Intertek Group plc (LON:ITRK) has announced its full year results.
• Revenue of £3,328.7m, +7.1% at constant currency and +4.3% at actual rates
• Highest LFL revenue growth in the last 10 years with 6.2% LFL revenue growth at constant currency
• LFL of 8.2% in Corporate Assurance, Health and Safety, Industry and Infrastructure, and World of Energy combined; Consumer Products LFL of 1.3%
• JLA, SAI and CEA acquisitions performing well, and Controle Analítico and PlayerLync integrations on track
• Acquisition of Base Met Labs to expand our Minerals ATIC offering in attractive growth and margin markets
• Adjusted operating profit of £551.1m, +10.9% at constant currency and +6.0% at actual rates
• Adjusted operating margin of 16.6%, +60bps at constant currency and +30bps at actual rates
• Adjusted diluted EPS of 223.0p, +11.0% at constant currency and +5.6% at actual rates
• Daily cash discipline delivers an all-time high operating cash flow of £749.0m with cash conversion of 122%
• Strong balance sheet; net debt reduced by £127m to £611m, and leverage ratio improved to 0.8x
• ROIC of 20.5%, +250bps year-on-year at constant currency and at actual rates
• Cost reduction programme delivered savings of £13m in 2023 and £10m expected in 2024
• Proven high quality compounding model; On track to deliver our medium-term margin target of 17.5%+
• Robust 2024 outlook: Mid-single digit LFL at constant currency, margin progression and strong cash flow
• Full Year dividend of 111.7p up 5.6% year-on-year; increasing targeted dividend payout to circa 65% from 2024
A FY results video is available on our website: https://www.intertek.com/investors/2023-full-year-results-video/
André Lacroix: Chief Executive Officer statement
“I would like to recognise all my colleagues for their unwavering support enabling us to deliver a strong 2023 performance in revenue growth, margin, EPS, cash and ROIC. Our revenue grew by 7.1% at constant currency driven by a LFL revenue growth of 6.2%, the highest in the last 10 years, and the contribution of our acquisitions. Our systemic performance management drove strong profit conversion with margins rising 60bps at constant currency, driving EPS growth of 11.0% at constant currency. Cash conversion at 122% was excellent. We have delivered our highest ever cash from operations of £749m resulting in our net debt declining by £127m to £611m. We have a strong balance sheet giving us the ability to invest in growth. ROIC increased by 250bps to 20.5%.
Our clients are increasing their focus on Risk-based Quality Assurance to operate with higher standards on quality, safety and sustainability in each part of their value chain, triggering a higher demand for our ATIC solutions which are powered by our Science-based Customer Excellence ATIC Advantage. Over the last nine years, from 2014-2023, we have delivered a CAGR of 5.3%, 6.1% and 6.0% for revenue, operating profit and EPS, notwithstanding the impact of Covid. In May 2023, we unveiled our Intertek AAA differentiated growth strategy to capitalise on the best-in-class operating platform we have built and target the areas where we have opportunities to get better. Our highly engaged, customer-centric organisation is laser-focused to take Intertek to greater heights putting our AAA strategy in action and continuing to deliver sustainable growth and value for all stakeholders.
Based on our positive momentum, we expect the Group will deliver a robust performance in 2024 with mid-single digit LFL revenue growth at constant currency, margin progression and a strong cash flow performance. We are on track to get back to our peak margin of 17.5% and beyond in the medium-term, capitalising on 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.
We believe in the value of accretive disciplined capital allocation. In recognition of our highly cash generative earnings model, our strong financial position, the Board’s confidence in the attractive long-term growth prospects for the Group and its ability to fund continued growth investments, we are increasing our targeted dividend payout ratio to circa 65% of earnings from 2024.”
| Key Adjusted Financials |  | 2023 | 2022 | Change at actual rates | Change at constant rates1 |
| Revenue | £3,328.7m | £3,192.9m | 4.3% | 7.1% | |
| Like-for-like revenue2 | £3,300.9m | £3,192.9m | 3.4% | 6.2% | |
| Operating profit3 | £551.1m | £520.1m | 6.0% | 10.9% | |
| Operating margin3 | 16.6% | 16.3% | 30bps | 60bps | |
| Profit before tax3 | £507.2m | £488.2m | 3.9% | 9.2% | |
| Diluted earnings per share3 | 223.0p | 211.1p | 5.6% | 11.0% | |
| Dividend per share | 111.7p | 105.8p | 5.6% | ||
| Cash flow from operations less net capex3 | £643.6m | £609.7m | 5.6% | ||
| Adjusted Free Cash Flow3 | £378.4m | £386.3m | (2.0%) | ||
| Financial net debt4 | £610.6m | £737.9m | (17.3%) | ||
| Financial net debt / EBITDA3, 4 | 0.8x | 1.1x | |||
| ROIC5 | 20.5% | 18.0% |
| Key Statutory Financials | 2023 | 2022 | Change at actual rates | 1 Constant rates are calculated by translating 2022 results at 2023 exchange rates. | |
| Revenue | £3,328.7m | £3,192.9m | 4.3% | 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 24. 4 Financial net debt excludes the IFRS 16 lease liability of £307.8m. Total net debt is £918.4m. See note 6 on page 36. 5 ROIC is defined as adjusted profit after tax divided by invested capital. | |
| Operating profit | £486.2m | £452.4m | 7.5% | ||
| Operating margin | 14.6% | 14.2% | 40bps | ||
| Profit before tax | £422.3m | £419.8m | 0.6% | ||
| Profit after tax | £318.1m | £306.8m | 3.7% | ||
| Diluted earnings per share | 183.4p | 178.4p | 2.8% | ||
| Cash generated from operations | £725.9m | £704.1m | 3.1% |
The Directors will propose a final dividend of 74.0p per share (2022: 71.6p) at the Annual General Meeting on 24 May 2024, to be paid on 21 June 2024 to shareholders on the register at close of business on 31 May 2024.
Analysts’ Call
A live audiocast for analysts and investors will be held today at 10am. 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
The Annual Report comprising the Strategic, Sustainability and Financial Reports for the year ended 31 December 2023 will be available on the Company’s website www.intertek.com on 22 March 2024.
