Intertek Group Regulatory News (ITRK)

7 Mar 2005 07:00

Intertek Group PLC07 March 2005 PRELIMINARY 2004 RESULTS ANNOUNCEMENT 7 MARCH 2005 Intertek Group plc ("Intertek"), the global testing, inspection andcertification company, today announces its preliminary results for the year to31 December 2004. FINANCIAL HIGHLIGHTS Turnover £499.6m Up 6.0% at actual exchange rates Up 14.5% at constant exchange rates(1)Operating profit (2) £85.2m Up 11.8% at actual exchange rates Up 23.5% at constant exchange rates(1)Operating margin (2) 17.1% Up from 15.8% at constant exchange ratesOperating cash flow (3) £73.9m Up 31.0%Profit before tax £75.8m Up 7.4%Earnings per share (4) 36.3p Up 22.2%Basic earnings per share 34.1p Up 8.9%Dividend per share 10.4p Up 18.2% 1. Excluding acquisitions and disposals, turnover was up 11.6% and operating profit was up 20.1% at constant exchange rates.2. Before goodwill amortisation and exceptional items and including profit from associates3. After net capital expenditure.4. Fully diluted underlying earnings per share before goodwill amortisation and exceptional items. CHIEF EXECUTIVE OFFICER, RICHARD NELSON commented: In 2004, each of our divisions achieved excellent growth in turnover andoperating profit at both constant and actual exchange rates. At actual exchangerates, turnover in 2004 was £499.6m, 6.0% above 2003 and operating profit was£85.2m, 11.8% above 2003. Approximately 80% of Intertek's profits were in USdollars or currencies that move in line with the US dollar. The average value ofthe US dollar compared to sterling in 2004 has declined by 12% since 2003 whichreduced the results on translation into sterling. At constant exchange rates,turnover grew by 14.5% and operating profit grew by 23.5%. Despite the currencyeffect, the headline earnings per share increased by 22.2% to 36.3p. We made seven acquisitions in the year at a cost of £27.6m. Excluding theresults of the acquisitions and disposals made in 2003 and 2004, at constantexchange rates, turnover increased by 11.6% and operating profit increased by20.1%. Labtest, which tests and inspects textiles, toys and other consumer goods aswell as certifying systems, continued to perform very strongly. Turnoverincreased by 11.2% and operating profit increased by 16.9% at constant exchangerates. Excluding the results of acquisitions and disposals made in 2003 and2004, at constant exchange rates, turnover grew by 13.5% and operating profitgrew by 16.6%. The most significant growth areas in Labtest continued to be thetesting of textiles, toys and hardlines, particularly in China and Hong Kong,where the key business drivers remained strong. Caleb Brett, which inspects and tests oil and chemicals, reported strong growthin 2004. Whilst market conditions improved compared to last year due to highervolumes of shipments, the main source of growth continued to be outsourcedtesting. This business grew by 34% increasing its contribution to divisionalturnover from 25% to 30%. Several new contracts were gained in the year,including business from Avecia, ChevronTexaco, ExxonMobil, BP and Shell. ETL SEMKO, which tests, inspects and certifies electrical and electronic goods,reported strong growth in 2004 with turnover up 19.4% at constant exchangerates. Excluding the results of acquisitions, turnover grew by 8.0% at constantexchange rates. The main acquisition was Entela Inc, an automotive componenttesting business located in the US and acquired in May 2004. Turnover in Asiaincreased, particularly in China where the demand for safety testing of homeappliances continued to grow. In Foreign Trade Standards turnover and operating profit grew very wellprincipally due to the pre-shipment inspection contract in Venezuela whichstarted in the second half of 2003, and due to all the other main contractsperforming well. The Group will continue to focus on extending the services we offer tocustomers. The key growth drivers remain strong and there are many newopportunities to develop both organically and through acquisitions. Based on our continuing confidence in the future growth of the business, theBoard is recommending a final dividend of 7.0p per share making the full yeardividend 10.4p, an increase of 18.2% on last year. After more than 20 years leading Intertek, I have decided to retire in Marchthis year from my role as Chief Executive Officer. I will then serve on theBoard as Non-Executive Deputy Chairman. I am delighted that Wolfhart Hauser isbecoming Chief Executive Officer and I am confident that under his leadershipthe Group will continue to drive growth and produce excellent value for itscustomers and returns for its shareholders. ANALYSTS' MEETINGThere will be a meeting for analysts at 9.30am today at Goldman SachsInternational, Peterborough Court, 133 Fleet Street, London EC4A 2BB. A copy ofthe presentation will be available on the website later today. CONTACT For further information, please contactAston Swift, Treasurer and Investor Relations Telephone: +44 (0) 20 7396 3400 aston.swift@intertek.comTim Lynch, Tulchan CommunicationsTelephone: +44 (0) 20 7353 4200 tlynch@tulchangroup.comCorporate website: www.intertek.com High resolution images of Intertek Group plc businesses are available todownload, free of charge from www.vismedia.co.uk. ABOUT INTERTEKIntertek is a leading international testing, inspection and certificationorganisation which assesses customers' products and commodities against a widerange of safety, regulatory, quality and performance standards and certifies themanagement systems of customers. Intertek has 294 laboratories and over 13,500people around the world and is increasingly undertaking outsourced testing workfor its customers. REVIEW OF RESULTS FOR 2004OverviewIn 2004, each of the divisions achieved excellent growth in turnover andoperating profit at both constant and actual exchange rates. Group turnover was£499.6m, up 6% on the previous year at actual exchange rates and up 14.5% atconstant exchange rates. Total operating profit before goodwill amortisation and operating exceptionalitems, was £85.2m, up 11.8% on the previous year at actual exchange rates and up23.5% at constant exchange rates. Labtest and Foreign Trade Standards continuedto grow well and produce excellent results. Following the restructuring andmanagement changes in 2003, ETL SEMKO and Caleb Brett markedly improved theirresults over last year, showing excellent growth in turnover and operatingprofit. About 80% of the Group's results are denominated in US dollars or currencieslinked to the US dollar. The strength of sterling against the US dollar andrelated currencies during 2004 had a negative impact on the results of the Groupon translation into sterling. In order to compare the Group's results for 2004with 2003 at constant exchange rates, the reported results for 2003, have beenretranslated into sterling using the 2004 average exchange rates. In 2004, the Group made seven acquisitions and two disposals for a netconsideration of £27.6m. Excluding the results of the acquisitions and disposalsmade in 2003 and 2004, at constant exchange rates turnover increased by 11.6%over the previous year and operating profit increased by 20.1%. The Group's operating margin after central overheads improved from 15.8% to17.1% with increases in every division. The growth in each division is shown below at both constant and actual exchangerates. The figures at constant exchange rates are used in the explanation belowof the performance of each division. FINANCIAL PERFORMANCE BY DIVISION Turnover Total operating profit (2) 2004 2003 Growth at Growth at 2004 2003 Growth at Growth at constant rates actual rates constant rates actual rates £m £m % % £m £m % %---------------------- ------- ------ ------ ------ ------ ------ ------ ------Labtest 132.3 119.0 11.2 1.1 45.0 38.5 16.9 5.1 Caleb Brett 177.3 157.9 12.3 4.5 15.5 11.9 30.3 17.4 ETL SEMKO 122.4 102.5 19.4 9.7 17.5 13.0 34.6 23.2Foreign TradeStandards 67.6 56.8 19.0 14.4 14.0 11.4 22.8 17.6Centraloverheads - - - - (6.8) (5.8) 17.2 15.3---------------------- ------- ------ ------ ------ ------ ------ ------ ------ Continuingoperations atconstantexchangerates(1) 499.6 436.2 14.5 - 85.2 69.0 23.5 - Exchange rateadjustment - 34.9 - - - 7.2 - ------------------------ ------- ------ ------ ------ ------ ------ ------ ------ As reported atactual averageexchange rates 499.6 471.1 - 6.0 85.2 76.2 - 11.8---------------------- ------- ------ ------ ------ ------ ------ ------ ------ 1. 2004 and 2003 figures are stated at average annual exchange rates for 2004.2. Total operating profit is stated before goodwill amortisation and exceptional items. REVIEW OF 2004 DIVISIONAL PERFORMANCEOperating profit referred to in the discussion below is total operating profitbefore goodwill amortisation and operating exceptional items. Growth rates arecalculated using constant exchange rates. Labtest Labtest continued to perform very strongly and maintained its market leaderposition. Labtest's turnover increased by 11.2% to £132.3m and operating profitincreased by 16.9% to £45.0m. Excluding the results of the acquisitions anddisposals made in 2003 and 2004, turnover increased by 13.5% and operatingprofit increased by 16.6%. About 90% of the operating profits of the divisionare generated in Asia where the main drivers of the Labtest business continuedto be strong: retailers increasing their sourcing of products from China andother parts of Asia, their need for reliable testing of quality and safetycertification, shorter product life cycles and widening ranges of products, andmanufacturers wanting technical support on quality. Textiles, toys and hardlinestesting all performed well and there was growth in social compliance auditing.Inspection work declined slightly due to increased competition and pricingpressure. Our businesses in China and India grew particularly well, accountingfor about 16% and 4%, respectively, of the division's total turnover in 2004.The division's operating margin increased from 32.4% in 2003 to 34.0% in 2004. In September, the Group completed a transaction with Atlas LLC whereby twoLabtest subsidiaries in the laboratory equipment sales business were sold toAllium LLC, a newly formed company, in return for a 40% interest in it. Atlassimultaneously sold its business to Allium in return for a 60% interest. Thisbusiness generated turnover of £4.7m and an operating loss of £0.2m in 2004, upto the date of disposal. In March 2004, Labtest acquired a small business inMauritius. Caleb Brett Caleb Brett reported strong growth in 2004. Turnover increased by 12.3% to£177.3m and operating profit increased by 30.3% to £15.5m. The cargo inspectionmarket accounted for 70% of the turnover in 2004 (2003: 75%). Whilst marketconditions improved compared to last year due to higher volumes of shipments,the main source of growth continued to be outsourced testing. This business grewby 34%, increasing its contribution to divisional turnover from 25% to 30%.Several new contracts were gained during the year, including business fromAvecia, ChevronTexaco, ExxonMobil, BP and Shell. Caleb Brett's operating marginincreased from 7.5% in 2003 to 8.7% in 2004, partly due to the reduced cost basewhich resulted from the restructuring in the first half of 2003 and partly dueto the growth in outsourcing which has a higher margin than cargo inspection andtesting. In April, Caleb Brett acquired the assets of Vestfold TelemarkMetering, a consultancy company offering metering services in Norway, for £1.0mand in December it bought the assets of Kelley Completion Services, an offshoreoil and gas measurement business operating in the Gulf of Mexico for £5.3m. ETL SEMKO Following the restructuring and management changes made in 2003, ETL SEMKOreturned to a strong growth position. Turnover increased by 19.4% to £122.4m andoperating profit increased by 34.6% to £17.5m. In May 2004, ETL SEMKO boughtEntela Inc., a US automotive component testing business for £16.2m. The businesshas performed well and accounted for about half the turnover growth in thedivision. ETL SEMKO also made two other small acquisitions in the year.Excluding the results of these three acquisitions, turnover increased by 8.0%and operating income increased by 23.8%. Asia continued to perform strongly,particularly in the safety testing of household appliances manufactured in Chinafor export to the West. The sales team in the United States has been successfulin gaining acceptance for the ETL safety label from the major retailers. ETLSEMKO has traditionally had a very small share of the market in the UnitedStates for the safety testing and labelling of electrical products sold byretailers, but it is now starting to compete aggressively in this marketalthough the main competitor still has a strongly entrenched position. Thedivision's operating margin increased from 12.7% to 14.3%, due to the reducedcost base following the restructuring in the second half of 2003 and the growthin Asia, where the profit margin is higher than in the West. Foreign Trade Standards Turnover increased by 19.0% to £67.6m and operating profit increased by 22.8% to£14.0m. The operating margin increased from 20.1% to 20.7%. The growth wasprincipally due to the pre-shipment inspection contract in Venezuela whichstarted in the second half of 2003 and due to the other main contractsperforming well. Central overheads Central overheads increased by 17.2% to £6.8m in the year, principally due tothe strengthening of central IT resources and additional expenses on internalaudit and compliance. INTERESTThe Group's net interest charge before exceptional items for the year was £5.4mcompared to £7.9m in 2003. The decrease was primarily due to the reduced levelof net borrowings during the year. In December 2004, the Group arranged a new £300m credit facility with its banks.Fees of £0.6m were incurred in connection with this arrangement. The newfacility replaced the credit facilities put in place at the time of the Group'sflotation in 2002. The fees associated with the previous credit arrangement werebeing amortised over five years but the balance of £2.1m was fully amortised in2004. The total fee amortisation of £2.7m was reported as an exceptional financecharge in 2004. PROFIT BEFORE TAXProfit before tax was £75.8m compared to £70.6m in 2003, mainly due to the goodtrading performance in the year. TAXATIONTax on profit before exceptional items was £20.8m, £2.1m higher than last yearbut the effective tax rate before exceptional items reduced from 27.8% to 26.5%.The effective tax rate is expected to be close to the current year level in theshort to medium-term. NET PROFITNet profit after tax and exceptional items but before minority interests was£55.5m compared to £51.8m last year. MINORITY INTERESTSProfit attributable to minority shareholders reduced from £3.7m in 2003 to £2.8min 2004, mainly due to the reduction in minority shareholdings in certain of theGroup's subsidiaries in China. EARNINGS PER SHAREAs set out in note 10 to the Financial Statements, basic earnings per share inthe year were 34.1p (2003: 31.3p), an increase of 8.9%. An adjusted earnings pershare calculation is also shown which removes the impact of exceptional itemsand goodwill amortisation to give underlying basic earnings per share of 36.5p(2003: 29.8p). DIVIDENDAn interim dividend of 3.4p per share (2003: 2.9p) was paid on 16 November 2004.A final dividend of 7.0p per share (2003: 5.9p) has been proposed, which subjectto shareholder approval, will be paid on 17 June 2005, to shareholders on theRegister at 3 June 2005. This makes a full year dividend of 10.4p per share, up18.2% over last year. SHAREHOLDERS' DEFICITThe net profit after minority interests for 2004 of £52.7m (2003: £48.1m) wasreduced by dividends of £16.1m (2003: £13.6m). Shareholders' deficit reduced by£39.5m in the year, mainly due to retained profits of £36.6m (2003: £34.5m) andfavourable foreign exchange movements taken through reserves of £7.1m (2003:£10.2m), reduced by an actuarial loss on the pension funds of £6.6m (2003: £1.6mgain) . At the end of 2004, shareholders' funds were in deficit by £3.6mcompared to a deficit of £43.1m at 31 December 2003. The deficit arisesprincipally from the write-off of goodwill in 1996 when the Group was purchasedfrom its former owners. This amounted to £229.9m at 31 December 2004. CASH AND LIQUIDITYThe Group's net debt at 31 December 2004, was £112.4m compared to £132.2m at theprevious year end. The principal inflow arose from operating activities whichgenerated £101.9m (2003: £80.0m). The principal outflows were £36.3m (2003:£6.8m) for net repayment of borrowings, £28.2m (2003: £24.4m) in respect of thepurchase of fixed assets, £26.3m (2003: £7.8m) related to the cost ofacquisitions, £18.5m (2003: £15.3m) related to dividends, £16.0m (2003: £13.7m)tax paid and £5.3m (2003: £7.3m) net interest paid. Throughout the year there has continued to be a strong focus on cash managementwith an emphasis on working capital management. ACQUISITIONS AND DISPOSALSDuring 2004, the Group made seven acquisitions and two disposals for a netconsideration of £27.6m. In April, Caleb Brett acquired the assets of VestfoldTelemark Metering, a consultancy company offering metering services in Norway,for £1.0m. In May, Avecia outsourced its Analytical Sciences Group to CalebBrett in the UK, which involved the acquisition of assets for £4.4m. Also inMay, ETL SEMKO bought Entela Inc., a US automotive component testing businessfor £16.2m. In September, the Group completed a transaction with Atlas LLCwhereby two Labtest subsidiaries in the laboratory equipment sales business weresold to Allium LLC, a newly formed company in return for a 40% interest in it.Atlas simultaneously sold its business to Allium in return for a 60% interest.In December, Caleb Brett bought the assets of Kelley Completion Services, anoffshore oil and gas measurement business operating in the Gulf of Mexico, for£5.3m. During the year, Labtest also bought a small business in Mauritius andETL SEMKO bought a small business in the US. ACCOUNTING POLICIESDuring the year, the Group adopted UITF 38: Accounting for ESOP Trusts. Theimpact of this change was immaterial. Apart from this, the accounting policiesof the Group remain unchanged from last year. GROUP PROFIT AND LOSS ACCOUNTfor the year ended 31 December 2004 Pre-exceptional Exceptional Pre-exceptional Exceptional items items Total items items Total 2004 2004 2004 2003 2003 2003 £m £m £m £m £m £m---------------- --------- -------- -------- ------- -------- -------- ------- Turnover -continuingoperations 499.6 - 499.6 471.1 - 471.1Cost of sales (385.0) - (385.0) (364.2) - (364.2)---------------- --------- -------- -------- ------- -------- -------- -------Gross profit 114.6 - 114.6 106.9 - 106.9---------------- --------- -------- -------- ------- -------- -------- ------- -------- -------- ------- -------- -------- -------Administrativeexpenses (30.6) - (30.6) (31.9) (1.1) (33.0)Goodwillamortisation (1.5) - (1.5) (1.0) - (1.0)---------------- --------- -------- -------- ------- -------- -------- -------Totaladministrativeexpenses (32.1) - (32.1) (32.9) (1.1) (34.0)----------------------- -------- -------- ------- -------- -------- -------Groupoperatingprofit 82.5 - 82.5 74.0 (1.1) 72.9Share ofoperatingprofit ofassociates 1.2 - 1.2 1.2 - 1.2---------------- --------- -------- -------- ------- -------- -------- -------Totaloperatingprofit 83.7 - 83.7 75.2 (1.1) 74.1---------------- --------- -------- -------- ------- -------- -------- ------- -------- -------- ------- -------- -------- -------Continuingoperations 83.7 - 83.7 75.2 (3.7) 71.5Discontinuedoperations - - - - 2.6 2.6 -------- -------- ------- -------- -------- ------- Non-operating exceptionalitemsNet profit ondisposal ofbusinesses -continuing - - - - 4.5 4.5----------------------- -------- -------- ------- -------- -------- -------Profit onordinaryactivitiesbeforeinterest 83.7 - 83.7 75.2 3.4 78.6Net interestand similarcharges (5.4) (2.7) (8.1) (7.9) - (7.9)Other netfinanceincome/(expense) 0.2 - 0.2 (0.1) - (0.1)----------------------- -------- -------- ------- -------- -------- -------Profit onordinaryactivitiesbeforetaxation 78.5 (2.7) 75.8 67.2 3.4 70.6Taxation onprofit onordinaryactivities (20.8) 0.5 (20.3) (18.7) (0.1) (18.8)----------------------- -------- -------- ------- -------- -------- -------Profit onordinaryactivitiesafter taxation 57.7 (2.2) 55.5 48.5 3.3 51.8Attributableto minorities- equityinterests (2.8) - (2.8) (3.7) - (3.7)----------------------- -------- -------- ------- -------- -------- -------Profit for thefinancial year 54.9 (2.2) 52.7 44.8 3.3 48.1Dividends (16.1) - (16.1) (13.6) - (13.6)---------------- --------- -------- -------- ------- -------- -------- -------Retainedprofit for theyear 38.8 (2.2) 36.6 31.2 3.3 34.5----------------------- -------- -------- ------- -------- -------- ------- Earnings pershareBasic 35.6p (1.5)p 34.1p 29.1p 2.2p 31.3p---------------- --------- -------- -------- ------- -------- -------- -------Diluted 35.3p (1.4)p 33.9p 29.0p 2.1p 31.1p---------------- --------- -------- -------- ------- -------- -------- ------- GROUP BALANCE SHEETat 31 December 2004 2004 2003 £m £m Fixed assetsIntangible assets - goodwill 36.9 17.8Tangible assets 88.5 77.8Investments:Associates 1.8 1.2---------------- --------- ------- -------- -------- -------- 127.2 96.8---------------- --------- ------- -------- -------- --------Current assetsStocks 1.5 1.4Debtors 109.8 105.3Cash at bank and in hand 52.5 81.5----------------------- ------- -------- -------- -------- 163.8 188.2Creditors due within one year -------- -------- --------Borrowings (14.0) (17.5)Other creditors (106.2) (92.1) -------- -------- -------- (120.2) (109.6)---------------- --------- ------- -------- -------- --------Net current assets 43.6 78.6---------------- --------- ------- -------- -------- --------Total assets less current liabilities 170.8 175.4 Creditors due after more than one year -------- -------- --------Borrowings (150.9) (196.2)Other creditors (0.5) (1.4) -------- -------- -------- (151.4) (197.6)Provisions for liabilities and charges (6.0) (8.6)--------------------------- -------- -------- --------Net assets/(liabilities) excluding pensionliabilities 13.4 (30.8)Pension liabilities (11.3) (5.1)---------------- --------- ------- -------- -------- --------Net assets/(liabilities) 2.1 (35.9)---------------- --------- ------- -------- -------- -------- Capital and reservesCalled up share capital 1.5 1.5Share premium 234.5 232.1Merger reserve 3.6 3.6Other reserves 2.8 2.8Profit and loss account (246.0) (283.1)----------------------- ------- -------- -------- --------Shareholders' (deficit)/funds (3.6) (43.1)Minority shareholders' equity interest 5.7 7.2----------------------- ------- -------- -------- --------Capital employed - equity 2.1 (35.9)----------------------- ------- -------- -------- -------- STATEMENT OF GROUP CASH FLOWfor the year ended 31 December 2004 2004 2003 £m £m ---------------- --------- ------- -------- -------- --------Net cash inflow from operating activities 101.9 80.0Dividends received from associatedundertakings 0.8 0.7Returns on investments and servicing offinance (9.4) (10.1)Taxation (16.0) (13.7)Capital expenditure and financial investment (28.0) (23.6)Acquisitions and disposals:Cash outflow from acquisitions (26.3) (7.8)Cash inflow from disposal 6.6Equity dividends paid (14.4) (12.5)---------------- --------- ------- -------- -------- --------Cash inflow before financing 8.6 19.6Financing:Net issue of shares 1.1 (0.1)Decrease in debt (36.3) (6.8)--------------------------- -------- -------- --------(Decrease)/increase in cash in the year (26.6) 12.7--------------------------- -------- -------- -------- RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBTfor the year ended 31 December 2004 2004 2003 £m £m----------------------- ------- -------- -------- --------(Decrease)/increase in cash in the year (26.6) 12.7Decrease in debt 36.3 6.8----------------------- ------- -------- -------- --------Decrease in net debt resulting from cash flows 9.7 19.5Acquisitions and disposals (0.3) 0.5Other non-cash movements (2.8) (1.0)Exchange adjustments 13.2 15.7----------------------- ------- -------- -------- --------Decrease in net debt in the year 19.8 34.7Net debt at the start of the year (132.2) (166.9)----------------------- ------- -------- -------- --------Net debt at the end of the year (112.4) (132.2)----------------------- ------- -------- -------- -------- STATEMENT OF TOTAL GROUP RECOGNISED GAINS AND LOSSESfor the year ended 31 December 2004 2004 2003 £m £m--------------------------------- -------- --------Net profit from group companies 52.0 47.3Net profit from associates 0.7 0.8--------------------------------- -------- --------Profit for the financial year 52.7 48.1Actuarial pension (loss)/gain* (6.6) 1.6Exchange adjustments 7.1 10.2--------------------------------- -------- --------Total recognised gains and losses relating tothe year 53.2 59.9--------------------------------- -------- -------- * Actuarial pension (loss)/gain is stated net ofdeferred tax. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' (DEFICIT)/FUNDS 2004 2003 £m £m----------------------- -------- -------- --------Opening shareholders' (deficit) (43.0) (90.5)/fundsRestatement (see note below)* (0.1) (0.1)----------------------- -------- -------- --------Restated at 1 January 2004 (43.1) (90.6)Issue of ordinary shares 2.4 0.5Profit for the financial year 52.7 48.1Dividends (16.1) (13.6)Goodwill on - 0.7disposalsActuarial pension (loss)/gain ** (6.6) 1.6Exchange adjustments 7.1 10.2----------------------- -------- -------- --------Closing shareholders' (deficit) (3.6) (43.1)/funds -------- -------- ------------------------------- * In accordance with UITF 38, own shares of £0.1m held by the ESOT have been reclassified from investments.**Actuarial pension (loss)/gain is stated net of deferred tax. HISTORICAL COST PROFITS AND LOSSES A note of consolidation historical cost profits and losses is not presented as there is no material difference in either year between the profits of the Group as shown in these accounts and those shown on a historical cost basis. NOTES 1. SEGMENTAL INFORMATIONThe Group comprises four operating divisions which are organised as follows:Labtest, which tests and inspects textiles, toys and other consumer products; CalebBrett, which tests and inspects oil, chemicals and agricultural produce; ETL SEMKO,which tests and certifies electrical and electronic products, telecommunicationequipment, automotive components, building products and heating, ventilation and airconditioning equipment and Foreign Trade Standards, which provides standardsprogrammes and pre-shipment inspection programmes to standards bodies andgovernments. Central overheads comprise the costs of the corporate head office andnon-operating holding companies. 2004 2003BUSINESS Turnover Profit before Net operating Turnover Profit before Net operatingANALYSIS interest and assets* interest and assets* tax tax £m £m £m £m £m £m---------------- --------- ------- --------- ------- -------- ------- --------By activityLabtest 132.3 45.0 23.7 130.8 42.8 23.4Caleb Brett 177.3 15.5 53.7 169.6 13.2 48.7ETL SEMKO 122.4 17.5 32.3 111.6 14.2 32.6Foreign TradeStandards 67.6 14.0 8.5 59.1 11.9 13.7Centraloverheads - (6.8) 1.2 - (5.9) (3.5)---------------- --------- ------- --------- ------- -------- ------- --------Totalcontinuingoperations 499.6 85.2 119.4 471.1 76.2 114.9Goodwillamortisation - (1.5) - - (1.0) ----------------- --------- ------- --------- ------- -------- ------- --------Total beforeoperatingexceptionalitems 499.6 83.7 119.4 471.1 75.2 114.9Operatingexceptionalitems -continuing - - - - (3.7) ------------------------ ------- --------- ------- -------- ------- --------Continuingoperations 499.6 83.7 119.4 471.1 71.5 114.9Operatingexceptionalitems -discontinued - - - - 2.6 -Non-operatingexceptionalitems - - - - 4.5 ----------------- --------- ------- --------- ------- -------- ------- -------- Total 499.6 83.7 119.4 471.1 78.6 114.9---------------- --------- ------- --------- ------- -------- ------- --------* See analysis below Turnover and profit before interest and tax for 2004, includes £18.3m and £3.0mrespectively, from acquisitions made during the year and includes £4.6m and£(0.1)m respectively, from businesses that were sold during the year. The following table shows turnover, operating profit, and net operating assetsby significant countries. 2004 2003BY SIGNIFICANT COUNTRY Turnover Operating Net operating Turnover Operating Net operating profit* assets profit* assets £m £m £m £m £m £m---------------- --------- ------- --------- ------- -------- ------- --------United States 132.1 11.8 38.5 124.0 6.7 37.5United Kingdom 77.2 3.0 20.4 63.5 0.8 19.2Hong Kong 64.6 25.1 5.4 70.4 25.5 6.8China 33.0 14.3 7.1 25.9 11.0 6.5Other (eachunder 10% oftotal) 192.7 31.0 48.0 187.3 32.2 44.9---------------- --------- ------- --------- ------- -------- ------- --------Continuingoperations 499.6 85.2 119.4 471.1 76.2 114.9---------------- --------- ------- --------- ------- -------- ------- -------- * Operating profit is stated before goodwill amortisation and operating exceptionalitems. 2004 2003BY GEOGRAPHIC Turnover Operating Net operating Turnover Operating Net operatingORIGIN profit* assets profit* assets £m £m £m £m £m £m---------------- --------- ------- --------- ------- -------- ------- --------Americas 169.0 17.6 47.9 157.3 12.0 47.0Europe, MiddleEast andAfrica 166.3 14.4 41.6 149.6 11.0 38.3Asia 164.3 53.2 29.9 164.2 53.2 29.6---------------- --------- ------- --------- ------- -------- ------- --------Continuingoperations 499.6 85.2 119.4 471.1 76.2 114.9---------------- --------- ------- --------- ------- -------- ------- -------- * Operating profit is stated before goodwill amortisation and operating exceptionalitems. The above table shows the turnover analysed by geographic origin. The turnoverof continuing operations by geographic destination was Americas £181.3m (2003:£161.1m), Europe, Middle East and Africa £149.0m (2003: £142.1m) and Asia£169.3m (2003: £167.9m). In order to facilitate comparison of the underlying performance, profit oncontinuing operations by activity shown above, is stated before exceptionaloperating items and before allocating goodwill amortisation to the divisions.After allocating these costs, the divisional profitability was: Labtest £44.9m(2003: £42.7m), Caleb Brett £14.8m (2003: £9.6m), ETL SEMKO £16.8m (2003:£12.3m), FTS £14.0m (2003: £12.8m) and Central overheads £(6.8)m (2003: £(5.9)m)and geographically was: Americas £17.0m (2003: £10.2m), Europe, Middle East andAfrica £13.6m (2003: £8.6m) and Asia £53.1m (2003: £52.7m). 2. EARNINGS PER SHARE The calculation of earnings per ordinary share is based on earnings after taxand minority interests and the weighted average number of ordinary shares inissue during the year. In addition to the earnings per share required by FRS 14:Earnings per share, an underlying earnings per share has also been calculatedand is based on earnings excluding the effect of the exceptional items andgoodwill amortisation. It has been calculated to allow shareholders to gain aclearer understanding of the trading performance of the Group. Details of theunderlying earnings per share are set out below: 2004 2003Based on the profit for £m £mthe year: ------- --------- ------- -------------------------------Underlyingprofit beforetax 80.0 68.2Taxation onunderlyingprofit (20.8) (18.7)Minorityinterest inunderlyingprofit (2.8) (3.7)----------------------- ------- --------- ------- --------Underlyingearnings 56.4 45.8Goodwillamortisation (1.5) (1.0)Exceptionaloperatingitems - (1.1)Exceptionalnon-operatingitems - 4.5Exceptionalfinancecharges (2.7) -Taxation onexceptionalitems 0.5 (0.1)---------------- --------- ------- --------- ------- --------Basic earnings 52.7 48.1---------------- --------- ------- --------- ------- -------- Number of shares(millions): ------- --------- ------- -------------------------------Basic weightedaverage numberof shares 154.4 153.7Potentiallydilutive shareoptions 1.1 0.7--------------------------- --------- ------- --------Dilutedweightedaverage numberof shares 155.5 154.4--------------------------- --------- ------- -------- Basicunderlyingearnings pershare 36.5p 29.8pOptions (0.2)p (0.1)p----------------------- ------- --------- ------- --------Dilutedunderlyingearnings pershare 36.3p 29.7p----------------------- ------- --------- ------- -------- Basic earningsper share 34.1p 31.3pOptions (0.2)p (0.2)p----------------------- ------- --------- ------- --------Dilutedearnings pershare 33.9p 31.1p----------------------- ------- --------- ------- -------- The weighted average number of shares used in the calculation of the dilutedearnings per share for the year to 31 December 2004, excludes 56,280 potentialshares (2003: 1,220,962) as these were not dilutive in accordance with FRS 14:Earnings per share. 3. RECONCILIATION OF OPERATING PROFIT TO OPERATING CASHFLOWS 2004 2003 £m £m----------------------- --------- ------- --------Group operating profit after exceptional items 82.5 72.9Depreciation charge 18.4 18.6Goodwill amortisation 1.5 1.0Loss on disposal of fixed assets 0.2 0.5(Increase)/decrease in stocks (0.8) 0.1Increase in debtors (8.9) (10.5)Increase/(decrease) in creditors 11.9 (3.3)(Decrease)/increase in provisions (2.9) 0.7----------------------- ------- --------- ------- --------Total operating cash inflow 101.9 80.0----------------------- ------- --------- ------- -------- 4. ANNUAL REPORT AND ACCOUNTSThe financial information set out above does not constitute the Group'sstatutory accounts for the years ended 31 December 2004 or 2003. Statutoryaccounts for 2003 have been delivered to the Registrar of Companies and thosefor 2004 will be delivered following the Company's Annual General Meeting. Theauditor has reported on those accounts; their reports were unqualified and didnot contain statements under section 237(2) or (3) of the Companies Act 1985.The Report and Accounts will be posted in March 2005. The Annual General Meetingwill be held on 6 May 2005. This information is provided by RNS The company news service from the London Stock Exchange