Intertek Group plc

Good day, ladies and gentlemen, and welcome to Intertech 2023 results. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session. If you wish to ask a question, we ask that you please use the raised hand function at the bottom of your Zoom screen. If you have dialled in, please select star nine to raise your hand and then star six to unmute. Instructions will also follow at the time of Q&A. Participants can also submit questions through the webcast page using the ask a question button. I would like to remind all participants that this call is being recorded. Questions will follow after the presentation. I will now hand over to Andre Lacroix to start the presentation. Thank you.

Good morning and welcome to you all. In 2023, we have delivered a strong performance in revenue, margin, EPS, cash, and RIC. And I would like to start our call today recognizing all of my colleagues around the world of Intertech for the incredible support. Indeed, 2023 marks another year of consistent delivery with earnings slightly ahead of market expectations. Here are the key takeaways for call today. First, we have delivered the highest like-for-like performance in the last 10 years, something that we are tremendously proud of. Profit conversion was strong with a margin improvement of 60 basis points at constant currency. We have delivered the highest ever cash flow operation. We are on track to deliver a medium-term margin target of 17.5% plus. Given our confidence in the significant value growth opportunity ahead, we are increasing our dividend payout to circa 65%. And importantly, we expect to deliver a robust financial performance in 2024. So let's start with our performance highlights. As I just said, we've delivered a strong financial performance in 23. Our group revenue was up 7.1% at constant rate and 4.3% at actual rate. Like for like revenue growth was 6.2% at constant rate. Operating profit was up 11% at constant rate and 6% at actual rate. Operating margin was robust at 16.6%, 60 basis point up on last year. Our EPS growth was double-digit, 11% at a constant rate. We've delivered a very strong ROIC of 20.5%, up 250 bps. We've announced a full-year dividend of 111.7p, a PR near by 5.6%. And our balance sheet remains very strong. Our net debt to EBITDA ratio is 0.8. Our like-for-like revenue growth of 6.2% at a constant rate was the best like-for-like performance in the last 10 years. The demand for ATX solutions is accelerating around the world across all of our business lines, and our like-for-like revenue growth was broad-based, driven by both volume and price. Our like-for-like revenue growth, excluding the consumer product division, was up 8.2%. The recent SAI, GLA, and CA acquisitions we've made to scale up our portfolio and attractive growth and margin sectors are performing very well. The integration of the recent acquisition we made in 2023 with Control Analytical in Brazil and PlayLink in North America are on track. Yesterday, we've announced the acquisition of leading providers of metallurgical testing services in minerals based in North America. The consolidation opportunities in our industry are significant and we'll continue to invest in organic growth. From a geographic standpoint, our revenue growth was also broad-based, with Americas, EMA, and APAC up by 7.6%, 7.1%, and 6.4% at constant currency. And now, I would like to give you an update on the performance of our China business. In China, 75% of our business is linked to the export sector. The Chinese export activities are up 35% compared to 2019, and as we know, down 6% compared to 2022. We grew our like-for-like by 4.6% in 2023, outperforming the overall export sector, and our like-for-like performance was inline and consistent with the 4.9% CAGR we reported in China between 2015 and 2022. We have a very strong business in China. And we remain very confident about the growth opportunities ahead, given the manufacturing excellence that China provides to all Western brands and, of course, the untapped opportunity in the domestic market. We provide our clients with total quality assurance powered by our unique systemic ethical approach to quality, safety and sustainability. Our ATIC offering is well diversified, with assurance, testing, inspection, and certification representing, respectively, 21%, 46%, 25%, and 8% of our total revenue. Between 2015 and 2023, assurance and testing that represent two-thirds of our revenues have grown double digits. Margin of 16.6% was robust and up 60 basis points at concern rates and up 160 basis points if we exclude our consumer product division. How did we deliver such a strong performance? We benefited from fixed cost leverage linked to growth. The faster growth, the more operating leverage. For activity improvements, we never stopped working hard on productivity opportunities. Our restructuring program, which I will talk about in a second, our M&A was accretive in 2023. We had a one-off benefit from a property sales of circa 5 million. These positive margin drivers were partially offset by the negative portfolio mix effect we saw, the cost of inflation, and of course, our investments in capability to accelerate growth. Marginal equity revenue growth is central to the way we deliver value, and this time last year, we announced a cost reduction program to target productivity opportunities based on streamlining some of our operational costs and making some technology upgrades. We've done better than we thought, and our restructuring program has delivered 13 million pounds of savings in 2023, and we are expecting 10 million of savings in 2024. Looking at our performance by division, we've made good progress, improving margin by more than 100 BIPs in three of our five divisions. Cash conversion was excellent. We've delivered the highest ever cash flow operation, £749 million, with a cash conversion of 122%. That enables us to invest in growth, and we invested both in organic CapEx with £117 million and acquisitions with £40 million. Net debt declined by 127 million pounds to 611 million pounds. And as I said earlier, our net debt to EBITDA ratio improved to 0.8. Sustainability is an exciting growth driver, which we'll discuss later. Internally, we are focused on sustainability excellence in every operation. We have a net zero plan and we are targeting net zero by 2050. And we have reduced our CO2 emissions by 11% in 2023 and by 37% since 2019. Sustainability is, of course, much more than achieving net zero. We continue to make progress on customer satisfaction, diversity and inclusion, health and safety, compliance and engagement. I will now hand over to Colm to discuss our full year financial details.

Thank you, Andre. In summary, in 2023, Group delivered strong financial performance. Total revenue growth was 7.1% at constant currency and 4.3% at actual rates. Sterling strengthened compared to major currencies and has impacted our revenues by 280 basis points. Operating profit at constant rates was up 10.9% to 551.1 million. delivering a margin of 16.6% up year on year by 60 basis points at constant currency and 30 basis points at actual rates. Diluted earnings per share were 223 pence, growth of 11% at constant rates and 5.6 at actual rates. The group delivered record adjusted cash from operations of £749 million up year on year by 3.7%. Adjusted free cash flow of 378.4 million was down year on year by 7.9 million as the growth in operating cash flow was offset by higher tax payouts and financing costs. We finished 2023 with financial net debt of 610.6 million pounds down year on year by 127 million and represents a financial net debt to adjusted EBITDA ratio of 0.8 times. Turning to our financial guidance for 24, we expect net finance costs to be in the range of 41 to 43 million, excluding FX. We expect our effective tax rate to be between 25 and 26%, our minority interest to be between 23 and 24 million pounds, and CapEx investment to be in the range of 135 to 145 million pounds. Our financial net debt guidance in excluding any major changes in FX rates or M&A is 510 to 560 million pounds. I will now hand back to Andre.