- Revenue and profit up 6.6% and 13%
- Medium-term margin target of 18.5%
- New £350 million share buyback
Business assurance, testing, inspection and certification services group Intertek (ITRK) topped the FTSE gainers, rising as much as 7% to a new three-year high of £55.35, after raising its medium-term operating margin target and announcing a £350 million share buyback.
The share price gain takes the advance over the last 12-months to 18% compared with a 15% increase in the blue-chip FTSE 100 index.
WHAT DID THE COMPANY SAY?
Chief executive Andre Lacroix commented: ‘We have delivered a strong margin of 17.4% in 2024, effectively achieving our medium-term target of 17.5%+ faster than expected, and today we are announcing a new margin target of 18.5%+ in the medium-term, capitalising on the revenue growth acceleration we are seeing for our ATIC solutions, our disciplined performance management and our investments in high growth and high margin segments.’
The company said that considering the strength of its earnings model and the current leverage ratio of 0.7 times net debt to EBITDA (earnings before interest, tax, depreciation, and amortisation) being below the targeted range of 1.3 to 1.8 times, it intends to start a £350 million share buyback.
The full year dividend was hiked 40% to 156.5p per share in line with the group’s policy to pay out circa 65% of EPS, which jumped 15% in constant currencies to 240.6p.
CONFIDENT OUTLOOK
Revenue for the 12-monts to 31 December increased 6.6% in constant currencies to £3.4 billion, in line with analysts’ expectations, and equating to 6.3% like-for-like growth.
Adjusted operating margin on sales increased by a full percentage point to 17.4% reflecting sales mix, operating leverage and productivity benefits, and helping to propel 13% growth in adjusted operating profit to £590 million.
Looking ahead the company expressed confidence in delivering a ‘robust’ performance with mid-single digit like-for-like revenue growth and ‘strong cash flow performance.
Shore Capital analyst Robin Speakman said he expects to push through a ‘modest’ upgrade following the annual results.
‘We expect momentum from H2 FY24F to continue into H1 FY25F, and without strongly negative foreign exchange in FY25F, we see EPS (earnings per share) growth of 9% this year.
‘Beyond this we expect organic growth to normalise in a 4% to 5% range with margins now guided to an 18.5% target (over what term?) – but noting likely higher and rising cost of service delivery,’ explained Speakman.
Speakman added, ‘We note global economic growth challenges evident in key regions across Europe, China, and South America, and now a global trade protectionist agenda from the USA – which we note could also spawn opportunities.’
