Intertek Group Share News (ITRK)

(Alliance News) - Trading at Intertek Group PLC was better-than-expected, but weaker foreign exchange rates could limit any forecast increases, analysts on Friday said.

In a trading update for the four months to April, issued on Friday, the London-based consumer product testing and certification agency said revenue rose 7.5% at constant currency to GBP1.08 billion, or by 2.0% at actual rates.

In the first four months of 2023, Intertek reported revenue of GBP1.06 billion, up 11% from GBP951.3 million a year earlier.

Shares in Intertek were up 1.4% to 5,025.00 pence in London on Friday morning. The wider FTSE 100 index was down 0.5%.

Chief Executive Andre Lacroix said: "We have had a strong start to 2024.

"Recent acquisitions are performing well, benefitting from the scale-up opportunities within our global network, and we continue to invest in organic and inorganic opportunities in high-growth and high-margin segments."

Intertek said revenue rose 7.0% on a like-for-like basis with growth broad-based. Like-for-like revenue rose 6.2% in Consumer Products, 7.6% in Corporate Assurance, 9.9% in Health and Safety, 4.2% in Industry and Infrastructure, and 9.4% in World of Energy.

Intertek reaffirmed its outlook for 2024 outlook for mid-single digit like-for-like revenue growth, margin progression and strong free cash flow.

"We are well positioned 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," Lacroix added.

Analysts at Citigroup said organic growth of 7% was above Visible Alpha consensus of 5.7%.

Citi said organic growth in Consumer Products of 6.2% was well above consensus at 4.2%, "and in that crucial division (over 40% of adjusted earnings before interest and tax in 2023) management increased the full-year guide to mid-single digit from low-to-mid single digit."

Elsewhere, Citi noted World of Energy delivered organic growth of 9.4% versus consensus at 6.9%.

"The beats in these lab-based divisions should deliver operational leverage and be helpful for divisional margins at constant FX, " Citi said.

"Industry and Infrastructure was a little disappointing, with organic growth of 4.2% coming in below consensus at 6.9%. This was principally because building and construction was worse than management expected," the bank noted.

Citi also noted that currency rates have "worsened" for Intertek, with management guiding to revenue and earnings headwinds of 200 and 300 basis points respectively. This compared to previous guidance of 150bps for both provided in early March.

Stifel called it a "solid start to the year" for Intertek with better-than-expected organic growth of 7%, offset by weaker forex than expected.

This left revenue in line with expectations, the broker added.

Stifel said "we should see a small upgrade of organic growth expectations, but offset by weaker FX on both the top line and earnings, which should leave consensus estimates broadly unchanged."

"We think this is a solid start to the year, highlighted by this better organic growth performance, however we do not see room for estimate upgrades as FX weighs."

By Jeremy Cutler, Alliance News reporter

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