Intertek Annual Report 2008

FC1 Intertek Group plc Annual Report 2008 Report Annual Bringing competitive advantage to business Annual Report 2008 IFC2 Contents 01 Financial Highlights 02 At a Glance 04 Chairman’s Statement Directors’ Report – Business Review 06 Chief Executive Officer’s Review 09 Operating Review 23 Chief Operating Officer’s Review 24 Financial Review 28 Risks and Uncertainties Directors’ Report – Governance 32 Board of Directors 34 Intertek Operations Committee 36 Corporate Governance Report 42 Remuneration Report 56 Other Statutory Information 58 Statement of Directors’ Responsibilities 59 Corporate Social Responsibility Report Financial Statements 66 Independent Auditors’ Report 68 Consolidated Income Statement 69 Consolidated Balance Sheet 70 Consolidated Statement of Cash Flows 71 Consolidated Statement of Recognised Income and Expense 72 Notes to the Financial Statements 112 Intertek Group plc Company Balance Sheet 113 Notes to the Company Financial Statements Shareholder Information 116 Corporate and Shareholder Information 117 Financial Calendar and Contact Information Cautionary statement This Annual Report contains certain forward- looking statements with respect to the financial condition, results, operations and business of Intertek Group plc. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. Nothing in this Annual Report should be construed as a profit forecast. 01 Annual Report 2008 01 Financial Highlights Revenue £m Operating profit £m +29.4% +27.4% 2008 1,003.5 2008 147.9 2007 775.4 2007 116.1 +18.7% at constant rates1 Adjusted operating profit2 £m Adjusted operating profit margin +35.4% +70bp 2008 164.7 2008 16.4% 2007 121.6 2007 15.7% +21.2% at constant rates1 +30bp at constant rates1 Operating cash flow £m Profit before income tax £m +30.1% +31.0% 2008 194.0 2008 138.6 2007 149.1 2007 105.8 Basic earnings per share Dividend per share4 +27.4% +15.6% 2008 59.5p 2008 20.8p 2007 46.7p 2007 18.0p 67.1p diluted adjusted EPS3 1. Growth at constant exchange rates compares revenue and 3. Diluted adjusted EPS based on adjusted earnings (see note 9 adjusted operating profit for 2008 and 2007 at the average to the financial statements). exchange rates for 2008. 4. Dividend per share is based on the interim dividend paid of 2. Operating profit before amortisation of acquisition intangibles, 7.1p (2007: 5.8p) plus the proposed final dividend of 13.7p goodwill impairment and non-recurring costs (see reconciliation (2007: 12.2p). in note 3 to the financial statements). 02 Client: Intertek Project: Annual Report 2008 ID No: C14294 Page no: Date: 05-03-2009 WI No: Verbal Operator: .../ac/dw/ac/dw/sc/dw/wf;ac;sc Proof Reader: 02 www.intertek.com At a Glance Intertek revenue growth in 2008 Asia Pacific +37% Americas +26% EMEA +26% Our customers Our industries • Aerojet • Honeywell • Payless ShoeSource • Agfa Healthcare • Hydro-Québec • Petroleo Brasileiro Aerospace & Automotive • AkzoNobel • IBM • Rolls-Royce Building Products • Auchan • IKEA • SABIC • The Government of • J C Penney Company, Inc. • Samsung Chemicals Bangladesh • Kohl’s • The Government of • Barrick Gold of Australia • The Government of Kuwait Saudi Arabia Consumer Goods & Retailers • BHP Billiton Worsley • Lear Corporation • Saudi Aramco Electrical & Electronic Alumina Pty Ltd • Levi Strauss & Co • Schneider Electric • Boddington Gold Mine/ • LG • Sears Holdings Management Energy Newmont Asia Pacific • LIDL Corporation • Bosch • Linde • Shell Food & Agriculture • Bose Corporation • Lloyd’s Register • Smiths Medical Industrial • BP • Maersk • StatoilHydro • Canon • Marks & Spencer • Talisman Energy IT & Telecom • Certified Automotive • McDonald’s Corporation • Territory Resources Limited Parts Association • The Government of Mexico • Tesco Medical & Pharmaceutical • ChevronTexaco • Morgan Stanley • The Home Depot Inc • Cisco • Mothercare • Timberland Minerals • Citgo • The Government of • TOKYO ELECTRON LTD Petroleum • ConocoPhillips Mozambique • Toshiba • DSM • Nestlé • Total Toys, Games & Hardlines • ExxonMobil • Newcrest Mining Limited • Trafigura • Gap Inc • The Government of Nigeria • Valero Textiles, Apparel & Footwear • Häagen-Dazs® • Nikon • Vitol • Haier • Nordstrom, Inc. • YAMAHA • Hitachi • Panasonic 03 Annual Report 2008 03 Intertek is a leading provider of quality and safety solutions serving a wide range of industries around the world. From auditing and inspection, to testing, quality assurance and certification, Intertek people are dedicated to adding value to customers’ products and processes, supporting their success in the global marketplace. Intertek has the expertise, resources and global reach to support its customers through its network of more than 1,000 laboratories and offices and over 23,000 people in more than 100 countries around the world. Our divisions Contribution What we do to revenue Testing Consumer Goods Employees 8,531 Offices 104 Laboratories 71 25% Inspection Commercial & Electrical Employees 3,527 Offices 72 Laboratories 76 20% Certification Oil, Chemical & Agri Employees 8,060 Offices 367 Laboratories 232 31% Auditing Government Services Employees 563 Offices 40 Outsourcing Laboratories 1 5% Analytical Services Employees 1,320 Advisory Offices 25 Laboratories 34 12% Industrial Services Training Employees 417 Offices 40 3% Minerals Quality Employees 1,340 assurance Offices 24 Laboratories 29 4% 04 Client: Intertek Project: Annual Report 2008 ID No: C14294 Page no: Date: 05-03-2009 WI No: Verbal Operator: .../ac/dw/ac/dw/sc/dw/wf;ac;sc Proof Reader: 04 www.intertek.com Chairman’s Statement Results Earnings per share I am pleased to report that Intertek delivered excellent Basic earnings per share were 59.5p, up 27.4% over results in 2008 and ended the year with a revenue last year and diluted adjusted earnings per share figure of £1,003.5m, up 29.4% over last year. were 67.1p, up 37.5%. Excluding acquisitions, revenue growth was 22.5%. Dividends Operating profit was £147.9m, up 27.4% over An interim dividend of 7.1p per share (2007: 5.8p) last year. Adjusted operating profit increased to was paid to shareholders on 18 November 2008. £164.7m, up 35.4%. Our adjusted operating The Directors will propose a final dividend of 13.7p margin increased by 70 basis points to 16.4%. per share at the Annual General Meeting on 15 May Excluding acquisitions, adjusted operating profit 2009, to be paid on 19 June 2009 to shareholders grew by 28.4%. on the register at close of business on 5 June 2009. If approved, this will make a full year dividend of Acquisitions 20.8p per share (2007: 18.0p), an increase of We continued our successful track record of making 15.6%. This is in line with our dividend policy and infill acquisitions. In 2008 we acquired 14 new reflects the good performance of the Group. businesses for total consideration of £79.5m (2007: £100.0m). Details of the acquisitions are given in The Board the Operating Review by division and in note 26 to Other than the previously announced appointment the financial statements. To date in 2009, we of Mark Loughead to the Board on 1 January 2008, have completed two further acquisitions for initial there were no changes to the Board during 2008. consideration of £21.5m which further widen the Mark’s appointment further strengthens the depth scope and range of the services we offer. Additional of experience on the Board. Biographies of each of consideration of up to £5.6m is payable dependent the Board members are set out on pages 32 and 33. on future financial performance. We intend to Intertek Operations Committee continue prudently investing in new opportunities The day-to-day management of the Group is in our chosen industry sectors. undertaken by the Intertek Operations Committee (IOC). The IOC currently comprises the three Executive Directors, the six Executive Vice Presidents who head up the operating divisions and the Vice President of Human Resources. Biographies of each of the IOC members are set out on pages 34 and 35. Acquisitions in 2008 14 businesses acquired for £79.5m in nine countries across six divisions 05 Annual Report 2008 05 Employees Outlook Our mission to support and add value for our Our 2008 revenue growth excluding acquisitions, Basic earnings customers is delivered through almost 24,000 people was 12.3% at constant exchange rates. Whilst a per share across Intertek worldwide. We continue to improve significant global recession will obviously affect our capacity to attract, develop and retain the best our business, our strategy as well as our geographic people who share in the mission, values and success and industry diversification, will help to mitigate 59.5p of the Group. any adverse impact and provide us with a range of opportunities. As a result, we are confident that On behalf of the Board, I would like to welcome Dividend per share Intertek will continue to grow well in 2009. all new employees to Intertek and to thank all our employees around the world for their commitment 20.8p to making 2008 another successful year. Vanni Treves Environmental impact Chairman Intertek is committed to playing an important and positive role with respect to climate change and the environmental impact of products and processes. We advise our clients, as an integral part of our business, on many issues which have an impact on the environment, such as the chemical content of their products and packaging, the energy efficiency of their equipment, CO2 emissions and the disposal of harmful substances and waste electrical products. We also provide advisory and consultancy services to help retailers and manufacturers design their products and services to comply with current and future environmental regulations around the world. Through our services we help our clients to minimise the environmental impact of their products and processes for the benefit of society as a whole.

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