Intertek profit margin declines despite 10 per cent rise in revenue

Intertek Group, which provides solutions to industries worldwide, has posted a 9.9 per cent year-on-year rise in revenue for the first four months of the year, driven by organic growth, favourable currency movements and the benefit of acquisitions made in 2012 and 2013. However, the group's operating profit margin is below the level seen last year following the impact of the sharp profit decline in the minerals business. This minerals decline is now expected to continue into the second half of the year as that sector overall experiences a more prolonged downturn.Divisionally, in Commodities, revenue from minerals, especially in Australia, Brazil and the Philippines, declined more sharply than the company had expected. This was primarily as a result of a reduction in mining activities leading to lower sample volumes and price competition. The decline follows strong growth in the prior year and is characteristic of this more cyclical industry. Oil cargo inspection grew well in the period, the group said.Industry & Assurance saw the technical inspection of energy assets grew well, driven mainly by capital investment going into the oil, gas, power and renewables industries, whilst growth from Business Assurance was weaker.Within Consumer Goods, growth in textiles continued to be "strong", with good demand also in factory auditing services. The firm said Toys and hardlines were flat, whilst awaiting an improvement in trading from a tighter regulatory environment expected for the mid-year buying season.In Commercial & Electrical, it said the increased investments made in 2012 are ramping up and starting to have a positive effect on the volume of testing. Electric vehicles and lighting continued to register strong growth, however slower demand in some European countries for electrical testing, a weaker renewable market and strong comparables for medical device testing as a result of new regulations in 2012 moderated the division's overall growth rate.Chemicals & Pharmaceuticals had a mixed start to the year with health, environmental and regulatory and pharmaceutical services growth being much stronger than chemicals and materials.Wolfhart Hauser, Chief Executive Officer of Intertek, said: "Revenue grew well overall in the period against high comparable growth from last year and in a more variable economic environment than we had expected at the beginning of the year. "Looking ahead, whilst we expect the margin drag from the minerals business to reduce in the second half, its effect is expected to leave full year group margin broadly stable with the prior year."NR