Intertek Group plc

Good day, ladies and gentlemen, and welcome to Intertech Full Year Results 2024. 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 raise hand function at the bottom of your Zoom screen. If you have dialed in, please select star nine to raise your hand and star six to unmute. Instructions will also follow at the time of Q&A. 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, Chief Executive Officer, to start the presentation.

Good morning to you all and thanks for joining us on a call today here from London. I have with me Colm Deasy, our CFO and Denis Moreau, our VP of Investor Relations. In 2024, we've delivered a strong performance with earnings slightly ahead of market expectations. And I would like to start our call today by recognizing all of my colleagues around the world for their incredible support. Here are the key takeaways of our presentation today. 2024 marks the fourth consecutive year of consistent mid-single-digit like-for-like revenue growth in line with the strategic guidance we gave at our capital market event a couple of years ago. Profit conversion was strong with a margin increase year-on-year of 100 bps. EPS growth at constant currency was 15.2%. We had very strong cash performance and delivered a record adjusted cash flow of 700 bps. 89 million pounds. RIC was outstanding at 22.4%, up year-on-year by 250 basis points. And our dividends to shareholders are up 40.1%. Importantly, moving forward, the value growth opportunity ahead of us is significant. We expect a robust financial performance in 2025. We are announcing today an initial share buyback program of 350 million pounds, and we are raising our medium term margin targets to 18.5% plus. Let's start with our performance highlights. We've delivered, as I said, a strong financial performance in 2024. Our group revenue was up 6.6% at constant rate and 1.9% at actual rate. Like-for-like revenue growth was in line with expectation at 6.3% at constant rate. Operating profit was up 13% at constant rate and 7% at actual rate. Operating margin was excellent, as I said. 17.4% up year-on-year by 100 basis points. EPS grew at 15% at constant rate. RIC, 22.4%, up 250 basis points at constant rate. And our free cash flow of £409 million was up year-on-year by 8%. In line with our dividend policy, our full-year dividend is 156.5p and is up year-on-year by 40.1%. Our balance sheet is very strong with a net debt to EBITDA ratio of 0.7 times. Let's now discuss our lack-for-lack revenue growth performance. The demand for ATIC solutions was robust and 2024 marks the fourth consecutive year of mid-single-digit lack-for-lack revenue growth, clearly a higher growth cycle compared to what we saw pre-COVID. Our lack-for-lack revenue growth of 6.3% at constant rate was driven by both volume and price. and we'll discuss later in the call the performance by division and business line. The acquisitions we've made are performing extremely well. We've made six acquisitions in the last five years to strengthen our ethic value proposition in high growth and high margin sectors. These six investments are value-creative to the group, having delivered in aggregate a margin of 25.1% in 2024. The consolidation opportunities in our industry are very exciting and significant, and will remain selective as we continue to invest in inorganic growth. From a geographic standpoint, our revenue growth was broad-based, with Americas, EMEA, and APAC up respectively by 5.9%, 7.5%, and 6.7% at constant currency. There's been a lot of discussion about the economy in China and the impact it has on our business. Let me give you an update on the performance of our business in China. We have a super strong business in China, which we have built over the last 50 years, where we operate a diversified portfolio with scale positions across all of our business lines. We've delivered a robust like-for-like revenue growth performance of 6.7% in China in 2024, with growth accelerating to 7.7% in the second half. The growth opportunities ahead in China are significant, given the manufacturing excellence that China offers to Western brands, the investment made in existing and new sectors, and of course, the untapped opportunities in the domestic market. We provide our clients with total quality assurance given our unique end-to-end ethical approach to quality, safety, and sustainability. Our ethical portfolio is very well diversified with assurance, testing, inspection, and certification representing respectively 21%, 46%, 25%, and 8% of our total revenue. As you can see on the slide, between 2015 and 2024, our capital light and high margin assurance business has grown double digit. Let's move to margin. We're very pleased with our margin performance of 17.4%, up 100 basis points at constant currency, as I just explained. We benefited, of course, from a portfolio mix, but also from fixed cost leverage linked to our 6% plus organic growth, productivity improvement, our restructuring programs and accretive M&A. These positive margin drivers were partially offset by cost of inflation, as you would expect. And in addition, we've continued to invest in capability to accelerate revenue growth. A few years ago, we announced a cost reduction program to target productivity opportunities based on operational streamlining and technology upgrade initiatives. Our restructuring program has delivered 30 million of savings in 2023 and a further 11 million in 2024. We expect a 3 million benefit in 2025 from the restructuring done in 2024. And of course, we'll continue to look at further cost reduction opportunities. Marginal accruative revenue growth, as you know, is central to the way we deliver value at Intertech. We have increased margin by 190 basis points between 2014 and 2024, making us the only global player in the industry with such an impressive track record. Cash was excellent with a cash conversion of 121%. In 2024, we delivered the highest ever cash from operation of £789 million, enabling us to invest in organic and inorganic growth. With free cash flow at £409 million, our net debt declined by £111 million to £500 million and our net debt to EBITDA ratio improved to 0.7. I will now hand over to Colm to discuss our full year results in detail.

Thank you, Andre. In summary, in 2024, the group delivered a strong financial performance. Total revenue grew to £3.4 billion, up 6.6% at constant currency and 1.9% at actual rates, starting to strengthen compared to major currencies, impacting our revenue growth by 470 basis points. Operating profit at constant rates was up 13% to £590 million, with operating margin of 17.4%, up year-on-year by 100 basis points at constant currency and 80 basis points at actual rates. Diluted earnings per share were at 240.6p, with double-digit growth of 15.2% at constant rates and 7.9% at actual rates. Turning now to cash flow and net debt. As you have heard from Andre, the group delivered record adjusted cash from operations of £789 million compared to £749 million last year, growth of 5.4%. Adjusted free cash flow of £409 million was higher year on year by £30 million, reflecting the growth in operating cash. We finished 2024 with financial net debt of just £500 million, £111 million lower than 2023 and represents financial net debt to adjusted EBITDA of 0.7 times. Turning to our financial guidance for 2025, we expect net finance costs to be in the range of £42 to £44 million, excluding FX. We expect our effective tax rate to be between 25% and 26%. Our minority interest would be between 23 and 24 million, and CapEx investment would be in the range of 135 to 145 million pounds. Our financial net debt guidance, excluding future change in FX rates, M&A, or the buyback, is 470 million to 520 million pounds. I will now hand back to Onbrecht.