Intertek Group plc

Ladies and gentlemen, and welcome to Intertech's Strategic Review and 2026 Q1 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 raised 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 the 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.

Good morning to you all, and thanks for joining us on our call. I would like to welcome Laura Christie, our new CFO on our call today, and of course, Denis Moreau, our VP of the Industrial Relations, is also on the call with us. There are three main takeaways in our calls today. First, we are announcing the start of a strategic review to determine whether we can accelerate growth and drive further shareholder value by creating two specialist-scale global AT businesses, Intertech Testing and Assurance and Intertech Energy and Infrastructure. The second key point on today's agenda, we had a strong start to the year with a robust like-for-like revenue growth at 5.4%, constant currency in the first quarter. And the third important message, we are confirming our full-year guidance. We are on track to deliver a strong 2026 with net single-digit like-for-like revenue growth as a constant currency, continuous margin progression, strong earning growth, and a strong free cash flow. I'd like to start by saying that we are truly energized by the launch of our strategic review to unleash the full potential of Intertech and deliver greater value for all. I am very proud of our passionate and talented colleagues who are building a stronger inter-tech every day in every single business with the disciplined executions behind our AAA growth strategy. We've launched our AAA strategy about three years ago. Since then, we've delivered annual revenue growth of 6% at constant currency, 240 bits margin accretion, an average EPS growth of 12% per annum, and of course, all of that with industry-leading margin and returns. Intertech has always been a pioneer in the industry, and true to our ever-better high-performance culture, we truly believe in the power of reinventing ourselves to accelerate growth and unleash our potential. We believe that the group has now reached a scale and breadth that would benefit from greater simplification and strategic focus to take our industry-leading global business lines to greater heights. That's why we have initiated a strategic review to evaluate whether the separation of e-tech testing and assurance and e-tech energy infrastructure, either by the way of the SER or the merger, could accelerate growth and create greater value for shareholders. In a strong growth environment that we are experiencing across our markets, we believe that two specialist-scale global e-tech businesses could be better positioned to unlock our full potential. Intertech Testing and Assurance and Intertech Energy Infrastructure are high-quality businesses with scale and are renowned for their science-based AP customer excellence and have earned the trust of our clients through the delivery of superior customer service for many years. Both businesses have compelling opportunities for further growth and value creation. They are offering premium market-leading AP solutions to their clients through their global network and we believe could grow faster with a more focused portfolio strategy sharper capital allocation, and faster in-market execution. Intertech Testing and Assurance and Intertech Energy and Infrastructure have different customers operating in different markets with different financial characteristics and offer distinct value propositions. The decentralized and coordinated operating structure that we have in place at Intertech means that these two businesses, has built the talents, the processes, has the assets and technology capability they need to thrive in today's and tomorrow's market. During the strategic review, which will be concluded and implemented by mid-2027, we will remain very focused on the disciplined execution of our AAA strategy, delivering on our corporate goals, of meeting legit life-for-life revenue goals at constant currency, continuous margin progression, strong cash generation, disciplined capital allocation, and an excellent RIC. Let me turn briefly to trading in the last three months. As usual, all the comments we'll make are at constant frequency. We have benefited from a strong demand for ATIC solutions across our divisions and geographies, enabling us to deliver a robust 5.4% like-for-like revenue at the group level. Our consumer product division delivered like-for-like revenue growth of 6.5%, delivered with mid-single-digit life-for-life revenue growth in South Rhine, high single-digit life-for-life growth in Hardline and Electrical, while GTS delivered a mid-single-digit negative life-for-life performance, as it was impacted by trading disruptions in the Mid-East. Our Corporate Assurance Division delivered life-for-life revenue growth of 10.8%, driven by double-digit life-for-life growth in Business Assurance, while we saw low single-digit negative life-for-life performance within Assurance, due to a baseline effect linked to a few large contracts that lapsed at the end of June last year. Our Health and Safety Division delivered life-for-life revenue growth of 5.9%, driven by double-digit life-for-life revenue growth, mid-single-digit in food, mid-single-digit life-for-life revenue growth in C&P, and our AgriWorld delivered a stable life-for-life performance. Our Industry and Infrastructure Division delivered life-for-life revenue growth of 5.5%, with low single-digit life-for-life revenue growth in industry services, with double-digit life-for-life revenue growth in our minerals business, and a low single-digit life-for-life revenue performance in building and construction. Our world energy division delivered a stable life-for-life revenue performance, with low single-digit life-for-life revenue growth within Caledbrecht and CEA, while our transportation technology business reported a negative double-digit life-for-life revenue performance due to the reduction by self-organized and R&D investments as they continue to focus on cost reduction in a challenging automotive environment. As always, there is much more detail in the R&S. Overall, we had a strong start to 2026, and let's now discuss the performance at the group level for Q1. Our revenue for Q1 grew 6.7% to 838.5 million pounds. Our lack-for-lack revenue growth, as I said, was 5.4%, driven by growth volume and pricing. The four acquisitions we made in 2025 to scale up our portfolio in attractive growth in margin sectors with CETIS in Brazil and Barrel Lab in Australia, CEPLI Lab in Costa Rica, and PTN in the U.S. are all performing very well. We saw continued margin progression as we benefited from division mix, operating leverage, cost control, and productivity improvements. We delivered a strong free cash flow and continued to operate with a strong balance sheet. We continue to invest in organic and inorganic growth opportunities. We've recently announced the acquisition of Aerial PV in Europe to expand our market-leading position in solar energy, and the acquisition of Q-Test in Colombia to expand our electrical business in an attractive Latin American market. Coming now to the outlook for 2026, we are confirming our full-year guidance. We expect to deliver mixed single-digit life-for-life revenue growth at constant currency, with high single-digit life-for-life in corporate assurance, mixed single-digit life-for-life in consumer product, industry infrastructures, and low single-digit like-for-like inheritance safety and the world of energy. We are targeting further margin progression, which, combined with expected revenue growth, will deliver strong earning growth. Our cash discipline will remain in place to deliver a strong free cash flow. We'll invest in growth with a capex of circa 150 to 160 million pounds. We'll, of course, continue to deliver an excellent ROIC. A quick update on currency for your model. The average starting rate in the last three months, applied to the full year results of 2025, will be broadly neutral at the revenue and operating profit level. In addition, going forward, I'm pleased to announce that we'll be providing quarterly trading updates for the three months ending March and September. In conclusion, we have seen a significant performance acceleration with a strong delivery of our pre-play strategy, and looking ahead, we are super excited about the significant value growth opportunity. To deliver quality growth and value for our shareholders, we'll capitalize on our high-quality cash compounding earning models, benefiting year after year from the compounding effect of mid-to-mid-life productivity growth, continuous market appreciation, strong free cash flow, and disciplined investments in high-growth and high-margin sectors. Our enduring competitive advantage underpins our confidence to deliver quality growth moving forward. We operate a high-quality portfolio with leading-scale positions in attractive industries, that are all poised for global growth. We are the premier leader in quality assurance with superior AT customer service, which has earned the trust of all of our clients over the years. Our high-quality cash component earnings model is underpinned by disciplined performance management, both on financial and non-financial metrics. Our science-based organization is a high-performance organization. We attract and we develop and retain the best talent in the industry. And last but not least, we operate with the culture of doing business the right way, with strong controls, compliance, and very strong governance. The strategic review we are announcing today will determine if the separation of Intertech Testing and Assurance and Intertech Energy Infrastructure into two specialist-scale global active leaders will augment this enduring competitive advantage with three major benefits. First, the focused specialist portfolio approach for each business resulting in greater strategic focus. Second, a sharper capital allocation to see the immediate and long-term growth opportunities targeting faster market share gains. And third, a simpler business to manage, resulting in faster in-market executions, increased productivity, and higher returns. We are all energized about the start of our strategic review to unleash our full potential and see the significant value growth opportunities ahead. Having said that, We all remain laser-focused on delivering quality roles in Q2, Q3, Q4 to make sure that we have a strong 2026 and, of course, we continue to deliver a strong performance in 2027 and beyond. Thank you for joining our call today. We'll take now any questions you might have.

We will now start the Q&A. If you are dialed into the call and wish to ask a question, please use the raise hand function at the bottom of your Zoom screen or star nine on your telephone keypad. We'll pause a moment to allow the queue to form. Our first question comes from Rory McKenzie with UBS. Please unmute your line and ask your question.