Intertek (ITRK) has once again raised its margins in the first half of the year - the fifth consecutive year of growth. The quality assurance specialist increased its adjusted operating margin 30 basis points to 16.9 per cent on a constant currency basis, with growth across all of its divisions.
Management argues that quality assurance is increasingly coming under focus for companies, and that this will drive Intertek’s growth into the future. According to group estimates, the total value of the quality assurance market is around $250bn, but at present four-fifths of this is carried out in-house - a pointer to the opportunity on offer. Companies need Intertek's services to prove they comply with new trading and safety requirements.
The group made a number of acquisitions in the period, contributing 1.9 per cent to the top line. The assurance sector is still highly fragmented, says management, and it is targeting either large companies in geographies such as North America or China, or high growth ones in South America and Southeast Asia. Even so, net debt increased by a relatively modest £48.1m since January, though that doesn't take account of lease liabilities have been highlighted due to the adoption of a new accounting standard.
Societe Generale is forecasting adjusted EPS of 213p, up from 198p in 2018.
| INTERTEK (ITRK) | ||||
| ORD PRICE: | 5,854p | MARKET VALUE: | £ 9.45bn | |
| TOUCH: | 5,850-5,856p | 12-MONTH HIGH: | 5,894p | LOW: 4,323p |
| DIVIDEND YIELD: | 1.7% | PE RATIO: | 32 | |
| NET ASSET VALUE: | 548p* | NET DEBT: | 90% | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 1.35 | 197 | 84.9 | 31.9 |
| 2019 | 1.44 | 206 | 89.1 | 34.2 |
| % change | +7 | +5 | +5 | +7 |
| Ex-div: | 26 Sep | |||
| Payment: | 11 Oct | |||
| *Includes intangible assets of £1.19bn, or 737p a share. NB: Net debt doesn't include £255m of lease liabilities. | ||||
