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Intertek falls into the red after energy impairments

Intertek swung to a full-year earnings loss on energy-linked impairments.
March 2, 2016

A non-cash impairment charge of £577m pushed Intertek (ITRK) to a net earnings loss in 2015, hardly an ideal maiden annual result for boss André Lacroix, who took over the reins last May. The charge is a reflection of continued uncertainties in the global oil and gas markets, as the inspection and certification group bore the charge on past acquisitions with exposure to energy markets.

IC TIP: Sell at 2953p

However, Intertek did record solid growth in its consumer division, complemented by margin expansion in its commodities, chemicals and pharmaceuticals businesses as a result of restructuring measures and operating leverage effects. Disregard one-off items, group operating profit was up 6 per cent to £343m, helped along by a 20 basis point uptick in the underlying margin.

Above all, these results point to a renewed focus on capital discipline, perhaps an indication that management views a hard road ahead. Intertek delivered operating cash flow of £466m, while the annual cash conversion rate came in at 136 per cent, although it's worth noting that year-end receivables were in advance of the 2014 total.

JPMorgan Cazenove gives adjusted pre-tax profit of £336m, leading to EPS of 146p, against £319m and 141p, respectively, in 2015.

 

INTERTEK (ITRK)
ORD PRICE:2,953pMARKET VALUE:£4.77bn
TOUCH:2,952-2,956p12-MONTH HIGH:3,030pLOW: 2,296p
DIVIDEND YIELD:1.8%PE RATIO:na
NET ASSET VALUE:193p*NET DEBT:228%

Year to 31 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20111.8021387.033.7
20122.1025710841.0
20132.2028212446.0
20142.0925211049.1
20152.17-308-22452.3
% change+3--+7

Ex-div: 19 May

Payment: 3 Jun

*Includes intangible assets of £632m, or 391p a share