Intertek Group plc

Good day, ladies and gentlemen, and welcome to Intertech November 2025 Trading Update. 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 9 to raise your hand and star 6 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 André Lacroix, Chief Executive Officer, to start the presentation. Thank you.

Good morning to you all and thanks for joining us on our call. I have with me Con Dizzi, our CFO, and Denis Moreau, our VP of Investor Relations. There are essentially five key takeaways from our call today regarding our July-October trading statement. First, we have benefited from a robust growth in our two highest margin divisions, consumer product and corporate assurance, in the July-October period, where we've delivered a 5.8% like-for-like revenue growth on a combined basis, despite a very demanding base last year. Second, we saw trading momentum improve in industry and infrastructure, with a strong acceleration in minerals and a good pickup in building and construction. Third important message on transportation technology, the restructuring in the automotive sector in Q3 results in double-digit negative like-for-like revenue growth in transportation technology. The group like-for-like performance in July-October ex-transportation technology was in line with the run rate we had in the first half. Of course, we continue to invest in growth with the three acquisitions that we've made in 2025 in high growth and high margin sectors. And we've launched several industry-leading innovations like Supply Tech and AI Square. Final message for today, given our strong margin and excellent cash performance, we are on track to meet the earnings expectations for 2025. These are the key takeaways for our calls today. So let me just start our call today by answering the three most frequently asked questions in our investing meetings. And the first question we get is, what are your growth expectations in consumer products? We are extremely pleased with the performance of our consumer product division, which has delivered a 6.9% like-for-like revenue growth in the first 10 months of the year, after an excellent year in 2024, where we saw 8% revenue growth. The global consumer continues to expect more choices of higher quality. triggering more innovation with existing brands and, of course, the emergence of new brands. We are very confident about the growth outlook of our consumer product division and we do not expect that megatrend to change. What I'd like to do now is give you a few examples of what our passionate and innovative colleagues do every day in our consumer product division. Within our softline teams, our global sales organization has won several new contracts with existing and new clients. Our hotline colleagues continue to expand the portfolio and recently created a breakthrough by opening a pet toy center of excellence in Hong Kong. Our electrical colleagues are continuing to invest in fast-growing space like energy storage, EMC, HVAC. They are the cutting edge of total quality assurance for AI-based products and services. And our GTS colleagues have won numerous new contracts in the Middle East and Africa. The second question we get is, what are the building blocks that you have in place to deliver your 18.5 plus margin target? As you know, margin accuracy revenue growth is central to the way we manage performance at Intertech. We have a strong track record of consistent margin progression and expect to reach 18.5% margin in the next few years with plenty of further opportunities beyond. We drive margin-accuracy revenue growth based on five distinct priorities. First, the portfolio effect at the site level linked to volume price and mix management. Second, fixed cost leverage linked to revenue growth. The faster revenue grows, the better leverage you have. Third, variable cost productivity improvement. We never stop reinventing ourselves to find new productivity opportunities. Fourth, targeted fixed cost reduction. We continuously remove unnecessary costs in the business. And fifth, of course, margin-accurative investments when we do innovation, technology, and M&A. We do this based on the best-in-class capability that we've built step-by-step over the years. We are indeed managing performance on daily, weekly, monthly basis with digital operating systems that gives us real-time visibility. We have a strong pricing discipline and take price increase regularly, leveraging our superior customer service. Our tight benchmarking tool gives our operation a precise, constructive analysis of where the opportunities are. We pursue a disciplined growth and margin-accretive capital allocation policy. And importantly, 70% of our annual incentive scheme is based on margin-accretive revenue growth. The third question we get is what are your growth investment priorities? We operate in a very exciting industry and we are laser-focused on the investments that we can make to seize the attractive growth opportunities ahead. And our number one priority is, of course, to invest in our local operations. We've invested more than a billion pounds in CapEx in the last decade, close to circa 30% of community budget-free cash flow, and we operate a state-of-the-art lab network around the world. Last month, we opened a footwear center of excellence lab in Betonville, Arkansas, the home of Walmart, and have witnessed firsthand how these investments already created immediate growth opportunities. Our second priority is to reinvent ourselves by offering our clients new solutions to address the needs that are not met in the industry today. We believe in the importance of technology to augment the strengths of ethics solutions, and let me give you a few examples of what we do in tech. Our people assurance business provides a comprehensive suite of audit and training solutions with SaaS delivery platforms reaching close to 5 million frontline workers today. Within our soft-line and out-line businesses, we have strengthened our customer value proposition with the digitization of our testing solutions with high-care and inspection services with R2Q. Recently, we've partnered with Trace for Good to offer a digital platform for our clients that need to manage their data to get their digital passports ready. A few months ago, we've launched AI Square to help our clients identify and manage the risks intrinsic to what they do with AI when they try to augment the value of their products or services. Our third priority is to invest in M&A to expand our IT portfolio. Our acquisition strategy targets companies that have a strong track record in high growth and high margin sectors. We made six acquisitions between 2020 and 2024, and these six investments have been able to aggregate a margin of 25.1% in 2024. This year, we've acquired three excellent companies, Testis in Brazil, and Barolab in Australia, and SupplyLab in Costa Rica. We're seeing a good pipeline of M&A opportunities, and we remain selective to identify the right M&A opportunities. Before I turn to our trading performance, I just want to let you know that in our investor website, you can now access three new types of information. An interactive financial modeling tool, the answers to the frequently asked questions, and a dedicated ULBMA's webpage where you can discover what we do every day for our clients. So let's now turn to trading in the last four months. The group has delivered a robust trading performance with a 4.1% back-for-luck moving growth at constant currency. We have seen a robust LFLA revenue growth in consumer product and corporate assurance against the demanding prior year comparator. LFLA revenue growth in health and safety was in line with expectations. We saw a trading momentum improvement in industry and infrastructure, while in the world of energy we saw a stable performance. Our consumer product division delivered LFLA revenue growth of 5.4% at constant currency, Driven by double-digit lack-for-lack revenue growth in GTS, a high single-digit lack-for-lack revenue growth in Softline, and a mid-single-digit lack-for-lack revenue growth in Airlines and Electrical. The 2024 base was very demanding for consumer products. Over two years, we've delivered a 15.1% lack-for-lack revenue growth at Constant Currency. Our Corporate Assurance Division delivered a L4L revenue growth of 6.6% at Constant Currency, driven by a high single-jit L4L revenue growth in Business Assurance and a stable L4L revenue in Assurance. The 2024 base was also very demanding for Corporate Assurance. In the past two years, we've delivered a 16.9% L4L revenue growth at Constant Currency. Our Health and Safety Division reported a L4L revenue growth of 0.8% at Constant Currency, Double-digit LFW growth in food and a low single-digit LFW in the agri-world was partially offset by negative mid-single-digit LFW performance in chemical and pharma due to a strong comparator and some temporary project delays. On a two-year basis, we delivered a 9.1% LFW growth at constant currency in health and safety. Industry and infrastructure reported a 6% LFW growth at constant currency, which was a 300-bit acceleration compared to what we saw in H1, driven by an improvement in minerals, where we delivered double-digit L4L revenue growth and improved building and construction performance with a low single-digit L4L revenue performance, while industry services continue to deliver mid-single-digit L4L revenue performance. The world of energy delivered a stable L4L revenue growth and constant currency, driven by double-digit L4L revenue growth in CEA and a low single-digit L4L. revenue growth within Caledbret, while transportation technologies saw a double-digit negative life-for-life revenue performance due to a baseline effect and a temporary reduction of investments for some of our clients as they focus on reducing their cost base in what is a more challenging market for them. Turning now to the performance at the group level on a year-to-date basis, our revenue for the 10 months to the end of October was £2,850,000, a growth of 4.6% at constant currency and 1.2% at actual rate, A like-for-like revenue growth of 4.3% at constant currency benefited both from volume and pricing. Our recent acquisitions are performing well and contributed £9 million revenue on a year-to-date basis. Margin progression was strong as we benefited from our divisional mix, pricing initiatives, good operating leverage, disciplined cost control and productivity improvements. We delivered an excellent free cash flow performance and ROIC was also excellent. We have completed 328 million of our 350 million share buy back program that we announced in March and we are basically now going to discuss our guidance for 2025. We continue to expect that the group will deliver mid single-digit life for life revenue growth at constant currency, high single-digit life for life performance in consumer product and corporate assurance, mid single-digit life for life performance in industry and infrastructure, low single-git light-for-light performance in health and safety, and a stable light-for-light performance in the world of energy. Given our strong margin performance in H1 and a strong quality of earnings in the July-October period, we are targeting strong margin progression. Our cash discipline will remain in place to deliver an excellent free cash flow. We'll invest in growth with circa 135-145 million of capex. We now expect a fashion-led debt to be in the range of $9.25 to $9.75, reflecting the two additional acquisitions made in the second half. Our interim currency guidance remains unchanged. Net-net, we are on track to meet the earning expectations for the full year. We are seeing high demand for ATX solutions and the value growth opportunity ahead is significant. We are laser-focused in converting revenue growth into stronger profit growth, targeting our 18.5% plus operating margin. Targets of strong cash generation will enable us to invest in growth while providing our shoulders, of course, with strong returns. We are confident in the sustainability of the strong performance that we have seen in the last few years, and we look forward to another strong performance in 2026. Our confidence is based on the continuing increased demand for IT solutions and our expectations for a more supportive macroeconomic backdrop. So let me summarize the highlights of our trading statements today before taking your questions. In the last four months, we've delivered quality growth with our two highest margin divisions, consumer product and corporate assurance, delivering a robust like-for-like performance. We're converting revenue growth into strong profit and excellent free cash flow. And we're on track to deliver a strong performance in 2025. And we are well positioned to deliver another strong performance in 2026. So thank you for joining us on our call today. We'll answer any questions you might have.

We will now start the Q&A. If you've dialled into the call and wish to ask a question, please use the raise hand function at the bottom of your Zoom screen. The first question is from Rory McKenzie at UBS. Please unmute yourself and begin with your question.