Intertek Reports Strong 2024 Results with 13% Profit Growth and Raises Medium-Term Margin Target
Why we think this is very good
Intertek's 2024 results demonstrate robust financial performance across key metrics. The 13% increase in adjusted operating profit at constant currency, coupled with a 15.2% rise in adjusted diluted EPS, signals strong earnings growth. Revenue grew by 6.6% at constant currency, with like-for-like growth of 6.3%, indicating healthy organic expansion. Notably, the adjusted operating margin improved by 100bps to 17.4%, showcasing enhanced operational efficiency. The company's cash generation remains strong, with excellent cash conversion at 121% and reduced net financial debt. The announcement of an initial £350m share buyback program and an increased dividend payout ratio to 65% reflects management's confidence in the company's financial position and future prospects. Furthermore, Intertek has raised its medium-term margin target to 18.5%+, suggesting a positive outlook for continued profitability improvement. While the current valuation appears somewhat high, it seems justified by the strong performance and optimistic future guidance. The absence of significant headwinds or challenges in the outlook further supports the very positive sentiment.
Key Points
- Revenue increased 6.6% at constant currency to £3,393.2m
- Adjusted operating profit up 13% at constant currency to £590.1m
- Adjusted operating margin improved 100bps to 17.4%
- Adjusted diluted EPS rose 15.2% at constant currency to 240.6p
- Strong cash generation with free cash flow of £408.8m
- Cash conversion at 121%
- Net financial debt reduced to £499.8m from £610.6m in 2023
- New £350m share buyback program announced
- Dividend payout ratio increased to 65%, full year dividend of 156.5p per share
- Medium-term margin target raised to 18.5%+
- Positive outlook for 2025 with expected mid-single digit LFL revenue growth
Summary
Intertek Group plc reported impressive 2024 results, demonstrating strong financial performance and positive outlook. Key highlights include:
• Revenue growth of 6.6% at constant currency to £3,393.2m • Adjusted operating profit up 13% at constant currency to £590.1m • Adjusted operating margin improved by 100bps to 17.4% • Adjusted diluted EPS increased by 15.2% at constant currency to 240.6p • Strong cash generation with free cash flow of £408.8m and cash conversion at 121% • Net financial debt reduced to £499.8m from £610.6m in 2023 • New £350m share buyback program announced • Dividend payout ratio increased to 65%, with full year dividend of 156.5p per share • Medium-term margin target raised to 18.5%+
The company's performance across all five divisions was robust, with particular strength in Consumer Products, Corporate Assurance, and World of Energy segments. The outlook for 2025 remains positive, with expectations of mid-single digit LFL revenue growth, margin progression, and strong free cash flow. Broker targets generally support a positive view, with several maintaining 'Buy' or 'Outperform' ratings and price targets above the current share price.