Intertek Group Revenue up 6.6% year‐on‐year

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Intertek Group plc (LON:ITRK) has today announced its 2019 full year results.

2019 Year Highlights (IAS 17 basis)

· Revenue of £2,987m: +4.8% at constant currency rates, +6.6% at actual rates

· Organic revenue growth of +3.3% at constant rates: Products +2.3%, Trade +4.1%, Resources +5.7%

· 1.5% revenue growth from acquisitions in attractive growth and margin sectors

· Adjusted operating margin of 17.2%: +10bps at constant rates, in-line with prior year at actual rates

· Adjusted operating profit of £513.3m: +5.2% at constant rates, +6.5% at actual rates

· Adjusted diluted EPS of 211.7p: +5.2% at constant rates, +6.8% at actual rates

· Free cash flow of £380.0m, +8.4% year-on-year driven by strong cash conversion

· Full year dividend per share of 105.8p, an increase of 6.8%

· ROIC of 22.8%, up 220bps at actual rates, up 150bps at constant rates

IFRS16 Reporting

IFRS 16 was adopted on 1 January 2019 for our statutory reporting, without restating prior year figures. As a result, the discussion of our operating results is on an IAS 17 basis for all periods presented, unless otherwise stated. Under IFRS 16, the Group delivered adjusted operating profit of £524.2m, generating a margin of 17.5% and adjusted diluted EPS of 212.5p. Statutory operating profit was £485.8m and statutory diluted EPS was 192.6p.

Key Adjusted Financials	2019IAS 17¹	2018IAS 17¹	Change at actual ratesIAS 17	Change at constant rates²IAS 17	2019IFRS 16¹
Revenue	£2,987.0m	£2,801.2m	6.6%	4.8%	£2,987.0m
Organic revenue³	£2,925.6m	£2,782.9m	5.1%	3.3%	£2,925.6m
EBITDA⁴	£616.5m	£570.5m	8.1%	6.5%	£695.7m
EBITDA margin⁴	20.6%	20.4%	20bps	30bps	23.3%
Operating profit⁴	£513.3m	£481.8m	6.5%	5.2%	£524.2m
Operating margin⁴	17.2%	17.2%	–	10bps	17.5%
Profit before tax⁴	£483.0m	£456.5m	5.9%	4.6%	£484.8m
Diluted earnings per share⁴	211.7p	198.3p	6.8%	5.2%	212.5p
Dividend per share	105.8p	99.1	6.8%	–	105.8p
Return On Invested Capital⁴	22.8%	20.6%	+220bps	+150bps	23.7%

Key Statutory Financials¹	2019IAS 17¹	2018IAS 17¹	Change at actual ratesIAS 17	2019IFRS 16¹
Revenue	£2,987.0m	£2,801.2m	6.6%	£2,987.0m
Operating profit	£474.9m	£436.2m	8.9%	£485.8m
Operating margin	15.9%	15.6%	30bps	16.3%
Profit before tax	£443.3m	£404.5m	9.6%	£445.1m
Profit after tax	£332.2m	£305.2m	8.8%	£333.6m
Diluted earnings per share	191.8p	174.7p	9.8%	192.6p

1. Following the adoption of IFRS 16 Leases on 1 January 2019, the Group’s statutory results for the twelve months ended 31 December 2019 are on an IFRS 16 basis, whereas the statutory results for the twelve months ended 31 December 2018 are on an IAS 17 basis as previously reported. For comparability, we have also presented the Group’s results for the twelve months ended 31 December 2019 on an IAS 17 basis and the associated growth rates are on this basis. Additional detail is provided in notes 1 and 10 of this release.

2. Constant currency is calculated by translating 2018 results at 2019 exchange rates.

3. Organic revenue growth excludes the impact of acquisitions and disposals in 2018 and 2019.

4. Adjusted results are stated before Separately Disclosed Items (‘SDIs’), see note 3 to the Condensed Consolidated Financial Statements. A reconciliation between reported and adjusted measures is shown in the Presentation of Results section.

The Directors will propose a final dividend of 71.6p per share (2018: 67.2p) at the Annual General Meeting on 21 May 2020, to be paid on 11 June 2020 to shareholders on the register at close of business on 22 May 2020.

André Lacroix, Intertek Group Chief Executive Officer statement
“In 2019, the Group has delivered revenue of £2,987m, up 6.6% year‐on‐year at actual rates and 4.8% at constant rates, driven by broad‐based organic growth of 3.3% at constant rates, by the contribution of the acquisitions we made recently in attractive growth and margin sectors and by a 180bps benefit due to foreign exchange translation. We have made continued progress on margin, profitability and free cash flow, with a record margin of 17.2% up 10bps at constant rates, EPS growth of 6.8% and a cash conversion of 127%. In-line with our dividend policy, that targets a payout ratio of circa 50%, we have announced a full year dividend of 105.8p, an increase of 6.8%.
2019 is the fifth consecutive year of revenue, EPS and cash progression which is a testament to our strong operating platform enabling the group to deliver sustainable value creation for all stakeholders. In the last five years we have made significant progress both on strategy and performance and we are extremely well positioned to seize the exciting growth opportunities ahead capitalising on the core strengths of Intertek: Our Total Quality Assurance (TQA) superior customer service, our powerful portfolio, our high margin and highly cash generative earnings model, our passionate customer-centric organisation and our disciplined performance management.
Prior to the outbreak of the Novel Coronavirus, we were targeting the Group to deliver continuous progress in 2020 with broad based good organic revenue growth at constant currency, good organic growth in Products and Trade and robust growth in Resources, moderate margin progression and strong cash conversion. However, Intertek is not immune to the impact of the Novel Coronavirus and our 2020 performance will be affected by the temporary disruption to the supply chains of our clients in China and any impact it might have on global trade activities. It is too early to quantify the impact of the Novel Coronavirus.
The $250 billion global Quality Assurance industry has attractive structural growth prospects driven by an increased focus of corporations on risk management, investments of our clients to improve the safety and wellness of their employees, global trade flows, global demand for energy, expanding regulations, more complex sourcing and distribution operations, technological innovations, government investments in large infrastructure projects, and increased consumer demand for higher quality and more sustainable products.
Our purpose to bring quality, safety and sustainability to life is truly meaningful to our clients given the increased complexity in their operations. We are benefiting from higher demand from our customers for our industry-leading TQA solutions that provides leading Assurance, Testing, Inspection and Certification (ATIC) services that are mission-critical to our customers across multiple industries through our global network of subject-matter experts and over 1,000 state-of-the-art facilities in over 100 countries.”