Global product-testing and certification company Intertek (ITRK) battled headwinds in some end markets to keep its profits moving forwards last year - but only just. Adjusted operating profit rose a mere 2 cent year-on-year to £343m as the group operating profit margin slipped 60 basis points to 15.7 per cent. Even chief executive Wolfhart Hauser described the numbers as “a mixed set of results”, and says the first half of the current year could be similar. But Mr Hauser is also “confident the second half will look better” as cost savings come through and end markets stabilise.
Around 30 basis points of the margin decline last year was due to weakness in demand from the minerals sector, as lower commodity prices hit exploration activity in Australia, Brazil and Africa. That sent adjusted operating profits in Intertek’s commodities division down 11 per cent on an organic basis to £70m. The European chemical sector was another soft spot as big chemical customers shifted R&D activities away from Europe and volumes on several major quality-assurance contracts tailed off. That hit the results of Intertek’s chemical and pharmaceuticals division, where underlying operating profits sank 16 per cent to £16.6m.
But it wasn’t all bad news. Intertek’s consumer-goods division, which tests products such as textiles and toys, put in a strong performance, with underlying operating profit up 7 per cent to £125m. The introduction of new toy-safety rules in Europe helped, as did growing demand in emerging markets such as China, India and Vietnam. Mr Hauser says these countries are an important source of future growth for Intertek, as their expanding middles classes demand higher-quality products. The company’s cash performance was another bright spot, with cash generated from operations up 14 per cent to £394m. That helped fund acquisitions of £122m whilst keeping the ratio of net debt to cash profits comfortable at 1.4 times.
Broker UBS expects adjusted earnings per share of 151p this year (2013: 139p).
INTERTEK (ITRK) | ||||
|---|---|---|---|---|
| ORD PRICE: | 2,932p | MARKET VALUE: | £ 4.7bn | |
| TOUCH: | 2,931p-2,934p | 12-MONTH HIGH: | 3,510p | LOW: 2,784p |
| DIVIDEND YIELD: | 1.6% | PE RATIO: | 24 | |
| NET ASSET VALUE: | 454p* | NET DEBT: | 82% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 1.24 | 169 | 72 | 25.5 |
| 2010 | 1.37 | 190 | 81 | 28.1 |
| 2011 | 1.75 | 213 | 87 | 33.7 |
| 2012 | 2.05 | 257 | 108 | 41 |
| 2013 | 2.18 | 282 | 124 | 46 |
| % change | +6 | +10 | +15 | +12 |
Ex-div: 21 May Payment: 06 Jun * Includes intangible assets of £907m, or 562p a share | ||||
