Last checked at 13 Nov 2008 07:00
Interim Management Statement
Intertek Group plc ("Intertek"), the leading international provider of quality and safety services to a wide range of industries, releases its Interim Management Statement for the period 1 January 2008 to 31 October 2008.
The Group has continued its strong first half performance. Total revenue growth for the ten month period to 31 October 2008, against the same period last year, was 27% at actual exchange rates. This comprised 12% organic revenue growth at constant exchange rates; 8% revenue growth from acquisitions made in 2007 and 2008; and 7% favourable exchange rate movements. Favourable exchange rate movements are due to the weakness of sterling against many currencies, including the US dollar, Hong Kong dollar and Chinese renminbi, the three currencies that make up over half of group revenue.
The key growth drivers behind Intertek's business model remain intact, being:
Global, regional and local trade through new product development; increasing demand for high quality, safe and environmentally-friendly products imposed by regulation, as well as end-customer preferences; increased outsourcing of in-house testing; and growth in demand for independent certifiers of internationally traded goods.These drivers have supported our revenue growth in 2008, despite reduced economic activity in some of the countries and business sectors in which we operate. These drivers are expected to continue to produce good organic revenue growth throughout the cycle, albeit at moderated levels in weaker periods of economic growth.
Intertek continues to monitor closely its markets and will respond swiftly to any changes in the overall economic environment, ensuring that its cost base is aligned appropriately to the levels of growth in its respective markets. The Group is also progressing the internal "Intertek as One" programme, which includes increasing cross-selling opportunities, the implementation of shared service solutions and improving the efficiency of back office functions.
The Group continued its acquisition strategy and so far this year has completed 11 transactions for total consideration of £67 million. These acquisitions are in complementary industries, or provide services that the Group can leverage to increase long term value for shareholders. Growth through selective acquisitions remains a key part of the Group's strategy, with the future pace of acquisitions likely to reflect the prevailing economic conditions.
The Group has in place £484 million of committed debt facilities, of which £390 million falls due in three years or longer. The current ratio of net debt to EBITDA (earnings before interest, tax, depreciation, goodwill and intangible asset amortisation) at under 1.5 times, is significantly within the Group's bank financial covenant of 3.5 times.
The following narrative summarises year to date performance to 31 October 2008 by division.
Consumer Goods has continued its strong performance with revenue growth of approximately 35% at actual exchange rates, of which approximately 21% was organic at constant exchange rates. Toys testing, driven by the requirements of retailers and manufacturers to improve product safety, is driving this strong growth and this is likely to be sustained as a result of the recent enactment of the Consumer Product Safety Improvement Act in the US. The other segments within this division also performed well. Divisional margin remained stable, with strong growth in higher margin textiles and toys businesses offsetting the dilutive effect of lower margin areas which continue to bring new growth.
Commercial & Electrical has performed well at the top line with revenue growth of approximately 23% at actual exchange rates, of which approximately 9% was organic at constant exchange rates. Despite the continued cost inflation in Asia and slower growth in Europe, the margin in this division has improved compared to that achieved at the half year.
Oil, Chemical & Agri has continued with very good revenue growth of approximately 22% at actual exchange rates, of which around 14% was organic at constant exchange rates. The demand for testing and inspection services for petroleum products has been at elevated levels during the commodities boom. Hurricanes Ike and Gustav caused a work stoppage in the Intertek labs due to customers' capacity reductions. This has resulted in around £2 million of lost revenue, most of which has impacted operating profit. There may be recovery of some of this from insurance after the deduction of an excess. Despite the effect of the hurricanes, the margin in this division is higher than that reported for the full year of 2007.
Revenue growth in the New Divisions is strong at approximately 41% at actual exchange rates, of which around 7% was organic at constant exchange rates. Analytical Services, making up about 60% by revenue of the sector, was also impacted by the hurricanes in the US, and continued to suffer from delays and cancellations from pharmaceutical clients. Costs are being reduced in the affected laboratories. Minerals, making up about 20% by revenue of the sector, continued to exhibit very strong growth as the laboratories continued to fill capacity. A seven year contract with Fortescue Metals Group in Australia that commenced in the first half has continued to grow well. Industrial, the smallest division in the sector grew well, breaking even as it continued to build scale.
As anticipated following the termination of the Ecuador contract at the end of February 2008, Government Services is showing no revenue growth at actual exchange rates and reduced profits at constant exchange rates. This division now accounts for less than 5% of Group revenue. The Board is conducting a strategic review of the division which could lead to a restructuring of its business activities.
Commenting, Wolfhart Hauser, CEO Intertek, said:
"We have had a good first ten months of the year, reflecting our robust business model. Whilst we remain vigilant of the changing global economic picture, our key growth drivers remain intact and we believe that these will continue to allow us to deliver organic growth in 2009."
-ends-
| Contacts |
| Aston Swift / Sarah Ogilvie |
| Telephone: +44 (0) 20 7396 3400 |
| aston.swift@intertek.com / sarah.ogilvie@intertek.com |
| Richard Mountain / Sophie Kernon, Financial Dynamics |
| Telephone: +44 (0) 20 7831 3113 |
| richard.mountain@fd.com / sophie.kernon@fd.com |
Notes to Editors
ABOUT INTERTEK
Intertek (LSE: ITRK) is the leading provider of quality and safety solutions serving a wide range of industries around the world. From auditing and inspection, to testing, quality assurance and certification, Intertek people are dedicated to adding value to customers' products and processes, supporting their success in the global marketplace. Intertek has the expertise, resources and global reach to support its customers through its network of more than 1,000 laboratories and offices and over 23,000 people in 110 countries around the world.
www.intertek.com
Copyright Business Wire 2008