TIDMITRK
RNS Number : 7727Q
Intertek Group PLC
02 March 2021
For a printer friendly version of this announcement, please
click on the link below:
http://www.rns-pdf.londonstockexchange.com/rns/7727Q_1-2021-3-1.pdf
2020 FULL YEAR RESULTS ANNOUNCEMENT
2 March 2021
Strong recovery in H2 with record margin and EXCELLENT cash conversion
-- Resilient FY financial performance, ahead of earnings and cash expectations
-- H2 2020 adjusted operating profit of GBP259.5m with record
adjusted operating margin of 18.4%, up 60bps YoY(1)
-- Excellent cash conversion of c.150% drives a record adjusted
free cash flow of GBP435.6m, up 10.2% YoY
-- Strong balance sheet with financial net debt of GBP419.9m,
down GBP209.5m YoY; financial net debt to EBITDA of 0.7x
-- Highly cash generative and carbon-light earnings model
delivers strong adjusted ROIC of 21.6%, down 190bps YoY(1)
-- Sustainable returns to shareholders with FY 2020 dividend of 105.8p, in-line with 2019
-- Carbon neutral in 2020 and continuous focus on
sustainability; targeting Net Zero emissions by 2050
-- Strongly positioned for growth: COVID-19 recovery, increased
corporate focus on risk & M&A growth opportunities
2020 2019 Change at Change at H1 2020 H2 2020 Change at
actual rates constant constant
rates (1) rates (1)
============ ============ ============== ============= ============ ============ ==============
Revenue GBP2,741.7m GBP2,987.0m (8.2%) (6.7%) GBP1,330.6m GBP1,411.1m 7.8%
Like-for-like
revenue (2) GBP2,735.9m GBP2,983.3m (8.3%) (6.8%) GBP1,326.7m GBP1,409.2m 7.9%
Adjusted
operating
profit (3) GBP427.7m GBP524.2m (18.4%) (17.0%) GBP168.2m GBP259.5m 56.4%
Adjusted
operating
margin (3) 15.6% 17.5% (190bps) (190bps) 12.6% 18.4% 570bps
Adjusted
diluted EPS
(3) 170.9p 212.5p (19.6%) (18.1%) 63.1p 107.8p 73.0%
Statutory
operating
profit GBP378.2m GBP485.8m (22.1%) (20.7%) GBP146.9m GBP231.3m 59.9%
Statutory
diluted EPS 152.4p 192.6p (20.9%) (19.4%) 58.6p 93.8p 62.8%
--------------- ------------ ------------ -------------- ------------- ------------ ------------ --------------
A FY results video is available on our website at
http://www.intertek.com/investors/ 2020-full-year
-results-video
André Lacroix: Chief Executive Officer statement
"I am very proud of the energy, agility and innovation of our
colleagues around the world that has enabled us to navigate a
difficult 2020 with a laser focus on health and safety, customer
service, cost control, cash management and employee engagement. My
sincere thanks to all my colleagues.
In 2020, we delivered resilient revenue of GBP2,742m, down 6.7%
at constant rates, with our earnings and cash performance well
ahead of expectations. This has enabled us to deliver sustained
returns to our shareholders with a full year dividend of 105.8p,
in-line with 2019, reflecting our strong financial position and
confidence in the future.
The second half of 2020 saw a strong performance in each of our
divisions. At the Group level, H2 revenues were ahead of H1 by 8 %
and operating profit grew 5 6 % at constant rates , driving a
record operating margin of 18.4% , up YoY by 60bps . We made
further excellent progress in cash management.
Intertek is a force for good bringing quality, safety and
sustainability to life and delivering sustainable value for all
stakeholders. We support our client s ' sustainability agenda with
our operational sustainability assurance solutions, our global
audits to verify their ESG disclosures and our industry leading
corporate certification program. Sustainability is central to
everything we do internally at Intertek, and I am pleased to report
that the Group was carbon neutral in 2020 and that we are committed
to making further progress on our sustainability agenda, including
targeting Net Zero carbon emissions by 2050. Indeed, Intertek has
joined the UN Race to Zero campaign - a global effort from the
United Nations Framework Convention on Climate Change that calls
for a resilient, zero-carbon recovery from the COVID-19 pandemic
and is aligned with our own ambitious agenda to Build Back Ever
Better .
In 2021, we will continue to benefit from the C OVID -19
recovery and the attractive growth opportunities in our industry.
We are confident that the Group will continue to drive sustained
value for our shareholders with year-on-year progress in revenue,
margin and cash.
All of us at Intertek are truly energised by the Quality
Assurance growth opportunities moving forward as the C OVID --19
global pandemic has made the case for Total Quality Assurance
clearer and stronger for our clients. Post Covid-19, we expect the
Total Quality Assurance market to grow faster than pre - Covid.
Indeed, the exciting structural growth drivers in the $250 billion
global Quality Assurance Market pre--C OVID --19, now include a
wide array of new opportunities in many areas, including a greater
focus on outsourcing. These opportunities to help foster a better
and safer world for all post--C OVID --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
With our industry leading ATIC capability and expertise,
innovation and insight, Intertek is uniquely positioned to seize
the compelling structural 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."
Key Adjusted Financials 2020 2019 Change Change at
at actual constant
rates rates(1)
Revenue GBP2,741.7m GBP2,987.0m (8.2%) (6.7%)
============ ============ =========== ==========
Like-for-like revenue(2) GBP2,735.9m GBP2,983.3m (8.3%) (6.8%)
============ ============ =========== ==========
Operating profit(3) GBP427.7m GBP524.2m (18.4%) (17.0%)
============ ============ =========== ==========
Operating margin(3) 15.6% 17.5% (190bps) (190bps)
============ ============ =========== ==========
Profit before tax(3) GBP392.8m GBP484.8m (19.0%) (17.4%)
============ ============ =========== ==========
Diluted earnings per
share(3) 170.9p 212.5p (19.6%) (18.1%)
============ ============ =========== ==========
Dividend per share 105.8p 105.8p -
============ ============ ===========
Cash flow from operations
less net capex(3) GBP632.9m GBP616.3m 2.7%
============ ============ ===========
Free Cash Flow(3) GBP435.6m GBP395.3m 10.2%
============ ============ ===========
Financial net debt(4) GBP419.9m GBP629.4m (33.3%)
============ ============ ===========
Financial net debt
/ L12M EBITDA(3, 4) 0.7 0.9
============ ============ ----------
Key Statutory Financials 2020 2019 Change (1) FY constant rates
at actual are calculated by translating
rates 2019 results at 2020
exchange rates. H1
v H2 constant rates
are calculated by translating
H1 2020 results at
FY 2020 exchange rates.
(2) Like-for-like
revenue includes acquisitions
following their 12-month
anniversary of ownership
and removes 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.
(4) Financial net
debt excludes the IFRS
16 lease liability
of GBP224.2m. Total
net debt is GBP644.1m.
Reflects prior 12 months
EBITDA for relevant
period. See note 7.
Revenue GBP2,741.7m GBP2,987.0m (8.2%)
============ ============ ===========
Operating profit GBP378.2m GBP485.8m (22.1%)
============ ============ ===========
Operating margin 13.8% 16.3% (250bps)
============ ============ ===========
Profit before tax GBP343.9m GBP445.1m (22.7%)
============ ============ ===========
Profit after tax GBP262.6m GBP333.6m (21.3%)
============ ============ ===========
Diluted earnings per
share 152.4p 192.6p (20.9%)
============ ============ ===========
Net cash flows generated
from operating activities GBP558.8m GBP562.8m (0.7%)
============ ============ ===========
The Directors will propose a final dividend of 71.6p per share
(2019: 71.6p) at the Annual General Meeting on 26 May 2021, to be
paid on 18 June 2021 to shareholders on the register at close of
business on 28 May 2021 .
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 @fti consulting .com
Analysts' Call
A live audiocast for analysts and investors will be held today
at 7.45am. Details can be found at
http://www.intertek.com/investors/ together with presentation
slides and a pdf copy of this report. A recording
of the audiocast will be available later in the day.
Annual Report and Sustainability Report
The Annual Report and Sustainability Report for the year ended
31 December 2020 will be available on the Company's website at
www.intertek.com on 19 March 2021.
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 Total Quality Assurance expertise, delivered
consistently, with precision, pace and passion, enabling our
customers to power ahead safely.
intertek.com
Full YEAR REPORT 2020
GROUP CEO REVIEW
Ever since I joined Intertek in 2015, the most important part of
my review has come where I can take a moment to thank my colleagues
around the world for their outstanding contribution during the
year. Never has this been more the case than in 2020, a year like
no other when in the face of unparalleled challenges, Intertek's
amazing people worked tirelessly to ensure our operations across
the world could keep supporting our clients, helping global supply
chains to operate safely.
It was an extraordinary performance, and I thank each and every
one of them from the bottom of my heart. The indomitable spirit
that drove them is the same that has made us a leader in our
industry for so long. No matter the challenges Intertek has faced -
during 2020, or during the 130 years of our evolution - we have
always exercised our spirit of innovation, the passion of our
people and our unmatched customer commitment to realise our purpose
of making the world an ever better, safer and more sustainable
place for all.
Thanks to these qualities, we entered 2020 with a very strong
record of sustainable growth across our entire history, and
particularly over the previous five years.
Our five-priority response
Given what was about to happen, the strength of our track record
and culture was particularly valuable and important. From early in
the year, as we know, businesses across the world were rapidly
affected by the pandemic. It caused significant disruption to the
supply chains of our clients, restricting global mobility and
impacting the global economy.
The agility of our people and our business as a whole was vital.
We quickly refocused the organisation and implemented a decisive,
five-priority response to the situation. Our financial results are
testament to the success of these actions, and to the strength of
our high-quality earnings model: strong pricing power driving
strong margins and a high cash-generation while enabling Intertek
to operate in an exceptionally capital- and carbon-light manner
.
Our first priority is always health and safety. We swiftly
created a comprehensive, global C OVID -19 Employee Health &
Wellbeing policy, which we have updated regularly throughout as we
have learned more about best practice in managing the virus. The
policy is publicly available on our website.
Our second priority is superior customer service. We are a
customer-centric organisation and understand that what we do every
day to ensure our customers' supply chains operate safely, securely
and efficiently is mission-critical. Our clients were facing
unprecedented challenges and since day one, we have increased the
frequency with which we communicate and kept our operations open
24/7, to ensure we can react and respond to customer needs
quickly.
As a result, we have rapidly been able to bring a range of
innovations to market, including exciting new services like Protek,
SourceClear(TM) and CarbonClear. What they all have in common is
their ability to confront and resolve real issues in a way that
makes it easier and safer for our customers to operate.
Many of our employees have also gone beyond the normal call of
duty and responded fast to help in any way they could, like
creating hand sanitiser s in countries including China, India, the
Philippines, Turkey, the UK and the Netherlands to keep customers
and colleagues safe. Colleagues in Intertek Indonesia provided some
of the worst affected countries with 200,000 face masks, and our UK
Food business line team has been working seven days a week to
collect, register and process samples, safely and in line with
tight customer deadlines. In Azerbaijan, our people have helped to
buy relief packages for suffering families, and our facilities team
in Bangladesh set up a virtual hospital. These are just a few
examples of our people's actions across the world.
Our third priority is margin discipline. We took new steps to
protect our margin during the crisis, building further on the
disciplined approach to pricing and cost that we have focused on
over the years. Actions included a pause on all recruitment, a
six-month delay to the 2020 annual salary increase, and
participation in a range of government support schemes. Such
initiatives mean we will have the ability to support our clients
fully once their operations are back to normal.
Our fourth priority is cash discipline and we continue to be
highly focused around cash collection. Our operational focus on
cash is delivering strong free cash flow which is further
strengthening our robust balance sheet. We continue to take a
disciplined approach to capital allocation, investing in
high-growth and high-margin sectors, as well as implementing our
progressive dividend policy.
Our fifth priority is purpose-led employee engagement. With many
of our people working remotely during lockdown restrictions, it has
never been more important to stay connected every day. Our
world-class digital internal communications platform has enabled us
to reach out frequently to everybody in the organisation, and their
response has been universally exceptional. A central part of our
internal communication narratives was purpose - led , reminding all
of us about the meaning of what we do at Intertek . Indeed,
Intertek provid es m ission -c ritical solutions to make sure that
the world ' s supply chains can operate fully and safely .
Our results in 2020
Our results for 2020 demonstrate that in the C OVID -19 era, the
need for risk-based quality assurance has never been greater for
all our stakeholders. The pandemic brought to life, as never
before, the great importance of Intertek's purpose-led role in
society. Amid the unprecedented pressures affecting so many
companies, the strength of our strategy, people and end-to-end
systemic approach has been emphasised by the continuing resilience
of our revenue performance and our strong cash flow .
Key highlights of our 2020 performance:
-- Resilient FY financial performance, ahead of earnings and cash expectations
-- H2 2020 adjusted operating profit of GBP259.5m with record
adjusted operating margin of 18.4%, up 60bps YoY at constant
rates
-- Excellent cash conversion of c.150% drives a record adjusted
free cash flow of GBP435.6m, up 10% YoY
-- Strong balance sheet with financial net debt of GBP419.9m,
down GBP209.5m YoY; financial net debt to EBITDA of 0.7x
-- Highly cash generative and carbon-light earnings model
delivers strong adjusted ROIC of 21.6%, down 190bps YoY at constant
rates
-- Sustainable returns to shareholders with FY 2020 dividend of 105.8p, in-line with 2019
-- Carbon neutral in 2020 and continuous focus on
sustainability; targeting Net Zero emissions by 2050
-- Strongly positioned for growth: COVID-19 recovery, increased
corporate focus on risk and M&A growth opportunities
Our three sectors
The attractive structural growth drivers in each of our three
market sectors - Products, Trade and Resources - enabled us to
deliver a resilient financial performance during an unprecedented
global pandemic .
While we inevitably experienced some impact from disrupted
client supply chains and factory closures in our Products sector,
our leading positions across multiple industries have helped us to
deliver a resilient like-for-like revenue decline of (5.9%) at
constant rates. Some delays to audits and product launches were
offset by a number of positive developments, including increased
demand for testing personal protective equipment and medical
devices, growth in e-commerce and associated services and increased
demand for ATIC (Assurance, Testing, Inspection, Certification)
services in areas like supply chain assurance, energy efficiency
and sustainability services.
In our Trade sector, the defensive strengths of our AgriWorld
business enabled us to report a like-for-like revenue decline of
(9.9%) at constant rates. This was despite the reduced level of
demand for oil and gas which
impacted our Caleb Brett business , as well as the challenging trading conditions for GTS.
Our Resources business delivered a resilient performance ,
despite the impact of lockdown in many territories on our Opex
maintenance services and the reduction of our clients' capex
investment in the second half, while our Minerals business
delivered robust revenue growth help ing the sector achieve a
like-for-like revenue decline of (6.1%) at constant rates.
These assets are built around our five strategic priorities of
our 5x5 Differentiated Strategy for Growth on which we have
continued to focus in 2020.
The growth opportunit ies ahead
The first pandemic in our global, highly connected world has
radically increased the complexity facing organisations everywhere.
It is not as though life was simple for corporations before the
pandemic given the intertwined network of mega-trends they faced -
from multiple geopolitical risks on a global basis, through to the
rapid impact of social media on world opinion, the accelerating
application of AI and automation , the energy transition , wealth
inequality, increasing safety issues and more.
Now, this complexity is set to continue and accelerate further,
as the economic, infrastructur e and social impacts of the pandemic
remain long after the immediate threat of the virus has receded.
But I firmly believe that the post-pandemic world will ultimately
emerge as a better and a safer place for all. And I believe that
Intertek has a fundamental role to play in making this happen.
Intertek is a world leader in the $250 billion Quality Assurance
market, with a proven, high-quality business model and a global
network of customer-focused operations and highly engaged subject
matter experts.
The uninterrupted support our teams provide in local markets has
never been needed more, servicing our clients with precision, pace
and passion as the world recovers. The mission-critical services we
provide will help to drive this recovery, playing an ever-more
important role in society as a source of good for everyone and an
important home of innovation for industries across the world. We
are a force for good in society, helping our clients manage risk
and deliver their sustainability agenda, while remaining internally
focused on delivering sustainability excellence based on our 10
Total Sustainability Assurance (TSA) standards . Today, just 20 per
cent of the Quality Assurance market is outsourced, providing us
with extremely attractive growth prospects as we innovate with ever
greater pace to meet fast-increasing demand for the truly
end-to-end Total Quality Assurance (TQA) solutions that only
Intertek is uniquely placed to provide. We continue to look at
M&A opportunities in attractive high-margin and high-growth
areas and w e believe that the post-pandemic world will also offer
us significant new growth opportunities through industry
consolidation.
All the sectors we address are presenting us with a wide array
of structural growth drivers, and these are only set to diversify
and increase further in the post-pandemic world. Our Products
sector, for example, is ideally positioned to leverage faster
innovation by companies across the world, growing numbers of brands
and SKUs, and increasing demand for Smart products. In our Trade
sector, social mobility and requirements for traceability and
operational sustainability are growing fast, fuelling the need for
our services. In Resources, increasing needs for digital supply
chain management, renewable energies and exploration &
production are similarly driving demand. And the need for
end-to-end corporate services, from cyber-security to risk-based
quality assurance and people assurance, ensures that Intertek will
stay front-of-mind for major corporations across the world.
In short, having withstood more than 130 years' worth of
challenges - including world wars, economic recessions and even
depressions - Intertek is now proving its ability to respond
positively and effectively to the biggest and most challenging
crisis of our time. We are well placed to meet the growing demand
for the mission-critical services and solutions that are essential
in helping to bring about a better and safer world for all as we
recover from this crisis.
Solutions that are enabling our customers to operate safely,
efficiently and with total peace of mind as we help them to Build
Back Ever Better. To do so, we are focusing our innovative efforts
on three core priority areas: supporting supply chains; ensuring
better personal safety for everybody; and helping the world to
lower its carbon intensity.
A p urpose-led o rganisation
Through our unique range of products and services, our
high-margin, cash-generative earnings model consistently delivers
value for all our stakeholders.
This success is based on the energy and enthusiasm with which
our people react to our meaningful Purpose of Bringing Quality,
Safety and Sustainability to Life .
Our Vision is to be the world's most trusted partner for Quality
Assurance, underpinned by our shared Values:
-- We are a global family that values diversity
-- We always do the right thing. With precision, pace and passion
-- We trust each other and have fun winning together
-- We own and shape our future
-- We create sustainable growth. For all
The key assets that set us apart
Our Purpose, Vision and Values are vital assets, which guide and
support all our thinking and activities. They are centred on our
people, our unrivalled global population of TQA Experts. They are
our core strength, combining passion, innovation and customer
commitment in a way that sets us apart and sustains our
entrepreneurial spirit and decentralised operating culture. They
embody every day all the other key assets that distinguish us.
These include:
-- Our TQA Customer Promise: Intertek's Total Quality Assurance
expertise, delivered consistently with precision, pace and passion,
enabling our customers to power ahead safely
-- Our high-margin, cash-generative Earnings Model, based on our
capital-light business model and entrepreneurial culture, which
enable us to respond rapidly to new growth opportunities
-- Our ATIC Customer Value Proposition: providing our customers
with the quality and safety controls that are more important today
than at any time in the past as their operations and value chains
grow more complex and exposed to risk:
- A: the end-to-end assessment and Assurance of quality and safety processes
o enabling our customers to identify and mitigate intrinsic risk
in their operations, their supply and distribution chains and their
quality-management systems
- TIC: providing quality and safety controls
o Testing : evaluating how customers' products and services
exceed quality, safety, sustainability and performance
standards
o Inspection : validating the specification, value and safety of
our customers' raw materials, products and assets
o Certification : formally confirming our customers' products
and services meet all trusted external and internal standards.
These factors combine to drive our commitment to enabling the
world to become a better and a safer place both during and
following the pandemic. To do so, we have focused on leveraging the
spirit of innovation that runs through our organisation,
continually strengthening our existing products and services while
also introducing exciting new solutions to meet emerging needs. We
take a three-pronged approach to innovation:
-- from the core: evolving existing solutions and creating new
ones to broaden our service offerings to clients in the sectors
where we are already established;
-- in adjacent sectors: leveraging our expertise in one sector
by adapting existing solutions to meet identified needs in an
adjacent market; and
-- targeting new markets: creating entirely new solutions for
markets in which we are currently not involved.
Our Ever Better approach to innovation, driven by our
customer-centric TQA Experts, is supporting our clients to thrive
by delivering pioneering solutions for today and tomorrow.
Helping o ur c lients to Build Back Ever Better
2020 will be remembered as the year when a global external event
forced everyone to rethink how to operate and make the world a
safer place.
We are convinced that the world will be a better and safer place
post COVID -19.
We expect the theme of "Build Back Ever Better" to guide the
actions of governments, companies, investors, regulators and
consumers. The learnings of the global pandemic we faced in 2020
will be in three areas:
-- Managements, Boards and shareholders will want to see their
companies operate with a safer supply chain
-- Consumers, governments, companies and regulators will want better personal safety
-- The way we will operate and invest post COVID-19 will help build a lower carbon society
The demand for our services and the experience of our customers
across the world clearly demonstrate that the global need for Total
Quality Assurance is stronger than ever. And more than ever, our
clients are calling for our support, energy, expertise and
relentless focus on overcoming the challenges they face.
We know there is much more we can do to build back an Ever
Better world by helping to make the supply chains of our clients
safer, by ensuring better personal safety for everyone in society
and by helping the world to lower its carbon intensity and get to N
et Z ero fast.
Safer supply chains
Supply chain assurance is in Intertek's DNA. It became even more
important during the pandemic, with strengthened growth drivers
ranging from faster access to supplies, improved intelligence,
increased demand for supply resilience, end-to-end traceability and
more. During the year we drew on our expertise and intimate
customer understanding to create a more risk-free trading
environment for our clients everywhere.
New services included SourceClear(TM) , a new technology
platform that provides visibility and traceability across the full
range of supply-chain relationships, enabling companies to track
sustainable material claims throughout all stages of trade and
production in the supply chain. In this way, it empowers our
customers to demonstrate their sustainability commitments by
managing and certifying verifiable product and materials data and
transactions across all supply-chain participants. By allowing
independent validation of factors such as recycled content, organic
materials and good practice during manufacturing, it enables
accurate and verified labelling, helping consumers to make
well-informed buying decisions.
We brought FastTek to market, a comprehensive solution for the
key global accounts of our Trade customers , which enables our
customers to move their goods more quickly through global supply
chains.
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 Florence, Italy is our
new innovative experiential space where science meets luxury, and
will bring together - virtually or face-to-face - our industry
experts, forward-thinking fashion brands, industry leaders,
academics and a host of textile industry participants to
collaborate and to take bold new ideas and turn them into reality,
reshaping the future in a more sustainable way.
Developments to existing supply-chain Assurance services
included a significant upgrade to our market-leading supply-chain
compliance solution with the launch of Inlight2.0 . Inlight(TM)
uses integrated learning to help organisations better understand
their supply chains and protect their brands. Inlight2.0 builds on
this by providing enhanced analytics that give clients live
dashboards of supplier performance, trends, risks and
opportunities. This enables them to analyse risks at every point,
from the sourcing of raw materials, to regulatory compliance and
end-use by consumers.
Responding to demand during the pandemic, we also further
developed our Remote Video Inspection (RVI) service, part of our
market-leading Inview virtual assurance solution, which uses remote
live video-streaming and smartphone technology to carry out
mission-critical inspection services across the oil and gas supply
chain. With some companies restricting access to their sites, our
RVI solutions enable inspectors to remain home-based while leading
inspections of client premises. This is enabling global customers
to maintain business continuity, supply chain requirements and
manufacturing schedules.
Better personal safety
Our view, supported by research and strengthened by the
pandemic, is that health, safety and wellbeing constitute the
number one concern for the entire world. Companies everywhere are
having to abide by increasingly stringent health, safety, wellbeing
and associated risk-management standards, creating important
structural growth opportunities for Intertek moving forward. During
2020, we responded positively to this trend, providing governments
and clients with pandemic-related assurance solutions and
developing many truly ground-breaking innovations.
Intertek Protek , for example, which we launched at the
beginning of May 2020, is the world's first industry-agnostic,
end-to-end health, safety and wellbeing assurance programme for
people, workplaces and public spaces. The Protek portfolio
comprises four sets of specialist services:
-- Protek People Assurance: an on-demand training and
certification programme to ensure employees are up-to-date with
essential health and safety topics;
-- Protek Business Assurance: end-to-end auditing of all
procedures and systems to ensure clients can demonstrate
safety;
-- Protek Facilities Assurance: audit and inspection services
for facilities including hotels, retail outlets, travel hubs,
schools and workplaces, where people will look for visible signs of
safety verification;
-- Protek Materials & Surfaces: complete workplace and
public-space testing solutions to ensure employee and customer
safety.
Our Protek experts were also closely involved in the publication
of Travel Truth and Lies Unmasked , a C OVID -safe travel tips
eBook written in association with New York Times best-selling
author, Martin Lindstrom. The book contains practical advice and
guidance covering many areas, to help the world as it starts to
travel again. The book is free-to-download from our website
https://www.intertek.com/protek/travel-unmasked-ebook/
The reactions of our clients around the world to Protek has been
very positive. It is very much in line with what the world needs
right now, and we already have many thousands of customers for our
solutions in markets across the world. Our new Protek POSI-Check
audit solution, for example, helps in the Prevention of the Spread
of Infection (POSI) and has been designed to formulate and monitor
an effective response to infections in hotels and restaurants. Its
primary aim is to help hospitality clients ensure the safety of
their staff and guests as global travel accelerates once again when
the pandemic has been brought under control. The CEO of Club Med,
specialists in luxury all-inclusive holidays, posted a personal
"welcome back" video message to its guests, reassuring them of the
health and safety measures which have been implemented at their
resorts by Intertek's Protek solution.
We continued to expand the range of solutions from our Intertek
Alchemy business, the leading provider of training and engagement
solutions for frontline workers. This included the launch of
Alchemy Playbook(TM) , a mobile application that reduces unplanned
downtime for manufacturers by identifying and reallocating workers
to fill any gaps in the production caused by a key employee being
absent. This has proved particularly important during the
pandemic.
We have also been quick to develop a wide range of other
services in response to the pandemic, leveraging our leadership in
areas including the testing of ventilators, protective clothing and
other forms of PPE. Intertek is becoming established as a global
PPE market leader, with full testing and inspection capabilities in
all key regions.
Among other related initiatives, we also increased our testing
capacity and speed of services for hand sanitisers, germicides and
surface disinfectants. We built a leading position in germicidal
products, strengthened our support to pharma companies for vaccine
development, and further developed our cyber-security audit
solution for people working from home.
Low carbon society
With a tipping point having been reached, sustainability is the
movement of our time, and the expectations of all stakeholders have
changed as people across the world are deliberately choosing to
lead greener 'stay local' lifestyles. This move has accelerated
during the pandemic, with remote working, distance learning and
online shopping all gaining traction as never before. We built on
our position as the industry-leading provider of Total
Sustainability Assurance (TSA) solutions during the year with new
launches that help our clients and their customers mitigate their
risks and carbon footprint. As a world leader in sustainability
services, and a purpose-led organisation, we believe it is
important for us to ensure that our own standards are as high as
those we provide for our clients. As such our sustainability
reporting follows the TSA ten corporate certification standards.
You can read the detail of our activities in this area during 2020
in our Sustainability Report.
We started to scale up our Cyber Assured Program , the unique
cyber-security testing and certification programme providing
continuous vulnerability monitoring for connected products,
increasingly important given the rise in home-working, online
shopping, etc. Intertek Cyber Assured enables manufacturers to
ensure their products meet security best practices and emerging
regulatory requirements, clearly demonstrating a high level of
security to regulators and consumers.
In a major breakthrough innovation, we launched CarbonClear ,
the world's first independent carbon-intensity certification
programme. It gives oil & gas producers the ability both to
evaluate emissions across every stage of exploration and production
and to validate the carbon impact of producing one barrel of oil
equivalent. This brings unique clarity to their cradle-to-gate
operations, enabling producers to reduce carbon-intensity and
participate in the transition to a low-carbon economy. Ultimately,
it will provide consumer transparency, drive buying decisions and
enable producers to exercise a price advantage. Critically of
course, decarbonising the production of oil & gas is an
imperative for the sector and such transparency is a fundamental
factor in investment decisions.
Ever Better Intertek
Our focus on our role in the global recovery from the pandemic
is incredibly important to everybody at Intertek. It draws on our
commitment to innovation, growth, cost control, performance
management and sustainability. And it acknowledges that the world
needs Intertek more than ever - our insight, our innovation, our
expertise and our passion.
Our five corporate goals have consistently driven our activities
over the last five years, and have become more important than ever
for us during - and after - the COVID -19 pandemic:
-- Fully engaged employees working in a safe environment
-- Superior customer service in Assurance, Testing, Inspection and Certification
-- Margin-accretive revenue growth based on GDP+ like-for-like growth
-- Strong cash conversion from operations
-- Accretive, disciplined capital allocation policy
Once again, during 2020 we have made strong progress on our five
strategic priorities (see below), which are empowered by our unique
set of strategic enablers:
-- living our customer-centric culture, built on a strong spirit of
entrepreneurship, a customer-focused mindset and engagement at
all levels of the organisation;
-- disciplined performance management, built on financial and non-financial
metrics and processes focusing on margin accretive revenue growth
and strong cash conversion;
-- superior technology, improving the customer experience, leveraging
back office synergies and delivering superior business intelligence;
-- energising our people through investments in their capabilities,
providing a fully aligned reward system and promoting internal
growth; and
-- delivering sustainable results, providing growth for our customers
and shareholders, recognising the importance of sustainability
for the wider community and achieving the right balance between
performance and sustainability.
Our Five Strategic Priorities
Our differentiated brand proposition
Intertek is positioned globally as the leading supplier of truly
end-to-end Total Quality Assurance. We have achieved global
consistency on our TQA brand proposition and identity across more
than 100 countries. At a time when the need for a better and a
safer world has never been greater, we have been quick to address
ATIC opportunities arising from emerging new growth drivers and
created stand-out product brands for our market-leading
innovations.
Superior customer service
Our commitment to outperforming our competition on the quality
of our customer service is driven by a straightforward business
imperative: to build loyalty from our existing clients and win new
customers. We recognised the huge operational challenges customers
faced during the pandemic and have raised our game even further. We
are continuously communicating to understand and respond to their
needs and drawing on the metrics and insights from the 6, 000+ NPS
(Net Promoter Score) customer interviews we hold every month has
enabled us to constantly improve our quality of delivery and
develop innovative new and improved ATIC solutions, including
unique offerings like Protek and CarbonClear.
Effective sales strategy
Existing clients are the most productive source of new business
opportunities, and we maintained our focus during 2020 on
increasing account penetration into new parts of our customers'
businesses. The end-to-end nature of our ATIC portfolio is
delivering unique opportunities in this area, supporting the
cross-selling of new and existing services. In addition, our
emphasis during the year on safer supply chains, health and safety,
and the low-carbon society opened many opportunities with new
customers across the world.
Growth and margin accretive portfolio
To achieve the sustainable growth we target, we prioritise those
business lines, geographies and service areas where the solutions
we provide are of the greatest value to customers and prospects.
This enables us to invest in those areas that demonstrate the
greatest potential for delivering attractive returns, in terms of
both business growth and good margins. During 2020, in the face of
the pandemic, we maintained our disciplined focus on how we
allocate resource, capital and people, ensuring that we continued
to strengthen the core of our business during a time of
unprecedented challenges. The Group's centre of gravity continues
to move towards the high-growth and high-margin sectors that in
turn feed further accelerated margin accretive revenue growth.
Operational excellence
Continuous improvement is essential to drive the operational
excellence that underpins sustainable growth. To achieve this, we
operate strict performance management controls to improve the
consistency of all activities and processes, so ensuring we achieve
the highest standards of efficiency and productivity. We have in
place a holistic view of performance at all our locations across
the world, enabling us to apply our Ever Better approach to every
part of the business, with metrics on key financials such as
revenue growth, margin, cash conversion, pricing power and capital
allocation; and operational indicators such as customer retention
and acquisition rates, marketing leads, the sales funnel, our
health and safety performance and NPS.
Highly cash generative and carbon-light earnings model
The power of our earnings model has massively contributed to
Intertek's ranking as the FTSE's leading company in terms of
dividend progression between 2003 and 2019, with a CAGR of 17%.
This has been achieved thanks to our highly cash-generative and
carbon-light earnings model, based on our investments in
high-growth, high-margin areas, disciplined capital allocation,
strong free cash flow and margin-accretive revenue growth.
Now, with our people across the world drawing on our strategic
enablers to deliver against our priorities and so achieve our
goals, Intertek is destined to make the world a better, safer and
more sustainable place for all.
The services we offer have never been more mission-critical than
now and in the years to come. Our position as the FTSE's leading
company in terms of dividend growth emphasises our superb
performance throughout the 21st Century.
But I believe our best years are still ahead of us.
Sustainability excellence
Intertek is bringing quality, safety and sustainability to life
and delivering sustainable value for all stakeholders. We support
our client s' sustainability agenda with our operational
sustainability assurance solutions, our global audits to verify
their ESG disclosures and o ur industry leading corporate
certification program. Sustainability is central to everything we
do internally at Intertek, and I am pleased to report that the
Group was carbon neutral in 2020 and that we are committed to
further progress on our sustainability agenda moving forward,
including targeting Net Zero emissions by 2050 .
Intertek has been a force for good for over 130 years, bringing
quality and safety to life with a pioneering spirit. Sustainability
is central to everything we do at Intertek and we are passionate
about making Intertek ever better , every day.
In 2020, we have made significant progress to deliver
sustainability excellence in every operation within the Group,
including:
-- driven our sustainability agenda deeper into the organisation by
inspiring our people to create local sustainability initiatives;
-- developed an Environmental Sustainability Dashboard down to site
level to give our people the visibility and ownership of their
own environmental data; and
-- evaluated ourselves against our own TSA standards and improved
our understanding of how we can be truly Best-in-Class.
Our commitment to N et Z ero emissions
In line with our commitment to reducing the carbon footprint of
our direct operations, we continue to focus on improving our energy
efficiency, purchasing energy from clean sources such as renewables
and investing in on-site renewable energy generation at our
locations.
In 2017, we set ourselves the target of reducing GHG emissions
per employee by 5% by 2023, and we are well on track to achieve
that.
We have a carbon-light earnings model. Our average carbon
intensity over the last three years was 4. 5 tonnes of CO2 per
employee, which is low compared to the all-industry average of 12.3
tonnes of CO2 per employee ( Intertek research based on publicly
available information for 2018/19) .
In addition, we have bought carbon credits to offset our direct
operational Scope 1, 2 and 3 GHG emissions, making 2020 our first
carbon neutral year. The credits we have bought help to fund
verified carbon off-setting projects that have a meaningful benefit
to communities in which we operate, including a hydropower project
in Pakistan, an electricity generation project in Turkey, a wind
power project in India and a forest conservation project in
Brazil.
Further, w e have signed up to the Science Based Targets
initiative which means that we are formally committed to setting
independently verified science-based GHG emission reduction
targets. Our aim is for our Science Based Target to be aligned to
limiting global temperature rise to below 1.5degC and reaching
net-zero emissions no later than 2050.
Intertek has also joined the UN Race to Zero campaign - a global
effort from the United Nations Framework Convention on Climate
Change that calls for a resilient, zero-carbon recovery from the
COVID-19 pandemic and is aligned with our own ambitious agenda to
Build Back Ever Better.
Sustainability means more than N et Z ero
Sustainability is central to our 5x5 differentiated strategy for
growth. Internally, we are focused on sustainability excellence in
every operation. We believe that Doing Business the Right Way with
a systemic approach is the only way to deliver our corporate goals
and create sustainable value creation for all stakeholders. To do
that, we follow precise processes and standard operating procedures
in 10 areas which form our Corporate Sustainability Certification
standards. They are:
-- Quality & safety
-- Environment
-- Governance
-- Risk management
-- Compliance
-- Financial
-- People & culture
-- Enterprise security
-- Communities
-- Communications & disclosures
In line with our Sustainability standard on Communications &
Disclosures , we have made the disclosures in our 2020 Annual R
eport broad based to provide total transparency.
W e have also set and embedded our targets to go beyond Net Zero
in those areas in our business model that are central to delivering
sustainable value for all our stakeholders. Our beyond Net Zero
sustainability targets are:
-- 6,000 NPS interviews per month
-- Women in 30% of senior management roles by 2025
-- Total Recordable Incidents below 0.5 per 200,000 hours worked
-- 100% attendance of all employees at Compliance training
-- Voluntary permanent turnover rate less than 15%
-- Group Engagement Index score of 90%
Future f ocus and o utlook
Our structural growth prospects appear ever-more compelling as
health, safety, wellbeing, transparency and sustainability grow in
importance for companies and individuals alike. Intertek's
continued strong performance during the pandemic and the associated
global economic downturn highlights the unprecedented importance of
our role.
Our success in launching innovative new products and services,
and the continuing emergence of powerful growth drivers, also
demonstrate the significant scale of the available growth
opportunities.
The quality of our results in 2020 illustrates the heightened
relevance of our purpose , the underlying strength of our strategy
and the resilience of our high-quality and cash-generative
compounder earnings model.
Into 2021 and the years ahead, we are committed to further
leveraging these strengths and targeting new opportunities to grasp
a greater share of the ATIC market. Society has changed. We are in
the 'new normal' and are observing new trends and behaviours and
demands for products and services that didn't exist prior to the
pandemic. Consumers want more sustainable products , supply chain
simplicity, visibility and traceability of goods , new solutions
for hygiene, health and wellbeing , as well as lower carbon
emissions. Employers are being tasked with developing and providing
new tech and virtual remote-working solutions.
T he world needs Intertek more than ever, with the unrivalled
expertise of our people, our focus on delivering risk-based Total
Quality Assurance solutions, and our proven track record of
innovating and anticipating the growing needs of our clients as the
world around them grows more complex. We provide mission critical
ATIC solutions to enable the world's supply chains to operate fully
and safely, given the increased expectations from all stakeholders
to live in a better and safer society.
André Lacroix
Chief Executive Officer
Operating Review
For the year ended 31 December 2020
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
20 20 20 19
GBPm GBPm Change at actual rates Change at constant rates (1)
Revenue 2,741.7 2,987.0 (8.2%) (6.7%)
Like-for-like revenue (2) 2,735.9 2,983.3 (8.3%) (6.8%)
Adjusted Operating profit (3) 427.7 524.2 (18.4%) (17.0%)
Margin (3) 15.6% 17.5% (190bps) (190bps)
Net financing costs (3) (34.9) (39.4) 11.4% 11.6%
Income tax expense (3) (100.2) (118.8) 15.7% 14.0%
Adjusted Earnings for the period (3) 292.6 366.0 (20.1%) (18.5%)
Adjusted d iluted earnings per share
(3) 170.9p 212.5p (19.6%) (18.1%)
======================================== ======== ======== ======================= =============================
1. Constant rates are calculated by translating 2019 results at 2020 exchange rates.
2. Like-for-like revenue includes acquisitions following their
12-month anniversary of ownership and removes the historical
contribution of any business disposals/closures.
3. Adjusted results are stated before SDIs, see note 3 to the
Condensed Consolidated Financial Statements.
Total reported Group revenue declined by 8.2%, with 0.1% growth
contributed by acquisitions, a LfL revenue decline of 8.3% and a
decrease of 150bps from foreign exchange reflecting sterling
appreciation against most of the Group's trading currencies.
The Group's LfL revenue at constant rates consisted of a decline
of 5.9% in Products, 9.9% in Trade and 6.1% in Resources.
We delivered an adjusted operating profit performance of GBP
427.7m , down 17.0% at constant rates and 18.4% at actual rates.
Our disciplined approach to performance management and capital
allocation remained in place and we have taken a number of steps to
protect our margin during the pandemic.
The Group's adjusted operating margin was 15.6%, a decrease of
190bps from the prior year at constant exchange rates. Margin
declined in each of our three divisions: (160bps) in Products,
(460bps) in Trade and (10bps) in Resources at constant rates.
In 2020, the Group participated in a range of government support
schemes and received GBP22.5m (H1: GBP9.3m, H2: GBP13.2m) (2019:
GBP5.0m (H1: GBP1.9m, H2: GBP3.1m)) in government grants with the
increase driven by the COVID-19 pandemic.
The Group's statutory operating profit after SDIs for the period
was GBP378.2m (2019: GBP485.8m) , down 20.7% at constant rates, and
margin was 13.8% (2019: 16.3%).
Net Financing Costs
Net financing costs were GBP34.9m, a decrease of GBP4.5m on 2019
resulting from a combination of lower interest expense and the
impact of foreign exchange rates. This comprised GBP1.1m (2019:
GBP1.2m) of finance income and GBP36.0m (2019: GBP40.6m) of finance
expense.
Tax
The adjusted effective tax rate was 25.5%, an increase of 1.0%
on the prior year (2019: 24.5%). The tax charge, including the
impact of SDIs, of GBP81.3m (2019: GBP111.5m), equates to an
effective rate of 23.6% (2019: 25.1%), the decrease mainly driven
by an adjustment to goodwill and other intangibles deferred
tax.
Earnings per share
Adjusted diluted earnings per share at actual exchange rates was
19.6% lower at 170.9p. Diluted earnings per share after SDIs was
152.4p (2019: 192.6p) per share and basic earnings per share after
SDIs was 153.6p (2019 : 194.5p).
Dividend
Reflecting the Group's strong cash generation in 2020, reduced
leverage and confidence in the future, the Board recommends a full
year dividend of 105.8p per share, in-line with prior year.
The full year dividend of 105.8p equates to a total cost of GBP
170.8m or 62% of adjusted profit attributable to shareholders of
the Group for 2020 (2019: GBP170.8m and 50%). The dividend is
covered 1.6 times by earnings (2019: 2.0 times), based on adjusted
diluted earnings per share divided by dividend per share.
Portfolio activities
In March 2016, the Group announced its '5x5' differentiated
strategy for growth, with the aim to move the centre of gravity of
the Group towards high-growth, high-margin areas in its industry,
which included two strategic priorities relevant to the operational
structure of the business:
-- To operate a portfolio that delivers focused growth amongst the
business lines, countries and services, including a strategic review
of underperforming business units.
-- To deliver operational excellence in every operation to drive productivity,
including re-engineering of unnecessary processes and layers.
During the year, the Group has continued to implement certain
non-recurring action plans identified through the portfolio review
in specific country and/or Business Line combinations, consistent
with the '5x5' strategy, and after five years we have now completed
our portfolio review. In line with this, a GBP19.0m restructuring
charge has been recognised in SDIs in the year, which impacted 14
business units in the year, taking the total programme to 103.
These activities included the termination of certain Business Lines
in some countries; the closure and consolidation of business line
locations in certain countries; the re-organisation of various
management structures either in-country, in-region or in global
business lines.
Restructuring charges are included in the SDIs, in instances
where they have been specifically identified as part of the
portfolio review and are non-recurring , in contrast to
restructuring costs for ongoing standard cost efficiency and
cost-saving opportunities, which are incurred within adjusted
results.
Separately Disclosed Items ( ' SDIs')
A number of items are separately disclosed in the financial
statements as exclusion of these items provides readers with a
clear and consistent presentation of the underlying operating
performance of the Group ' s business. Reconciliations of the
statutory to adjusted measures are provided in the Presentation of
Results section.
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 fixed assets;
costs of acquiring and integrating acquisitions; the cost of any
fundamental restructuring of a business; material claims and
settlements; significant recycling of amounts from equity to the
income statement; and unrealised market or fair value gains or
losses on financial assets or 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 costs of any restructuring are
excluded from adjusted operating profit where they represent
fundamental changes in individual operations around the Group as a
result of the portfolio activities discussed above and are not
expected to recur in those operations. The profit and loss on
disposals of businesses or other significant assets and the costs
associated with successful, active or aborted acquisitions are
excluded from adjusted operating profit in order to provide useful
information regarding the underlying performance of the Group ' s
operations.
The SDIs charge for 2020 comprises amortisation of acquisition
intangibles of GBP28.1m (2019: GBP29.1m); acquisition costs
relating to successful, active or aborted acquisitions of GBP2.4m
(2019: GBP1.6m); restructuring costs (as described above) of
GBP19.0m (2019: GBP13.3m); gain on disposal of subsidiaries and
associates of GBPnil (2019: GBP1.8m); a credit for material claims
and settlements of GBPnil (2019: GBP4.6m); and an equalisation
adjustment of GBPnil (2019: GBP0.8m) due to a High Court ruling
over the calculation of the guaranteed minimum pension.
Details of the SDIs for the twelve months ended 31 December 2020
and the comparative period are given in note 3 to the Condensed
Consolidated Financial Statements.
Acquisitions and investments
Intertek is well positioned to seize the attractive external
growth opportunities in a very fragmented industry, and we continue
to make progress with our M&A strategy.
The Group completed no (2019: one) acquisitions in the year.
The Group invested GBP79.8m (2019: GBP116.8m) organically in
laboratory expansions, new technologies and equipment and other
facilities. This investment represented 2.9% of revenue (2019:
3.9%).
Cash flow
The Group ' s cash performance was strong with free cash flow of
GBP415.7m (2019: GBP380.0 m), driven by disciplined working capital
management and strong cash conversion. Adjusted cash flow from
operations was GBP705.1m (2019: GBP730.6m). Statutory cash flow
from operations was GBP685.2m (2019: GBP715.3m).
Financial position
The Group ended the period in a strong financial position.
Financial net debt was GBP419.9m, a decrease of GBP209.5m on 31
December 2019, reflecting the Group ' s strong operating cash
generation in the year. The undrawn headroom on the Group's
existing committed borrowing facilities at 31 December 2020 was
GBP494.0m.
Total net debt, including the impact of the IFRS 16 lease
liability, was GBP644.1 m (2019: GBP 875.4m) .
Outlook
Given our well diversified revenue streams across industries and
geographies and the broad based growth in revenue and profit in the
second half of last year, we will continue to benefit in 2021 from
the post COVID-19 recovery and the attractive TQA growth
opportunities. We are confident that the Group will deliver good
like-for-like growth at constant currencies with margin progression
year on year and a strong free cash flow performance.
Our financial guidance for 2021, assuming constant FX rates for
the rest of 2021, is that 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 interests of between GBP17-19m
-- Financial net debt at December 2021 of between GBP350-400m
(prior to any material movements in FX or M&A)
Based on the average FX rate since January 2021, applied for the
remainder of the year, currencies would have a c.350bps negative
impact at both the revenue and earnings level.
Operating Review by Division
Revenue Adjusted operating profit
202 0 2019 Change Change at 2020 2019 Change Change at
GBPm GBPm at actual constant GBPm GBPm at actual constant
rates rates rates rates
======== ======
Products 1,681.6 1,796.7 (6.4%) (5.7%) 351.6 405.4 (13.3%) (12.4%)
Trade 592.6 679.4 (12.8%) (9.9%) 47.1 86.6 (45.6%) (42.6%)
Resources 467.5 510.9 (8.5%) (6.3%) 29.0 32.2 (9.9%) (8.2%)
======== ======== =============== ============== ====== ====== =============== ==============
Group 2,741.7 2,987.0 (8.2%) (6.7%) 427.7 524.2 (18.4%) (17.0%)
======== ======== =============== ============== ====== ====== =============== ==============
Products Divisional Review
2020 2019 Change Change at H1 2020 H2 2020 Change at
GBPm GBPm at constant GBPm GBPm constant
actual rates rates
rates
Revenue 1,681.6 1,796.7 (6.4%) (5.7%) 800.3 881.3 11.6%
Like-for-like
revenue 1,676.2 1,794.5 (6.6%) (5.9%) 796.9 879.3 11.8%
Adjusted operating
profit 351.6 405.4 (13.3%) (12.4%) 135.5 216.1 61.4%
Adjusted operating
margin 20.9% 22.6% (170bps) (160bps) 16.9% 24.5% 760bps
======== ======== ========= ========== ======== ======== ==========
Intertek Value Proposition
Our Products-related businesses consist of business lines that
are focused on ensuring the quality and safety of physical
components and products, as well as minimising risk through
assessing the operating processes and quality management systems of
our customers.
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, food and hospitality,
healthcare and beauty, and pharmaceuticals.
Across these industries we provide a wide range of ATIC services
including; laboratory safety, quality and performance testing,
second-party supplier auditing, sustainability analysis, product
assurance, vendor compliance, process performance analysis,
facility plant and equipment verification and third-party
certification.
Strategy
Our TQA Value Proposition provides a systemic approach to
support the Quality Assurance efforts of our 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 and ultimately assist them in getting
their products to market quicker, in order to continually meet
evolving consumer demands.
Innovations
We continue to invest in innovation to deliver a superior
customer service in our Products related businesses:
PROTEK
Innovation: It is the world's first industry-agnostic,
end-to-end health, safety and wellbeing assurance programme for
people, workplaces and public spaces, offering audits, training,
inspection, verification and
certification solutions.
Customer Benefit: Based on Intertek's unique approach to total
quality, Protek safeguards people, systems and
processes, facilities, materials and surfaces, and products.
INLIGHT 2.0
Innovation: Intertek Inlight 2.0 adds new and enhanced features
to its market-leading supply chain compliance solution, enabling
organisations to manage increasingly complex supply chain risks.
The main new features include enhanced analytics and the
integration of Wisetail(TM), an integrated dynamic online learning
platform.
Customer Benefit: This unique platform enables organisations
more flexibility and customisation of their unique supply chain
programmes to map their supply chain and bring visibility to the
workings of their vendor partners. With the support of Inlight 2.0,
customers can turn potential disruptions and compliance
irregularities to their competitive advantage with captured market
share and operational efficiencies.
ALCHEMY PLAYBOOK
Innovation: Alchemy Playbook is an app to create, deliver, and
validate job-specific training right on the production floor.
Playbook also tracks the job qualifications of the employees, so a
client can quickly find a qualified worker for any job for their
facility or operations.
Customer Benefit: Alchemy Playbook can be used on any mobile
device and makes it incredibly easy to deliver consistent accurate
training, while helping clients to optimise their resources and
increase productivity.
INTERTEK MAISON CENTRE OF EXCELLENCE FOR LUXURY
Innovation: The pandemic has changed the world we live in and
has accelerated a shift in attitudes with clients and consumers
paying more attention to the safety , quality and sustainability of
materials used in fashion and accessories, and the risks associated
with local and global supply chains.
Customer Benefit : The Maison Centre of Excellence for Luxury in
Florence, Italy is the new Intertek home for luxury and premium
brands. It offers a unique, technologically advanced venue for
events, ideas and collaboration - supported by the research, design
and quality assurance expertise of the adjacent world class
laboratories and cutting-edge technology. It is designed to take
new, original, ideas from inspiration to reality.
2020 performance
Our Products business delivered a resilient revenue performance,
benefiting from its defensive strengths, with a robust margin of
20.9%.
Revenue of GBP1,681.6m was down 5.7% at constant rates and 5.9%
on a LfL basis. We delivered an adjusted operating profit of
GBP351.6m, down 12.4% at constant rates. Adjusted operating profit
margin was down 160bps at constant rates.
In H2 2020, our Products related businesses benefitted from a
strong rebound in ATIC demand and delivered a revenue performance
of GBP881.3m, up 12% on H1 2020 at constant currency. We delivered
an H2 2020 adjusted operating profit of GBP216.1m, up 61% on H1
2020, and an H2 2020 adjusted operating margin of 24.5%, up 760bps
on H1 2020.
-- In H2 2020, our Softlines business delivered a mid--single
digit decline in LfL revenue, resulting in a double-digit decline
in LfL revenue on a full year basis. In the last six months, our
global Softlines business benefited from continuous growth in
e-commerce, increased demand for testing protective equipment and
the reduction in the lockdown restrictions in some of our markets.
However, our performance was impacted by continued store closures
in Western Europe and North America and some retailers delaying the
launch of new products due to the disruption of their supply chains
in the first half of the year.
-- Our Hardlines business saw improved momentum in the second
half with a low single digit decline in LfL revenue, resulting in
mid-single digit decline in LfL revenue on a full year basis. In H2
2020, our Hardlines business benefited from continuous growth in
e--commerce, increased consumer demand for home furniture and toys
and the easing of lockdown restrictions in some of our markets,
while closures of stores in Western Europe and North America
continued.
-- Our Electrical & Connected World business delivered
robust LfL revenue growth in H2 2020, resulting in a solid LfL
revenue performance in 2020. In the last six months, our Electrical
and Connected World business saw an increased level of ATIC
activities driven by increased demand for higher regulatory
standards in energy efficiency, the strong growth in testing and
certification of medical devices, the increased testing
requirements for 5G and a greater corporate focus on Cyber
security.
-- Our Business Assurance business delivered a solid LfL revenue
performance in H2 2020, resulting in a mid--single digit decline in
LfL revenue on a full year basis. The easing of lockdown
restrictions in the second half has driven a rebound in the number
of ISO audits in some of our operations, while we continue to
benefit from attractive growth in supply chain assurance, the
continuous focus on ethical supply, the increased needs of
corporations for sustainability assurance and the strong growth in
our People Assurance segment.
-- Our Building & Construction business delivered a
mid--single digit LfL revenue decline in the last six months,
resulting in a low single digit LfL revenue decline on a full year
basis. We continue to benefit from the growing demand for more
environmentally friendly and higher quality buildings, as well as
strong investments in large infrastructure projects, although the
temporary reduction of building and construction activities we saw
in Q2 due to lockdown restrictions in some of our North America
markets continued in the second half.
-- Our Transportation Technologies business delivered a double
digit LfL revenue decline in H2 2020, resulting in a double digit
negative LFL revenue for the full year. The lower demand for
testing activities we saw in Western Europe and North America in Q2
continued in H2 2020, which was partially offset by the continued
investments of our clients in new powertrains to lower CO2/NOx
emissions and increase fuel efficiency.
-- Our Food business delivered a good LfL revenue growth
performance in H2 resulting in a solid revenue performance on a
full year basis. In H2 2020, we benefited from the resumption of
the supply operations of our clients in most markets, from
sustained demand for food safety testing activities and increased
demand for hygiene and safety audits in factories, hospitality and
retail locations.
-- In H2 2020, we saw a mid-single digit LfL decline in revenue
in our Chemicals & Pharma business, resulting in a high single
digit LfL decline in revenue on a full year basis. In the last six
months, we saw an improvement in demand for regulatory assurance
and chemical testing in some of our operations in America and
Western Europe while, given the importance of COVID--19, the Pharma
industry continues to reprioritise their R&D investments,
delaying testing projects for our laboratories.
2021 outlook
In 2021, we expect all of our Products business lines other than
Transportation Technologies to deliver YoY revenue growth.
Mid- to long-term growth outlook
Our Products division will benefit from mid- to long-term
structural growth drivers, including brand and SKU expansion, a
faster innovation cycle, increased focus on safety, performance
& quality, demands for smart products, a higher demand for
healthy and sustainably sourced products, and the middle class
growth of emerging markets.
Trade Divisional Review
2020 2019 Change Change at H1 2020 H2 2020 Change at
GBPm GBPm at constant GBPm GBPm constant
actual rates rates
rates
Revenue 592.6 679.4 (12.8%) (9.9%) 294.7 297.9 3.6%
Like-for-like
revenue 592.6 679.4 (12.8%) (9.9%) 294.7 297.9 3.6%
Adjusted operating
profit 47.1 86.6 (45.6%) (42.6%) 20.1 27.0 40.3%
Adjusted operating
margin 7.9% 12.7% (480bps) (460bps) 6.8% 9.1% 240bps
====== ====== ========= ========== ======== ======== ==========
Intertek Value Proposition
Our Trade division consists of three Global Business Lines with
global and regional trade flow based on similar mid- to long-term
structural growth drivers:
Our Caleb Brett business provides cargo inspection, analytical
assessment, calibration and related research and technical services
to the world ' s petroleum and biofuels industries.
Our Government & Trade Services ( ' GTS ' ) business
provides inspection services to governments and regulatory bodies
to support trade activities that help the flow of goods across
borders, predominantly in the Middle East, Africa and South
America.
Our AgriWorld business provides analytical and testing services
to global agricultural trading companies and growers.
Strategy
Our TQA Value Proposition assists our Trade related customers in
protecting the value and quality of their products during their
custody-transfer, storage and transportation, globally, 24/7. Our
expertise, service innovations and advanced analytical capabilities
allow us to optimise the return on our customers' cargoes and help
them resolve difficult technical challenges. Our independent
product assessments provide peace-of-mind to our government clients
that the quality of products imported into the country meet their
standards and import processes.
Innovations
We continue to invest in ATIC innovations to deliver a superior
customer service in our Trade related businesses:
INVIEW
Innovation: Intertek Inview is a unique remote inspection
solution, that brings state-of-the-art technology and Intertek
industry expertise together to provide faster and improved
inspections for customers. In a trade environment where speed is of
the essence, Inview allows real-time remote assessments via the
Inview app connecting with Intertek's technical inspection experts
via live video, and with leading capabilities offers augmented
reality annotations, and geo-tagged HD video and image
recording.
Customer Benefit: Inview reduces turnaround times and enhances
transparency with better and faster access to a team of technical
inspection experts and in the event that potential issues are
identified during the inspection, follow-up actions can be
discussed without delay. Where travel and access restrictions
prevent the conduct of in-person inspection services, Inview offers
greater flexibility and a more sustainable alternative.
BLOCKCHAIN POWERED POST-TRADE MANAGEMENT
Innovation: Intertek Caleb Brett has joined VAKT, an innovative
post trade management platform. VAKT's vision is to digitise the
global commodities trading industry, creating a secure, trusted
ecosystem, powered by blockchain technology.
Customer Benefit: The integration with the VAKT platform
contributes to de-risk quality issues related to transposition of
data and lead to a material improvement in turnaround time for the
clients.
DIGITAL CETANE TESTING
Innovation: Caleb Brett's new Cetane Rating Engine is the only
one of its kind in China for determining and certifying the
ignition quality of diesel fuel, and supports the government on its
nation-wide fuel quality program to prevent and control air
pollution to improve environmental and living standards.
Customer Benefit: Clients benefit from a state-of-the-art fuel
testing technology as the environment regulations become
increasingly demanding.
2020 performance
Our Trade business benefited from our strong customer
relationships and the defensive strengths of our agriculture
services.
W e delivered a resilient revenue of GBP592.6m with a LfL
revenue performance of 9.9% below prior year at constant rates and
an adjusted operating profit of GBP47.1m, down 42.6% at constant
rates. Adjusted operating margin of 7.9% was down 460bps versus
last year .
In H2 2020, our Trade related businesses saw a good sequential
improvement in demand, resulting in a revenue performance of
GBP297.9m, up 4% on H1 2020 at constant currency. We delivered an
H2 2020 adjusted operating profit of GBP27.0m, up 40% on H1 2020,
and an H2 2020 adjusted operating margin of 9.1%, up 240bps on H1
2020 at constant currency.
-- Our Caleb Brett business saw continued momentum in H2 2020
with a high single digit decline in LfL revenue, resulting in a
high single digit LfL revenue decline on a full year basis. In the
second half, our Caleb Brett business benefited from an improvement
of global mobility and a rebound of the global economy in H2.
-- Our Government & Trade Services business provides
certification services to governments in the Middle East and Africa
to facilitate the import of goods into their markets, based on
acceptable quality and safety standards. We saw a double digit
decline in LfL revenue in H2 2020 and on a full year basis, due to
the disruption of manufacturing in China in Q1 and the lockdown
activities in the Middle East and Africa impacting cross-border
trade flows in both Q2 and the second half of the year.
-- Our AgriWorld business delivered robust LfL revenue growth in
H2 2020 resulting in solid LfL revenue growth on a full year basis.
Following a stable performance in H1 2020, we saw an increase in
demand for inspection activities driven by an easing of the
lockdown restrictions in most of our markets.
2021 outlook
In 2021, we expect our Trade division revenue to be broadly
flat.
Mid- to long-term growth outlook
Our Trade division will continue to benefit from population
growth and social mobility, GDP growth, the development of regional
trade, improvements in transport infrastructure, the increased need
for end-to-end traceability and the increased focus on Operational
Sustainability.
Resources Divisional Review
2020 2019 Change Change at H1 2020 H2 2020 Change at
GBPm GBPm at constant GBPm GBPm constant
actual rates rates
rates
Revenue 467.5 510.9 (8.5%) (6.3%) 235.6 231.9 -
Like-for-like
revenue 467.1 509.4 (8.3%) (6.1%) 235.1 232.0 0.1%
Adjusted operating
profit 29.0 32.2 (9.9%) (8.2%) 12.6 16.4 28.3%
Adjusted operating
margin 6.2% 6.3% (10bps) (10bps) 5.3% 7.1% 160bps
====== ====== ======== ========== ======== ======== ==========
Intertek Value Proposition
Our Resources division consists of two Business Lines with
similar mid- to long-term structural growth drivers:
Our Industry Services business uses in-depth knowledge of the
oil, gas, nuclear and power industries to provide a diverse range
of TQA solutions to optimise the use of customers' assets and
minimise the risk in their supply chains. Some of our key services
include technical inspection, asset integrity management,
analytical testing and ongoing training services.
Our Minerals business provides a broad range of ATIC service
solutions to the mining and minerals exploration industries,
covering the resource supply chain from exploration and resource
development, through to production, shipping and commercial
settlement.
Strategy
Our TQA Value Proposition allows us to help customers gain peace
of mind that their projects will proceed on time and their assets
will continue to operate with a lower risk of technical failure or
delay. Our broad range of services allow us to assist clients in
protecting the quantity and quality of their mined and drilled
products, improve safety and reduce commercial risk in the trading
environment.
Innovations
We continue to invest in innovation to deliver a superior
customer service in our Resources related businesses:
CARBONCLEAR
Innovation : CarbonClear is the world's first independent carbon
intensity certification program that delivers a consistent
cradle-to-gate validation of the carbon impact of producing one
barrel of oil equivalent (BOE) per
field or across a company's portfolio.
Customer Benefit : CarbonClear allows customers to benchmark
performance, differentiate their product and drive
improvement in the transition to a low carbon economy.
WINDFARM PROJECT ASSURANCE
Innovation: It is an end-to-end solution dedicated to offshore
windfarm projects. Our many services include site selection and
characterisation, feasibility studies, survey and installation
oversight, Environmental Impact Assessments (EIAs) and scoping
studies, metocean assessments, and risk management for a variety of
offshore developments.
Customer Benefit: Our clients can proceed safely with the
deployment of their most complex projects in renewable
energies.
XRD BATCH FOR IRON ORES
Innovation: Our Minerals Team has developed a unique batching
method to considerably speed up the X-Ray Diffraction (XRD)
assessments of iron ores by processing the ores with set phases and
a pre-set refinement strategy.
Customer Benefit: Customisation of the XRD and introduction of
the batch process will lift capacity
significantly, delivering results faster to our clients and reducing the cost of analysis.
2020 performance
We benefited from the strength of our business model in
Resources, enabling us to deliver a resilient performance in
revenue and margin.
Our Resources related businesses delivered a revenue performance
of GBP467.5m with a LfL revenue change of (6.1%) at constant rates
and an adjusted operating profit of GBP29.0m, down 8.2% at constant
rates, enabling us to deliver a margin of 6.2%, down YoY by
10bps.
In H2 2020, Resources delivered a stable revenue performance at
constant currency compared to the first six months. We delivered an
H2 2020 adjusted operating profit of GBP16.4m, up 28% on H1 2020 at
constant currency, and an H2 2020 adjusted operating margin of
7.1%, up 160bps on H1 2020 at constant currency.
-- In H2 2020 we saw a reduction in Exploration and Production
investments by our clients in some of our markets such that our
Capex Inspection services business delivered a high single digit
negative LfL revenue performance in the last six months, resulting
in a low single digit LfL revenue decline in 2020.
-- We saw a double-digit negative revenue performance in Opex
Maintenance services in the second half, as well as in H1 2020, as
the lockdown restrictions and the cost saving initiatives of our
clients have impacted the demand for our inspection services.
-- We delivered robust revenue growth in our Minerals business
in 2020, as we saw increased demand for testing and inspection
activities.
2021 outlook
In 2021, we expect revenue in the Resources divisions to be
below last year .
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.
Presentation of Results
For the year ended 31 December 2020
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
As disclosed in the Group's FY19 preliminary results
announcement, to improve the understanding of the Group's
underlying growth performance, from 2020 we have adopted a
"Like-for-Like revenue" definition, replacing the previously used
"organic" revenue. LfL growth figures are calculated by including
acquisitions following their 12-month anniversary of ownership and
removing the historical contribution of any business disposals /
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 2019 results at
2020 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 fixed assets,
costs related to acquisition activity, the cost of any fundamental
restructuring of a business, material claims and settlements,
significant recycling of amounts from equity to the income
statement and unrealised market gains/losses on financial
assets/liabilities.
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 costs of any restructuring as part
of our '5x5' differentiated strategy for growth are excluded from
adjusted operating profit where they represent fundamental changes
in individual operations around the Group, and are not expected to
recur in those operations. 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 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 twelve months ended 31 December 2020
and the comparative period are given in note 3 to the Condensed
Consolidated Financial Statements.
Reconciliation of Results to Adjusted 2020 2020 2019
Performance Measures (GBPm) R eported SDIs 2020 Adjusted 2019 Reported SDIs 2019 Adjusted
Operating profit 378.2 49.5 4 27.7 485.8 38.4 524.2
----------- --------- -------------- -------------- ------ --------------
Operating margin 13.8% 1.8% 1 5.6% 16.3% 1.2% 17.5%
----------- --------- -------------- -------------- ------ --------------
Net financing costs (34.3) (0.6) (34.9) (40.7) 1.3 (39.4)
----------- --------- -------------- -------------- ------ --------------
Profit before tax 343.9 48.9 392.8 445.1 39.7 484.8
----------- --------- -------------- -------------- ------ --------------
Income tax expense (8 1 .3 ) (18. 9 ) (100.2) (111.5) (7.3) (118.8)
----------- --------- -------------- -------------- ------ --------------
Profit for the year 26 2 .6 3 0.0 292.6 333.6 32.4 366.0
----------- --------- -------------- -------------- ------ --------------
Cash flow from operations 6 85.2 19.9 7 05.1 715.3 15.3 730.6
----------- --------- -------------- -------------- ------ --------------
Cash flow from operations less net
capex 6 13.0 19.9 6 32.9 601.0 15.3 616.3
----------- --------- -------------- -------------- ------ --------------
Free cash flow 4 15.7 19.9 4 35.6 380.0 15.3 395.3
----------- --------- -------------- -------------- ------ --------------
Basic earnings per share 153. 6p 18. 6p 172.2 p 194.5p 20.1p 214.6p
----------- --------- -------------- -------------- ------ --------------
Diluted earnings per share 152. 4p 18. 5p 170.9 p 192.6p 19.9p 212.5p
----------- --------- -------------- -------------- ------ --------------
Reconciliation of revenue 2020 2019 Change
GBPm GBPm %
(8 .2
Reported revenue 2 ,741.7 2 ,987.0 %)
--------- --------- -------
Less: Acquisitions / disposals
/ closures revenue ( 5.8) ( 3.7)
--------- --------- -------
(8 .3
Like-for-like revenue 2 ,735.9 2 ,983.3 %)
--------- --------- -------
Impact of foreign exchange
movements - ( 47.1)
--------- --------- -------
Like-for-like revenue at (6 .8
constant currency 2 ,735.9 2 ,936.2 %)
--------- --------- -------
Reconciliation of financial net debt to adjusted EBITDA (GBPm) 2020 2019
GBPm GBPm
Net debt (644.1) (875.4)
-------- --------
IFRS 16 lease liability 224.2 246.0
-------- --------
Financial net debt (419.9) (629.4)
-------- --------
R eported operating profit 378.2 485.8
-------- --------
Depreciation 156.6 156.2
-------- --------
Amortisation 17.4 15.3
-------- --------
EBITDA 552.2 657.3
-------- --------
SDIs 49.5 38.4
-------- --------
Adjusted EBITDA 601.7 695.7
-------- --------
Financial net debt / adjusted EBITDA 0.7x 0.9x
-------- --------
Constant currency reconciliations 2020 2019 Change
GBPm GBPm %
Adjusted operating profit
at actual rates 427.7 524.2 (18.4%)
--------- ------- ----------
Impact of foreign exchange
movements - (9.1)
--------- ------- ----------
Adjusted operating profit
at constant rates 427.7 515.1 (17.0%)
--------- ------- ----------
Adjusted diluted EPS at
actual rates 170.9p 212.5p (19.6%)
--------- ------- ----------
Impact of foreign exchange
movements - (3.8p)
--------- ------- ----------
Adjusted diluted EPS at
constant rates 170.9p 208.7p (18.1%)
--------- ------- ----------
Diluted EPS at actual rates 152. 4 p 192.6p (20 .9 %)
--------- ------- ----------
Impact of foreign exchange
movements - (3.5p)
--------- ------- ----------
Diluted EPS at constant
rates 152. 4 p 189.1p (19. 4 %)
--------- ------- ----------
Full Year Report
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 Full 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.
Condensed Consolidated Income Statement
For the year ended 31 December 2020
2 020 2019
Adjusted Separately Disclosed Total Adjusted Separately Disclosed Total
Results Items* 2020 results Items* 2019
Notes GBPm GBPm GBPm GBPm GBPm GBPm
===================== ===== ========== ==================== ========= ========= ===================== =========
Revenue 2 2 ,741.7 - 2,741.7 2,987.0 - 2,987.0
Operating costs ( 2,314.0) (49.5) (2,363.5) (2,462.8) (38.4) (2,501.2)
===================== ===== ========== ==================== ========= ========= ===================== =========
Group operating
profit/(loss) 2 4 27.7 (49.5) 378.2 524.2 (38.4) 485.8
===================== ===== ========== ==================== ========= ========= ===================== =========
Finance income 1.1 - 1.1 1.2 - 1.2
Finance expense (36.0) 0.6 (35.4) (40.6) (1.3) (41.9)
===================== ===== ========== ==================== ========= ========= ===================== =========
Net financing
(costs)/income (34.9) 0.6 (34.3) (39.4) (1.3) (40.7)
===================== ===== ========== ==================== ========= ========= ===================== =========
Profit/(loss) before
income tax 392.8 (48.9) 343.9 484.8 (39.7) 445.1
Income tax
(expense)/credit (100.2) 18.9 (81.3) (118.8) 7.3 (111.5)
===================== ===== ========== ==================== ========= ========= ===================== =========
Profit/(loss) for the
period 2 292.6 (30.0) 262.6 366.0 (32.4) 333.6
===================== ===== ========== ==================== ========= ========= ===================== =========
Attributable to:
Equity holders of the
Company 277.3 (30.0) 247.3 345.5 (32.4) 313.1
Non-controlling
interest 15.3 - 15.3 20.5 - 20.5
===================== ===== ========== ==================== ========= ========= ===================== =========
Profit/(loss) for the
period 292.6 (30.0) 262.6 366.0 (32.4) 333.6
===================== ===== ========== ==================== ========= ========= ===================== =========
Earnings per share
===================== ===== ========== ==================== ========= ========= ===================== =========
Basic 4 172.2p 153.6p 214.6p 194.5p
===================== ===== ========== ==================== ========= ========= ===================== =========
Diluted 4 170.9p 152.4p 212.5p 192.6p
===================== ===== ========== ==================== ========= ========= =====================
Dividends in respect of the
period 105.8p 105.8p
============================ ========== ==================== ========= ========= ===================== =========
* See note 3.
Condensed Consolidated Statement of Comprehensive Income
For the year ended 31 December 2020
2020 2019
Notes GBPm GBPm
Profit for the period 2 262.6 333.6
============================================================================ ===== ====== ======
Other comprehensive income
Remeasurements on defined benefit pension schemes 0.8 (3.2)
Tax on items that will never be reclassified subsequently to profit or loss (3.1) 0.2
Items that will never be reclassified to profit or loss (2.3) (3.0)
Foreign exchange translation differences of foreign operations (53.9) (72.4)
Net exchange gain on hedges of net investments in foreign operations 3.7 31.2
Gain on fair value of cash flow hedges 0.3 0.7
Items that are or may be reclassified subsequently to profit or loss (49.9) (40.5)
============================================================================ ===== ====== ======
Total other comprehensive income for the period (52.2) (43.5)
============================================================================ ===== ====== ======
Total comprehensive income for the period 210.4 290.1
============================================================================ ===== ====== ======
Total comprehensive income for the period attributable to:
Equity holders of the Company 195.4 271.8
Non-controlling interest 15.0 18.3
============================================================================ ===== ====== ======
Total comprehensive income for the period 210.4 290.1
============================================================================ ===== ====== ======
Condensed Consolidated Statement of Financial Position
As at 31 December 2020
2020 2019
GBPm GBPm
Notes
Assets
Property, plant and equipment 9 585.8 644.2
Goodwill 8 835.9 859.8
Other intangible assets 279.7 302.4
Deferred tax assets 48.6 51.9
==================================================== ======= ========= =========
Total non-current assets 1,750.0 1,858.3
==================================================== ======= ========= =========
Inventories* 15.5 19.2
Trade and other receivables* 621.2 685.0
Cash and cash equivalents 7 203.9 227.4
Current tax receivable 24.5 28.5
==================================================== ======= ========= =========
Total current assets 865.1 960.1
==================================================== ======= ========= =========
Total assets 2,615.1 2,818.4
==================================================== ======= ========= =========
Liabilities
Interest bearing loans and borrowings 7 (31.0) (238.9)
Current taxes payable (53.8) (57.2)
Lease liabilities (61.4) (61.7)
Trade and other payables * (576.2) (518.0)
Provisions * (28.8) (24.2)
==================================================== ======= ========= =========
Total current liabilities (751.2) (900.0)
==================================================== ======= ========= =========
Interest bearing loans and borrowings 7 (592.8) (617.9)
Lease liabilities (162.8) (184.3)
Deferred tax liabilities (59.7) (68.2)
Net pension liabilities 5 (12.1) (13.4)
Other payables * (26.1) (29.2)
Provisions * (7.4) (20.1)
==================================================== ======= ========= =========
Total non-current liabilities (860.9) (933.1)
==================================================== ======= ========= =========
Total liabilities (1,612.1) (1,833.1)
==================================================== ======= ========= =========
Net assets 1,003.0 985.3
==================================================== ======= ========= =========
Equity
Share capital 1.6 1.6
Share premium 257.8 257.8
Other reserves (80.8) (31.2)
Retained earnings 796.4 727.7
==================================================== ======= ========= =========
Total attributable to equity holders of the Company 975.0 955.9
Non-controlling interest 28.0 29.4
==================================================== ======= ========= =========
Total equity 1,003.0 985.3
==================================================== ======= ========= =========
* Working capital of negative GBP4.0m (2019: positive GBP100.7m)
comprises the asterisked items in the above Statement of Financial
Position less refundable deposits aged over 12 months of GBP2.2m
(2019: GBP12.0m).
Condensed Consolidated Statement of Changes in Equity
For the year ended 31 December 2020
Attributable to equity holders of the
Company
========================================================================
Other Reserves
====================
Total
before
Share Share Translation Retained non-controlling Non-controlling Total
capital premium reserve Other earnings interest interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January
2019 1.6 257.8 1.7 5.4 588.3 854.8 34.3 889.1
Total
comprehensive
income for the
period
Profit - - - - 313.1 313.1 20.5 333.6
Other
comprehensive
income - - (39.0) 0.7 (3.0) (41.3) (2.2) (43.5)
================ ========= ========= ============ ====== ========== ================ ================ ========
Total
comprehensive
income for the
period - - (39.0) 0.7 310.1 271.8 18.3 290.1
================ ========= ========= ============ ====== ========== ================ ================ ========
Transactions
with
owners of the
company
recognised
directly
in equity
Contributions
by and
distributions
to the
owners of the
company
Dividends paid - - - - (163.2) (163.2) (19.1) (182.3)
Adjustment
arising
from changes
in NCI - - - - 4.1 4.1 (4.1) -
Purchase of own
shares - - - - (23.1) (23.1) - (23.1)
Tax paid on
share
award s
vested(1) - - - - (11.6) (11.6) - (11.6)
Equity-settled
transactions - - - - 21.9 21.9 - 21.9
Income tax on
equity-settled
transactions - - - - 1.2 1.2 - 1.2
================ ========= ========= ============ ====== ========== ================ ================ ========
Total
contributions
by and
distributions
to the owners
of the
company - - - - (170.7) (170.7) (23.2) (193.9)
================ ========= ========= ============ ====== ========== ================ ================ ========
At 31 December
2019 1.6 257.8 (37.3) 6.1 727.7 955.9 29.4 985.3
================ ========= ========= ============ ====== ========== ================ ================ ========
At 1 January
2020 1.6 257.8 (37.3) 6.1 727.7 955.9 29.4 985.3
Total
comprehensive
income for the
period
Profit - - - - 247.3 247.3 15.3 262.6
Other
comprehensive (4 9 (2. 3 (5 1 (5 2.2
income - - . 9 ) 0. 3 ) . 9 ) (0.3) )
================ ========= ========= ============ ====== ========== ================ ================ ========
Total
comprehensive
income for the
period - - (49.9) 0.3 245.0 195.4 15.0 210.4
================ ========= ========= ============ ====== ========== ================ ================ ========
Transactions
with
owners of the
company
recognised
directly
in equity
Contributions
by and
distributions
to the
owners of the
company
Dividends paid - - - - (170.4) (170.4) (18.6) (189.0)
Adjustment
arising
from changes
in NCI (2.2) (2.2) 2.2 -
Purchase of own
shares - - - - (12.2) (12.2) - (12.2)
Tax paid on
share
award s
vested(1) - - - - (8.5) (8.5) - (8.5)
Equity-settled
transactions - - - - 17.7 17.7 - 17.7
Income tax on
equity-settled
transactions - - - - - - - -
IFRS16 effects
of
deferred tax
rate
change - - - - (0.7) (0.7) - (0.7)
Total
contributions
by and
distributions
to the owners
of the
company - - - - (176.3) (176.3) (16.4) (192.7)
================ ========= ========= ============ ====== ========== ================ ================ ========
At 31 December
2020 1.6 257.8 (87.2) 6.4 796.4 975.0 28.0 1,003.0
================ ========= ========= ============ ====== ========== ================ ================ ========
(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 GBP115.3m dividend paid on 11 June 2020 represented a final
dividend of 71.6p per ordinary share in respect of the year ended
31 December 2019. The GBP108.2m dividend paid on 4 June 2019
represented a final dividend of 67.2p per ordinary share in respect
of the year ended 31 December 2018. No ordinary shares were issued
in the period to satisfy the vesting of share awards.
Condensed Consolidated Statement of Cash Flows
For the year ended 31 December 2020
2 020 2019
Notes GBPm GBPm
Cash flows from operating activities
Profit for the period 2 2 62.6 333.6
Adjustments for:
Depreciation charge 1 56.6 156.2
Amortisation of software 1 7.4 15.3
Amortisation of acquisition intangibles 2 8.1 29.1
Equity-settled transactions 1 7.7 21.9
Net financing costs 3 4.3 40.7
Income tax expense 81 .3 111.5
G ain on disposal of a ssociate - (1.8)
Gain on disposal of property, plant, equipment and software ( 0.9) (0.9)
================================================================================== ===== ======= =======
Operating cash flows before changes in working capital and operating provisions 5 97.1 705.6
================================================================================== ===== ======= =======
Change in inventories 3 .5 (1.5)
Change in trade and other receivables 5 2.9 (25.6)
Change in trade and other payables 36 .8 40.7
Change in provisions ( 3.1) (1.9)
Special contributions into pension schemes ( 2.0) (2.0)
================================================================================== ===== ======= =======
Cash generated from operations 6 85.2 715.3
================================================================================== ===== ======= =======
Interest and other finance expense paid ( 34.8) (40.7)
Income taxes paid ( 91.6) (111.8)
================================================================================== ===== ======= =======
Net cash flows generated from operating activities* 558.8 562.8
================================================================================== ===== ======= =======
Cash flows from investing activities
Proceeds from sale of property, plant, equipment and software* 7 .6 2.5
Interest received* 1 .1 1.2
Acquisition of subsidiaries, net of cash acquired - (16.9)
Consideration paid in respect of prior year acquisitions ( 0.5) (0.6)
S ale of an associate - 2.1
Acquisition of property, plant, equipment, software* 9 (79.8) (116.8)
================================================================================== ===== ======= =======
Net cash flows used in investing activities ( 71.6) (128.5)
================================================================================== ===== ======= =======
Cash flows from financing activities
Purchase of own shares (12.2) (23.1)
Tax paid on share awards vested (8.5) (11.6)
Drawdown of borrowings 279.9 110.0
Repayment of borrowings (507.1) (221.3)
R epayment of lease liabilities* ( 72.0) (69.7)
Purchase of non-controlling interest - (5.2)
Dividends paid to non-controlling interest (18.6) (19.1)
Equity dividends paid (170.4) (163.2)
================================================================================== ===== ======= =======
Net cash flows used in financing activities (508.9) (403.2)
================================================================================== ===== ======= =======
Net (decrease)/increase in cash and cash equivalents 7 (21.7) 3 1.1
================================================================================== ===== ======= =======
Cash and cash equivalents at 1 January 7 213.0 203.2
Effect of exchange rate fluctuations on cash held 7 (7.9) (21.3)
================================================================================== ===== ======= =======
Cash and cash equivalents at end of period 7 183.4 213.0
================================================================================== ===== ======= =======
* Free cash flow of GBP415.7m (2019: GBP380.0m) comprises the
asterisked items in the above Statement of Cash Flows.
Adjusted cash flow from operations of GBP705.1m (2019:
GBP730.6m) comprises statutory cash generated from operations of
GBP685.2m (2019: GBP715.3m) before cash outflows relating to
Separately Disclosed Items of GBP19.9m (2019: GBP15.3m).
Notes to the Condensed Consolidated Financial Statements
1. Basis of preparation
Reporting entity
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31 December 2020
and 2019 but is derived from the 2020 accounts. A full copy of the
2020 Annual Report will be available online at www.intertek.com in
April 2021. Statutory accounts for 2019 have been delivered to the
Registrar of Companies, and those for 2020 will be delivered in due
course. The auditors have reported on those accounts; their reports
were (i) unqualified, (ii) did not include references to any
matters to which the auditors drew attention by way of emphasis
without qualifying their reports and (iii) did not contain
statements under Sections 498(2) or 498(3) of the Companies Act
2006.
The preparation of the financial statements requires management
to make estimates and assumptions that affect the reported amount
of revenues, expenses, assets and liabilities at the date of the
financial statements. If in the future such estimates and
assumptions, which are based on management ' s best judgement at
the date of the financial statements, deviate from the actual
circumstances, the original estimates and assumptions will be
modified as appropriate in the year in which the circumstances
change.
Significant accounting policies
There are no significant new accounting policies that have a
material effect on the results of the Group. In 2020, the Group
participated in a range of COVID-19 government support schemes
which increased the quantum of grants received. As a result, in
2020 a Government Grant accounting policy has been disclosed as
follows:
Government grants are recognised in the income statement so as
to match them with the related expenses that they are intended to
compensate. Where grants are received in advance of the related
expenses, they are initially recognised in the balance sheet and
released to match the related expenditure. Non-monetary grants are
recognised at fair value. The related cash flow is classified in
accordance with the nature of the activity.
This policy was also applied in 2019 but was not disclosed given
the immaterial value of the grants received.
Estimates and judgements
The preparation of 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.
In preparing these Condensed Consolidated Financial Statements,
the nature of the significant judgements made by management in
applying the Group's accounting policies were the same as those
that were applied for the year ended 31 December 2019. During 2020,
the key sources of estimation were impacted as a result of the
COVID-19 pandemic with increased levels of estimation uncertainty
in relation to assumptions used in:
-- impairment assessments (e.g. cash flow projections, long-term growth, discount rate);
-- actuarial valuations on defined benefit pension schemes (e.g.
discount and mortality rates);
-- accounts receivable expected loss provisions (e.g. country-specific risk factors); and
-- estimating the amount of contingent consideration that is
likely to be due (e.g. profit and cash forecasts).
During 2020 management reassessed its estimates and judgements
in respect of taxation, pensions (note 5), contingent consideration
payable and fair value adjustments in respect of acquisitions made
in prior periods (note 8(b) and 8(c)), impairment (note 8(d)),
claims and litigation and also the recoverability of trade
receivables. Trade receivables are reflected net of an estimated
provision for impairment losses. This provision considers the past
payment history and the length of time that the debts have remained
unpaid.
Risks and uncertainties
The Group has a broad customer base across its multiple business
lines and in its different geographic regions and is supported by a
robust balance sheet and strong operational cash flows. 2020 was an
unprecedented year and the financial impact was managed with a
resilient revenue performance, robust margin and strong cash
generation.
The Board has reviewed the Group's financial forecasts up to 31
December 2022 to assess both liquidity requirements and debt
covenants. The Group's financial forecasts, which have been updated
for the expected continued impact of COVID-19, show a recovery in
2021 with:
-- all of our Products business lines other than Transportation
Technologies delivering YoY revenue growth;
-- Trade division revenues being broadly flat with 2020; and
-- revenue in our Resources divisions forecast to be below 2020.
In addition, the Group's financial forecasts for 2021 and 2022,
and the related liquidity position and forecast compliance with
debt covenants, have been sensitised for a severe decline in
economic conditions (including an illustrative sensitivity scenario
of a reduction of 50% to the base profit forecasts and the
corresponding impact to cash flow forecasts in each of these years
due to a greater than expected impact of COVID-19). The Board
remains satisfied with the Group's funding and liquidity position
with the Group forecast to remain within its committed facilities
and compliant with debt covenants even following the 50% stress
testing sensitivity. The sensitivity modelling excludes additional
mitigating actions (e.g. dividend cash payments, non-essential
overheads and non-committed capital expenditure) that are within
management control and could be initiated if deemed required.
The undrawn headroom on the Group's committed borrowing
facilities at 31 December 2020 was GBP494.0m (2019: GBP326.2m). As
disclosed in Note 14 of the financial statements, all the current
borrowing facilities are expected to be available at 31 December
2022, except for US$15m of senior notes that are due to be repaid
in July 2021 and US$140m of senior notes that are due to be repaid
in January 2022, and our models forecast these to be repaid using
current facilities. Full details of the Group's borrowing
facilities and maturity profile are outlined in note 14.
On the basis of its forecasts to 31 December 2022, 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 2020 2019 2020 2019
==================== ============ =========== ============ =============
US dollar 1.35 1.31 1.28 1.28
Euro 1.10 1.17 1.13 1.14
Chinese renminbi 8.81 9.17 8.88 8.82
Hong Kong dollar 10.47 10.18 9.96 10.00
A ustralian dollar 1.78 1.87 1.87 1.84
==================== ============ =========== ============ =============
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. These operating segments are aggregated
into three divisions, which are the Group's reportable segments,
based on similar nature of products and services and mid- to
long-term structural growth drivers. When aggregating operating
segments into the three divisions we have applied judgement over
the similarities of the services provided, the customer-base and
the mid- to long-term structural growth drivers. The costs of the
corporate head office and other costs which are not controlled by
the three divisions are allocated appropriately. A description of
the activity in each division is given in the Operating Review by
Division.
The results of the divisions are shown below:
For the year ended 31 Revenue Depreciation Adjusted Separately
December 2020 from external and software operating Disclosed Operating
customers amortisation profit Items profit
GBPm GBPm GBPm GBPm GBPm
============================== =============== ============== =========== =========== ==========
Products 1,681.6 (108.1) 351.6 (32.1) 319.5
Trade 592.6 (45.1) 47.1 (5.0) 42.1
Resources 467.5 (20.8) 29.0 (12.4) 16.6
============================== =============== ============== =========== =========== ==========
Total 2,741.7 (174.0) 427.7 (49.5) 378.2
============================== =============== ============== =========== =========== ==========
Group operating profit 427.7 (49.5) 378.2
Net financing (costs)/income (34.9) 0.6 (34.3)
============================== =============== ============== =========== =========== ==========
Profit before income
tax 392.8 (48.9) 343.9
Income tax (expense)/credit (100.2) 18.9 (81.3)
============================== =============== ============== =========== =========== ==========
Profit for the year 292.6 (30.0) 262.6
============================== =============== ============== =========== =========== ==========
For the year ended 31 Revenue
December 2019 from external Depreciation Adjusted Separately
customers and software operating Disclosed Operating
GBPm amortisation profit Items profit
GBPm GBPm GBPm GBPm
============================= =============== ============== =========== ============= ============
Products 1,796.7 (105.2) 405.4 (23.9) 381.5
Trade 679.4 (44.6) 86.6 (4.6) 82.0
Resources 510.9 (21.7) 32.2 (9.9) 22.3
============================= =============== ============== =========== ============= ============
Total 2,987.0 (171.5) 524.2 (38.4) 485.8
============================= =============== ============== =========== ============= ============
Group operating profit 524.2 (38.4) 485.8
Net financing costs (39.4) (1.3) (40.7)
============================= =============== ============== =========== ============= ============
Profit before income
tax 484.8 (39.7) 445.1
Income tax (expense)/credit (118.8) 7.3 (111.5)
============================= =============== ============== =========== ============= ============
Profit for the year 366.0 (32.4) 333.6
============================= =============== ============== =========== ============= ============
3. Separately Disclosed Items (SDIs)
2020 2019
GBPm GBPm
=========================================== ===== ======= =======
Operating costs
Amortisation of acquisition intangibles (a) (28.1) (29.1)
Acquisition costs (b) (2.4) (1.6)
Restructuring costs (c) (19.0) (13.3)
Gain on disposal of businesses - 1.8
Material claims and settlements (d) - 4.6
Guaranteed minimum pension equalisation - (0.8)
Total operating costs (49.5) (38.4)
Net financing income/(costs) (e) 0.6 (1.3)
=========================================== ===== ======= =======
Total before income tax (48.9) (39.7)
Income tax credit on Separately Disclosed
Items (f) 18.9 7.3
=========================================== ===== ======= =======
Total (30.0) (32.4)
================================================== ======= =======
Refer to the Presentation of Results section for further details
on SDIs
a) T he amortisation of acquisition intangibles relates to the
customer relationships, trade names, technology and non-compete
covenants acquired.
b) Transaction costs relating to acquisition activity in the
period and integration of prior period acquisitions were GBP2.4m
(2019: GBP1.6m).
c) Restructuring costs of GBP19.0m were incurred in the period
(2019: GBP13.3m), relating to various fundamental restructuring
activities, resulting from the implementation of the new Company
structure and corporate 5x5 strategy announced in 2016. These
activities included site consolidations, closure of non-core
business units, re-engineering of underperforming businesses and
delayering of management structures.
d) The 2019 material claims and settlements related to a
commercial claim that was separately disclosable due to its
size.
e) Net financing income of GBP0.6 m (2019: GBP1.3m cost) relates
to the unwinding of discounts and changes in fair value of
contingent consideration related to acquisitions.
f) Income tax credit on SDIs of GBP18.9m (2019: GBP7.3m)
includes a GBP15.8m adjustment to goodwill and other intangibles
deferred tax.
4. Earnings per share (EPS)
2020 2019
GBPm GBPm
Based on the profit for the period:
Profit attributable to ordinary shareholders 247.3 313.1
Separately Disclosed Items after tax (note
3) 30.0 32.4
=============================================== ======= =======
Adjusted earnings 277.3 345.5
=============================================== ======= =======
Number of shares (millions):
Basic weighted average number of ordinary
shares 161.0 161.0
Potentially dilutive share awards 1.3 1.6
=============================================== ======= =======
Diluted weighted average number of shares 162.3 162.6
=============================================== ======= =======
Basic earnings per share 153.6p 194.5p
Potentially dilutive share awards (1.2p) (1.9p)
=============================================== ======= =======
Diluted earnings per share 152.4p 192.6p
=============================================== ======= =======
Adjusted basic earnings per share 172.2p 214.6p
Potentially dilutive share awards (1.3p) (2.1p)
=============================================== ======= =======
Adjusted diluted earnings per share 170.9p 212.5p
=============================================== ======= =======
5. Pension schemes
During the year, the Group made a special cash contribution of
GBP2.0m (2019: GBP 2.0m) into The Intertek Pension Scheme in line
with a Minimum Funding Requirement agreement.
The significant actuarial assumptions used in the valuation of
the Group ' s material defined benefit pension schemes as at 31
December 2020 have been reviewed. The discount and inflation rates
used to value the pension liabilities, as well as the updated asset
valuations and the net pension liabilities, have not moved
materially since 31 December 2019. In addition to the special
contribution, a net actuarial gain before taxation of GBP0.8m
(2019: GBP3.2 m loss) has been recognised in the consolidated
statement of comprehensive income. The net pension liability stands
at GBP12.1m at 31 December 2020 (2019: GBP13.4m).
The expense recognised in the consolidated income statement for
the Group ' s material defined benefit pension schemes consists of
interest on the obligation for employee benefits and the expected
return on scheme assets. The Group recognised a net expense of GBP
0.2m in the year (2019: GBP0.2m).
In June 2019, the Group recorded a pension curtailment gain of
GBP5.8m . The 2019 gain relates to the closure of the Hong Kong
defined benefit scheme.
6. Equity-settled transactions
During the year, the Group recognised an expense of GBP17.7 m in
respect of the share awards made in 2017, 2018, 2019 and 2020. For
2019, the charge was GBP 21.9m in respect of the share awards made
in 2016, 2017, 2018 and 2019. Under the 2011 Long Term Incentive
Plan in 2020, Deferred Share Awards granted had an average fair
value of 4,814p and LTIP Share Awards had an average fair value of
4,793p. Under the Deferred Share Plan in 2020, Deferred Share
Awards granted had an average fair value of 5,429p.
Under the 2011 Long-Term Incentive Plan, 278,996 Deferred Share
Awards (2019: 303,942) and 315,054 LTIP Share Awards (2019:
369,529) were granted during the period and, under the Deferred
Share Plan, 21,762 Deferred Share Awards (2019: 24,806) were
granted during the year.
7. Analysis of net debt
2020 2019
GBPm GBPm
============================================= ======= =======
Cash and cash equivalents per the Statement
of Financial Position 203.9 227.4
Overdrafts (20.5) (14.4)
============================================= ======= =======
Cash per the Statement of Cash Flows 183.4 213.0
============================================= ======= =======
The components of net debt are outlined below:
1 January Cash flow Non-cash Exchange 31 December
2020 adjustments adjustments 2020
GBPm GBPm GBPm GBPm GBPm
=================================== ========== ========== ============= ============= ============
Cash 213.0 (21.7) - (7.9) 183.4
=================================== ========== ========== ============= ============= ============
Borrowings:
Revolving credit facility US$800m
2021* (285.5) 285.5 - - -
Revolving credit facility US$850m
2025 - (130.3) - (5.2) (135.5)
Senior notes US$150m 2020 (114.7) 111.4 - 3.3 -
Senior notes US$15m 2021 (11.5) - - 0.4 (11.1)
Senior notes US$140m 2022 (107.0) - - 3.3 (103.7)
Senior notes US$160m 2023 (30.6) (89.8) - 1.9 (118.5)
Senior notes US$125m 2024 (95.6) - - 3.0 (92.6)
Senior notes US$120m 2025 (30.6) (59.8) - 1.6 (88.8)
Senior notes US$75m 2026 (57.4) - - 1.9 (55.5)
Other** (109.5) 110.2 2.2 (0.5) 2.4
=================================== ========== ========== ============= ============= ============
Total borrowings (842.4) 227.2 2.2 9.7 (603.3)
=================================== ========== ========== ============= ============= ============
Total financial net debt (629.4) 205.5 2.2 1.8 (419.9)
=================================== ========== ========== ============= ============= ============
Lease liability (246.0) 72.0 (50.9) 0.7 (224.2)
=================================== ========== ========== ============= ============= ============
Total net debt (875.4) 277.5 (48.7) 2.5 (644.1)
=================================== ========== ========== ============= ============= ============
* In January 2020, the $800m revolving credit facility that was
due to mature in 2021, was refinanced with a $850m revolving credit
facility maturing in 2025.
** Other borrowings include facility fees of GBP2.4m (2019:
GBP0.7m), GBP110.0m of other uncommitted borrowings were repaid in
January 2020.
2020 2019
GBPm GBPm
====================================== ====== ======
Borrowings due in less than one year 10.5 224.5
Borrowings due in one to two years 103.0 296.9
Borrowings due in two to five years 434.3 233.1
Borrowings due in over five years 55.5 87.9
====================================== ====== ======
Total borrowings 603.3 842.4
====================================== ====== ======
Description of borrowings
Total undrawn committed borrowing facilities as at 31 December
2020 were GBP494.0m (31 December 2019: GBP326.2m).
Key facilities
US$850m revolving credit facility
In January 2020, the US$800m multi-currency revolving credit
facility was refinanced with a US$850m revolving credit facility
maturing in 2025 which is the Group's principal bank facility.
Advances under the facility bear interest at a rate equal to LIBOR,
or their local currency equivalent, plus a margin, depending on the
Group's leverage. Drawings under this facility at 31 December 2020
were GBP135.5m (2019: GBP285.5m under previous facility).
In January 2021, US$850m of the facility was extended to 2026,
the impact of this would be a transfer of GBP135.5m from borrowing
due to be repaid between two and five years to borrowings due to be
repaid in over five years.
Private placement bonds
In December 2010 the Group issued US$250m of senior notes. These
notes were issued in two tranches with US$100m repaid on 15
December 2017 at a fixed annual interest rate of 3.2% and US$150m
repaid on 15 December 2020 at a fixed annual interest rate of
3.91%.
In October 2011 the Group issued US$265m of senior notes. These
notes were issued in three tranches with US$20m repaid on 18
January 2019 at a fixed annual interest rate of 3.0%, US$140m
repayable on 18 January 2022 at a fixed annual interest rate of
3.75% and US$105m repayable on 18 January 2024 at a fixed annual
interest rate of 3.85%.
In February 2013 the Group issued US$80m of senior notes. These
notes were issued in two tranches with US$40m repayable on 14
February 2023 at a fixed annual interest rate of 3.10% and US$40m
repayable on 14 February 2025 at a fixed annual interest rate of
3.25%.
In July 2014 the Group issued US$110m of senior notes. These
notes were issued in four tranches with US$15m repayable on 31 July
2021 at a fixed annual interest rate of 3.37%, US$20m repayable on
31 July 2024 at a fixed annual interest rate of 3.86%, US$60m
repayable on 31 October 2026 at a fixed annual interest rate of
4.05% and US$15m repayable on 31 December 2026 at a fixed annual
interest rate of 4.10%.
In December 2020 the Group issued US$200m of senior notes. These
notes were issued in two tranches with US$120m repayable on 2
December 2023 at a fixed annual interest rate of 1.97% and US$80m
repayable on 2 December 2025 at a fixed annual interest rate of
2.08%.
8. Acquisition of businesses
(a) Acquisitions
The Group completed no acquisitions in 2020.
(b) Prior period acquisitions
GBP0.5m (2019: GBP0.6m) was paid during the period in respect of
prior period acquisitions.
(c) Details of 2019 acquisitions
Full details of acquisitions made in the year ended 31 December
2019 are disclosed in note 10 to the Annual Report for 2019. The
provisional fair value adjustments disclosed in note 10 to the
Annual Report 2019 have been updated resulting in a decrease in
goodwill of GBP7.0m, comprising of an increase in intangibles of
GBP5.5m and a decrease in deferred tax asset of GBP1.1m.
(d) Impairment
Past acquisitions generated goodwill, which has been tested
annually as required by accounting standards. No impairment was
required; however due to the prevailing market conditions, this
will be kept under review.
(e) Reconciliation of goodwill
GBPm
===================================== =======
Goodwill at 1 January 2020 859.8
Additions 0.4
Disposals (3.0)
Transfer to acquisition intangibles (4.4)
Foreign exchange (16.9)
===================================== =======
Goodwill at 31 December 2020 835.9
===================================== =======
9. Property, plant, equipment and software
During the year ended 31 December 2020, the Group acquired fixed
assets with a cost of GBP79.8m (2019: GBP 116.8m). In addition, the
Group acquired fixed assets of GBPnil (2019: GBP0.6 m) through
business combinations (note 8).
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR UARWRAVUORAR
(END) Dow Jones Newswires
March 02, 2021 02:00 ET (07:00 GMT)
Intertek (LSE:ITRK)
Gráfica de Acción Histórica
De Mar 2024 a Abr 2024
Intertek (LSE:ITRK)
Gráfica de Acción Histórica
De Abr 2023 a Abr 2024
