Intertek Group plc (LON:ITRK) has announced its 2024 half year results.
Strong performance with double digit growth in operating profit, EPS and free cash flow
• Revenue of £1,669.5m, +6.6% at constant currency, and +1.8% at actual rates
• Broad-based LFL revenue growth of 6.1%1: Consumer Products 6.0%, Corporate Assurance 8.3%, Health and Safety 8.5%, Industry and Infrastructure 2.2%, and World of Energy 8.3%
• Recent acquisitions in attractive growth and margin segments performing well
• Cost reduction programme delivered savings of £5m in H1 24 and £11m expected in 2024
• Adjusted operating profit of £265.1m, +14.2% at constant currency and +8.0% at actual rates
• Strong margin progression of 110bps1 driven by mix, pricing, operating leverage, cost control and productivity
• Double digit adjusted EPS growth: +17.5% at constant currency and +10.2% at actual rates
• Daily cash discipline delivers cash conversion of 118%1 and +14%2 growth in free cash flow
• Strong financial position: net debt reduced to £708m2 and net debt/EBITDA improved to 1.0x
• Continuing investment in growth: acquisition of Base Met Labs and capex of £56m
• Excellent progress in ROIC to 20.4% up +220bps at constant currency and +110bps at actual rates
• Interim dividend of 53.9p, +43.0% year on year in line with new dividend policy of 65% payout ratio
• Strong H2 2024 expected, on track to deliver our medium-term targets of mid-single digit LFL revenue growth1, 17.5%+ margin and strong cash
André Lacroix: Intertek Group Chief Executive Officer statement
“I would like to recognise all my colleagues for having delivered a strong performance in the first half of 2024, resulting in double-digit growth in adjusted operating profit, adjusted EPS and free cash flow. Our revenue grew by 6.6%1 driven by broad based LFL revenue growth of 6.1%1 and the contribution of acquisitions. We have seen strong margin progression of 110bps1 driven by mix, pricing initiatives, operating leverage linked growth, our disciplined cost approach and productivity improvements.
Our cash performance was excellent with cash conversion of 118%1 and free cash flow up 14% strengthening our balance sheet. We continue to invest in growth to seize the exciting organic and inorganic opportunities we see in high growth and high margin segments. We are pleased with the performance of our acquisitions and the integration of Base Met Labs is progressing well. Our ROIC increased by 220bps to 20.4%1 demonstrating the strong returns of our high-quality earnings model.
Our clients are increasing their focus on Risk-based Quality Assurance to operate with higher standards on quality, safety and sustainability in each part of their value chain. This is triggering higher demand for our ATIC solutions and creating a significant value growth opportunity moving forward, capitalising on our high-quality compounder earnings model. Indeed, during the period from 2014 to 2023, we delivered growth of 59% in revenue, an 81% EBITDA progression, a margin increase of 110bps, a cash flow improvement of +80%, a 128% dividend increase and 420bps improvement in ROIC.
Our good to great journey continues and in May 2023, we unveiled our Intertek AAA differentiated growth strategy to accelerate our revenue growth leveraging the best-in-class operating platform we have built, and targeting the areas where we have opportunities to get better. Our highly engaged, customer-centric organisation is laser-focused to take Intertek to greater heights, and the execution of our AAA strategy is on track to create sustainable growth and value for all stakeholders.
We enter the second half of the year with confidence, given the day-adjusted LFL growth rate acceleration in the May/June period and we expect the Group will deliver a strong performance in 2024 with mid-single digit LFL revenue growth at constant currency, margin progression and a strong cash flow performance. We are well-positioned to deliver our medium-term target of 17.5%+ margin, leveraging the revenue growth acceleration we are seeing for our ATIC solutions, our disciplined performance management and our investments in high growth and high margin segments.”
Note 1: at constant currency
Note 2: at actual rates
| Key Adjusted Financials | 2024 H1 | 2023 H1 | Change at actual rates | Change at constant rates1 | ||
| Revenue |  | £1,669.5m | £1,640.0m | 1.8% | 6.6% | |
| Like-for-like revenue2 | | £1,659.6m | £1,637.5m | 1.3% | 6.1% | |
| Operating profit3 | | £265.1m | £245.4m | 8.0% | 14.2% | |
| Operating margin3 | | 15.9% | 15.0% | 90bps | 110bps | |
| Profit before tax3 | | £242.6m | £223.2m | 8.7% | 16.2% | |
| Diluted earnings per share3 | | 104.9p | 95.2p | 10.2% | 17.5% | |
| Interim dividend per share | | 53.9p | 37.7p | 43.0% | ||
| Cash generated from operations3 | | £267.4m | £270.5m | (1.1%) | ||
| Free cash flow3 |  | £90.6m | £79.6m | 13.8% | ||
| Financial net debt4 | | £708.2m | £791.3m | (10.5%) | ||
| Financial net debt / EBITDA3, 4 | | 1.0x | 1.1x | |||
| ROIC (rolling 12 months) | 20.4% | 19.3% | 110bps | 220bps | ||
| Key Statutory Financials | 2024 H1 | 2023 H1 | Change atactual rates | 1 Constant rates are calculated by translating H1 23 results at H1 24 exchange rates. 2 LFL revenue includes acquisitions following their 12-month anniversary of ownership and excludes the historical contribution of any business disposals/closures. 3 Adjusted results are stated before Separately Disclosed Items (‘SDIs’), see note 3 to the Condensed Consolidated Financial Statements. 1,2,3 Reconciliations for these measures are shown in the Presentation of Results section on page 20. 4 Financial net debt excludes the IFRS 16 lease liability of £294.6m. Total net debt is £1,002.8m. Reflects prior 12 months’ EBITDA for relevant period. See note 7 to the Condensed Consolidated Financial Statements. | |
| Revenue | £1,669.5m | £1,640.0m | 1.8% | ||
| Operating profit | £232.4m | £215.0m | 8.1% | ||
| Operating margin | 13.9% | 13.1% | 80bps | ||
| Profit before tax | £206.2m | £191.7m | 7.6% | ||
| Profit after tax | £153.3m | £142.3m | 7.7% | ||
| Diluted earnings per share | 87.2p | 80.4p | 8.5% | ||
| Cash generated from operations | £260.3m | £261.6m | (0.5%) |
The Directors have approved an interim dividend of 53.9p per share (H1 23: 37.7p) to be paid on 8 October 2024 to shareholders on the register at close of business on 13 September 2024.
Intertek CEO Letter
I would like to recognise all my colleagues for having delivered a strong performance in the first half of 2024, resulting in double-digit growth in adjusted operating profit, adjusted EPS and free cash flow. Our revenue grew by 6.6%1 driven by broad based LFL revenue growth of 6.1%1 and the contribution of acquisitions. We have seen strong margin progression of 110bps1 driven by mix, pricing initiatives, operating leverage linked growth, our disciplined cost approach and productivity improvements.
Our cash performance was excellent with cash conversion of 118%1 and free cash flow up 14% strengthening our balance sheet. We continue to invest in growth to seize the exciting organic and inorganic opportunities we see in high growth and high margin segments. We are pleased with the performance of our acquisitions and the integration of Base Met Labs is progressing well. Our ROIC increased by 220bps to 20.4%1 demonstrating the strong returns of our high-quality earnings model.
Our clients are increasing their focus on Risk-based Quality Assurance to operate with higher standards on quality, safety and sustainability in each part of their value chain. This is triggering higher demand for our ATIC solutions and creating a significant value growth opportunity moving forward, capitalising on our high-quality compounder earnings model. Indeed, during the period from 2014 to 2023, we delivered growth of 59% in revenue, an 81% EBITDA progression, a margin increase of 110bps, a cash flow improvement of +80%, a 128% dividend increase and 420bps improvement in ROIC.
Our good to great journey continues and in May 2023, we unveiled our Intertek AAA differentiated growth strategy to accelerate our revenue growth leveraging the best-in-class operating platform we have built, and targeting the areas where we have opportunities to get better. Our highly engaged, customer-centric organisation is laser-focused to take Intertek to greater heights, and the execution of our AAA strategy is on track to create sustainable growth and value for all stakeholders.
We enter the second half of the year with confidence, given the day-adjusted LFL growth rate acceleration in the May/June period and we expect the Group will deliver a strong performance in 2024 with mid-single digit LFL revenue growth at constant currency, margin progression and a strong cash flow performance. We are well-positioned to deliver our medium-term target of 17.5%+ margin, leveraging the revenue growth acceleration we are seeing for our ATIC solutions, our disciplined performance management and our investments in high growth and high margin segments.
Note 1: at constant currency
