TIDMITRK
RNS Number : 7899Z
Intertek Group PLC
26 May 2021
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TRADING STATEMENT
26 May 2021
Intertek Group plc ("Intertek" or "the Group"), a leading Total
Quality Assurance provider to industries worldwide, today releases
its May Trading Update for the period from 1 January to 30 April
2021 ("period"). All comparative comments in this statement reflect
comparisons with the corresponding period during 2020. The Group's
half year results to 30 June 2021 will be announced on 30 July
2021.
Good start to the Year with performance accelerating in March-April
-- Solid Group YTD LFL revenue growth of 2.7% at constant
currency with Products division delivering a robust 7.4%
-- Broad-based momentum acceleration in March-April with 9.3%
LFL at constant currency; Products at 13.8% and Trade at 5.3%
-- Strong controls on pricing, cost and cash remain in place
-- On track to deliver 2021 targets in revenue, margin accretion and free cash flow
-- Well positioned to benefit from attractive Total Quality
Assurance growth opportunities post-Covid-19
-- Scale up of global industry leading assurance offering with
the acquisition of SAI Global Assurance
Like for Like (1) ("LFL") year-on-year revenue growth at constant rates
=================================================================================
Jan-Feb 2021 March-April YTD 2021 % of Group
2021 Operating Profit(2)
=============== ============= ========= =======================
Group (4.1%) 9.3% 2.7% 100%
=============== ============= ========= =======================
Products 0.7% 13.8% 7.4% 82%
=============== ============= ========= =======================
Trade (9.2%) 5.3% (2.2%) 11%
=============== ============= ========= =======================
Resources (12.3%) (0.8%) (6.6%) 7%
=============== ============= ========= =======================
André Lacroix: Chief Executive Officer statement
"The Group has started 2021 well, delivering a solid LFL Revenue
growth of 2.7% at constant currency, driven by a robust LFL revenue
performance of 7.4% at constant currency in our Products division
and by a continuous improvement of our trading performance in our
Trade and Resources divisions. In the March/April period, Group LFL
revenue growth accelerated to 9.3% at constant currency with our
Products division recording LFL revenue growth of 13.8% and our
Trade division 5.3%.
We are on track to deliver our full year targets of good LFL
revenue growth at constant currency with year on year margin
progression and a strong free cash flow performance notwithstanding
the continuing lockdown restrictions in several markets impacting
the supply chain of our clients and mobility. We expect our
Products division to deliver robust LFL revenue growth, our Trade
division to deliver solid LFL revenue growth and our Resources
division to be broadly stable.
On 13 May we announced that we have entered into an agreement to
acquire SAI Global Assurance to scale up our global industry
leading assurance offering and seize the high growth opportunities
in the high margin and capital light assurance market.
All of us at Intertek are truly energised by the Quality
Assurance growth opportunities moving forward as the Covid-19
global pandemic has made the case for Total Quality Assurance (TQA)
clearer and stronger for our clients. The exciting structural
growth drivers in the $250 billion global Quality Assurance Market
pre-Covid-19 now include a wide array of new opportunities in many
areas, including more outsourcing opportunities. These
opportunities to help foster a better and safer world for all
post-Covid-19 are compelling, and range from:
-- Safer, more diversified supply chains with greater
traceability, improved intelligence and increased resilience
-- A lower carbon economy, stay-local lifestyles, more remote
working, distance learning and online shopping
-- Better personal safety, higher health, hygiene and wellbeing
standards and greater investment in healthcare
That is why we have invested in attractive growth segments and
rapidly brought to market a range of innovations to support the
emerging needs of our clients to help them address their
operational and supply chain challenges. For example, our launch of
Protek, the world's first industry-agnostic end-to-end Health,
Safety and Wellbeing assurance program; CarbonClear, the world's
first assurance program that certifies the upstream carbon
intensity per barrel of oil; and our announcement last month of
Intertek CarbonZero certification which enables companies worldwide
to confidently market qualifying carbon neutral products and
services. Our passionate commitment to innovation is what enables
us to deliver sustainable shareholder value through the cycle.
With our industry leading ATIC (Assurance, Testing, Inspection
and Certification) capability and expertise, innovation and
insight, Intertek is uniquely positioned to seize the compelling
growth opportunities and to benefit from the GDP+, like-for-like
revenue growth prospects in the Quality Assurance Industry in the
medium to long-term. In short, the pandemic has brought to life as
never before the importance of Intertek's purpose-led role in
society."
Revenue Performance
====================================================================
4 months - January to April
=======================================================
2021 2020 Change Change Like-for-Like
GBPm GBPm at at constant at constant
actual (1)
====== ====== ======== ============= ==============
Products 526.8 519.9 1.3% 6.0% 7.4%
====== ====== ======== ============= ==============
Trade 184.8 200.8 (8.0%) (2.5%) (2.2%)
====== ====== ======== ============= ==============
Resources 143.8 160.9 (10.6%) (6.9%) (6.6%)
====== ====== ======== ============= ==============
Group 855.4 881.6 (3.0%) 1.7% 2.7%
====== ====== ======== ============= ==============
Contacts
For further information, please contact:
Denis Moreau, Investor Relations
Telephone: +44 (0) 20 7396 3415 investor@intertek.com
Jonathon Brill, FTI Consulting
Telephone: +44 (0) 20 3727 1000 SCintertek@fticonsulting.com
Analysts' Call
A live webcast for analysts and investors will be held today at
7.45am UK time; +44 (0) 33 0551 0200 ( webcast ). Details can be
found at http://www.intertek.com/investors/ . A recording will be
available later in the day.
Intertek is a leading Total Quality Assurance provider to
industries worldwide.
Our network of more than 1,000 laboratories and offices in more
than 100 countries, delivers innovative and bespoke Assurance,
Testing, Inspection and Certification solutions for our customers'
operations and supply chains.
Intertek is a purpose-led company to Bring Quality, Safety and
Sustainability to Life. We provide 24/7 mission-critical quality
assurance solutions to our clients to ensure that they can operate
with well-functioning supply chains in each of their
operations.
Our Customer Promise is: Intertek Total Quality Assurance
expertise, delivered consistently, with precision, pace and
passion, enabling our customers to power ahead safely.
intertek.com
Note 1: Like-for-like revenue includes acquisitions following
their 12-month anniversary of ownership and excludes the historical
contribution of any business disposals and closures. FY20
like-for-like revenue has been adjusted to present certain rebates
net within revenue to permit comparability period to period where
FY21 like-for-like revenue is also presented net of all
rebates.
Note 2: Based on 2020 adjusted profit
Products Divisional Review
Our Products business benefited from a strong increase in
customer demand for our ATIC solutions compared to the
November-December period in 2020, delivering a robust LFL Revenue
growth of 7.4% at constant currency for the period and 13.8% growth
in March-April. All business lines delivered double-digit LFL
revenue growth in the Jan-April period except for Transportation
Technology and Building & Construction.
-- Our Softlines business delivered double-digit LFL revenue
growth benefiting from the improved trading situation for retailers
in North America and Europe as well as from the continuous growth
in e-commerce, increased demand for testing protective equipment
and the greater focus of our clients on their sustainability
agenda.
-- Our Hardlines business reported a double-digit LFL revenue
increase reflecting better trading conditions for retailers in
North America and Europe in addition to the continuing growth in
e-commerce and higher consumer demand for home furniture and
toys.
-- Electrical and Connected World delivered double-digit LFL
revenue growth benefitted from the increased demand for higher
regulatory standards in energy efficiency, the strong growth in
testing and certifications of medical devices, the increased
testing requirements for 5G and a greater corporate focus on Cyber
security driving growth.
-- Our Business Assurance business reported double-digit LFL
revenue growth as clients caught up on ISO audits and we saw
increased investment in supply chain resilience as well as
continuing strong demand for our operational and corporate
sustainability solutions.
-- Our Building and Construction LFL revenues declined
mid-single digits. While we continue to benefit from the growing
demand for more environmentally friendly and higher quality
buildings as well as the strong investments in large infrastructure
project, our performance was impacted by the lock down restrictions
in certain parts of North America and the snow and ice storm in
Texas in February.
-- LFL Revenue in our Transportation Technology business was
down double-digits. We saw a lower level of Testing Activities from
OEMs and our Business in North America was impacted by the weather
event in Texas in February.
-- LFL Double-digit revenue increase in our Food business came
from the strong growth in the global food industry, a higher level
of food safety testing activities as well as from an increase
demand for hygiene and safety audits in factories, hospitality and
retail locations.
-- Our Chemicals & Pharma business delivered double-digit
LFL revenue growth benefiting from greater focus on regulatory
assurance and chemical testing as well as from the R&D
investments by the Pharma industry.
2021 Outlook
In 2021, we expect our Products division, which represents c.82%
of our earnings, to deliver robust LFL revenue growth at constant
currency.
Mid to Long Term outlook
Our Products division will benefit from mid- to long-term
structural growth drivers, including brand and SKU expansion, a
faster innovation cycle, increased focus on safety, performance
& quality, demands for smart products, a higher demand for
healthy and sustainably sourced products, and the growth of the
middle class in Emerging Markets.
Trade Divisional Review
In the first four months of 2021, our Trade business saw much
improved trading momentum compared to the 2020 November-December
period. LFL revenues at constant currency were down 2.2% in the
January to April period and LFL Revenues in March and April were up
5.3% on the same basis.
-- Trading improved at Caleb Brett compared to the second half
of 2020 and we reported a negative mid-single digit LFL revenue
performance. We are seeing a gradual recovery of global mobility
although it is still below pre-Covid-19 levels while our North
American business was affected by the Texas weather event in
February.
-- Our Government and Trade Services business delivered a good
LFL revenue performance benefiting from the growth in trade flows
in both Africa and the Middle East.
-- Our AgriWorld business posted a robust LFL revenue growth
benefiting from an increased demand for agri-products inspection
activities.
2021 Outlook
In 2021 we expect our Trade division, which represents c.11% of
our earnings, to deliver a solid LFL revenue growth at constant
currency.
Mid to Long Term Outlook
Our Trade division will continue to benefit from population
growth and social mobility, GDP growth, the development of regional
trade, improvements in transport infrastructure, the increased need
for end-to-end traceability and the increased focus on Operational
Sustainability.
Resources Divisional Review
Our Resources division saw improved trading momentum compared to
the November-December period in 2020 and delivered a -6.6% LFL
revenue performance at constant currency. The solid LFL revenue
performance in Minerals was offset by a mid-single digit LFL
revenue decline in Capex Inspection and high single digit LFL
revenue decline in Opex Inspection.
-- Our Capex Inspection business reported a negative mid-single
digit revenue performance. We saw an improvement in momentum in the
Jan-April period compared to the second half of 2020 when our
clients reduced investment in Exploration and Production.
-- Opex Inspection reported a high-single digit negative revenue
performance driven by lockdown restrictions in some of our markets
and the cost saving initiatives from our clients.
-- We delivered a solid LFL revenue performance in our Minerals
business as we continue to benefit from increased demand for our
testing and inspection services.
2021 Outlook
In 2021 we expect our Resources division, which represents c.7%
of our earnings, to deliver a broadly stable LFL Revenue
performance at constant currency.
Mid to Long Term growth Outlook
Our Resources division, will grow in the medium to long-term as
we benefit from population growth and social mobility, investment
in Exploration & Production, Storage and Transportation, Total
Energy and diversified portfolios, accelerated transition to
renewable energies, increased focus on Operational Sustainability,
and digital supply chain management.
Innovation
Intertek has been the pioneer of our industry across the world
for 130 years. We have a proven track record of innovating and
anticipating the growing needs of our clients, constantly evolving
and improving our customer proposition to meet their changing needs
and the changing world around us. Through the insights generated
from our TQA Experts and from our 6,000+ monthly NPS interviews
with customers, Intertek services are mission-critical for our
clients in helping them to address their needs for increased
support across quality, safety and sustainability.
Today, our truly systemic, end-to-end Assurance, Testing,
Inspection and Certification services enable our clients to operate
safely and with complete peace of mind. This is what we call
Intertek Total Quality Assurance and it is this approach which has
ideally placed us to support our clients in recent months.
Increasing corporate complexity is presenting opportunities to
us to accelerate our growth in high-growth, high-margin sectors by
seizing the industry evolution towards risk-based Quality Assurance
and delivering pioneering solutions to our customers for today and
tomorrow, through our three-tiered approach to innovation:
-- Firstly, from our 'Core' focus, we seek to build on the
strengths of our existing products and services, continually
improving them for our existing markets and customers. An example
of a core innovation is the launch of POSI-CHECK, part of our
Protek(TM) offering, which focuses on health, hygiene, safety and
risk management. Protek POSI-CHECK is a new audit solution to help
in the Prevention of the Spread of Infection ('POSI') in
restaurants, supermarkets, schools and other facilities.
We recently added new and enhanced features to our
market-leading supply chain compliance solution Inlight 2.0,
enabling organisations to manage increasingly-complex supply chain
risks. The platform enables organisations to bring visibility to
the workings of their vendor partners and turn potential
disruptions and compliance irregularities to their competitive
advantage with captured market share and operational
efficiencies.
-- Second, we aim to develop new products and services for
rapid-growth, high-margin markets that are 'Adjacen t' to those we
already serve. As more industries undergo profound shifts at an
even faster pace, the need for creative solutions underpinned by
research, design and quality assurance expertise, has never been
more relevant. Our Maison Centre of Excellence in Italy, is our new
innovative experiential space 'where science meets luxury' and
brings together - virtually and face-to-face - forward-thinking
fashion brands, industry leaders, academics and textile industry
experts to collaborate and to take bold new ideas and turn them
into reality.
In January 2021 , we launched an actionable data mining SaaS
platform WindAware, a data intelligence solution that helps wind
asset owners and operators make informed and real-time decisions to
optimize performance and maximize their asset life cycle.
-- And thirdly, we aim to develop 'Breakthrough' products and
services that enable us to create new attractive markets and target
emerging customer needs. These include CarbonClear(TM), the world's
first independent carbon-intensity certification programme, and
SourceClear(TM), a new technology platform that provides visibility
and traceability across the full range of supply chain
relationships.
In April 2021, we announced the launch of Intertek CarbonZero,
our new independent carbon neutral certification for products and
services and have issued the first Intertek CarbonZero Verified
certification to Lundin Energy, representing the world's first
certified carbon neutral oil trade.
M&A
On 13 May 2021, we announced that we have agreed to acquire SAI
Global Assurance to scale up our global industry leading assurance
offering and seize the high growth opportunities in the high margin
and capital light assurance market.
SAI Global Assurance will further strengthen our Assurance
offering by providing additional scale, enhanced geographic
coverage and new capabilities. Specifically, we will benefit post
acquisition from a stronger market position in Australia, the USA,
Canada, the UK and China, and an expanded service capability in the
following sectors: Food, AgriWorld, Quick Service Restaurants,
Sustainability and Global Market Access.
We continue to look at M&A opportunities in attractive
high-margin and high-growth areas.
With our strong balance sheet, we are well positioned to seize
the attractive external growth opportunities in a highly fragmented
industry.
Corporate
Given our industry-leading position across our business lines
and excellent customer relationships, we will continue to benefit
in 2021 from the post COVID-19 recovery and the attractive
structural TQA growth opportunities, as clients continue to
increase their investments to improve their quality, safety and
sustainability performance.
We remain confident that the Group will deliver good
like-for-like revenue growth at constant currencies with margin
progression year on year and a strong free cash flow performance,
notwithstanding the continuing lockdown restrictions in several
markets impacting the supply chains of our clients and
mobility.
Our financial guidance for 2021, assuming constant FX rates for
the rest of 2021, we expect:
-- Capital expenditure in the range of GBP110-120m
-- Net Finance Costs of around GBP29-33m
-- Effective tax rate in the 26.5-27.0% range
-- Minority interest of between GBP17-19m
-- Financial net debt at December 2021 of between GBP350-GBP
400m (prior to any material movements in FX or M&A) and of
GBP835- 885m, assuming closing the SAI transaction on September 1,
2021
Based on YTD performance and the average FX rate in the last
month applied for the remainder of the year, currencies would have
a c.500 BPS negative impact at both the revenue and earnings
level.
-ENDS-
The May 2021 Trading Statement Audiocast CEO Script will be
available after the call at www.intertek.com/investors/
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