2.2m).
7. Analysis of Net Debt
30 June 30 June 31 December
2023 2022 2022
GBPm GBPm GBPm
-------- --------
Cash and cash equivalents per the Statement
of Financial Position 239.5 257.6 321.6
-------- -------- ------------
Overdrafts (4.0) (15.6) (0.9)
--------------------------------------------- -------- -------- ------------
Cash per the Statement of Cash Flows 235.5 242.0 320.7
--------------------------------------------- -------- -------- ------------
The components of net debt are outlined below:
1 January Cash flow Non-cash Exchange 30 June
2023 GBPm adjustments adjustments 2023
GBPm GBPm GBPm GBPm
---------- ---------- ------------- -------------
Cash 320.7 (66.5) - (18.7) 235.5
--------------------------- ---------- ---------- ------------- ------------- ---------
Borrowings:
---------- ---------- ------------- ------------- ---------
Revolving credit facility
US$850m 2027 - (53.6) - 1.3 (52.3)
---------- ---------- ------------- ------------- ---------
Senior notes US$160m 2023 (133.1) 31.2 - 7.0 (94.9)
Acquisition facility 'A'
AU$88.0m 2023 (49.4) - - 3.4 (46.0)
Acquisition facility 'A'
US$96.9m 2023 (80.6) - - 4.0 (76.6)
Senior notes US$125m 2024 (104.0) - - 5.1 (98.9)
Senior notes US$120m 2025 (99.8) 1.7 - 3.3 (94.8)
---------- ---------- ------------- ------------- ---------
Senior notes US$75m 2026 (62.4) - - 3.0 (59.4)
---------- ---------- ------------- ------------- ---------
Senior notes US$150m 2027 (124.8) - - 6.2 (118.6)
---------- ---------- ------------- ------------- ---------
Senior notes US$165m 2028 (137.3) - - 6.8 (130.5)
---------- ---------- ------------- ------------- ---------
Senior notes US$165m 2029 (137.3) - - 6.8 (130.5)
---------- ---------- ------------- ------------- ---------
Senior notes US$160m 2030 (133.1) - - 6.6 (126.5)
---------- ---------- ------------- ------------- ---------
Other* 3.2 (0.1) (1.0) 0.1 2.2
Total borrowings (1,058.6) (20.8) (1.0) 53.6 (1,026.8)
Total financial net debt (737.9) (87.3) (1.0) 34.9 (791.3)
Lease liability (322.2) 39.8 (30.1) 14.3 (298.2)
Total net debt (1,060.1) (47.5) (31.1) 49.2 (1,089.5)
* Other borrowings include other uncommitted borrowings of
GBP0.8m (1 Jan 2023: GBP0.8m) and facility fees of GBP3.0m (1 Jan
2023: GBP4.0m).
Total undrawn committed borrowing facilities as at 30 June 2023
were GBP620.0m (31 December 2022: GBP707.3m).
30 June 30 June 31 December
2023 2022 2022
GBPm GBPm GBPm
-------- --------
Borrowings due in less than one year 299.4 32.0 261.5
-------- -------- ------------
Borrowings due in one to two years 46.7 312.8 103.0
------------
Borrowings due in two to five years 423.1 354.4 286.0
Borrowings due in over five years 257.6 401.9 408.1
-------------------------------------- -------- -------- ------------
Total borrowings 1,026.8 1,101.1 1,058.6
-------------------------------------- -------- -------- ------------
Key Facilities
The Group has a US$850m multi-currency revolving facility which
is the Group's principal facility. Drawings under the facility as
at the 30 June 2023 were GBP52.3m.
In February 2023, US$40m Senior notes fell due and were repaid.
Subsequent to the balance sheet date, in July 2023 the Group paid
down Acquisition facility 'A' of US$96.9m.
Further details of the Group's borrowing facilities were
disclosed in note 14 to the 2022 Annual Report.
Fair Values
The carrying value of interest-bearing loans and borrowings is
GBP1,026.8m. The fair value, based on the present value of the
future principal and interest cash flows discounted at the market
rate at reporting date, was GBP921.7m. The carrying values of trade
and other payables are considered approximate to their fair
values.
The carrying value of derivative assets/liabilities (namely
foreign currency forwards) is equal to their fair value. The fair
value of foreign currency forwards is estimated using present value
of future cash flows based on the forward exchange rates at the
balance sheet date. Derivative liabilities of GBP0.6m are included
within trade and other payables (H1 22: GBP0.2m derivative assets
included within trade and other receivables).
The fair value of cash and cash equivalents is based on the
sterling equivalent value of the Group's cash balances at the
market rate, which at reporting date was GBP239.5m. There is no
material difference between the carrying values of trade and other
receivables and their fair values, due to their short-term
duration. There is no concentration of credit risk with respect to
trade receivables as the Group has a large number of customers who
are internationally dispersed.
8. Acquisition of New Businesses
(a) Acquisitions
On 31 March 2023, the Group acquired Controle Analítico Análises
Técnicas Ltda (Controle Analítico), a leading provider of
environmental analysis, with a focus on water testing, based in
Brazil, for a purchase price of GBP19.1m. Purchase consideration
net of cash acquired was GBP18.5m. The purchase price includes cash
consideration of GBP15.4m and a further contingent consideration
payable of GBP3.7m. The cash outflow in the period associated with
this acquisition was GBP14.8m.
The acquisition of Controle Analítico represents an attractive
and complementary opportunity for the Group to expand its leading
Food and Agri Total Quality Assurance solutions in Brazil by
expanding our presence and service offering in the Environmental
testing market.
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.
Fair value to Group on
acquisition
GBPm
Property, plant and equipment 1.2
Goodwill 13.3
Other intangible assets 5.6
Trade and other receivables 1.1
Trade and other payables (0.5)
Provisions for liabilities and charges (0.3)
Deferred tax liabilities (1.9)
Net assets acquired 18.5
(b) Prior Period Acquisitions
GBP2.7m (H1 22: GBPnil) was paid during the period in respect of
prior period acquisitions.
(c) Impairment
Goodwill generated from past acquisitions has been tested
annually as required by accounting standards. No impairment
triggers were identified during the period and as such no
impairment charge was recorded (H1 22: GBPnil).
The total carrying amount of goodwill by CGU is as follows,
which is also used for the assessment of the Group's
impairment review. In order to reflect the change to Group
strategy described in Note 2, and consequential changes to the
monitoring of goodwill by management, the number of CGUs to which
goodwill is allocated has been increased from 12 to 17. This change
has had no impact on the carrying values of goodwill, which are set
out below:
30 June 2023 31 December 2022
(re-presented)
GBP'm GBP'm
Industry Services 10.9 11.5
Exploration and Production 4.1 4.3
Business Assurance 681.5 720.0
Food 40.9 40.4
AgriWorld 17.1 3.5
Caleb Brett 42.5 43.3
Sustainability 15.9 14.7
Government & Trade Services 0.8 0.8
Minerals 36.4 38.8
Softlines 6.1 6.2
Hardlines 4.5 4.5
Electrical & Connected World 89.3 93.4
Transportation Technologies 44.8 46.9
Building & Construction 226.4 238.2
Chemicals & Pharma 76.7 78.7
Assuris 5.4 5.5
CEA 64.9 67.7
Net Book value * 1,368.2 1,418.4
*All goodwill is recorded in local currency. Additions during
the period are converted at the exchange rate on the date of the
transaction and the goodwill at the end of the period is stated at
the closing exchange rates.
(d) Reconciliation of Goodwill
GBPm
Goodwill at 1 January 2023 1,418.4
Additions 13.3
Fair value adjustments 0.4
Foreign exchange (63.9)
Goodwill at 30 June 2023 1,368.2
GBPm
Goodwill at 1 January 2022 1,241.4
Additions -
Fair value adjustments 1.1
Foreign exchange 96.2
Goodwill at 30 June 2022 1,338.7
(e) Impact of Acquisitions on the Group Results
The revenue and profit for the period for the period from 1
January 2023 to the date of acquisition and the impact on the
Group's revenue and profit for the period from the date of
acquisition to 30 June 2023 were not significant.
9. Property, Plant, Equipment and Computer Software
(a) Property, Plant, Equipment Additions
During the six months ended 30 June 2023, the Group acquired
property, plant and equipment with a cost of GBP41.2m (H1 22:
GBP33.7m; year ended 31 December 2022: GBP96.1m).
During the six months ended 30 June 2023, the Group acquired
GBP1.2m of property, plant and equipment through business
combinations (H1 22: GBPnil; year ended 31 December 2022: GBP0.1m).
At 30 June 2023, the IFRS 16 right of use asset is GBP275.5m (H1
22: GBP303.9m; year ended 31 December 2022: GBP297.6m).
(b) Computer Software Additions
During the six months ended 30 June 2023, the Group acquired
computer software with a cost of GBP10.2m (H1 22: GBP7.4m; year
ended 31 December 2022: GBP20.4m). During the six months ended 30
June 2023, the Group did not acquire computer software through
business combinations (H1 22: GBPnil; year ended 31 December 2022:
GBPnil).
(c) Capital Commitments
Contracts for capital expenditure which are not provided in
these accounts amounted to GBP15.1m (H1 22: GBP16.3m).
10. Related Parties
There are no material changes in related parties or in related
party transactions from those described in the 2022 Annual
Report.
11. Subsequent Events
There are no post balance sheet events to report.
12. Approval
The Condensed Consolidated Interim Financial Statements were
approved by the Board on 27 July 2023.
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END
IR FLFIADEIDFIV
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July 28, 2023 02:00 ET (06:00 GMT)
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