Intertek Group Regulatory News (ITRK)

2011 HALF YEAR RESULTS ANNOUNCEMENT

1 AUGUST 2011

Intertek Group plc ("Intertek"), a leading international provider of quality and safety services, announces its half year results for the period ended 30 June 2011.

Strong growth in revenue and earnings

Highlights

·; Strong revenue growth of 17% to £763m; constant currency organic growth of 8.3%

·; Adjusted operating profit¹ margin 15.6%

·; Diluted EPS¹ increase of 12%

·; Good progress on Moody integration; savings delivery ahead of schedule

·; Three further acquisitions completed since 30 June 2011 for £11m

·; Restructuring of Finance and IT to save £10m per annum by 2014

·; Interim dividend increase of 15%

1. Adjusted results are stated before separately disclosed items which include amortisation of acquisition intangibles £9.5m (H1 10: £6.4m), acquisition and related integration costs £9.5m (H1 10: £3.6m), restructuring and other one-off costs £6.3m (H1 10: £2.8m). See Presentation of Results and note 3 to the Interim Financial Statements.

Wolfhart Hauser, Chief Executive Officer, commented:

"Intertek has delivered strong growth, successfully completed the strategic acquisition of Moody International and invested for future profit growth in the first half of the year.

Moody is performing very well, benefiting from structural recovery, rapid integration with the Intertek service and customer portfolio and achieving planned cost reductions ahead of schedule. For the two months post completion, pro forma revenue growth was 13% on an operating profit margin of 13%.

Our businesses continue to perform well overall, with strength in some areas offsetting slower growth in others. Commodities, Commercial & Electrical and the recently acquired Moody business are expected to continue to grow very well in the second half of the year. Consumer Goods is expected to make progress from the slower growth in the first half with its long term growth drivers remaining in place.

Whilst we are mindful of the uncertain economic conditions, we expect to grow revenue at high single digits on an organic constant currency basis for the full year with a margin close to that of the prior year."

Contacts

For further information, please contact

Aston Swift, Investor Relations

Telephone: +44 (0) 20 7396 3400 aston.swift@intertek.com

Richard Mountain, Financial Dynamics

Telephone: +44 (0) 20 7269 7121 richard.mountain@fd.com

Analysts' Meeting

There will be a meeting for analysts at 9.30am today at JPMorgan Cazenove, 20 Moorgate, London EC2R 6DA. A copy of the presentation will be available on the website later today.

The 2011 Half Year Report will be available to download from the website later today. If you wish to receive a hard copy of this report, please contact Intertek by email to investor@intertek.com or request by calling +44 (0) 20 7396 3400.

Corporate website: www.intertek.com 

HALF YEAR REPORT 2011

BUSINESS REVIEW

For the six months ended 30 June 2011

In order to present the performance of the Group in a clear, consistent and comparable format, certain items are disclosed separately on the face of the income statement. These items, which are described in the Presentation of Results section of this report and in note 3 to the Interim Financial Statements, are excluded from the adjusted results. The figures discussed in this review extracted from the income statement are presented before separately disclosed items.

Overview of performance

Revenue increased by 17% to £763.1m, principally due to strong organic growth and the effect of the Moody acquisition, partially offset by the effects of a stronger sterling exchange rate. At constant exchange rates revenue increased by 18%. Excluding the results of acquisitions made since 1 January 2010, organic revenue increased by 8% at constant exchange rates with all divisions contributing to growth.

Operating profit was £118.7m, up 17% at constant exchange rates driven by strong growth in Commercial & Electrical and Commodities and the recently acquired Moody business. The Group's adjusted operating margin was 30 basis points lower at actual exchange rates. Good organic margin growth in Commercial & Electrical and Commodities was offset by a weaker margin in Consumer Goods, the Moody acquisition and currency translation. At constant exchange rates the margin was down 20 basis points.

Net financing costs were £1.7m higher at £8.1m principally due to increased borrowings.

The adjusted effective tax rate was 28.0% (H1 10: 27.0%) and the full year rate is expected to be around this level.

Cash generated from operations was £76.3m, 13% lower than 2010 principally due to the phasing of payments within the year.

The Group completed the acquisition of Moody on 27 April for £450m on a debt and cash free basis. This was funded from existing and new debt facilities.

The Group ended the period in a strong financial position with net debt of £638.1m and an annualised net debt to EBITDA ratio of 1.9 on a pro forma basis (H1 10: 0.9).

Diluted adjusted earnings per share for the six months ended 30 June 2011 increased by 12% to 45.4p.

Following good progress during the first half including the outlook for the enlarged Group, the Board has approved a 15% increase in the interim dividend to 10.7p per share. The dividend will be paid on 18 November 2011 to shareholders on the register at 4 November 2011.

Business development highlights

Acquisitions

On 27 April 2011, the Group acquired 100% of the equity of Moody International (Moody) for £450m, on a cash free debt free basis. Moody is a leading worldwide provider of technical services to the global energy industry and a provider of systems certification services globally. Headquartered in the UK, Moody has approximately 2,500 people in over 80 offices and 60 countries. The acquisition of Moody extends the depth of the Group's portfolio of services for energy assets, processes and products, creating a new leading technical services platform for the global energy market and bringing global scale to our systems certification business. The integration of the Moody operations and employees into the Industry & Assurance division is progressing smoothly and we now expect to generate annual pre-tax synergies of around £6m per annum from 2012, one year earlier than expected.

Since 30 June 2011, the Group has completed three small bolt-on acquisitions for cash consideration of £8.2m. Further consideration of £2.7m is payable subject to certain performance conditions being met in the next two years.

Intertek as One Finance and IT restructuring

The Group continues to focus on delivery of overall margin improvement under its Intertek as One programme. Intertek aims to improve the Group's adjusted operating margin by 100 to 150 basis points by the end of 2014 from that reported in 2010. This is to be delivered through a combination of economies of scale, sales growth, revenue synergies and streamlining and improving the efficiency of back office support functions.

In 2010 the Group implemented its first integrated shared service centre across North America. The Group has now commenced on the next step in transforming its business services and is implementing a phased outsourcing of global IT applications and accounting back-office support. Working with Accenture, the programme will create a global shared services centre in Delhi, India for 10 countries where English is the predominant business language. The programme will be implemented in phases throughout the next two years.

This move will provide a more scalable and efficient platform to support the Group's strong growth at a lower cost and allow more efficient integration of acquisitions. The phased programme is expected to generate annual cost savings rising to approximately £10m per annum from 2014. This supports our medium term target of increasing the Group's margin by 100 to 150 basis points from the level reported in 2010. As the change programme will involve significant staff and organisational changes, the Group will record restructuring charges of around £11m over the next two years as the phases of the programme are implemented.

Separately disclosed items

Separately disclosed items before tax were £25.3m in the first half of 2011 (H1 10: £12.8m). This principally comprises the amortisation of acquisition intangibles of £9.5m (H1 10: £6.4m), acquisition transaction and integration costs of £9.5m (H1 10: £3.6m) and £6.3m for the finance and IT restructuring project described above. Further information on separately disclosed items is given in the Presentation of Results section of this report and in note 3 to the Interim Financial Statements.

OPERATING REVIEW BY DIVISION

As described in our Annual Report for 2010, from 1 January 2011, the Group's operational structure was reorganised to improve the alignment of our business lines with those of our customers. Certain divisions were also renamed to describe better their core activities. Our results for the six months to 30 June 2011 are reported in the new structure and all prior period comparative figures have been restated to show a like-for-like comparison. The restated segmental results for the six months to 30 June 2010 are presented in note 2 to the interim financial statements along with the previously reported segmental results. A review of the adjusted results of each division in the six months to 30 June 2011 compared to the six months to 30 June 2010 is set out below. 

Revenue and operating profit are presented at actual exchange rates and growth rates are shown at both actual and constant exchange rates. Operating profit and operating margin are stated before separately disclosed items.

Commodities

The Commodities division provides independent cargo inspection as well as non-inspection related laboratory testing, calibration and related technical services to the world's energy, petroleum, chemical and mining industries. The division also provides cargo scanning, fiscal support services and product conformity programmes to governments, national standards organisations and customs authorities. The minerals business line provides complete analytical and robotic solutions to the world's minerals, ore and mining industries offering key services such as analysis at the point of exploration and production of gold, precious metals and iron ore, fire assay, and testing and analysis of coal and coke as well as environmental monitoring.

Revenue increased to £251.2m, up 12.2% at constant exchange rates with growth from all business lines. In the oil and chemical sector, growth in the Americas, Middle East and Asia Pacific was partially offset by a decline in revenue in North Africa and parts of Europe where trading conditions have been challenging. There was strong growth from certain product conformity programmes and Minerals also performed very well, responding to buoyant market conditions and strong commodity prices.

Operating profit was £28.3m, up 21.5% at constant exchange rates and the operating margin was up 90 basis points.

The strong growth in minerals is expected to continue in the second half and the outlook for the oil and chemicals business is positive due to continued growth in demand in emerging economies which is expected to offset lower growth in mature markets.

Industry & Assurance

Industry & Assurance is a global provider of technical verification, inspection, testing and auditing services. This includes management systems certification, second-party auditing, supplier evaluation, conformity assessment, asset integrity management, expert consulting services, technical staffing, training, health and safety and risk consulting, and greenhouse gas services. We serve a wide variety of industries including oil, gas, petrochemical, power, renewable energy, and civil and infrastructure. We also provide services to customers in the food and agricultural sectors.

Total revenue increased to £154.6m, up 70.3% at constant exchange rates. Organic revenue increased by 3.0% at constant exchange rates. Good organic growth in systems certification and industry services was partially offset by a decline in the agricultural sector, where poor harvests of crops such as rice, cereals and pulses led to significantly reduced exports from North America. Excluding Agri, organic revenue increased by 6.3% at constant exchange rates.

The Moody business which was acquired on 27 April 2011 is being integrated into the Industry & Assurance division and is included in the above figures for the two months since acquisition. The new business is a good strategic and geographic fit with Intertek's existing portfolio and extends the depth of our portfolio of services for energy assets, processes and products, creating a new leading technical services platform for the global energy market and bringing global scale to our systems certification business. The business has performed very well since acquisition with pro forma revenue growth of 13% in the two months since acquisition and an operating margin of 13%.

Total operating profit was £15.1m, up 106.8% at constant exchange rates and the margin increased by 180 basis points.

The second half revenue will be materially higher than the first half due to a full half year contribution from the Moody acquisition.

Consumer Goods

The Consumer Goods division provides services to the textiles, toys, footwear, hardlines and retail industries. Services include testing, inspection, auditing, advisory services, quality assurance, and hazardous substance testing.

Revenue in Consumer Goods was £146.3m, up 3.6% at constant exchange rates. This growth was wholly organic. Revenue grew in all business lines apart from Inspection, which reported a small decline. Strong growth in countries such as Turkey, Vietnam, Bangladesh and Korea was reduced by flat revenues in China and a decline in Hong Kong. Manufacturing activity in China was slow to resume after the New Year shut down and was slower than expected due to economic pressures on costs.

Operating profit was 3.9% lower at £47.0m at constant exchange rates and the operating margin declined 250 basis points. The decline in margin was due to reduced volumes of specialised, high margin testing, cost pressures in China and organic investment in new facilities and activities.

The key drivers of the Consumer Goods business remain unchanged. Concerns over the safety of consumer products, ongoing legislation, the sourcing of products from countries where production costs are low, the trend towards shorter product life-cycles and increasing product variety will continue to contribute to our growth. The second half organic revenue growth at constant exchange rates is expected to be higher than the first half rate of 3.6%.

Commercial & Electrical

The Commercial & Electrical division provides services including testing and certification, electromagnetic compatibility testing (EMC), outsourcing, benchmark and performance testing and environmental testing. These are provided to a wide range of industries including the home appliance, lighting, medical, building, industrial and heating, ventilation and air conditioning (HVAC), information and communications technology (ICT), renewable energy, energy storage and automotive industries.

Commercial & Electrical delivered strong growth in the first half of 2011 across all business streams, all of which was organic. Revenue increased to £141.4m, up 10.9% at constant exchange rates. This growth was primarily due to testing and certification for new product development and product launches in the core service lines such as electrical & electronic, HVAC, ICT and lighting as well as services for renewable energy and energy efficiency. Recent investments into photo-voltaic and energy storage for electric vehicles testing are adding to this growth.

Operating profit was £22.9m, up 33.1% at constant exchange rates and the margin improved by 270 basis points to 16.2% due to the strong growth across the business lines, and the favourable geographic mix of growth, with the fastest growth coming from China and Asia which also have the highest margins.

This strong first half performance is expected to continue in the second half.

Chemicals & Pharmaceuticals

Chemicals and Pharmaceuticals provides a range of advanced laboratory and consulting services to chemical, automotive, aerospace and medical and pharmaceutical industries. Our expert services span next generation drug development, prototype materials testing, manufacturing support to chemical product registrations and regulatory submissions. We have an unrivalled track record of success in laboratory outsourcing with many large international companies.

Total revenue increased to £69.6m, up 13.5% at constant exchange rates, including organic revenue growth of 7.7%. Good growth in the chemicals & materials and in regulatory consulting services was mitigated by a decline in revenue in pharmaceuticals, where the market remains soft in the near term.

Total operating profit was £5.4m, up 10.2% at constant exchange rates.

Action is being taken to improve underperforming areas; whilst the pharmaceutical market is not expected to recover significantly in the second half.

PRESENTATION OF RESULTS

Adjusted results

In order to present the performance of the Group in a clear, consistent and comparable format, certain items are disclosed separately on the face of the income statement. These items which are described below, are excluded from the adjusted results.

Organic growth

Organic growth figures are calculated by excluding the results of acquisitions made since 1 January 2010.

Constant rates

In order to remove the impact of currency translation from our growth figures we present revenue and profit growth at constant rates. This is calculated by translating H1 10 results at H1 11 exchange rates.

Separately disclosed items

Separately disclosed items are items which by their nature or size, in the opinion of the Directors, distort the business performance of the Group and its operating divisions. When applicable, these items include amortisation of acquisition intangibles, impairment of goodwill and other assets, the profit or loss on disposals of businesses or other significant fixed assets, costs of acquiring and integrating acquisitions, the cost of any fundamental restructuring, material claims and settlements, significant recycling of amounts from equity to the income statement and unrealised market gains/losses on financial assets/liabilities. Details of the separately disclosed items for the six months ended 30 June 2011 and the comparative prior period are given in note 3 to the Interim Financial Statements. 

PRINCIPAL RISKS AND UNCERTAINTIES

The Board has overall responsibility for the establishment and oversight of the Group's risk management framework. The Board has an established, structured approach to risk management, which includes continuously assessing and monitoring the key risks and uncertainties of the business. During the first half of the year the risk management framework has been reviewed by the Board to ensure it remains relevant. The principal risks relevant to the Group, which are set out on pages 38 to 41 of the Group's Annual Report for 2010, which is available from our website at www.intertek.com, are outlined below:

·; Foreign currency risks

·; Interest rate risk

·; Liquidity risk

·; Credit risk

·; Taxation risk

·; Loss of key facilities

·; Risk of financial irregularities

·; Risk of litigation

·; Legal and regulatory compliance

·; Dependence on accreditation

·; Environmental health and safety risks

·; Political risk

·; Reputational risk

On 27 April 2011, the Group acquired Moody International for £450m. This is a material and complex acquisition, comprising 99 legal entities in over 60 countries which is being integrated into Intertek's Industry & Assurance division. This is the largest acquisition completed by the Group and whilst Intertek has successfully integrated acquisitions in the past and has a well developed approach to dealing with integration issues, it is recognised that there is an inherent risk in the process. In view of its size and complexity, management consider the integration of Moody to be a new risk to the Group, particularly in the first 12 months post acquisition. In order to minimise this risk the Group has established a dedicated integration team and appointed external advisors to help management ensure that the process is managed effectively. To date the integration is progressing well and ahead of schedule.

The Business Review and Operating Review by Division include consideration of key uncertainties affecting the Group in the remaining six months of the year.

MANAGEMENT REPORTS

Intertek will issue the next interim management statement in the fourth quarter of 2011. The year end results will be announced on 5 March 2012.

HALF YEAR REPORT

If you require a hard copy of this statement please contact the Group Company Secretary. This statement is available on www.intertek.com.

LEGAL NOTICE

RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE HALF YEAR REPORT

We confirm that to the best of our knowledge:

• the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU;

• the interim management report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

By order of the board of Intertek Group plc

Independent review report to Intertek Group plc

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half year report for the six months ended 30 June 2011 which comprises the condensed consolidated interim income statement, statement of comprehensive income, statement of financial position, statement of changes in equity, statement of cash flows and the related explanatory notes. We have read the other information contained in the half year report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Services Authority ("the UK FSA"). Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

The half year report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half year report in accordance with the DTR of the UK FSA.

The annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half year report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half year report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half year report for the six months ended 30 June 2011 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.

Paul Korolkiewicz

for and on behalf of KPMG Audit Plc

Chartered Accountants15 Canada Square

London E14 5GL29 July 2011

Condensed Consolidated Interim Income Statement

Six months ended 30 June 2011

* See note 3.

** Earnings per share on the adjusted result is disclosed in note 6.

Condensed Consolidated Interim Statement of Comprehensive Income

Six months ended 30 June 2011

Condensed Consolidated Interim Statement of Financial Position

As at 30 June 2011

Condensed Consolidated Interim Statement of Changes in Equity

Six months ended 30 June 2011

*After £244.1m for goodwill written off to retained earnings as at 1 January 2004 in relation to subsidiaries acquired prior to 31 December 1997.

** The Group purchased through its Employee Benefit Trust 20,000 shares (2010: 31,000) of Intertek Group plc to satisfy the future likely vesting of shares.

The dividend of £30.1m which was paid on 17 June 2011 represented a final dividend of 18.8p per ordinary share in respect of the year ended 31 December 2010. The dividend of £27.6m which was paid on 18 June 2010 represented a final dividend of 17.3p per ordinary share in respect of the year ended 31 December 2009. There was an issue of 588,017 ordinary shares during the prior period on exercise of share awards.

Condensed Consolidated Interim Statement of Cash Flows

Six months ended 30 June 2011

Notes to the Condensed Consolidated Interim Financial Statements

1 Basis of preparation

Reporting entity

Intertek Group plc (the 'Company') is a company incorporated and domiciled in the United Kingdom. The Condensed Consolidated Interim Financial Statements of the Company as at and for the six months ended 30 June 2011 comprise the Company and its subsidiaries (together referred to as the 'Group').

The Consolidated Financial Statements of the Group as at and for the year ended 31 December 2010, are available upon request from the Company's registered office at 25 Savile Row, London W1S 2ES. An electronic version is available from the Investors section of the Group website at www.intertek.com.

Statement of compliance

These Condensed Consolidated Interim Financial Statements are prepared in accordance with IAS 34: Interim Financial Reporting as endorsed and adopted for use in the European Union and the Disclosure and Transparency Rules (DTR) of the Financial Services Authority. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the Consolidated Financial Statements of the Group as at and for the year ended 31 December 2010.

The comparative figures for the financial year ended 31 December 2010 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditors and delivered to the registrar of companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

Significant accounting policies

These Condensed Consolidated Interim Financial Statements are unaudited and, except as described below, have been prepared on the basis of accounting policies consistent with those applied in the Consolidated Financial Statements for the year ended 31 December 2010.

There are no new standards effective for the first time in the current financial period with significant impact on its consolidated results or financial position.

Risks and uncertainties

The Operating Review includes consideration of the risks and uncertainties affecting the Group in the remaining six months of the year. The Board has reviewed forecasts, including forecasts adjusted for significantly worse economic conditions, and remains satisfied with the Group's funding and liquidity position. On the basis of its forecasts, both base case and stressed, and available facilities, the Board has concluded that the going concern basis of preparation continues to be appropriate.

Estimates

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these Condensed Consolidated Interim Financial Statements, the nature of the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation were the same as those that were applied to the consolidated financial statements as at and for the year ended 31 December 2010. During the six months ended 30 June 2011 management reassessed its estimates in respect of contingent consideration payable in respect of acquisitions made in prior periods (note 10 (c)) and also in respect of claims and settlements (note 3).

Foreign operations

The assets and liabilities of foreign operations, including goodwill, arising on acquisition, are translated to sterling at foreign exchange rates ruling at the reporting date. The income and expenses of foreign operations are translated into sterling at cumulative average rates of exchange during the year.

The most significant currencies for the Group were translated at the following exchange rates:

Business analysis

On 1 January 2011 the internal operating structure of the Group was reorganised into five operating divisions (2010: six) to improve the alignment of business lines with those of its customers. In addition certain divisions were renamed to describe better their core activities. The key changes are:

·; Oil, Chemical & Agri (OCA) was renamed Commodities and incorporates Minerals;

·; Analytical Services (AS) was renamed Chemicals & Pharmaceuticals and incorporates Health & Environmental (formerly in IS); and

·; Industrial Services (IS) was renamed Industry & Assurance and incorporates Food (formerly in Consumer Goods), Agri (formerly in OCA) and Upstream (formerly in AS).

The information given in the operating segments in note 2 is presented in the new structure and prior period comparatives for the six months to 30 June 2010 have been restated to provide a like-for like comparison.

From 1 January 2011, the Group is organised into five operating divisions: Commodities, Industry & Assurance, Consumer Goods, Commercial & Electrical and Chemicals & Pharmaceuticals. The costs of corporate head office and other costs which are not controlled by the operating divisions are allocated to these divisions. These divisions are the basis on which the Group reports its primary segment information. A description of the activity in each division is given below.

Commodities provides testing, inspection and other technical services to the global petroleum and minerals industries, and supports government programmes, helping our clients power the global economy.

Industry & Assurance provides a wide range of engineering, inspection, auditing, and testing services

Consumer Goods partners with global retailers, manufacturers, and distributors to enhance clients' products, processes, and brands.

Commercial & Electrical provides manufacturers and retailers the most comprehensive scope of safety, performance and quality testing and certification services.

Chemicals & Pharmaceuticals helps international organisations across a wide range of industries to sharpen their competitive edge by providing advanced measurement, consulting and related technical support services to accelerate research programmes, process efficiency and product development.

Prior to 1 January 2011, the Group was organised into six divisions: Consumer Goods, Commercial & Electrical, Oil, Chemical & Agri, Analytical Services, Industrial Services and Minerals.

2 Operating segments

Six months ended 30 June 2010 (as previously reported)

Geographical analysis

In presenting the information on the basis of geographical segments, segment revenue is based on the location of the entity generating that revenue.

3 Separately disclosed items

In line with IAS 38, acquisition intangibles are amortised over their useful economic life. This amortisation is excluded from adjusted results and is separately disclosed as this is consistent with the way in which results are reviewed by Intertek management and provides a consistent view of performance across the Group's operations.

Acquisition and integration costs of £9.5m comprise £8.0m in relation to the acquisition of Moody International, £1.0m in respect of related integration costs and £0.5m for acquisitions not yet completed. In the six months ended 30 June 2010 the amount of £3.6m included £2.6m in connection with an aborted acquisition, £0.5m for completed acquisitions and £0.5m for integration costs.

Costs of £6.3m have been incurred in connection with a business process outsourcing project in which certain of the Group's finance and IT processes will be outsourced to a service provider based in India.

Costs of £2.8m were incurred in the six months ended 30 June 2010 in settlement of an employment issue in the USA.

The income tax associated with the separately disclosed items is a credit of £4.5m for the six months ended 30 June 2011 (six months ended 30 June 2010: £3.2m credit).

4 Income tax expense

Income tax expense is recognised based on management's best estimate of the weighted average annual income tax rate expected for the full financial year applied to the pre-tax income of the interim period in respect of the adjusted results. The income tax expense for the adjusted results for the six months ended 30 June 2011 is £31.0m (six months ended 30 June 2010: £26.3m). The Group's adjusted consolidated effective tax rate for the six months ended 30 June 2011 is 28.0% (six months ended 30 June 2010: 27.0%). The income tax expense for the total results for the six months ended 30 June 2011 is £26.5m (six months ended 30 June 2010: £23.1m). The Group's consolidated effective tax rate for the six months ended 30 June 2011 is 31.1% (six months ended 30 June 2010: 27.3%). Differences between the estimated adjusted effective rate of 28.0% and the weighted average notional statutory UK rate of 26.5% include, but are not limited to the mix of profits, the effect of tax rates in foreign jurisdictions, non deductible expenses, the effect of utilised tax losses and under/over provisions in previous periods.

The Budget on 23 March 2011 revised the previously announced phased reduction in the UK statutory corporation tax rate. The rate is now proposed to reduce to 23.0% (previously 24.0%) by 1 April 2014. The reduction in the UK corporation tax rate from 26.0% to 25.0% was substantially enacted on 5 July 2011. This change will not have a significant impact on the Group since the majority of its operations are outside the UK.

5 Income tax recognised in other comprehensive income and equity

Income tax in other comprehensive income

Six months ended 30 June 2011

Income tax in equity

Six months ended 30 June 2011

6 Earnings per share

7 Pension schemes

During the period the Group made a special contribution of £1.2m (six months ended 30 June 2010: £1.2m) into the Intertek Pension Scheme.

The Directors have evaluated the significant assumptions used in the valuation of the Group's defined benefit pension schemes and consider that there is no significant change in the net liabilities of the schemes since 31 December 2010. Therefore actuarial valuations of the assets and liabilities of the defined benefit pension schemes for IAS 19 purposes were not performed at 30 June 2011.

The expense recognised in the consolidated interim income statement for the Group's defined benefit pension schemes consists of the current service cost, interest on the obligation for employee benefits and the expected return on scheme assets. For the six months ended 30 June 2011, the Group recognised a net expense of £0.9m (six months ended 30 June 2010: £0.9m).

8 Equity-settled transactions

The Company has operated a share option scheme and two long-term incentive plans, details of which were contained in the Annual Report for the year ended 31 December 2010. The share option scheme has been discontinued and the last options under the scheme were granted on 13 September 2005. Awards under the first long-term incentive plan were made from April 2006 to May 2010. A new, similar, Long Term Incentive Plan was approved by shareholders in May 2011. Under the new plan, 399,467 Share Awards (2010: 501,849 under the old plan) and 297,754 Performance Shares (2010: 358,779 under the old plan) were granted during the period. The Performance Shares have both an EPS (Earnings per Share) and a TSR (Total Shareholder Return) condition.

In accordance with IFRS 2 - Share Based Payments, the fair value of services received in return for share awards granted to employees, is measured by reference to the fair value of the share awards granted. The estimate of the fair value of the services received is measured based on the Monte Carlo formula, a financial model used to calculate the fair value of the awards.

During the six months ended 30 June 2011, the Group recognised an expense of £4.6m in respect of the share awards made in April 2008, 2009, 2010 and 2011. For the six months ended 30 June 2010, the charge was £3.8m in respect of the share awards made in April 2007, 2008, 2009 and 2010. The shares granted in 2011 had fair values of 1,834p for the Share Awards and for the EPS condition in the Performance Shares and 1,109p in respect of the TSR condition for the Performance Shares.

9 Analysis of net debt

In January 2010, the Group signed a US$60m bilateral, multi-currency facility available to 25 January 2013. Drawings under this facility at 30 June 2011 were nil.

In December 2010, the Group signed a multi-currency facility available to 31 March 2016. The facility comprises a £20m multi-currency revolver facility and a €12m multi-currency term loan facility. On 22 March 2011 the £20m multi-currency revolver facility was increased by £10m to £30m. Drawings under these facilities at 30 June 2011 were £35.9m.

In February 2011, the Group successfully completed the refinancing of the principal bank facility. The new syndicated facility comprises a US$600m multi-currency revolving credit facility available to 31 March 2016. Advances under the new facility bear interest at a rate equal to LIBOR, or their local currency equivalent, plus a margin, depending upon the Group's leverage. On execution of the new facility, the Group's previous principal bank facility was cancelled. Drawings under this facility at 30 June 2011 were £305.7m.

On 4 March 2011 the Group signed a $300m facility with a Group of banks to part fund the Moody International acquisition. This facility matures on 31 March 2013 with part principal repayments of US$60m due on each of 31 December 2011 and 31 December 2012. Advances under the facility bear interest at a rate equal to LIBOR plus a margin, depending on the Group's leverage. Drawings under this facility at 30 June 2011 were £187.5m.

Private placement bonds

In June 2008, the Group raised US$100m by way of a senior note issue. The notes are repayable on 26 June 2015 and pay a fixed annual interest rate of 5.54%. In December 2008, the Group issued a further US$100m of senior notes. These notes were issued in two tranches with US$25m repayable on 21 January 2014 at a fixed annual interest rate of 7.5% and US$75m repayable on 10 June 2016 at a fixed annual interest rate of 8.0%. In December 2010, the Group issued a further US$250m of senior notes. These notes were issued in two tranches with US$100m repayable on 15 December 2017 at a fixed annual interest rate of 3.20% and US$150m repayable on 15 December 2020 at a fixed annual interest rate of 3.91%.

10 Acquisition of businesses

(a) Moody International

The sole acquisition in the period, which occurred on 27 April 2011 was the acquisition of 100% of the equity of Moody International (comprising Moody International (Holdings) Limited, Inspection Services (US) Inc and Inspection Services Italy (SRL)) for a cash consideration of £449.9m, on a cash and debt free basis. Moody International is headquartered in Haywards Heath, UK and operates in over 60 countries. It is a leading worldwide provider of quality and safety services to the global energy industry. It also provides systems certification services to the manufacturing, construction and service markets. This acquisition is being integrated into the Industry & Assurance division.

Provisional details of net assets acquired and fair value adjustments are set out in the following table. The analysis is provisional and amendments may be made to these figures in the 12 months following the date of the acquisition.

\* Trade receivables comprise gross contractual amounts due of £51.6m with a fair value of £49.7m

The goodwill of £312.2m represents the value of the assembled workforce and the benefits Intertek expects to gain from becoming a leading provider of quality and safety services for the global energy market, creating a global platform for the provision of Industry Services, extending existing EU and American positions and extending the depth of the service portfolio for energy assets, processes and products.

The intangible assets of £145.9m represent the value placed on customer contracts and relationships and the deferred tax thereon was £44.7m.

The revenue for the period 27 April 2011 to 30 June 2011 was £53.9m. The revenue for the period 1 January 2011 to 26 April 2011 was £104.7m. The profit for the period 27 April 2011 to 30 June 2011 attributable to the Group was £2.0m. The profit for the period 1 January 2011 to 27 April 2011 was £2.6m.

(b) Acquisitions subsequent to the balance sheet date

Subsequent to the balance sheet date, the Group completed three small bolt-on acquisitions for cash consideration of £8.2m. Further consideration of £2.7m is payable subject to certain performance conditions being met in the next two years.

(c) Prior period acquisitions

Consideration of £2.3m was paid during the period in respect of prior period acquisitions.

(d) Impact of acquisitions on the Group results

The Group revenue and profit for the six months ended 30 June 2011 attributable to the Group would have been £867.8m and £55.7m respectively if the acquisition was assumed to have been made on 1 January 2011.

(e) Details of 2010 acquisitions

Full details of acquisitions made in the year ended 31 December 2010 were disclosed in note 22 to the Annual Report for 2010.

(f) Reconciliation of goodwill

11 Property, plant, equipment and software

(a) Acquisitions and disposals

During the six months ended 30 June 2011, the Group acquired fixed assets with a cost of £36.7m (six months ended 30 June 2010: £26.4m; year ended 31 December 2010: £65.9m) including assets acquired through business combinations (note 10) of £5.1m (six months ended 30 June 2010: £1.6m; year ended 31 December 2010: £3.6m).

There were disposals with net book value of £0.3m during the six months ended 30 June 2011 (six months ended 30 June 2010: £0.1m; year ended 31 December 2010: £1.0m). This resulted in a loss on disposal of nil for the six months ended 30 June 2011 (six months ended 30 June 2010: nil; year ended 31 December 2010: £0.2m).

(b) Capital commitments

Contracts for capital expenditure which are not provided in these accounts amounted to £8.2m (at 30 June 2010: £4.5m; at 31 December 2010: £5.6m).

12 Related parties

Identity of related parties

The Group has a related party relationship with its key management.

Transactions between the Company and its subsidiaries and between subsidiaries have been eliminated on consolidation and are not discussed in this note.

Transactions with key management personnel

Key management personnel compensation, including the Group's Directors, is shown in the table below.

Detailed information concerning Directors' remuneration, shareholdings, pension entitlements, share awards and other long-term incentive plans for the year ended 31 December 2010 was disclosed in the Remuneration Report in the Annual Report for 2010.

Apart from the above, no member of key management had a personal interest in any business transactions of the Group.

13 Contingent liabilities

Claims and litigation

From time to time, the Group is involved in various claims and lawsuits incidental to the ordinary course of its business, including claims for damages, negligence and commercial disputes regarding inspection and testing and disputes with employees. The Group is not currently party to any legal proceedings other than ordinary litigation incidental to the conduct of business.

The outcome of the litigation to which Intertek Group companies are party cannot be readily foreseen. Based on information currently available, the Directors consider that the cost to the Group of any likely unfavourable outcome arising from such litigation would not be expected to have a materially adverse effect on the financial position of the Group in the foreseeable future.

Tax

The Group operates in more than 100 countries and is subject to a wide range of complex tax laws and regulations. At any point in time it is normal for there to be a number of open years in any particular territory which may be subject to enquiry by local authorities.Where the effect of the laws and regulations is unclear, estimates are used in determining the liability for the tax to be paid on past profits which are recognised in the financial statements. The Group considers the estimates, assumptions and judgements to be reasonable; but this can involve complex issues which may take a number of years to resolve. The final determination of prior year tax liabilities could be different from the estimates reflected in the financial statements.

14 Approval

The Condensed Consolidated Interim Financial Statements were approved by the Board on 29 July 2011.