Intertek posts solid first half numbers

Inspection, product testing and certification company Intertek described a first half of “strong” earnings growth and cash generation on Tuesday, with revenue improving 2.7% and constant currencies and 13.9% at actual rates to £1.372bn.

The FTSE 100 firm said diluted earnings per share were ahead 11.4% at constant rates in the six months to 30 June at 90.4p, with free cash flow up £75m year-on-year, driven by “strong” cash conversion.

“The group has delivered a strong earnings and cash performance in the first half, reflecting the group's performance management discipline focussed on margin accretive revenue growth with strong cash conversion and accretive disciplined capital allocation,” said chief executive André Lacroix.

“In line with our progressive dividend policy and underpinned by our excellent cash generation, we have announced a half year dividend of 23.5p, an increase of 21.1%.”

Its organic revenue growth stood at 1.7%, driven by the products and trade divisions which improved 5.8% and 4.6% respectively, while the resources division was 12.3% softer.

“The products and trade related divisions, which represent 94% of the group's earnings, delivered an excellent performance with organic growth of 5.5% at constant rates while, as expected, trading conditions remained challenging in the resources related division,” Lacroix added.

“The recent acquisitions in high margin and high growth areas performed well.

“We are well positioned to deliver solid organic revenue growth with robust margin progression at constant currency in 2017.”

The Intertek board said strength in its portfolio, as well as discipline when it came to costs, helped its margin progression, which was up 90 basis points at constant rates and 110 basis points at actual rates, at 16.3%.

Its board declared a 21.1% uplift in the interim dividend for this year, to 23.5p per share.

“The $250bn global quality assurance industry has attractive structural growth prospects driven by an increased focus of corporations on risk management, global trade flows, global demand for energy, expanding regulations, more complex sourcing and distribution operations, technological innovations, government investments in large infrastructure projects, and increased consumer demand for higher quality and more sustainable products,” added Lacroix.

“We are uniquely positioned to seize these exciting growth opportunities with our ‘Total Quality Assurance’ value proposition that provides a superior service, offering global assurance, testing, inspection and certification solutions to our customers across multiple industries through our global network of over 1,000 state of the art facilities in over 100 countries.”

Lacroix said the company operated a “high quality” and “highly cash generative” earnings model.

“Our differentiated growth strategy will continue to move the centre of gravity of our portfolio towards the attractive growth and margin opportunities in the industry based on a disciplined approach to revenue, margin, portfolio and cash performance management, and an accretive disciplined capital allocation to deliver sustainable returns for our shareholders.

“We are on track on our 'good to great' journey, making progress on both performance and strategy.”