- 15.5% year-to-date revenue growth, FX adds 6.5%
- China disruption pressures margins
- Positive outlook helps lift shares
Testing and assurance services specialist Intertek (ITRK) said revenues for the 10 months to 31 October increased 15.5% driven by strong like-for-like growth of 5.2% and a foreign exchange translation benefit of 6.5% thanks to the strong dollar.
At constant currencies, revenues were up 9% to $2.63 billion including a £120 million contribution from recent acquisitions.
The company said its ‘strong’ pricing power allowed it to make ‘good progress’ on pricing while disciplined cost management is delivering a strong cash performance in the second half.
MARGIN PRESSURES
On a less positive note, disruption to its business due to Covid restrictions in China in the early part of the year means the full-year margin will be lower than 2021. China represents around 63% of group revenues.
The company also cited a divisional mix impact and investments made to address the inflationary impact on its operations as headwinds.
Chief executive Andre Lacroix commented: ‘We have an excellent business in China with leading and scale positions. The lockdown restrictions had a significant impact in our China business between March and June with Shanghai the most impacted.
‘It has been operating as normal from July onwards and as expected, our business has rebounded quickly delivering a good like-for-like revenue growth at constant currency in the July to October period.’
For the full year to 31 December, Intertek expects to deliver ‘good’ constant currency earnings growth and free cash flow generation.
While the margin compression is disappointing, investors seemed to focus on the positives with the shares edging 0.7% higher to £38.89.
EXPERT VIEW
Shore Capital analyst Robin Speakman took a more cautious view on the outlook: ‘We continue to see challenges going into the 2023 financial year driven by lower global consumer demand, continuing geopolitical tensions and critically in competition - all combining in continuing potential margin pressure.
‘Caution is required, and we will therefore retain flat margin assumptions going into FY23F, post this year’s margin fall (minus 60 basis points to 16.4%).’
