Intertek Group Annual Report 2009

Plain-text annual report

Intertek Group plc 25 Savile Row London W1S 2ES United Kingdom t: +44 20 7396 3400 f: +44 20 7396 3480 e: info@intertek.com www.intertek.com I n t e r t e k G r o u p p l c A n n u a l R e p o r t 2 0 0 9 Success through quality Annual Report 2009 38113_Cover.indd 2-1 5/3/10 05:01:49 Our Business Corporate Information 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 25,000 people in more than 100 countries around the world. Board of Directors Vanni Treves, Chairman* David Allvey* Edward Astle* (appointed 1 September 2009) Gavin Darby* (appointed 1 September 2009) Christopher Knight* Debra Rade* Wolfhart Hauser, Chief Executive Officer Mark Loughead, Chief Operating Officer William Spencer, Chief Financial Officer * Non-Executive Directors Company Secretary Fiona Evans Investor Relations E: investor@intertek.com T: +44 20 7396 3400 Registrars Equiniti The Causeway Worthing West Sussex BN99 6DA T: 0871 384 2653 T: +44 121 415 7047 (outside UK) Auditors KPMG Audit Plc PO Box 486 8 Salisbury Square London EC4Y 8BB T: +44 20 7311 1000 Registered Office Intertek Group plc 25 Savile Row London W1S 2ES T: +44 20 7396 3400 F: +44 20 7396 3480 www.intertek.com Registered number: 4267576 ISIN: GB0031638363 London Stock Exchange Support Services FTSE 100 Symbol: ITRK Brokers J.P. Morgan Cazenove 20 Moorgate London EC2R 6DA T: +44 20 7588 2828 Goldman Sachs International Peterborough Court 133 Fleet Street London EC4A 2BB T: +44 20 7774 1000 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. Designed by 35 Communications. Cover photograph by Charlie Fawell. 38113_Cover.indd 4-3 5/3/10 05:01:56 www.intertek.com Intertek Annual Report 2009 01 Contents Overview IFC Our Business 02 Financial Highlights 04 At a Glance 06 Chairman’s Statement Directors’ Report – Business Review 08 Chief Executive Ofﬁcer’s Review 12 Chief Operating Ofﬁcer’s Review 14 Operating Review 26 Financial Review 32 Corporate Social Responsibility Report 38 Principal Risks and Uncertainties Directors’ Report – Governance 42 Board of Directors 44 Intertek Operations Committee 46 Corporate Governance Report 53 Remuneration Report 66 Other Statutory Information 68 Statement of Directors’ Responsibilities Financial Statements 70 Consolidated Income Statement 71 Consolidated Statement of Comprehensive Income 72 Consolidated Statement of Financial Position 73 Consolidated Statement of Changes in Equity 74 Consolidated Statement of Cash Flows 75 Notes to the ﬁnancial statements 119 Intertek Group plc – Company Balance Sheet 120 Notes to the Company ﬁnancial statements 123 Independent Auditors’ Report 124 Shareholder Information Financial Calendar IBC Corporate Information Go online… www.intertek.com 02 Intertek Annual Report 2009 Financial Highlights Recession-beating organic growth boosted by acquisitions and favourable currency movements. > Revenue up 23% and adjusted operating proﬁt up 27% at actual exchange rates > Organic revenue and adjusted operating proﬁt both up 4% at constant exchange rates > Full year dividend up 23% Intertek revenue distribution in 2009 EMEA 29% Asia Paciﬁc 37% Americas 34% www.intertek.com Intertek Annual Report 2009 03 Revenue £m +23.3% 2009 +7.0% at constant rates1 Operating proﬁ t £m +26.2% 1,237.3 2009 186.7 Adjusted operating proﬁ t2 £m Adjusted operating proﬁ t margin +26.9% 2009 +6.1% at constant rates1 Operating cash ﬂ ow £m +43.5% 2009 Basic earnings per share +21.7% 2009 81.5p diluted adjusted EPS3 +50bp 209.0 2009 16.9% down 10bp at constant rates1 Proﬁ t before income tax £m +22.1% 278.4 2009 169.2 Dividend per share4 +22.6% 72.4p 2009 25.5p 1. Growth at constant exchange rates compares revenue and adjusted operating proﬁ t for 2009 and 2008 at the average exchange rates for 2009. 2. Operating proﬁ t before amortisation of acquisition intangibles, goodwill impairment and non-recurring costs (see reconciliation in note 3 to the ﬁ nancial statements). 3. Diluted adjusted EPS based on adjusted earnings (see note 9 to the ﬁ nancial statements). 4. Dividend per share is based on the interim dividend paid of 8.2p (2008: 7.1p) plus the proposed ﬁ nal dividend of 17.3p (2008: 13.7p). Go online for the 5-year summary www.intertek.com/investors/ﬁ ve-year-summary 04 Intertek Annual Report 2009 At a Glance 25,000+ employees, 1,000+ labs and ofﬁ ces, 100+ countries across the globe serving the world’s leading brands – our customers. Our Divisions Oil, Chemical & Agri Consumer Goods Commercial & Electrical We provide independent cargo inspection, non-inspection related laboratory testing, calibration and related technical services to the world’s energy, petroleum, chemical and agricultural industries. We also provide cargo scanning, ﬁ scal support services and standards programmes to governments, national standards organisations and customs authorities. We are a market leading provider of services to the textiles, toys, footwear, hardlines, food and retail industries. Services include testing, inspection, auditing, advisory services, quality assurance and hazardous substance testing. Customers are often retailers but also include manufacturers and suppliers within a global supply chain. Through our global network of accredited ofﬁ ces we provide manufacturers and retailers with the most comprehensive scope of safety, performance and quality testing and certiﬁ cation services. We support customers in a wide range of industries including home appliances, lighting, medical, building, industrial and HVAC/R (heating, ventilation, air conditioning and refrigeration), IT, telecom, renewable energy and automotive. Analytical Services Industrial Services Minerals Serving a wide range of industries including chemical, pharmaceutical, oil and gas, and automotive and aerospace, we offer expert laboratory measurement and consultancy services. We have an established track record of success in laboratory outsourcing with many large, internationally recognised companies. Using in-depth knowledge of the oil, gas, petrochemical, power, renewable energy, civil and infrastructure, aerospace and medical ﬁ elds, we provide a range of services to help customers meet global quality standards. These include management systems certiﬁ cation, second-party auditing, supplier evaluation, technical veriﬁ cation, conformity assessment, asset integrity management, 3D laser scanning and dimensional control management, training, health and safety consulting and greenhouse gas services. We offer analytical testing, inspection and mine-site laboratory services to the world’s minerals, exploration, ore and mining industries. We provide a wide range of analytical services for materials including precious metals, base metals and their raw content, such as iron ore, bauxite, coal and coke, as well as bulk commodities. www.intertek.com Intertek Annual Report 2009 05 Our Services Our Customers Testing Outsourcing Inspection Advisory Certiﬁ cation Training Auditing Quality Assurance Our Industries Aerospace & Automotive Industrial Building Products IT & Telecom Chemicals Medical & Pharmaceutical Consumer Goods & Retailers Electrical & Electronic Energy Food & Agriculture Minerals Petroleum Toys, Games & Hardlines Textiles, Apparel & Footwear (cid:115)(cid:0)(cid:0)(cid:33)(cid:36)(cid:45) (cid:115)(cid:0)(cid:0)(cid:33)(cid:75)(cid:90)(cid:79)(cid:46)(cid:79)(cid:66)(cid:69)(cid:76) (cid:115)(cid:0)(cid:0)(cid:33)(cid:76)(cid:67)(cid:65)(cid:78)(cid:0)(cid:48)(cid:65)(cid:67)(cid:75)(cid:65)(cid:71)(cid:73)(cid:78)(cid:71) (cid:115)(cid:0)(cid:0)(cid:33)(cid:82)(cid:75)(cid:69)(cid:77)(cid:65) 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(cid:115)(cid:0)(cid:0)(cid:52)(cid:82)(cid:73)(cid:85)(cid:77)(cid:80)(cid:72)(cid:0)(cid:39)(cid:82)(cid:79)(cid:85)(cid:80) (cid:115)(cid:0)(cid:0)(cid:53)(cid:78)(cid:73)(cid:76)(cid:69)(cid:86)(cid:69)(cid:82) (cid:115)(cid:0)(cid:0)(cid:53)(cid:14)(cid:51)(cid:14)(cid:0)(cid:39)(cid:82)(cid:69)(cid:69)(cid:78)(cid:0)(cid:34)(cid:85)(cid:73)(cid:76)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:35)(cid:79)(cid:85)(cid:78)(cid:67)(cid:73)(cid:76) (cid:115)(cid:0)(cid:0)(cid:54)(cid:65)(cid:76)(cid:69)(cid:82)(cid:79) (cid:115)(cid:0)(cid:0)(cid:54)(cid:73)(cid:84)(cid:79)(cid:76) (cid:115)(cid:0)(cid:0)(cid:55)(cid:73)(cid:76)(cid:77)(cid:65)(cid:82)(cid:0)(cid:39)(cid:82)(cid:79)(cid:85)(cid:80) (cid:115)(cid:0)(cid:0)(cid:57)(cid:65)(cid:77)(cid:65)(cid:72)(cid:65) 06 Intertek Annual Report 2009 Chairman’s Statement Positioning for future growth Results Intertek delivered strong results in 2009, notwithstanding very difﬁcult macro-economic conditions throughout the world and ended the year with a revenue ﬁgure of £1,237.3m, up 23.3% over last year. Excluding acquisitions revenue growth was 19.4%. Operating proﬁt was £186.7m, up 26.2% over last year. Adjusted operating proﬁt increased to £209.0m, up 26.9%. Our adjusted operating margin increased by 50 basis points to 16.9%. Excluding acquisitions, adjusted operating proﬁt grew by 24.4%. Earnings per share Basic earnings per share were 72.4p, up 21.7% over last year and diluted adjusted earnings per share were 81.5p, up 21.5%. Dividends An interim dividend of 8.2p per share (2008: 7.1p) was paid to shareholders on 20 November 2009. The Directors will propose a ﬁnal dividend of 17.3p per share at the Annual General Meeting on 14 May 2010, to be paid on 18 June 2010 to shareholders on the register at close of business on 4 June 2010. If approved, this will make a full year dividend of 25.5p per share (2008: 20.8p), an increase of 22.6%. Acquisitions In 2009, we made three bolt-on acquisitions for total consideration of £30.8m (2008: £83.1m). Details of these acquisitions are given in the Operating Review by division and in note 24 to the ﬁnancial statements. Our strategy of growing key industry sectors through acquisitions is unchanged, although we deliberately scaled back our acquisitions in 2009 to concentrate on integrating the businesses we acquired in prior years. We will continue to invest in new opportunities as they arise. The Board On 14 January 2010, we announced that Bill Spencer has decided to retire from his position as Chief Financial Ofﬁcer. Bill has served Intertek extremely well for over 18 years and has played a valuable part in the development of the Group. After 24 years with the Group, Richard Nelson retired from the Intertek Board on 1 September 2009. Richard’s work over the past two decades, as Chief Executive Ofﬁcer and more recently as Non-Executive Director and Deputy Chairman, will have a lasting impact and has been integral in taking Intertek to the successful position that it holds today. On behalf of the Board, I would like to thank both Bill and Richard very much for the signiﬁcant contribution they have made to the Group. Our best wishes for the future to them both. On 1 September 2009, I was pleased to welcome Edward Astle and Gavin Darby to the Board as Non-Executive Directors. Edward Astle is Pro-Rector of Commercial Development at Imperial College London where he leads the development of major business opportunities in the UK and internationally. Edward’s management and commercial strategy experience at high level in the telecoms, industrial and science related ﬁelds will bring additional perspective to the Board. Vanni Treves Chairman www.intertek.com Intertek Annual Report 2009 07 and there are email and telephone hotlines so that staff may report anonymously, any inaccurate or unethical working practices. Our strong focus on compliance provides assurance to our customers that our reports and certiﬁcates are valid and accurate. Employees Our mission to support and add value for our customers is delivered through over 25,000 people across Intertek worldwide. It’s been a tough year for many of our customers and the dedication of our employees to customer service and going the extra mile has helped us to retain business in the face of increased competition. We constantly strive to improve our capacity to attract, develop and retain the best people who share in the mission, values and success of the Group. On behalf of the Board, I would like to welcome all new employees to Intertek and to thank all our employees around the world for their commitment to making 2009 another successful year. Summary Intertek has performed strongly in difﬁcult circumstances and generated cash. Our key growth drivers remain intact and the Board’s conﬁdence in the future is reﬂected by the dividend increase of 22.6%. Gavin Darby is Operations and Business Development Director of Vodafone Group Plc for the Asia Paciﬁc and Middle East Region. Gavin’s extensive background in overseeing the operational development of businesses across international markets will be a valuable complement to the Board. In April 2010, Lloyd Pitchford will join the Board as Chief Financial Ofﬁcer. Lloyd has spent ten years with BG Group plc, one of the largest UK publicly listed companies holding the role of Group Financial Controller for the BG Group for the past ﬁve years. Lloyd’s extensive international and management experience with large, complex and growing organisations will assist Intertek to explore exciting opportunities across global markets. I am delighted to welcome Lloyd to the Board and am conﬁdent that he will contribute to Intertek’s continued success. Environmental impact 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. We are also mindful of our own impact on the environment and are working on various initiatives to reduce this. Quality and integrity Quality and integrity are in essence what our customers are buying and they therefore lie at the heart of Intertek’s culture and processes. We have embedded our values across the organisation and are continually reviewing and reinforcing our internal processes to ensure compliance. The Intertek Compliance Code and Code of Ethics provide practical guidance and instruction for employees 08 Intertek Annual Report 2009 Directors’ Report – Business Review Chief Executive Ofﬁcer’s Review Our strategy in action Our commitment to supporting and adding value to our customers by improving their products and processes and reducing their costs drives everything we do. Introduction As expected, 2009 was a challenging year with tougher global market conditions, recession in many countries and severe contraction in some industries. Despite these difﬁculties, the key business drivers to Intertek’s global business remained intact and combined with our customer focused strategy enabled us to achieve strong results for the year. Our strategy Our mission is to add value to our customers’ processes, products and brands through providing quality and safety services. We concentrate on industry sectors in which we have the critical size to provide our customers with global world-class services which are based on a deep understanding of their current and evolving future needs and challenges. Our divisions are organised to focus on speciﬁc sectors and they continuously improve their capabilities and procedures to deliver customer centric services. Our excellent staff, market leading response times and high value solutions differentiate us in the marketplace. Our network of laboratories and ofﬁces are located where our customers need them and our highly motivated people are chosen for their understanding of local culture as well as their industry expertise. We understand that our people are our core assets and invest continuously in them. Our close relationship with our customers and our reputation for quality has allowed us to develop partnerships with many globally-renowned companies where we take over and operate our customers’ in-house testing facilities or quality processes along their supply chain. Companies can outsource their laboratory activities to Intertek and be conﬁdent that the service they receive will be both high quality and more cost effective. Our strategy is to be the premier high value service provider in our industry sectors and we will continue to build a full service portfolio to offer our customers one-stop shopping solutions and give us the opportunity to leverage excellent customer relationships across a broad portfolio. Besides focusing on delivering strong organic growth rates we will continue our well deﬁned acquisition strategy to strengthen our position in evolving market segments and the important regional markets of the future. We will do this with small to medium sized bolt-on acquisitions but we are also well prepared to be an active consolidator in the industry. Wolfhart Hauser Chief Executive Ofﬁcer www.intertek.com Intertek Annual Report 2009 09 In 2010, we will further strengthen our Intertek brand as the name on which leading global players rely if they want to be conﬁdent that their products and procedures match the highest quality, safety and environmental standards. Action: adding value to the energy sector We have worked closely with some of the major oil companies to develop better ways to analyse crude oils from offshore production ﬁelds. We have developed a groundbreaking approach that uses near infra-red to conduct pipeline crude oil analysis in combination with predictive software. This solution has enabled our customers to cut costs, increase revenues and deliver greater proﬁtability. Action: using global and local knowledge We helped one of our well-known retailer clients improve their quality control procedures in various countries. Our solution balanced global and local concerns. Multi-disciplinary quality assurance teams worked closely with the client in each location to analyse the supply chain and strengthen local quality control procedures at source. Our innovative database technology provided transparency and allowed rapid analysis and correction of problems in supply before they hit the shelves – reducing costs for our client and protecting their worldwide reputation and brand. Action: helping our customers grow We have helped our customers in China compete on the global stage. We contributed expertise in multiple areas for one of the world’s largest manufacturer of white goods. By assisting with design and R&D and providing training to improve internal capability we helped our client make and market better products at a much faster rate. This improved their competitive advantage, enabling them to further their international growth. Action: expanding our service offering Through our knowledge of the energy and industrial markets, we identiﬁed that our customers worldwide needed global technical inspection and expediting support to bring them new expertise, project efﬁciencies and cost saving. In February 2009, we acquired the WISco group of companies to add these service capabilities to our Industrial Services division. We are now able to offer these services globally to our customers. Action: understanding the regulations We used our knowledge and understanding of international regulations and standards to help the world’s largest manufacturer of rehabilitation equipment to navigate the labyrinth of medical regulatory standards that apply to their products. When a new edition of the IEC 60601 international series of standards for electronic medical devices was released, we were able to determine which edition would be most suitable for the client’s design, certiﬁcation and market entry needs, thus supporting their reputation for engineering excellence. Action: being close to our clients One of our clients in the mining industry wanted to be able to analyse iron as soon as it was extracted. We set up a laboratory at their mine site which uses robotic technology and automated systems to provide faster, more accurate analysis which is also cleaner and safer. Our results allow our client to make more informed decisions and improve resource utilisation. Action: focusing on global trade A customer in the aerospace industry had been working with multiple companies to certify their facilities across the world. They recognised the inefﬁciency of this approach and asked Intertek to provide this service globally. As one of the best known certiﬁers in the aerospace industry and one of the ﬁrst companies to provide AS9100 certiﬁcation (the internationally recognised quality management standard speciﬁcally written for the aerospace industry), we were a natural choice. Result: sustainable growth Despite tougher global market conditions, the key business drivers to Intertek’s global business remain intact, namely product variety, supply chain complexity, the outsourcing of in-house testing laboratories and increasing demand for safe, environmentally friendly and quality products driven by ongoing regulation and end customers. Supporting our customers as they strive to be more competitive and cost effective underpins this growth. We expect this strategy and customer focus to generate continued and sustainable growth. 10 Intertek Annual Report 2009 Directors’ Report – Business Review Chief Executive Ofﬁ cer’s Review The Intertek growth drivers Our success lies in our strategy. Our consistent and committed focus on our customers is the cornerstone of our success and enables us to take advantage of the ﬁ ve key growth drivers in our business which are shown below. 1 2 3 4 5 GLOBAL TRADE: Impacting volume related businesses MARKET DRIVERS: Increasing demand for quality and safety, concern for the environment and product variety EXPANSION: More services, regions and industries DRIVING THE INDUSTRY: Customers outsourcing to make ﬁ xed costs variable EXTERNAL GROWTH: Strong track record of acquiring complementary businesses www.intertek.com Intertek Annual Report 2009 11 The drivers of our growth remain robust Only about 30% of our business relies on the volume of global trade, so although growth in global trade has slowed down since the economic crisis began, this has primarily impacted our inspection related businesses. Consumer demand for product variety and safe, environmentally friendly and quality products continues to grow. An increasing number of products are subject to regulations which require them to be tested, often by an independent company. We are continually developing the range of services we can offer customers and expanding the industry sectors that we cover. Each of our divisions broadly supports different industries although customers have access to all the services available in the Group. We provide local support to our customers on an international scale by locating our ofﬁ ces and laboratories close to our customers’ buying ofﬁ ces and manufacturers. The trend is for customers to concentrate on their core business and reduce their ﬁ xed costs by outsourcing any non-core activities to specialists. We have a successful track record of providing outsourced laboratory services to many leading companies in a wide variety of industries. We have acquired over 50 businesses in the past ﬁ ve years to complement and enhance our service portfolio. In 2009, we reduced our investment in acquisitions to reﬂ ect the uncertain market conditions and provide increased capacity to fund medium or larger acquisitions should suitable opportunities arise. Go online for more information www.intertek.com/investors/presentations 12 Intertek Annual Report 2009 Directors’ Report – Business Review Chief Operating Ofﬁcer’s Review Our Intertek as One programme positions us to serve our customers better and help them succeed in a difﬁcult business environment. Our clients are producing some of the most exciting innovations in their industries today, ranging from creating safer and more environmentally friendly products, to introducing groundbreaking technologies and developing alternative sources of energy. As the environment in which they are operating is evolving, our clients are rapidly adapting their strategies, business models and supply chains to ensure they keep their competitive edge. Intertek is changing with them, as we continue to execute our customer-focused Intertek as One strategy. In 2009, we further strengthened the integration and co-operation across the operating divisions with the nomination of a further eight country managers, bringing the total to 25, covering 84% of the Group’s revenues. The country managers are responsible for co-ordinating the actions and activities of the operating divisions within a country to ensure that we present a consistent ‘face’ to our clients and simplify our service offering to enable them to understand exactly how we can help them. Under the Intertek as One initiative, we met with more than 200 global industry leading clients to understand their priorities. These meetings not only provided insight into their business challenges; we were able to talk about how we can expedite their product time-to-market, improve their supply chains, reduce cost and increase efﬁciency, meet regulatory requirements and adopt sustainable business practices. These client engagements resulted in over 130 assignments and contracts, including some signiﬁcant projects with world-leading companies to provide services from the combined divisions of Intertek. We also learnt that Intertek enjoys a reputation for integrity, speed of response, and prompt delivery of unique solutions, which is one of our competitive advantages. As we move into 2010, we will focus on developing collaborative relationships based on mutual trust and conﬁdence, sustaining momentum in pursuing new opportunities, and delivering superior service that encourages retention. Mark Loughead Chief Operating Ofﬁcer www.intertek.com Intertek Annual Report 2009 13 Intertek – The marks of quality For more than 100 years, Intertek has guided clients through the challenging certiﬁ cation process. Offering the broadest range of certiﬁ cation and accreditation marks accepted in markets around the world, Intertek can help clients to succeed in new and existing markets, meet evolving regulatory requirements and win new customers. In support of our single ‘face’ to clients and stakeholders, we launched the new Intertek website at www.intertek.com. Going forward, we will build on this new platform to increase engagement and develop new business. Internally we are investing in infrastructure improvements to enable faster, more efﬁ cient service and productivity that will lead to higher long-term margins. We will transition to common systems and processes, beginning with the Intertek Common Financial Platform (cid:65)(cid:78)(cid:68)(cid:0)(cid:83)(cid:72)(cid:65)(cid:82)(cid:69)(cid:68)(cid:0)(cid:83)(cid:69)(cid:82)(cid:86)(cid:73)(cid:67)(cid:69)(cid:0)(cid:67)(cid:69)(cid:78)(cid:84)(cid:82)(cid:69)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:66)(cid:69)(cid:73)(cid:78)(cid:71)(cid:0)(cid:80)(cid:73)(cid:76)(cid:79)(cid:84)(cid:69)(cid:68)(cid:0)(cid:73)(cid:78)(cid:0)(cid:46)(cid:79)(cid:82)(cid:84)(cid:72)(cid:0)(cid:33)(cid:77)(cid:69)(cid:82)(cid:73)(cid:67)(cid:65)(cid:14)(cid:0) (cid:38)(cid:82)(cid:79)(cid:77)(cid:0)(cid:17)(cid:0)(cid:42)(cid:65)(cid:78)(cid:85)(cid:65)(cid:82)(cid:89)(cid:0)(cid:18)(cid:16)(cid:17)(cid:16)(cid:12)(cid:0)(cid:87)(cid:69)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0)(cid:65)(cid:0)(cid:83)(cid:73)(cid:78)(cid:71)(cid:76)(cid:69)(cid:0)(cid:65)(cid:67)(cid:67)(cid:79)(cid:85)(cid:78)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:80)(cid:76)(cid:65)(cid:84)(cid:70)(cid:79)(cid:82)(cid:77)(cid:12)(cid:0)(cid:66)(cid:73)(cid:76)(cid:76)(cid:73)(cid:78)(cid:71)(cid:0) system and Customer Relationship Management system, fully integrated across all divisions in the USA, operating from a newly created shared service centre in Houston. We have reduced costs by leveraging our combined buying power across the Group and utilising central procurement teams. To date, we have consolidated our suppliers for services such as travel, telecoms, logistics ofﬁ ce supplies and laboratory equipment and we will continue to seek other cost saving arrangements. Also as part of this strategy, and aligned with our corporate social responsibility planning, we are establishing a sustainable and ethical procurement system. We have also redesigned and relaunched the Intertek Intranet with improved graphics and enhanced content, which will serve to inform and align our global organisation in support of our growth initiatives. What we’ve accomplished this past year has positioned us to serve our customers better and help them succeed in a difﬁ cult business environment. There is no end point for our Intertek as One strategy, which will evolve as we invest in our capabilities and our people. We will continue to prioritise our spending where we see opportunities to grow our business and deliver faster, more efﬁ cient customer service. 14 Intertek Annual Report 2009 Directors’ Report – Business Review Operating Review Group overview Intertek is a global market leader in many industries, supporting customers in the international marketplace and ensuring that their products comply with their own quality and safety standards and all relevant external regulations. Our services cover the whole supply chain including the sourcing of raw materials, product design, manufacturing processes, compliance certiﬁcations and performance testing of the end product. Our customers range from major household names and international corporations to niche suppliers, globally and locally. With over 1,000 facilities in more than 100 countries and over 25,000 employees, we can provide services in almost every country in the world. www.intertek.com Intertek Annual Report 2009 15 What we do Intertek is a global market leader providing safety and quality services to customers to add value to their products and processes, and support their success in the global marketplace. We help customers improve performance, gain efﬁciencies in manufacturing and logistics, overcome market constraints and reduce risk. We offer a comprehensive range of services from testing, inspection and certiﬁcation through to auditing and consultancy. Using internationally-approved methods, standards, equipment and guidelines, we test consumer products, commercial products, commodities, food, and raw materials for quality control, research, vendor compliance and against regulatory and customer requirements. Our testing methods use a wide range of skills including complex analytical laboratory techniques in the ﬁelds of organic and inorganic chemistry and biochemistry, critical analysis to trouble- shoot customers’ problems, 3D laser scanning, electromagnetic compatibility testing, minerals assay and performance testing amongst many others. We provide inspection services to manufacturers, retailers, bulk commodity traders, governments and international buyers and sellers of goods, including factory evaluation, quality inspection, custody transfer, pre-production, in-production, ﬁnal random sampling, pre-shipment and loading supervision. We hold an extensive range of global accreditations, recognitions and agreements to provide certiﬁcation services for manufacturers, retailers and traders to enable them to sell products in virtually any market in the world. Our audit services check whether a process, system or facility is performing in the prescribed manner. This includes corporate social responsibility auditing to ensure that factory conditions, especially in developing countries, meet the standards required by our clients. We also offer an extensive range of consultancy and training services. Our services are integrated together to provide our customers with a complete and customised service that meets the precise requirements of the different industries in which they operate. Our market Intertek provides services to a wide range of industry sectors, including Aerospace & Automotive, Building Products, Chemicals, Consumer Goods & Retailers, Electrical & Electronic, Energy, Food & Agriculture, Industrial, IT & Telecom, Medical & Pharmaceutical, Minerals, Petroleum, Toys, Games & Hardlines and Textiles, Apparel & Footwear. Each industry has its own characteristics but there are a number of key drivers for our services common to all markets. These are global and local trade through new product development, increasing consumer demand for good quality, safe and environmentally friendly products, more stringent regulations, and the increasing requirement for independent certiﬁcation of the quantity and quality of traded commodities. By outsourcing their testing to us, customers reduce the cost of maintaining in-house testing facilities and they beneﬁt from the economies of scale that we can achieve by higher utilisation of the laboratory equipment and personnel. Many products are subject to increased regulation to protect consumers and the environment. For example, the US Consumer Product Safety Improvement Act (CPSIA) contains many provisions concerning the safety and quality of consumer goods and more stringent requirements for children’s products. In the European Union, the Registration, Evaluation and Authorisation of Chemicals (REACH) regulation covers over 30,000 chemicals used in products. We advise our customers on the regulatory developments that are applicable to their products in the markets they choose. Despite slower economic activity, the key growth drivers behind the Intertek business model remain intact. We tend to test products at the prototype stage and therefore our business is driven by product development activity rather than the volume of products sold. Our employees At 31 December 2009, the Group employed 25,183 people (2008: 23,841) in over 100 countries. Our people include highly skilled scientists and engineers with specialist knowledge of the industries in which we operate. Many are educated to degree level and above and are peer group leaders in their ﬁelds of expertise. Our operations are located close to our customers and our strategy is to employ and develop people native to those locations as they have a better understanding of local issues and cultures and can build strong customer relationships. Through their appointed relationship manager, our clients can access all the services and expertise offered by our global network. Through our Intertek as One programme we emphasise the need to join together to ensure our customers receive a co-ordinated and cohesive service. We have a strong emphasis on training and professional development and this together with the strength of our collective leadership ensures that our employees remain motivated to deliver a world class service. 16 Intertek Annual Report 2009 Directors’ Report – Business Review Operating Review Group overview Our impact on the environment Being a service industry, energy consumption is not a material part of our cost base. In 2009, 1.2% (2008: 1.3%) of our total costs were spent on gas and electricity. However, we are mindful of our impact on the environment and where possible take measures to reduce energy consumption and eliminate waste. Our internal meetings are increasingly held by conference call to reduce our emissions footprint. We recycle waste paper and we dispose of our waste products responsibly and in compliance with applicable legislation. In the UK and Ireland we operate a ‘green’ company car policy. Our main impact on the environment is through the services we offer to customers. We test the performance and evaluate the efﬁciency of products and advise customers of ways in which they can improve their products and processes to reduce energy use. Since we usually perform our work at the design stage of product development, the small amount of energy that we use to conduct our tests is far outweighed by the global beneﬁts to the environment of our clients using our advice to produce energy efﬁcient products on a larger scale. Our services are supporting the growing alternative energy sectors such as photovoltaic, biofuels and wind energy. More details about our employees and the environment are provided in our Corporate Social Responsibility Report which starts on page 32. Signiﬁcant relationships The Group does not have any contractual or other relationships with any single party which are essential to the business of the Group and therefore, no such relationships have been disclosed. Divisional structure For management purposes we organise ourselves into operating divisions combining similar industry sectors. During 2009, these divisions were Consumer Goods, Commercial & Electrical, Oil, Chemical & Agri, Analytical Services, Industrial Services and Minerals. We aim to operate a balanced portfolio of businesses across industry sectors and regions. Our performance in 2009 Considering the challenging economic environment the Group had a good year with underlying organic growth boosted by acquisitions and favourable exchange rates. Revenue increased by 23.3% (7.0% at constant exchange rates) and adjusted operating proﬁt increased by 26.9% (6.1% at constant exchange rates). The adjusted operating margin was 16.9%, up 50 basis points from last year (down 10 basis points at constant exchange rates). The results for 2009 by division are summarised below. £m Consumer Goods Commercial & Electrical Oil, Chemical & Agri Analytical Services Industrial Services Minerals Revenue Change at actual rates 2009 Adjusted operating profit1 Change at constant rates Change at actual rates Change at constant rates 2009 320.9 32.3% 12.4% 105.5 40.5% 16.8% 244.8 20.2% 406.7 16.7% 137.5 15.1% 2.3% 2.2% 4.3% 80.7 46.7 77.0% 53.1% 6.6% (4.9)% 34.7 43.7 14.6 6.5 4.0 18.8% (2.0)% 11.2% (7.2)% 10.6% (2.0)% 132.1% 91.2% (21.6)% (32.2)% Revenue/Adjusted operating profit 1,237.3 23.3% 7.0% 209.0 26.9% 6.1% Amortisation Non-recurring costs Operating profit Net financing costs Profit before income tax Income tax expense Result for the year (12.8) (9.5) 186.7 26.2% (17.5) 169.2 22.1% (45.5) 1,237.3 23.3% 7.0% 123.7 21.0% 1. Before amortisation of acquisition intangibles, goodwill impairment and non-recurring costs. www.intertek.com Intertek Annual Report 2009 17 The key growth drivers in our business model remain unchanged so our business is robust. The prevailing economic uncertainty made it difﬁcult to predict performance in 2009 and to some extent this continues into 2010. The decline in global trade in products and commodities affected our customers and reduced the volume of goods that we inspect. Some of our customers are undertaking fewer development projects and have reduced their outsourcing which has reduced the number of products that we test and certify. Each of our divisions offers opportunities for organic growth through increasing our service offering to customers, to add value to their products and processes and help them compete in the global market. We anticipate that businesses will increasingly be looking to reduce the cost of non-core activities such as in-house testing, which provides us with an opportunity to offer our services. We have been very successful in ﬁnding acquisitions which extend our range of services. Whilst we deliberately reduced the number of acquisitions completed in 2009, we still maintain a pipeline of opportunities which we are pursuing, and we expect to continue our strategy of growing our business through acquisitions in the future. We calculate organic growth by excluding the results of acquisitions made in 2008 and 2009. On an organic basis, revenue grew by 19.4% (3.5% at constant exchange rates) and adjusted operating proﬁt grew by 24.4% (3.7% at constant exchange rates). The organic growth was generated primarily by growth in the market for quality and safety services, an increase in environmental regulations and an increase in outsourcing. Part of the Group’s growth strategy is to make acquisitions which complement and extend the Group’s service offering into new areas of expertise and new locations. As the economic outlook in 2009 was uncertain and ﬁnancial markets were turbulent, the Group took the strategic decision to slow down its acquisition activity. Three businesses were acquired in the ﬁrst part of the year which had operations in six different countries. The two main acquisitions were in Industrial Services which is one of the sectors targeted for investment. Details of the performance of each division, including more information about the acquisitions are given in the Review by division which starts on page 18. The market for our services continues to expand. Consumers and regulatory bodies are increasingly concerned about the quality and safety of products and services and their impact on health and the environment. The number of global and domestic regulations regarding the environment and the safety and quality of products continues to increase. Manufacturers and retailers need to meet the demands of their customers and ensure that they comply with quality and safety requirements, increasingly complex legislation and longer supply chains. We work in partnership with our customers to help them meet those demands and increase the value of their products and services. Our business is based on facilitating trade and increasing consumer demand for product variety, quality and safety, as well as manufacturers’ desire to reduce overhead costs by outsourcing testing and inspection activities. Our 2009 organic revenue growth at constant exchange rates was 3.5%. As expected, some of our businesses were signiﬁcantly affected by the global recession, however we are very well diversiﬁed, both geographically and across industry sectors, which helped to mitigate any weaker performing areas. 18 Intertek Annual Report 2009 Directors’ Report – Business Review Operating Review Consumer Goods Paul Yao Group Executive Vice President Consumer Goods Financial Highlights Revenue Adjusted operating profit Adjusted operating margin 2009 £m Change at Change at actual rates constant rates 320.9 105.5 32.9% 32.3% 40.5% 190bp 12.4% 16.8% 120bp Our performance in 2009 The Consumer Goods division delivered very strong results with total revenue of £320.9m up 32.3% (12.4% at constant exchange rates) and organic revenue up 29.0% (9.3% at constant exchange rates). What we do The Consumer Goods division is a market leading provider of services to the textiles, toys, footwear, hardlines, food and retail industries. Services include testing, inspection, auditing, advisory services, quality assurance and hazardous substance testing. Customers are often retailers but also include manufacturers and suppliers within a global supply chain. The market for the services of the Consumer Goods division is diverse. Demand is driven by retailers who require the goods they sell to be produced to a quality set by either their own internal standards or by standards applicable in a particular country or region. Increasingly, materials are sourced and goods are manufactured in locations that are remote from the consumer, causing supply chains to be longer and more complex. The market is also being driven by regulations issued to address safety and environmental concerns over such issues as carcinogenic dyes in textiles and chemicals in children’s products, toys and cosmetics. Textiles, Apparel & Footwear which is the largest sector in the division grew well, with excellent results in China supported by growth in Turkey, Taiwan, India and Vietnam. The ﬁ rst half of 2009, beneﬁ ted from the surge in volume of children’s products requiring testing to comply with the US Consumer Product Safety Improvement Act (CPSIA), which started in the second half of 2008. This increase was not sustained in the second half of 2009 as customers had cleared their inventory back logs and volumes became normalised. Intertek has 26 laboratories accredited under CPSIA, located in the Americas, Europe and Asia. Although still relatively small, revenue from the food sector increased considerably, helped by good results from businesses we acquired in 2008. Our strategy of investing in the food industry continued with the establishment of new food testing laboratories in India and Thailand. Total adjusted operating proﬁ t was £105.5m, up 40.5% (16.8% at constant exchange rates). Organic adjusted operating proﬁ t increased by 40.5% (16.6% at constant exchange rates). The total adjusted operating margin increased 190 basis points to 32.9% from 31.0% in 2008. Zero injuries The number of injuries reported following the implementation of our quality and safety programme for toys distributed by one of our global clients. www.intertek.com Intertek Annual Report 2009 19 Concern over the safety of consumer products has increased demand from consumers and regulatory bodies for independent assurance of quality and safety. On 13 October 2009, we celebrated the 20th anniversary of Intertek’s operations in mainland China. The Group commenced its operations in China in 1989 with a consumer goods testing joint venture in Shenzhen, making it the ﬁrst international provider of quality and safety solutions to enter China. Since then we have signiﬁcantly expanded the range of services we offer and the industries we support. We continue to invest in our operations and facilities in China in all our divisions and today we have more than 6,000 employees in China and over 100 ofﬁces and laboratories. The key growth drivers in Consumer Goods remain strong, principally the sourcing of products from lower cost manufacturers in countries such as China, the increasingly wide range of products being sold by retailers and shorter product lifecycles. Concern over the safety of consumer products has increased demand from consumers and regulatory bodies for independent assurance of quality and safety. Although two-thirds of revenue is derived from toys and textiles testing, the remainder is from our expanding service lines such as consultancy, inspection, supply chain services, food and corporate social responsibility where margins are not always as high as those earned by the established services. As many economies are currently entering a recessionary phase, consumer spending is declining. Whilst our business is dependent on the variety of goods produced and new product development rather than the volume sold, a prolonged decline in consumer spending could result in a reduction in product development. We aim to grow our revenue by developing new services, integrating our services and providing innovative supply chain solutions to our customers. 24/7 Our virtual database tools provide 24/7 transparency and allow rapid real-time analysis and documentation of ﬁeld data, helping us to deliver immediate solutions and recurring beneﬁts to our clients. 20 Intertek Annual Report 2009 Directors’ Report – Business Review Operating Review Commercial & Electrical Financial Highlights Revenue Adjusted operating profit Adjusted operating margin 2009 £m Change at Change at actual rates constant rates 244.8 34.7 14.2% 20.3% 18.8% (10)bp 2.3% (2.0)% (70)bp What we do The Commercial & Electrical division provides services including testing and certiﬁcation, electromagnetic compatibility testing (EMC), outsourcing, benchmark and performance testing and environmental testing. These are provided to a wide range of industries including the home appliance, lighting, medical, building, industrial and HVAC/R (heating, ventilation, air conditioning and refrigeration), IT, telecom, renewable energy and automotive industries. Our customers are mostly manufacturers but also retailers, industry organisations and government departments. Intertek has the widest (cid:82)(cid:65)(cid:78)(cid:71)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:79)(cid:87)(cid:78)(cid:69)(cid:68)(cid:0)(cid:77)(cid:65)(cid:82)(cid:75)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:65)(cid:67)(cid:67)(cid:82)(cid:69)(cid:68)(cid:73)(cid:84)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:12)(cid:0)(cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:37)(cid:52)(cid:44)(cid:0)(cid:76)(cid:73)(cid:83)(cid:84)(cid:69)(cid:68)(cid:0) (cid:77)(cid:65)(cid:82)(cid:75)(cid:12)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:55)(cid:65)(cid:82)(cid:78)(cid:79)(cid:67)(cid:75)(cid:0)(cid:40)(cid:69)(cid:82)(cid:83)(cid:69)(cid:89)(cid:0)(cid:77)(cid:65)(cid:82)(cid:75)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:46)(cid:79)(cid:82)(cid:84)(cid:72)(cid:0)(cid:33)(cid:77)(cid:69)(cid:82)(cid:73)(cid:67)(cid:65)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:51)(cid:0)(cid:77)(cid:65)(cid:82)(cid:75)(cid:12)(cid:0) Asta mark and BEAB mark for Europe, as well as being a leader in providing CB certiﬁcation and the CE mark and GS mark for Europe. The market for our Commercial & Electrical services is driven primarily by increasing regulations over the safety of products, product variety and growing environmental concerns. This includes current concerns over climate change and the impact on the environment of electrical products. Gregg Tiemann Division Executive Vice President Commercial & Electrical Our performance in 2009 Total revenue increased to £244.8m, up 20.3% (2.3% at constant exchange rates) and organic revenue increased by 18.0% (0.4% at constant exchange rates). Performance in the Commercial & Electrical division was strong in some sectors such as the core electrical testing business, which reported good results worldwide, particularly in lighting, and heating, ventilation and air conditioning (HVAC). We also reported good growth in the renewable energy sector where we guide clients through the complex regulatory issues affecting renewable energies including photovoltaic and wind power equipment. Growth in the building products sector was limited by delays in new construction projects and the automotive industry continued to be depressed. Total adjusted operating proﬁt was £34.7m, up 18.8% (down 2.0% at constant exchange rates). Organic adjusted operating proﬁt increased by 10.9% (down 8.7% at constant exchange rates). The total adjusted operating margin decreased 10 basis points to 14.2%. Despite difﬁcult trading conditions in certain markets, the adjusted operating proﬁt at constant exchange rates did not decline signiﬁcantly. Underperforming sectors were reorganised to improve opportunities, maximise synergies and contain costs. In April 2009, the Group acquired Sagentia Catella, a globally renowned battery testing business based in Sweden. This business has been integrated with Intertek’s global energy services laboratories throughout Europe, the USA and Asia and beneﬁts global customers who are developing more efﬁcient energy storage technologies and more reliable and environmentally friendly products. Since acquisition, we have extended the service offering into the hybrid and electrical vehicles market, which we expect to be a future growth area. 83% This is the time saving we achieved by streamlining one of our clients’ solar panel testing process from 18 months to 84 days. Accelerating product delivery has increased customer satisfaction and improved sales. www.intertek.com Intertek Annual Report 2009 21 Customer demand for safe, reliable, energy efﬁcient products continues to increase and the market for Commercial & Electrical continues to evolve presenting opportunities for growth. Customer demand for safe, reliable, energy efﬁcient products continues to increase and the market for Commercial & Electrical continues to evolve presenting opportunities for growth. Market drivers in the medical and renewable energy sectors remain strong. Concerns over climate change are driving new directives regarding the energy usage of products, particularly in the HVAC industry and this is expected to extend to other industries. The consumer market for home appliances and electronics is under pressure and the growth of information, communication and technology products is also slowing down. This may provide us with opportunities as customers seek to maintain or increase their market share through product innovation, improvements in quality and durability, and performance comparisons, and cut their costs by improving efﬁciency. The issues in the automotive industry are well documented but we do not anticipate a signiﬁcant further decline. We are closely monitoring our business in this sector and will reduce costs if revenue continues to decline. Market conditions in 2009 provided both challenges and opportunities for the Commercial & Electrical division. The renewable energy industries are expected to grow rapidly and we are well placed to support this growth. The automotive sector remains a concern although there are signs that the decline will not worsen. We will continue to strive for operational excellence and aim to strengthen our market share by offering superior service. There are many small niche players in the market and this provides opportunities for us to continue adding inﬁll acquisitions. Rated “Best Buy” This is the status a leading manufacturer of consumer electronics achieved when we helped to improve the performance of their (cid:44)(cid:35)(cid:36)(cid:0)(cid:52)(cid:54)(cid:83)(cid:0)(cid:84)(cid:72)(cid:82)(cid:79)(cid:85)(cid:71)(cid:72)(cid:0)(cid:84)(cid:69)(cid:67)(cid:72)(cid:78)(cid:73)(cid:67)(cid:65)(cid:76)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:83)(cid:83)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:14)(cid:0) 22 Intertek Annual Report 2009 Directors’ Report – Business Review Operating Review Oil, Chemical & Agri Financial Highlights Revenue Adjusted operating profit Adjusted operating margin 2009 £m Change at Change at actual rates constant rates 406.7 43.7 10.7% 16.7% 11.2% (60)bp 2.2% (7.2)% (110)bp What we do The Oil, Chemical & Agri division provides independent cargo inspection as well as non-inspection related laboratory testing, calibration and related technical services. Our customers include the world’s energy, petroleum, chemical and agricultural industries. Cargo inspection and testing is a well established global market in which Intertek is one of the leading service providers. High barriers to entry are principally due to the ﬁxed costs of establishing a global network of operations and laboratories and our excellent reputation and experience earned through decades of service in the industry. The division also provides cargo scanning, ﬁscal support services and standards programmes to governments, national standards organisations and customs authorities. These services were previously reported separately as the Government Services division. Jay Gutierrez Division Executive Vice President Oil, Chemical & Agri Our performance in 2009 Revenue increased to £406.7m, up 16.7% (2.2% at constant exchange rates). There were no acquisitions in this division so all growth is organic. Double digit revenue growth in the Middle East, Asia and South America was reduced by a decline in revenues in (cid:46)(cid:79)(cid:82)(cid:84)(cid:72)(cid:0)(cid:33)(cid:77)(cid:69)(cid:82)(cid:73)(cid:67)(cid:65)(cid:14)(cid:0)(cid:52)(cid:72)(cid:69)(cid:0)(cid:82)(cid:69)(cid:68)(cid:85)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:73)(cid:78)(cid:0)(cid:71)(cid:82)(cid:79)(cid:87)(cid:84)(cid:72)(cid:0)(cid:87)(cid:65)(cid:83)(cid:0)(cid:77)(cid:65)(cid:73)(cid:78)(cid:76)(cid:89)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:37)(cid:65)(cid:83)(cid:84)(cid:0)(cid:35)(cid:79)(cid:65)(cid:83)(cid:84)(cid:0) and the East Gulf Coast regions of the USA where trading conditions have been particularly badly affected by the economic downturn. Several reﬁneries have closed and customers have reduced their development expenditure and retained more analytical work in-house. The recession also slowed the growth in demand for biofuels market, although we expect this to recover as soon as conﬁdence in the economy returns. Total adjusted operating proﬁt increased to £43.7m, up 11.2% (down 7.2% at constant exchange rates). The adjusted operating margin declined by 60 basis points to 10.7%. The margin decline was mainly due to a change in the mix of services provided and increased pricing pressure. The revenue growth was mostly in inspection and inspection related testing which earns a lower margin than more complex non-inspection related testing. Underperforming operations have been reorganised and some small non-core businesses will be divested. The core inspection business is steady and we expect the demand for higher margin complex testing services to increase once the global recession recedes and investment resumes. We also expect the demand for biofuels to grow, leading to the development of new technologies and production methods. Once market conditions improve we expect the margin for this division to increase. Recognition We have a strong track record of turning original ideas into new solutions. Our new oil analysis process has been reviewed independently and been given formal accreditation to the international standard ISO 17025. www.intertek.com Intertek Annual Report 2009 23 Analytical Services Andrew Swift Division Executive Vice President Analytical Services Financial Highlights Revenue Adjusted operating profit Adjusted operating margin 2009 £m Change at Change at actual rates constant rates 137.5 14.6 10.6% 15.1% 10.6% (40)bp 4.3% (2.0)% (70)bp What we do Analytical Services provides expert laboratory measurement and consultancy services to a broad range of industries including chemical, pharmaceutical, oil and gas, and automotive and aerospace. We have an established track record of success in laboratory outsourcing with many large internationally recognised companies. Our performance in 2009 Total revenue in 2009 was £137.5m, up 15.1% (4.3% at constant exchange rates) over the prior year. Organic revenue increased 14.9% (4.0% at constant exchange rates). Results in Analytical Services were mixed, with some operating segments delivering good results and others performing less well. Revenue increased in upstream oil and gas services, and in downstream chemicals and materials testing, but declined in pharmaceutical and speciality chemicals. Much of Intertek’s upstream services support the exploration, production and transportation of hydrocarbon reserves. Although crude oil prices remained fairly steady in 2009, most production facilities implemented aggressive cost reduction programmes where discretionary expenditure on all non-production critical projects was curtailed or delayed, causing our revenue growth to be lower than expected in one service line. Downstream chemicals and materials testing which accounted for almost half of the division’s revenue, had a strong ﬁnish to the year with several manufacturing plants returning to normal production rates, from their previous 12-month record low. Our results also beneﬁted strongly from our efforts to generate sales in new materials research and development projects and from the impact of impending new regulatory programmes in automotive lubricants. Overall, the pharmaceutical and speciality chemicals sector continued to be challenging. Sales erosion was experienced mostly in the USA, due to the merger of large pharmaceutical companies and the shortage of investment capital available to the smaller biotech companies. The Intertek pharmaceutical services business was restructured to consolidate resources and reposition its business growth opportunity into wider markets. Total adjusted operating proﬁt increased to £14.6m, up 10.6% (down 2.0% at constant exchange rates). Organic adjusted operating proﬁt increased by 13.0% (down 1.5% at constant exchange rates). Despite the volatility in revenue which made it difﬁcult to manage costs, the division reported an adjusted operating proﬁt margin of 10.6%, down 40 basis points on the prior year. The overall reduction in manufacturing volumes in the downstream chemicals and materials markets, combined with the upheaval in the global pharmaceuticals markets, made 2009 a particularly challenging and volatile year. We see signs of improvement in 2010, with evidence of recovering manufacturing volumes and larger projects being commissioned and clients reawakening their interest in outsourcing. We are currently considering a number of strategic opportunities which will enhance our future growth. US$350,000 The potential lost revenue per day for one of our pharmaceutical clients if we had not been able to validate their quality control methods within the deadline set by the regulator. 24 Intertek Annual Report 2009 Directors’ Report – Business Review Operating Review Industrial Services Stefan Butz Group Executive Vice President Industrial Services Financial Highlights Revenue Adjusted operating profit Adjusted operating margin 2009 £m Change at Change at actual rates constant rates 80.7 6.5 8.1% 77.0% 132.1% 200bp 53.1% 91.2% 160bp Also in February, the Group acquired Aptech Engineering Services which is a US based engineering consulting company specialising in the life management of infrastructure, facilities and equipment. This business has also performed very well in 2009. What we do Industrial Services is a global provider of inspection, testing and auditing services. This includes management systems certiﬁ cation, second-party auditing, supplier evaluation, technical veriﬁ cation, conformity assessment, asset integrity management, 3D laser scanning and dimensional control management, training, health and safety consulting and greenhouse gas services. We serve a wide variety of industries including oil, gas, petrochemical, power, renewable energy, civil and infrastructure, aerospace and medical. Our performance in 2009 Total revenue in 2009 was £80.7m, up 77.0% (53.1% at constant exchange rates) over the prior year. Organic revenue increased 22.8% (6.2% at constant exchange rates). Total adjusted operating proﬁ t increased to £6.5m, up 132.1% (91.2% at constant exchange rates). Organic adjusted operating proﬁ t increased 80.0% (38.5% at constant exchange rates). The adjusted operating margin was 8.1%, up 200 basis points on the prior year. The Industrial Services division reported good organic growth which was further enhanced by successful acquisitions. In February 2009, the Group acquired the WISco group of companies, which provide global technical inspection and expediting support to a wide range of customers in the oil, gas, petrochemical and power generation industries and their supplier markets. The successful integration of the acquisition has had a positive impact on organic growth through enhanced management and economies of scale. Towards the end of 2009, the market for industrial services was affected by the lack of funding available for capital projects. Customers either cancelled or delayed projects pending the stabilisation of world economies and the global capital markets. There are signs that conﬁ dence is returning and investment is increasing but there is little certainty of signiﬁ cant improvement in 2010. The market for systems certiﬁ cation was challenging, especially in the automotive sector resulting in reduced demand for our services. The development of the systems certiﬁ cation businesses depends on acquiring scale. Although still relatively small, revenue in the health and environmental sector grew by over 30%. The impact of the REACH legislation has been minimal to date as only pre-registration has been required. However the next registration deadline is 1 December 2010 so, providing this is complied with, we expect growth in 2010. The compliance requirements are complicated and we anticipate a surge in interest ahead of the deadline. Other green initiatives from government to reduce greenhouse gas emissions will also create further opportunities for Intertek to advise clients on how best to meet these regulatory challenges. Efﬁ ciency Using sophisticated data capture and scanning technology a leading energy client, operating in the Gulf of Mexico, was delighted to be able to save on cost, release supply vessels and become operational ahead of schedule. www.intertek.com Intertek Annual Report 2009 25 Minerals Financial Highlights Revenue Adjusted operating profit Adjusted operating margin 2009 £m Change at Change at actual rates constant rates 46.7 4.0 8.6% 6.6% (21.6)% (300)bp (4.9)% (32.2)% (350)bp What we do The Minerals division offers analytical testing, inspection and mine-site laboratory services to the world’s minerals, exploration, ore and mining industries. We provide a wide range of analytical services for materials including precious metals, base metals and their raw content, such as iron ore, bauxite, coal and coke, as well as bulk commodities. We also provide marine and inspection services of minerals shipments. Marc Hoffer Division Executive Vice President Minerals Our performance in 2009 In 2009, total revenue was £46.7m, up 6.6% (down 4.9% at constant exchange rates) over the prior year and organic revenue increased by 3.8% (down 7.4% at constant exchange rates). Total adjusted operating proﬁt decreased to £4.0m, down 21.6% (down 32.2% at constant exchange rates). Organic adjusted operating proﬁt decreased by 18.8% (down 29.1% at constant exchange rates). The adjusted operating margin was 8.6%, down 300 basis points on the prior year. The difﬁcult trading conditions in the minerals and industrial markets which started in the second half of 2008, continued through 2009. Although volumes have returned to almost pre-recession levels in some locations, overcapacity in the industry has resulted in increased price pressure. The revenue growth in facilities we established in 2008 has been steadily increasing, albeit at a slower rate than originally anticipated. The price of commodities such as gold, uranium and other strategic metals remains high and this should encourage increased exploration by the established mining companies. The junior companies are likely to remain inactive until the capital markets recover and funding restrictions are eased. We have the expertise and capacity to take advantage of an upturn in activity and as we currently have a very small share of the available market in the minerals industry, even in a declining market we anticipate being able to grow revenues by gaining market share from competitors. We have reduced our costs and will concentrate on improving our margin in those areas which are underperforming. Productivity & Safety Robotic and automated systems are part of Intertek’s commitment to increase daily productivity, quality and reduce costs for our clients. 26 Intertek Annual Report 2009 Directors’ Report – Business Review Financial Review Results for the year Proﬁt before income tax increased by 22.1% to £169.2m (2008: £138.6m) and diluted adjusted earnings per share were 81.5p (2008: 67.1p). Basic earnings per share were 72.4p (2008: 59.5p). Key ﬁnancial performance indicators (cid:55)(cid:69)(cid:0)(cid:85)(cid:83)(cid:69)(cid:0)(cid:65)(cid:0)(cid:86)(cid:65)(cid:82)(cid:73)(cid:69)(cid:84)(cid:89)(cid:0)(cid:79)(cid:70)(cid:0)(cid:75)(cid:69)(cid:89)(cid:0)(cid:80)(cid:69)(cid:82)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:73)(cid:78)(cid:68)(cid:73)(cid:67)(cid:65)(cid:84)(cid:79)(cid:82)(cid:83)(cid:0)(cid:8)(cid:43)(cid:48)(cid:41)(cid:83)(cid:9)(cid:0)(cid:84)(cid:79)(cid:0)(cid:77)(cid:79)(cid:78)(cid:73)(cid:84)(cid:79)(cid:82)(cid:0) the performance of the Group. Similar indicators are used to review (cid:84)(cid:72)(cid:69)(cid:0)(cid:80)(cid:69)(cid:82)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:79)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:68)(cid:73)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(cid:83)(cid:14)(cid:0)(cid:52)(cid:72)(cid:69)(cid:83)(cid:69)(cid:0)(cid:43)(cid:48)(cid:41)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:82)(cid:69)(cid:86)(cid:73)(cid:69)(cid:87)(cid:69)(cid:68)(cid:0) by the Board and management on a monthly basis and are used to assess past performance and set targets for the future. Many of the (cid:43)(cid:48)(cid:41)(cid:83)(cid:0)(cid:65)(cid:76)(cid:83)(cid:79)(cid:0)(cid:70)(cid:79)(cid:82)(cid:77)(cid:0)(cid:80)(cid:65)(cid:82)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:77)(cid:65)(cid:78)(cid:65)(cid:71)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:73)(cid:78)(cid:67)(cid:69)(cid:78)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:83)(cid:67)(cid:72)(cid:69)(cid:77)(cid:69)(cid:0)(cid:87)(cid:72)(cid:69)(cid:82)(cid:69)(cid:66)(cid:89)(cid:0) managers may receive annual bonus payments on achieving or exceeding a range of targets set for the year. Further information on management incentives is given in the Remuneration Report which starts on page 53. Revenue Up 23.3% Organic revenue Up 19.4% Adjusted operating proﬁt Up 26.9% Organic adjusted operating proﬁt Up 24.4% Adjusted operating margin Up 50bp Operating cash ﬂow Up 43.5% Operating cash ﬂow/operating proﬁt 121.0% Diluted adjusted earnings per share Up 21.5% Dividend per share Up 22.6% Return on invested capital 26.5% www.intertek.com Intertek Annual Report 2009 27 Growth in revenue Top line revenue growth is a key performance measure. In 2009, revenue was £1,237.3m up 23.3% over the prior year (7.0% at constant exchange rates). Impact of currency movements The Group operates in 74 different currencies. The majority of the Group’s earnings are denominated in US dollars or currencies linked to the US dollar or which historically have moved in line with the dollar. Other currencies such as the Euro and the Chinese renminbi are also important constituents of our overseas earnings. Therefore the Group’s results, when translated into sterling, are exposed to changes in the value of the US dollar and other currencies. We show below the main currencies that make up the Group’s earnings and the cumulative average exchange rates that we have used when translating results into sterling in 2009 and 2008. Impact of currency movements Value of £1 US dollar Euro Chinese renminbi (cid:40)(cid:79)(cid:78)(cid:71)(cid:0)(cid:43)(cid:79)(cid:78)(cid:71)(cid:0)(cid:68)(cid:79)(cid:76)(cid:76)(cid:65)(cid:82)(cid:0) (cid:0) (cid:0) (cid:0) 2009 1.56 1.12 10.63 12.06 2008 1.87 1.26 13.03 14.59 The weak value of sterling compared to most of the currencies in which we operate had a signiﬁcant effect on our results in 2009. Our revenue growth was 23.3% at actual rates but 7.0% at constant exchange rates. Growth in adjusted operating proﬁt was 26.9% at actual rates but 6.1% at constant exchange rates. Growth in adjusted operating proﬁt and margin 2009 £m 2008 £m Change Operating profit 186.7 147.9 26.2% Amortisation of acquisition intangibles 12.8 Impairment of goodwill (cid:46)(cid:79)(cid:78)(cid:13)(cid:82)(cid:69)(cid:67)(cid:85)(cid:82)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0)(cid:67)(cid:79)(cid:83)(cid:84)(cid:83)(cid:0) (cid:0) – 9.5 9.6 0.5 6.7 33.3% – 41.8% Adjusted operating profit 209.0 164.7 26.9% Adjusted operating margin 16.9% 16.4% Up 50bp In 2009, adjusted operating proﬁt was £209.0m, up 26.9% over the previous year. The adjusted operating margin was 16.9%, up 50 basis points from 16.4%. Amortisation of acquisition intangibles Amortisation of acquisition intangibles is provided on a straight line basis over the life of the assets, which is normally ﬁve years but can be up to ten years. The charge was £12.8m in 2009, up from £9.6m in 2008 due to the accumulation of intangible assets acquired in the past ﬁve years. Impairment of goodwill As described in note 11 to the ﬁnancial statements, we perform a detailed review of goodwill each year to consider whether there is any impairment in its carrying value. The capitalised goodwill at 31 December 2009 was £257.8m (2008: £242.1m) which relates to acquisitions made since 1998. As a result of the ‘Intertek as One’ internal Group-wide initiative, various levels of restructuring occurred during 2008 and 2009. This restructuring was considered as part of the annual goodwill impairment test which included a re-assessment of not only the constitution of the CGUs but also the allocation of goodwill across those CGUs and operating segments (as required under the newly adopted standard, IFRS 8 – Operating Segments). The impact of the restructuring has led to greater global operational control across divisions, improved management of global customer accounts, and more effective integration of acquired businesses into existing Intertek operations (which previously had more local, independent control over decision- making). The above review has led to a change in the composition of the CGUs and also to a change in the level at which we monitor goodwill. There are now eight CGUs which generate cash inﬂows which are largely independent of other CGUs and to which goodwill has been allocated. These CGUs have been tested for impairment in accordance with the Group’s accounting policy described on page 81. This review revealed no requirement for any impairment in 2009 (2008: £0.5m). Non-recurring costs In 2009, the Group reported non-recurring costs of £9.5m which comprised acquisition costs of £2.5m and restructuring and other costs of £7.0m, as per note 4. Although the Group has not early adopted IFRS 3 (Revised), acquisition-related costs have been incurred prior to the adoption of this standard in relation to acquisitions that will be accounted for in accordance with IFRS 3 (Revised). The Group has chosen to expense these acquisition-related costs as incurred. (cid:46)(cid:79)(cid:84)(cid:87)(cid:73)(cid:84)(cid:72)(cid:83)(cid:84)(cid:65)(cid:78)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:41)(cid:38)(cid:50)(cid:51)(cid:0)(cid:19)(cid:0)(cid:8)(cid:50)(cid:69)(cid:86)(cid:73)(cid:83)(cid:69)(cid:68)(cid:9)(cid:0)(cid:73)(cid:83)(cid:0)(cid:78)(cid:79)(cid:84)(cid:0)(cid:89)(cid:69)(cid:84)(cid:0)(cid:69)(cid:70)(cid:70)(cid:69)(cid:67)(cid:84)(cid:73)(cid:86)(cid:69)(cid:12)(cid:0)(cid:73)(cid:84)(cid:0)(cid:73)(cid:83)(cid:0)(cid:69)(cid:88)(cid:80)(cid:69)(cid:67)(cid:84)(cid:69)(cid:68)(cid:0) to be effective at the time that the related business combinations are expected to occur. The restructuring and other costs were principally related to employment costs, including redundancies, retirement costs and settlements to former employees. There were also some closure costs and asset write downs in underperforming businesses. The majority of the restructuring was in the Oil, Chemical & Agri division. 28 Intertek Annual Report 2009 Directors’ Report – Business Review Financial Review In 2008, the Group incurred costs of £6.7m in relation to the integration of the Government Services division into the Oil, Chemical & Agri division. Net ﬁnancing costs Details of the Group’s net ﬁnancing costs are given in note 7 to the ﬁnancial statements. The Group reported ﬁnance income in 2009 of £7.7m (2008: £13.1m). This comprised the gain in the fair value of ﬁnancial instruments held for trading, the expected return on pension assets, the net change in fair value of available-for-sale ﬁnancial assets transferred from equity, and interest on bank balances. The decrease was mainly due to the absence of foreign exchange gains made on the revaluation of net monetary assets and liabilities in 2008. The Group’s ﬁnance expense for 2009 was £25.2m compared to £22.6m in 2008. The charge comprised interest on borrowings, pension interest cost, foreign exchange losses on revaluation of net monetary assets and liabilities and other ﬁnancing fees. Income tax expense Income tax expense for 2009 was £45.5m (2008: £36.4m), comprising a current tax charge of £54.1m (2008: £41.9m) less a deferred tax credit of £8.6m (2008: £5.5m). The effective tax rate was 26.9%, up from 26.3% in 2008. The change in the effective tax rate was mainly due to changes in the mix of proﬁts and an increasing dividend withholding tax burden. Proﬁt for the year Proﬁt for the year after income tax was £123.7m (2008: £102.2m) of which £114.7m (2008: £93.8m) was attributable to equity holders of the Company. Minority interests Proﬁt attributable to minority shareholders was £9.0m in 2009 (2008: £8.4m). The increase was mainly due to the strong growth in the Group’s non-wholly owned subsidiaries in Asia. Earnings per share Earnings per share are calculated by dividing the proﬁt attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares in issue during the year. As set out in note 9 to the ﬁnancial statements, basic earnings per share at the end of the year were 72.4p (2008: 59.5p), an increase of 21.7%. A diluted adjusted earnings per share calculation is also shown, which removes the post-tax impact of amortisation of acquisition intangibles, impairment of goodwill and non-recurring costs from earnings, and includes potentially dilutive share options in the number of shares, to give diluted adjusted earnings per share of 81.5p (2008: 67.1p), an increase of 21.5%. We consider that growth in the diluted adjusted earnings per share ﬁgure gives a more representative measure of underlying performance and is one of the key performance targets that the Group uses to incentivise its managers. Dividends During the year, the Group paid total dividends of £34.7m (2008: £30.4m), which comprised £21.7m in respect of the ﬁnal dividend (cid:70)(cid:79)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:89)(cid:69)(cid:65)(cid:82)(cid:0)(cid:69)(cid:78)(cid:68)(cid:69)(cid:68)(cid:0)(cid:19)(cid:17)(cid:0)(cid:36)(cid:69)(cid:67)(cid:69)(cid:77)(cid:66)(cid:69)(cid:82)(cid:0)(cid:18)(cid:16)(cid:16)(cid:24)(cid:12)(cid:0)(cid:80)(cid:65)(cid:73)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:17)(cid:25)(cid:0)(cid:42)(cid:85)(cid:78)(cid:69)(cid:0)(cid:18)(cid:16)(cid:16)(cid:25)(cid:0) at the rate of 13.7p per share and £13.0m being the interim dividend in respect of the year ended 31 December 2009, paid (cid:79)(cid:78)(cid:0)(cid:18)(cid:16)(cid:0)(cid:46)(cid:79)(cid:86)(cid:69)(cid:77)(cid:66)(cid:69)(cid:82)(cid:0)(cid:18)(cid:16)(cid:16)(cid:25)(cid:0)(cid:65)(cid:84)(cid:0)(cid:65)(cid:0)(cid:82)(cid:65)(cid:84)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:24)(cid:14)(cid:18)(cid:80)(cid:0)(cid:80)(cid:69)(cid:82)(cid:0)(cid:83)(cid:72)(cid:65)(cid:82)(cid:69)(cid:14)(cid:0)(cid:52)(cid:72)(cid:69)(cid:83)(cid:69)(cid:0)(cid:65)(cid:77)(cid:79)(cid:85)(cid:78)(cid:84)(cid:83)(cid:0) were charged to retained earnings (see note 20 to the ﬁnancial statements). After the 31 December 2009, the Board recommended a 26.3% increase in the ﬁnal dividend in respect of the year ended 31 December 2009, to 17.3p per share (2008: 13.7p), which together with the interim dividend will give a full year dividend of 25.5p per share (2008: 20.8p), an increase of 22.6% over last year. If approved, the ﬁnal dividend will be paid to shareholders (cid:79)(cid:78)(cid:0)(cid:17)(cid:24)(cid:0)(cid:42)(cid:85)(cid:78)(cid:69)(cid:0)(cid:18)(cid:16)(cid:17)(cid:16)(cid:14)(cid:0)(cid:52)(cid:72)(cid:69)(cid:0)(cid:84)(cid:79)(cid:84)(cid:65)(cid:76)(cid:0)(cid:67)(cid:79)(cid:83)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:108)(cid:78)(cid:65)(cid:76)(cid:0)(cid:68)(cid:73)(cid:86)(cid:73)(cid:68)(cid:69)(cid:78)(cid:68)(cid:0)(cid:73)(cid:83)(cid:0)(cid:69)(cid:88)(cid:80)(cid:69)(cid:67)(cid:84)(cid:69)(cid:68)(cid:0) to be £27.5m, giving a total cost of £40.5m for the dividends paid in respect of the year ended 31 December 2009. This represents 32.7% of the proﬁt for the year for 2009, or a dividend covered 3.2 times by earnings, based on diluted adjusted earnings per share. Cash and liquidity Cash and liquidity 2009 £m 2008 £m Change Cash generated from operations 278.4 194.0 43.5% (cid:44)(cid:69)(cid:83)(cid:83)(cid:0)(cid:78)(cid:69)(cid:84)(cid:0)(cid:65)(cid:67)(cid:81)(cid:85)(cid:73)(cid:83)(cid:73)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:80)(cid:82)(cid:79)(cid:80)(cid:69)(cid:82)(cid:84)(cid:89)(cid:12)(cid:0) plant, equipment and software Operating cash flow after capital expenditure Operating profit Operating cash flow/ operating profit (52.5) (67.2) (21.9)% 225.9 186.7 126.8 78.2% 147.9 26.2% 121.0% 85.7% 3530bp The primary source of the Group’s cash liquidity over the last two ﬁnancial years has been cash generated from operations and the drawdown of debt. A portion of these funds has been used to fund acquisitions and capital expenditure and to pay interest, dividends and taxes. www.intertek.com Intertek Annual Report 2009 29 The Group continued to generate good cash ﬂow. Cash generated from operations was £278.4m for 2009, compared to £194.0m for 2008. The increase of 43.5% was due to favourable exchange rates, improved proﬁtability and effective working capital management. One of the key performance indicators we use to measure the efﬁciency of our cash generation is the percentage of operating proﬁt that is converted into cash. As shown in the table on page 28, in 2009, 121.0% of operating proﬁt was converted into cash compared to 85.7% in 2008. The signiﬁcant increase in the conversion rate reﬂects a 21.9% reduction in the capital expenditure, increase in operating proﬁt and a much improved working capital position. The reduction in capital expenditure was induced by the need to conserve cash during the difﬁcult borrowing environment in 2009. In order to support our growth strategy we need to invest continually in our operations. In 2009, net cash ﬂows used in investing activities were £79.6m (2008: £156.6m), a reduction reﬂecting a policy to conserve cash during the difﬁcult economic background in 2009. We paid £23.9m net of cash acquired, (2008: £67.8m) for three new businesses, £10.2m (2008: £16.7m) for deferred consideration on prior year acquisitions, and £52.5m (2008: £67.2m) for the acquisition of property, plant and equipment and computer software, net of disposals. In 2009, we sold for £5.7m, shares in a listed investment acquired in 2008 for £4.4m and also divested our 40% interest in the associate Allium for £0.9m. Cash ﬂows from ﬁnancing activities comprised proceeds from the issue of share capital following the exercise of employee share options of £3.6m (2008: £2.6m), the net repayment of debt of £58.7m (2008: drawdown of £79.5m), and cash outﬂows of dividends paid to minorities of £6.3m (2008: £6.1m) and dividends paid to Group shareholders of £34.7m (2008: £30.4m), which resulted in a net cash outﬂow from ﬁnancing activities of £96.1m (2008: cash inﬂow £46.1m). Interest bearing loans and borrowings were £335.6m at 31 December 2009, a decrease of 20.4% over 2008. The Group’s borrowings are made in currencies which, as far as possible match its asset base. The decrease in borrowings comprised exchange adjustments of £27.3m due to the translation into sterling of borrowings denominated in other currencies and the net repayment of debt of £58.7m. Cash and cash equivalents at 31 December 2009, were £134.2m, an increase of 18.4% over 2008. This increase was due to a net cash inﬂow of £27.0m, partially offset by adverse exchange movements of £6.1m. As shown in note 27 to the ﬁnancial statements, net debt at 31 December 2009 was substantially reduced to £201.4m (2008: £308.3m). Borrowings The Group has a sterling denominated multi-currency bank debt facility that was placed in December 2004. This facility was originally due to expire on 15 December 2009, however the Group exercised its option to extend the facility by a year in 2005 and by a further year in 2006, so the facility is now due to expire in December 2011. The margins currently paid on the borrowings in this facility are in (cid:84)(cid:72)(cid:69)(cid:0)(cid:82)(cid:65)(cid:78)(cid:71)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:16)(cid:14)(cid:19)(cid:5)(cid:0)(cid:84)(cid:79)(cid:0)(cid:17)(cid:14)(cid:21)(cid:5)(cid:0)(cid:79)(cid:86)(cid:69)(cid:82)(cid:0)(cid:44)(cid:41)(cid:34)(cid:47)(cid:50)(cid:14)(cid:0)(cid:41)(cid:78)(cid:0)(cid:42)(cid:85)(cid:78)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:42)(cid:85)(cid:76)(cid:89)(cid:0)(cid:18)(cid:16)(cid:16)(cid:24)(cid:12)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0) Group raised a further £75.0m under this facility from three new banks who joined the existing syndicate of ten banks under the same terms and conditions and margin. In 2008, the Group also raised a total of US$200.0m by way of senior note issues which have a blended ﬁxed borrowing rate of 6.71%. This comprised US$100.0m with a ﬁxed interest rate of 5.54%, (cid:82)(cid:69)(cid:80)(cid:65)(cid:89)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:79)(cid:78)(cid:0)(cid:18)(cid:22)(cid:0)(cid:42)(cid:85)(cid:78)(cid:69)(cid:0)(cid:18)(cid:16)(cid:17)(cid:21)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:53)(cid:51)(cid:4)(cid:17)(cid:16)(cid:16)(cid:14)(cid:16)(cid:77)(cid:0)(cid:87)(cid:72)(cid:73)(cid:67)(cid:72)(cid:0)(cid:73)(cid:83)(cid:0)(cid:82)(cid:69)(cid:80)(cid:65)(cid:89)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:73)(cid:78)(cid:0) two tranches with US$25.0m at a ﬁxed interest rate of 7.5%, (cid:82)(cid:69)(cid:80)(cid:65)(cid:89)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:79)(cid:78)(cid:0)(cid:18)(cid:17)(cid:0)(cid:42)(cid:65)(cid:78)(cid:85)(cid:65)(cid:82)(cid:89)(cid:0)(cid:18)(cid:16)(cid:17)(cid:20)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:53)(cid:51)(cid:4)(cid:23)(cid:21)(cid:14)(cid:16)(cid:77)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0)(cid:65)(cid:0)(cid:108)(cid:88)(cid:69)(cid:68)(cid:0)(cid:73)(cid:78)(cid:84)(cid:69)(cid:82)(cid:69)(cid:83)(cid:84)(cid:0) (cid:82)(cid:65)(cid:84)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:24)(cid:14)(cid:16)(cid:5)(cid:0)(cid:82)(cid:69)(cid:80)(cid:65)(cid:89)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:79)(cid:78)(cid:0)(cid:17)(cid:16)(cid:0)(cid:42)(cid:85)(cid:78)(cid:69)(cid:0)(cid:18)(cid:16)(cid:17)(cid:22)(cid:14)(cid:0)(cid:52)(cid:72)(cid:69)(cid:83)(cid:69)(cid:0)(cid:83)(cid:69)(cid:78)(cid:73)(cid:79)(cid:82)(cid:0)(cid:78)(cid:79)(cid:84)(cid:69)(cid:83)(cid:0)(cid:87)(cid:69)(cid:82)(cid:69)(cid:0) applied against bank debt borrowings to increase the amount of liquidity headroom on the facility. (cid:41)(cid:78)(cid:0)(cid:42)(cid:65)(cid:78)(cid:85)(cid:65)(cid:82)(cid:89)(cid:0)(cid:18)(cid:16)(cid:17)(cid:16)(cid:12)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:0)(cid:83)(cid:85)(cid:67)(cid:67)(cid:69)(cid:83)(cid:83)(cid:70)(cid:85)(cid:76)(cid:76)(cid:89)(cid:0)(cid:78)(cid:69)(cid:71)(cid:79)(cid:84)(cid:73)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:65)(cid:0)(cid:53)(cid:51)(cid:4)(cid:22)(cid:16)(cid:14)(cid:16)(cid:77)(cid:0) bilateral, multi-currency revolving credit facility with the Bank of China, (cid:44)(cid:79)(cid:78)(cid:68)(cid:79)(cid:78)(cid:0)(cid:34)(cid:82)(cid:65)(cid:78)(cid:67)(cid:72)(cid:12)(cid:0)(cid:65)(cid:86)(cid:65)(cid:73)(cid:76)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:85)(cid:80)(cid:0)(cid:84)(cid:79)(cid:0)(cid:18)(cid:21)(cid:0)(cid:42)(cid:65)(cid:78)(cid:85)(cid:65)(cid:82)(cid:89)(cid:0)(cid:18)(cid:16)(cid:17)(cid:19)(cid:14) The maturity of the Group’s borrowings at 31 December 2009 is set out below: Borrowings Due within one year Due between one and two years Due between two and five years Due in over five years Total 2009 £m 8.2 198.5 19.0 109.9 335.6 2008 £m 14.0 44.3 222.0 141.3 421.6 The composition of the Group’s gross borrowings by currency is as follows: US dollar (cid:53)(cid:43)(cid:0)(cid:83)(cid:84)(cid:69)(cid:82)(cid:76)(cid:73)(cid:78)(cid:71)(cid:0) (cid:0) Australian dollar (cid:40)(cid:79)(cid:78)(cid:71)(cid:0)(cid:43)(cid:79)(cid:78)(cid:71)(cid:0)(cid:68)(cid:79)(cid:76)(cid:76)(cid:65)(cid:82)(cid:0) (cid:0) Euro Swedish kroner (cid:42)(cid:65)(cid:80)(cid:65)(cid:78)(cid:69)(cid:83)(cid:69)(cid:0)(cid:89)(cid:69)(cid:78)(cid:0) (cid:0) (cid:0) (cid:0) (cid:0) 2009 63% 28% 9% – – – – 2008 63% 12% 1% 9% 8% 4% 3% (cid:0) (cid:0) (cid:0) 30 Intertek Annual Report 2009 Directors’ Report – Business Review Financial Review The Group’s policy is to ensure that a liquidity buffer is available in the short-term, to absorb the net effects of transactions made and expected changes in liquidity both under normal and stressed conditions without incurring unacceptable losses or risking damage to the Group’s reputation. At 31 December the Group’s liquidity position showed substantial improvement as shown below: Debt facilities Repayments to 31 December Borrowings 2009 £m 600.3 (109.9) 2008 £m 612.4 (88.0) (331.9) (417.7) (cid:44)(cid:69)(cid:84)(cid:84)(cid:69)(cid:82)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:67)(cid:82)(cid:69)(cid:68)(cid:73)(cid:84)(cid:0) (cid:0) (cid:0) (cid:0) (5.3) Undrawn committed borrowing facilities 153.2 Cash and cash equivalents Liquid funds 134.2 287.4 (8.9) 97.8 113.3 211.1 Where appropriate, cash is managed in currency based cash pools and is put on overnight deposit, bearing interest at rates ﬁxed daily in advance. At 31 December 2009, 81.1% of cash was on overnight deposit (2008: 91.3%). Capital structure and management The Group is committed to enhancing shareholder value, both by investing in the business so as to improve the return on investment in the longer term and by managing our capital structure. The Group’s policy is to maintain a strong capital base so as to maintain investor, creditor and market conﬁdence and to sustain future development of the business. Management monitors both the demographic spread of shareholders, as well as the return on capital. The Group seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position. Return on capital in 2009 was 26.5% compared to 19.9% in 2008. This substantial increase was primarily due to a higher level of operating proﬁt, reduced capital expenditure and a better working capital position in 2009. Return on invested capital Operating profit Amortisation of acquisition intangibles Impairment of goodwill (cid:46)(cid:79)(cid:78)(cid:13)(cid:82)(cid:69)(cid:67)(cid:85)(cid:82)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0)(cid:67)(cid:79)(cid:83)(cid:84)(cid:83)(cid:0) (cid:0) (cid:0) Adjusted operating profit Tax rate 2009 £m 186.7 12.8 – 9.5 2008 £m 147.9 9.6 0.5 6.7 209.0 164.7 26.9% 26.3% Adjusted operating profit after tax 152.8 121.4 Property, plant and equipment Goodwill Other intangible assets Inventories Trade and other receivables Trade and other payables Provisions Invested capital 220.9 257.8 46.9 7.6 234.8 242.1 55.2 8.2 265.9 284.4 (190.5) (187.8) (31.5) (26.6) 577.1 610.3 Return on invested capital 26.5% 19.9% There were no changes to the Group’s approach to capital management during the year and neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements. Critical accounting policies The consolidated ﬁnancial statements are prepared in accordance with IFRS as adopted by the EU. Intertek’s accounting policies are set out in note 2 to the ﬁnancial statements. www.intertek.com Intertek Annual Report 2009 31 New accounting standards The Group has adopted in the year the following new standards, amendments to standards and interpretations, which have had no material impact on the ﬁnancial statements: (cid:115)(cid:0) (cid:41)(cid:38)(cid:50)(cid:51)(cid:0)(cid:24)(cid:0)(cid:47)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:83)(cid:69)(cid:71)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:27)(cid:0) (cid:115)(cid:0) (cid:41)(cid:33)(cid:51)(cid:0)(cid:18)(cid:19)(cid:0)(cid:8)(cid:50)(cid:69)(cid:86)(cid:73)(cid:83)(cid:69)(cid:68)(cid:9)(cid:0)(cid:34)(cid:79)(cid:82)(cid:82)(cid:79)(cid:87)(cid:73)(cid:78)(cid:71)(cid:0)(cid:67)(cid:79)(cid:83)(cid:84)(cid:83)(cid:27) (cid:115)(cid:0) (cid:41)(cid:33)(cid:51)(cid:0)(cid:17)(cid:0)(cid:8)(cid:50)(cid:69)(cid:86)(cid:73)(cid:83)(cid:69)(cid:68)(cid:9)(cid:0)(cid:48)(cid:82)(cid:69)(cid:83)(cid:69)(cid:78)(cid:84)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:108)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:83)(cid:84)(cid:65)(cid:84)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:27) (cid:115)(cid:0) (cid:0)(cid:41)(cid:77)(cid:80)(cid:82)(cid:79)(cid:86)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:84)(cid:79)(cid:0)(cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:78)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:65)(cid:76)(cid:0)(cid:38)(cid:73)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:50)(cid:69)(cid:80)(cid:79)(cid:82)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0) Standards 2008. IFRS 3 (Revised) Business combinations, was endorsed by the EU in (cid:42)(cid:85)(cid:78)(cid:69)(cid:0)(cid:18)(cid:16)(cid:16)(cid:25)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:73)(cid:83)(cid:0)(cid:69)(cid:70)(cid:70)(cid:69)(cid:67)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:65)(cid:78)(cid:78)(cid:85)(cid:65)(cid:76)(cid:0)(cid:80)(cid:69)(cid:82)(cid:73)(cid:79)(cid:68)(cid:83)(cid:0)(cid:79)(cid:78)(cid:0)(cid:79)(cid:82)(cid:0)(cid:65)(cid:70)(cid:84)(cid:69)(cid:82)(cid:0)(cid:17)(cid:0)(cid:42)(cid:85)(cid:76)(cid:89)(cid:0)(cid:18)(cid:16)(cid:16)(cid:25)(cid:14)(cid:0) Although the Group has not early adopted IFRS 3 (Revised), acquisition-related costs have been incurred prior to the adoption of this standard in anticipation of acquisitions that will be accounted for in accordance with IFRS 3 (Revised). The Group has chosen to (cid:69)(cid:88)(cid:80)(cid:69)(cid:78)(cid:83)(cid:69)(cid:0)(cid:84)(cid:72)(cid:69)(cid:83)(cid:69)(cid:0)(cid:65)(cid:67)(cid:81)(cid:85)(cid:73)(cid:83)(cid:73)(cid:84)(cid:73)(cid:79)(cid:78)(cid:13)(cid:82)(cid:69)(cid:76)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:67)(cid:79)(cid:83)(cid:84)(cid:83)(cid:0)(cid:65)(cid:83)(cid:0)(cid:73)(cid:78)(cid:67)(cid:85)(cid:82)(cid:82)(cid:69)(cid:68)(cid:14)(cid:0)(cid:46)(cid:79)(cid:84)(cid:87)(cid:73)(cid:84)(cid:72)(cid:83)(cid:84)(cid:65)(cid:78)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0) that IFRS 3 (Revised) is not yet effective, it is expected to be effective at the time that the related business combinations are expected to occur. 32 Intertek Annual Report 2009 Directors’ Report – Business Review Corporate Social Responsibility Report Contents Introduction from the Chief Executive Ofﬁ cer 32 32 Our business 33 Our values 33 Our employees 35 Our communities 36 Our environment 36 Our customers, suppliers and shareholders 37 Our corporate social responsibility (CSR) structure Introduction from the Chief Executive Ofﬁ cer We continue to insist on the worldwide strict application of our ethical standards, which are fundamental to the success of our business. Our work helps our customers improve the quality, safety and sustainability of their products and enables consumers to rely on our customers’ claims for their products. It is essential to us that the advice we give and the services we provide globally are independent and are seen to be so. Our Code of Ethics and Compliance Code are designed and implemented to help us achieve this. This year we celebrated 20 years of operations in China. In that time China has achieved remarkable economic progress, with which Intertek’s growth and development has been closely linked. Innovation, openness to global trade and increasing emphasis on sustainability, have corresponded with developments in Intertek’s service offerings, leading us to world-class expertise across a full range of quality and safety activities. We operate in many countries but in our dealings with employees, customers and other partners we aim to provide the local approach, as the following report shows. Our business The range of services we provide has continued to increase. During 2009 we have introduced new ways of helping our customers to assure their customers of the quality of their products and we have added new capabilities to our services. (cid:47)(cid:85)(cid:82)(cid:0)(cid:39)(cid:82)(cid:69)(cid:69)(cid:78)(cid:0)(cid:44)(cid:69)(cid:65)(cid:70)(cid:0)(cid:45)(cid:65)(cid:82)(cid:75)(cid:12)(cid:0)(cid:87)(cid:72)(cid:73)(cid:67)(cid:72)(cid:0)(cid:72)(cid:69)(cid:76)(cid:80)(cid:83)(cid:0)(cid:67)(cid:79)(cid:78)(cid:83)(cid:85)(cid:77)(cid:69)(cid:82)(cid:83)(cid:0) identify products that meet a range of international regulatory environmental standards, was launched in 2009. Our main driver, as ever, is to provide the services that are needed to help customers around the world improve their products and reduce their risk. The beneﬁ ts that arise may be environmental, for example by showing customers how to reduce hazardous waste or developing energy efﬁ ciency labelling programmes, or they may be in the safety of the product. We are a world leader in the design of safe products, with particular expertise in children’s toys. Our centres of excellence in Chicago (cid:65)(cid:78)(cid:68)(cid:0)(cid:44)(cid:79)(cid:78)(cid:68)(cid:79)(cid:78)(cid:0)(cid:80)(cid:82)(cid:79)(cid:86)(cid:73)(cid:68)(cid:69)(cid:0)(cid:65)(cid:68)(cid:86)(cid:73)(cid:67)(cid:69)(cid:0)(cid:84)(cid:79)(cid:0)(cid:83)(cid:79)(cid:77)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:87)(cid:79)(cid:82)(cid:76)(cid:68)(cid:7)(cid:83)(cid:0)(cid:76)(cid:65)(cid:82)(cid:71)(cid:69)(cid:83)(cid:84)(cid:0)(cid:80)(cid:82)(cid:79)(cid:68)(cid:85)(cid:67)(cid:84)(cid:0) brands to advance the design of safe products in the marketplace. In partnership with industry and health bodies we collect and analyse safety data in connection with child accidents, and use this information to help our customers design safer products. Our work includes testing compliance and effectiveness targets in the production of biofuels and ethanol, assisting customers to comply with ultra low sulphur diesel legislation, and helping to assess low energy and low emission equipment. We provide audit and consultancy services to corporations, non-governmental and regulatory organisations to improve the social and ethical impact of their operations. Increasingly consumers around the world want peace of mind that products they have purchased have not been created through social or ethical abuses of workers or unfair trade. We audit factory conditions and work practices to ensure that they are legal, ethical and humane. We work with corporations to develop bespoke global CSR standards and programmes to ensure that they exceed minimum social and ethical thresholds in their sourcing. We have successfully initiated partnerships and collaborations with non-governmental and not-for-proﬁ t organisations to improve standards. (cid:52)(cid:72)(cid:69)(cid:0)(cid:33)(cid:77)(cid:69)(cid:82)(cid:73)(cid:67)(cid:65)(cid:78)(cid:0)(cid:51)(cid:79)(cid:67)(cid:73)(cid:69)(cid:84)(cid:89)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:49)(cid:85)(cid:65)(cid:76)(cid:73)(cid:84)(cid:89)(cid:0)(cid:72)(cid:65)(cid:83)(cid:0)(cid:67)(cid:82)(cid:69)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:51)(cid:80)(cid:69)(cid:78)(cid:67)(cid:69)(cid:82)(cid:0)(cid:40)(cid:85)(cid:84)(cid:67)(cid:72)(cid:69)(cid:78)(cid:83)(cid:0)(cid:42)(cid:82)(cid:14)(cid:0) Social Responsibility Medal which each year recognises the achievements of an individual who has been an outstanding advocate for social responsibility. Spencer Hutchens, after whom the medal is named, is a senior Vice President of Intertek in California, a global expert in the ﬁ eld of quality control and an Academician for the International Academy for Quality. www.intertek.com Intertek Annual Report 2009 33 Growth in employee numbers 25,000 20,000 15,000 10,000 5,000 Asia Paciﬁc EMEA Americas 2005 2006 2007 2008 2009 Objectives Our focus this year has been on: (cid:115)(cid:0) (cid:84)(cid:82)(cid:65)(cid:73)(cid:78)(cid:73)(cid:78)(cid:71)(cid:27) (cid:115)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0)(cid:83)(cid:84)(cid:82)(cid:69)(cid:78)(cid:71)(cid:84)(cid:72)(cid:0)(cid:79)(cid:70)(cid:0)(cid:79)(cid:85)(cid:82)(cid:0)(cid:67)(cid:79)(cid:76)(cid:76)(cid:69)(cid:67)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:76)(cid:69)(cid:65)(cid:68)(cid:69)(cid:82)(cid:83)(cid:72)(cid:73)(cid:80)(cid:27) (cid:115)(cid:0) (cid:67)(cid:79)(cid:77)(cid:77)(cid:85)(cid:78)(cid:73)(cid:67)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0)(cid:69)(cid:77)(cid:80)(cid:76)(cid:79)(cid:89)(cid:69)(cid:69)(cid:83)(cid:27)(cid:0)(cid:65)(cid:78)(cid:68) (cid:115)(cid:0) (cid:73)(cid:77)(cid:80)(cid:82)(cid:79)(cid:86)(cid:73)(cid:78)(cid:71)(cid:0)(cid:79)(cid:85)(cid:82)(cid:0)(cid:67)(cid:65)(cid:80)(cid:65)(cid:67)(cid:73)(cid:84)(cid:89)(cid:0)(cid:84)(cid:79)(cid:0)(cid:65)(cid:84)(cid:84)(cid:82)(cid:65)(cid:67)(cid:84)(cid:12)(cid:0)(cid:82)(cid:69)(cid:84)(cid:65)(cid:73)(cid:78)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:77)(cid:79)(cid:84)(cid:73)(cid:86)(cid:65)(cid:84)(cid:69)(cid:0)(cid:69)(cid:77)(cid:80)(cid:76)(cid:79)(cid:89)(cid:69)(cid:69)(cid:83)(cid:14)(cid:0) Our policies We have framework policies in place that enable us to treat employees fairly across the Group, whilst still giving local managers the authority and ﬂexibility to adopt what is right for their local area. As we grow, whether organically or by acquisition, we continue to promote and monitor these policies, which are concerned with matters such as fair recruitment, performance assessment, internal communications and remuneration. The graph above shows how our workforce is distributed geographically and why it is important for us to respect regional and cultural differences. Our human resource managers support the progress of our people through country-speciﬁc teams who are able to respond to local circumstances. Our strategy is to develop and promote locally for the best blend of understanding of the local market, with provision of career progress opportunities for everyone. We continue to give opportunities to the most talented individuals to advance into international management. Our values Our principal aim is to use our resources to add value to our customers’ products and processes whilst employing the highest standards of integrity in business. Our Mission Statement We will: (cid:115)(cid:0) (cid:0)(cid:80)(cid:82)(cid:79)(cid:77)(cid:79)(cid:84)(cid:69)(cid:0)(cid:65)(cid:0)(cid:67)(cid:85)(cid:76)(cid:84)(cid:85)(cid:82)(cid:69)(cid:0)(cid:87)(cid:72)(cid:69)(cid:82)(cid:69)(cid:0)(cid:77)(cid:79)(cid:84)(cid:73)(cid:86)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:67)(cid:85)(cid:83)(cid:84)(cid:79)(cid:77)(cid:69)(cid:82)(cid:13)(cid:79)(cid:82)(cid:73)(cid:69)(cid:78)(cid:84)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0) employees can ﬂourish, experience professional fulﬁlment and reach their highest potential; (cid:115)(cid:0) (cid:0)(cid:65)(cid:67)(cid:84)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0)(cid:73)(cid:78)(cid:84)(cid:69)(cid:71)(cid:82)(cid:73)(cid:84)(cid:89)(cid:12)(cid:0)(cid:72)(cid:79)(cid:78)(cid:69)(cid:83)(cid:84)(cid:89)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:82)(cid:69)(cid:83)(cid:80)(cid:69)(cid:67)(cid:84)(cid:27) (cid:115)(cid:0) (cid:0)(cid:86)(cid:65)(cid:76)(cid:85)(cid:69)(cid:0)(cid:69)(cid:65)(cid:67)(cid:72)(cid:0)(cid:69)(cid:77)(cid:80)(cid:76)(cid:79)(cid:89)(cid:69)(cid:69)(cid:7)(cid:83)(cid:0)(cid:67)(cid:79)(cid:78)(cid:84)(cid:82)(cid:73)(cid:66)(cid:85)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:84)(cid:79)(cid:87)(cid:65)(cid:82)(cid:68)(cid:0)(cid:65)(cid:67)(cid:72)(cid:73)(cid:69)(cid:86)(cid:73)(cid:78)(cid:71)(cid:0)(cid:79)(cid:85)(cid:82)(cid:0) business objectives; (cid:115)(cid:0) (cid:0)(cid:86)(cid:65)(cid:76)(cid:85)(cid:69)(cid:0)(cid:84)(cid:82)(cid:85)(cid:83)(cid:84)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:80)(cid:69)(cid:82)(cid:83)(cid:79)(cid:78)(cid:65)(cid:76)(cid:0)(cid:82)(cid:69)(cid:83)(cid:80)(cid:79)(cid:78)(cid:83)(cid:73)(cid:66)(cid:73)(cid:76)(cid:73)(cid:84)(cid:89)(cid:27)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0) (cid:115)(cid:0) (cid:0)(cid:82)(cid:69)(cid:83)(cid:80)(cid:69)(cid:67)(cid:84)(cid:0)(cid:68)(cid:73)(cid:86)(cid:69)(cid:82)(cid:83)(cid:69)(cid:0)(cid:80)(cid:69)(cid:82)(cid:83)(cid:80)(cid:69)(cid:67)(cid:84)(cid:73)(cid:86)(cid:69)(cid:83)(cid:12)(cid:0)(cid:69)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:84)(cid:82)(cid:65)(cid:68)(cid:73)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0) as essential. In all our activities we aim to: (cid:115)(cid:0) (cid:0)(cid:66)(cid:69)(cid:0)(cid:66)(cid:79)(cid:84)(cid:72)(cid:0)(cid:67)(cid:79)(cid:77)(cid:77)(cid:69)(cid:82)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:70)(cid:65)(cid:73)(cid:82)(cid:27) (cid:115)(cid:0) (cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:71)(cid:78)(cid:73)(cid:83)(cid:69)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:73)(cid:77)(cid:80)(cid:79)(cid:82)(cid:84)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:84)(cid:79)(cid:0)(cid:65)(cid:76)(cid:76)(cid:0)(cid:83)(cid:84)(cid:65)(cid:75)(cid:69)(cid:72)(cid:79)(cid:76)(cid:68)(cid:69)(cid:82)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:69)(cid:78)(cid:83)(cid:85)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0) the health and safety of all our employees; (cid:115)(cid:0) (cid:0)(cid:77)(cid:65)(cid:73)(cid:78)(cid:84)(cid:65)(cid:73)(cid:78)(cid:0)(cid:79)(cid:85)(cid:82)(cid:0)(cid:73)(cid:78)(cid:84)(cid:69)(cid:71)(cid:82)(cid:73)(cid:84)(cid:89)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:80)(cid:82)(cid:79)(cid:70)(cid:69)(cid:83)(cid:83)(cid:73)(cid:79)(cid:78)(cid:65)(cid:76)(cid:73)(cid:83)(cid:77)(cid:27)(cid:0)(cid:65)(cid:78)(cid:68) (cid:115)(cid:0) (cid:0)(cid:83)(cid:84)(cid:82)(cid:73)(cid:86)(cid:69)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:67)(cid:79)(cid:78)(cid:84)(cid:73)(cid:78)(cid:85)(cid:65)(cid:76)(cid:0)(cid:73)(cid:77)(cid:80)(cid:82)(cid:79)(cid:86)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:73)(cid:78)(cid:78)(cid:79)(cid:86)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:14) The following systems help us ensure that our values are maintained: (cid:115)(cid:0) (cid:0)(cid:65)(cid:76)(cid:76)(cid:0)(cid:69)(cid:77)(cid:80)(cid:76)(cid:79)(cid:89)(cid:69)(cid:69)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:82)(cid:69)(cid:81)(cid:85)(cid:73)(cid:82)(cid:69)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:83)(cid:73)(cid:71)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:7)(cid:83)(cid:0)(cid:35)(cid:79)(cid:68)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:37)(cid:84)(cid:72)(cid:73)(cid:67)(cid:83)(cid:12)(cid:0)(cid:87)(cid:72)(cid:73)(cid:67)(cid:72)(cid:0) sets out our robust stance on upholding sound business ethics; (cid:115)(cid:0) (cid:0)(cid:79)(cid:85)(cid:82)(cid:0)(cid:67)(cid:69)(cid:78)(cid:84)(cid:82)(cid:65)(cid:76)(cid:0)(cid:67)(cid:79)(cid:77)(cid:80)(cid:76)(cid:73)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:84)(cid:69)(cid:65)(cid:77)(cid:0)(cid:69)(cid:78)(cid:83)(cid:85)(cid:82)(cid:69)(cid:83)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:79)(cid:85)(cid:82)(cid:0)(cid:80)(cid:79)(cid:76)(cid:73)(cid:67)(cid:73)(cid:69)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0) procedures are properly applied in practice and that they remain appropriate to the business; (cid:115)(cid:0) (cid:0)(cid:65)(cid:76)(cid:76)(cid:0)(cid:69)(cid:77)(cid:80)(cid:76)(cid:79)(cid:89)(cid:69)(cid:69)(cid:83)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0)(cid:65)(cid:67)(cid:67)(cid:69)(cid:83)(cid:83)(cid:0)(cid:84)(cid:79)(cid:0)(cid:87)(cid:72)(cid:73)(cid:83)(cid:84)(cid:76)(cid:69)(cid:13)(cid:66)(cid:76)(cid:79)(cid:87)(cid:73)(cid:78)(cid:71)(cid:0)(cid:72)(cid:79)(cid:84)(cid:76)(cid:73)(cid:78)(cid:69)(cid:83)(cid:14)(cid:0)(cid:37)(cid:77)(cid:80)(cid:76)(cid:79)(cid:89)(cid:69)(cid:69)(cid:83)(cid:0) and external parties also have access to a hotline through the Group website; and (cid:115)(cid:0) (cid:0)(cid:79)(cid:85)(cid:82)(cid:0)(cid:33)(cid:85)(cid:68)(cid:73)(cid:84)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:50)(cid:73)(cid:83)(cid:75)(cid:0)(cid:35)(cid:79)(cid:77)(cid:77)(cid:73)(cid:84)(cid:84)(cid:69)(cid:69)(cid:0)(cid:82)(cid:69)(cid:71)(cid:85)(cid:76)(cid:65)(cid:82)(cid:76)(cid:89)(cid:0)(cid:82)(cid:69)(cid:86)(cid:73)(cid:69)(cid:87)(cid:83)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:79)(cid:85)(cid:84)(cid:67)(cid:79)(cid:77)(cid:69)(cid:83)(cid:0) from hotlines and compliance reports on behalf of the Board. Our employees Our principal strength is the talent of our employees. Our intention is to unlock the potential of every employee to perform to the best of his or her abilities. This enables us to achieve maximum results for them, our customers and shareholders. At 31 December 2009, we employed 25,183 people, an increase of 5.6% over the prior year. The growth in employee numbers in each region over the past ﬁve years, is shown in the following graph. The largest increase was in the Asia Paciﬁc region where more than 55% of employees are based. Because we operate in so many countries, we have adopted a framework of human resource procedures and policies to ensure a fair and consistent approach to employee matters around the Group. 34 Intertek Annual Report 2009 Directors’ Report – Business Review Corporate Social Responsibility Report As part of our equal opportunities policy, people with disabilities are given the same consideration as others when they apply for jobs. Depending on their skills and aptitudes, they enjoy the same career prospects as other employees. If employees become disabled every effort will be made to retain them in their current role or to look at possibilities for retraining or redeployment within the Group. Where necessary the Group aims to provide these employees with facilities, equipment and training to assist them in doing their jobs. Our ongoing commitment to reduce workplace injuries continues with good results. In the USA, which accounts for some 10% of our workforce, there was a signiﬁcant reduction in the injury rate for 2009 compared with 2008, which was a statistically good year. Hazard awareness, safety training and local cultural development are helping to reduce injuries. Also in the USA we are targeting speciﬁc safety training needs through ‘learning paths’ assigned by job responsibility and we use online monitoring of and documentation for particular groups, such as the employees who deal with dangerous goods shipments. In several countries an incident log is maintained and posted on the intranet, allowing management to view injuries or near misses at other locations and discuss ‘lessons learned’ with their employees. The health and safety of our employees is of paramount importance to the Group. We aim to provide a safe working environment and ensure that our employees have the information and knowledge to perform their duties safely. We are committed to maintaining high standards and complying with relevant local legislation and guidelines in any area in which we operate. We continually seek to minimise harm to our employees and our procedures are regularly monitored by our compliance team to ensure that they are being properly applied in practice. (cid:55)(cid:69)(cid:0)(cid:67)(cid:79)(cid:78)(cid:84)(cid:73)(cid:78)(cid:85)(cid:65)(cid:76)(cid:76)(cid:89)(cid:0)(cid:83)(cid:84)(cid:82)(cid:73)(cid:86)(cid:69)(cid:0)(cid:84)(cid:79)(cid:0)(cid:80)(cid:82)(cid:79)(cid:77)(cid:79)(cid:84)(cid:69)(cid:0)(cid:65)(cid:0)(cid:83)(cid:65)(cid:70)(cid:69)(cid:84)(cid:89)(cid:0)(cid:67)(cid:85)(cid:76)(cid:84)(cid:85)(cid:82)(cid:69)(cid:14)(cid:0)(cid:41)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:53)(cid:43)(cid:0)(cid:84)(cid:72)(cid:73)(cid:83)(cid:0) has led this year to the creation of a safety committee that effects HSE improvements country-wide rather than on a business-line basis and better identiﬁes areas that need additional support. (cid:33)(cid:76)(cid:83)(cid:79)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:53)(cid:43)(cid:12)(cid:0)(cid:65)(cid:76)(cid:76)(cid:0)(cid:83)(cid:65)(cid:70)(cid:69)(cid:84)(cid:89)(cid:0)(cid:82)(cid:69)(cid:80)(cid:82)(cid:69)(cid:83)(cid:69)(cid:78)(cid:84)(cid:65)(cid:84)(cid:73)(cid:86)(cid:69)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:82)(cid:69)(cid:81)(cid:85)(cid:73)(cid:82)(cid:69)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:71)(cid:65)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0) IOSH Managing Safely certiﬁcate. Information about employees It is important to monitor progress in matters such as diversity, employment of disabled people, training, employee retention and safety, to attain the best results for the Group. The more information we have, the better we will be able to make changes when they are necessary. Group-wide human resource meetings and intranet-based sharing of information are used to communicate objectives and share knowledge and we have begun to introduce software that will, once extended around the globe, provide us with more detailed and consistent data. Information for employees Good communication is the basis of every successful relationship and we continually look for ways to increase two-way communication opportunities with our employees. We particularly need to ensure that our employees are aware of our ethical, risk and safety procedures. The development of virtual communities through the extended intranet allows us to communicate and promote best practice in matters such as safety or marketing around the Group more speedily than before. With the increasing range and complexity of our activities we are investing more in the ﬂow of information up, down and across the Group to enhance commitment to Group values and consistency in how we support customers and each other. We have extended the use of our intranet to encourage Group-wide communication and knowledge sharing. Our intranet is being built into an online encyclopaedia of the Group, a home to internal communities, a reference for policies and information and an e-learning forum. Online safety training began during the year. In the USA our online training programme was expanded to include additional safety, health and environmental matters and safety bulletins. Health, Safety & Environmental ‘ﬂash’ notiﬁcations are used for notices that need to be issued quickly. www.intertek.com Intertek Annual Report 2009 35 Intertek in Taiwan supported the restoration work in Taiwan after the devastation caused by Typhoon Morakot, not only with a donation to the Red Cross, but by offering free food microbiology and chemical testing and also giving several jobs to victims. A Red Cross donation was also made by employees in Vietnam to help the victims of (cid:52)(cid:89)(cid:80)(cid:72)(cid:79)(cid:79)(cid:78)(cid:0)(cid:43)(cid:69)(cid:84)(cid:83)(cid:65)(cid:78)(cid:65)(cid:0)(cid:84)(cid:72)(cid:69)(cid:82)(cid:69)(cid:14)(cid:0) Intertek in Singapore is a strong advocate of developing the scientists of tomorrow. On average 30 students per year take part in a structured intern training programme, enabling them to gain valuable industry experience and enhance their academic training. In Africa, Intertek donated 20 used computers to two schools (cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:82)(cid:85)(cid:82)(cid:65)(cid:76)(cid:0)(cid:65)(cid:82)(cid:69)(cid:65)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:43)(cid:87)(cid:65)(cid:58)(cid:85)(cid:76)(cid:85)(cid:0)(cid:46)(cid:65)(cid:84)(cid:65)(cid:76)(cid:0)(cid:8)(cid:43)(cid:58)(cid:46)(cid:9)(cid:12)(cid:0)(cid:87)(cid:72)(cid:73)(cid:67)(cid:72)(cid:0)(cid:87)(cid:69)(cid:82)(cid:69)(cid:0)(cid:73)(cid:68)(cid:69)(cid:78)(cid:84)(cid:73)(cid:108)(cid:69)(cid:68)(cid:0) (cid:65)(cid:83)(cid:0)(cid:78)(cid:69)(cid:69)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:65)(cid:83)(cid:83)(cid:73)(cid:83)(cid:84)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:66)(cid:89)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:43)(cid:58)(cid:46)(cid:0)(cid:36)(cid:69)(cid:80)(cid:65)(cid:82)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:37)(cid:68)(cid:85)(cid:67)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:14) (cid:37)(cid:65)(cid:67)(cid:72)(cid:0)(cid:89)(cid:69)(cid:65)(cid:82)(cid:0)(cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:84)(cid:69)(cid:75)(cid:0)(cid:69)(cid:77)(cid:80)(cid:76)(cid:79)(cid:89)(cid:69)(cid:69)(cid:83)(cid:0)(cid:86)(cid:73)(cid:83)(cid:73)(cid:84)(cid:0)(cid:65)(cid:78)(cid:0)(cid:79)(cid:82)(cid:80)(cid:72)(cid:65)(cid:78)(cid:65)(cid:71)(cid:69)(cid:0)(cid:67)(cid:65)(cid:76)(cid:76)(cid:69)(cid:68)(cid:0)(cid:34)(cid:69)(cid:86)(cid:73)(cid:69)(cid:83)(cid:0)(cid:46)(cid:85)(cid:82)(cid:83)(cid:69)(cid:82)(cid:89)(cid:0) which caters for children with different disabilities or who are infected with HIV/AIDS, and provides the children with clothes, uniforms, toys, books, food and other items. The orphanage is located on the (cid:78)(cid:79)(cid:82)(cid:84)(cid:72)(cid:0)(cid:79)(cid:70)(cid:0)(cid:43)(cid:58)(cid:46)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:72)(cid:65)(cid:83)(cid:0)(cid:66)(cid:69)(cid:67)(cid:79)(cid:77)(cid:69)(cid:0)(cid:80)(cid:65)(cid:82)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:84)(cid:69)(cid:75)(cid:0)(cid:70)(cid:65)(cid:77)(cid:73)(cid:76)(cid:89)(cid:14) We also encourage the development of links with professional peers, providing lecturers and examiners and contributing to publications and presentations. As an example, one of our Manchester based subsidiaries strengthened its relationship with its customers in the chemical (cid:73)(cid:78)(cid:68)(cid:85)(cid:83)(cid:84)(cid:82)(cid:89)(cid:0)(cid:66)(cid:89)(cid:0)(cid:72)(cid:79)(cid:83)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:65)(cid:78)(cid:0)(cid:69)(cid:86)(cid:69)(cid:78)(cid:73)(cid:78)(cid:71)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:46)(cid:79)(cid:82)(cid:84)(cid:72)(cid:0)(cid:55)(cid:69)(cid:83)(cid:84)(cid:7)(cid:83)(cid:0)(cid:35)(cid:72)(cid:69)(cid:77)(cid:73)(cid:67)(cid:65)(cid:76)(cid:0) Industry Association in 2009. We use face-to-face review meetings, safety meetings, regular management meetings and, increasingly, country-focused newsletters to give and receive information. Employees are also able to use our conﬁdential telephone and email hotlines if they have any issues that they want to communicate anonymously. All hotline calls are investigated sensitively by our compliance managers. Our Intertek as One programme of cross-divisional liaison has contributed to increased knowledge of the Group and to better opportunities for our employees through regional and country- based meetings, communications and workshops. Share interests We are committed to encouraging our senior executives to align themselves with the interests of shareholders and the Group’s performance through the ownership of the Company’s shares. The Company operates a long-term incentive share plan for senior executives and requires the most senior of them to retain some of the shares they obtain through this plan. More information about the plan is contained in the Remuneration Report which starts on page 53. We are pleased to note that a number of our employees have chosen to invest in the Group and that some £5m of our shares were held by employees and Directors at the end of 2009. Our communities Because of the decentralised structure of our Group and the nature of our activities, community involvement is organised at local level by local managers. We recognise the importance of our relationship with the communities in which we operate, and encourage our businesses and employees to undertake community service and charitable giving. Here are some examples: In Thailand, where there has been ﬂooding, our managers obtained the consent of a number of customers and were able to redeploy product samples not needed for testing – giving toys, clothes and utensils to local recipients. Following the earthquake disaster in China, we joined with other companies in donating 50,000 books to children in the affected area. 36 Intertek Annual Report 2009 Directors’ Report – Business Review Corporate Social Responsibility Report Our environment We have measured our carbon emissions at 10 key sites over the last three years to gain a better understanding of our energy use. This has helped us track the impact of various initiatives on CO2 emissions. Our Singapore laboratory, for example, showed a much reduced CO2 footprint following initiatives such as installing motion sensors, reducing ﬂuorescent lighting and adjusting air-conditioning settings. Our compliance team carries out regular reviews of risks at key sites, and as part of these reviews conﬁrms that the sites comply with (cid:65)(cid:80)(cid:80)(cid:76)(cid:73)(cid:67)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:69)(cid:78)(cid:86)(cid:73)(cid:82)(cid:79)(cid:78)(cid:77)(cid:69)(cid:78)(cid:84)(cid:65)(cid:76)(cid:0)(cid:76)(cid:69)(cid:71)(cid:73)(cid:83)(cid:76)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:14)(cid:0)(cid:46)(cid:79)(cid:0)(cid:77)(cid:65)(cid:74)(cid:79)(cid:82)(cid:0)(cid:73)(cid:83)(cid:83)(cid:85)(cid:69)(cid:83)(cid:0)(cid:87)(cid:69)(cid:82)(cid:69)(cid:0)(cid:73)(cid:68)(cid:69)(cid:78)(cid:84)(cid:73)(cid:108)(cid:69)(cid:68)(cid:0) in 2009 and minor issues were corrected as part of the process. (cid:44)(cid:79)(cid:67)(cid:65)(cid:76)(cid:0)(cid:79)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:65)(cid:76)(cid:0)(cid:77)(cid:65)(cid:78)(cid:65)(cid:71)(cid:69)(cid:82)(cid:83)(cid:0)(cid:82)(cid:69)(cid:86)(cid:73)(cid:69)(cid:87)(cid:0)(cid:69)(cid:78)(cid:86)(cid:73)(cid:82)(cid:79)(cid:78)(cid:77)(cid:69)(cid:78)(cid:84)(cid:65)(cid:76)(cid:0)(cid:67)(cid:79)(cid:78)(cid:84)(cid:82)(cid:79)(cid:76)(cid:83)(cid:0)(cid:79)(cid:78)(cid:0)(cid:65)(cid:78)(cid:0) ongoing basis. In common with many areas of Intertek’s business, the implementation of our framework policy on the environment is operated by local management in accordance with relevant local legislation and guidelines. A number of projects have been carried out at the local level during the year. We have continued with the following initiatives: (cid:115)(cid:0) (cid:0)(cid:82)(cid:69)(cid:68)(cid:85)(cid:67)(cid:73)(cid:78)(cid:71)(cid:0)(cid:80)(cid:65)(cid:80)(cid:69)(cid:82)(cid:0)(cid:85)(cid:83)(cid:65)(cid:71)(cid:69)(cid:0)(cid:66)(cid:89)(cid:0)(cid:73)(cid:78)(cid:84)(cid:82)(cid:79)(cid:68)(cid:85)(cid:67)(cid:73)(cid:78)(cid:71)(cid:0)(cid:80)(cid:65)(cid:80)(cid:69)(cid:82)(cid:13)(cid:70)(cid:82)(cid:69)(cid:69)(cid:0)(cid:68)(cid:69)(cid:76)(cid:73)(cid:86)(cid:69)(cid:82)(cid:89)(cid:0)(cid:84)(cid:79)(cid:0)(cid:67)(cid:76)(cid:73)(cid:69)(cid:78)(cid:84)(cid:83)(cid:12)(cid:0) using electronic document management systems, using electronic communication with shareholders and increasing the use of the internet and intranet for communications including telephone calls; (cid:115)(cid:0) (cid:73)(cid:78)(cid:67)(cid:82)(cid:69)(cid:65)(cid:83)(cid:73)(cid:78)(cid:71)(cid:0)(cid:73)(cid:78)(cid:86)(cid:69)(cid:83)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:73)(cid:78)(cid:0)(cid:76)(cid:79)(cid:87)(cid:13)(cid:69)(cid:78)(cid:69)(cid:82)(cid:71)(cid:89)(cid:0)(cid:69)(cid:81)(cid:85)(cid:73)(cid:80)(cid:77)(cid:69)(cid:78)(cid:84)(cid:27)(cid:0) (cid:115)(cid:0) (cid:73)(cid:78)(cid:67)(cid:82)(cid:69)(cid:65)(cid:83)(cid:73)(cid:78)(cid:71)(cid:0)(cid:82)(cid:69)(cid:67)(cid:89)(cid:67)(cid:76)(cid:73)(cid:78)(cid:71)(cid:0)(cid:83)(cid:67)(cid:72)(cid:69)(cid:77)(cid:69)(cid:83)(cid:0)(cid:84)(cid:72)(cid:82)(cid:79)(cid:85)(cid:71)(cid:72)(cid:79)(cid:85)(cid:84)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:27)(cid:0) (cid:115)(cid:0) (cid:0)(cid:82)(cid:69)(cid:68)(cid:85)(cid:67)(cid:73)(cid:78)(cid:71)(cid:0)(cid:67)(cid:65)(cid:82)(cid:66)(cid:79)(cid:78)(cid:13)(cid:70)(cid:85)(cid:69)(cid:76)(cid:0)(cid:84)(cid:82)(cid:65)(cid:86)(cid:69)(cid:76)(cid:0)(cid:66)(cid:89)(cid:0)(cid:72)(cid:79)(cid:76)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:77)(cid:69)(cid:69)(cid:84)(cid:73)(cid:78)(cid:71)(cid:83)(cid:0)(cid:66)(cid:89)(cid:0)(cid:67)(cid:79)(cid:78)(cid:70)(cid:69)(cid:82)(cid:69)(cid:78)(cid:67)(cid:69)(cid:0) call or Webinar and amending travel policies to include environmentally-friendly elements; (cid:115)(cid:0) (cid:0)(cid:64)(cid:71)(cid:82)(cid:69)(cid:69)(cid:78)(cid:0)(cid:79)(cid:70)(cid:108)(cid:67)(cid:69)(cid:7)(cid:0)(cid:73)(cid:78)(cid:73)(cid:84)(cid:73)(cid:65)(cid:84)(cid:73)(cid:86)(cid:69)(cid:83)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0)(cid:82)(cid:69)(cid:68)(cid:85)(cid:67)(cid:69)(cid:68)(cid:0)(cid:80)(cid:65)(cid:80)(cid:69)(cid:82)(cid:0)(cid:85)(cid:83)(cid:65)(cid:71)(cid:69)(cid:12)(cid:0)(cid:83)(cid:65)(cid:86)(cid:69)(cid:68)(cid:0)(cid:69)(cid:78)(cid:69)(cid:82)(cid:71)(cid:89)(cid:12)(cid:0) and cut costs. Intertek’s compliance team takes an active role in identifying areas where the Group and employees can have a positive effect on reducing our environmental impact. These include energy and water consumption, use of fuel by Group vehicles, reduced use of ozone- depleting substances and waste and by-product production. We continue to achieve ISO14001 (Environmental management) and OHSAS18001 (Health & Safety management) accreditation in (cid:84)(cid:72)(cid:69)(cid:0)(cid:53)(cid:43)(cid:14)(cid:0)(cid:52)(cid:72)(cid:82)(cid:69)(cid:69)(cid:0)(cid:65)(cid:68)(cid:68)(cid:73)(cid:84)(cid:73)(cid:79)(cid:78)(cid:65)(cid:76)(cid:0)(cid:83)(cid:73)(cid:84)(cid:69)(cid:83)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0)(cid:66)(cid:69)(cid:69)(cid:78)(cid:0)(cid:65)(cid:67)(cid:67)(cid:82)(cid:69)(cid:68)(cid:73)(cid:84)(cid:69)(cid:68)(cid:0)(cid:73)(cid:78)(cid:0)(cid:18)(cid:16)(cid:16)(cid:25)(cid:14) We aim to educate our employees so that we can all work towards a better future for the environment. The circulation of information concerning, for example, energy consumption, is one of the ways we identify and enlist the help of all employees in minimising speciﬁc and overall usage. Our customers, suppliers and shareholders At Intertek we: (cid:115)(cid:0) (cid:0)(cid:77)(cid:65)(cid:73)(cid:78)(cid:84)(cid:65)(cid:73)(cid:78)(cid:0)(cid:81)(cid:85)(cid:65)(cid:76)(cid:73)(cid:84)(cid:89)(cid:0)(cid:77)(cid:65)(cid:78)(cid:65)(cid:71)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:83)(cid:89)(cid:83)(cid:84)(cid:69)(cid:77)(cid:83)(cid:0)(cid:73)(cid:78)(cid:0)(cid:79)(cid:85)(cid:82)(cid:0)(cid:68)(cid:73)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0) continually monitor the service we provide; (cid:115)(cid:0) (cid:0)(cid:86)(cid:65)(cid:76)(cid:85)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:83)(cid:69)(cid:82)(cid:86)(cid:69)(cid:0)(cid:79)(cid:85)(cid:82)(cid:0)(cid:67)(cid:85)(cid:83)(cid:84)(cid:79)(cid:77)(cid:69)(cid:82)(cid:83)(cid:12)(cid:0)(cid:65)(cid:83)(cid:0)(cid:69)(cid:77)(cid:66)(cid:79)(cid:68)(cid:73)(cid:69)(cid:68)(cid:0)(cid:73)(cid:78)(cid:0)(cid:79)(cid:85)(cid:82)(cid:0)(cid:67)(cid:85)(cid:83)(cid:84)(cid:79)(cid:77)(cid:69)(cid:82)(cid:13) focused mission statement; (cid:115)(cid:0) (cid:0)(cid:79)(cid:70)(cid:70)(cid:69)(cid:82)(cid:0)(cid:65)(cid:78)(cid:0)(cid:73)(cid:78)(cid:84)(cid:69)(cid:71)(cid:82)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:85)(cid:78)(cid:73)(cid:108)(cid:69)(cid:68)(cid:0)(cid:83)(cid:69)(cid:82)(cid:86)(cid:73)(cid:67)(cid:69)(cid:0)(cid:79)(cid:78)(cid:0)(cid:65)(cid:0)(cid:71)(cid:76)(cid:79)(cid:66)(cid:65)(cid:76)(cid:0)(cid:66)(cid:65)(cid:83)(cid:73)(cid:83)(cid:27) (cid:115)(cid:0) (cid:87)(cid:69)(cid:76)(cid:67)(cid:79)(cid:77)(cid:69)(cid:0)(cid:70)(cid:69)(cid:69)(cid:68)(cid:66)(cid:65)(cid:67)(cid:75)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:65)(cid:76)(cid:76)(cid:0)(cid:83)(cid:84)(cid:65)(cid:75)(cid:69)(cid:72)(cid:79)(cid:76)(cid:68)(cid:69)(cid:82)(cid:83)(cid:27) (cid:115)(cid:0) (cid:0)(cid:72)(cid:79)(cid:76)(cid:68)(cid:0)(cid:82)(cid:69)(cid:71)(cid:85)(cid:76)(cid:65)(cid:82)(cid:0)(cid:70)(cid:69)(cid:69)(cid:68)(cid:66)(cid:65)(cid:67)(cid:75)(cid:0)(cid:77)(cid:69)(cid:69)(cid:84)(cid:73)(cid:78)(cid:71)(cid:83)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0)(cid:67)(cid:85)(cid:83)(cid:84)(cid:79)(cid:77)(cid:69)(cid:82)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:87)(cid:69)(cid:76)(cid:67)(cid:79)(cid:77)(cid:69)(cid:0) their inspection of our premises; (cid:115)(cid:0) (cid:0)(cid:80)(cid:82)(cid:79)(cid:86)(cid:73)(cid:68)(cid:69)(cid:0)(cid:65)(cid:78)(cid:0)(cid:65)(cid:67)(cid:67)(cid:69)(cid:83)(cid:83)(cid:73)(cid:66)(cid:76)(cid:69)(cid:0)(cid:70)(cid:69)(cid:69)(cid:68)(cid:66)(cid:65)(cid:67)(cid:75)(cid:0)(cid:83)(cid:69)(cid:82)(cid:86)(cid:73)(cid:67)(cid:69)(cid:0)(cid:84)(cid:79)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:83)(cid:83)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:81)(cid:85)(cid:65)(cid:76)(cid:73)(cid:84)(cid:89)(cid:0) of service provided; and (cid:115)(cid:0) (cid:0)(cid:67)(cid:79)(cid:78)(cid:68)(cid:85)(cid:67)(cid:84)(cid:0)(cid:67)(cid:85)(cid:83)(cid:84)(cid:79)(cid:77)(cid:69)(cid:82)(cid:0)(cid:83)(cid:65)(cid:84)(cid:73)(cid:83)(cid:70)(cid:65)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:83)(cid:85)(cid:82)(cid:86)(cid:69)(cid:89)(cid:83)(cid:14)(cid:0) As a Group, we do not have any individual suppliers on whom we are overly reliant and we aim to treat all suppliers with fairness and integrity. We strive to create relationships based on mutual trust and ensure payment of all invoices on a timely basis. Our Compliance Code sets out our business principles including their application in business relationships. The Code is available in the Compliance and Corporate Governance section of our website at www.intertek.com/investors/governance. Communication with shareholders is given a high priority and a number of means are used to promote greater understanding and dialogue with investment audiences. Our investor programme includes: (cid:115)(cid:0) (cid:0)(cid:82)(cid:69)(cid:71)(cid:85)(cid:76)(cid:65)(cid:82)(cid:0)(cid:73)(cid:78)(cid:68)(cid:73)(cid:86)(cid:73)(cid:68)(cid:85)(cid:65)(cid:76)(cid:0)(cid:77)(cid:69)(cid:69)(cid:84)(cid:73)(cid:78)(cid:71)(cid:83)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0)(cid:83)(cid:72)(cid:65)(cid:82)(cid:69)(cid:72)(cid:79)(cid:76)(cid:68)(cid:69)(cid:82)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:73)(cid:78)(cid:86)(cid:69)(cid:83)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0) managers during the year; (cid:115)(cid:0) (cid:82)(cid:79)(cid:65)(cid:68)(cid:0)(cid:83)(cid:72)(cid:79)(cid:87)(cid:83)(cid:0)(cid:73)(cid:78)(cid:0)(cid:77)(cid:65)(cid:78)(cid:89)(cid:0)(cid:67)(cid:79)(cid:85)(cid:78)(cid:84)(cid:82)(cid:73)(cid:69)(cid:83)(cid:27)(cid:0) (cid:115)(cid:0) (cid:82)(cid:69)(cid:71)(cid:85)(cid:76)(cid:65)(cid:82)(cid:0)(cid:65)(cid:78)(cid:65)(cid:76)(cid:89)(cid:83)(cid:84)(cid:0)(cid:66)(cid:82)(cid:73)(cid:69)(cid:108)(cid:78)(cid:71)(cid:83)(cid:27)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0) (cid:115)(cid:0) (cid:0)(cid:64)(cid:73)(cid:78)(cid:86)(cid:69)(cid:83)(cid:84)(cid:79)(cid:82)(cid:0)(cid:68)(cid:65)(cid:89)(cid:83)(cid:7)(cid:0)(cid:87)(cid:72)(cid:69)(cid:82)(cid:69)(cid:0)(cid:65)(cid:78)(cid:65)(cid:76)(cid:89)(cid:83)(cid:84)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:73)(cid:78)(cid:86)(cid:69)(cid:83)(cid:84)(cid:79)(cid:82)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:73)(cid:78)(cid:86)(cid:73)(cid:84)(cid:69)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:86)(cid:73)(cid:83)(cid:73)(cid:84)(cid:0) some of our laboratories to meet our employees and observe work being performed. In addition, Intertek has an experienced investor relations team to handle enquiries and report investor-related matters to the Board. Feedback on the Group’s investor programme has been positive and Intertek has a good relationship with investors and their representatives. www.intertek.com Intertek Annual Report 2009 37 During the course of the year shareholders are kept informed on the progress of the Group through reports on our ﬁnancial results, and other announcements of signiﬁcant developments that are released through regulatory outlets and our own website, which received a relaunch during the year. We have introduced the option of electronic communications with shareholders as a way of reducing paper-based reporting. Our corporate social responsibility structure Intertek has businesses in many locations around the world. Our activities are organised to permit local or functional managers to manage operations within the framework established by the Board of Intertek Group plc. We consider local managers are best placed to understand and react to their local business environment. They have the knowledge to apply policies with due regard to their relationships with local stakeholders such as employees, customers and communities. Ethical policy Intertek prohibits the offer, giving or acceptance of bribes in any (cid:70)(cid:79)(cid:82)(cid:77)(cid:14)(cid:0)(cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:84)(cid:69)(cid:75)(cid:0)(cid:80)(cid:82)(cid:79)(cid:72)(cid:73)(cid:66)(cid:73)(cid:84)(cid:83)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:80)(cid:82)(cid:79)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:73)(cid:77)(cid:80)(cid:82)(cid:79)(cid:80)(cid:69)(cid:82)(cid:0)(cid:66)(cid:69)(cid:78)(cid:69)(cid:108)(cid:84)(cid:83)(cid:14)(cid:0)(cid:46)(cid:79)(cid:0) reward, gift or favour dependent on the outcome of any work will be accepted by employees. Employees shall operate free from any conﬂict of interest. Employee policy Intertek will strive to provide a safe and healthy environment for its employees to work in. It will comply with national employee legislation. In the absence of any local prescription, employees will be assessed solely on the basis of their ability irrespective of their race, religion, colour, age, disabilities, gender or sexual orientation or their participation in legitimate union activities. Employees’ diverse perspectives, experiences and traditions will be respected. Wherever possible, employees’ personal growth will be fostered through the provision of training. The corporate social responsibility framework within which these activities are to be managed, was formally adopted by the Board of Intertek Group plc in 2007. Community and stakeholder policy Intertek will take into account, when making decisions, its impact on all relevant stakeholders. General policy Intertek’s core businesses provide services that are ultimately of beneﬁt to consumers and other stakeholders. We test substances for purity and performance. We test products for safety and quality. We measure air and noise emissions. We review imports to assess their content accurately. We provide advice that can lead to greater efﬁciency of production or operation. We carry out audits to help ensure that factory conditions and work practices are legal, humane and ethical. Intertek takes seriously the beneﬁts that our businesses confer and will continue to endeavour in all its dealings to improve quality, safety and to bring about environmental beneﬁts through improved efﬁciency of products. Environmental policy Intertek will strive to prevent its operations causing adverse impact on the environment. We will comply with national environmental legislation and will endeavour to identify, monitor and control our environmental risks. We will seek to reduce emissions, efﬂuents, waste and adverse effect on biodiversity. We will commit to recycling schemes and energy efﬁciency. We will provide beneﬁts in respect of environmental impacts through our testing of environmental standards and will operate safely. Business practices policy Intertek will carry out its work in an honest, professional, independent and impartial manner. Marketing will be conducted in a manner that is not misleading. Procurement from suppliers whose corporate responsibility policies align with Intertek’s will be encouraged. We have cascaded these policies through the management structure and added them to our corporate intranet to disseminate them. Employees are encouraged to supply ideas and information concerning our CSR performance by contacting us through the intranet. Overall and ultimate responsibility for the Group’s CSR policies, issues and their implementation lies with the Chief Executive Ofﬁcer. We take a responsible and active role in the business communities in which we operate. Intertek is a member of a number of CSR related associations such as CSR Europe, the Ethos Institute of Business and Social Responsibility and Canadian Business for Social Responsibility. We aim to increase our participation and membership of such bodies in the future to show our commitment to being a signiﬁcant player in the corporate social responsibility arena. 38 Intertek Annual Report 2009 Directors’ Report – Business Review Principal Risks and Uncertainties This section sets out a description of the principal risks and uncertainties that could have a material adverse effect on the Intertek Group’s strategy, performance, results, ﬁnancial condition and/or reputation. The risks and uncertainties set out below, do not appear in any particular order of potential materiality or probability of occurrence. Risk framework The Board has overall responsibility for the establishment and oversight of the Group’s risk management framework. There is an established, structured approach to risk management, which is described in the Corporate Governance Report which starts on page 46. The Vice President of Risk Management and Internal Audit, who reports to the Chief Financial Ofﬁcer and the Audit and Risk Committee, has accountability for reporting the key risks, controls and mitigating actions. Risks are formally identiﬁed and recorded in a risk matrix for each operating division and support function, which calculates gross risk and net risk after mitigating controls are applied. The risk matrix is updated annually and is used to plan the Group’s internal audit and risk strategy. In addition to the risk matrix, all senior executives and their direct reports are required to complete an annual return to conﬁrm that management controls have been effectively applied during the year. The return covers operations, compliance, risk management and ﬁnance. The Vice President of Risk Management and Internal Audit attends the meetings of the Audit and Risk Committee and meets with the members of that committee alone at least once a year. In common with all businesses, the Group is affected by a number of risk factors, some of which are outside our control. Although many of the risk factors inﬂuencing the Group’s performance are macroeconomic and likely to affect the performance of the business generally, others are particular to Intertek’s operations. Speciﬁc risks of which we are aware are detailed below, however there may be other risks that are currently unknown or are currently regarded as immaterial which could turn out to be material. Any of these risks could have the potential to impact the performance of the Group, its assets, liquidity and capital resources. Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the Group’s income or the value of its assets and liabilities. These risks are managed by the Group’s treasury function as described below. Treasury management The Board is responsible for approving the treasury policy for the Group. The Group’s treasury and funding activities are undertaken by a centralised treasury function which reports to the Chief Financial Ofﬁcer. Its primary activities are to manage the Group’s liquidity, funding requirements and ﬁnancial risk, principally arising from movements in interest and foreign currency exchange rates. The Group’s policy is to ensure that adequate liquidity and ﬁnancial resource is available to support the Group’s continuing activities and growth whilst managing these risks. The Group’s policy is not to engage in speculative ﬁnancial transactions. Generally, the Group seeks to apply hedge accounting in order to manage volatility in proﬁt or loss. There have been no signiﬁcant changes in the Group’s policies in the last year. Group Treasury operates as a service centre within clearly deﬁned objectives and controls and is subject to periodic review by internal audit. Foreign currency risk The Group operates in more than 100 countries and has 219 (2008: 217) subsidiaries, of which 185 (2008: 180) report in currencies other than sterling. The net assets of foreign subsidiaries represent a signiﬁcant portion of the Group’s shareholders’ funds and a substantial percentage of the Group’s revenue and operating costs are incurred in currencies other than sterling. Because of the high proportion of international activity, the Group’s proﬁt is exposed to exchange rate ﬂuctuations. Two types of risk arise as a result: (i) translation risk, that is, the risk of adverse currency ﬂuctuations in the translation of foreign currency operations and foreign assets and liabilities into sterling and (ii) transaction risk, that is, the risk that currency ﬂuctuations will have a negative effect on the value of the Group’s commercial cash ﬂows in various currencies. (i) Translation risk The results of the Group’s overseas activities are translated into sterling using the cumulative average exchange rates for the period concerned. The balance sheets of overseas subsidiaries are translated at actual exchange rates applicable at 31 December. (cid:43)(cid:69)(cid:89)(cid:0)(cid:82)(cid:65)(cid:84)(cid:69)(cid:83)(cid:0)(cid:85)(cid:83)(cid:69)(cid:68)(cid:0)(cid:68)(cid:85)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:89)(cid:69)(cid:65)(cid:82)(cid:0)(cid:87)(cid:69)(cid:82)(cid:69)(cid:0)(cid:65)(cid:83)(cid:0)(cid:70)(cid:79)(cid:76)(cid:76)(cid:79)(cid:87)(cid:83)(cid:26) Value of £1 US dollar Euro Chinese renminbi (cid:40)(cid:79)(cid:78)(cid:71)(cid:0)(cid:43)(cid:79)(cid:78)(cid:71)(cid:0)(cid:68)(cid:79)(cid:76)(cid:76)(cid:65)(cid:82) Assets and liabilities Actual rates Income and expenses Cumulative average rates 31 Dec 09 31 Dec 08 1.60 1.12 10.90 12.38 1.46 1.02 9.95 11.28 2009 1.56 1.12 10.63 12.06 2008 1.87 1.26 13.03 14.59 www.intertek.com Intertek Annual Report 2009 39 The Group has a sterling denominated multi-currency bank debt facility that was placed in December 2004. This facility was originally due to expire on 15 December 2009, however the Group exercised its option to extend the facility by a year in 2005 and by a further year in 2006, so the facility is now due to expire in December 2011. The margins currently paid on the borrowings in this facility are in (cid:84)(cid:72)(cid:69)(cid:0)(cid:82)(cid:65)(cid:78)(cid:71)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:16)(cid:14)(cid:19)(cid:5)(cid:0)(cid:84)(cid:79)(cid:0)(cid:17)(cid:14)(cid:21)(cid:5)(cid:0)(cid:79)(cid:86)(cid:69)(cid:82)(cid:0)(cid:44)(cid:41)(cid:34)(cid:47)(cid:50)(cid:14)(cid:0)(cid:41)(cid:78)(cid:0)(cid:18)(cid:16)(cid:16)(cid:24)(cid:12)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:0)(cid:82)(cid:65)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0) a further £75.0m under this facility under the same terms and conditions and margin and also raised US$200.0m by way of senior note issues which have a blended ﬁxed borrowing rate of 6.71%. The notes are repayable in three tranches with US$100.0m due on (cid:18)(cid:22)(cid:0)(cid:42)(cid:85)(cid:78)(cid:69)(cid:0)(cid:18)(cid:16)(cid:17)(cid:21)(cid:12)(cid:0)(cid:53)(cid:51)(cid:4)(cid:18)(cid:21)(cid:14)(cid:16)(cid:77)(cid:0)(cid:68)(cid:85)(cid:69)(cid:0)(cid:79)(cid:78)(cid:0)(cid:18)(cid:17)(cid:0)(cid:42)(cid:65)(cid:78)(cid:85)(cid:65)(cid:82)(cid:89)(cid:0)(cid:18)(cid:16)(cid:17)(cid:20)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:53)(cid:51)(cid:4)(cid:23)(cid:21)(cid:14)(cid:16)(cid:77)(cid:0)(cid:68)(cid:85)(cid:69)(cid:0) (cid:79)(cid:78)(cid:0)(cid:17)(cid:16)(cid:0)(cid:42)(cid:85)(cid:78)(cid:69)(cid:0)(cid:18)(cid:16)(cid:17)(cid:22)(cid:14)(cid:0)(cid:41)(cid:78)(cid:0)(cid:42)(cid:65)(cid:78)(cid:85)(cid:65)(cid:82)(cid:89)(cid:0)(cid:18)(cid:16)(cid:17)(cid:16)(cid:12)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:0)(cid:83)(cid:85)(cid:67)(cid:67)(cid:69)(cid:83)(cid:83)(cid:70)(cid:85)(cid:76)(cid:76)(cid:89)(cid:0)(cid:78)(cid:69)(cid:71)(cid:79)(cid:84)(cid:73)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0) a US$60.0m bilateral, multi-currency revolving credit facility with (cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:65)(cid:78)(cid:75)(cid:0)(cid:79)(cid:70)(cid:0)(cid:35)(cid:72)(cid:73)(cid:78)(cid:65)(cid:12)(cid:0)(cid:44)(cid:79)(cid:78)(cid:68)(cid:79)(cid:78)(cid:0)(cid:34)(cid:82)(cid:65)(cid:78)(cid:67)(cid:72)(cid:12)(cid:0)(cid:65)(cid:86)(cid:65)(cid:73)(cid:76)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:85)(cid:80)(cid:0)(cid:84)(cid:79)(cid:0)(cid:18)(cid:21)(cid:0)(cid:42)(cid:65)(cid:78)(cid:85)(cid:65)(cid:82)(cid:89)(cid:0)(cid:18)(cid:16)(cid:17)(cid:19)(cid:14) The sterling equivalent of the gross available and drawn borrowings as at 31 December 2009 was £488.8m (2008: £519.4m) of which £335.6m (2008: £421.6m) was drawn and £153.2m (2008: £97.8m) was available when translated at the year end exchange rates. The Group also reported a cash balance of £134.2m at 31 December 2009 (2008: £113.3m). The borrowings and cash are mostly in currencies other than sterling and so the value of these can ﬂuctuate when translated into sterling. The liquidity headroom is sterling denominated and so this can also ﬂuctuate depending on the sterling value of the drawn borrowings. The Group has prepared forecasts, including scenarios adjusted for signiﬁcantly worse economic conditions and we have concluded that these facilities are expected to be adequate to support the Group’s medium-term funding requirements. The analysis of the debt and a description of the borrowings and their respective maturity dates is given in note 17 to the ﬁnancial statements and the currency of the debt is shown in note 26. Surplus cash is placed on deposit with short-term maturities providing liquidity when required. Material changes in the exchange rates can create volatility in the results when they are translated into sterling. In order to mitigate this translation exposure, the Group’s policy is to match the currency of external borrowings to the currency of expected cash ﬂows and the currency of net investments. At 31 December 2009, over 60% of the Group’s borrowings were denominated in US dollars. (ii) Transaction risk The Group’s policy requires overseas subsidiaries to hedge all signiﬁcant transaction exposures with Group Treasury where they are managed centrally. Subsidiaries’ transaction exposures include committed foreign currency sales and purchases together with the anticipated transactions reasonably expected to occur during future periods. The Group’s policy is also to hedge transaction exposures arising from the remittance of overseas dividends and interest as soon as they are committed. Transaction exposures are hedged forward using forward currency contracts which mature in less than 12 months. Interest rate risk and exposure The Group’s policy is to ensure that between 33% and 67% of its exposure to changes in interest rates on borrowings is on a ﬁxed rate basis. This is achieved by entering into interest rate swaps. The balance between ﬁxed and variable rate debt is periodically adjusted on the basis of prevailing and anticipated market conditions and the Group’s gearing and interest cover, which are monitored by Group Treasury. Details of the interest rate hedges in place at 31 December 2009 are given in note 26 to the ﬁnancial statements. Liquidity (cid:44)(cid:73)(cid:81)(cid:85)(cid:73)(cid:68)(cid:73)(cid:84)(cid:89)(cid:0)(cid:82)(cid:73)(cid:83)(cid:75)(cid:0)(cid:73)(cid:83)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:82)(cid:73)(cid:83)(cid:75)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:0)(cid:73)(cid:83)(cid:0)(cid:85)(cid:78)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:84)(cid:79)(cid:0)(cid:77)(cid:69)(cid:69)(cid:84)(cid:0)(cid:73)(cid:84)(cid:83)(cid:0)(cid:108)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0) obligations as and when they fall due. Managing liquidity risk is particularly important in the current economic environment where the availability of capital is limited. The management of operational liquidity risk aims primarily at ensuring that the Group always has a liquidity buffer that is able, in the short term, to absorb the net effects of transactions made and expected changes in liquidity both under normal and stressed conditions without incurring unacceptable losses or risking damage to the Group’s reputation. Group Treasury manages this liquidity risk through the use of daily headroom calculations as well as forecast headroom calculations. Group Treasury is in regular contact with the banks and capital debt markets, as well as other potential providers of debt to ensure a proper understanding of the availability and pricing of debt funding. 40 Intertek Annual Report 2009 Directors’ Report – Business Review Principal Risks and Uncertainties Credit risk Credit risk is the risk of a ﬁnancial loss to the Group if a customer or counterparty to a ﬁnancial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers. (i) Trade receivables There is no concentration of credit risk with respect to trade receivables as the Group has a large number of customers which are internationally dispersed. All companies in the Group are required to operate a credit policy under which each new customer is analysed individually for creditworthiness before the company transacts any business with the customer. Each division has a range of targets for days sales outstanding and to encourage and reward good performance, these form part of the bonus criteria for divisional managers. The Group establishes an allowance for impairment that represents our estimate of likely losses in respect of trade and other receivables. The main components of this allowance are a speciﬁc loss component that relates to individually signiﬁcant exposures and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identiﬁed. The collective loss allowance is determined based on historical data of payment statistics for similar ﬁnancial assets. Due to the current economic recession there is an increased risk that certain of our customers may face ﬁnancial difﬁculties and as a result be unable to meet our credit terms or cease trading. We have reinforced our credit checking procedures and have increased our vigilance in monitoring and reacting to changes in our clients’ circumstances. (ii) Counterparty The Group monitors the distribution of cash deposits, borrowings and hedging instruments which are assigned to each of the Group’s counterparties and which are subject to periodic review. Tax risk Tax risk is the risk that the value of tax assets and liabilities in the Group’s Consolidated Statement of Financial Position is misstated, resulting in ﬁnancial loss to the Group. The Group operates in more than 100 countries and is subject to wide range of complex tax laws and regulations. At any point in time it is normal for there to be a number of open years in any particular territory which may be subject to enquiry by local authorities. Where the effect of the laws and regulations is unclear, estimates are used in determining the liability for the tax to be paid on past proﬁts which are recognised in the ﬁnancial statements. The Group considers the estimates, assumptions and judgements to be reasonable but this can involve complex issues which may take a number of years to resolve. The ﬁnal determination of prior year tax liabilities could be different from the estimates reﬂected in the ﬁnancial statements. Risk of ﬁnancial irregularities Risk of ﬁnancial irregularities is the risk that assets of the Group could be misappropriated resulting in ﬁnancial loss to the Group, as well as the risk of management misrepresenting results. The Group comprises 219 subsidiaries, operating in over 100 countries. Historically, the ﬁnance structure was organised on a divisional basis. In 2009, the function was reorganised on a geographic basis with a Chief Financial Ofﬁcer allocated to each of the three regions. Country ﬁnance managers have been nominated in all major countries and the Group is migrating towards larger, multi-divisional accounting centres with common accounting systems and controls. These changes have further strengthened ﬁnancial controls and support the Intertek as One programme. The Group operates a rigorous programme of internal audits and management reviews, however, we cannot be certain that internal and external audit procedures will always identify any ﬁnancial irregularity. The Group regularly reminds the operating company ofﬁcers of their ﬁduciary responsibilities and maintains a culture of openness to promote disclosure. As described above, each of the senior executives and their direct reports are required to complete an annual return to conﬁrm that management controls have been effectively applied during the year. Risk of litigation Risk of litigation is the risk that the Group could suffer a material ﬁnancial loss resulting from a legal judgement against the Group or one of its subsidiaries. Such a judgement could also result in adverse publicity which could damage the reputation of the Group. The Group is regularly notiﬁed of, or involved in, a number of claims and proceedings which are incidental to its ordinary course of business. Claims can arise in the context of a dispute between the parties to a commercial transaction in which the Group has provided testing, inspection or certiﬁcation services. Often the Group’s role in the transaction will be incidental to the underlying dispute, but the claim will be notiﬁed to the Group in order to toll the relevant statute of limitations in respect of such a claim. In certain situations, a claim may only be notiﬁed to the Group after resolution of the underlying commercial dispute and, in such cases, a considerable period of time may elapse between the performance of services by the Group and the assertion of a claim in respect of such services. In either case, because the underlying commercial transaction can be of signiﬁcant value, the claims notiﬁed to the Group can allege substantial damages. To reduce the likelihood of claims arising, the Group has extensive quality assurance and control procedures to ensure that work is performed in accordance with proper protocols. All incidents that could potentially result in a claim against the Group are reported to www.intertek.com Intertek Annual Report 2009 41 compliance ofﬁcers and are logged in a database of incidents. The Company Secretary reports signiﬁcant claims to the Audit and (cid:50)(cid:73)(cid:83)(cid:75)(cid:0)(cid:35)(cid:79)(cid:77)(cid:77)(cid:73)(cid:84)(cid:84)(cid:69)(cid:69)(cid:14)(cid:0)(cid:44)(cid:69)(cid:71)(cid:65)(cid:76)(cid:0)(cid:67)(cid:79)(cid:85)(cid:78)(cid:83)(cid:69)(cid:76)(cid:0)(cid:73)(cid:83)(cid:0)(cid:65)(cid:80)(cid:80)(cid:79)(cid:73)(cid:78)(cid:84)(cid:69)(cid:68)(cid:0)(cid:73)(cid:70)(cid:0)(cid:65)(cid:80)(cid:80)(cid:82)(cid:79)(cid:80)(cid:82)(cid:73)(cid:65)(cid:84)(cid:69)(cid:14)(cid:0)(cid:52)(cid:72)(cid:69)(cid:0) Group mitigates the risk of ﬁnancial loss arising from litigation by maintaining insurance against potential claims, however there can be no assurance that claims brought against the Group will always be covered by insurance, or that such insurance, if available, will be sufﬁcient to cover fully the damages or other expenses which the Group may be required to pay. Legal and regulatory compliance We are subject worldwide to laws and regulations that govern and/ or affect where and how our business may be conducted. We have implemented internal compliance and audit systems to facilitate compliance with the requirements of the laws and regulations affecting our business conduct, and we believe that we have taken the appropriate steps to comply with these requirements. However, there can be no assurance that compliance issues under the above laws and regulations may not arise with respect to Intertek, our (cid:69)(cid:77)(cid:80)(cid:76)(cid:79)(cid:89)(cid:69)(cid:69)(cid:83)(cid:0)(cid:79)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:67)(cid:79)(cid:78)(cid:84)(cid:82)(cid:65)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:0)(cid:65)(cid:67)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:79)(cid:78)(cid:0)(cid:79)(cid:85)(cid:82)(cid:0)(cid:66)(cid:69)(cid:72)(cid:65)(cid:76)(cid:70)(cid:14)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:67)(cid:79)(cid:77)(cid:80)(cid:76)(cid:73)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0) with applicable laws and regulations could result in criminal liability on behalf of the Company and/or the Directors, imposition of signiﬁcant ﬁnes, as well as negative publicity and reputational damage. Dependence on accreditations Intertek holds accreditations and afﬁliations that manufacturers need for the global market entry of their products. These accreditations are granted by governments, accreditation bodies, manufacturers, retailers and other bodies to the legal entities operating within Intertek. Each accreditation has a deﬁned scope and is site speciﬁc. In order to maintain an accreditation, each site is subject to regular audits by the accreditation issuer and other associated parties. Intertek has extensive quality assurance procedures and routines embedded through the Group to ensure that accreditations are maintained and that we uphold the highest standards in both our testing methods and our business practices. Failure to retain an accreditation could lead to loss of business in the relevant industry sector and damage to our reputation. Loss of key facilities There is a risk that assets of the Group could be damaged or destroyed by an environmental incident and that the Group could incur loss of revenue as a result of the ensuing disruption to operations. Intertek operates facilities in geographical locations which are subject to local, environmental and political factors. Disasters such as ﬁre, hurricanes, ﬂoods and earthquakes can cause damage to property and personnel and can disrupt operations, causing loss of revenue. The Group maintains disaster recovery plans at key facilities for such events and endeavours to ensure that adequate insurance is in place. Environmental health and safety risks We are subject to worldwide laws and regulations governing activities that may have adverse environmental effects, such as discharges to air and water and handling, storage and disposal of hazardous wastes and chemicals. In many jurisdictions these laws are complex, change frequently, and have tended to become more stringent over time. Our operations are also subject to various health and safety laws and regulations. We believe that we are in material compliance with applicable environmental and health and safety laws where failure to comply would materially and adversely affect the Intertek Group. However, there can be no assurance that breaches of these laws have not occurred or will not occur or be identiﬁed, or that these laws will not change in the future in a manner that could materially and adversely affect the Group. Environmental laws and regulations may also impose obligations to investigate and remediate or pay for the investigation and remediation of environmental contamination, and compensate public and private parties for related damages. If an environmental issue arises in relation to a property and it is not remedied, or not capable of being remedied, this may result in such property either being sold at a reduced sale price or becoming unsaleable. Political risk Political risk is the risk that the Group could suffer ﬁnancial losses due to the action of a government. The Group operates in some countries where there is potential risk of political instability which can make it difﬁcult to operate. In particular, government contracts in the Oil, Chemical & Agri division can be subject to change or termination at short notice. The Group manages this risk by maintaining close relationships with government representatives, however the risk cannot be entirely mitigated. Reputational risk Our continued success is dependent upon our ability to maintain our reputation in the marketplace as an independent and trustworthy entity. The Group’s primary business objectives require adherence to local, national and international laws and require all the Group’s employees to operate professionally, fairly and with integrity and honesty in all business dealings. Failure to follow these principles could result in adverse publicity which could harm our reputation among our customers, damage our brand and affect both our operational performance and ﬁnancial position. A combination of awareness training and targeted controls is in place to encourage and monitor adherence to these principles and prevent such events occurring, however we cannot guarantee that our association with any negative publicity will not have an adverse effect upon public opinion and a consequential impact on our business. 42 Intertek Annual Report 2009 Directors’ Report – Governance Board of Directors 01 02 03 04 05 06 07 08 09 www.intertek.com Intertek Annual Report 2009 43 01 Vanni Treves (69) Chairman 06 Gavin Darby (54) (cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82) Appointed to the Board as Chairman in May 2002. He is a corporate (cid:76)(cid:65)(cid:87)(cid:89)(cid:69)(cid:82)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:87)(cid:65)(cid:83)(cid:0)(cid:65)(cid:0)(cid:48)(cid:65)(cid:82)(cid:84)(cid:78)(cid:69)(cid:82)(cid:0)(cid:79)(cid:70)(cid:0)(cid:65)(cid:0)(cid:77)(cid:65)(cid:74)(cid:79)(cid:82)(cid:0)(cid:44)(cid:79)(cid:78)(cid:68)(cid:79)(cid:78)(cid:0)(cid:108)(cid:82)(cid:77)(cid:0)(cid:79)(cid:70)(cid:0)(cid:51)(cid:79)(cid:76)(cid:73)(cid:67)(cid:73)(cid:84)(cid:79)(cid:82)(cid:83)(cid:12)(cid:0)(cid:45)(cid:65)(cid:67)(cid:70)(cid:65)(cid:82)(cid:76)(cid:65)(cid:78)(cid:69)(cid:83)(cid:12)(cid:0) for 30 years, (during twelve of which he was Senior Partner). He has been (cid:35)(cid:72)(cid:65)(cid:73)(cid:82)(cid:77)(cid:65)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:82)(cid:69)(cid:69)(cid:0)(cid:76)(cid:73)(cid:83)(cid:84)(cid:69)(cid:68)(cid:0)(cid:67)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:73)(cid:69)(cid:83)(cid:12)(cid:0)(cid:35)(cid:72)(cid:65)(cid:78)(cid:78)(cid:69)(cid:76)(cid:0)(cid:38)(cid:79)(cid:85)(cid:82)(cid:0)(cid:52)(cid:69)(cid:76)(cid:69)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:44)(cid:79)(cid:78)(cid:68)(cid:79)(cid:78)(cid:0) (cid:34)(cid:85)(cid:83)(cid:73)(cid:78)(cid:69)(cid:83)(cid:83)(cid:0)(cid:51)(cid:67)(cid:72)(cid:79)(cid:79)(cid:76)(cid:0)(cid:65)(cid:78)(cid:68)(cid:12)(cid:0)(cid:85)(cid:78)(cid:84)(cid:73)(cid:76)(cid:0)(cid:82)(cid:69)(cid:67)(cid:69)(cid:78)(cid:84)(cid:76)(cid:89)(cid:12)(cid:0)(cid:79)(cid:70)(cid:0)(cid:37)(cid:81)(cid:85)(cid:73)(cid:84)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:44)(cid:73)(cid:70)(cid:69)(cid:0)(cid:33)(cid:83)(cid:83)(cid:85)(cid:82)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:51)(cid:79)(cid:67)(cid:73)(cid:69)(cid:84)(cid:89)(cid:14)(cid:0) (cid:40)(cid:69)(cid:0)(cid:73)(cid:83)(cid:0)(cid:67)(cid:85)(cid:82)(cid:82)(cid:69)(cid:78)(cid:84)(cid:76)(cid:89)(cid:0)(cid:35)(cid:72)(cid:65)(cid:73)(cid:82)(cid:77)(cid:65)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:46)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:65)(cid:76)(cid:0)(cid:35)(cid:79)(cid:76)(cid:76)(cid:69)(cid:71)(cid:69)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:44)(cid:69)(cid:65)(cid:68)(cid:69)(cid:82)(cid:83)(cid:72)(cid:73)(cid:80)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0) (cid:79)(cid:70)(cid:0)(cid:43)(cid:79)(cid:82)(cid:78)(cid:0)(cid:38)(cid:69)(cid:82)(cid:82)(cid:89)(cid:15)(cid:55)(cid:72)(cid:73)(cid:84)(cid:69)(cid:72)(cid:69)(cid:65)(cid:68)(cid:0)(cid:45)(cid:65)(cid:78)(cid:78)(cid:12)(cid:0)(cid:65)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:0)(cid:79)(cid:70)(cid:0)(cid:33)(cid:77)(cid:80)(cid:76)(cid:73)(cid:70)(cid:79)(cid:78)(cid:0)(cid:51)(cid:14)(cid:80)(cid:14)(cid:33)(cid:14)(cid:0)(cid:8)(cid:65)(cid:78)(cid:0)(cid:41)(cid:84)(cid:65)(cid:76)(cid:73)(cid:65)(cid:78)(cid:0) (cid:80)(cid:85)(cid:66)(cid:76)(cid:73)(cid:67)(cid:0)(cid:67)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:9)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:65)(cid:0)(cid:52)(cid:82)(cid:85)(cid:83)(cid:84)(cid:69)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:42)(cid:0)(cid:48)(cid:65)(cid:85)(cid:76)(cid:0)(cid:39)(cid:69)(cid:84)(cid:84)(cid:89)(cid:0)(cid:42)(cid:82)(cid:0)(cid:35)(cid:72)(cid:65)(cid:82)(cid:73)(cid:84)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:52)(cid:82)(cid:85)(cid:83)(cid:84)(cid:14) 02 Wolfhart Hauser (60) Chief Executive Ofﬁcer Appointed to the Board as Chief Executive Ofﬁcer in March 2005 after (cid:83)(cid:69)(cid:82)(cid:86)(cid:73)(cid:78)(cid:71)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:0)(cid:83)(cid:73)(cid:78)(cid:67)(cid:69)(cid:0)(cid:46)(cid:79)(cid:86)(cid:69)(cid:77)(cid:66)(cid:69)(cid:82)(cid:0)(cid:18)(cid:16)(cid:16)(cid:18)(cid:14)(cid:0)(cid:40)(cid:69)(cid:0)(cid:87)(cid:65)(cid:83)(cid:0) previously Chief Executive Ofﬁcer of TÜV Product Services for 10 years and Chief Executive Ofﬁcer and President of TÜV Süddeutschland AG from 1998 to 2002. Starting his career as a scientist in pharmacology and ergonomics, he established and led a broad range of successful international service industry businesses over 25 years. He is also (cid:67)(cid:85)(cid:82)(cid:82)(cid:69)(cid:78)(cid:84)(cid:76)(cid:89)(cid:0)(cid:65)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:0)(cid:79)(cid:70)(cid:0)(cid:44)(cid:79)(cid:71)(cid:73)(cid:67)(cid:65)(cid:0)(cid:80)(cid:76)(cid:67)(cid:14) 03 Bill Spencer (50) Chief Financial Ofﬁcer (retiring 31 March 2010) Appointed to the Board as a Director in April 2002, he has been Chief Financial Ofﬁcer of the Group since its acquisition from Inchcape plc in 1996. Previously, he was the Finance Director of lnchcape Testing Services (cid:44)(cid:84)(cid:68)(cid:12)(cid:0)(cid:72)(cid:65)(cid:86)(cid:73)(cid:78)(cid:71)(cid:0)(cid:74)(cid:79)(cid:73)(cid:78)(cid:69)(cid:68)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:0)(cid:73)(cid:78)(cid:0)(cid:17)(cid:25)(cid:25)(cid:18)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:0)(cid:50)(cid:69)(cid:71)(cid:73)(cid:79)(cid:78)(cid:65)(cid:76)(cid:0)(cid:38)(cid:73)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:47)(cid:70)(cid:108)(cid:67)(cid:69)(cid:82)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0) (cid:47)(cid:73)(cid:76)(cid:12)(cid:0)(cid:35)(cid:72)(cid:69)(cid:77)(cid:73)(cid:67)(cid:65)(cid:76)(cid:0)(cid:6)(cid:0)(cid:33)(cid:71)(cid:82)(cid:73)(cid:0)(cid:68)(cid:73)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(cid:14)(cid:0)(cid:40)(cid:69)(cid:0)(cid:72)(cid:65)(cid:83)(cid:0)(cid:72)(cid:69)(cid:76)(cid:68)(cid:0)(cid:108)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:80)(cid:79)(cid:83)(cid:73)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:73)(cid:78)(cid:0)(cid:47)(cid:76)(cid:73)(cid:86)(cid:69)(cid:84)(cid:84)(cid:73)(cid:0)(cid:53)(cid:43)(cid:0) (cid:44)(cid:84)(cid:68)(cid:12)(cid:0)(cid:50)(cid:69)(cid:88)(cid:65)(cid:77)(cid:0)(cid:48)(cid:44)(cid:35)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:35)(cid:69)(cid:78)(cid:84)(cid:82)(cid:73)(cid:67)(cid:65)(cid:0)(cid:80)(cid:76)(cid:67)(cid:14)(cid:0)(cid:40)(cid:69)(cid:0)(cid:73)(cid:83)(cid:0)(cid:65)(cid:0)(cid:38)(cid:69)(cid:76)(cid:76)(cid:79)(cid:87)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:35)(cid:72)(cid:65)(cid:82)(cid:84)(cid:69)(cid:82)(cid:69)(cid:68)(cid:0)(cid:41)(cid:78)(cid:83)(cid:84)(cid:73)(cid:84)(cid:85)(cid:84)(cid:69)(cid:0) of Management Accountants and a member of the Association of Corporate Treasurers. 04 David Allvey (64) (cid:51)(cid:69)(cid:78)(cid:73)(cid:79)(cid:82)(cid:0)(cid:41)(cid:78)(cid:68)(cid:69)(cid:80)(cid:69)(cid:78)(cid:68)(cid:69)(cid:78)(cid:84)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82) (cid:33)(cid:80)(cid:80)(cid:79)(cid:73)(cid:78)(cid:84)(cid:69)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:0)(cid:73)(cid:78)(cid:0)(cid:45)(cid:65)(cid:89)(cid:0)(cid:18)(cid:16)(cid:16)(cid:18)(cid:14)(cid:0)(cid:55)(cid:73)(cid:84)(cid:72)(cid:0)(cid:65)(cid:0) career that started in civil engineering, as a Chartered Accountant he has held positions in major international businesses including Group Finance Director for BAT Industries plc and Barclays Bank plc and Chief Operating Ofﬁcer for Zurich Financial Services. He is currently Chairman of Costain (cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:0)(cid:48)(cid:44)(cid:35)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:33)(cid:82)(cid:69)(cid:78)(cid:65)(cid:0)(cid:35)(cid:79)(cid:86)(cid:69)(cid:78)(cid:84)(cid:82)(cid:89)(cid:0)(cid:44)(cid:84)(cid:68)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:65)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:0)(cid:79)(cid:70)(cid:0) (cid:55)(cid:73)(cid:76)(cid:76)(cid:73)(cid:65)(cid:77)(cid:0)(cid:40)(cid:73)(cid:76)(cid:76)(cid:0)(cid:48)(cid:44)(cid:35)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:52)(cid:72)(cid:79)(cid:77)(cid:65)(cid:83)(cid:0)(cid:35)(cid:79)(cid:79)(cid:75)(cid:0)(cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:0)(cid:80)(cid:76)(cid:67)(cid:12)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:73)(cid:83)(cid:0)(cid:65)(cid:0)(cid:70)(cid:79)(cid:82)(cid:77)(cid:69)(cid:82)(cid:0)(cid:66)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0) (cid:77)(cid:69)(cid:77)(cid:66)(cid:69)(cid:82)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:53)(cid:43)(cid:0)(cid:33)(cid:67)(cid:67)(cid:79)(cid:85)(cid:78)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:51)(cid:84)(cid:65)(cid:78)(cid:68)(cid:65)(cid:82)(cid:68)(cid:83)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:14) 05 Edward Astle (56) (cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82) (cid:33)(cid:80)(cid:80)(cid:79)(cid:73)(cid:78)(cid:84)(cid:69)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:0)(cid:73)(cid:78)(cid:0)(cid:51)(cid:69)(cid:80)(cid:84)(cid:69)(cid:77)(cid:66)(cid:69)(cid:82)(cid:0)(cid:18)(cid:16)(cid:16)(cid:25)(cid:14)(cid:0) He is currently Pro-Rector of Commercial Development at Imperial College (cid:44)(cid:79)(cid:78)(cid:68)(cid:79)(cid:78)(cid:0)(cid:87)(cid:72)(cid:69)(cid:82)(cid:69)(cid:0)(cid:72)(cid:69)(cid:0)(cid:76)(cid:69)(cid:65)(cid:68)(cid:83)(cid:0)(cid:77)(cid:65)(cid:74)(cid:79)(cid:82)(cid:0)(cid:73)(cid:78)(cid:84)(cid:69)(cid:82)(cid:78)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:65)(cid:76)(cid:0)(cid:66)(cid:85)(cid:83)(cid:73)(cid:78)(cid:69)(cid:83)(cid:83)(cid:0)(cid:68)(cid:69)(cid:86)(cid:69)(cid:76)(cid:79)(cid:80)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0) (cid:80)(cid:82)(cid:79)(cid:74)(cid:69)(cid:67)(cid:84)(cid:0)(cid:79)(cid:80)(cid:80)(cid:79)(cid:82)(cid:84)(cid:85)(cid:78)(cid:73)(cid:84)(cid:73)(cid:69)(cid:83)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:53)(cid:43)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:73)(cid:78)(cid:84)(cid:69)(cid:82)(cid:78)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:65)(cid:76)(cid:76)(cid:89)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:53)(cid:78)(cid:73)(cid:86)(cid:69)(cid:82)(cid:83)(cid:73)(cid:84)(cid:89)(cid:14)(cid:0) (cid:37)(cid:68)(cid:87)(cid:65)(cid:82)(cid:68)(cid:0)(cid:87)(cid:65)(cid:83)(cid:0)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:0)(cid:79)(cid:70)(cid:0)(cid:46)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:65)(cid:76)(cid:0)(cid:39)(cid:82)(cid:73)(cid:68)(cid:0)(cid:80)(cid:76)(cid:67)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:18)(cid:16)(cid:16)(cid:17)(cid:0)(cid:84)(cid:79)(cid:0)(cid:18)(cid:16)(cid:16)(cid:24)(cid:12)(cid:0) a Managing Director at the BICC Group from 1997 to 1999 and an Executive and Regional Director at Cable & Wireless plc from 1989 to 1997. Previously (cid:72)(cid:69)(cid:0)(cid:72)(cid:69)(cid:76)(cid:68)(cid:0)(cid:83)(cid:69)(cid:78)(cid:73)(cid:79)(cid:82)(cid:0)(cid:66)(cid:85)(cid:83)(cid:73)(cid:78)(cid:69)(cid:83)(cid:83)(cid:0)(cid:83)(cid:84)(cid:82)(cid:65)(cid:84)(cid:69)(cid:71)(cid:89)(cid:0)(cid:80)(cid:79)(cid:83)(cid:73)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:53)(cid:43)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:38)(cid:82)(cid:65)(cid:78)(cid:67)(cid:69)(cid:14) (cid:33)(cid:80)(cid:80)(cid:79)(cid:73)(cid:78)(cid:84)(cid:69)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:0)(cid:73)(cid:78)(cid:0)(cid:51)(cid:69)(cid:80)(cid:84)(cid:69)(cid:77)(cid:66)(cid:69)(cid:82)(cid:0)(cid:18)(cid:16)(cid:16)(cid:25)(cid:14)(cid:0) He is currently Operations & Business Development Director of Vodafone Group Plc for the Asia Paciﬁc and Middle East Region, and prior to that, Chief Executive Ofﬁcer for Vodafone Afﬁliates in the USA, Africa, China (cid:65)(cid:78)(cid:68)(cid:0)(cid:41)(cid:78)(cid:68)(cid:73)(cid:65)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:18)(cid:16)(cid:16)(cid:20)(cid:0)(cid:84)(cid:79)(cid:0)(cid:18)(cid:16)(cid:16)(cid:24)(cid:12)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:35)(cid:37)(cid:47)(cid:0)(cid:79)(cid:70)(cid:0)(cid:54)(cid:79)(cid:68)(cid:65)(cid:70)(cid:79)(cid:78)(cid:69)(cid:0)(cid:53)(cid:43)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:18)(cid:16)(cid:16)(cid:18)(cid:0)(cid:84)(cid:79)(cid:0)(cid:18)(cid:16)(cid:16)(cid:20)(cid:14)(cid:0) Gavin’s operational and management experience spans the consumer goods and technology sectors, having held senior executive positions at Coca-Cola (cid:35)(cid:79)(cid:12)(cid:0)(cid:51)(cid:14)(cid:35)(cid:0)(cid:42)(cid:79)(cid:72)(cid:78)(cid:83)(cid:79)(cid:78)(cid:0)(cid:6)(cid:0)(cid:51)(cid:79)(cid:78)(cid:0)(cid:44)(cid:84)(cid:68)(cid:0)(cid:8)(cid:53)(cid:43)(cid:9)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:51)(cid:80)(cid:73)(cid:76)(cid:76)(cid:69)(cid:82)(cid:83)(cid:0)(cid:38)(cid:79)(cid:79)(cid:68)(cid:83)(cid:14)(cid:0)(cid:39)(cid:65)(cid:86)(cid:73)(cid:78)(cid:0)(cid:73)(cid:83)(cid:0)(cid:67)(cid:85)(cid:82)(cid:82)(cid:69)(cid:78)(cid:84)(cid:76)(cid:89)(cid:0) (cid:65)(cid:78)(cid:0)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:0)(cid:79)(cid:70)(cid:0)(cid:54)(cid:79)(cid:68)(cid:65)(cid:70)(cid:79)(cid:78)(cid:69)(cid:0)(cid:37)(cid:83)(cid:83)(cid:65)(cid:82)(cid:0)(cid:44)(cid:84)(cid:68)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:41)(cid:78)(cid:68)(cid:85)(cid:83)(cid:0)(cid:52)(cid:79)(cid:87)(cid:69)(cid:82)(cid:83)(cid:0)(cid:44)(cid:84)(cid:68)(cid:0)(cid:8)(cid:41)(cid:78)(cid:68)(cid:73)(cid:65)(cid:9)(cid:12)(cid:0) (cid:54)(cid:79)(cid:68)(cid:65)(cid:70)(cid:79)(cid:78)(cid:69)(cid:0)(cid:37)(cid:71)(cid:89)(cid:80)(cid:84)(cid:0)(cid:51)(cid:33)(cid:37)(cid:12)(cid:0)(cid:54)(cid:79)(cid:68)(cid:65)(cid:70)(cid:79)(cid:78)(cid:69)(cid:0)(cid:40)(cid:85)(cid:84)(cid:67)(cid:72)(cid:73)(cid:78)(cid:83)(cid:79)(cid:78)(cid:0)(cid:33)(cid:85)(cid:83)(cid:84)(cid:82)(cid:65)(cid:76)(cid:73)(cid:65)(cid:0)(cid:48)(cid:84)(cid:89)(cid:0)(cid:44)(cid:73)(cid:77)(cid:73)(cid:84)(cid:69)(cid:68)(cid:12)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0) (cid:65)(cid:76)(cid:84)(cid:69)(cid:82)(cid:78)(cid:65)(cid:84)(cid:69)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:35)(cid:72)(cid:73)(cid:78)(cid:65)(cid:0)(cid:45)(cid:79)(cid:66)(cid:73)(cid:76)(cid:69)(cid:0)(cid:44)(cid:84)(cid:68)(cid:14) 07 Christopher Knight (63) (cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82) (cid:33)(cid:80)(cid:80)(cid:79)(cid:73)(cid:78)(cid:84)(cid:69)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:0)(cid:73)(cid:78)(cid:0)(cid:45)(cid:65)(cid:82)(cid:67)(cid:72)(cid:0)(cid:18)(cid:16)(cid:16)(cid:22)(cid:14)(cid:0) He was an investment banker for nearly 30 years, for much of that time with Morgan Grenfell and Deutsche Bank, of which he was a managing director until 2001. He is a Chartered Accountant and has extensive corporate (cid:108)(cid:78)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:69)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69)(cid:0)(cid:71)(cid:65)(cid:73)(cid:78)(cid:69)(cid:68)(cid:0)(cid:68)(cid:85)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0)(cid:72)(cid:73)(cid:83)(cid:0)(cid:66)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71)(cid:0)(cid:67)(cid:65)(cid:82)(cid:69)(cid:69)(cid:82)(cid:0)(cid:73)(cid:78)(cid:0)(cid:44)(cid:79)(cid:78)(cid:68)(cid:79)(cid:78)(cid:12)(cid:0)(cid:46)(cid:69)(cid:87)(cid:0)(cid:57)(cid:79)(cid:82)(cid:75)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0)(cid:40)(cid:79)(cid:78)(cid:71)(cid:0)(cid:43)(cid:79)(cid:78)(cid:71)(cid:14)(cid:0)(cid:40)(cid:69)(cid:0)(cid:73)(cid:83)(cid:0)(cid:35)(cid:72)(cid:65)(cid:73)(cid:82)(cid:77)(cid:65)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:34)(cid:82)(cid:79)(cid:79)(cid:75)(cid:83)(cid:0)(cid:45)(cid:65)(cid:67)(cid:68)(cid:79)(cid:78)(cid:65)(cid:76)(cid:68)(cid:0)(cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:0)(cid:80)(cid:76)(cid:67)(cid:14)(cid:0) 08 Mark Loughead (50) Chief Operating Ofﬁcer Appointed to the Board and appointed Chief Operating Ofﬁcer of Intertek (cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:0)(cid:80)(cid:76)(cid:67)(cid:0)(cid:79)(cid:78)(cid:0)(cid:17)(cid:0)(cid:42)(cid:65)(cid:78)(cid:85)(cid:65)(cid:82)(cid:89)(cid:0)(cid:18)(cid:16)(cid:16)(cid:24)(cid:14)(cid:0)(cid:33)(cid:83)(cid:0)(cid:35)(cid:47)(cid:47)(cid:12)(cid:0)(cid:72)(cid:69)(cid:0)(cid:76)(cid:69)(cid:65)(cid:68)(cid:83)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:71)(cid:76)(cid:79)(cid:66)(cid:65)(cid:76)(cid:0)(cid:73)(cid:78)(cid:84)(cid:69)(cid:71)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0) sales, key account management, global information systems and country- focused activities across the Group. Previously, he was Chief Executive of Intertek’s Oil, Chemical & Agri division. Before this, he was Vice President of the division in the Americas and prior to that, divisional Vice President in Europe, Middle East and Africa. He joined the Group in 1988 as Operations (cid:45)(cid:65)(cid:78)(cid:65)(cid:71)(cid:69)(cid:82)(cid:0)(cid:73)(cid:78)(cid:0)(cid:44)(cid:73)(cid:86)(cid:69)(cid:82)(cid:80)(cid:79)(cid:79)(cid:76)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:73)(cid:78)(cid:0)(cid:17)(cid:25)(cid:25)(cid:19)(cid:0)(cid:72)(cid:69)(cid:0)(cid:87)(cid:65)(cid:83)(cid:0)(cid:80)(cid:82)(cid:79)(cid:77)(cid:79)(cid:84)(cid:69)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:50)(cid:69)(cid:71)(cid:73)(cid:79)(cid:78)(cid:65)(cid:76)(cid:0)(cid:45)(cid:65)(cid:78)(cid:65)(cid:71)(cid:69)(cid:82)(cid:0) for Scotland, based in Aberdeen. Prior to joining Intertek, he spent 13 years at Inspectorate including six years in the Middle East. 09 Debra Rade (56) (cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82) (cid:33)(cid:80)(cid:80)(cid:79)(cid:73)(cid:78)(cid:84)(cid:69)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:0)(cid:73)(cid:78)(cid:0)(cid:42)(cid:65)(cid:78)(cid:85)(cid:65)(cid:82)(cid:89)(cid:0)(cid:18)(cid:16)(cid:16)(cid:22)(cid:14)(cid:0) (cid:34)(cid:69)(cid:84)(cid:87)(cid:69)(cid:69)(cid:78)(cid:0)(cid:17)(cid:25)(cid:24)(cid:25)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:18)(cid:16)(cid:16)(cid:18)(cid:12)(cid:0)(cid:83)(cid:72)(cid:69)(cid:0)(cid:87)(cid:65)(cid:83)(cid:0)(cid:65)(cid:78)(cid:0)(cid:79)(cid:70)(cid:108)(cid:67)(cid:69)(cid:82)(cid:0)(cid:79)(cid:70)(cid:0)(cid:53)(cid:78)(cid:68)(cid:69)(cid:82)(cid:87)(cid:82)(cid:73)(cid:84)(cid:69)(cid:82)(cid:83)(cid:0)(cid:44)(cid:65)(cid:66)(cid:79)(cid:82)(cid:65)(cid:84)(cid:79)(cid:82)(cid:73)(cid:69)(cid:83)(cid:0) Inc., a global provider of systems certiﬁcation, product inspection, testing and certiﬁcation, and held various positions there, including Senior Vice President, (cid:35)(cid:72)(cid:73)(cid:69)(cid:70)(cid:0)(cid:33)(cid:68)(cid:77)(cid:73)(cid:78)(cid:73)(cid:83)(cid:84)(cid:82)(cid:65)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:47)(cid:70)(cid:108)(cid:67)(cid:69)(cid:82)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:35)(cid:72)(cid:73)(cid:69)(cid:70)(cid:0)(cid:44)(cid:69)(cid:71)(cid:65)(cid:76)(cid:0)(cid:47)(cid:70)(cid:108)(cid:67)(cid:69)(cid:82)(cid:14)(cid:0)(cid:38)(cid:79)(cid:82)(cid:77)(cid:69)(cid:82)(cid:76)(cid:89)(cid:0)(cid:65)(cid:0)(cid:80)(cid:65)(cid:82)(cid:84)(cid:78)(cid:69)(cid:82)(cid:0)(cid:73)(cid:78)(cid:0) (cid:65)(cid:0)(cid:76)(cid:65)(cid:82)(cid:71)(cid:69)(cid:0)(cid:73)(cid:78)(cid:84)(cid:69)(cid:82)(cid:78)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:65)(cid:76)(cid:0)(cid:76)(cid:65)(cid:87)(cid:0)(cid:108)(cid:82)(cid:77)(cid:12)(cid:0)(cid:83)(cid:72)(cid:69)(cid:0)(cid:73)(cid:83)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:77)(cid:65)(cid:78)(cid:65)(cid:71)(cid:73)(cid:78)(cid:71)(cid:0)(cid:65)(cid:84)(cid:84)(cid:79)(cid:82)(cid:78)(cid:69)(cid:89)(cid:0)(cid:79)(cid:70)(cid:0)(cid:50)(cid:65)(cid:68)(cid:69)(cid:0)(cid:44)(cid:65)(cid:87)(cid:0)(cid:44)(cid:44)(cid:35)(cid:0) in Chicago focused on corporate law, and legal issues concerning product testing, safety, certiﬁcation, standards and regulations. Additionally, she is (cid:84)(cid:72)(cid:69)(cid:0)(cid:67)(cid:72)(cid:73)(cid:69)(cid:70)(cid:0)(cid:69)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:79)(cid:70)(cid:108)(cid:67)(cid:69)(cid:82)(cid:0)(cid:79)(cid:70)(cid:0)(cid:50)(cid:65)(cid:68)(cid:69)(cid:0)(cid:35)(cid:79)(cid:78)(cid:83)(cid:85)(cid:76)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:44)(cid:44)(cid:35)(cid:0)(cid:80)(cid:82)(cid:79)(cid:86)(cid:73)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:67)(cid:79)(cid:82)(cid:80)(cid:79)(cid:82)(cid:65)(cid:84)(cid:69)(cid:0) strategic planning services. 44 Intertek Annual Report 2009 Directors’ Report – Governance Intertek Operations Committee 01 Wolfhart Hauser Chief Executive Ofﬁcer See Board of Directors. 02 Bill Spencer Chief Financial Ofﬁcer See Board of Directors. 03 Mark Loughead Chief Operating Ofﬁcer See Board of Directors. 04 Paul Yao Group Executive Vice President Consumer Goods (cid:42)(cid:79)(cid:73)(cid:78)(cid:69)(cid:68)(cid:0)(cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:84)(cid:69)(cid:75)(cid:0)(cid:73)(cid:78)(cid:0)(cid:17)(cid:25)(cid:25)(cid:20) (cid:48)(cid:65)(cid:85)(cid:76)(cid:0)(cid:57)(cid:65)(cid:79)(cid:0)(cid:87)(cid:65)(cid:83)(cid:0)(cid:65)(cid:80)(cid:80)(cid:79)(cid:73)(cid:78)(cid:84)(cid:69)(cid:68)(cid:0)(cid:65)(cid:0)(cid:77)(cid:69)(cid:77)(cid:66)(cid:69)(cid:82)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:77)(cid:65)(cid:78)(cid:65)(cid:71)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:84)(cid:69)(cid:65)(cid:77)(cid:0) (cid:79)(cid:78)(cid:0)(cid:17)(cid:0)(cid:42)(cid:85)(cid:76)(cid:89)(cid:0)(cid:18)(cid:16)(cid:16)(cid:22)(cid:14)(cid:0)(cid:48)(cid:82)(cid:73)(cid:79)(cid:82)(cid:0)(cid:84)(cid:79)(cid:0)(cid:84)(cid:72)(cid:73)(cid:83)(cid:12)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:42)(cid:65)(cid:78)(cid:85)(cid:65)(cid:82)(cid:89)(cid:0)(cid:18)(cid:16)(cid:16)(cid:19)(cid:0)(cid:72)(cid:69)(cid:0)(cid:87)(cid:65)(cid:83)(cid:0)(cid:54)(cid:73)(cid:67)(cid:69)(cid:0)(cid:48)(cid:82)(cid:69)(cid:83)(cid:73)(cid:68)(cid:69)(cid:78)(cid:84)(cid:0) with responsibility for Consumer Goods in China and Taiwan. Before joining Intertek, Paul worked in Regional Sales & Marketing for companies such as Hitachi Chemical, Brent Plc and SISIR Singapore. 05 Stefan Butz Group Executive Vice President Industrial Services (cid:42)(cid:79)(cid:73)(cid:78)(cid:69)(cid:68)(cid:0)(cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:84)(cid:69)(cid:75)(cid:0)(cid:73)(cid:78)(cid:0)(cid:18)(cid:16)(cid:16)(cid:24) In addition to Industrial Services, Stefan Butz has responsibility for the Group functions of Strategy, Corporate Development and Marketing. (cid:51)(cid:84)(cid:69)(cid:70)(cid:65)(cid:78)(cid:0)(cid:72)(cid:65)(cid:83)(cid:0)(cid:72)(cid:69)(cid:76)(cid:68)(cid:0)(cid:84)(cid:72)(cid:73)(cid:83)(cid:0)(cid:82)(cid:79)(cid:76)(cid:69)(cid:0)(cid:83)(cid:73)(cid:78)(cid:67)(cid:69)(cid:0)(cid:42)(cid:65)(cid:78)(cid:85)(cid:65)(cid:82)(cid:89)(cid:0)(cid:18)(cid:16)(cid:16)(cid:24)(cid:12)(cid:0)(cid:87)(cid:72)(cid:69)(cid:78)(cid:0)(cid:72)(cid:69)(cid:0)(cid:42)(cid:79)(cid:73)(cid:78)(cid:69)(cid:68)(cid:0)(cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:84)(cid:69)(cid:75)(cid:0) from TÜV SÜD, where he was CEO America with an earlier role as Head of Corporate Development. Prior to this he was a Strategy Consultant with Accenture Germany. 06 Jonathan Lawrence Group Executive Vice President Human Resources (cid:42)(cid:79)(cid:73)(cid:78)(cid:69)(cid:68)(cid:0)(cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:84)(cid:69)(cid:75)(cid:0)(cid:73)(cid:78)(cid:0)(cid:18)(cid:16)(cid:16)(cid:21) (cid:42)(cid:79)(cid:78)(cid:65)(cid:84)(cid:72)(cid:65)(cid:78)(cid:0)(cid:72)(cid:65)(cid:83)(cid:0)(cid:77)(cid:65)(cid:78)(cid:89)(cid:0)(cid:89)(cid:69)(cid:65)(cid:82)(cid:83)(cid:0)(cid:69)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:78)(cid:0)(cid:73)(cid:78)(cid:84)(cid:69)(cid:82)(cid:78)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:65)(cid:76)(cid:0)(cid:72)(cid:85)(cid:77)(cid:65)(cid:78)(cid:0)(cid:82)(cid:69)(cid:83)(cid:79)(cid:85)(cid:82)(cid:67)(cid:69)(cid:83) (cid:68)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:84)(cid:69)(cid:83)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:73)(cid:78)(cid:83)(cid:80)(cid:69)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:66)(cid:85)(cid:83)(cid:73)(cid:78)(cid:69)(cid:83)(cid:83)(cid:0)(cid:66)(cid:65)(cid:83)(cid:69)(cid:68)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:53)(cid:43)(cid:12) France and the USA. Before moving to Intertek, he was Group Senior Vice President of Human Resources at Bureau Veritas and prior to this he was Group Director Management Development at Valeo Automotive. 01 02 03 04 05 www.intertek.com Intertek Annual Report 2009 45 07 Andrew Swift Division Executive Vice President Analytical Services (cid:42)(cid:79)(cid:73)(cid:78)(cid:69)(cid:68)(cid:0)(cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:84)(cid:69)(cid:75)(cid:0)(cid:73)(cid:78)(cid:0)(cid:18)(cid:16)(cid:16)(cid:17) 09 Jay Gutierrez Division Executive Vice President Oil, Chemical & Agri (cid:42)(cid:79)(cid:73)(cid:78)(cid:69)(cid:68)(cid:0)(cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:84)(cid:69)(cid:75)(cid:0)(cid:73)(cid:78)(cid:0)(cid:17)(cid:25)(cid:25)(cid:23) (cid:48)(cid:82)(cid:73)(cid:79)(cid:82)(cid:0)(cid:84)(cid:79)(cid:0)(cid:65)(cid:83)(cid:83)(cid:85)(cid:77)(cid:73)(cid:78)(cid:71)(cid:0)(cid:72)(cid:73)(cid:83)(cid:0)(cid:67)(cid:85)(cid:82)(cid:82)(cid:69)(cid:78)(cid:84)(cid:0)(cid:82)(cid:79)(cid:76)(cid:69)(cid:12)(cid:0)(cid:73)(cid:78)(cid:0)(cid:42)(cid:65)(cid:78)(cid:85)(cid:65)(cid:82)(cid:89)(cid:0)(cid:18)(cid:16)(cid:16)(cid:24)(cid:12)(cid:0)(cid:33)(cid:78)(cid:68)(cid:82)(cid:69)(cid:87)(cid:0)(cid:51)(cid:87)(cid:73)(cid:70)(cid:84)(cid:0)(cid:87)(cid:65)(cid:83)(cid:0) Vice President of Global Outsourcing within Intertek’s Oil, Chemical & Agri division, having originally started as Business Development Manager and then Director of Global Outsourcing. Andrew began his career by (cid:76)(cid:65)(cid:85)(cid:78)(cid:67)(cid:72)(cid:73)(cid:78)(cid:71)(cid:0)(cid:35)(cid:51)(cid:45)(cid:33)(cid:0)(cid:44)(cid:84)(cid:68)(cid:12)(cid:0)(cid:87)(cid:72)(cid:69)(cid:82)(cid:69)(cid:0)(cid:72)(cid:69)(cid:0)(cid:66)(cid:69)(cid:67)(cid:65)(cid:77)(cid:69)(cid:0)(cid:45)(cid:65)(cid:78)(cid:65)(cid:71)(cid:73)(cid:78)(cid:71)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:0)(cid:73)(cid:78)(cid:0)(cid:17)(cid:25)(cid:25)(cid:19)(cid:14) 08 Gregg Tiemann Division Executive Vice President Commercial & Electrical (cid:42)(cid:79)(cid:73)(cid:78)(cid:69)(cid:68)(cid:0)(cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:84)(cid:69)(cid:75)(cid:0)(cid:73)(cid:78)(cid:0)(cid:17)(cid:25)(cid:25)(cid:19) (cid:48)(cid:82)(cid:73)(cid:79)(cid:82)(cid:0)(cid:84)(cid:79)(cid:0)(cid:65)(cid:83)(cid:83)(cid:85)(cid:77)(cid:73)(cid:78)(cid:71)(cid:0)(cid:72)(cid:73)(cid:83)(cid:0)(cid:67)(cid:85)(cid:82)(cid:82)(cid:69)(cid:78)(cid:84)(cid:0)(cid:82)(cid:79)(cid:76)(cid:69)(cid:0)(cid:73)(cid:78)(cid:0)(cid:42)(cid:65)(cid:78)(cid:85)(cid:65)(cid:82)(cid:89)(cid:0)(cid:18)(cid:16)(cid:16)(cid:24)(cid:0)(cid:39)(cid:82)(cid:69)(cid:71)(cid:71)(cid:0)(cid:52)(cid:73)(cid:69)(cid:77)(cid:65)(cid:78)(cid:78)(cid:0)(cid:87)(cid:65)(cid:83)(cid:0) President of Intertek’s Commercial & Electrical division in Europe and the Americas since 2004, having started as General Manager of the (cid:44)(cid:79)(cid:83)(cid:0)(cid:33)(cid:78)(cid:71)(cid:69)(cid:76)(cid:69)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:45)(cid:69)(cid:88)(cid:73)(cid:67)(cid:79)(cid:0)(cid:35)(cid:73)(cid:84)(cid:89)(cid:0)(cid:76)(cid:65)(cid:66)(cid:79)(cid:82)(cid:65)(cid:84)(cid:79)(cid:82)(cid:73)(cid:69)(cid:83)(cid:0)(cid:73)(cid:78)(cid:0)(cid:17)(cid:25)(cid:25)(cid:19)(cid:14)(cid:0)(cid:34)(cid:69)(cid:70)(cid:79)(cid:82)(cid:69)(cid:0)(cid:74)(cid:79)(cid:73)(cid:78)(cid:73)(cid:78)(cid:71)(cid:0)(cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:84)(cid:69)(cid:75)(cid:12)(cid:0) Gregg worked in sales and marketing for the software industry. (cid:42)(cid:65)(cid:89)(cid:0)(cid:39)(cid:85)(cid:84)(cid:73)(cid:69)(cid:82)(cid:82)(cid:69)(cid:90)(cid:0)(cid:65)(cid:83)(cid:83)(cid:85)(cid:77)(cid:69)(cid:68)(cid:0)(cid:72)(cid:73)(cid:83)(cid:0)(cid:67)(cid:85)(cid:82)(cid:82)(cid:69)(cid:78)(cid:84)(cid:0)(cid:82)(cid:79)(cid:76)(cid:69)(cid:0)(cid:73)(cid:78)(cid:0)(cid:42)(cid:65)(cid:78)(cid:85)(cid:65)(cid:82)(cid:89)(cid:0)(cid:18)(cid:16)(cid:16)(cid:24)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:73)(cid:78)(cid:67)(cid:79)(cid:82)(cid:80)(cid:79)(cid:82)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0) (cid:39)(cid:79)(cid:86)(cid:69)(cid:82)(cid:78)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:51)(cid:69)(cid:82)(cid:86)(cid:73)(cid:67)(cid:69)(cid:83)(cid:0)(cid:73)(cid:78)(cid:0)(cid:42)(cid:65)(cid:78)(cid:85)(cid:65)(cid:82)(cid:89)(cid:0)(cid:18)(cid:16)(cid:16)(cid:25)(cid:14)(cid:0)(cid:48)(cid:82)(cid:69)(cid:86)(cid:73)(cid:79)(cid:85)(cid:83)(cid:76)(cid:89)(cid:12)(cid:0)(cid:72)(cid:69)(cid:0)(cid:87)(cid:65)(cid:83)(cid:0)(cid:54)(cid:73)(cid:67)(cid:69)(cid:0)(cid:48)(cid:82)(cid:69)(cid:83)(cid:73)(cid:68)(cid:69)(cid:78)(cid:84)(cid:0) (cid:70)(cid:79)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:47)(cid:73)(cid:76)(cid:12)(cid:0)(cid:35)(cid:72)(cid:69)(cid:77)(cid:73)(cid:67)(cid:65)(cid:76)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:33)(cid:71)(cid:82)(cid:73)(cid:0)(cid:68)(cid:73)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:33)(cid:77)(cid:69)(cid:82)(cid:73)(cid:67)(cid:65)(cid:83)(cid:14)(cid:0)(cid:42)(cid:65)(cid:89)(cid:0)(cid:66)(cid:69)(cid:71)(cid:65)(cid:78)(cid:0)(cid:72)(cid:73)(cid:83)(cid:0) career with Intertek with a focus to develop the Chemical business stream, later assuming responsibility for International Coordination and Sales & Marketing. Prior to joining Intertek he spent eight years as General (cid:45)(cid:65)(cid:78)(cid:65)(cid:71)(cid:69)(cid:82)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:35)(cid:14)(cid:42)(cid:14)(cid:0)(cid:52)(cid:72)(cid:73)(cid:66)(cid:79)(cid:68)(cid:69)(cid:65)(cid:85)(cid:88)(cid:12)(cid:0)(cid:41)(cid:78)(cid:67)(cid:14) 10 Marc Hoffer Division Executive Vice President Minerals (cid:42)(cid:79)(cid:73)(cid:78)(cid:69)(cid:68)(cid:0)(cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:84)(cid:69)(cid:75)(cid:0)(cid:73)(cid:78)(cid:0)(cid:18)(cid:16)(cid:16)(cid:21) (cid:45)(cid:65)(cid:82)(cid:67)(cid:0)(cid:40)(cid:79)(cid:70)(cid:70)(cid:69)(cid:82)(cid:0)(cid:65)(cid:83)(cid:83)(cid:85)(cid:77)(cid:69)(cid:68)(cid:0)(cid:72)(cid:73)(cid:83)(cid:0)(cid:67)(cid:85)(cid:82)(cid:82)(cid:69)(cid:78)(cid:84)(cid:0)(cid:82)(cid:79)(cid:76)(cid:69)(cid:0)(cid:73)(cid:78)(cid:0)(cid:42)(cid:65)(cid:78)(cid:85)(cid:65)(cid:82)(cid:89)(cid:0)(cid:18)(cid:16)(cid:16)(cid:24)(cid:0)(cid:73)(cid:78)(cid:0)(cid:65)(cid:68)(cid:68)(cid:73)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:84)(cid:79)(cid:0) continued responsibility for Intertek’s Oil, Chemical & Agri division in Asia. Prior to joining Intertek Marc spent 13 years at SGS, part of the time as Country Manager of Taiwan, Brazil and Switzerland and part as Regional Financial Controller for Asia and Europe. 06 07 08 09 10 46 Intertek Annual Report 2009 (cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:7)(cid:0)(cid:50)(cid:69)(cid:80)(cid:79)(cid:82)(cid:84)(cid:0)(cid:110)(cid:0)(cid:39)(cid:79)(cid:86)(cid:69)(cid:82)(cid:78)(cid:65)(cid:78)(cid:67)(cid:69) Corporate Governance Report Introduction The Group is committed to high standards of corporate governance and this report outlines its compliance with the provisions of the revised Combined Code on Corporate Governance issued by the Financial Reporting Council in June 2008 (the Code). The Code is available at www.frc.org.uk. Throughout 2009 the Group complied with almost all of the provisions of the Code. The areas of non-compliance are as follows, and are further discussed and explained below: (cid:115)(cid:0) (cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:68)(cid:73)(cid:68)(cid:0)(cid:78)(cid:79)(cid:84)(cid:0)(cid:67)(cid:79)(cid:77)(cid:80)(cid:82)(cid:73)(cid:83)(cid:69)(cid:0)(cid:65)(cid:84)(cid:0)(cid:76)(cid:69)(cid:65)(cid:83)(cid:84)(cid:0)(cid:72)(cid:65)(cid:76)(cid:70)(cid:0)(cid:73)(cid:78)(cid:68)(cid:69)(cid:80)(cid:69)(cid:78)(cid:68)(cid:69)(cid:78)(cid:84)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0) Directors in accordance with section A.3.2 of the Code. for the eight month period to 1 September 2009 but has done so since that date; and (cid:115)(cid:0) (cid:0)(cid:85)(cid:78)(cid:84)(cid:73)(cid:76)(cid:0)(cid:17)(cid:0)(cid:51)(cid:69)(cid:80)(cid:84)(cid:69)(cid:77)(cid:66)(cid:69)(cid:82)(cid:0)(cid:18)(cid:16)(cid:16)(cid:25)(cid:12)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:77)(cid:69)(cid:77)(cid:66)(cid:69)(cid:82)(cid:83)(cid:72)(cid:73)(cid:80)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:50)(cid:69)(cid:77)(cid:85)(cid:78)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) Committee and the Audit and Risk Committee, each included two (cid:73)(cid:78)(cid:68)(cid:69)(cid:80)(cid:69)(cid:78)(cid:68)(cid:69)(cid:78)(cid:84)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:0)(cid:73)(cid:78)(cid:83)(cid:84)(cid:69)(cid:65)(cid:68)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:82)(cid:69)(cid:69)(cid:12)(cid:0)(cid:65)(cid:83)(cid:0)(cid:82)(cid:69)(cid:81)(cid:85)(cid:73)(cid:82)(cid:69)(cid:68)(cid:0) (cid:66)(cid:89)(cid:0)(cid:83)(cid:69)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:34)(cid:14)(cid:18)(cid:14)(cid:17)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:35)(cid:14)(cid:19)(cid:14)(cid:17)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:35)(cid:79)(cid:68)(cid:69)(cid:0)(cid:82)(cid:69)(cid:83)(cid:80)(cid:69)(cid:67)(cid:84)(cid:73)(cid:86)(cid:69)(cid:76)(cid:89)(cid:0)(cid:66)(cid:69)(cid:67)(cid:65)(cid:85)(cid:83)(cid:69)(cid:12)(cid:0)(cid:65)(cid:83)(cid:0) Chairman of the Company, Vanni Treves is not viewed as independent under the Code. Since 1 September 2009 the Remuneration Committee and the Audit and Risk Committee (cid:69)(cid:65)(cid:67)(cid:72)(cid:0)(cid:78)(cid:79)(cid:87)(cid:0)(cid:67)(cid:79)(cid:77)(cid:80)(cid:82)(cid:73)(cid:83)(cid:69)(cid:0)(cid:84)(cid:72)(cid:82)(cid:69)(cid:69)(cid:14)(cid:0)(cid:73)(cid:78)(cid:68)(cid:69)(cid:80)(cid:69)(cid:78)(cid:68)(cid:69)(cid:78)(cid:84)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:0) in compliance with the Code. The Board (cid:52)(cid:72)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:73)(cid:83)(cid:0)(cid:82)(cid:69)(cid:83)(cid:80)(cid:79)(cid:78)(cid:83)(cid:73)(cid:66)(cid:76)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:65)(cid:67)(cid:67)(cid:79)(cid:85)(cid:78)(cid:84)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:84)(cid:79)(cid:0)(cid:83)(cid:72)(cid:65)(cid:82)(cid:69)(cid:72)(cid:79)(cid:76)(cid:68)(cid:69)(cid:82)(cid:83)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0) ensuring that the Company is appropriately managed and that it (cid:65)(cid:67)(cid:72)(cid:73)(cid:69)(cid:86)(cid:69)(cid:83)(cid:0)(cid:73)(cid:84)(cid:83)(cid:0)(cid:79)(cid:66)(cid:74)(cid:69)(cid:67)(cid:84)(cid:73)(cid:86)(cid:69)(cid:83)(cid:14)(cid:0)(cid:52)(cid:72)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:7)(cid:83)(cid:0)(cid:77)(cid:65)(cid:73)(cid:78)(cid:0)(cid:82)(cid:79)(cid:76)(cid:69)(cid:0)(cid:73)(cid:83)(cid:0)(cid:84)(cid:79)(cid:0)(cid:85)(cid:78)(cid:68)(cid:69)(cid:82)(cid:83)(cid:84)(cid:65)(cid:78)(cid:68)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0) meet its obligations to its shareholders and others, to lead the Group within a framework of prudent and effective controls which (cid:69)(cid:78)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:82)(cid:73)(cid:83)(cid:75)(cid:0)(cid:84)(cid:79)(cid:0)(cid:66)(cid:69)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:83)(cid:83)(cid:69)(cid:68)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:77)(cid:65)(cid:78)(cid:65)(cid:71)(cid:69)(cid:68)(cid:12)(cid:0)(cid:84)(cid:79)(cid:0)(cid:65)(cid:80)(cid:80)(cid:82)(cid:79)(cid:86)(cid:69)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:7)(cid:83)(cid:0) strategic objectives and to ensure that the appropriate ﬁnancial and (cid:79)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:82)(cid:69)(cid:83)(cid:79)(cid:85)(cid:82)(cid:67)(cid:69)(cid:83)(cid:0)(cid:65)(cid:83)(cid:0)(cid:82)(cid:69)(cid:81)(cid:85)(cid:73)(cid:82)(cid:69)(cid:68)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:77)(cid:65)(cid:68)(cid:69)(cid:0)(cid:65)(cid:86)(cid:65)(cid:73)(cid:76)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:84)(cid:79)(cid:0)(cid:69)(cid:78)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:73)(cid:84)(cid:0)(cid:84)(cid:79)(cid:0)(cid:77)(cid:69)(cid:69)(cid:84)(cid:0) (cid:84)(cid:72)(cid:79)(cid:83)(cid:69)(cid:0)(cid:79)(cid:66)(cid:74)(cid:69)(cid:67)(cid:84)(cid:73)(cid:86)(cid:69)(cid:83)(cid:14)(cid:0)(cid:52)(cid:72)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:65)(cid:76)(cid:83)(cid:79)(cid:0)(cid:69)(cid:78)(cid:83)(cid:85)(cid:82)(cid:69)(cid:83)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:80)(cid:76)(cid:65)(cid:78)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:73)(cid:78)(cid:0)(cid:80)(cid:76)(cid:65)(cid:67)(cid:69)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0) (cid:79)(cid:82)(cid:68)(cid:69)(cid:82)(cid:76)(cid:89)(cid:0)(cid:83)(cid:85)(cid:67)(cid:67)(cid:69)(cid:83)(cid:83)(cid:73)(cid:79)(cid:78)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:65)(cid:80)(cid:80)(cid:79)(cid:73)(cid:78)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:84)(cid:79)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:83)(cid:69)(cid:78)(cid:73)(cid:79)(cid:82)(cid:0) management. All Directors have a wide range of experience and skills, bringing independent judgement to bear on issues of strategy, performance, resources and standards of conduct. (cid:36)(cid:85)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:89)(cid:69)(cid:65)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:67)(cid:79)(cid:78)(cid:83)(cid:73)(cid:83)(cid:84)(cid:69)(cid:68)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:35)(cid:72)(cid:65)(cid:73)(cid:82)(cid:77)(cid:65)(cid:78)(cid:0)(cid:54)(cid:65)(cid:78)(cid:78)(cid:73)(cid:0)(cid:52)(cid:82)(cid:69)(cid:86)(cid:69)(cid:83)(cid:12)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:69)(cid:80)(cid:85)(cid:84)(cid:89)(cid:0)(cid:35)(cid:72)(cid:65)(cid:73)(cid:82)(cid:77)(cid:65)(cid:78)(cid:0)(cid:50)(cid:73)(cid:67)(cid:72)(cid:65)(cid:82)(cid:68)(cid:0)(cid:46)(cid:69)(cid:76)(cid:83)(cid:79)(cid:78)(cid:0)(cid:8)(cid:82)(cid:69)(cid:84)(cid:73)(cid:82)(cid:69)(cid:68)(cid:0) (cid:17)(cid:0)(cid:51)(cid:69)(cid:80)(cid:84)(cid:69)(cid:77)(cid:66)(cid:69)(cid:82)(cid:0)(cid:18)(cid:16)(cid:16)(cid:25)(cid:9)(cid:12)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:35)(cid:72)(cid:73)(cid:69)(cid:70)(cid:0)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:47)(cid:70)(cid:108)(cid:67)(cid:69)(cid:82)(cid:0)(cid:55)(cid:79)(cid:76)(cid:70)(cid:72)(cid:65)(cid:82)(cid:84)(cid:0)(cid:40)(cid:65)(cid:85)(cid:83)(cid:69)(cid:82)(cid:12)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0)(cid:35)(cid:72)(cid:73)(cid:69)(cid:70)(cid:0)(cid:47)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:47)(cid:70)(cid:108)(cid:67)(cid:69)(cid:82)(cid:0)(cid:45)(cid:65)(cid:82)(cid:75)(cid:0)(cid:44)(cid:79)(cid:85)(cid:71)(cid:72)(cid:69)(cid:65)(cid:68)(cid:12)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:35)(cid:72)(cid:73)(cid:69)(cid:70)(cid:0)(cid:38)(cid:73)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0) (cid:47)(cid:70)(cid:108)(cid:67)(cid:69)(cid:82)(cid:0)(cid:34)(cid:73)(cid:76)(cid:76)(cid:0)(cid:51)(cid:80)(cid:69)(cid:78)(cid:67)(cid:69)(cid:82)(cid:12)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:84)(cid:72)(cid:82)(cid:69)(cid:69)(cid:0)(cid:73)(cid:78)(cid:68)(cid:69)(cid:80)(cid:69)(cid:78)(cid:68)(cid:69)(cid:78)(cid:84)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:12)(cid:0) David Allvey, who is also the Senior Independent Director, (cid:35)(cid:72)(cid:82)(cid:73)(cid:83)(cid:84)(cid:79)(cid:80)(cid:72)(cid:69)(cid:82)(cid:0)(cid:43)(cid:78)(cid:73)(cid:71)(cid:72)(cid:84)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:36)(cid:69)(cid:66)(cid:82)(cid:65)(cid:0)(cid:50)(cid:65)(cid:68)(cid:69)(cid:14)(cid:0)(cid:47)(cid:78)(cid:0)(cid:17)(cid:0)(cid:51)(cid:69)(cid:80)(cid:84)(cid:69)(cid:77)(cid:66)(cid:69)(cid:82)(cid:0)(cid:18)(cid:16)(cid:16)(cid:25)(cid:0) (cid:37)(cid:68)(cid:87)(cid:65)(cid:82)(cid:68)(cid:0)(cid:33)(cid:83)(cid:84)(cid:76)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:39)(cid:65)(cid:86)(cid:73)(cid:78)(cid:0)(cid:36)(cid:65)(cid:82)(cid:66)(cid:89)(cid:0)(cid:87)(cid:69)(cid:82)(cid:69)(cid:0)(cid:65)(cid:80)(cid:80)(cid:79)(cid:73)(cid:78)(cid:84)(cid:69)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0) (cid:65)(cid:83)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:14)(cid:0)(cid:52)(cid:72)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:7)(cid:0)(cid:66)(cid:73)(cid:79)(cid:71)(cid:82)(cid:65)(cid:80)(cid:72)(cid:73)(cid:69)(cid:83)(cid:0)(cid:65)(cid:80)(cid:80)(cid:69)(cid:65)(cid:82)(cid:0) on page 43. Matters reserved for the Board The Group has identiﬁed a number of key areas that are subject (cid:84)(cid:79)(cid:0)(cid:82)(cid:69)(cid:71)(cid:85)(cid:76)(cid:65)(cid:82)(cid:0)(cid:82)(cid:69)(cid:80)(cid:79)(cid:82)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:79)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:12)(cid:0)(cid:83)(cid:79)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:80)(cid:69)(cid:82)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0) management can be reviewed and monitored. A board matrix is (cid:73)(cid:78)(cid:0)(cid:80)(cid:76)(cid:65)(cid:67)(cid:69)(cid:0)(cid:87)(cid:72)(cid:73)(cid:67)(cid:72)(cid:0)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:76)(cid:76)(cid:89)(cid:0)(cid:79)(cid:85)(cid:84)(cid:76)(cid:73)(cid:78)(cid:69)(cid:83)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:77)(cid:65)(cid:84)(cid:84)(cid:69)(cid:82)(cid:83)(cid:0)(cid:83)(cid:80)(cid:69)(cid:67)(cid:73)(cid:108)(cid:67)(cid:65)(cid:76)(cid:76)(cid:89)(cid:0)(cid:82)(cid:69)(cid:81)(cid:85)(cid:73)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0)(cid:67)(cid:79)(cid:78)(cid:83)(cid:69)(cid:78)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:70)(cid:85)(cid:76)(cid:76)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:14)(cid:0)(cid:45)(cid:65)(cid:84)(cid:84)(cid:69)(cid:82)(cid:83)(cid:0)(cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:69)(cid:26) (cid:115)(cid:0) (cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:0)(cid:83)(cid:84)(cid:82)(cid:65)(cid:84)(cid:69)(cid:71)(cid:89)(cid:27) (cid:115)(cid:0) (cid:33)(cid:78)(cid:78)(cid:85)(cid:65)(cid:76)(cid:0)(cid:66)(cid:85)(cid:68)(cid:71)(cid:69)(cid:84)(cid:27) (cid:115)(cid:0) (cid:33)(cid:78)(cid:78)(cid:85)(cid:65)(cid:76)(cid:0)(cid:50)(cid:69)(cid:80)(cid:79)(cid:82)(cid:84)(cid:12)(cid:0)(cid:40)(cid:65)(cid:76)(cid:70)(cid:0)(cid:57)(cid:69)(cid:65)(cid:82)(cid:0)(cid:50)(cid:69)(cid:83)(cid:85)(cid:76)(cid:84)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:82)(cid:69)(cid:76)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:65)(cid:78)(cid:78)(cid:79)(cid:85)(cid:78)(cid:67)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:27) (cid:115)(cid:0) (cid:35)(cid:65)(cid:80)(cid:73)(cid:84)(cid:65)(cid:76)(cid:0)(cid:69)(cid:88)(cid:80)(cid:69)(cid:78)(cid:68)(cid:73)(cid:84)(cid:85)(cid:82)(cid:69)(cid:27) (cid:115)(cid:0) (cid:0)(cid:33)(cid:67)(cid:81)(cid:85)(cid:73)(cid:83)(cid:73)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:12)(cid:0)(cid:68)(cid:73)(cid:83)(cid:80)(cid:79)(cid:83)(cid:65)(cid:76)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:79)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:84)(cid:82)(cid:65)(cid:78)(cid:83)(cid:65)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:79)(cid:85)(cid:84)(cid:83)(cid:73)(cid:68)(cid:69)(cid:0) delegated limits; (cid:115)(cid:0) (cid:45)(cid:65)(cid:84)(cid:69)(cid:82)(cid:73)(cid:65)(cid:76)(cid:0)(cid:67)(cid:79)(cid:78)(cid:84)(cid:82)(cid:65)(cid:67)(cid:84)(cid:83)(cid:27) (cid:115)(cid:0) (cid:36)(cid:73)(cid:86)(cid:73)(cid:68)(cid:69)(cid:78)(cid:68)(cid:0)(cid:80)(cid:79)(cid:76)(cid:73)(cid:67)(cid:89)(cid:27) (cid:115)(cid:0) (cid:33)(cid:80)(cid:80)(cid:82)(cid:79)(cid:86)(cid:65)(cid:76)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:82)(cid:69)(cid:65)(cid:83)(cid:85)(cid:82)(cid:89)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:82)(cid:73)(cid:83)(cid:75)(cid:0)(cid:77)(cid:65)(cid:78)(cid:65)(cid:71)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:80)(cid:79)(cid:76)(cid:73)(cid:67)(cid:73)(cid:69)(cid:83)(cid:14) (cid:52)(cid:72)(cid:69)(cid:0)(cid:66)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:77)(cid:65)(cid:84)(cid:82)(cid:73)(cid:88)(cid:0)(cid:65)(cid:76)(cid:83)(cid:79)(cid:0)(cid:73)(cid:68)(cid:69)(cid:78)(cid:84)(cid:73)(cid:108)(cid:69)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:65)(cid:83)(cid:0)(cid:87)(cid:72)(cid:69)(cid:82)(cid:69)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:72)(cid:65)(cid:83)(cid:0) delegated authority to executive management, subject to certain (cid:108)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:76)(cid:73)(cid:77)(cid:73)(cid:84)(cid:83)(cid:14)(cid:0)(cid:55)(cid:72)(cid:69)(cid:82)(cid:69)(cid:0)(cid:65)(cid:78)(cid:89)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:65)(cid:67)(cid:84)(cid:73)(cid:86)(cid:73)(cid:84)(cid:73)(cid:69)(cid:83)(cid:0)(cid:73)(cid:78)(cid:86)(cid:79)(cid:76)(cid:86)(cid:69)(cid:0)(cid:65)(cid:77)(cid:79)(cid:85)(cid:78)(cid:84)(cid:83)(cid:0)(cid:71)(cid:82)(cid:69)(cid:65)(cid:84)(cid:69)(cid:82)(cid:0) (cid:84)(cid:72)(cid:65)(cid:78)(cid:0)(cid:84)(cid:72)(cid:79)(cid:83)(cid:69)(cid:0)(cid:76)(cid:73)(cid:77)(cid:73)(cid:84)(cid:83)(cid:0)(cid:84)(cid:72)(cid:69)(cid:89)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:82)(cid:69)(cid:70)(cid:69)(cid:82)(cid:82)(cid:69)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:14)(cid:0) Board meetings (cid:52)(cid:72)(cid:69)(cid:82)(cid:69)(cid:0)(cid:87)(cid:69)(cid:82)(cid:69)(cid:0)(cid:83)(cid:69)(cid:86)(cid:69)(cid:78)(cid:0)(cid:83)(cid:67)(cid:72)(cid:69)(cid:68)(cid:85)(cid:76)(cid:69)(cid:68)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:84)(cid:87)(cid:79)(cid:0)(cid:85)(cid:78)(cid:83)(cid:67)(cid:72)(cid:69)(cid:68)(cid:85)(cid:76)(cid:69)(cid:68)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:77)(cid:69)(cid:69)(cid:84)(cid:73)(cid:78)(cid:71)(cid:83)(cid:0) (cid:72)(cid:69)(cid:76)(cid:68)(cid:0)(cid:73)(cid:78)(cid:0)(cid:18)(cid:16)(cid:16)(cid:25)(cid:14)(cid:0)(cid:52)(cid:72)(cid:69)(cid:82)(cid:69)(cid:0)(cid:87)(cid:65)(cid:83)(cid:12)(cid:0)(cid:73)(cid:78)(cid:0)(cid:65)(cid:68)(cid:68)(cid:73)(cid:84)(cid:73)(cid:79)(cid:78)(cid:12)(cid:0)(cid:70)(cid:82)(cid:69)(cid:81)(cid:85)(cid:69)(cid:78)(cid:84)(cid:0)(cid:73)(cid:78)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:76)(cid:0)(cid:67)(cid:79)(cid:78)(cid:84)(cid:65)(cid:67)(cid:84)(cid:0) (cid:66)(cid:69)(cid:84)(cid:87)(cid:69)(cid:69)(cid:78)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:0)(cid:84)(cid:79)(cid:0)(cid:68)(cid:73)(cid:83)(cid:67)(cid:85)(cid:83)(cid:83)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:7)(cid:83)(cid:0)(cid:65)(cid:70)(cid:70)(cid:65)(cid:73)(cid:82)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:68)(cid:69)(cid:86)(cid:69)(cid:76)(cid:79)(cid:80)(cid:0)(cid:73)(cid:84)(cid:83)(cid:0) (cid:66)(cid:85)(cid:83)(cid:73)(cid:78)(cid:69)(cid:83)(cid:83)(cid:14)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:7)(cid:0)(cid:65)(cid:84)(cid:84)(cid:69)(cid:78)(cid:68)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:65)(cid:84)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:77)(cid:69)(cid:69)(cid:84)(cid:73)(cid:78)(cid:71)(cid:83)(cid:0)(cid:73)(cid:83)(cid:0)(cid:83)(cid:72)(cid:79)(cid:87)(cid:78)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0) table on page 49. Also on several occasions, the Chairman met with (cid:84)(cid:72)(cid:69)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:79)(cid:85)(cid:84)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:0)(cid:66)(cid:69)(cid:73)(cid:78)(cid:71)(cid:0) (cid:80)(cid:82)(cid:69)(cid:83)(cid:69)(cid:78)(cid:84)(cid:14)(cid:0)(cid:52)(cid:72)(cid:69)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0)(cid:65)(cid:76)(cid:83)(cid:79)(cid:0)(cid:72)(cid:65)(cid:68)(cid:0)(cid:68)(cid:73)(cid:83)(cid:67)(cid:85)(cid:83)(cid:83)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0) without the Chairman being present. If a Director has any concerns about the Group or a proposed action, then such concerns are (cid:82)(cid:69)(cid:67)(cid:79)(cid:82)(cid:68)(cid:69)(cid:68)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:77)(cid:73)(cid:78)(cid:85)(cid:84)(cid:69)(cid:83)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:0)(cid:77)(cid:65)(cid:84)(cid:84)(cid:69)(cid:82)(cid:0)(cid:79)(cid:70)(cid:0)(cid:67)(cid:79)(cid:85)(cid:82)(cid:83)(cid:69)(cid:14)(cid:0) Role of the Chairman, Chief Executive Ofﬁcer and Senior Independent Director In order to avoid any one individual having unfettered powers, there is a clear division of responsibilities between the Chairman and the (cid:35)(cid:72)(cid:73)(cid:69)(cid:70)(cid:0)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:47)(cid:70)(cid:108)(cid:67)(cid:69)(cid:82)(cid:14)(cid:0)(cid:52)(cid:72)(cid:69)(cid:83)(cid:69)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0)(cid:66)(cid:69)(cid:69)(cid:78)(cid:0)(cid:83)(cid:69)(cid:84)(cid:0)(cid:79)(cid:85)(cid:84)(cid:0)(cid:73)(cid:78)(cid:0)(cid:87)(cid:82)(cid:73)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0) (cid:65)(cid:80)(cid:80)(cid:82)(cid:79)(cid:86)(cid:69)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:14)(cid:0) (cid:54)(cid:65)(cid:78)(cid:78)(cid:73)(cid:0)(cid:52)(cid:82)(cid:69)(cid:86)(cid:69)(cid:83)(cid:0)(cid:87)(cid:65)(cid:83)(cid:0)(cid:65)(cid:80)(cid:80)(cid:79)(cid:73)(cid:78)(cid:84)(cid:69)(cid:68)(cid:0)(cid:35)(cid:72)(cid:65)(cid:73)(cid:82)(cid:77)(cid:65)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:73)(cid:78)(cid:0)(cid:45)(cid:65)(cid:89)(cid:0)(cid:18)(cid:16)(cid:16)(cid:18)(cid:12)(cid:0) at which point he met the independence criteria as set out in the (cid:35)(cid:79)(cid:68)(cid:69)(cid:14)(cid:0)(cid:40)(cid:73)(cid:83)(cid:0)(cid:82)(cid:69)(cid:83)(cid:80)(cid:79)(cid:78)(cid:83)(cid:73)(cid:66)(cid:73)(cid:76)(cid:73)(cid:84)(cid:73)(cid:69)(cid:83)(cid:0)(cid:65)(cid:83)(cid:0)(cid:35)(cid:72)(cid:65)(cid:73)(cid:82)(cid:77)(cid:65)(cid:78)(cid:0)(cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:69)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:76)(cid:69)(cid:65)(cid:68)(cid:69)(cid:82)(cid:83)(cid:72)(cid:73)(cid:80)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0) (cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:12)(cid:0)(cid:69)(cid:78)(cid:83)(cid:85)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0)(cid:73)(cid:84)(cid:83)(cid:0)(cid:69)(cid:70)(cid:70)(cid:69)(cid:67)(cid:84)(cid:73)(cid:86)(cid:69)(cid:78)(cid:69)(cid:83)(cid:83)(cid:0)(cid:73)(cid:78)(cid:0)(cid:65)(cid:76)(cid:76)(cid:0)(cid:65)(cid:83)(cid:80)(cid:69)(cid:67)(cid:84)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:73)(cid:84)(cid:83)(cid:0)(cid:82)(cid:79)(cid:76)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:83)(cid:69)(cid:84)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0) its agenda; ensuring that the Directors receive accurate, timely and clear information; ensuring effective communication with (cid:83)(cid:72)(cid:65)(cid:82)(cid:69)(cid:72)(cid:79)(cid:76)(cid:68)(cid:69)(cid:82)(cid:83)(cid:27)(cid:0)(cid:70)(cid:65)(cid:67)(cid:73)(cid:76)(cid:73)(cid:84)(cid:65)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:69)(cid:70)(cid:70)(cid:69)(cid:67)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:67)(cid:79)(cid:78)(cid:84)(cid:82)(cid:73)(cid:66)(cid:85)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:84)(cid:79)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:79)(cid:70)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:0)(cid:73)(cid:78)(cid:0)(cid:80)(cid:65)(cid:82)(cid:84)(cid:73)(cid:67)(cid:85)(cid:76)(cid:65)(cid:82)(cid:27)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:69)(cid:78)(cid:83)(cid:85)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0)(cid:67)(cid:79)(cid:78)(cid:83)(cid:84)(cid:82)(cid:85)(cid:67)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0) (cid:82)(cid:69)(cid:76)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:72)(cid:73)(cid:80)(cid:83)(cid:0)(cid:66)(cid:69)(cid:84)(cid:87)(cid:69)(cid:69)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:14)(cid:0) (cid:52)(cid:72)(cid:69)(cid:0)(cid:35)(cid:72)(cid:65)(cid:73)(cid:82)(cid:77)(cid:65)(cid:78)(cid:7)(cid:83)(cid:0)(cid:79)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:77)(cid:65)(cid:73)(cid:78)(cid:0)(cid:67)(cid:79)(cid:77)(cid:77)(cid:73)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:68)(cid:69)(cid:84)(cid:65)(cid:73)(cid:76)(cid:69)(cid:68)(cid:0)(cid:73)(cid:78)(cid:0)(cid:72)(cid:73)(cid:83)(cid:0) biography on page 43. www.intertek.com Intertek Annual Report 2009 47 Wolfhart Hauser, the Chief Executive Ofﬁcer, has direct charge of the Group on a day-to-day basis and is accountable to the Board for the ﬁnancial and operational performance of the Group. David Allvey was appointed Senior Independent Director in (cid:45)(cid:65)(cid:89)(cid:0)(cid:18)(cid:16)(cid:16)(cid:18)(cid:14)(cid:0)(cid:40)(cid:73)(cid:83)(cid:0)(cid:82)(cid:69)(cid:83)(cid:80)(cid:79)(cid:78)(cid:83)(cid:73)(cid:66)(cid:73)(cid:76)(cid:73)(cid:84)(cid:73)(cid:69)(cid:83)(cid:0)(cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:69)(cid:0)(cid:76)(cid:69)(cid:65)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0) Directors’ annual consideration of the Chairman’s performance (cid:65)(cid:78)(cid:68)(cid:0)(cid:72)(cid:79)(cid:76)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:68)(cid:73)(cid:83)(cid:67)(cid:85)(cid:83)(cid:83)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:79)(cid:85)(cid:84)(cid:0) management present. David Allvey is readily available to shareholders if they have concerns that remain unresolved after contacting the Group through the usual channels of the Chairman or any of the Executive Directors or where such contact is inappropriate. Board balance and independence The Code requires that half of the Board comprises independent (cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:14)(cid:0)(cid:38)(cid:79)(cid:76)(cid:76)(cid:79)(cid:87)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:65)(cid:80)(cid:80)(cid:79)(cid:73)(cid:78)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0) (cid:45)(cid:65)(cid:82)(cid:75)(cid:0)(cid:44)(cid:79)(cid:85)(cid:71)(cid:72)(cid:69)(cid:65)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:17)(cid:0)(cid:42)(cid:65)(cid:78)(cid:85)(cid:65)(cid:82)(cid:89)(cid:0)(cid:18)(cid:16)(cid:16)(cid:24)(cid:12)(cid:0)(cid:73)(cid:78)(cid:68)(cid:69)(cid:80)(cid:69)(cid:78)(cid:68)(cid:69)(cid:78)(cid:84)(cid:0) Directors represented less than half the Board. In order to refresh (cid:84)(cid:72)(cid:69)(cid:0)(cid:67)(cid:79)(cid:77)(cid:80)(cid:79)(cid:83)(cid:73)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:12)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:46)(cid:79)(cid:77)(cid:73)(cid:78)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:35)(cid:79)(cid:77)(cid:77)(cid:73)(cid:84)(cid:84)(cid:69)(cid:69)(cid:0) (cid:65)(cid:80)(cid:80)(cid:79)(cid:73)(cid:78)(cid:84)(cid:69)(cid:68)(cid:0)(cid:65)(cid:78)(cid:0)(cid:73)(cid:78)(cid:68)(cid:69)(cid:80)(cid:69)(cid:78)(cid:68)(cid:69)(cid:78)(cid:84)(cid:0)(cid:83)(cid:69)(cid:65)(cid:82)(cid:67)(cid:72)(cid:0)(cid:67)(cid:79)(cid:78)(cid:83)(cid:85)(cid:76)(cid:84)(cid:65)(cid:78)(cid:67)(cid:89)(cid:0)(cid:73)(cid:78)(cid:0)(cid:42)(cid:65)(cid:78)(cid:85)(cid:65)(cid:82)(cid:89)(cid:0)(cid:18)(cid:16)(cid:16)(cid:25)(cid:14)(cid:0) (cid:47)(cid:78)(cid:0)(cid:17)(cid:0)(cid:51)(cid:69)(cid:80)(cid:84)(cid:69)(cid:77)(cid:66)(cid:69)(cid:82)(cid:0)(cid:18)(cid:16)(cid:16)(cid:25)(cid:0)(cid:84)(cid:87)(cid:79)(cid:0)(cid:78)(cid:69)(cid:87)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:12)(cid:0)(cid:37)(cid:68)(cid:87)(cid:65)(cid:82)(cid:68)(cid:0) Astle and Gavin Darby, were appointed to the Board. Following these additional appointments, and the retirement of Richard (cid:46)(cid:69)(cid:76)(cid:83)(cid:79)(cid:78)(cid:12)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:78)(cid:79)(cid:87)(cid:0)(cid:67)(cid:79)(cid:77)(cid:80)(cid:82)(cid:73)(cid:83)(cid:69)(cid:83)(cid:0)(cid:77)(cid:79)(cid:82)(cid:69)(cid:0)(cid:84)(cid:72)(cid:65)(cid:78)(cid:0)(cid:72)(cid:65)(cid:76)(cid:70)(cid:0)(cid:73)(cid:78)(cid:68)(cid:69)(cid:80)(cid:69)(cid:78)(cid:68)(cid:69)(cid:78)(cid:84)(cid:0) (cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:14)(cid:0) The Board considers David Allvey, Edward Astle, Gavin Darby, (cid:35)(cid:72)(cid:82)(cid:73)(cid:83)(cid:84)(cid:79)(cid:80)(cid:72)(cid:69)(cid:82)(cid:0)(cid:43)(cid:78)(cid:73)(cid:71)(cid:72)(cid:84)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:36)(cid:69)(cid:66)(cid:82)(cid:65)(cid:0)(cid:50)(cid:65)(cid:68)(cid:69)(cid:0)(cid:73)(cid:78)(cid:68)(cid:69)(cid:80)(cid:69)(cid:78)(cid:68)(cid:69)(cid:78)(cid:84)(cid:0)(cid:73)(cid:78)(cid:0)(cid:67)(cid:72)(cid:65)(cid:82)(cid:65)(cid:67)(cid:84)(cid:69)(cid:82)(cid:0) and judgement and conﬁrms that they have been Directors of the Company for less than nine years, were never employed by the Group and have no material relationships or links to the business which would compromise their independence. Under the Code, (cid:50)(cid:73)(cid:67)(cid:72)(cid:65)(cid:82)(cid:68)(cid:0)(cid:46)(cid:69)(cid:76)(cid:83)(cid:79)(cid:78)(cid:0)(cid:87)(cid:65)(cid:83)(cid:0)(cid:78)(cid:79)(cid:84)(cid:0)(cid:67)(cid:79)(cid:78)(cid:83)(cid:73)(cid:68)(cid:69)(cid:82)(cid:69)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:66)(cid:69)(cid:0)(cid:73)(cid:78)(cid:68)(cid:69)(cid:80)(cid:69)(cid:78)(cid:68)(cid:69)(cid:78)(cid:84)(cid:0)(cid:73)(cid:78)(cid:0)(cid:72)(cid:73)(cid:83)(cid:0)(cid:80)(cid:79)(cid:83)(cid:73)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) (cid:65)(cid:83)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:69)(cid:80)(cid:85)(cid:84)(cid:89)(cid:0)(cid:35)(cid:72)(cid:65)(cid:73)(cid:82)(cid:77)(cid:65)(cid:78)(cid:0)(cid:68)(cid:85)(cid:69)(cid:0)(cid:84)(cid:79)(cid:0)(cid:72)(cid:73)(cid:83)(cid:0)(cid:80)(cid:82)(cid:69)(cid:86)(cid:73)(cid:79)(cid:85)(cid:83)(cid:0)(cid:82)(cid:79)(cid:76)(cid:69)(cid:0)(cid:65)(cid:83)(cid:0) Chief Executive Ofﬁcer of the Group. However, until his retirement (cid:73)(cid:78)(cid:0)(cid:51)(cid:69)(cid:80)(cid:84)(cid:69)(cid:77)(cid:66)(cid:69)(cid:82)(cid:0)(cid:50)(cid:73)(cid:67)(cid:72)(cid:65)(cid:82)(cid:68)(cid:0)(cid:46)(cid:69)(cid:76)(cid:83)(cid:79)(cid:78)(cid:0)(cid:67)(cid:79)(cid:78)(cid:84)(cid:73)(cid:78)(cid:85)(cid:69)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:66)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0)(cid:65)(cid:78)(cid:0)(cid:73)(cid:78)(cid:68)(cid:69)(cid:80)(cid:69)(cid:78)(cid:68)(cid:69)(cid:78)(cid:84)(cid:0) viewpoint and valuable expertise to the Board through his extensive knowledge of the business and industry. (cid:52)(cid:72)(cid:69)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0)(cid:65)(cid:0)(cid:80)(cid:65)(cid:82)(cid:84)(cid:73)(cid:67)(cid:85)(cid:76)(cid:65)(cid:82)(cid:0)(cid:82)(cid:69)(cid:83)(cid:80)(cid:79)(cid:78)(cid:83)(cid:73)(cid:66)(cid:73)(cid:76)(cid:73)(cid:84)(cid:89)(cid:0)(cid:84)(cid:79)(cid:0) ensure that the strategies proposed by the Executive Directors are fully discussed and critically examined, not only in the best long- term interests of shareholders, but also to ensure that they take proper account of the interests of customers, employees and other (cid:83)(cid:84)(cid:65)(cid:75)(cid:69)(cid:72)(cid:79)(cid:76)(cid:68)(cid:69)(cid:82)(cid:83)(cid:14)(cid:0)(cid:52)(cid:72)(cid:69)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:65)(cid:76)(cid:76)(cid:0)(cid:69)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69)(cid:68)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0) inﬂuential individuals and through their mix of skills and business experience they contribute signiﬁcantly to the effective functioning of the Board and its committees, ensuring that matters are fully debated and that no one individual or group dominates the decision-making process. The Company’s Articles of Association contain provisions relating to the retirement, election and re-election of directors. At the forthcoming AGM Edward Astle and Gavin Darby will stand for (cid:69)(cid:76)(cid:69)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:108)(cid:82)(cid:83)(cid:84)(cid:0)(cid:84)(cid:73)(cid:77)(cid:69)(cid:14)(cid:0)(cid:36)(cid:65)(cid:86)(cid:73)(cid:68)(cid:0)(cid:33)(cid:76)(cid:76)(cid:86)(cid:69)(cid:89)(cid:12)(cid:0)(cid:51)(cid:69)(cid:78)(cid:73)(cid:79)(cid:82)(cid:0)(cid:41)(cid:78)(cid:68)(cid:69)(cid:80)(cid:69)(cid:78)(cid:68)(cid:69)(cid:78)(cid:84)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13) Executive Director will retire and, being eligible, will offer himself for re-election. Information and professional development To enable the Board to discharge its duties, all Directors have full and timely access to all relevant information. Papers are circulated well before the Board and Committee meetings to ensure that Directors have the necessary time to read and review them. The (cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:0)(cid:82)(cid:69)(cid:67)(cid:69)(cid:73)(cid:86)(cid:69)(cid:0)(cid:77)(cid:79)(cid:78)(cid:84)(cid:72)(cid:76)(cid:89)(cid:0)(cid:77)(cid:65)(cid:78)(cid:65)(cid:71)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:65)(cid:67)(cid:67)(cid:79)(cid:85)(cid:78)(cid:84)(cid:83)(cid:0) and regular management reports and information which enable them to scrutinise the Group’s and management’s performance against agreed objectives and prior performance. (cid:53)(cid:80)(cid:79)(cid:78)(cid:0)(cid:65)(cid:80)(cid:80)(cid:79)(cid:73)(cid:78)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:84)(cid:79)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:12)(cid:0)(cid:78)(cid:69)(cid:87)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:0) receive a formal induction programme, co-ordinated by the Group Company Secretary, tailored to suit the individual’s previous experience. Ongoing training is provided to Directors as necessary, for example, on best practice and changes in legislation, developments in the economic and regulatory environment and on the Company’s businesses. In addition, visits to sites are arranged at least once a year and one Board meeting is held abroad which incorporates a visit to one of the Group’s principal sites to further (cid:84)(cid:72)(cid:69)(cid:73)(cid:82)(cid:0)(cid:75)(cid:78)(cid:79)(cid:87)(cid:76)(cid:69)(cid:68)(cid:71)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:7)(cid:83)(cid:0)(cid:79)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:14)(cid:0)(cid:52)(cid:72)(cid:69)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0) Directors also attend various seminars during the year on topics relevant to a publicly-listed company. All Directors have access to the advice and services of the Group Company Secretary, who will assist in arranging any additional training and information as required. The appointment and removal of the Group Company Secretary is a matter for the Board as a whole. All Directors are entitled to obtain independent professional advice, at the Group’s expense, in the performance of their duties as (cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:14)(cid:0)(cid:46)(cid:79)(cid:0)(cid:83)(cid:85)(cid:67)(cid:72)(cid:0)(cid:65)(cid:68)(cid:86)(cid:73)(cid:67)(cid:69)(cid:0)(cid:87)(cid:65)(cid:83)(cid:0)(cid:83)(cid:79)(cid:85)(cid:71)(cid:72)(cid:84)(cid:0)(cid:68)(cid:85)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:89)(cid:69)(cid:65)(cid:82)(cid:14)(cid:0)(cid:41)(cid:78)(cid:0)(cid:65)(cid:67)(cid:67)(cid:79)(cid:82)(cid:68)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0) with the Company’s Articles of Association, the Company has granted an indemnity, to the extent permitted by law, to each of the Directors and Group Company Secretary. Directors’ and ofﬁcers’ liability insurance is in place. The Board believes that strong corporate governance improves the performance of the business and enhances shareholder value. During its meetings in 2009, the Board received and discussed reports from the Chief Executive Ofﬁcer, Chief Operating Ofﬁcer and Chief Financial Ofﬁcer on strategy, debt ﬁnancing, market reports, share trading reports, analysts’ forecasts, potential acquisitions, litigation reports, ﬁnal and interim dividend recommendations, 48 Intertek Annual Report 2009 Directors’ Report – Governance Corporate Governance Report potential contract bids, road show and investor feedback, budgets, tax policy, Annual Report, Half Year Results, interim management statements, announcements and a wide range of other issues. Performance evaluation Once again, the Board engaged in a performance evaluation process led by the Chairman comprising of a series of detailed questionnaires which provide a framework for the evaluation process. This provides a source of information not just on the Board’s performance but also on that of individual Directors and the Chairman. It also provides the Chairman with a means of making year-on-year comparisons. There are questionnaires for each of the following: the Board; each individual Director; and the Audit and Risk, Nominations and Remuneration Committees. This annual evaluation of the effectiveness of the Board and its Committees ensures that the performance of each individual Director and the functioning and constitution of the Board and each Committee are properly measured and debated. The Chairman assesses the individual performance of each Director, taking into account discussions with other Directors. The Senior Independent Director has discussions with the other Executive and Non-Executive Directors, without the Chairman being present, in order to appraise the Chairman’s performance during the year. For the year under review, these assessments concluded that the information supplied to the Board was extensive and informative. The assessment highlighted a wish for several presentations by senior managers to be made to the Board during 2009, which took place and such presentations will continue during 2010. The performance of the Board and each Director was, and is, effective, and all Directors demonstrate full commitment in their respective roles to the Company evidenced, inter alia, by the Board and Committee attendance records set out in this report. The evaluations further demonstrate that the Board has an appropriate set of skills, that all the Directors add value to the overall effectiveness and success of the Group, and that no substantial issues have arisen out of the evaluation process. The Audit and Risk, Nominations and Remuneration Committees also each held an evaluation of their work and effectiveness during the year, the results of which were reported to the Board by the Group Company Secretary. The reviews concluded that each Committee was operating in an efﬁcient and effective manner. The Board will continue to develop the evaluation process in order to ensure that it can properly review, on an annual basis, its performance and that of its individual members and Committees. Board Committees The Board has established three Committees, each with clearly deﬁned terms of reference, procedures and powers. These terms of reference are available on request from the Group Company Secretary at the registered ofﬁce or can be downloaded from www.intertek.com. The Directors who held ofﬁce during the year and the number of full Board meetings and Committee meetings attended by each Director during the year are given in the table on page 49. The Remuneration Committee At the end of 2009 this Committee comprised of three independent Non-Executive Directors, David Allvey (Chairman), Gavin Darby and Christopher Knight. Vanni Treves is also a member of the Committee. The Code requires the Remuneration Committee to have at least three independent Non-Executive Directors whilst allowing the Chairman of the Board of Directors of the Company, if considered independent on appointment, to be a member. The Committee complied with the Code provision on composition from 1 September 2009, when Gavin Darby was appointed as a member of the Remuneration Committee. The Committee has responsibility for making recommendations to the Board on the remuneration of the Chairman, Executive Directors and senior executives and for the determination, within agreed terms of reference, of additional beneﬁts for each of the Executive Directors, including pension rights and any compensation for loss of ofﬁce. The Committee is also responsible for the implementation and operation of employee share incentive arrangements. Details of the matters discussed and actions taken by the Remuneration Committee, including the Group’s remuneration for Executive Directors, and details of beneﬁts, share options, pension entitlements, service contracts and compensation payments are given in the Remuneration Report which starts on page 53. The Nominations Committee This Committee currently comprises three Non-Executive Directors, Vanni Treves (Chairman), David Allvey and Christopher Knight. During 2009 this Committee was evaluated and the Board agreed that membership of the Committee was appropriate and effective. The composition of the Committee is in compliance with the Code. This Committee met three times during the year. The main purpose of the Committee is to nominate candidates to ﬁll board vacancies, review talent mapping and succession planning for the Board and senior management and make recommendations on the balance and composition of the Board. During the year the Board accepted the Committee’s recommendations that Edward Astle and Gavin Darby join the Board. Both were appointed on 1 September 2009 as Non- Executive Directors, increasing the number of independent www.intertek.com Intertek Annual Report 2009 49 Attendance at Board and Committee meetings Name/Position Vanni Treves Chairman Wolfhart Hauser Chief Executive Officer Mark Loughead Chief Operating Officer Bill Spencer Chief Financial Officer David Allvey Senior Independent Non-Executive Director Edward Astle (appointed 1 September 2009)* Independent Non-Executive Director Gavin Darby (appointed 1 September 2009)* Independent Non-Executive Director Christopher Knight Independent Non-Executive Director Debra Rade Independent Non-Executive Director Former director Richard Nelson (retired 1 September 2009)* Non-Executive Deputy Chairman Scheduled Board meetings Audit and Risk Committee meetings Nominations Committee meetings Remuneration Committee meetings 7 (7) 7 (7) 7 (7) 7 (7) 7 (7) 3 (3) 3 (3) 7 (7) 7 (7) 4 (4) 3 (3) 6 (6) n/a n/a n/a 4 (4) 1(1) n/a 4 (4) n/a n/a n/a n/a 3 (3) n/a n/a 3 (3) n/a n/a n/a n/a 6 (6) n/a 1 (1) 6 (6) n/a 3 (4) n/a n/a n/a * Actual attendance/maximum number of meetings a Director could attend as a Board/Committee member. Membership of the three relevant Board Committees is set out on pages 48 to 50. Non-Executive Directors to ﬁve, and also helping to maintain the balance of the Board in the context of the retirement of Richard Nelson from the Board during 2009. In respect of the appointment of Edward Astle and Gavin Darby, the Committee engaged an independent search consultancy to help it identify suitable candidates with the necessary skills and capabilities required. Talent mapping and succession planning are important components in ensuring the continued success of the Group. The goal of the Intertek talent mapping process is to have the right organisation with the right people in the right jobs at the right time, including identifying and preparing the next generation. This approach was ﬁrst introduced in 2006. The 2009 objectives were to continue the roll out of the customer centric organisation and cascade the talent processes through and across the global operations. Resources. The global Intertek talent mapping process includes the identiﬁcation and readiness of potential successors and highlights coaching, mentoring and training if required. Bearing in mind the balance of existing skills, knowledge and experience of the Board, a job description is prepared for any new Board position and when a Non-Executive Director is appointed, the Committee requires conﬁrmation that he or she can devote sufﬁcient time to fulﬁl the commitments of the role. The terms and conditions of appointment of Non-Executive Directors are available for inspection by any person at the Company’s registered ofﬁce during normal business hours and at the AGM (for 15 minutes prior to the meeting and during the meeting). All new Directors are subject to election by shareholders at the ﬁrst AGM after their appointment and then subject to re-election by shareholders once every three years. Reviews are conducted by ‘career committees’ of the Chief Executive Ofﬁcer, Division Executive Vice Presidents, Group Executive Vice President Human Resources and the Division Vice Presidents Human The policy on Directors’ service contracts is set out in the Remuneration Report. 50 Intertek Annual Report 2009 Directors’ Report – Governance Corporate Governance Report The Audit and Risk Committee (cid:52)(cid:72)(cid:73)(cid:83)(cid:0)(cid:35)(cid:79)(cid:77)(cid:77)(cid:73)(cid:84)(cid:84)(cid:69)(cid:69)(cid:0)(cid:67)(cid:85)(cid:82)(cid:82)(cid:69)(cid:78)(cid:84)(cid:76)(cid:89)(cid:0)(cid:67)(cid:79)(cid:77)(cid:80)(cid:82)(cid:73)(cid:83)(cid:69)(cid:83)(cid:0)(cid:70)(cid:79)(cid:85)(cid:82)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:12)(cid:0) (cid:36)(cid:65)(cid:86)(cid:73)(cid:68)(cid:0)(cid:33)(cid:76)(cid:76)(cid:86)(cid:69)(cid:89)(cid:0)(cid:8)(cid:35)(cid:72)(cid:65)(cid:73)(cid:82)(cid:77)(cid:65)(cid:78)(cid:9)(cid:12)(cid:0)(cid:37)(cid:68)(cid:87)(cid:65)(cid:82)(cid:68)(cid:0)(cid:33)(cid:83)(cid:84)(cid:76)(cid:69)(cid:12)(cid:0)(cid:35)(cid:72)(cid:82)(cid:73)(cid:83)(cid:84)(cid:79)(cid:80)(cid:72)(cid:69)(cid:82)(cid:0)(cid:43)(cid:78)(cid:73)(cid:71)(cid:72)(cid:84)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0) Vanni Treves. The Code requires the Audit and Risk Committee (cid:84)(cid:79)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0)(cid:65)(cid:84)(cid:0)(cid:76)(cid:69)(cid:65)(cid:83)(cid:84)(cid:0)(cid:84)(cid:72)(cid:82)(cid:69)(cid:69)(cid:0)(cid:73)(cid:78)(cid:68)(cid:69)(cid:80)(cid:69)(cid:78)(cid:68)(cid:69)(cid:78)(cid:84)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:14)(cid:0) As Chairman of the Company, Vanni Treves is not viewed as independent by the Code and therefore the Committee did not comply with the Code until 1 September 2009 when Edward Astle was appointed a member of the Audit and Risk Committee. (cid:34)(cid:79)(cid:84)(cid:72)(cid:0)(cid:36)(cid:65)(cid:86)(cid:73)(cid:68)(cid:0)(cid:33)(cid:76)(cid:76)(cid:86)(cid:69)(cid:89)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:35)(cid:72)(cid:82)(cid:73)(cid:83)(cid:84)(cid:79)(cid:80)(cid:72)(cid:69)(cid:82)(cid:0)(cid:43)(cid:78)(cid:73)(cid:71)(cid:72)(cid:84)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0)(cid:82)(cid:69)(cid:67)(cid:69)(cid:78)(cid:84)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0) relevant ﬁnancial experience as detailed in their biographies on page 43. The Audit and Risk Committee monitors the integrity of the Group’s ﬁnancial statements and any formal announcements relating to the Group’s performance. The Committee is responsible for monitoring the effectiveness of the external audit process and making recommendations to the Board in relation to the appointment, reappointment and remuneration of the external auditors, and for ensuring that an appropriate relationship is maintained between the Group and its external auditors. It also reviews annually the Group’s systems of internal control, risk management, the processes for monitoring and evaluating the risks facing the Group and the effectiveness of the internal audit function. It reviews the progress of internal audit activity against the annual plan, and reviews the strategy, scope and approach of the internal audit and risk management teams. It reviews the corrective action taken by management to address any control issues identiﬁed by the internal audit and risk management function. It is responsible for approving the appointment and termination of the Vice President Risk Management and Internal Audit and meets with him at least once a year without management present. Committee meetings are usually attended by the Group’s external auditors, Chief Executive Ofﬁcer, Chief Financial Ofﬁcer, Vice President Financial Control and the Vice President Risk Management and Internal Audit. The Group’s external auditors meet with the members of the Audit and Risk Committee at least once a year without management present. The Audit and Risk Committee seeks to ensure the continued independence and objectivity of the Group’s external auditors. A policy on the provision of non-audit work by the external auditors has been approved by the Board to ensure that auditors’ objectivity and independence are safeguarded. To this end, the policy highlights those areas where the external auditor cannot provide services to the Group, including inter alia, the provision of Group management functions, internal audit outsourcing, provision of legal advice and recruitment and remuneration advice. The external auditors conﬁrm by way of letter to the Board that processes to ensure compliance with this policy are in place, and that these processes are monitored regularly. A detailed breakdown of the audit and non-audit fees paid to the Group’s auditors during the year is set out in note 5 to the ﬁnancial statements. (cid:52)(cid:72)(cid:69)(cid:0)(cid:35)(cid:79)(cid:77)(cid:77)(cid:73)(cid:84)(cid:84)(cid:69)(cid:69)(cid:0)(cid:72)(cid:65)(cid:83)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:77)(cid:77)(cid:69)(cid:78)(cid:68)(cid:69)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:43)(cid:48)(cid:45)(cid:39)(cid:0) Audit Plc be reappointed auditor at the forthcoming Annual General Meeting. At its meetings during 2009, the Committee reviewed and endorsed prior to submission to the Board, the Group’s 2008 Annual Report (cid:65)(cid:78)(cid:68)(cid:0)(cid:18)(cid:16)(cid:16)(cid:25)(cid:0)(cid:40)(cid:65)(cid:76)(cid:70)(cid:0)(cid:57)(cid:69)(cid:65)(cid:82)(cid:0)(cid:50)(cid:69)(cid:83)(cid:85)(cid:76)(cid:84)(cid:83)(cid:14)(cid:0)(cid:52)(cid:72)(cid:69)(cid:0)(cid:35)(cid:72)(cid:65)(cid:73)(cid:82)(cid:77)(cid:65)(cid:78)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:79)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:35)(cid:79)(cid:77)(cid:77)(cid:73)(cid:84)(cid:84)(cid:69)(cid:69)(cid:0) members also attend meetings with the external auditors and management to discuss any accounting issues associated with the annual audit. It also reviewed the Group’s arrangements for the avoidance and detection of fraud and related matters, whistle- blowing and hotlines, compliance, training, quality assurance systems and potential claims affecting the Company. The ultimate responsibility for reviewing and approving the (cid:33)(cid:78)(cid:78)(cid:85)(cid:65)(cid:76)(cid:0)(cid:50)(cid:69)(cid:80)(cid:79)(cid:82)(cid:84)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:40)(cid:65)(cid:76)(cid:70)(cid:0)(cid:57)(cid:69)(cid:65)(cid:82)(cid:0)(cid:50)(cid:69)(cid:83)(cid:85)(cid:76)(cid:84)(cid:83)(cid:0)(cid:65)(cid:78)(cid:78)(cid:79)(cid:85)(cid:78)(cid:67)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:82)(cid:69)(cid:77)(cid:65)(cid:73)(cid:78)(cid:83)(cid:0) with the Board. During 2009 the Audit and Risk Committee met four times. Procedures to deal with Directors’ conﬂicts of interests The Board has a formal system to deal with conﬂicts of Directors’ interests. Each year all Directors complete a questionnaire in order to identify any conﬂicts or potential conﬂicts of interests. The decision to authorise a conﬂict of interest can only be made by non- conﬂicted Directors, meaning those who have no interest in the matter being considered. The authorised decisions are reviewed on an annual basis or, where appropriate, authorisation is sought prior to the appointment of any new directors or if a new conﬂict arises. During 2009 this procedure operated effectively. Internal control The Group’s primary business objectives require adherence to local, national and international laws and require the Group’s employees to show integrity and honesty in all business dealings. Risk management and internal controls are therefore embedded in the running of each division and support function, assuring the accuracy and validity of reports and certiﬁcates that the Group provides to customers. The Board is responsible for establishing and maintaining the Group’s system of internal control and for reviewing its effectiveness. Such a system can realistically only manage rather than eliminate, the risk of failure to achieve business objectives and can only provide reasonable assurance against material misstatement or loss. www.intertek.com Intertek Annual Report 2009 51 There are a number of controls in place to ensure that the Group has robust procedures for preparing consolidated accounts and for ﬁnancial reporting. Intertek has a clear set of Accounting Policies and Procedures available to all staff. This gives instructions on accounting treatment and reporting. There are ongoing reviews of adherence to these policies by Group Internal Audit and by Finance Management. The Group is audited externally by KPMG Audit Plc. The Board conﬁrms that in addition to internal audits, there is an ongoing process for identifying, evaluating and managing any signiﬁcant risks to the Group’s short and long-term value, including those arising from social, environmental and ethical matters. This process, which is regularly reviewed by the Board and accords with the Turnbull Guidance, has been in place for the year under review and up to the date of approval of the Annual Report. Any breaches of internal controls identiﬁed by the Group’s control review procedures are reported to the Audit and Risk Committee and corrective action taken. In carrying out the risk review, the Board is satisﬁed that it received adequate information from the operations around the world. Training is provided to Directors on these matters where necessary. The Audit and Risk Committee has reviewed the effectiveness of the system of ﬁnancial and non-ﬁnancial internal control during the year. In particular, it has reviewed and continues to seek to improve the process for identifying and evaluating the signiﬁcant risks affecting the business and the policies and procedures by which these risks are managed. This is reinforced by the Intertek Compliance Code and Code of Ethics, which provide practical guidance and instruction for employees. The Codes are available at www.intertek.com. The Group maintains a robust stance in regard to breaches of ethics and all employees are required to sign a certiﬁcate conﬁrming their understanding that any breaches of the Group’s Code of Ethics will result in disciplinary action that may include summary dismissal of the employee concerned. To support Group policies and to facilitate the raising of concerns about possible improprieties in matters of ﬁnancial reporting or any other matters, the Group provides and publicises email and telephone hotlines so that staff may report anonymously any inaccurate or unethical working practices. All complaints are investigated thoroughly with action taken as appropriate. The number of complaints received, together with the corrective actions taken, are reported to the Audit and Risk Committee. During 2009, 88 complaints were received and investigated. This is an increase from the 42 reported last year. The Group has increased the awareness of hotlines to internal and external parties, and sees hotlines as an important tool in eradicating isolated cases of poor behaviour. Most investigations concluded that the complaint was unfounded, but corrective action was taken where appropriate. In carrying out its review, the Audit and Risk Committee endeavours to ensure that the Group has in place the most appropriate and effective controls, checks, systems and risk management techniques so as to be in line with best practice on such matters. Each operating division and support function is responsible for the identiﬁcation and evaluation of signiﬁcant risks applicable to that area of business, together with the design and operation of suitable internal controls. These risks are assessed on a continual basis, and may be associated with a variety of internal or external factors including control breakdowns, disruption of information systems, loss of key facilities, retention of key staff, competition, natural catastrophe and regulatory requirements. Operation of the controls is designed to minimise the occurrence of risk or its consequences. A process of control using self-assessment and hierarchical reporting has been established which provides a documented trail of accountability. These procedures are applied across Group operations and provide for continuing assurances to be given at increasingly higher levels of management and ﬁnally, to the Board. This process is facilitated by Internal Audit which also provides assurance as to the operation and validity of the system of internal controls. Planned corrective actions are independently monitored for timely completion. Each division and support function reports annually to the Audit and Risk Committee via the Vice President Risk Management and Internal Audit on its review of risks and how they are managed. Each year senior managers throughout the Group conﬁrm the adequacy of their systems of internal controls, compliance with Group policies, local laws and regulations and report any control weaknesses identiﬁed in the past year. One of the Audit and Risk Committee’s main roles is to review, on behalf of the Board, the key risks inherent in the business and the system of controls necessary to ensure such risks are properly managed. Quality assurance audits are carried out by the divisions, and the ﬁndings reported to divisional management and to compliance ofﬁcers. Each division has at least one compliance ofﬁcer who undertakes investigations of issues that arise either from quality assurance audits or by other means, such as the employee hotline. Reports of signiﬁcant ﬁndings are presented to the Audit and Risk Committee. Each geographic region has at least one internal auditor who is independent of the divisions. Sites are reviewed regularly on a schedule based on materiality and perceived risk. Reports of signiﬁcant ﬁndings are presented to the Audit and Risk Committee which monitors and reviews the effectiveness of the internal audit function. The internal audit department was awarded ISO 9001 accreditation in 2003. An external accreditation body conducts 52 Intertek Annual Report 2009 Directors’ Report – Governance Corporate Governance Report Any comments received from institutional shareholders are communicated directly to the Board, and all analysts’ and brokers’ reports on the Group are sent to each Director. The Company’s AGM provides all shareholders with the opportunity to further develop their understanding of the Company and to ask questions of the full Board on the matters put to the meeting, including the Annual Report. All Board members attend the AGM (cid:65)(cid:78)(cid:68)(cid:0)(cid:73)(cid:78)(cid:0)(cid:80)(cid:65)(cid:82)(cid:84)(cid:73)(cid:67)(cid:85)(cid:76)(cid:65)(cid:82)(cid:12)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:35)(cid:72)(cid:65)(cid:73)(cid:82)(cid:77)(cid:69)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:33)(cid:85)(cid:68)(cid:73)(cid:84)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:50)(cid:73)(cid:83)(cid:75)(cid:12)(cid:0)(cid:46)(cid:79)(cid:77)(cid:73)(cid:78)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0) and Remuneration Committees are available to answer questions. At General Meetings, a schedule of the proxy votes cast is made available to all shareholders and is also available on the Group website. The Company proposes a resolution on each substantially separate issue and does not combine resolutions inappropriately. Going concern After making diligent enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operation for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Group’s ﬁnancial statements. surveillance audits of the internal audit department every year, and conducts a more detailed review every three years. During 2009, the department’s ISO 9001 accreditation was successfully renewed for a further three years. The Group will, from time to time, be required by its customers to operate in countries where there is potential political and economic risk. In doing so, the Group fulﬁls its policy of facilitating international trade inspection and audit services that help to prevent corruption and assist with humanitarian aid. Where there are no laws in place that prohibit business dealings in certain countries, the Group will consider operating in those countries, but only in compliance with its stringent Code of Ethics. The Chief Executive Ofﬁcer also reports to the Board on signiﬁcant changes in the business and the external environment which could impact on risk. The Chief Financial Ofﬁcer provides the Board with monthly ﬁnancial information, which includes the comparison of key performance ﬁgures against budgets, and forecasts. Information is also provided with regards to risk indicators. The Board approves the treasury policy and the Treasury department’s activities are also subject to regular internal audits. During 2009 the policies and procedures of the Treasury department were also reviewed by PricewaterhouseCoopers. Relations with shareholders The Board recognises the importance of maintaining an effective investor relations and communication programme as part of its ongoing relationship with the Company’s shareholders. The Group produces an Annual Report which is available to shareholders and also publishes interim management statements (cid:65)(cid:78)(cid:68)(cid:0)(cid:40)(cid:65)(cid:76)(cid:70)(cid:0)(cid:57)(cid:69)(cid:65)(cid:82)(cid:0)(cid:50)(cid:69)(cid:83)(cid:85)(cid:76)(cid:84)(cid:83)(cid:14)(cid:0)(cid:52)(cid:72)(cid:69)(cid:0)(cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:0)(cid:87)(cid:69)(cid:66)(cid:83)(cid:73)(cid:84)(cid:69)(cid:0)(cid:8)(cid:87)(cid:87)(cid:87)(cid:14)(cid:73)(cid:78)(cid:84)(cid:69)(cid:82)(cid:84)(cid:69)(cid:75)(cid:14)(cid:67)(cid:79)(cid:77)(cid:9)(cid:0) contains up-to-date information on its activities and published ﬁnancial results. Shareholders can subscribe via the Investors’ section of www.intertek.com to receive email alerts of important announcements made by the Group. The Companies Act 2006 and the Disclosure and Transparency Rules of the Financial Services Authority enable communications with shareholders using electronic means via the Group website or by email. The Group’s Annual Report, notices of meetings and proxy forms are provided electronically as a default option. However, shareholders are also able to request paper copies of documents if they so choose. www.intertek.com Directors’ Report – Governance Intertek Annual Report 2009 53 Remuneration Report Contents 53 53 54 55 This report Chairman’s commentary Policy Executive Directors and other executives 55 56 57 57 58 (cid:21)(cid:25)(cid:0) (cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83) 59 TSR Performance graph 60 62 Cash bonuses Deferred Bonus Share Plan Salaries Pensions Service contracts The Committee Audited information This Report This report sets out the Group’s policy and disclosures in relation to Directors’ remuneration for the year ended 31 December 2009. It will be subject to shareholder vote at the forthcoming AGM. The report has been prepared on behalf of the Board and complies fully with the requirements of the Companies Act 2006 and (cid:51)(cid:67)(cid:72)(cid:69)(cid:68)(cid:85)(cid:76)(cid:69)(cid:0)(cid:24)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:44)(cid:65)(cid:82)(cid:71)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:45)(cid:69)(cid:68)(cid:73)(cid:85)(cid:77)(cid:13)(cid:83)(cid:73)(cid:90)(cid:69)(cid:68)(cid:0)(cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:73)(cid:69)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:83)(cid:0) (Accounts and Reports) Regulations 2008 (the Regulations) and the Combined Code on Corporate Governance (the Code) and has been (cid:65)(cid:85)(cid:68)(cid:73)(cid:84)(cid:69)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0)(cid:43)(cid:48)(cid:45)(cid:39)(cid:0)(cid:33)(cid:85)(cid:68)(cid:73)(cid:84)(cid:0)(cid:48)(cid:76)(cid:67)(cid:0)(cid:84)(cid:79)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:69)(cid:88)(cid:84)(cid:69)(cid:78)(cid:84)(cid:0)(cid:82)(cid:69)(cid:81)(cid:85)(cid:73)(cid:82)(cid:69)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:50)(cid:69)(cid:71)(cid:85)(cid:76)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:14)(cid:0) The Group has applied the Principles of Good Corporate Governance relating to the remuneration of its Directors and this report outlines how the Group has complied with the provisions of the Code as well as some of the guidelines issued by institutional shareholder bodies. Commentary from the Chairman of the Remuneration Committee The principal challenge for the Remuneration Committee this year has been to judge the changing economic conditions, their impact on employment and the reactions of investors and advisory bodies around the world. During the period under review there has been increased external scrutiny of and changes proposed for corporate governance (cid:65)(cid:70)(cid:70)(cid:69)(cid:67)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:82)(cid:69)(cid:87)(cid:65)(cid:82)(cid:68)(cid:12)(cid:0)(cid:80)(cid:65)(cid:82)(cid:84)(cid:73)(cid:67)(cid:85)(cid:76)(cid:65)(cid:82)(cid:76)(cid:89)(cid:0)(cid:65)(cid:67)(cid:82)(cid:79)(cid:83)(cid:83)(cid:0)(cid:37)(cid:85)(cid:82)(cid:79)(cid:80)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:46)(cid:79)(cid:82)(cid:84)(cid:72)(cid:0)(cid:33)(cid:77)(cid:69)(cid:82)(cid:73)(cid:67)(cid:65)(cid:14)(cid:0) There have been numerous proposals for changes in remuneration practices. The Committee has monitored these and will apply them where they are considered relevant and applicable to Intertek. Reﬂ ecting the continued success of the business, in March 2009, Intertek was promoted into the FTSE 100. Because of this we have changed the peer groups we use to judge our relative performance when making remuneration decisions. As you will see in the Financial Review, Intertek has continued to perform well compared to many other companies. In addition many of the current recommendations for remuneration governance under discussion for other sectors are already part of Intertek’s policies. For example, evaluation of risk is a factor used to decide bonus, there is already deferral of part of bonus for three years and the possible claw-back of bonuses and share awards in the event of misstatement of results. However, speciﬁ c changes have been made over this year and in 2010 to take account of the wider economic and governance environments and the Company’s success: (cid:115)(cid:0) (cid:0)(cid:33)(cid:77)(cid:69)(cid:78)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:52)(cid:79)(cid:84)(cid:65)(cid:76)(cid:0)(cid:51)(cid:72)(cid:65)(cid:82)(cid:69)(cid:72)(cid:79)(cid:76)(cid:68)(cid:69)(cid:82)(cid:0)(cid:50)(cid:69)(cid:84)(cid:85)(cid:82)(cid:78)(cid:0)(cid:8)(cid:52)(cid:51)(cid:50)(cid:9)(cid:0)(cid:80)(cid:69)(cid:82)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0) conditions for our Deferred Bonus Share Plan performance awards granted in 2009 so that the peer group included FTSE companies ranked 76 to 175. We will change the peer group again for 2010 awards, to include companies ranked 51 to 150. (cid:115)(cid:0) (cid:0)(cid:50)(cid:69)(cid:67)(cid:79)(cid:78)(cid:83)(cid:73)(cid:68)(cid:69)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:67)(cid:72)(cid:65)(cid:78)(cid:71)(cid:69)(cid:83)(cid:0)(cid:87)(cid:69)(cid:0)(cid:72)(cid:65)(cid:68)(cid:0)(cid:80)(cid:76)(cid:65)(cid:78)(cid:78)(cid:69)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:77)(cid:65)(cid:75)(cid:69)(cid:0)(cid:84)(cid:79)(cid:0)(cid:80)(cid:69)(cid:82)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0) conditions and deciding that Earnings per share (EPS) was not an appropriate measure for deferred bonus awards made in 2009 or 2010. (cid:115)(cid:0) (cid:0)(cid:35)(cid:65)(cid:83)(cid:72)(cid:0)(cid:66)(cid:79)(cid:78)(cid:85)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:83)(cid:72)(cid:65)(cid:82)(cid:69)(cid:0)(cid:66)(cid:79)(cid:78)(cid:85)(cid:83)(cid:0)(cid:79)(cid:80)(cid:80)(cid:79)(cid:82)(cid:84)(cid:85)(cid:78)(cid:73)(cid:84)(cid:73)(cid:69)(cid:83)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:0) and other senior employees have been increased for 2010 following a benchmarking review. There are no major strategic changes of direction planned. Whilst market turbulence and changes in advised governance continue we will keep their effects on our remuneration policy under close review. The Board has announced the retirement of Bill Spencer and the (cid:65)(cid:80)(cid:80)(cid:79)(cid:73)(cid:78)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:72)(cid:73)(cid:83)(cid:0)(cid:83)(cid:85)(cid:67)(cid:67)(cid:69)(cid:83)(cid:83)(cid:79)(cid:82)(cid:12)(cid:0)(cid:44)(cid:76)(cid:79)(cid:89)(cid:68)(cid:0)(cid:48)(cid:73)(cid:84)(cid:67)(cid:72)(cid:70)(cid:79)(cid:82)(cid:68)(cid:14)(cid:0)(cid:34)(cid:73)(cid:76)(cid:76)(cid:0)(cid:87)(cid:73)(cid:76)(cid:76)(cid:0)(cid:66)(cid:69)(cid:0)(cid:76)(cid:69)(cid:65)(cid:86)(cid:73)(cid:78)(cid:71)(cid:0) the business on 31 March 2010. Details of Bill Spencer’s arrangements on departure are set out on page 58. Details of (cid:44)(cid:76)(cid:79)(cid:89)(cid:68)(cid:0)(cid:48)(cid:73)(cid:84)(cid:67)(cid:72)(cid:70)(cid:79)(cid:82)(cid:68)(cid:7)(cid:83)(cid:0)(cid:82)(cid:69)(cid:77)(cid:85)(cid:78)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:83)(cid:84)(cid:73)(cid:76)(cid:76)(cid:0)(cid:66)(cid:69)(cid:73)(cid:78)(cid:71)(cid:0)(cid:108)(cid:0)(cid:78)(cid:65)(cid:76)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:87)(cid:73)(cid:76)(cid:76)(cid:0)(cid:66)(cid:69)(cid:0) disclosed in next year’s Remuneration Report. 54 Intertek Annual Report 2009 (cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:7)(cid:0)(cid:50)(cid:69)(cid:80)(cid:79)(cid:82)(cid:84)(cid:0)(cid:110)(cid:0)(cid:39)(cid:79)(cid:86)(cid:69)(cid:82)(cid:78)(cid:65)(cid:78)(cid:67)(cid:69) Remuneration Report Policy Our remuneration strategy remains to: (cid:115)(cid:0) 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(cid:65)(cid:83)(cid:0)(cid:65)(cid:80)(cid:80)(cid:82)(cid:79)(cid:86)(cid:65)(cid:76)(cid:0)(cid:80)(cid:82)(cid:79)(cid:67)(cid:69)(cid:68)(cid:85)(cid:82)(cid:69)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:82)(cid:69)(cid:86)(cid:73)(cid:69)(cid:87)(cid:0)(cid:70)(cid:82)(cid:69)(cid:81)(cid:85)(cid:69)(cid:78)(cid:67)(cid:89)(cid:12)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0)(cid:69)(cid:65)(cid:67)(cid:72)(cid:0)(cid:79)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) (cid:82)(cid:69)(cid:84)(cid:65)(cid:73)(cid:78)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:70)(cid:82)(cid:69)(cid:69)(cid:68)(cid:79)(cid:77)(cid:0)(cid:84)(cid:79)(cid:0)(cid:78)(cid:65)(cid:86)(cid:73)(cid:71)(cid:65)(cid:84)(cid:69)(cid:12)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:70)(cid:82)(cid:65)(cid:77)(cid:69)(cid:87)(cid:79)(cid:82)(cid:75)(cid:0)(cid:84)(cid:79)(cid:0)(cid:108)(cid:78)(cid:68)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0)(cid:66)(cid:69)(cid:83)(cid:84)(cid:0)(cid:76)(cid:79)(cid:67)(cid:65)(cid:76)(cid:0)(cid:83)(cid:79)(cid:76)(cid:85)(cid:84)(cid:73)(cid:79)(cid:78)(cid:14) (cid:47)(cid:85)(cid:82)(cid:0)(cid:80)(cid:69)(cid:69)(cid:82)(cid:0)(cid:71)(cid:82)(cid:79)(cid:85)(cid:80)(cid:83)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:77)(cid:65)(cid:74)(cid:79)(cid:82)(cid:73)(cid:84)(cid:89)(cid:0)(cid:79)(cid:70)(cid:0)(cid:79)(cid:85)(cid:82)(cid:0)(cid:69)(cid:77)(cid:80)(cid:76)(cid:79)(cid:89)(cid:69)(cid:69)(cid:83)(cid:0)(cid:67)(cid:79)(cid:78)(cid:83)(cid:73)(cid:83)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0) (cid:73)(cid:78)(cid:84)(cid:69)(cid:82)(cid:78)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:65)(cid:76)(cid:0)(cid:73)(cid:78)(cid:68)(cid:85)(cid:83)(cid:84)(cid:82)(cid:73)(cid:65)(cid:76)(cid:0)(cid:79)(cid:82)(cid:71)(cid:65)(cid:78)(cid:73)(cid:83)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:83)(cid:73)(cid:77)(cid:73)(cid:76)(cid:65)(cid:82)(cid:13)(cid:83)(cid:73)(cid:90)(cid:69)(cid:68)(cid:0)(cid:66)(cid:85)(cid:83)(cid:73)(cid:78)(cid:69)(cid:83)(cid:83)(cid:69)(cid:83)(cid:0)(cid:73)(cid:78)(cid:0) (cid:69)(cid:65)(cid:67)(cid:72)(cid:0)(cid:68)(cid:79)(cid:77)(cid:65)(cid:73)(cid:78)(cid:14)(cid:0)(cid:41)(cid:78)(cid:0)(cid:82)(cid:69)(cid:83)(cid:80)(cid:69)(cid:67)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:79)(cid:85)(cid:82)(cid:0)(cid:77)(cid:79)(cid:82)(cid:69)(cid:0)(cid:83)(cid:69)(cid:78)(cid:73)(cid:79)(cid:82)(cid:0)(cid:69)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:83)(cid:12)(cid:0)(cid:87)(cid:69)(cid:0)(cid:66)(cid:65)(cid:83)(cid:69)(cid:0)(cid:79)(cid:85)(cid:82)(cid:0) (cid:80)(cid:65)(cid:89)(cid:0)(cid:67)(cid:79)(cid:77)(cid:80)(cid:65)(cid:82)(cid:73)(cid:83)(cid:79)(cid:78)(cid:83)(cid:0)(cid:79)(cid:78)(cid:0)(cid:65)(cid:0)(cid:66)(cid:76)(cid:69)(cid:78)(cid:68)(cid:0)(cid:79)(cid:70)(cid:0)(cid:70)(cid:65)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:0)(cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:83)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:12)(cid:0)(cid:74)(cid:79)(cid:66)(cid:0)(cid:76)(cid:79)(cid:67)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:12)(cid:0) (cid:82)(cid:69)(cid:83)(cid:80)(cid:79)(cid:78)(cid:83)(cid:73)(cid:66)(cid:73)(cid:76)(cid:73)(cid:84)(cid:89)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:82)(cid:79)(cid:76)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:80)(cid:69)(cid:82)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:78)(cid:67)(cid:69)(cid:12)(cid:0)(cid:87)(cid:72)(cid:73)(cid:76)(cid:83)(cid:84)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:71)(cid:78)(cid:73)(cid:83)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0) (cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:0)(cid:73)(cid:83)(cid:0)(cid:53)(cid:43)(cid:13)(cid:76)(cid:73)(cid:83)(cid:84)(cid:69)(cid:68)(cid:14) (cid:55)(cid:69)(cid:0)(cid:66)(cid:69)(cid:76)(cid:73)(cid:69)(cid:86)(cid:69)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:82)(cid:69)(cid:87)(cid:65)(cid:82)(cid:68)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:82)(cid:69)(cid:84)(cid:69)(cid:78)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:83)(cid:69)(cid:78)(cid:73)(cid:79)(cid:82)(cid:0)(cid:69)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:83)(cid:0)(cid:65)(cid:0) (cid:83)(cid:73)(cid:71)(cid:78)(cid:73)(cid:108)(cid:67)(cid:65)(cid:78)(cid:84)(cid:0)(cid:80)(cid:82)(cid:79)(cid:80)(cid:79)(cid:82)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:82)(cid:69)(cid:77)(cid:85)(cid:78)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:83)(cid:72)(cid:79)(cid:85)(cid:76)(cid:68)(cid:0)(cid:66)(cid:69)(cid:0)(cid:80)(cid:69)(cid:82)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:78)(cid:67)(cid:69)(cid:13) (cid:82)(cid:69)(cid:76)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0)(cid:80)(cid:65)(cid:82)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:82)(cid:69)(cid:77)(cid:85)(cid:78)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:66)(cid:69)(cid:73)(cid:78)(cid:71)(cid:0)(cid:68)(cid:69)(cid:70)(cid:69)(cid:82)(cid:82)(cid:69)(cid:68)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:70)(cid:79)(cid:82)(cid:77)(cid:0) (cid:79)(cid:70)(cid:0)(cid:83)(cid:72)(cid:65)(cid:82)(cid:69)(cid:0)(cid:65)(cid:87)(cid:65)(cid:82)(cid:68)(cid:83)(cid:0)(cid:86)(cid:69)(cid:83)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:87)(cid:69)(cid:76)(cid:76)(cid:0)(cid:65)(cid:70)(cid:84)(cid:69)(cid:82)(cid:0)(cid:71)(cid:82)(cid:65)(cid:78)(cid:84)(cid:14)(cid:0)(cid:55)(cid:69)(cid:0)(cid:66)(cid:69)(cid:76)(cid:73)(cid:69)(cid:86)(cid:69)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:83)(cid:72)(cid:65)(cid:82)(cid:69)(cid:0) (cid:79)(cid:87)(cid:78)(cid:69)(cid:82)(cid:83)(cid:72)(cid:73)(cid:80)(cid:0)(cid:83)(cid:72)(cid:79)(cid:85)(cid:76)(cid:68)(cid:0)(cid:70)(cid:79)(cid:82)(cid:77)(cid:0)(cid:65)(cid:0)(cid:83)(cid:73)(cid:71)(cid:78)(cid:73)(cid:108)(cid:67)(cid:65)(cid:78)(cid:84)(cid:0)(cid:69)(cid:76)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:73)(cid:78)(cid:0)(cid:83)(cid:69)(cid:78)(cid:73)(cid:79)(cid:82)(cid:0)(cid:69)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:83)(cid:7)(cid:0) (cid:67)(cid:79)(cid:77)(cid:80)(cid:69)(cid:78)(cid:83)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:83)(cid:79)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:84)(cid:79)(cid:84)(cid:65)(cid:76)(cid:0)(cid:82)(cid:69)(cid:77)(cid:85)(cid:78)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:87)(cid:73)(cid:76)(cid:76)(cid:0)(cid:68)(cid:69)(cid:80)(cid:69)(cid:78)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0) (cid:83)(cid:85)(cid:83)(cid:84)(cid:65)(cid:73)(cid:78)(cid:69)(cid:68)(cid:0)(cid:70)(cid:85)(cid:84)(cid:85)(cid:82)(cid:69)(cid:0)(cid:83)(cid:85)(cid:67)(cid:67)(cid:69)(cid:83)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:14)(cid:0) (cid:52)(cid:72)(cid:69)(cid:0)(cid:70)(cid:79)(cid:76)(cid:76)(cid:79)(cid:87)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:83)(cid:69)(cid:84)(cid:83)(cid:0)(cid:79)(cid:85)(cid:84)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:69)(cid:76)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:77)(cid:65)(cid:75)(cid:69)(cid:0)(cid:85)(cid:80)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0) (cid:82)(cid:69)(cid:77)(cid:85)(cid:78)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:26) Performance – short-term (cid:33)(cid:78)(cid:78)(cid:85)(cid:65)(cid:76)(cid:0)(cid:67)(cid:65)(cid:83)(cid:72)(cid:0)(cid:80)(cid:69)(cid:82)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:66)(cid:79)(cid:78)(cid:85)(cid:83)(cid:0) (cid:52)(cid:72)(cid:69)(cid:0)(cid:67)(cid:65)(cid:83)(cid:72)(cid:0)(cid:66)(cid:79)(cid:78)(cid:85)(cid:83)(cid:0)(cid:83)(cid:69)(cid:82)(cid:86)(cid:69)(cid:83)(cid:0)(cid:84)(cid:79)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:71)(cid:78)(cid:73)(cid:83)(cid:69)(cid:0)(cid:83)(cid:72)(cid:79)(cid:82)(cid:84)(cid:13)(cid:84)(cid:69)(cid:82)(cid:77)(cid:0)(cid:80)(cid:69)(cid:82)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:65)(cid:71)(cid:65)(cid:73)(cid:78)(cid:83)(cid:84)(cid:0)(cid:84)(cid:65)(cid:82)(cid:71)(cid:69)(cid:84)(cid:83)(cid:0)(cid:87)(cid:72)(cid:73)(cid:67)(cid:72)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:65)(cid:0)(cid:77)(cid:73)(cid:88)(cid:0)(cid:79)(cid:70)(cid:0) (cid:0)(cid:83)(cid:72)(cid:65)(cid:82)(cid:69)(cid:72)(cid:79)(cid:76)(cid:68)(cid:69)(cid:82)(cid:12)(cid:0)(cid:66)(cid:85)(cid:83)(cid:73)(cid:78)(cid:69)(cid:83)(cid:83)(cid:12)(cid:0)(cid:84)(cid:69)(cid:65)(cid:77)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:80)(cid:69)(cid:82)(cid:83)(cid:79)(cid:78)(cid:65)(cid:76)(cid:0)(cid:79)(cid:66)(cid:74)(cid:69)(cid:67)(cid:84)(cid:73)(cid:86)(cid:69)(cid:83)(cid:12)(cid:0)(cid:66)(cid:79)(cid:84)(cid:72)(cid:0)(cid:78)(cid:85)(cid:77)(cid:69)(cid:82)(cid:73)(cid:67)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:78)(cid:79)(cid:78)(cid:13)(cid:78)(cid:85)(cid:77)(cid:69)(cid:82)(cid:73)(cid:67)(cid:14)(cid:0)(cid:52)(cid:72)(cid:69)(cid:0)(cid:67)(cid:82)(cid:73)(cid:84)(cid:69)(cid:82)(cid:73)(cid:65)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0)(cid:84)(cid:65)(cid:82)(cid:71)(cid:69)(cid:84)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:82)(cid:69)(cid:83)(cid:69)(cid:84)(cid:0)(cid:69)(cid:65)(cid:67)(cid:72)(cid:0)(cid:89)(cid:69)(cid:65)(cid:82)(cid:0)(cid:84)(cid:79)(cid:0)(cid:108)(cid:84)(cid:0)(cid:67)(cid:72)(cid:65)(cid:78)(cid:71)(cid:73)(cid:78)(cid:71)(cid:0)(cid:66)(cid:85)(cid:83)(cid:73)(cid:78)(cid:69)(cid:83)(cid:83)(cid:0)(cid:79)(cid:66)(cid:74)(cid:69)(cid:67)(cid:84)(cid:73)(cid:86)(cid:69)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:69)(cid:67)(cid:79)(cid:78)(cid:79)(cid:77)(cid:73)(cid:67)(cid:0)(cid:69)(cid:78)(cid:86)(cid:73)(cid:82)(cid:79)(cid:78)(cid:77)(cid:69)(cid:78)(cid:84)(cid:14) Performance – long-term (cid:36)(cid:69)(cid:70)(cid:69)(cid:82)(cid:82)(cid:69)(cid:68)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:45)(cid:65)(cid:84)(cid:67)(cid:72)(cid:73)(cid:78)(cid:71)(cid:0)(cid:33)(cid:87)(cid:65)(cid:82)(cid:68)(cid:83)(cid:0) (cid:77)(cid:65)(cid:68)(cid:69)(cid:0)(cid:85)(cid:78)(cid:68)(cid:69)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:84)(cid:69)(cid:75)(cid:0) (cid:36)(cid:69)(cid:70)(cid:69)(cid:82)(cid:82)(cid:69)(cid:68)(cid:0)(cid:34)(cid:79)(cid:78)(cid:85)(cid:83)(cid:0)(cid:51)(cid:72)(cid:65)(cid:82)(cid:69)(cid:0)(cid:48)(cid:76)(cid:65)(cid:78) 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(cid:34)(cid:65)(cid:83)(cid:69)(cid:0)(cid:83)(cid:65)(cid:76)(cid:65)(cid:82)(cid:89)(cid:0) Fixed Pension Fixed (cid:47)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:66)(cid:69)(cid:78)(cid:69)(cid:108)(cid:84)(cid:83)(cid:0) (cid:52)(cid:72)(cid:69)(cid:0)(cid:65)(cid:78)(cid:78)(cid:85)(cid:65)(cid:76)(cid:0)(cid:66)(cid:65)(cid:83)(cid:69)(cid:0)(cid:83)(cid:65)(cid:76)(cid:65)(cid:82)(cid:89)(cid:0)(cid:84)(cid:65)(cid:75)(cid:69)(cid:83)(cid:0)(cid:65)(cid:67)(cid:67)(cid:79)(cid:85)(cid:78)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:83)(cid:73)(cid:90)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:74)(cid:79)(cid:66)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:83)(cid:85)(cid:83)(cid:84)(cid:65)(cid:73)(cid:78)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:67)(cid:79)(cid:77)(cid:80)(cid:69)(cid:84)(cid:69)(cid:78)(cid:67)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68) 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(cid:52)(cid:72)(cid:69)(cid:83)(cid:69)(cid:0)(cid:77)(cid:65)(cid:89)(cid:0)(cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:69)(cid:0)(cid:67)(cid:65)(cid:82)(cid:0)(cid:65)(cid:76)(cid:76)(cid:79)(cid:87)(cid:65)(cid:78)(cid:67)(cid:69)(cid:83)(cid:12)(cid:0)(cid:76)(cid:73)(cid:70)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:80)(cid:82)(cid:73)(cid:86)(cid:65)(cid:84)(cid:69)(cid:0)(cid:77)(cid:69)(cid:68)(cid:73)(cid:67)(cid:65)(cid:76)(cid:0)(cid:73)(cid:78)(cid:83)(cid:85)(cid:82)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:65)(cid:78)(cid:78)(cid:85)(cid:65)(cid:76)(cid:0)(cid:77)(cid:69)(cid:68)(cid:73)(cid:67)(cid:65)(cid:76)(cid:83)(cid:12) (cid:65)(cid:83)(cid:0)(cid:65)(cid:80)(cid:80)(cid:82)(cid:79)(cid:80)(cid:82)(cid:73)(cid:65)(cid:84)(cid:69)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:69)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:68)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:65)(cid:0)(cid:76)(cid:73)(cid:83)(cid:84)(cid:69)(cid:68)(cid:0)(cid:67)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:14) www.intertek.com Intertek Annual Report 2009 55 Executive Directors and other executives For 2009 the total remuneration for our Executive Directors was as follows: Wolfhart Hauser £71k (3%) £114k (5%) £448k (18%) £571k (24%) £628k (26%) £578k (24%) Mark Loughead £21k (2%) £34k (3%) £381k (34%) £241k (22%) £241k (22%) £187k (17%) Bill Spencer £17k (3%) £40k (8%) £283k (54%) £188k (35%) Fixed Base salary Benefits Pension Variable Cash bonus Deferred shares Matching shares The base salary, beneﬁts, cash bonus, deferred shares and for Wolfhart Hauser pension, are shown in the table on page 60. The pension for Mark Loughead and Bill Spencer is the increase in actual transfer value for 2009 as shown on page 62. The matching share bonus is half the fair value of the maximum potential number of matching shares that may vest,subject to performance. Details of how the fair values of the deferred and matching shares have been calculated, are set out in note 25 of the ﬁnancial statements. Each of these components is examined in more detail below. Cash bonuses The Executive Directors and senior executives are eligible for annual cash bonus payments for the achievement of the ﬁnancial and strategic goals of the Group and its businesses. These bonuses are not pensionable. Targets are a mix of numeric and non-numeric measures. The annual cash bonus potential set for 2009 and 2010 are: Percentage of base salary Wolfhart Hauser Mark Loughead Bill Spencer Executive Vice Presidents 2009 2010 100% 130% 70% 70% 60% 90% n/a 75% The increase in bonus opportunity for 2010 has been agreed by the Committee based on benchmarking information in respect of similarly-sized companies. Senior executives’ bonus criteria for 2009 and the forthcoming year comprise the following: (i) Group performance elements; (ii) divisional performance elements, where the executive is responsible for divisional results, and personal objectives; and (iii) discretionary elements. The goals derive from the annual planning process for the Group, which forms the cornerstone of the Group’s results-focused culture. The divisional elements of bonus are based upon ﬁnancial performance indicators similar to the Group elements but with targets appropriate to that division. Bonus elements 2010 Executive Directors 80% 20% Group and Divisional EVPs 40% 40% 20% Group Function VPs 50% 30% 20% Group Divisional/personal Discretionary Group bonus breakdown 2010 50% 25% 15% 10% (cid:115) Diluted adjusted earnings per share (cid:115) Adjusted operating profit (cid:115) Operating cash flow % of adjusted operating profit (cid:115) Return on invested capital The business outcomes for the bonus criteria for 2009 were: Diluted adjusted earnings per share growth Adjusted operating profit growth* Operating cash flow % of adjusted operating profit* Return on invested capital *calculated using constant 2008 exchange rates. 21.5% 7.2% 112.2% 26.5% Combined with the decisions on the non-numeric discretionary part of total bonus this resulted in total annual bonus outcome for the Executive Directors of 100%, 70% and 65.8% of base salary for Wolfhart Hauser, Mark Loughead and Bill Spencer respectively, to be paid in March 2010. The Committee also decided that it was appropriate to award an additional discretionary cash bonus of £50,000 to Wolfhart Hauser in recognition of his outstanding contribution to the Group’s strong performance in 2009, despite difﬁcult market conditions. 56 Intertek Annual Report 2009 Directors’ Report – Governance Remuneration Report Group and Division bonus targets are established and reviewed by the Committee each year and set to ensure they are linked to current business goals, and are sufﬁciently demanding, taking full account of the economic conditions. Achievement of business targets typically delivers half of the bonus opportunity so as to encourage and reward performance above expectations. The Committee has reviewed whether remuneration packages should take more account of risk behaviour. Intertek’s business is not one with unusual risk features beyond the normal commercial ones that are described on pages 38 to 41 and the Committee has concluded that Group, personal and discretionary targets have been set with sufﬁcient regard to risk issues. The discretionary element, of up to 20% of total bonus, is determined by taking into account the overall personal contribution of the executive to the goals and results of the Group for the year, the development of the medium-term strategy of the Group, the achievement over the year of strategic objectives and demonstrable efforts and results in team-building and leadership. The Committee recognises its responsibility to shareholders to use its discretion in a reasonable and informed manner and in the Group’s interests, and to be accountable and transparent in the exercise of that discretion. The Committee can additionally award a discretionary payment if it feels very exceptional performance has taken place or where circumstances have occurred which were beyond the direct responsibility of the executive and the executive has managed and mitigated the impact of any loss, or where circumstances have arisen outside the Group’s control and the Committee feels that payment is necessary to retain and motivate the executive concerned. The Committee has the ability to reduce bonus payments if it believes that short-term performance has been achieved at the expense of the Group’s long-term future. The Committee also retains the discretion to reclaim payments if the performance achievements are subsequently found to have been signiﬁcantly misstated. Neither of these discretions was exercised in respect of the bonuses paid in 2009. Deferred Bonus Share Plan The only long-term incentive plan currently in use is the Intertek Deferred Bonus Share Plan (the Plan). The key purposes of this Plan are the reward and retention of senior executives and key specialists and the alignment of their interests with shareholders by linking bonus rewards to Intertek’s share price performance. Additional detail about the Plan appears on page 64. At the same time as it considers cash bonuses each year the Committee agrees the award of bonus shares to executives and key specialists. The awards usually vest three years after grant and in the case of Matching awards, which are granted to the most senior executives, vest subject to the achievement of performance criteria, discussed in more detail on page 64. Awards of Deferred Bonus Shares cannot exceed 100% of base salary and Matching awards are limited to twice the number of Deferred Bonus Shares. The majority of Plan participants receive awards equivalent to 10%-30% base salary. In considering the grant of Plan awards in 2010 the Committee has taken into account benchmarking data and as a result removed in respect of awards to be granted in 2010 and following years the 70% of base salary limit it had previously imposed. In practice only the most senior employees will be affected by this change. The Committee regularly reviews the appropriateness of the Company’s share incentive arrangements and targets to ensure that they remain both competitive and challenging. A minor variation to the terms of the Deferred and Matching awards granted under the Plan to executives in April 2007 has been made available to UK executives. Such awards (including awards held by the Executive Directors) will be permitted to vest nine days ahead of their normal vesting date, 10 April 2010 (the third anniversary of grant). All other terms of the awards will remain unchanged (including the performance conditions, which shall continue to apply over the three year performance period set for the awards, such period having expired 31 December 2009). The amendment will provide an opportunity for the lower taxation of the awards as a result of the maturity falling within the 2009/10 tax year. Any acceleration will be conditional on claw-back terms based on the provision that if the awards would have otherwise been forfeited between the new vesting date and the normal vesting date, for example in ‘bad leaver’ circumstances, the Company may recover the award gain from the participant. In its consideration of share plan incentives in 2009 the Committee reviewed the performance criteria for future Matching Share awards, taking full account of the economy and business climate at the time of the award. The Committee reached the decision that in respect www.intertek.com Intertek Annual Report 2009 57 of awards to be granted in 2009, the performance criteria should remain based wholly on TSR and not, as had been planned, be based partly on EPS. This was because the prevailing economic turbulence made the setting of realistic stretching EPS targets very difﬁcult. The vesting schedule also remained unchanged from the previous year. This decision will apply also in respect of awards granted in 2010. The Committee will continue to keep performance criteria under review. Executive Directors and other key employees are eligible to participate in our share plans. Non-Executive Directors are not. The Company has undertaken to limit the number of awards satisﬁed by newly issued shares under the Plan in the ten-year period from the time the plan was adopted to 5% of the Company’s issued share capital. As at 31 December 2009 outstanding awards represented 1.4% of the Company’s issued share capital and 0.2% of issued share capital had been issued in satisfaction of awards. The Committee has decided not to publish the part-way achievement of performance conditions applicable to outstanding awards, or the expected value of the anticipated vested awards, as it considers this information would be misleading to a greater extent than it is informative. Share retention A shareholding retention requirement has been set by the Committee. Executive Directors and the members of the Intertek Operations Committee (IOC), who form the senior management of Intertek, are required within ﬁve years, to build up a shareholding in the Company worth at least 100% of base salary. To assist in the building of this holding, it is expected that, after allowing for tax and similar liabilities, all the shares subject to each vested award under the Intertek Deferred Bonus Share Plan will be retained by the executive until the ownership target is attained. Salaries Salaries are reviewed annually, in accordance with the Group’s Remuneration Policy Framework. Increases in base salary are linked to: (cid:115)(cid:0) (cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:71)(cid:82)(cid:79)(cid:87)(cid:84)(cid:72)(cid:0)(cid:73)(cid:78)(cid:0)(cid:83)(cid:73)(cid:90)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:67)(cid:79)(cid:77)(cid:80)(cid:76)(cid:69)(cid:88)(cid:73)(cid:84)(cid:89)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:66)(cid:85)(cid:83)(cid:73)(cid:78)(cid:69)(cid:83)(cid:83)(cid:27)(cid:0) (cid:115)(cid:0) (cid:0)(cid:68)(cid:69)(cid:77)(cid:79)(cid:78)(cid:83)(cid:84)(cid:82)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:69)(cid:70)(cid:70)(cid:79)(cid:82)(cid:84)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:67)(cid:79)(cid:78)(cid:84)(cid:82)(cid:73)(cid:66)(cid:85)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:65)(cid:78)(cid:0)(cid:73)(cid:78)(cid:68)(cid:73)(cid:86)(cid:73)(cid:68)(cid:85)(cid:65)(cid:76)(cid:0)(cid:84)(cid:79)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0) (cid:68)(cid:69)(cid:86)(cid:69)(cid:76)(cid:79)(cid:80)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:84)(cid:69)(cid:75)(cid:7)(cid:83)(cid:0)(cid:83)(cid:84)(cid:82)(cid:65)(cid:84)(cid:69)(cid:71)(cid:89)(cid:12)(cid:0)(cid:83)(cid:89)(cid:78)(cid:69)(cid:82)(cid:71)(cid:89)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:69)(cid:70)(cid:108)(cid:67)(cid:73)(cid:69)(cid:78)(cid:67)(cid:89)(cid:27)(cid:0) (cid:115)(cid:0) (cid:82)(cid:69)(cid:84)(cid:69)(cid:78)(cid:84)(cid:73)(cid:79)(cid:78)(cid:27)(cid:0)(cid:65)(cid:78)(cid:68) (cid:115)(cid:0) (cid:77)(cid:65)(cid:82)(cid:75)(cid:69)(cid:84)(cid:0)(cid:77)(cid:79)(cid:86)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:14)(cid:0) Where a decision is made to increase a senior manager’s base salary the Committee will expect the individual, taking into account levels of experience, to have demonstrated exceptional leadership within the business combined with a results-orientated approach. When the Committee takes benchmarking information into account it reviews the performance of the individual concerned against the above measures to ensure that there is no unjustiﬁed upward ratchet in remuneration. When determining salary increases for Executive Directors, the Committee also takes account of pay and employment conditions elsewhere in the Group, as well as the general appropriate market. This is achieved by reviewing detailed information on the four countries (Hong Kong, mainland China, UK and USA) within the Group that employ the greatest number of employees. Salaries for the Executive Directors were increased in 2009, (see table below). The Committee, applying the above criteria consistently with previous years, considered the performance of the individuals, taken in conjunction with the continuing growth, increasing complexity and ﬁnancial success of the Group, justiﬁed the increases. Elsewhere in the Group salary increases were also awarded where justiﬁed by the growth, increasing complexity and results of the relevant businesses. Having considered whether its remit over remuneration other than that relating to the Executive Directors is sufﬁciently broad, the Committee came to the conclusion that the salary review process adequately informs the Committee of issues relating to reward. The Executive Directors’ salaries are: Base salary % increase over 2008 from 1 April salary 2009 Base salary % increase over 2009 from 1 April salary 2010 Wolfhart Hauser £577,500 5% £606,375 Mark Loughead1 US$535,000 7% US$556,400 Bill Spencer 2 £286,173 4% n/a 5% 4% n/a 1. In addition to his base salary Mark Loughead received £43,000 in Directors’ fees in 2009 (2008: £43,000) 2. Bill Spencer will retire from the Group on 31 March 2010. Pensions As the result of its international proﬁle, Intertek operates a number of pension arrangements around the world, appropriate to the employing location. The pension arrangements for Executive Directors are as follows: 58 Intertek Annual Report 2009 Directors’ Report – Governance Remuneration Report Wolfhart Hauser Wolfhart Hauser is not a member of a Group company pension scheme. Instead the Group contributes an amount equal to 20% of his base salary to a personal pension arrangement. For 2009 this amounted to £114,000 (2008: £106,700). In 2010 the Group contribution will increase to an amount equal to 25% of base salary. He is entitled to life cover beneﬁt comprising a lump sum payment equivalent to four times his base salary. Mark Loughead and Bill Spencer Mark Loughead and Bill Spencer were both members of the deﬁned beneﬁt section of the Intertek UK Company Pension Scheme throughout the year. This is a deﬁned beneﬁt and deﬁned contribution occupational pension scheme approved by HMRC. The main features of the deﬁned beneﬁt section of the scheme and the beneﬁt to the directors for 2009 are shown on page 61. Service contracts Details of the service contracts currently in place for Executive Directors who served during the year are as follows: Wolfhart Hauser Mark Loughead Bill Spencer Date of contract 1 March 2005 1 January 2008 24 May 2002 Wolfhart Hauser’s contract is a 12-month rolling contract terminable by either party on 12 months’ notice and contains provisions by way of compensation for loss of ofﬁce, limited to payment of salary over a 12-month period in lieu of notice. The contract permits payments in lieu of notice to be made, at the Company’s election, either (i) in full on termination or (ii) on a monthly basis, but only for so long as he receives no remuneration from any other business. If he does receive any such remuneration, the monthly amount payable will be reduced by that remuneration, determined on a monthly basis. The service contract contains no provisions regarding a change of control. Bill Spencer, on leaving the Company, will take early retirement at the end of March 2010, prior to the imminent change in UK pension law which would require deferment of retirement at least to the age of 55. Actuarial reductions in accordance with the rules of the Intertek Pension Scheme will be made in respect of the pension he will receive. He has the option to have his early retirement beneﬁts from the Scheme enhanced by requiring the Company to pay in some or all of a contractual departure payment up to £225,636. He will receive no bonus in respect of his service in 2010. As a retiree, he has good leaver status under the Deferred Bonus Plan rules. All Deferred awards will vest in full. The Committee has decided that the 2007 and 2008 Matching Share awards will vest fully, as to date the Total Shareholder Return conditions in respect of those awards have been met. The unvested Matching Share awards granted in 2009 will be forfeited. Mark Loughead has both an executive service contract with Intertek USA Inc. and a letter of appointment in respect of his directorship of Intertek Group plc. The executive service contract is subject to 12 months’ notice on either side and contains provisions for Mark Loughead to continue to receive an amount equal to salary and beneﬁts during the period of notice in accordance with his normal payroll schedule unless he receives remuneration from any other business. Bonuses not already received will not be paid unless pro- rata payment formed part of the bonus criteria. The appointment as an Executive Director of Intertek Group plc is for an initial term of three years, but can be terminated by either party giving one month’s notice and provides for an annual fee of £43,000. The service contract contains provisions regarding a change of control based on the same criteria as apply to the Intertek Deferred Bonus Plan. Non-Executive Directors’ fees David Allvey Edward Astle1 Gavin Darby1 Christopher Knight Richard Nelson2 Debra Rade Vanni Treves Annual Basic fee from 1 April 2009 or date of appointment £ Remuneration Committee Audit and Risk Committee Nominations Committee Additional committee fee £ Total Annual fees £ Fees used to purchase shares in 2009 £ 53,000 Chairman Chairman 39,500 92,500 10,000 53,000 53,000 53,000 68,000 53,000 180,000 – – – – – – – – – – 7,500 60,500 5,000 58,000 n/a n/a 15,000 68,000 10,000 n/a n/a 68,000 10,000 53,000 10,000 Chairman – 180,000 20,000 1. Appointed 1 September 2009. Pro-rata fees paid in 2009 appear in the remuneration table on page 60. Fees of £10,000 will be used to purchase shares in 2010. 2. Retired 1 September 2009. www.intertek.com Intertek Annual Report 2009 59 Policy on external appointments The Company recognises that, during their employment with the Company, Executive Directors may be invited to become non-executive directors of other companies and that such duties can broaden their experience and knowledge. Executive Directors may, with the written consent of the Company, accept such appointments outside the Company, and the policy is that any fees may be retained by the (cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:14)(cid:0)(cid:55)(cid:79)(cid:76)(cid:70)(cid:72)(cid:65)(cid:82)(cid:84)(cid:0)(cid:40)(cid:65)(cid:85)(cid:83)(cid:69)(cid:82)(cid:0)(cid:73)(cid:83)(cid:0)(cid:65)(cid:0)(cid:78)(cid:79)(cid:78)(cid:13)(cid:69)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:68)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:0)(cid:79)(cid:70)(cid:0)(cid:44)(cid:79)(cid:71)(cid:73)(cid:67)(cid:65)(cid:0)(cid:80)(cid:76)(cid:67)(cid:14)(cid:0) His earnings for this appointment for 2009, which he retained, were £45,000. Non-Executive Directors Pursuant to the policy of aligning directors’ interests with those (cid:79)(cid:70)(cid:0)(cid:83)(cid:72)(cid:65)(cid:82)(cid:69)(cid:72)(cid:79)(cid:76)(cid:68)(cid:69)(cid:82)(cid:83)(cid:12)(cid:0)(cid:65)(cid:0)(cid:80)(cid:82)(cid:79)(cid:80)(cid:79)(cid:82)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:70)(cid:69)(cid:69)(cid:83)(cid:0)(cid:68)(cid:85)(cid:69)(cid:0)(cid:84)(cid:79)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0) Directors is used each year to purchase shares in the Company. A (cid:83)(cid:85)(cid:77)(cid:77)(cid:65)(cid:82)(cid:89)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:7)(cid:0)(cid:70)(cid:69)(cid:69)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:80)(cid:82)(cid:69)(cid:13)(cid:84)(cid:65)(cid:88)(cid:0) amounts of those fees used to purchase shares in the Company in (cid:18)(cid:16)(cid:16)(cid:25)(cid:0)(cid:73)(cid:83)(cid:0)(cid:83)(cid:72)(cid:79)(cid:87)(cid:78)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:84)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:79)(cid:78)(cid:0)(cid:80)(cid:65)(cid:71)(cid:69)(cid:0)(cid:21)(cid:24)(cid:14)(cid:0)(cid:52)(cid:72)(cid:69)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:7)(cid:0) basic fees increased by £3,000 per annum and the Chairman’s fee increased by £10,000 per annum, with effect from 1 April 2009. David Allvey, as Chairman of two Committees, also received an increase of £2,000 per annum in his Committee fees. The Executive Directors, having reviewed benchmarking information, felt that these increases were justiﬁed in view of the increasing time commitment (cid:70)(cid:79)(cid:82)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:73)(cid:78)(cid:67)(cid:82)(cid:69)(cid:65)(cid:83)(cid:73)(cid:78)(cid:71)(cid:0)(cid:67)(cid:79)(cid:77)(cid:80)(cid:76)(cid:69)(cid:88)(cid:73)(cid:84)(cid:89)(cid:0)(cid:79)(cid:70)(cid:0) Intertek’s business. Other than Vanni Treves, who has the beneﬁt of a company car, and (cid:50)(cid:73)(cid:67)(cid:72)(cid:65)(cid:82)(cid:68)(cid:0)(cid:46)(cid:69)(cid:76)(cid:83)(cid:79)(cid:78)(cid:12)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:87)(cid:72)(cid:79)(cid:77)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:0)(cid:67)(cid:79)(cid:78)(cid:84)(cid:73)(cid:78)(cid:85)(cid:69)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:77)(cid:65)(cid:73)(cid:78)(cid:84)(cid:65)(cid:73)(cid:78)(cid:0)(cid:65)(cid:0)(cid:76)(cid:73)(cid:70)(cid:69)(cid:0) insurance policy in accordance with the terms of his previous employment contract with the Company, no other beneﬁts-in-kind are provided. (cid:52)(cid:72)(cid:69)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:0)(cid:68)(cid:79)(cid:0)(cid:78)(cid:79)(cid:84)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0)(cid:83)(cid:69)(cid:82)(cid:86)(cid:73)(cid:67)(cid:69)(cid:0)(cid:67)(cid:79)(cid:78)(cid:84)(cid:82)(cid:65)(cid:67)(cid:84)(cid:83)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0)(cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:14)(cid:0)(cid:52)(cid:72)(cid:69)(cid:0)(cid:76)(cid:69)(cid:84)(cid:84)(cid:69)(cid:82)(cid:0)(cid:79)(cid:70)(cid:0)(cid:69)(cid:78)(cid:71)(cid:65)(cid:71)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:69)(cid:65)(cid:67)(cid:72)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0) Director states that they are appointed for an initial period of three years and all appointments are terminable by one month’s notice on either side. At the end of the initial period the appointment may be renewed for a further period, if the Company and the Director agree, subject to reappointment at the AGM. Each letter of engagement states that should the Group terminate the (cid:65)(cid:80)(cid:80)(cid:79)(cid:73)(cid:78)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:12)(cid:0)(cid:79)(cid:78)(cid:0)(cid:83)(cid:85)(cid:67)(cid:72)(cid:0)(cid:84)(cid:69)(cid:82)(cid:77)(cid:73)(cid:78)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:0) will not be entitled to any compensation for loss of ofﬁce. Vanni Treves and David Allvey are each engaged by the Group as (cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:0)(cid:85)(cid:78)(cid:68)(cid:69)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:84)(cid:69)(cid:82)(cid:77)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:65)(cid:0)(cid:76)(cid:69)(cid:84)(cid:84)(cid:69)(cid:82)(cid:0)(cid:79)(cid:70)(cid:0)(cid:65)(cid:80)(cid:80)(cid:79)(cid:73)(cid:78)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0) commencing 29 May 2002. Both appointments were renewed for three years at the end of their second three-year period. (cid:53)(cid:78)(cid:68)(cid:69)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:84)(cid:69)(cid:82)(cid:77)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:72)(cid:73)(cid:83)(cid:0)(cid:76)(cid:69)(cid:84)(cid:84)(cid:69)(cid:82)(cid:0)(cid:79)(cid:70)(cid:0)(cid:65)(cid:80)(cid:80)(cid:79)(cid:73)(cid:78)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:50)(cid:73)(cid:67)(cid:72)(cid:65)(cid:82)(cid:68)(cid:0)(cid:46)(cid:69)(cid:76)(cid:83)(cid:79)(cid:78)(cid:0)(cid:87)(cid:65)(cid:83)(cid:0) entitled to remuneration of £1,000 per working day for any special project work agreed in advance by the Chairman. In addition the Company agreed to pay premiums for a life assurance policy for (cid:50)(cid:73)(cid:67)(cid:72)(cid:65)(cid:82)(cid:68)(cid:0)(cid:46)(cid:69)(cid:76)(cid:83)(cid:79)(cid:78)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:72)(cid:73)(cid:83)(cid:0)(cid:76)(cid:73)(cid:70)(cid:69)(cid:84)(cid:73)(cid:77)(cid:69)(cid:14)(cid:0) (cid:36)(cid:69)(cid:66)(cid:82)(cid:65)(cid:0)(cid:50)(cid:65)(cid:68)(cid:69)(cid:0)(cid:87)(cid:65)(cid:83)(cid:0)(cid:69)(cid:78)(cid:71)(cid:65)(cid:71)(cid:69)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:0) under the terms of a letter of appointment for an initial period of (cid:84)(cid:72)(cid:82)(cid:69)(cid:69)(cid:0)(cid:89)(cid:69)(cid:65)(cid:82)(cid:83)(cid:0)(cid:67)(cid:79)(cid:77)(cid:77)(cid:69)(cid:78)(cid:67)(cid:73)(cid:78)(cid:71)(cid:0)(cid:17)(cid:0)(cid:42)(cid:65)(cid:78)(cid:85)(cid:65)(cid:82)(cid:89)(cid:0)(cid:18)(cid:16)(cid:16)(cid:22)(cid:14)(cid:0)(cid:52)(cid:72)(cid:73)(cid:83)(cid:0)(cid:65)(cid:80)(cid:80)(cid:79)(cid:73)(cid:78)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:87)(cid:65)(cid:83)(cid:0) (cid:82)(cid:69)(cid:78)(cid:69)(cid:87)(cid:69)(cid:68)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:65)(cid:0)(cid:70)(cid:85)(cid:82)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:84)(cid:72)(cid:82)(cid:69)(cid:69)(cid:0)(cid:89)(cid:69)(cid:65)(cid:82)(cid:83)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0)(cid:69)(cid:70)(cid:70)(cid:69)(cid:67)(cid:84)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:17)(cid:0)(cid:42)(cid:65)(cid:78)(cid:85)(cid:65)(cid:82)(cid:89)(cid:0)(cid:18)(cid:16)(cid:16)(cid:25)(cid:14) (cid:35)(cid:72)(cid:82)(cid:73)(cid:83)(cid:84)(cid:79)(cid:80)(cid:72)(cid:69)(cid:82)(cid:0)(cid:43)(cid:78)(cid:73)(cid:71)(cid:72)(cid:84)(cid:0)(cid:87)(cid:65)(cid:83)(cid:0)(cid:69)(cid:78)(cid:71)(cid:65)(cid:71)(cid:69)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0) Director under the terms of a letter of appointment for an initial period of three years commencing 30 March 2006. This appointment was renewed for a further three years, effective from 30 March 2009. Edward Astle and Gavin Darby each joined the Group on 1 September 2009. Each has been engaged under the terms of a letter of appointment for an initial period of three years commencing 1 September 2009, subject to election by the shareholders at the forthcoming AGM. TSR Performance graph TSR comprising the changes in value of a share and dividends distributed can be represented by the value of a notional £100 invested at the beginning of a period and its change over that period. The graph below shows the TSR in respect of the Company over ﬁve years. The TSR for the Company is compared with: i) the TSR for the FTSE 250 Index, which is the index we have used since the Company’s ﬂotation in 2002 as the most appropriate comparator, being a broad market index; and ii) the TSR for the FTSE 100 Index. The Company joined the FTSE100 in March 2009 and the Committee considers it helpful to show this comparison also. Intertek Group v FTSE 100 and FTSE 250 TSR 220 200 180 160 140 120 100 80 2005 2006 2007 2008 2009 Intertek Group FTSE 100 FTSE 250 (cid:50)(cid:73)(cid:67)(cid:72)(cid:65)(cid:82)(cid:68)(cid:0)(cid:46)(cid:69)(cid:76)(cid:83)(cid:79)(cid:78)(cid:0)(cid:82)(cid:69)(cid:84)(cid:73)(cid:82)(cid:69)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:17)(cid:0)(cid:51)(cid:69)(cid:80)(cid:84)(cid:69)(cid:77)(cid:66)(cid:69)(cid:82)(cid:0)(cid:18)(cid:16)(cid:16)(cid:25)(cid:14)(cid:0)(cid:40)(cid:73)(cid:83)(cid:0)(cid:79)(cid:82)(cid:73)(cid:71)(cid:73)(cid:78)(cid:65)(cid:76)(cid:0)(cid:69)(cid:78)(cid:71)(cid:65)(cid:71)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0) (cid:66)(cid:89)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:0)(cid:87)(cid:65)(cid:83)(cid:0)(cid:85)(cid:78)(cid:68)(cid:69)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:84)(cid:69)(cid:82)(cid:77)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:65)(cid:0) letter of appointment for an initial period of three years commencing 8 April 2005, extended for a further two years on 7 March 2008. (cid:41)(cid:78)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:80)(cid:82)(cid:79)(cid:86)(cid:73)(cid:68)(cid:69)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0)(cid:42)(cid:14)(cid:48)(cid:14)(cid:0)(cid:45)(cid:79)(cid:82)(cid:71)(cid:65)(cid:78)(cid:0)(cid:35)(cid:65)(cid:90)(cid:69)(cid:78)(cid:79)(cid:86)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:67)(cid:65)(cid:76)(cid:67)(cid:85)(cid:76)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:65)(cid:67)(cid:67)(cid:79)(cid:82)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:79)(cid:0)(cid:77)(cid:69)(cid:84)(cid:72)(cid:79)(cid:68)(cid:79)(cid:76)(cid:79)(cid:71)(cid:89)(cid:0) that is compliant with the requirements of the Companies Act 2006. The performance of the Company, as indicated by the graph, is not indicative of vesting levels under Intertek’s Deferred Bonus Share Plan. 60 Intertek Annual Report 2009 (cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:7)(cid:0)(cid:50)(cid:69)(cid:80)(cid:79)(cid:82)(cid:84)(cid:0)(cid:110)(cid:0)(cid:39)(cid:79)(cid:86)(cid:69)(cid:82)(cid:78)(cid:65)(cid:78)(cid:67)(cid:69) Remuneration Report The Committee On behalf of the Board, the Committee: (cid:115)(cid:0) (cid:0)(cid:68)(cid:69)(cid:84)(cid:69)(cid:82)(cid:77)(cid:73)(cid:78)(cid:69)(cid:83)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:7)(cid:83)(cid:0)(cid:80)(cid:79)(cid:76)(cid:73)(cid:67)(cid:89)(cid:0)(cid:79)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:82)(cid:69)(cid:77)(cid:85)(cid:78)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:12)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0) (cid:73)(cid:78)(cid:67)(cid:69)(cid:78)(cid:84)(cid:73)(cid:86)(cid:69)(cid:83)(cid:0)(cid:70)(cid:79)(cid:82)(cid:12)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:35)(cid:72)(cid:65)(cid:73)(cid:82)(cid:77)(cid:65)(cid:78)(cid:12)(cid:0)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:79)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:83)(cid:69)(cid:78)(cid:73)(cid:79)(cid:82)(cid:0) (cid:69)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:83)(cid:0)(cid:8)(cid:77)(cid:65)(cid:73)(cid:78)(cid:76)(cid:89)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:41)(cid:47)(cid:35)(cid:0)(cid:87)(cid:72)(cid:73)(cid:67)(cid:72)(cid:0)(cid:67)(cid:79)(cid:77)(cid:80)(cid:82)(cid:73)(cid:83)(cid:69)(cid:83)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0) 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(cid:36)(cid:65)(cid:86)(cid:73)(cid:68)(cid:0)(cid:33)(cid:76)(cid:76)(cid:86)(cid:69)(cid:89)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:35)(cid:72)(cid:82)(cid:73)(cid:83)(cid:84)(cid:79)(cid:80)(cid:72)(cid:69)(cid:82)(cid:0)(cid:43)(cid:78)(cid:73)(cid:71)(cid:72)(cid:84)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:73)(cid:78)(cid:68)(cid:69)(cid:80)(cid:69)(cid:78)(cid:68)(cid:69)(cid:78)(cid:84)(cid:0)(cid:73)(cid:78)(cid:0)(cid:65)(cid:67)(cid:67)(cid:79)(cid:82)(cid:68)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0) 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(cid:35)(cid:79)(cid:77)(cid:77)(cid:73)(cid:84)(cid:84)(cid:69)(cid:69)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0)(cid:69)(cid:70)(cid:70)(cid:69)(cid:67)(cid:84)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:17)(cid:0)(cid:51)(cid:69)(cid:80)(cid:84)(cid:69)(cid:77)(cid:66)(cid:69)(cid:82)(cid:0)(cid:18)(cid:16)(cid:16)(cid:25)(cid:14)(cid:0)(cid:40)(cid:69)(cid:0)(cid:73)(cid:83)(cid:0)(cid:82)(cid:69)(cid:71)(cid:65)(cid:82)(cid:68)(cid:69)(cid:68)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:78)(cid:0) (cid:73)(cid:78)(cid:68)(cid:69)(cid:80)(cid:69)(cid:78)(cid:68)(cid:69)(cid:78)(cid:84)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:0)(cid:73)(cid:78)(cid:0)(cid:65)(cid:67)(cid:67)(cid:79)(cid:82)(cid:68)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:35)(cid:79)(cid:68)(cid:69)(cid:14) (cid:115)(cid:0) (cid:0)(cid:68)(cid:69)(cid:84)(cid:69)(cid:82)(cid:77)(cid:73)(cid:78)(cid:69)(cid:83)(cid:0)(cid:84)(cid:72)(cid:69)(cid:73)(cid:82)(cid:0)(cid:82)(cid:69)(cid:77)(cid:85)(cid:78)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:80)(cid:65)(cid:67)(cid:75)(cid:65)(cid:71)(cid:69)(cid:83)(cid:12)(cid:0)(cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:65)(cid:78)(cid:89)(cid:0) 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(cid:65)(cid:78)(cid:68)(cid:0)(cid:66)(cid:69)(cid:83)(cid:84)(cid:0)(cid:80)(cid:82)(cid:65)(cid:67)(cid:84)(cid:73)(cid:67)(cid:69)(cid:0)(cid:68)(cid:69)(cid:86)(cid:69)(cid:76)(cid:79)(cid:80)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:83)(cid:72)(cid:65)(cid:82)(cid:69)(cid:72)(cid:79)(cid:76)(cid:68)(cid:69)(cid:82)(cid:0)(cid:69)(cid:88)(cid:80)(cid:69)(cid:67)(cid:84)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:14)(cid:0) (cid:36)(cid:85)(cid:69)(cid:0)(cid:82)(cid:69)(cid:71)(cid:65)(cid:82)(cid:68)(cid:0)(cid:73)(cid:83)(cid:0)(cid:71)(cid:73)(cid:86)(cid:69)(cid:78)(cid:0)(cid:84)(cid:79)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:73)(cid:78)(cid:84)(cid:69)(cid:82)(cid:69)(cid:83)(cid:84)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:83)(cid:72)(cid:65)(cid:82)(cid:69)(cid:72)(cid:79)(cid:76)(cid:68)(cid:69)(cid:82)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0) (cid:82)(cid:69)(cid:81)(cid:85)(cid:73)(cid:82)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:44)(cid:73)(cid:83)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:50)(cid:85)(cid:76)(cid:69)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:65)(cid:83)(cid:83)(cid:79)(cid:67)(cid:73)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:71)(cid:85)(cid:73)(cid:68)(cid:65)(cid:78)(cid:67)(cid:69)(cid:14)(cid:0) (cid:52)(cid:72)(cid:69)(cid:0)(cid:35)(cid:79)(cid:77)(cid:77)(cid:73)(cid:84)(cid:84)(cid:69)(cid:69)(cid:0)(cid:77)(cid:69)(cid:84)(cid:0)(cid:83)(cid:73)(cid:88)(cid:0)(cid:84)(cid:73)(cid:77)(cid:69)(cid:83)(cid:0)(cid:68)(cid:85)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0)(cid:18)(cid:16)(cid:16)(cid:25)(cid:14)(cid:0)(cid:41)(cid:84)(cid:83)(cid:0)(cid:84)(cid:69)(cid:82)(cid:77)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:82)(cid:69)(cid:70)(cid:69)(cid:82)(cid:69)(cid:78)(cid:67)(cid:69)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0) (cid:65)(cid:86)(cid:65)(cid:73)(cid:76)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:79)(cid:78)(cid:0)(cid:79)(cid:85)(cid:82)(cid:0)(cid:87)(cid:69)(cid:66)(cid:83)(cid:73)(cid:84)(cid:69)(cid:0)(cid:65)(cid:84)(cid:0)(cid:87)(cid:87)(cid:87)(cid:14)(cid:73)(cid:78)(cid:84)(cid:69)(cid:82)(cid:84)(cid:69)(cid:75)(cid:14)(cid:67)(cid:79)(cid:77)(cid:14)(cid:0) (cid:52)(cid:72)(cid:69)(cid:0)(cid:70)(cid:79)(cid:76)(cid:76)(cid:79)(cid:87)(cid:73)(cid:78)(cid:71)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:0)(cid:83)(cid:69)(cid:82)(cid:86)(cid:69)(cid:68)(cid:0) (cid:79)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:35)(cid:79)(cid:77)(cid:77)(cid:73)(cid:84)(cid:84)(cid:69)(cid:69)(cid:0)(cid:73)(cid:78)(cid:0)(cid:18)(cid:16)(cid:16)(cid:25)(cid:26)(cid:0)(cid:36)(cid:65)(cid:86)(cid:73)(cid:68)(cid:0)(cid:33)(cid:76)(cid:76)(cid:86)(cid:69)(cid:89)(cid:0)(cid:8)(cid:35)(cid:72)(cid:65)(cid:73)(cid:82)(cid:77)(cid:65)(cid:78)(cid:9)(cid:12)(cid:0)(cid:39)(cid:65)(cid:86)(cid:73)(cid:78)(cid:0)(cid:36)(cid:65)(cid:82)(cid:66)(cid:89)(cid:0) Directors’ remuneration summary (cid:52)(cid:72)(cid:69)(cid:0)(cid:35)(cid:79)(cid:77)(cid:77)(cid:73)(cid:84)(cid:84)(cid:69)(cid:69)(cid:0)(cid:77)(cid:69)(cid:77)(cid:66)(cid:69)(cid:82)(cid:83)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0)(cid:78)(cid:79)(cid:0)(cid:80)(cid:69)(cid:82)(cid:83)(cid:79)(cid:78)(cid:65)(cid:76)(cid:0)(cid:108)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:73)(cid:78)(cid:84)(cid:69)(cid:82)(cid:69)(cid:83)(cid:84)(cid:12)(cid:0)(cid:69)(cid:88)(cid:67)(cid:69)(cid:80)(cid:84)(cid:0) (cid:87)(cid:72)(cid:69)(cid:82)(cid:69)(cid:0)(cid:84)(cid:72)(cid:69)(cid:89)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:65)(cid:83)(cid:0)(cid:83)(cid:72)(cid:65)(cid:82)(cid:69)(cid:72)(cid:79)(cid:76)(cid:68)(cid:69)(cid:82)(cid:83)(cid:12)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:77)(cid:65)(cid:84)(cid:84)(cid:69)(cid:82)(cid:83)(cid:0)(cid:84)(cid:79)(cid:0)(cid:66)(cid:69)(cid:0)(cid:68)(cid:69)(cid:67)(cid:73)(cid:68)(cid:69)(cid:68)(cid:14)(cid:0)(cid:55)(cid:72)(cid:69)(cid:82)(cid:69)(cid:0) (cid:84)(cid:72)(cid:69)(cid:82)(cid:69)(cid:0)(cid:73)(cid:83)(cid:0)(cid:65)(cid:78)(cid:89)(cid:0)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:0)(cid:79)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:0)(cid:54)(cid:73)(cid:67)(cid:69)(cid:0)(cid:48)(cid:82)(cid:69)(cid:83)(cid:73)(cid:68)(cid:69)(cid:78)(cid:84)(cid:0)(cid:40)(cid:85)(cid:77)(cid:65)(cid:78)(cid:0) (cid:50)(cid:69)(cid:83)(cid:79)(cid:85)(cid:82)(cid:67)(cid:69)(cid:83)(cid:0)(cid:73)(cid:78)(cid:0)(cid:65)(cid:84)(cid:84)(cid:69)(cid:78)(cid:68)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:73)(cid:78)(cid:0)(cid:65)(cid:78)(cid:0)(cid:65)(cid:68)(cid:86)(cid:73)(cid:83)(cid:79)(cid:82)(cid:89)(cid:0)(cid:67)(cid:65)(cid:80)(cid:65)(cid:67)(cid:73)(cid:84)(cid:89)(cid:12)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:73)(cid:78)(cid:68)(cid:73)(cid:86)(cid:73)(cid:68)(cid:85)(cid:65)(cid:76)(cid:0)(cid:87)(cid:73)(cid:76)(cid:76)(cid:0) (cid:65)(cid:66)(cid:83)(cid:69)(cid:78)(cid:84)(cid:0)(cid:72)(cid:73)(cid:77)(cid:83)(cid:69)(cid:76)(cid:70)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:77)(cid:69)(cid:69)(cid:84)(cid:73)(cid:78)(cid:71)(cid:83)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:77)(cid:65)(cid:84)(cid:84)(cid:69)(cid:82)(cid:83)(cid:0)(cid:82)(cid:69)(cid:76)(cid:65)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:79)(cid:0)(cid:72)(cid:73)(cid:83)(cid:0)(cid:79)(cid:87)(cid:78)(cid:0) (cid:82)(cid:69)(cid:77)(cid:85)(cid:78)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:14) Information required to be audited (cid:52)(cid:72)(cid:69)(cid:0)(cid:65)(cid:85)(cid:68)(cid:73)(cid:84)(cid:79)(cid:82)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:82)(cid:69)(cid:81)(cid:85)(cid:73)(cid:82)(cid:69)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:82)(cid:69)(cid:80)(cid:79)(cid:82)(cid:84)(cid:0)(cid:79)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:73)(cid:78)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:67)(cid:79)(cid:78)(cid:84)(cid:65)(cid:73)(cid:78)(cid:69)(cid:68)(cid:0) (cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:70)(cid:79)(cid:76)(cid:76)(cid:79)(cid:87)(cid:73)(cid:78)(cid:71)(cid:0)(cid:83)(cid:69)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:50)(cid:69)(cid:80)(cid:79)(cid:82)(cid:84)(cid:14) (cid:52)(cid:72)(cid:69)(cid:0)(cid:84)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:66)(cid:69)(cid:76)(cid:79)(cid:87)(cid:0)(cid:83)(cid:85)(cid:77)(cid:77)(cid:65)(cid:82)(cid:73)(cid:83)(cid:69)(cid:83)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:7)(cid:0)(cid:82)(cid:69)(cid:77)(cid:85)(cid:78)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:80)(cid:69)(cid:78)(cid:83)(cid:73)(cid:79)(cid:78)(cid:0) (cid:67)(cid:79)(cid:78)(cid:84)(cid:82)(cid:73)(cid:66)(cid:85)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:18)(cid:16)(cid:16)(cid:25)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:80)(cid:82)(cid:73)(cid:79)(cid:82)(cid:0)(cid:89)(cid:69)(cid:65)(cid:82)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:67)(cid:79)(cid:77)(cid:80)(cid:65)(cid:82)(cid:73)(cid:83)(cid:79)(cid:78)(cid:14)(cid:0)(cid:33)(cid:83)(cid:0) (cid:68)(cid:69)(cid:83)(cid:67)(cid:82)(cid:73)(cid:66)(cid:69)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:80)(cid:65)(cid:71)(cid:69)(cid:0)(cid:21)(cid:24)(cid:12)(cid:0)(cid:34)(cid:73)(cid:76)(cid:76)(cid:0)(cid:51)(cid:80)(cid:69)(cid:78)(cid:67)(cid:69)(cid:82)(cid:0)(cid:73)(cid:83)(cid:0)(cid:69)(cid:78)(cid:84)(cid:73)(cid:84)(cid:76)(cid:69)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:65)(cid:0)(cid:67)(cid:79)(cid:78)(cid:84)(cid:82)(cid:65)(cid:67)(cid:84)(cid:85)(cid:65)(cid:76)(cid:0) (cid:68)(cid:69)(cid:80)(cid:65)(cid:82)(cid:84)(cid:85)(cid:82)(cid:69)(cid:0)(cid:80)(cid:65)(cid:89)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:97)(cid:18)(cid:18)(cid:21)(cid:12)(cid:22)(cid:19)(cid:22)(cid:0)(cid:79)(cid:78)(cid:0)(cid:72)(cid:73)(cid:83)(cid:0)(cid:82)(cid:69)(cid:84)(cid:73)(cid:82)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:14)(cid:0)(cid:46)(cid:79)(cid:0)(cid:79)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0) (cid:80)(cid:65)(cid:89)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:76)(cid:79)(cid:83)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:79)(cid:70)(cid:108)(cid:67)(cid:69)(cid:0)(cid:87)(cid:69)(cid:82)(cid:69)(cid:0)(cid:77)(cid:65)(cid:68)(cid:69)(cid:0)(cid:68)(cid:85)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:89)(cid:69)(cid:65)(cid:82)(cid:0)(cid:79)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0) (cid:80)(cid:82)(cid:73)(cid:79)(cid:82)(cid:0)(cid:89)(cid:69)(cid:65)(cid:82)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:78)(cid:79)(cid:0)(cid:79)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:65)(cid:87)(cid:65)(cid:82)(cid:68)(cid:83)(cid:0)(cid:87)(cid:69)(cid:82)(cid:69)(cid:0)(cid:77)(cid:65)(cid:68)(cid:69)(cid:0)(cid:84)(cid:79)(cid:0)(cid:65)(cid:78)(cid:89)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:14)(cid:0) Executive Directors (cid:55)(cid:79)(cid:76)(cid:70)(cid:72)(cid:65)(cid:82)(cid:84)(cid:0)(cid:40)(cid:65)(cid:85)(cid:83)(cid:69)(cid:82)(cid:0) (cid:45)(cid:65)(cid:82)(cid:75)(cid:0)(cid:44)(cid:79)(cid:85)(cid:71)(cid:72)(cid:69)(cid:65)(cid:68)(cid:0) (cid:34)(cid:73)(cid:76)(cid:76)(cid:0)(cid:51)(cid:80)(cid:69)(cid:78)(cid:67)(cid:69)(cid:82)(cid:0) (cid:0) (cid:0) Non-Executive Directors (cid:36)(cid:65)(cid:86)(cid:73)(cid:68)(cid:0)(cid:33)(cid:76)(cid:76)(cid:86)(cid:69)(cid:89)(cid:0) (cid:37)(cid:68)(cid:87)(cid:65)(cid:82)(cid:68)(cid:0)(cid:33)(cid:83)(cid:84)(cid:76)(cid:69)(cid:0) (cid:39)(cid:65)(cid:86)(cid:73)(cid:78)(cid:0)(cid:36)(cid:65)(cid:82)(cid:66)(cid:89)(cid:0) (cid:0) (cid:0) (cid:35)(cid:72)(cid:82)(cid:73)(cid:83)(cid:84)(cid:79)(cid:80)(cid:72)(cid:69)(cid:82)(cid:0)(cid:43)(cid:78)(cid:73)(cid:71)(cid:72)(cid:84)(cid:0) (cid:50)(cid:73)(cid:67)(cid:72)(cid:65)(cid:82)(cid:68)(cid:0)(cid:46)(cid:69)(cid:76)(cid:83)(cid:79)(cid:78)(cid:0) (cid:36)(cid:69)(cid:66)(cid:82)(cid:65)(cid:0)(cid:50)(cid:65)(cid:68)(cid:69)(cid:0) (cid:54)(cid:65)(cid:78)(cid:78)(cid:73)(cid:0)(cid:52)(cid:82)(cid:69)(cid:86)(cid:69)(cid:83)(cid:0) Total (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) Base salary and fees 2009 £000 Cash bonuses 2009 £000 Notes (cid:17) 2 (cid:19) (cid:19) (cid:20) 571 381 283 91 17 16 67 48 53 178 628 241 188 – – – – – – – 1,705 1,057 Other Pension benefits contributions5 2009 £000 2009 £000 Total emoluments 2009 £000 Total emoluments 2008 £000 Deferred bonus6 2009 £000 Deferred bonus6 2008 £000 71 21 17 – – – – 51 – 14 174 114 1,384 (cid:17)(cid:12)(cid:18)(cid:18)(cid:23)(cid:0) – – – – – – – – – 643 488 91 17 16 67 99 53 192 (cid:20)(cid:25)(cid:22)(cid:0) (cid:20)(cid:20)(cid:25)(cid:0) (cid:24)(cid:22)(cid:0) – – (cid:22)(cid:21)(cid:0) (cid:17)(cid:17)(cid:22)(cid:0) (cid:21)(cid:16)(cid:0) (cid:17)(cid:24)(cid:17)(cid:0) 578(cid:0) 241(cid:0) –(cid:0) (cid:19)(cid:23)(cid:20) (cid:17)(cid:23)(cid:16) (cid:17)(cid:22)(cid:19) – – – – – – – – – – – – – – 114 3,050 (cid:18)(cid:12)(cid:22)(cid:23)(cid:16)(cid:0) 819(cid:0) (cid:23)(cid:16)(cid:23) (cid:17)(cid:14)(cid:0)(cid:0)(cid:45)(cid:65)(cid:82)(cid:75)(cid:0)(cid:44)(cid:79)(cid:85)(cid:71)(cid:72)(cid:69)(cid:65)(cid:68)(cid:7)(cid:83)(cid:0)(cid:66)(cid:65)(cid:83)(cid:69)(cid:0)(cid:83)(cid:65)(cid:76)(cid:65)(cid:82)(cid:89)(cid:12)(cid:0)(cid:66)(cid:79)(cid:78)(cid:85)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:66)(cid:69)(cid:78)(cid:69)(cid:70)(cid:73)(cid:84)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:80)(cid:65)(cid:73)(cid:68)(cid:0)(cid:73)(cid:78)(cid:0)(cid:53)(cid:51)(cid:0)(cid:68)(cid:79)(cid:76)(cid:76)(cid:65)(cid:82)(cid:83)(cid:14)(cid:0)(cid:52)(cid:72)(cid:69)(cid:83)(cid:69)(cid:0)(cid:87)(cid:69)(cid:82)(cid:69)(cid:0)(cid:53)(cid:51)(cid:4)(cid:25)(cid:19)(cid:19)(cid:12)(cid:21)(cid:24)(cid:18)(cid:0)(cid:73)(cid:78)(cid:0)(cid:18)(cid:16)(cid:16)(cid:25)(cid:0)(cid:8)(cid:18)(cid:16)(cid:16)(cid:24)(cid:26)(cid:0)(cid:53)(cid:51)(cid:4)(cid:24)(cid:20)(cid:22)(cid:12)(cid:21)(cid:19)(cid:19)(cid:9)(cid:14)(cid:0)(cid:41)(cid:78)(cid:0)(cid:65)(cid:68)(cid:68)(cid:73)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:72)(cid:69)(cid:0)(cid:82)(cid:69)(cid:67)(cid:69)(cid:73)(cid:86)(cid:69)(cid:68)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:7)(cid:0)(cid:70)(cid:69)(cid:69)(cid:83)(cid:0) (cid:79)(cid:70)(cid:0)(cid:97)(cid:20)(cid:19)(cid:12)(cid:16)(cid:16)(cid:16)(cid:0)(cid:8)(cid:18)(cid:16)(cid:16)(cid:24)(cid:26)(cid:0)(cid:97)(cid:20)(cid:19)(cid:12)(cid:16)(cid:16)(cid:16)(cid:9)(cid:14) (cid:18)(cid:14)(cid:0)(cid:0)(cid:52)(cid:72)(cid:69)(cid:0)(cid:70)(cid:73)(cid:71)(cid:85)(cid:82)(cid:69)(cid:83)(cid:0)(cid:68)(cid:73)(cid:83)(cid:67)(cid:76)(cid:79)(cid:83)(cid:69)(cid:68)(cid:0)(cid:65)(cid:66)(cid:79)(cid:86)(cid:69)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:34)(cid:73)(cid:76)(cid:76)(cid:0)(cid:51)(cid:80)(cid:69)(cid:78)(cid:67)(cid:69)(cid:82)(cid:0)(cid:69)(cid:88)(cid:67)(cid:76)(cid:85)(cid:68)(cid:69)(cid:0)(cid:65)(cid:77)(cid:79)(cid:85)(cid:78)(cid:84)(cid:83)(cid:0)(cid:80)(cid:65)(cid:89)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:73)(cid:78)(cid:0)(cid:67)(cid:79)(cid:78)(cid:78)(cid:69)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0)(cid:72)(cid:73)(cid:83)(cid:0)(cid:82)(cid:69)(cid:84)(cid:73)(cid:82)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:79)(cid:78)(cid:0)(cid:19)(cid:17)(cid:0)(cid:45)(cid:65)(cid:82)(cid:67)(cid:72)(cid:0)(cid:18)(cid:16)(cid:17)(cid:16)(cid:14)(cid:0)(cid:33)(cid:78)(cid:0)(cid:65)(cid:77)(cid:79)(cid:85)(cid:78)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:97)(cid:18)(cid:18)(cid:21)(cid:12)(cid:22)(cid:19)(cid:22)(cid:0)(cid:87)(cid:73)(cid:76)(cid:76)(cid:0)(cid:66)(cid:69)(cid:0)(cid:80)(cid:65)(cid:73)(cid:68)(cid:0)(cid:85)(cid:78)(cid:68)(cid:69)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0) (cid:84)(cid:69)(cid:82)(cid:77)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:72)(cid:73)(cid:83)(cid:0)(cid:67)(cid:79)(cid:78)(cid:84)(cid:82)(cid:65)(cid:67)(cid:84)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:72)(cid:73)(cid:83)(cid:0)(cid:79)(cid:85)(cid:84)(cid:83)(cid:84)(cid:65)(cid:78)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:68)(cid:69)(cid:70)(cid:69)(cid:82)(cid:82)(cid:69)(cid:68)(cid:0)(cid:83)(cid:72)(cid:65)(cid:82)(cid:69)(cid:83)(cid:0)(cid:87)(cid:73)(cid:76)(cid:76)(cid:0)(cid:86)(cid:69)(cid:83)(cid:84)(cid:0)(cid:73)(cid:78)(cid:0)(cid:70)(cid:85)(cid:76)(cid:76)(cid:14) (cid:19)(cid:14)(cid:0)(cid:33)(cid:80)(cid:80)(cid:79)(cid:73)(cid:78)(cid:84)(cid:69)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:17)(cid:0)(cid:51)(cid:69)(cid:80)(cid:84)(cid:69)(cid:77)(cid:66)(cid:69)(cid:82)(cid:0)(cid:18)(cid:16)(cid:16)(cid:25)(cid:14) (cid:20)(cid:14)(cid:0)(cid:50)(cid:69)(cid:84)(cid:73)(cid:82)(cid:69)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:17)(cid:0)(cid:51)(cid:69)(cid:80)(cid:84)(cid:69)(cid:77)(cid:66)(cid:69)(cid:82)(cid:0)(cid:18)(cid:16)(cid:16)(cid:25)(cid:14) (cid:21)(cid:14)(cid:0)(cid:0)(cid:45)(cid:65)(cid:82)(cid:75)(cid:0)(cid:44)(cid:79)(cid:85)(cid:71)(cid:72)(cid:69)(cid:65)(cid:68)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:34)(cid:73)(cid:76)(cid:76)(cid:0)(cid:51)(cid:80)(cid:69)(cid:78)(cid:67)(cid:69)(cid:82)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:77)(cid:69)(cid:77)(cid:66)(cid:69)(cid:82)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:84)(cid:69)(cid:75)(cid:0)(cid:36)(cid:69)(cid:70)(cid:73)(cid:78)(cid:69)(cid:68)(cid:0)(cid:34)(cid:69)(cid:78)(cid:69)(cid:70)(cid:73)(cid:84)(cid:0)(cid:48)(cid:69)(cid:78)(cid:83)(cid:73)(cid:79)(cid:78)(cid:0)(cid:51)(cid:67)(cid:72)(cid:69)(cid:77)(cid:69)(cid:0)(cid:8)(cid:83)(cid:69)(cid:69)(cid:0)(cid:80)(cid:65)(cid:71)(cid:69)(cid:0)(cid:22)(cid:17)(cid:9)(cid:14)(cid:0)(cid:35)(cid:79)(cid:78)(cid:84)(cid:82)(cid:73)(cid:66)(cid:85)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:84)(cid:79)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:51)(cid:67)(cid:72)(cid:69)(cid:77)(cid:69)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:78)(cid:79)(cid:84)(cid:0)(cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:69)(cid:68)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:73)(cid:83)(cid:0)(cid:84)(cid:65)(cid:66)(cid:76)(cid:69)(cid:14)(cid:0) (cid:55)(cid:79)(cid:76)(cid:70)(cid:72)(cid:65)(cid:82)(cid:84)(cid:0)(cid:40)(cid:65)(cid:85)(cid:83)(cid:69)(cid:82)(cid:0)(cid:73)(cid:83)(cid:0)(cid:78)(cid:79)(cid:84)(cid:0)(cid:65)(cid:0)(cid:77)(cid:69)(cid:77)(cid:66)(cid:69)(cid:82)(cid:0)(cid:79)(cid:70)(cid:0)(cid:65)(cid:78)(cid:89)(cid:0)(cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:84)(cid:69)(cid:75)(cid:0)(cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:0)(cid:80)(cid:69)(cid:78)(cid:83)(cid:73)(cid:79)(cid:78)(cid:0)(cid:80)(cid:76)(cid:65)(cid:78)(cid:14)(cid:0)(cid:52)(cid:72)(cid:69)(cid:0)(cid:67)(cid:79)(cid:78)(cid:84)(cid:82)(cid:73)(cid:66)(cid:85)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:73)(cid:83)(cid:0)(cid:84)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:65)(cid:77)(cid:79)(cid:85)(cid:78)(cid:84)(cid:83)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:0)(cid:80)(cid:65)(cid:89)(cid:83)(cid:0)(cid:84)(cid:79)(cid:0)(cid:65)(cid:0)(cid:80)(cid:69)(cid:82)(cid:83)(cid:79)(cid:78)(cid:65)(cid:76)(cid:0)(cid:80)(cid:69)(cid:78)(cid:83)(cid:73)(cid:79)(cid:78)(cid:0)(cid:65)(cid:82)(cid:82)(cid:65)(cid:78)(cid:71)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:14) (cid:22)(cid:14)(cid:0)(cid:0)(cid:52)(cid:72)(cid:69)(cid:83)(cid:69)(cid:0)(cid:70)(cid:73)(cid:71)(cid:85)(cid:82)(cid:69)(cid:83)(cid:0)(cid:69)(cid:88)(cid:67)(cid:76)(cid:85)(cid:68)(cid:69)(cid:0)(cid:65)(cid:77)(cid:79)(cid:85)(cid:78)(cid:84)(cid:83)(cid:0)(cid:82)(cid:69)(cid:76)(cid:65)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:79)(cid:0)(cid:45)(cid:65)(cid:84)(cid:67)(cid:72)(cid:73)(cid:78)(cid:71)(cid:0)(cid:33)(cid:87)(cid:65)(cid:82)(cid:68)(cid:83)(cid:0)(cid:71)(cid:82)(cid:65)(cid:78)(cid:84)(cid:69)(cid:68)(cid:0)(cid:85)(cid:78)(cid:68)(cid:69)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:84)(cid:69)(cid:75)(cid:0)(cid:36)(cid:69)(cid:70)(cid:69)(cid:82)(cid:82)(cid:69)(cid:68)(cid:0)(cid:34)(cid:79)(cid:78)(cid:85)(cid:83)(cid:0)(cid:51)(cid:72)(cid:65)(cid:82)(cid:69)(cid:0)(cid:48)(cid:76)(cid:65)(cid:78)(cid:14)(cid:0)(cid:36)(cid:69)(cid:84)(cid:65)(cid:73)(cid:76)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:79)(cid:83)(cid:69)(cid:0)(cid:65)(cid:87)(cid:65)(cid:82)(cid:68)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:84)(cid:72)(cid:69)(cid:73)(cid:82)(cid:0)(cid:80)(cid:69)(cid:82)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:67)(cid:82)(cid:73)(cid:84)(cid:69)(cid:82)(cid:73)(cid:65)(cid:0) (cid:65)(cid:82)(cid:69)(cid:0)(cid:71)(cid:73)(cid:86)(cid:69)(cid:78)(cid:0)(cid:79)(cid:78)(cid:0)(cid:80)(cid:65)(cid:71)(cid:69)(cid:83)(cid:0)(cid:21)(cid:22)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:22)(cid:20)(cid:14)(cid:0) www.intertek.com Intertek Annual Report 2009 61 Mark Loughead and Bill Spencer Intertek Deﬁned Beneﬁt Pension Scheme Normal retirement age 65 Annual pension at normal retirement age 1/60 of ﬁnal pensionable salary (highest base salary in any 12-month period during the ﬁve years immediately preceding retirement date) for each year of pensionable service, except, for those members who were active members of the Scheme on 5 April 1996, the accrual rate is 1/45 for pensionable service in the period after 5 April 1996 and before 6 April 1999. Members may exchange part of their pension for a tax-free cash sum. This will reduce their pension but not that of their spouse. Spouse’s or dependant’s pension Half of member’s pension. payable on death of member Early retirement From age 50 onwards with the consent of the Company and the Trustees, based on accrued entitlement reduced by an amount calculated in accordance with the Scheme rules for each year of retirement prior to age 65. With effect from 6 April 2010, the minimum retirement age will increase to age 55. Pension increases in payment or deferment Increases in deferment – revaluation is in two parts: i) The part that represents the Guaranteed Minimum Pension (GMP) will be increased at the rate of 4% for each complete tax year between date of leaving and State Pension Age. The balance of the pension will increase at the rate of 2.5% per annum or in line with the Retail Price Index if lower, for each completed year between the date of leaving and the Normal Retirement Date. ii) Increases in retirement (or payment): i) Pre 6 April 1997, excess pension beneﬁts will increase at the rate of 3% per annum. ii) 6 April 1997 to 5 April 2005, excess pension beneﬁts will increase at the rate of the lower of 2.5% per annum or the increase in the Retail Price Index. iii) Post 5 April 2005, excess pension beneﬁts will increase at the rate of the lower of 2.5% per annum or the increase in the Retail Price Index. iv) Pre 1988 GMP will not increase. v) Post 1988 GMP will increase at the rate of 3% per annum or the increase in the Retail Price Index, if lower. Employee contributions As determined by the Company and the Trustees: currently 8.5% of base salary (excluding incentive payments) up to the Company-set earnings cap which is £119,427 for the 09/10 tax year (£115,949 for 08/09). Employer contributions As determined by the Company and the Trustees: currently 16% of base salary (excluding incentive payments) up to the Company-set earnings cap. Ill health or incapacity Death in service In the case of ill health, the pension is calculated as for early retirement but without reduction. In the case of incapacity, the pension is calculated as if pensionable service had continued to normal retirement date. Death in service leads to a refund of the member’s own contributions plus either: i) a lump sum of four times pensionable salary plus spouse’s pension which is 50% of the member’s prospective pension at normal retirement date (based on prospective pensionable service to normal retirement date and ﬁnal pensionable salary immediately prior to the member’s death); or a lump sum of eight times pensionable salary, but with no spouse’s pension (except for the contracting-out requirements). ii) 62 Intertek Annual Report 2009 Directors’ Report – Governance Remuneration Report Details of the accrued pension to which Mark Loughead and Bill Spencer would be entitled on leaving service and the changes during the year are shown in the table below: Name Mark Loughead Bill Spencer4 Contributions made by the Director during the year £ Age at 31 December 2009 Increase in accrued entitlement during the year2 £ Accrued entitlement1 2009 £ Transfer value3 2008 £ Increase in transfer value in year less Transfer contributions made by Director £ value3 2009 £ 50 50 10,077 10,077 2,962 28,032 273,634 323,924 40,213 3,278 36,492 445,044 489,202 34,081 1. The accrued pension entitlement is the amount that would be paid each year on retirement at 65 based on service to 31 December 2009, excluding the effect of inflation. 2. Including inflation, the increases during the year for Bill Spencer and Mark Loughead were £3,278 and £2,962 respectively (these are the same as the figures given above as the inflationary increase during the year was nil). 3. Transfer values have been calculated using the Cash Equivalent Transfer Value Basis adopted by the Trustees with effect from 1 October 2008, in accordance with The Occupational Pension Schemes (Transfer Values) (Amendment) Regulations 2008 (SI2008/1050). The transfer values disclosed above do not represent a sum paid or payable to the individual Director, instead they represent a potential liability of the Pension Scheme. The value represents the full transfer value without reduction for any shortfall in scheme funding. 4. In addition to the benefit accrued under the Intertek Pension Scheme shown above, Bill Spencer also has an additional fixed pension payable at 65 of £9,777 per annum in relation to previous transfers. The liabilities in respect of the transferred-in benefits are included in the transfer values stated above. Advisors To ensure that the Group’s remuneration practices are market competitive and to help achieve its objectives, the Committee obtains information from various independent sources. The Committee has appointed and taken independent advice on remuneration matters and share incentive arrangements from Hewitt New Bridge Street (Hewitt), on remuneration benchmarking from Towers Watson (TW) and on UK pension matters from Premier Pensions Management Limited (PPM). During 2009 PPM’s associate company was engaged to provide additional FSA-regulated services in respect of UK pension matters. PPM, TW and Hewitt have no other connection with the Company or its senior ofﬁcers. Other beneﬁts Executive Directors are entitled to the use of a company car or the cash equivalent, a fuel allowance, life assurance, an annual medical and private medical insurance. Richard Nelson was entitled to life assurance in accordance with the terms of his previous employment contract with the Company, for £1.0m to be maintained for the whole of his life and payable to his beneﬁciaries on his death. Vanni Treves is entitled to a company car. Transactions with Directors As disclosed in note 29 to the ﬁnancial statements, no Director had a personal interest in any business transactions of the Group. Pensions The Committee continues to review the liabilities under the deﬁned beneﬁt section of the UK pension scheme and to monitor the effect of changes to future mortality rates and investment returns and consider how to limit the potential liability created by pension commitments. The majority of the Group’s employees are non-UK based and are therefore unaffected. Further details of the Group’s pension schemes, including the funding position, are disclosed in note 23 to the ﬁnancial statements. Details of the pension arrangements for those who have served as Executive Directors during the ﬁnancial year are shown above and on pages 57, 58 and 61. www.intertek.com Intertek Annual Report 2009 63 The Intertek Deferred Bonus Share Plan 31 December 2008 or on appointment Number of shares Granted in 2009 Number of shares Award Price1 £ Vested in 2009 Number of shares2 Lapsed in 2009 Number of shares 31 December 2009 Number of shares Wolfhart Hauser 2006 2007 2008 2009 Total Bill Spencer 2006 2007 2008 2009 Total Mark Loughead 2006 2007 2008 2009 Total Deferred Matching Deferred Matching Deferred Matching Deferred Matching Deferred Matching Deferred Matching Deferred Matching Deferred Matching Deferred Matching Deferred Matching Deferred Matching Deferred Matching 14,514 29,028 22,753 45,506 26,448 52,896 – – – – – – – – 46,152 92,304 8.276 8.276 (14,514) (29,028) 9.166 9.166 9.150 9.150 8.342 8.342 – – – – – – 191,145 138,456 (43,542) 6,391 12,782 9,774 19,548 13,813 27,626 – – – – – – – – 19,524 39,048 8.276 8.276 (6,391) (12,782) 9.166 9.166 9.150 9.150 8.342 8.342 – – – – – – 89,934 58,572 (19,173) 7,133 14,266 9,351 18,702 9,972 19,944 – – – – – – – – 26,687 53,374 8.276 8.276 (7,133) (14,266) 9.166 9.166 9.150 9.150 8.342 8.342 – – – – – – 79,368 80,061 (21,399) – – – – – – – – – – – – – – – – – – – – – – – – – – – Date award vests3 April 2009 April 2010 – – 22,753 45,506 26,448 March 2011 52,896 46,152 March 2012 92,304 286,059 – – 9,774 19,548 April 2009 April 2010 13,813 March 2011 27,626 19,524 March 2012 39,048 129,333 – – 9,351 18,702 April 2009 April 2010 9,972 March 2011 19,944 26,687 March 2012 53,374 138,030 1. Awards are made based on a share price obtained by averaging the closing share prices for the five dealing days before the date of grant. On the date of grant in 2009 the share price was £8.995. No payment is made by participants in the Plan. 2. Awards vested on 7 April 2009, on which date the closing market price of shares was £9.165, having been granted on 7 April 2006 on which date the closing market price was £8.31. 3. Awards normally vest three years after grant. The vesting of Matching Awards is subject to additional performance conditions described on page 64. 4. UK participants in the Plan have been offered the opportunity to elect for accelerated vesting on the Award due to mature in April 2010. An explanation appears on page 56. 5. The aggregate gain made by Directors on the vesting of the awards was £771,000. 64 Intertek Annual Report 2009 Directors’ Report – Governance Remuneration Report Directors’ interests in ordinary shares The interests of the Directors in the shares of the Company as at the year end are set out below. Save as stated in this report, during the course of the year, no Director nor any member of his or her immediate family had any other interest in the ordinary share capital of the Company or any of its subsidiaries. Number of ordinary shares of 1p David Allvey Edward Astle Gavin Darby 31 December 2008 or on appointment Acquired Disposed 5,897 677 – – – – – – – 31 December 2009 or at retirement 6,574 – – Wolfhart Hauser 1,336 43,542 17,908 26,970 Christopher Knight 5,627 677 Mark Loughead 14,485 21,399 Richard Nelson1 500,637 1,445 574 688 – – – – 6,304 35,884 501,211 2,133 132,000 85,978 130,8302 87,148 51,276 1,377 – 52,653 Debra Rade Bill Spencer Vanni Treves 1. Retired 1 September 2009. 2. Includes 63,000 shares in which Bill Spencer ceased to be beneﬁcially interested on 10 March 2009. No changes in the above Directors’ interests have taken place between 31 December 2009 and the date of this report. Directors’ interests in the Intertek Deferred Bonus Plan and share options Non-Executive Directors are not allowed to participate in the Company’s share plans. Additional information on these share plans appears below. Additional information about the Intertek Deferred Bonus Share Plan The Plan The Plan has two elements: (cid:115)(cid:0) (cid:0)(cid:36)(cid:69)(cid:70)(cid:69)(cid:82)(cid:82)(cid:69)(cid:68)(cid:0)(cid:51)(cid:72)(cid:65)(cid:82)(cid:69)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:65)(cid:87)(cid:65)(cid:82)(cid:68)(cid:69)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:69)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:83)(cid:0)(cid:66)(cid:65)(cid:83)(cid:69)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:73)(cid:82)(cid:0) annual achievement. For the Executive Directors and IOC the value of Deferred Shares will be equal to the cash bonus, subject, to a maximum of 100% of salary. The Committee believes that this provides a simple and well-targeted form of reward. The awards normally vest three years after grant subject to continued employment. (cid:115)(cid:0) (cid:0)(cid:45)(cid:65)(cid:84)(cid:67)(cid:72)(cid:73)(cid:78)(cid:71)(cid:0)(cid:51)(cid:72)(cid:65)(cid:82)(cid:69)(cid:0)(cid:65)(cid:87)(cid:65)(cid:82)(cid:68)(cid:83)(cid:12)(cid:0)(cid:87)(cid:72)(cid:73)(cid:67)(cid:72)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:83)(cid:85)(cid:66)(cid:74)(cid:69)(cid:67)(cid:84)(cid:0)(cid:84)(cid:79)(cid:0)(cid:76)(cid:79)(cid:78)(cid:71)(cid:13)(cid:84)(cid:69)(cid:82)(cid:77)(cid:0) performance requirements are at the discretion of the Committee, awarded to the most senior executives. Awards of Matching Shares are linked to awards of Deferred Shares, and for the Executive Directors and IOC are granted at the maximum ratio of two Matching Shares for every Deferred Share. Matching Shares vest after three years depending on performance. For awards granted 2006-2009 the performance test for Matching Share comprised the Company’s relative Total Shareholder Return (TSR) measured against a peer group of companies from the FTSE Index (excluding investment trusts). For awards granted between 2006 and 2008 the peer group comprised the members of the FTSE250. For awards granted in 2009 the peer group comprised FTSE Index members 76 to 175. Grants made in 2010 will use the peer group of FTSE Index members 51 to 150. In addition, irrespective of the Company’s TSR performance, no part of a Matching Award can vest unless the Company’s normalised EPS growth over the performance period was, on average, at least 2% per annum above the growth in the UK Retail Prices Index. TSR calculations are conducted independently by Hewitt. Awards vest as follows: TSR Ranking % of Matching Award that vests Awards made under the Intertek Deferred Bonus Share Plan are shown on page 63. Share options granted to the Executive Directors under the 2002 Plan and the Approved Plan are shown on page 65. Below median Median None 25% Between median and upper quartile Pro-rata on a straight line between 25% and 100% Upper quartile 100% The Committee can set different performance conditions from those described above for future awards. Any such new targets will not, in the reasonable opinion of the Committee, be materially less challenging in the circumstances than those described above. www.intertek.com Intertek Annual Report 2009 65 The 2002 Share Option Plans Wolfhart Hauser Approved Plan 2002 Plan Total Bill Spencer Approved Plan 2002 Plan 2002 Plan 2002 Plan 2002 Plan Total Mark Loughead 2002 Plan 2002 Plan Total 31 December 2008 Number of shares 3,277 40,429 43,706 6,864 15,466 20,406 24,069 25,131 91,936 21,472 17,912 39,384 Option price1 £ 7.78 7.78 4.37 4.37 3.59 5.24 7.78 5.24 7.78 Options exercised in 2009 Number of shares Options lapsed in 2009 Number of shares 31 December 2009 Number of shares Date option became exercisable1 Date option expires – – – (6,864)2 (15,466)3 (20,406)3 (24,069)3 – (66,805) – – – – – – – – – – – – – – – 3,277 April 2008 April 2015 40,429 April 2008 April 2015 43,706 – – – – May 2005 May 2012 May 2005 May 2012 April 2006 April 2013 April 2007 April 2014 25,131 April 2008 April 2015 25,131 21,472 April 2007 April 2014 17,912 April 2008 April 2015 39,384 1. Option exercise prices were determined by the average of the closing middle market quotations of an ordinary share in the Company on the five days immediately prior to the date of grant. No payment was made for participation in the option plans. 2. The closing market price of shares on the date of exercise of options was £8.915. 3. The closing market price of shares on the date of exercise of options was £10.49. 4. The aggregate gain made by Directors on the exercise of options was £393,000. Deferred awards will normally vest on the third anniversary of grant provided the participant is still employed in the Group. Matching awards will normally vest on the third anniversary of grant once the Committee has determined the extent to which the applicable performance conditions have been satisﬁed and provided the participant is still employed in the Group. As described on page 56 the Committee has made a concession in respect of the vesting period for UK-based participants who have awards maturing in April 2010. the extent to which the performance conditions have been satisﬁed over the full performance period or up to the date of cessation as appropriate and awards will vest on a pro-rata basis on the date of cessation, although the Committee may decide not to pro-rate an award if it regards it as inappropriate to do so in the particular circumstances. In the event of a change of control, vesting of Matching awards will occur on the same basis as for leaving employment, described above. Deferred awards will vest in full. Awards may be satisﬁed by the issue of new shares or by purchasing shares in the market. If a participant leaves employment for certain reasons beyond the participant’s control or for any other reason at the discretion of the Committee, then the awards vest as follows: (i) Deferred awards will vest on a pro-rata basis on the date of cessation, although the Committee may decide not to pro-rate an award if it regards it as inappropriate to do so in the particular circumstances; (ii) Matching awards will vest at the end of the period over which the performance conditions are measured, or the Committee may decide that the Matching award will vest on cessation of employment. The extent to which a Matching award will vest will depend upon Share information On 31 December 2009 the closing market price of Intertek ordinary shares was £12.55. The highest and lowest prices of the shares during the year were £13.54 and £7.73 respectively. Approval of the Remuneration Report The Remuneration Report was approved by the Board on 8 March 2010. David Allvey Chairman Remuneration Committee 66 Intertek Annual Report 2009 Directors’ Report – Governance Other Statutory Information Directors The Directors who held ofﬁce during the year are set out below. Vanni Treves (cid:50)(cid:73)(cid:67)(cid:72)(cid:65)(cid:82)(cid:68)(cid:0)(cid:46)(cid:69)(cid:76)(cid:83)(cid:79)(cid:78)(cid:0) Wolfhart Hauser (cid:45)(cid:65)(cid:82)(cid:75)(cid:0)(cid:44)(cid:79)(cid:85)(cid:71)(cid:72)(cid:69)(cid:65)(cid:68)(cid:0) Bill Spencer (cid:36)(cid:65)(cid:86)(cid:73)(cid:68)(cid:0)(cid:33)(cid:76)(cid:76)(cid:86)(cid:69)(cid:89)(cid:0) (cid:37)(cid:68)(cid:87)(cid:65)(cid:82)(cid:68)(cid:0)(cid:33)(cid:83)(cid:84)(cid:76)(cid:69)(cid:0) (cid:39)(cid:65)(cid:86)(cid:73)(cid:78)(cid:0)(cid:36)(cid:65)(cid:82)(cid:66)(cid:89)(cid:0) Chairman (cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:69)(cid:80)(cid:85)(cid:84)(cid:89)(cid:0)(cid:35)(cid:72)(cid:65)(cid:73)(cid:82)(cid:77)(cid:65)(cid:78) (retired 1 September 2009) Chief Executive Ofﬁcer (cid:35)(cid:72)(cid:73)(cid:69)(cid:70)(cid:0)(cid:47)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:47)(cid:70)(cid:108)(cid:67)(cid:69)(cid:82)(cid:0) Chief Financial Ofﬁcer (to retire on 31 March 2010) (cid:51)(cid:69)(cid:78)(cid:73)(cid:79)(cid:82)(cid:0)(cid:41)(cid:78)(cid:68)(cid:69)(cid:80)(cid:69)(cid:78)(cid:68)(cid:69)(cid:78)(cid:84)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82) (cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:0) (appointed 1 September 2009) (cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:0) (appointed 1 September 2009) (cid:35)(cid:72)(cid:82)(cid:73)(cid:83)(cid:84)(cid:79)(cid:80)(cid:72)(cid:69)(cid:82)(cid:0)(cid:43)(cid:78)(cid:73)(cid:71)(cid:72)(cid:84)(cid:0) (cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82) (cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82) (cid:36)(cid:69)(cid:66)(cid:82)(cid:65)(cid:0)(cid:50)(cid:65)(cid:68)(cid:69)(cid:0) The Company’s Articles of Association contain provisions relating to the retirement, election and re-election of Directors. (cid:115)(cid:0) (cid:0)(cid:37)(cid:68)(cid:87)(cid:65)(cid:82)(cid:68)(cid:0)(cid:33)(cid:83)(cid:84)(cid:76)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:39)(cid:65)(cid:86)(cid:73)(cid:78)(cid:0)(cid:36)(cid:65)(cid:82)(cid:66)(cid:89)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0)(cid:66)(cid:69)(cid:69)(cid:78)(cid:0)(cid:65)(cid:80)(cid:80)(cid:79)(cid:73)(cid:78)(cid:84)(cid:69)(cid:68)(cid:0)(cid:83)(cid:73)(cid:78)(cid:67)(cid:69)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0) last AGM and therefore will offer themselves for election at the forthcoming AGM. (cid:115)(cid:0) (cid:0)(cid:36)(cid:65)(cid:86)(cid:73)(cid:68)(cid:0)(cid:33)(cid:76)(cid:76)(cid:86)(cid:69)(cid:89)(cid:12)(cid:0)(cid:72)(cid:65)(cid:86)(cid:73)(cid:78)(cid:71)(cid:0)(cid:78)(cid:79)(cid:84)(cid:0)(cid:66)(cid:69)(cid:69)(cid:78)(cid:0)(cid:82)(cid:69)(cid:13)(cid:65)(cid:80)(cid:80)(cid:79)(cid:73)(cid:78)(cid:84)(cid:69)(cid:68)(cid:0)(cid:65)(cid:84)(cid:0)(cid:69)(cid:73)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0) previous two AGMs, retires by rotation and, being eligible, offers himself for re-election at the forthcoming AGM. (cid:115)(cid:0) (cid:0)(cid:34)(cid:73)(cid:76)(cid:76)(cid:0)(cid:51)(cid:80)(cid:69)(cid:78)(cid:67)(cid:69)(cid:82)(cid:0)(cid:82)(cid:69)(cid:84)(cid:73)(cid:82)(cid:69)(cid:83)(cid:0)(cid:79)(cid:78)(cid:0)(cid:19)(cid:17)(cid:0)(cid:45)(cid:65)(cid:82)(cid:67)(cid:72)(cid:0)(cid:18)(cid:16)(cid:17)(cid:16)(cid:14) Short biographies of all the Directors are set out on page 43. Directors’ powers The Directors are responsible for the management of the business of the Company and their powers to do so are determined by the provisions of the Companies Act 2006 and the Company’s Articles of Association as amended at the previous AGM on 15 May 2009 and which came into force on 1 October 2009. Further powers are granted by members in general meeting and those currently in place are set out in detail within the appropriate section of this report. Directors’ interests (cid:50)(cid:73)(cid:67)(cid:72)(cid:65)(cid:82)(cid:68)(cid:0)(cid:46)(cid:69)(cid:76)(cid:83)(cid:79)(cid:78)(cid:0)(cid:87)(cid:72)(cid:79)(cid:0)(cid:82)(cid:69)(cid:83)(cid:73)(cid:71)(cid:78)(cid:69)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:17)(cid:0)(cid:51)(cid:69)(cid:80)(cid:84)(cid:69)(cid:77)(cid:66)(cid:69)(cid:82)(cid:0)(cid:18)(cid:16)(cid:16)(cid:25)(cid:0)(cid:79)(cid:67)(cid:67)(cid:65)(cid:83)(cid:73)(cid:79)(cid:78)(cid:65)(cid:76)(cid:76)(cid:89)(cid:0) undertook special project work for the Group, although none was performed in 2009 or 2008. Details of these service arrangements are disclosed in the Remuneration Report on page 59. With this exception, other than employment contracts, none of the Directors of the Company had a personal interest in any business transactions of the Company or its subsidiaries. The terms of the Directors’ service contracts and the Directors’ interests in the shares and options of the Company in respect of which transactions are notiﬁable to the Company under the Disclosure and Transparency Rule 3.1.2 are disclosed in the Remuneration Report on pages 58 and 64 to 65. Directors’ indemnities The Board believes that it is in the best interests of the Group to attract and retain the services of the most able and experienced directors by offering competitive terms of engagement, including the granting of indemnities on terms consistent with the applicable statutory provisions. Qualifying third-party indemnity provisions (as deﬁned by section 234 of the Act) were accordingly in force during the course of the ﬁnancial year ended 31 December 2009 for the beneﬁt of the Directors and, at the date of this report, are in force for the beneﬁt of the Directors in relation to certain losses and liabilities which they may incur (or have incurred) in connection with their duties, powers or ofﬁce. Share capital The issued share capital of the Company, and details of the movements in the Company’s share capital during the year, are shown in note 20 to the ﬁnancial statements. Rights and obligations attaching to shares The holders of ordinary shares are entitled to receive dividends when declared, to receive the Company’s report and accounts, to attend and speak at general meetings of the Company, to appoint proxies and exercise voting rights. There are no restrictions on the transfer of ordinary shares in the Company. The rights attached to shares in the Company are provided by the Articles of Association, which may be amended or replaced by means of a special resolution of the Company in a General Meeting. (cid:52)(cid:72)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:7)(cid:0)(cid:80)(cid:79)(cid:87)(cid:69)(cid:82)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:67)(cid:79)(cid:78)(cid:70)(cid:69)(cid:82)(cid:82)(cid:69)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:77)(cid:0)(cid:66)(cid:89)(cid:0)(cid:53)(cid:43)(cid:0)(cid:76)(cid:69)(cid:71)(cid:73)(cid:83)(cid:76)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0) by the Company’s Articles. (cid:46)(cid:79)(cid:0)(cid:79)(cid:82)(cid:68)(cid:73)(cid:78)(cid:65)(cid:82)(cid:89)(cid:0)(cid:83)(cid:72)(cid:65)(cid:82)(cid:69)(cid:83)(cid:0)(cid:67)(cid:65)(cid:82)(cid:82)(cid:89)(cid:0)(cid:65)(cid:78)(cid:89)(cid:0)(cid:83)(cid:80)(cid:69)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:82)(cid:73)(cid:71)(cid:72)(cid:84)(cid:83)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0)(cid:82)(cid:69)(cid:71)(cid:65)(cid:82)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:67)(cid:79)(cid:78)(cid:84)(cid:82)(cid:79)(cid:76)(cid:0) of the Company and there are no restrictions on voting rights except that a shareholder has no right to vote in respect of a share unless all sums due in respect of that share are fully paid. There are no arrangements known to the Company by which ﬁnancial rights carried by any shares in the Company are held by a person other than the holders of the shares, nor are there any arrangements between holders of securities that may result in restrictions on the transfer of securities or on voting rights known to the Company. All issued shares are fully paid. (cid:51)(cid:72)(cid:65)(cid:82)(cid:69)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:65)(cid:68)(cid:77)(cid:73)(cid:84)(cid:84)(cid:69)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:84)(cid:82)(cid:65)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:79)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:44)(cid:79)(cid:78)(cid:68)(cid:79)(cid:78)(cid:0)(cid:51)(cid:84)(cid:79)(cid:67)(cid:75)(cid:0)(cid:37)(cid:88)(cid:67)(cid:72)(cid:65)(cid:78)(cid:71)(cid:69)(cid:0) and may be traded through the CREST system. www.intertek.com Intertek Annual Report 2009 67 Allotment of shares At the AGM held in 2009, the shareholders generally and unconditionally authorised the Directors to allot relevant securities up to approximately two-thirds of the nominal amount of issued share capital. This authority was not exercised during the year. It is the Directors intention to renew this authority in line with guidance issued by the Association of British Insurers. The resolution is set (cid:79)(cid:85)(cid:84)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:46)(cid:79)(cid:84)(cid:73)(cid:67)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:33)(cid:39)(cid:45)(cid:0)(cid:65)(cid:67)(cid:67)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:73)(cid:83)(cid:0)(cid:33)(cid:78)(cid:78)(cid:85)(cid:65)(cid:76)(cid:0)(cid:50)(cid:69)(cid:80)(cid:79)(cid:82)(cid:84)(cid:14)(cid:0) Also at the AGM in 2009, the Directors were empowered by the shareholders to allot equity securities, up to 5% of the Company’s issued share capital, for cash under section 570 of the Companies Act 2006. It is intended that this authority be renewed, up to 5%, at the forthcoming AGM. Purchase of own shares At the AGM held in 2009, shareholders generally and unconditionally authorised the Company to buy back up to 10% of its own ordinary shares by market purchase until the conclusion of the AGM to be (cid:72)(cid:69)(cid:76)(cid:68)(cid:0)(cid:84)(cid:72)(cid:73)(cid:83)(cid:0)(cid:89)(cid:69)(cid:65)(cid:82)(cid:14)(cid:0)(cid:46)(cid:79)(cid:0)(cid:83)(cid:85)(cid:67)(cid:72)(cid:0)(cid:80)(cid:85)(cid:82)(cid:67)(cid:72)(cid:65)(cid:83)(cid:69)(cid:83)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0)(cid:66)(cid:69)(cid:69)(cid:78)(cid:0)(cid:77)(cid:65)(cid:68)(cid:69)(cid:0)(cid:84)(cid:79)(cid:0)(cid:68)(cid:65)(cid:84)(cid:69)(cid:0)(cid:80)(cid:85)(cid:82)(cid:83)(cid:85)(cid:65)(cid:78)(cid:84)(cid:0) to this authority. The Directors will seek to renew this authority for up to 10% of the Company’s issued share capital at the forthcoming AGM. This power will only be exercised if the Directors are satisﬁed that any purchase will increase the earnings per share of the ordinary share capital in issue after the purchase and accordingly that the purchase is in the interests of shareholders. The Directors will also give careful consideration to gearing levels of the Company and its general ﬁnancial position. Any shares purchased in this way may be held in treasury which, the Directors believe, will provide the Company with ﬂexibility in the management of its share capital. Where treasury shares are used to satisfy share options or awards, they will be classed as new issue shares for the purpose of the 10% limit on the number of shares that may be issued over a ten-year period under our relevant share plan rules. Policy and practice on payment of suppliers The Group does not follow a single standard on payment practice but has a variety of payment terms with its suppliers. Payment terms are agreed at the commencement of business with each supplier and it is the policy of the Group that payment is made accordingly, subject to the terms and conditions being met. The Parent Company, Intertek Group plc does not trade and therefore has no trade payables. Signiﬁcant relationships The Group does not have any contractual or other relationships with any single party which are essential to the business of the Group and therefore, no such relationships have been disclosed. Social and community issues We encourage our local managers to foster community links that are appropriate to the businesses they manage. Further details are given in our Corporate Social Responsibility Report on page 35. Substantial shareholdings The following disclosures of major holdings of voting rights have been made (and have not been amended or withdrawn) to the Company pursuant to the requirements of the Financial Services Authority Disclosure and Transparency Rule 5: (cid:115)(cid:0) (cid:0)(cid:44)(cid:79)(cid:78)(cid:69)(cid:0)(cid:48)(cid:73)(cid:78)(cid:69)(cid:0)(cid:35)(cid:65)(cid:80)(cid:73)(cid:84)(cid:65)(cid:76)(cid:0)(cid:44)(cid:44)(cid:35)(cid:0)(cid:6)(cid:0)(cid:51)(cid:84)(cid:69)(cid:80)(cid:72)(cid:69)(cid:78)(cid:0)(cid:38)(cid:0)(cid:45)(cid:65)(cid:78)(cid:68)(cid:69)(cid:76)(cid:0)(cid:42)(cid:82)(cid:0)(cid:71)(cid:65)(cid:86)(cid:69)(cid:0)(cid:78)(cid:79)(cid:84)(cid:73)(cid:67)(cid:69)(cid:0)(cid:79)(cid:78)(cid:0) 3 February 2010 that they had an indirect interest on 1 February 2010 in 15,354,614 Intertek Group plc ordinary shares, representing 9.67% of the ordinary shares in issue at that date. (cid:115)(cid:0) (cid:0)(cid:44)(cid:69)(cid:71)(cid:65)(cid:76)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:39)(cid:69)(cid:78)(cid:69)(cid:82)(cid:65)(cid:76)(cid:0)(cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:0)(cid:80)(cid:76)(cid:67)(cid:0)(cid:71)(cid:65)(cid:86)(cid:69)(cid:0)(cid:78)(cid:79)(cid:84)(cid:73)(cid:67)(cid:69)(cid:0)(cid:79)(cid:78)(cid:0)(cid:17)(cid:25)(cid:0)(cid:46)(cid:79)(cid:86)(cid:69)(cid:77)(cid:66)(cid:69)(cid:82)(cid:0)(cid:18)(cid:16)(cid:16)(cid:25)(cid:0) (cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:73)(cid:84)(cid:0)(cid:72)(cid:65)(cid:68)(cid:0)(cid:65)(cid:0)(cid:68)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:0)(cid:73)(cid:78)(cid:84)(cid:69)(cid:82)(cid:69)(cid:83)(cid:84)(cid:0)(cid:79)(cid:78)(cid:0)(cid:17)(cid:23)(cid:0)(cid:46)(cid:79)(cid:86)(cid:69)(cid:77)(cid:66)(cid:69)(cid:82)(cid:0)(cid:18)(cid:16)(cid:16)(cid:25)(cid:0)(cid:73)(cid:78)(cid:0)(cid:22)(cid:12)(cid:19)(cid:20)(cid:16)(cid:12)(cid:23)(cid:19)(cid:22)(cid:0) Intertek Group plc ordinary shares, representing 3.99% of the ordinary shares in issue at that date. (cid:115)(cid:0) (cid:0)(cid:37)(cid:77)(cid:73)(cid:78)(cid:69)(cid:78)(cid:67)(cid:69)(cid:0)(cid:35)(cid:65)(cid:80)(cid:73)(cid:84)(cid:65)(cid:76)(cid:12)(cid:0)(cid:44)(cid:44)(cid:35)(cid:0)(cid:6)(cid:0)(cid:50)(cid:73)(cid:67)(cid:75)(cid:89)(cid:0)(cid:35)(cid:0)(cid:51)(cid:65)(cid:78)(cid:68)(cid:76)(cid:69)(cid:82)(cid:0)(cid:71)(cid:65)(cid:86)(cid:69)(cid:0)(cid:78)(cid:79)(cid:84)(cid:73)(cid:67)(cid:69)(cid:0)(cid:79)(cid:78)(cid:0) 19 October 2009 that they had an indirect interest on 19 October 2009 in 6,110,000 Intertek Group plc ordinary shares, representing 3.85% of the ordinary shares in issue at that date. Charitable and political donations During 2009, the Group made charitable donations of £107,000 (2008: £108,000), to a wide variety of charities, including support to employees in the Philippines and Vietnam affected by natural disasters. At the AGM in 2009 shareholders passed a resolution, on a precautionary basis, to authorise the Company to make donations to EU political organisations and to incur EU political expenditure (as such terms are deﬁned in the Companies Act 2006) not exceeding £90,000. During the year the Group did not make any political donations (2008: £nil). It is the Company’s policy not, directly or through any subsidiary, to make what are commonly regarded as donations to any political party. However, at the forthcoming AGM of the Company shareholders’ approval will again be sought to authorise the Group to make political donations and/or incur political expenditure (as such terms are deﬁned in Sections 362 to 379 of the Companies Act 2006). Further details (cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:73)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:67)(cid:79)(cid:78)(cid:84)(cid:65)(cid:73)(cid:78)(cid:69)(cid:68)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:46)(cid:79)(cid:84)(cid:73)(cid:67)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:33)(cid:39)(cid:45)(cid:14)(cid:0) Auditors (cid:52)(cid:72)(cid:69)(cid:0)(cid:65)(cid:85)(cid:68)(cid:73)(cid:84)(cid:79)(cid:82)(cid:83)(cid:12)(cid:0)(cid:43)(cid:48)(cid:45)(cid:39)(cid:0)(cid:33)(cid:85)(cid:68)(cid:73)(cid:84)(cid:0)(cid:48)(cid:76)(cid:67)(cid:12)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0)(cid:73)(cid:78)(cid:68)(cid:73)(cid:67)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:84)(cid:72)(cid:69)(cid:73)(cid:82)(cid:0)(cid:87)(cid:73)(cid:76)(cid:76)(cid:73)(cid:78)(cid:71)(cid:78)(cid:69)(cid:83)(cid:83)(cid:0)(cid:84)(cid:79)(cid:0) continue in ofﬁce and a resolution that they be reappointed will be proposed at the forthcoming AGM in accordance with Section 489 of the Companies Act 2006. 68 Intertek Annual Report 2009 Directors’ Report – Governance Statement of Directors’ Responsibilities Annual General Meeting (cid:52)(cid:72)(cid:69)(cid:0)(cid:46)(cid:79)(cid:84)(cid:73)(cid:67)(cid:69)(cid:0)(cid:67)(cid:79)(cid:78)(cid:86)(cid:69)(cid:78)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:33)(cid:39)(cid:45)(cid:12)(cid:0)(cid:84)(cid:79)(cid:0)(cid:66)(cid:69)(cid:0)(cid:72)(cid:69)(cid:76)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:38)(cid:82)(cid:73)(cid:68)(cid:65)(cid:89)(cid:0)(cid:17)(cid:20)(cid:0)(cid:45)(cid:65)(cid:89)(cid:0)(cid:18)(cid:16)(cid:17)(cid:16)(cid:12)(cid:0) is available for download from the Company’s corporate website (cid:65)(cid:84)(cid:0)(cid:87)(cid:87)(cid:87)(cid:14)(cid:73)(cid:78)(cid:84)(cid:69)(cid:82)(cid:84)(cid:69)(cid:75)(cid:14)(cid:67)(cid:79)(cid:77)(cid:14)(cid:0)(cid:52)(cid:72)(cid:69)(cid:0)(cid:46)(cid:79)(cid:84)(cid:73)(cid:67)(cid:69)(cid:0)(cid:87)(cid:73)(cid:76)(cid:76)(cid:0)(cid:68)(cid:69)(cid:84)(cid:65)(cid:73)(cid:76)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:66)(cid:85)(cid:83)(cid:73)(cid:78)(cid:69)(cid:83)(cid:83)(cid:0)(cid:84)(cid:79)(cid:0)(cid:66)(cid:69)(cid:0) conducted at the meeting and include information concerning the deadlines for submitting proxy forms and in relation to voting rights. Statement of Directors’ responsibilities in respect of the Annual Report and the ﬁnancial statements The Directors are responsible for preparing the Annual Report and the Group and Parent Company ﬁnancial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare Group and Parent Company ﬁnancial statements for each ﬁnancial year. Under that law, they are required to prepare the Group ﬁnancial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs) and applicable law and have elected to prepare the Parent Company ﬁnancial statements (cid:73)(cid:78)(cid:0)(cid:65)(cid:67)(cid:67)(cid:79)(cid:82)(cid:68)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0)(cid:53)(cid:43)(cid:0)(cid:33)(cid:67)(cid:67)(cid:79)(cid:85)(cid:78)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:51)(cid:84)(cid:65)(cid:78)(cid:68)(cid:65)(cid:82)(cid:68)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:65)(cid:80)(cid:80)(cid:76)(cid:73)(cid:67)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:76)(cid:65)(cid:87)(cid:0) (cid:8)(cid:53)(cid:43)(cid:0)(cid:39)(cid:69)(cid:78)(cid:69)(cid:82)(cid:65)(cid:76)(cid:76)(cid:89)(cid:0)(cid:33)(cid:67)(cid:67)(cid:69)(cid:80)(cid:84)(cid:69)(cid:68)(cid:0)(cid:33)(cid:67)(cid:67)(cid:79)(cid:85)(cid:78)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:48)(cid:82)(cid:65)(cid:67)(cid:84)(cid:73)(cid:67)(cid:69)(cid:9)(cid:14) Under company law the Directors must not approve the ﬁnancial statements unless they are satisﬁed that they give a true and fair view of the state of affairs of the Group and Parent Company and of their proﬁt or loss for that period. In preparing each of the Group and Parent Company ﬁnancial statements, the Directors are required to: (cid:115)(cid:0) (cid:0)(cid:83)(cid:69)(cid:76)(cid:69)(cid:67)(cid:84)(cid:0)(cid:83)(cid:85)(cid:73)(cid:84)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:65)(cid:67)(cid:67)(cid:79)(cid:85)(cid:78)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:80)(cid:79)(cid:76)(cid:73)(cid:67)(cid:73)(cid:69)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:84)(cid:72)(cid:69)(cid:78)(cid:0)(cid:65)(cid:80)(cid:80)(cid:76)(cid:89)(cid:0)(cid:84)(cid:72)(cid:69)(cid:77)(cid:0)(cid:67)(cid:79)(cid:78)(cid:83)(cid:73)(cid:83)(cid:84)(cid:69)(cid:78)(cid:84)(cid:76)(cid:89)(cid:27)(cid:0) (cid:115)(cid:0) (cid:0)(cid:77)(cid:65)(cid:75)(cid:69)(cid:0)(cid:74)(cid:85)(cid:68)(cid:71)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:69)(cid:83)(cid:84)(cid:73)(cid:77)(cid:65)(cid:84)(cid:69)(cid:83)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:82)(cid:69)(cid:65)(cid:83)(cid:79)(cid:78)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:80)(cid:82)(cid:85)(cid:68)(cid:69)(cid:78)(cid:84)(cid:27)(cid:0) (cid:115)(cid:0) (cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:0)(cid:108)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:83)(cid:84)(cid:65)(cid:84)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:12)(cid:0)(cid:83)(cid:84)(cid:65)(cid:84)(cid:69)(cid:0)(cid:87)(cid:72)(cid:69)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:89)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0) been prepared in accordance with IFRSs as adopted by the EU; (cid:115)(cid:0) (cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:48)(cid:65)(cid:82)(cid:69)(cid:78)(cid:84)(cid:0)(cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:0)(cid:108)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:83)(cid:84)(cid:65)(cid:84)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:12)(cid:0)(cid:83)(cid:84)(cid:65)(cid:84)(cid:69)(cid:0)(cid:87)(cid:72)(cid:69)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0) (cid:65)(cid:80)(cid:80)(cid:76)(cid:73)(cid:67)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:53)(cid:43)(cid:0)(cid:33)(cid:67)(cid:67)(cid:79)(cid:85)(cid:78)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:51)(cid:84)(cid:65)(cid:78)(cid:68)(cid:65)(cid:82)(cid:68)(cid:83)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0)(cid:66)(cid:69)(cid:69)(cid:78)(cid:0)(cid:70)(cid:79)(cid:76)(cid:76)(cid:79)(cid:87)(cid:69)(cid:68)(cid:12)(cid:0)(cid:83)(cid:85)(cid:66)(cid:74)(cid:69)(cid:67)(cid:84)(cid:0) to any material departures disclosed and explained in the Parent Company ﬁnancial statements; and (cid:115)(cid:0) (cid:0)(cid:80)(cid:82)(cid:69)(cid:80)(cid:65)(cid:82)(cid:69)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:108)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:83)(cid:84)(cid:65)(cid:84)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:79)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:71)(cid:79)(cid:73)(cid:78)(cid:71)(cid:0)(cid:67)(cid:79)(cid:78)(cid:67)(cid:69)(cid:82)(cid:78)(cid:0)(cid:66)(cid:65)(cid:83)(cid:73)(cid:83)(cid:0) unless it is inappropriate to presume that the Group and the Parent Company will continue in business. The Directors are responsible for keeping adequate accounting records that disclose with reasonable accuracy, at any time, the ﬁnancial position of the Parent Company and enable them to ensure that its ﬁnancial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. Under applicable law and regulations, the Directors are also responsible for preparing a Directors’ Report, Directors’ Remuneration Report and Corporate Governance Report that comply with that law and those regulations. The Directors are responsible for the maintenance and integrity of the corporate and ﬁnancial information included on the Company’s (cid:87)(cid:69)(cid:66)(cid:83)(cid:73)(cid:84)(cid:69)(cid:14)(cid:0)(cid:44)(cid:69)(cid:71)(cid:73)(cid:83)(cid:76)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:53)(cid:43)(cid:0)(cid:71)(cid:79)(cid:86)(cid:69)(cid:82)(cid:78)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:80)(cid:82)(cid:69)(cid:80)(cid:65)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0) dissemination of ﬁnancial statements may differ from legislation in other jurisdictions. Responsibility statement of the Directors in respect of the annual ﬁnancial report We conﬁrm that to the best of our knowledge: (cid:115)(cid:0) (cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:108)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:83)(cid:84)(cid:65)(cid:84)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:12)(cid:0)(cid:80)(cid:82)(cid:69)(cid:80)(cid:65)(cid:82)(cid:69)(cid:68)(cid:0)(cid:73)(cid:78)(cid:0)(cid:65)(cid:67)(cid:67)(cid:79)(cid:82)(cid:68)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0) applicable set of accounting standards, give a true and fair view of the assets, liabilities, ﬁnancial position and proﬁt or loss of the Company and the undertakings included in the consolidation taken as a whole; and (cid:115)(cid:0) (cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:7)(cid:0)(cid:82)(cid:69)(cid:80)(cid:79)(cid:82)(cid:84)(cid:0)(cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:69)(cid:83)(cid:0)(cid:65)(cid:0)(cid:70)(cid:65)(cid:73)(cid:82)(cid:0)(cid:82)(cid:69)(cid:86)(cid:73)(cid:69)(cid:87)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:68)(cid:69)(cid:86)(cid:69)(cid:76)(cid:79)(cid:80)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0) and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. Statement of disclosure of information to auditors The Directors who held ofﬁce at the date of approval of this Directors’ Report conﬁrm that, so far as they are aware, there is no relevant audit information of which the Company’s auditors are unaware and each Director has taken all the steps that he or she ought to have taken as a Director to make himself or herself aware of any relevant audit information and to establish that the Company’s auditors are aware of that information. This Directors’ Report comprising pages 8 to 68 has been approved by the Board and signed on its behalf by: Wolfhart Hauser Director 8 March 2010 Registered Ofﬁce 25 Savile Row (cid:44)(cid:79)(cid:78)(cid:68)(cid:79)(cid:78) W1S 2ES (cid:50)(cid:69)(cid:71)(cid:73)(cid:83)(cid:84)(cid:69)(cid:82)(cid:69)(cid:68)(cid:0)(cid:46)(cid:85)(cid:77)(cid:66)(cid:69)(cid:82)(cid:26)(cid:0)(cid:20)(cid:18)(cid:22)(cid:23)(cid:21)(cid:23)(cid:22) Intertek Annual Report 2009 69 Financial statements 70 Consolidated Income Statement 71 Consolidated Statement of Comprehensive Income 72 Consolidated Statement of Financial Position 73 Consolidated Statement of Changes in Equity 74 Consolidated Statement of Cash Flows 75 Notes to the ﬁnancial statements 119 Intertek Group plc – Company Balance Sheet 120 Notes to the Company ﬁnancial statements 123 Independent Auditors’ Report 124 Shareholder Information 124 Financial Calendar IBC Corporate Information 14 Deferred tax assets and liabilities 94 12 Investment in associates 94 13 Other investments 94 95 15 Inventories 96 16 Trade and other receivables 17 Interest bearing loans 96 and borrowings 97 18 Trade and other payables 97 19 Provisions 98 20 Capital and reserves 99 21 Minority interests 99 22 Commitments 99 23 Employee beneﬁts 102 24 Acquisitions 109 25 Share schemes 110 26 Financial instruments 116 27 Analysis of net debt 117 28 Contingent liabilities 117 29 Related parties 118 30 Post balance sheet events 118 31 Principal operating subsidiaries and associated companies 2 Signiﬁcant accounting policies Notes 75 1 General 75 83 3 Operating segments 86 4 Non-recurring costs 86 5 Expenses and auditors’ remuneration 86 6 Employees 87 7 Net ﬁnancing costs 88 8 Income tax expense 89 9 Earnings per ordinary share 90 91 10 Property, plant and equipment 11 Goodwill and other intangible assets 70 Intertek Annual Report 2009 Consolidated Income Statement For the year ended 31 December 2009 Revenue Cost of sales Gross profit Administrative expenses Group operating profit Analysis of Group operating profit Adjusted Group operating profit Amortisation of acquisition intangibles* Impairment of goodwill* Non-recurring costs* Group operating profit Finance income Finance expense Net financing costs Share of profit of associates Profit before income tax Income tax expense Profit for the year Attributable to: Equity holders of the Company Minority interest Profit for the year Earnings per share Basic Diluted * included in administrative expenses Notes 2009 £m 2008 £m 1,237.3 (965.4) 1,003.5 (792.6) 3 11 11 4 3 7 7 12 8 21 271.9 (85.2) 186.7 209.0 (12.8) – (9.5) 186.7 7.7 (25.2) (17.5) – 169.2 (45.5) 123.7 114.7 9.0 123.7 210.9 (63.0) 147.9 164.7 (9.6) (0.5) (6.7) 147.9 13.1 (22.6) (9.5) 0.2 138.6 (36.4) 102.2 93.8 8.4 102.2 9 9 72.4p 71.2p 59.5p 58.9p www.intertek.com Intertek Annual Report 2009 71 Consolidated Statement of Comprehensive Income For the year ended 31 December 2009 Profit for the year Other comprehensive income Foreign exchange translation differences of foreign operations Net exchange gain/(loss) on hedges of net investments in foreign operations Effective portion of changes in fair value of cash flow hedges Net change in fair value of cash flow hedges transferred to profit or loss Net change in fair value of available-for-sale financial assets Net change in fair value of available-for-sale financial assets transferred to profit or loss Actuarial gains and losses on defined benefit pension schemes Income tax recognised in other comprehensive income Total other comprehensive income for the year Total comprehensive income for the year Total comprehensive income for the year attributable to: Equity holders of the Company Minority interest Total comprehensive income for the year Notes 2009 £m 2008 £m 123.7 102.2 7 7 7 7 7 7 23 8 21 (35.4) 27.2 1.3 0.2 1.1 (1.1) (2.5) (1.2) (10.4) 113.3 138.4 (110.9) (3.7) – – – (12.3) 0.1 11.6 113.8 104.9 8.4 113.3 101.9 11.9 113.8 72 Intertek Annual Report 2009 Consolidated Statement of Financial Position As at 31 December 2009 Assets Property, plant and equipment Goodwill Other intangible assets Investments in associates Other investments Deferred tax assets Total non-current assets Inventories Trade and other receivables Cash and cash equivalents Total current assets Total assets Liabilities Interest bearing loans and borrowings Derivative financial instruments Current taxes payable Trade and other payables Provisions Total current liabilities Interest bearing loans and borrowings Deferred tax liabilities Net pension liabilities Other payables Provisions Total non-current liabilities Total liabilities Net assets Equity Share capital Share premium Other reserves Retained earnings Total equity attributable to equity holders of the Company Minority interest Total equity Notes 2009 £m 2008 £m 10 11 11 12 13 14 15 16 17 26 18 19 17 14 23 18 19 20 21 220.9 257.8 46.9 0.2 – 22.6 548.4 7.6 265.9 134.2 407.7 234.8 242.1 55.2 1.3 4.4 15.7 553.5 8.2 284.4 113.3 405.9 956.1 959.4 (8.2) (3.0) (29.2) (186.9) (30.3) (257.6) (327.4) (7.5) (19.5) (3.6) (1.2) (359.2) (14.0) (4.5) (36.3) (184.4) (26.4) (265.6) (407.6) (6.4) (18.5) (3.4) (0.2) (436.1) (616.8) (701.7) 339.3 257.7 1.6 253.5 25.9 40.3 321.3 18.0 1.6 249.9 32.0 (41.8) 241.7 16.0 339.3 257.7 The financial statements on pages 70 to 118 were approved by the Board on 8 March 2010 and were signed on its behalf by: Wolfhart Hauser Director Bill Spencer Director www.intertek.com Intertek Annual Report 2009 73 Consolidated Statement of Changes in Equity For the year ended 31 December 2009 Attributable to equity holders of the Company Other reserves Share capital premium £m £m Notes Share Translation Hedging Fair value reserve £m reserve £m reserve Other £m £m Total before Retained minority Minority interest interest earnings* £m £m £m Total equity £m At 1 January 2008 1.6 247.3 6.1 (0.8) – 6.4 (96.4) 164.2 11.6 175.8 Total comprehensive income for the year Profit Other comprehensive income Total comprehensive income for the year Transactions with owners, recorded directly in equity Contributions by and distributions to owners: Dividends paid Issue of shares Equity-settled transactions Income tax on equity-settled transactions 20/21 20 25 8 Total contributions by and distributions to owners Changes in ownership interests in subsidiaries: Additions to minority interest Purchase of minority interest Total changes in ownership interests in subsidiaries Total transactions with owners 21 21 – – – – – – – – – – – – – – – – 24.0 24.0 – (3.7) (3.7) – 2.6 – – 2.6 – – – 2.6 – – – – – – – – – – – – – – – – – – At 31 December 2008 1.6 249.9 30.1 (4.5) – – – – – – – – – – – – – – – – – – – – – – – – – 93.8 (12.2) 93.8 8.1 8.4 102.2 11.6 3.5 81.6 101.9 11.9 113.8 (30.4) – 3.3 (0.1) (30.4) 2.6 3.3 (0.1) (6.1) – – – (36.5) 2.6 3.3 (0.1) (27.2) (24.6) (6.1) (30.7) – 0.2 – 0.2 0.7 (2.1) 0.7 (1.9) 0.2 0.2 (1.4) (1.2) (27.0) (24.4) (7.5) (31.9) 6.4 (41.8) 241.7 16.0 257.7 At 1 January 2009 1.6 249.9 30.1 (4.5) – 6.4 (41.8) 241.7 16.0 257.7 Total comprehensive income for the year Profit Other comprehensive income Total comprehensive income for the year Transactions with owners, recorded directly in equity Contributions by and distributions to owners: Dividends paid Issue of shares Equity-settled transactions Income tax on equity-settled transactions Total contributions by and distributions to owners Changes in ownership interests in subsidiaries: Purchase of minority interest Total changes in ownership interests in subsidiaries Total transactions with owners 20/21 20 25 8 21 – – – – – – – – – – – – – – – (7.6) (7.6) – 1.5 1.5 – 3.6 – – 3.6 – – 3.6 – – – – – – – – – – – – – – – – At 31 December 2009 1.6 253.5 22.5 (3.0) – – – – – – – – – – – – – – – – – – – – – – – 114.7 (3.7) 114.7 (9.8) 9.0 123.7 (10.4) (0.6) 111.0 104.9 8.4 113.3 (34.7) – 4.9 1.4 (34.7) 3.6 4.9 1.4 (6.3) – – – (41.0) 3.6 4.9 1.4 (28.4) (24.8) (6.3) (31.1) (0.5) (0.5) (0.1) (0.6) (0.5) (0.5) (0.1) (0.6) (28.9) (25.3) (6.4) (31.7) 6.4 40.3 321.3 18.0 339.3 * After £244.1m for goodwill written off to retained earnings as at 1 January 2004 in relation to subsidiaries acquired prior to 31 December 1997. This figure has not been restated as permitted by IFRS 1. 74 Intertek Annual Report 2009 Consolidated Statement of Cash Flows For the year ended 31 December 2009 Cash flows from operating activities Profit for the year Adjustments for: Depreciation charge Amortisation of software Amortisation of acquisition intangibles Impairment of goodwill Equity-settled transactions Share of profit of associates Net financing costs Income tax expense Loss on disposal of property, fixtures, fittings, equipment and software Operating profit before changes in working capital and operating provisions Change in inventories Change in trade and other receivables Change in trade and other payables Change in provisions Special contributions into pension schemes Cash generated from operations Interest and other finance expense paid Income taxes paid Net cash flows generated from operating activities Cash flows from investing activities Proceeds from sale of property, fixtures, fittings, equipment and software Interest received Acquisition of subsidiaries, net of cash acquired Consideration paid in respect of prior year acquisitions Purchase of minority interests Sale/(purchase) of a listed investment Sale/(purchase) of an associate Acquisition of property, fixtures, fittings and equipment Acquisition of software Net cash flows used in investing activities Cash flows from financing activities Proceeds from the issue of share capital Issue of shares by subsidiary undertaking to minority Drawdown of borrowings Repayment of borrowings Dividends paid to minorities Equity dividends paid Net cash flows (used in)/from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at 1 January Effect of exchange rate fluctuations on cash held Cash and cash equivalents at 31 December The notes on pages 75 to 118 are an integral part of these consolidated financial statements. Notes 2009 £m 2008 £m 3 10 11 11 11 25 12 7 8 5 23 24 19 21 13 12 10 11 20 21 20 27 27 27 27 123.7 102.2 47.4 4.0 12.8 – 4.9 – 17.5 45.5 0.4 256.2 0.3 8.9 9.8 5.2 (2.0) 278.4 (16.1) (59.6) 202.7 0.3 1.0 (23.9) (10.2) (0.6) 5.7 0.9 (45.7) (7.1) (79.6) 3.6 – 191.8 (250.5) (6.3) (34.7) (96.1) 27.0 113.3 (6.1) 134.2 36.6 2.9 9.6 0.5 3.3 (0.2) 9.5 36.4 0.6 201.4 (1.1) (20.1) 11.4 5.4 (3.0) 194.0 (16.5) (36.6) 140.9 0.4 1.5 (67.8) (16.7) (1.9) (4.4) (0.1) (63.9) (3.7) (156.6) 2.6 0.5 177.9 (98.4) (6.1) (30.4) 46.1 30.4 58.6 24.3 113.3 www.intertek.com Intertek Annual Report 2009 75 Notes to the ﬁnancial statements 1 General Intertek Group plc is a company incorporated and domiciled in the UK. The Group financial statements as at and for the year ended 31 December 2009 consolidate those of the Company and its subsidiaries (together referred to as the Group) and equity account the Group’s interest in associates. The Parent Company financial statements present information about the Company as a separate entity and not about its Group. The Group’s activities are the testing, inspection and certification of products and commodities against a wide range of safety, regulatory, quality and performance standards. Note 3 provides a segmental analysis of the Group’s performance. 2 Significant accounting policies (a) Basis of preparation Statement of compliance The Group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the EU (IFRSs). The Company has elected to prepare its Parent Company financial statements in accordance with UK GAAP; these are presented on pages 119 to 122. Measurement convention The financial statements are prepared on the historical cost basis except that derivative financial instruments and available-for-sale financial assets are stated at fair value. Functional and presentation currency These consolidated financial statements are presented in sterling, which is the Company’s functional currency. All information presented in sterling has been rounded to the nearest £100,000. Changes in accounting policies The accounting policies set out below have been applied consistently to all years presented in these consolidated financial statements, except as explained below which addresses changes in accounting policies. The Group has adopted in the year the following new standards, amendments to standards and interpretations: (i) IFRS 8 – Operating Segments (ii) IAS 23 (Revised) – Borrowing Costs (iii) IAS 1 (Revised) – Presentation of Financial Statements (iv) Improvements to International Financial Reporting Standards 2008 i) Operating Segments – As of 1 January 2009, the Group determines and presents operating segments based on the information that is internally presented to the Board of Directors, who in their entirety are the Group’s chief operating decision maker. This change in accounting policy is due to the adoption of IFRS 8 Operating Segments. Previously operating segments were determined and presented in accordance with IAS 14 Segmental Reporting. Comparative segmental information has been re-presented in conformity with the transitional requirements of such standard. Since the change in accounting policy only impacts presentation and disclosure aspects, there is no impact on earnings per share. ii) Borrowing Costs – In respect of borrowing costs relating to qualifying assets for which the commencement date for capitalisation is on or after 1 January 2009, the Group capitalises borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. Previously the Group immediately recognised all borrowing costs as an expense. The change in accounting policy was due to the adoption of IAS 23 Borrowing Costs (2007) in accordance with the transitional provisions of such standard; comparative figures have not been restated. The change in accounting policy has had no material effect on earnings per share. iii) Presentation of Financial Statements – The Group applies revised IAS 1 Presentation of Financial Statements (2007) which became effective as of 1 January 2009. As a result the Group presents in the consolidated statement of changes in equity all owner changes in equity, whereas all non-owner changes in equity are presented in two separate statements, the consolidated income statement displaying components of profit and loss and a consolidated statement of comprehensive income displaying components of comprehensive income. Comparative information has been re-presented so that it is also in conformity with the revised standard. Since the change in accounting policy only impacts presentation aspects, there is no impact on earnings per share. iv) Improvements to International Financial Reporting Standards – There have been no impact on the financial statements from the application of these improvements. 76 Intertek Annual Report 2009 Notes to the ﬁnancial statements 2 Significant accounting policies (continued) The following new standards, amendments to standards and interpretations are not yet effective for the year ended 31 December 2009, and have not been applied in preparing these consolidated financial statements: (cid:115)(cid:0) 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EU in November 2009) (cid:115)(cid:0) 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not yet endorsed by the EU) (cid:115)(cid:0) 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endorsed by the EU) The adoption of these standards and interpretations in future periods is not expected to have a material impact on the income, expenses, assets and liabilities of the Group, except as listed below: IFRS 3 (Revised) – Although the Group has not early adopted IFRS 3 (Revised), acquisition-related costs have been incurred prior to the adoption of this standard in relation to acquisitions that will be accounted for in accordance with IFRS 3 (Revised). The Group has chosen to expense these acquisition-related costs as incurred, see note 4. Notwithstanding that IFRS 3 (Revised) is not yet effective, it is expected to be effective at the time that the related business combinations are expected to occur. Under the new accounting policy, as mentioned above, transaction costs that the Group incurs in connection with a business combination, such as finder’s fees, legal fees, due diligence fees, and other professional and consulting fees are expensed as incurred. The change in accounting policy may have an impact on earnings per share. IAS 27 (Revised) – Acquisitions of non-controlling interests are accounted for as transactions with equity holders in their capacity as equity holders and therefore no goodwill is recognised on these transactions. The change in accounting policy will not have a significant impact on earnings per share. The Group continues to monitor the potential impact of other new standards and interpretations which may be endorsed by the European Union and require adoption by the Group in future accounting periods. Going concern The Board has reviewed forecasts, including forecasts adjusted for significantly worse economic conditions. The Board has also reviewed the Group’s funding requirements and considered the expiry of its sterling denominated multi-currency bank debt in December 2011. As a result of these reviews the Board remains satisfied with the Group’s funding and liquidity position. The Board believes that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook. In addition, on the basis of its forecasts, both base case and stressed, and available facilities, which are described in note 17, the Board has concluded that the going concern basis of preparation continues to be appropriate. Further information regarding the Group’s business activities, together with the factors likely to affect its future development, performance and position is set out in the Business Review on pages 14 to 25. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the primary statements and note 17 to the financial statements. In addition note 26 to the financial statements includes the Group’s financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk. Use of judgements and estimates The preparation of financial statements in conformity with IFRSs, requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimates are revised and in any future years affected. In applying the Group’s accounting policies, management has applied judgement in the following areas that have a significant impact on the amounts recognised in the financial statements. Also discussed below, are key assumptions concerning the future and other key sources of estimation at the balance sheet date, that have a risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year. Non-recurring costs These are items which, in management’s judgement, need to be disclosed by virtue of their size or incident in order for the user to obtain a proper understanding of the financial information. The determination of which items are separately disclosed as non-recurring costs requires a significant degree of judgement, see note 4. www.intertek.com Intertek Annual Report 2009 77 2 Significant accounting policies (continued) Income tax The actual tax on profits is determined according to complex tax laws and regulations. Where the effect of these laws and regulations is unclear, estimates are used in determining the liability for the tax to be paid on past profits which are recognised in the financial statements. The Group considers the estimates, assumptions and judgements to be reasonable but this can involve complex issues which may take a number of years to resolve. The final determination of prior year tax liabilities could be different from the estimates reflected in the financial statements, see note 8. Deferred tax Deferred tax assets and liabilities require management judgement in determining the amounts to be recognised. In particular, judgement is used when assessing the extent to which deferred tax assets should be recognised, with consideration given to the timing and level of future taxable income, see note 14. Intangible assets When the Group makes an acquisition, management reviews the business and assets acquired to determine whether any intangible assets should be recognised separately from goodwill. If such an asset is identified, then it is valued by discounting the probable future cash flows expected to be generated by the asset, over the estimated life of the asset. Where there is uncertainty over the amount of economic benefit and the useful life, this is factored into the calculation, see note 11. Impairment of goodwill The Group determines whether goodwill is impaired on an annual basis. This requires an estimation of the value in use of the cash generating units to which the goodwill is allocated. Estimating the value-in-use requires the Group to make an estimate of the expected future cash flows from the cash generating unit that holds the goodwill, at a determined discount rate to calculate the present value of those cash flows, see note 11. Contingent consideration When the Group acquires businesses, the total consideration may consist of an amount paid on completion plus further amounts payable on agreed post completion dates. These further amounts are contingent on the acquired business meeting agreed performance targets. At the date of acquisition, the Group reviews the profit and cash forecasts for the acquired business and estimates the amount of contingent consideration that is likely to be due, see note 19. Basis of consolidation Judgement is applied when determining if an entity acquired is controlled by the Group, and therefore is defined as a subsidiary. Control is presumed to exist when the Group owns, directly or indirectly through subsidiaries, more than half of the voting power of an entity. However, even if the Group owns half or less of the voting power of an entity, control may still exist. In assessing control, the Group considers whether it has the ability to control on a legal or contractual basis rather than whether that control is actually exercised. Specific examples of where the Group has control of subsidiaries are where it has the power to govern the entity’s financial and operating policies by virtue of statute or agreement and where it has the power to cast the majority of votes of the entity’s governing body, see note 24. Claims In making provision for claims, management bases its judgement on the circumstances relating to each specific event, internal and external legal advice, knowledge of the industries and markets, prevailing commercial terms and legal precedents. The Group’s legal and warranty claims are reviewed, at a minimum, on a quarterly basis by senior management, see note 19. Employee post-retirement benefit obligations The Group has three principal defined pension benefit plans. The obligations under these plans are recognised in the balance sheet and represent the present value of the obligation calculated by independent actuaries, with input from management. These actuarial valuations include assumptions such as discount rates, return on assets, salary progression and mortality rates. These assumptions vary from time to time according to prevailing economic and social conditions, see note 23. Recoverability of trade receivables Trade receivables are reflected net of an estimated provision for impairment losses. This provision is based primarily on a review of all outstanding accounts and considers the past payment history and creditworthiness of each account and the length of time that the debt has remained unpaid. The actual amounts of debts that ultimately prove irrecoverable could vary from the actual provision made, see note 26. (b) Basis of consolidation Subsidiaries Subsidiaries are those entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed where necessary to align them with the policies adopted by the Group. For purchases of minority interest in subsidiaries, the Group applies the ‘entity concept method’. Under this method, the entire difference between the cost of the additional interest in the subsidiary, and the minority interest’s share of the assets and liabilities reflected in the consolidated balance sheet at the date of acquisition of the minority interests, is reflected directly in the shareholders’ equity. 78 Intertek Annual Report 2009 Notes to the ﬁnancial statements 2 Significant accounting policies (continued) Associates Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20% and 50% of the voting power of another entity. Investments in associates are accounted for using the equity method and are recognised initially at cost. The Group’s investment includes goodwill identified on acquisition, net of any accumulated impairment losses. The consolidated financial statements include the Group’s share of the total recognised income and expense of associates on an equity accounted basis, after adjustments to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases. When the Group’s share of losses exceeds its interest in an associate, the Group’s carrying amount of that interest is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has a legal or constructive obligation or has made payments on behalf of an associate. The Group does not consider the associates to be an integral part of the Group’s operations and therefore its results are presented outside of the Group operating profit. Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised gains and losses or income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with associates are eliminated against the investment to the extent of the Group’s interest in the entity. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. (c) Foreign currency Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement, except those arising on the retranslation of a financial liability designated as a hedge of net investment in a foreign operation, and on retranslation of available-for-sale equity instruments which are recognised directly in equity. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated at foreign exchange rates ruling at the dates the fair values were determined. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Foreign operations The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to sterling at foreign exchange rates ruling at the reporting date. The income and expenses of foreign operations are translated into sterling at cumulative average rates of exchange during the year. The most significant currencies for the Group were translated at the following exchange rates: Value of £1 US dollar Euro Chinese renminbi Hong Kong dollar Assets and liabilities Actual rates 31 Dec 09 31 Dec 08 1.60 1.11 10.90 12.38 1.46 1.02 9.95 11.28 Income and expenses Cumulative average rates 2009 1.56 1.12 10.63 12.06 2008 1.87 1.26 13.03 14.59 Exchange differences arising from the translation of foreign operations, and of related qualifying hedges are taken directly to equity in the translation reserve. They are released into the income statement upon disposal. The Group has taken advantage of relief available in IFRS 1, to deem the cumulative translation differences for all foreign operations to be zero at the date of transition to IFRSs on 1 January 2004. Hedges of net investments in foreign operations are discussed in accounting policy (e). (d) Financial instruments Loans and receivables Loans and receivables are recognised initially at fair value and subsequently are stated at their amortised cost less impairment losses (see accounting policy (i)). Loans and receivables comprise trade and other receivables. Cash and cash equivalents and net debt Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. Net debt comprises borrowings less cash and cash equivalents. Available-for-sale financial assets The Group’s investments in equity securities are classified as available-for-sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses (which are recognised in the income statement), and foreign currency differences on available-for-sale monetary items (see note (c)), are recognised directly in equity. When an investment is derecognised, the cumulative gain or loss in equity is transferred to profit or loss. www.intertek.com Intertek Annual Report 2009 79 2 Significant accounting policies (continued) Non-derivative financial liabilities Trade and other payables are recognised initially at fair value and subsequently are stated at their amortised cost. Interest-bearing borrowings are initially recognised at fair value, less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis. Derivative financial instruments The Group uses derivative financial instruments to hedge economically its exposure to foreign exchange and interest rate risks arising from operational, financing and investment activities. In accordance with its treasury policy, the Group does not hold or issue derivative financial instruments for trading purposes. Derivative financial instruments are recognised initially at fair value; attributable transaction costs are recognised in profit or loss when incurred. Subsequent to initial recognition, derivative financial instruments are measured at fair value. The gain or loss on re-measurement to fair value is recognised immediately in the income statement except where derivatives qualify for hedge accounting, in which case the recognition of any resultant gain or loss depends on the nature of the item being hedged (see accounting policy (e)). Derivatives that do not qualify for hedge accounting are accounted for as trading instruments. The fair value of interest rate swaps is the estimated amount that the Group would receive or pay to terminate the swap at the balance sheet date, taking into account current interest rates and the current creditworthiness of the swap counterparties. The fair value of forward exchange contracts is their quoted market price at the balance sheet date, being the present value of the difference between the quoted forward price and the exercise price of the contract. Classification of financial instruments issued by the Group Financial instruments issued by the Group are treated as equity (i.e. forming part of shareholders’ funds) only to the extent that they meet the following two conditions: (i) they include no contractual obligations upon the Group to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Group; and (ii) where the instrument will or may be settled in the Company’s own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the Company’s own equity instruments, or is a derivative that will be settled by the Company’s exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments. To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so classified takes the legal form of the Company’s own shares, the amounts presented in these financial statements for called up share capital and share premium exclude amounts in relation to those shares. Finance payments associated with financial liabilities are dealt with as part of finance expenses. Finance payments associated with financial instruments that are classified in equity are dividends and are recorded directly in equity. (e) Hedging Cash flow hedges Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a highly probable forecasted transaction, the effective part of any gain or loss on the derivative financial instrument is recognised directly in the hedging reserve. The ineffective part of any gain or loss on the derivative financial instrument is recognised in the income statement. When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of the hedge relationship but the hedged transaction is still expected to occur, the cumulative gain or loss at that point remains in equity and is recognised in the income statement when the transaction occurs. If the hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss recognised in equity is recognised in the income statement immediately. When the hedged item is a non-financial asset, the amount recognised in equity is transferred to the income statement in the same year that the hedged item affects the income statement. Hedge of monetary assets and liabilities Where a derivative financial instrument is used economically to hedge the foreign exchange exposure of a recognised monetary asset or liability, no hedge accounting is applied and any gain or loss on the hedging instrument is recognised in the income statement. Hedge of net investment in a foreign operation The portion of the gain or loss on an instrument designated as a hedge of a net investment in a foreign operation that is determined to be an effective hedge, is recognised directly in equity in the translation reserve. The ineffective portion is recognised immediately in the income statement. When the hedged net investment is disposed of, the cumulative amount in equity is transferred to the income statement as an adjustment to the profit or loss on disposal. 80 Intertek Annual Report 2009 Notes to the ﬁnancial statements 2 Significant accounting policies (continued) (f) Property, plant and equipment Owned assets Items of property, plant and equipment are measured at cost less accumulated depreciation (see below) and accumulated impairment losses (see accounting policy (i)). Cost includes expenditure that is directly attributable to the acquisition of the asset. Gains and losses on disposal of items of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised in profit or loss. The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred. Leased assets Leases in which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Where land and buildings are held under finance leases, the accounting treatment of the land is considered separately from that of the buildings. Leased assets acquired by way of finance leases are stated at an amount equal to the lower of their fair value and the present value of the minimum lease payments at inception of the lease, less accumulated depreciation and impairment losses. Other leases are operating leases. These leased assets are not recognised on the Group’s balance sheet. Depreciation Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of items of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives, unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated. The estimated useful lives are as follows: Freehold buildings and long leasehold buildings Short leasehold buildings Fixtures, fittings and equipment 50 years Term of lease 3–10 years Depreciation methods, residual values and the useful lives of all assets are re-assessed at each reporting date. Borrowing costs In respect of borrowing costs relating to qualifying assets, the Group capitalises borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. (g) Intangible assets Goodwill Goodwill arises on the acquisition of businesses. All business combinations are accounted for by applying the purchase method. Goodwill represents the difference between the cost of acquisition and the Group’s interest in the fair value of the identifiable assets, liabilities and contingent liabilities acquired. Goodwill is stated at cost less any accumulated impairment losses (see accounting policy (i)). Goodwill is allocated to cash generating units (CGUs) and is not amortised but is tested annually for impairment. In respect of associates, the carrying amount of goodwill is included in the carrying amount of the investments in associates. The Group has taken advantage of the exemption permitted by IFRS 1 and has not restated goodwill on acquisitions prior to 1 January 2004, the date of transition to IFRS. In respect of acquisitions prior to 1 January 2004, goodwill represents the amount recognised under the Group’s previous accounting framework. Purchased goodwill in respect of acquisitions before 1 January 1998 was written off to reserves in the year of acquisition, in accordance with the accounting standard then in force. Negative goodwill arising on an acquisition is recognised immediately in the income statement. Fair value adjustments are made in respect of acquisitions. If at the balance sheet date the fair values of the acquiree’s identifiable assets, liabilities and contingent liabilities can only be established provisionally, then these values are used. Any adjustments to these values made within 12 months of the acquisition date are taken as adjustments to goodwill. Other intangible assets Other than goodwill, intangible assets arising on acquisitions and computer software, are stated at cost less accumulated amortisation and accumulated impairment losses. Identifiable intangibles are those which can be sold separately or which arise from legal rights regardless of whether those rights are separable, and which have finite useful lives. www.intertek.com Intertek Annual Report 2009 81 2 Significant accounting policies (continued) Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives. The estimated useful lives are as follows: Computer software Customer relationships Know-how Licences Covenants not to compete Up to 5 years Up to 10 years Up to 5 years Contractual life Contractual life (h) Inventories Inventories are measured at the lower of cost and net realisable value. The cost of the inventories is based on the first-in-first-out (FIFO) principle. Cost comprises expenditure incurred in the normal course of business in bringing inventories to their present condition and location and net realisable value is the estimated selling price in the ordinary course of business, less the estimated selling costs. (i) Impairment Financial assets A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. Receivables with a short duration are not discounted. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognised in the income statement. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost, the reversal is recognised in profit or loss. Non-financial assets The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. The recoverable amount of goodwill is estimated at each reporting date. An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement. Impairment losses recognised in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash generating units and then to reduce the carrying amount of the other assets in the unit on a pro-rata basis. A cash generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The recoverable amount of an asset or a cash generating unit is the greater of its fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash generating units that are expected to benefit from the synergies of the combination. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash generating unit to which the asset belongs. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. An impairment loss in respect of goodwill is not reversed. In respect of other assets, an impairment loss is reversed when there is an indication that the impairment loss may no longer exist as a result of a change in the estimates used to determine the recoverable amount. (j) Employee benefits Defined contribution plan A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an employee benefit expense in the income statement as incurred. 82 Intertek Annual Report 2009 Notes to the ﬁnancial statements 2 Significant accounting policies (continued) Defined benefit plans A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Group’s net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior years; that benefit is discounted to determine its present value. Any unrecognised past service costs and the fair value of any plan assets are deducted. The discount rate is the yield at the reporting date on AA credit- rated bonds that have maturity dates approximating the terms of the Group’s obligations and that are denominated in the same currency in which the benefits are expected to be paid. The calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Group, the recognised asset is limited to the total of any unrecognised past service costs and the present value of economic benefits available in the form of (i) an unconditional right to a refund from the plan or (ii) reductions in future contributions to the plan as measured by the estimated future service cost less the estimated minimum funding contributions required in respect of the future accrual of benefits in that year. An economic benefit is available to the Group if it is realisable during the life of the plan, or on settlement of the plan liabilities. In addition a provision for future minimum funding contributions is recorded to the extent that such payments are required to cover an existing shortfall, as measured on a minimum funding contribution basis, and having been paid will not be available as a refund or a reduction in future contributions to the plan. The increase in the present value of the liabilities expected to arise from the employees’ services in the accounting period is charged to the operating profit in the income statement. The expected return on the schemes’ assets and the interest on the present value of the schemes’ liabilities, during the accounting period, are shown as finance income and finance expense respectively. Actuarial gains and losses are recognised immediately in equity. Share-based payment transactions The share-based compensation plans operated by the Group allow employees to acquire shares of the Company. The fair value of the employee services received in exchange for the grant of share options or shares, is measured at the grant date and is recognised as an expense with a corresponding increase in equity. The charge is calculated using the Monte Carlo method and expensed to the income statement over the vesting period of the relevant award. The charge for the share options and for the share awards is adjusted to reflect expected and actual levels of vesting where conditions are non-market based. The expense of the share awards under the deferred bonus plan is also adjusted for the probability of performance conditions being achieved. The Group has taken advantage of the provisions of IFRS 1: First-time Adoption of International Financial Reporting Standards, and has recognised an expense only in respect of share options and share awards granted since 7 November 2002. Own shares held by ESOT trust Transactions of the Group sponsored ESOT trust are included in the Group financial statements. In particular, the trust’s purchases of shares in the Company are debited directly to equity. (k) Provisions A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation that can be estimated reliably as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. (l) Revenue Revenue represents the total amount receivable for services rendered, excluding sales related taxes and intra-group transactions. Revenue from services rendered is recognised in the income statement when the relevant service is completed, usually when the report of findings is issued or in certain circumstances, in proportion to the stage of completion, normally determined by reference to costs incurred to date in proportion to the total anticipated costs of the transaction at the balance sheet date. (m) Expenses Operating lease payments Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives received are recognised in the income statement as an integral part of the total lease expense over the term of the lease. Net financing costs Net financing costs comprise interest expense on borrowings calculated using the effective interest rate method, facility fees, interest receivable on funds invested, net foreign exchange gains or losses on external income and expense relating to pension assets and liabilities, and gains and losses on hedging instruments, that are recognised in the income statement (see accounting policy (e)). Interest income is recognised in the income statement as it accrues using the effective interest rate method. All borrowing costs are recognised in the income statement using the effective interest rate method. (n) Income tax Income tax for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. www.intertek.com Intertek Annual Report 2009 83 2 Significant accounting policies (continued) Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: initial recognition of goodwill; the initial recognition of assets or liabilities in a transaction that is not a business combination and that affect neither accounting nor taxable profit; overseas retained earnings, the distribution of which is under the control of the Group, and which are not likely to be distributed in the foreseeable future; and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Any additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend. (o) Dividends Interim dividends are recognised as a movement in equity when they are paid. Final dividends are reported as a movement in equity in the year in which they are approved by the shareholders. (p) Operating segments An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments operating results are reviewed regularly by the Board of Directors to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. 3 Operating segments From 1 January 2009, the Group is organised into six operating divisions each of which offer services to different industries and are managed separately: Consumer Goods, Commercial & Electrical, Oil, Chemical & Agri, Analytical Services, Industrial Services and Minerals. The costs of the corporate head office and other costs which are not controlled by the operating divisions are allocated to these divisions. Prior to 1 January 2009, Government Services was reported as a separate division. This division was restructured in 2008 and from 1 January 2009 was incorporated into the Oil, Chemical & Agri division. Following the restructuring, a small number of companies have changed division to ensure a good strategic fit. Segmental information previously reported for periods prior to 1 January 2009 has been restated to show a like-for-like comparison. These divisions are the operating segments that are reported to the chief operating decision maker and are the Group’s reportable segments. Inter-segment pricing is determined on an arm’s length basis. There is no significant seasonality in the Group’s operations. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly borrowings, pension fund liabilities, corporate expenses and assets and tax. Segment capital expenditure is the total cost incurred during the year to acquire property, plant and equipment, and computer software. Principal activities are as follows: Consumer Goods provides services to the textiles, toys, footwear, hardlines, food, and retail industries. Services include testing, inspection, auditing, advisory services, quality assurance, and hazardous substance testing. Commercial & Electrical provides services including testing and certification, electromagnetic compatibility testing (EMC), outsourcing, benchmark and performance testing and environmental testing. These are provided to a wide range of industries including the home appliance, lighting, medical, building, industrial and HVAC/R (heating, ventilation, air conditioning and refrigeration), IT, telecom, renewable energy and automotive industries. Oil, Chemical & Agri provides independent cargo inspection as well as non-inspection related laboratory testing, calibration and related technical services to the world’s energy, petroleum, chemical and agricultural industries. It also provides cargo scanning, fiscal support services and standards programmes to governments, national standards organisations and customs authorities. Analytical Services provides expert laboratory services and consultancy to a broad range of industries including chemical, pharmaceutical, oil and gas, and automotive and aerospace. We have an established track record of success in laboratory outsourcing with many large internationally recognised companies. Industrial Services provides inspection, testing and auditing services, including management systems certification, second-party auditing, supplier evaluation, technical verification, conformity assessment, asset integrity management, dimensional control management, training, health and safety and risk consulting, and greenhouse gas services. Minerals provides complete analytical solutions to the world’s minerals, ore and mining industries. 84 Intertek Annual Report 2009 Notes to the ﬁnancial statements 3 Operating segments (continued) Year ended 31 December 2009 Consumer Goods Commercial & Electrical Oil, Chemical & Agri Analytical Services Industrial Services Minerals Eliminations Total Unallocated non-recurring costs Group operating profit Net financing costs Profit before income tax Income tax expense Profit for the year Year ended 31 December 2009 Consumer Goods Commercial & Electrical Oil, Chemical & Agri Analytical Services Industrial Services Minerals Central Total allocated Investments Unallocated Total Year ended 31 December 2008 Consumer Goods Commercial & Electrical Oil, Chemical & Agri* Analytical Services Industrial Services Minerals Eliminations Total Net financing costs Share of profit of associates Profit before income tax Income tax expense Profit for the year Revenue from external customers £m 320.9 244.8 406.7 137.5 80.7 46.7 – Inter- segment revenue £m 0.8 2.9 1.2 1.7 3.9 – (10.5) Total revenue £m 321.7 247.7 407.9 139.2 84.6 46.7 (10.5) 1,237.3 – 1,237.3 Adjusted operating profit £m Amortisation of acquisition intangibles £m Non- recurring costs £m Operating profit £m 105.5 34.7 43.7 14.6 6.5 4.0 – 209.0 (0.8) (3.1) (0.8) (4.1) (2.8) (1.2) – (12.8) – – (6.3) – – – – (6.3) 104.7 31.6 36.6 10.5 3.7 2.8 – 189.9 (3.2) 186.7 (17.5) 169.2 (45.5) 123.7 Depreciation and software amortisation £m Segment liabilities £m Capital expenditure including software £m 43.6 46.1 65.5 16.2 11.9 6.9 14.7 204.9 – 411.9 616.8 12.3 11.3 16.2 5.6 0.7 4.9 0.4 51.4 – – 51.4 13.6 10.6 15.4 5.1 0.4 3.3 4.4 52.8 – – 52.8 Segment assets £m 124.6 187.0 180.8 159.8 62.2 72.9 9.9 797.2 – 158.9 956.1 Revenue from external customers £m 242.5 203.5 348.6 119.5 45.6 43.8 – Inter- segment revenue £m 0.5 2.6 7.3 – 1.8 – (12.2) Total revenue £m 243.0 206.1 355.9 119.5 47.4 43.8 (12.2) 75.1 29.2 39.3 13.2 2.8 5.1 – 1,003.5 – 1,003.5 164.7 Adjusted operating profit £m Amortisation of acquisition intangibles £m Impairment Non-recurring costs of goodwill £m £m Operating profit £m (1.0) (1.5) (0.6) (3.9) (1.6) (1.0) – (9.6) – (0.5) – – – – – (0.5) – – (6.7) – – – – (6.7) 74.1 27.2 32.0 9.3 1.2 4.1 – 147.9 (9.5) 0.2 138.6 (36.4) 102.2 www.intertek.com Intertek Annual Report 2009 85 3 Operating segments (continued) Year ended 31 December 2008 Consumer Goods Commercial & Electrical Oil, Chemical & Agri* Analytical Services Industrial Services Minerals Central Total allocated Investments Unallocated Total Depreciation and software amortisation £m Segment liabilities £m Capital expenditure including software £m 47.3 47.2 61.5 16.4 4.8 6.3 8.0 191.5 – 510.2 701.7 9.3 8.8 13.6 4.4 0.4 2.8 0.2 39.5 – – 39.5 14.3 16.3 17.0 5.4 0.5 12.3 1.8 67.6 – – 67.6 Segment assets £m 139.2 198.8 202.4 171.8 33.9 68.9 6.5 821.5 5.7 132.2 959.4 *Oil, Chemical & Agri includes Government Services which was previously reported as a separate division. Geographic segments All the business segments are managed on a worldwide basis but the main countries, which represent greater than 10% of either the Group’s external revenues or non-current assets, are Australia, China (including Hong Kong), the United Kingdom and the United States. In presenting information on the basis of geographic segments, segment revenue is based on the location of the entity generating that revenue. Segment assets are based on the geographical location of the assets. China (including Hong Kong) Australia Other Total Asia Pacific United States Other Total Americas United Kingdom Other Total Europe, Middle East and Africa Unallocated Total Revenue from external customers Non-current assets 2009 £m 273.7 44.7 142.3 460.7 342.6 81.4 424.0 120.6 232.0 352.6 – 2008 £m 210.1 41.0 115.7 366.8 272.3 68.8 341.1 108.9 186.7 295.6 – 1,237.3 1,003.5 2009 £m 38.4 58.5 38.8 135.7 207.2 13.9 221.1 91.9 76.9 168.8 22.8 548.4 2008 £m 46.4 52.8 42.5 141.7 205.4 10.7 216.1 93.3 81.0 174.3 21.4 553.5 Major customers No revenue from any individual customer exceeded 10% of total Group revenue in 2008 or 2009. 86 Intertek Annual Report 2009 Notes to the ﬁnancial statements 4 Non-recurring costs The non-recurring costs of £9.5m in 2009 comprise acquisition costs of £2.5m and restructuring and other costs of £7.0m. Although the Group has not early adopted IFRS 3 (Revised), acquisition-related costs have been incurred prior to the adoption of this standard in relation to acquisitions that will be accounted for in accordance with IFRS 3 (Revised). The Group has chosen to expense these acquisition-related costs as incurred. Notwithstanding that IFRS 3 (Revised) is not yet effective, it is expected to be effective at the time that the related business combinations are expected to occur. The restructuring and other costs are principally related to employment costs, including redundancies, retirement costs and settlements to former employees. There are also some closure costs and asset write downs in underperforming businesses. The majority of the restructuring was in the Oil, Chemical & Agri division. The tax impact for these costs is a tax credit of £1.6m. The non-recurring costs of £6.7m in 2008 comprised employee redundancies and settlements, lease terminations and consultancy and legal fees. The tax impact was a tax credit of £1.2m. The costs related primarily to the integration of the Government Services division with the Oil, Chemical & Agri division, following the Group’s strategic review of its operating segments. 5 Expenses and auditors’ remuneration Included in profit for the year are the following expenses: Property rentals Lease and hire charges – fixtures, fittings and equipment Depreciation and software amortisation Loss on disposal of property, fixtures, fittings, equipment and software Auditors’ remuneration: Audit of these financial statements Amounts receivable by auditors and their associates in respect of: Audit of financial statements of subsidiaries pursuant to legislation Other services pursuant to such legislation – review of interim financial statements Taxation services Transaction advisory Pension services Other Total 2009 £m 40.4 8.2 51.4 0.4 2008 £m 32.7 6.2 39.5 0.6 2009 £000’s 2008 £000’s 349 313 1,182 80 172 397 – 137 2,317 1,055 79 137 – 22 52 1,658 In addition the auditors and their associates were paid £10,000 (2008: £10,000) in respect of the audit of associated pension schemes. 6 Employees Employee costs Wages and salaries Equity-settled transactions Social security costs Pension costs Total employee costs 2009 £m 477.4 4.9 47.6 19.8 549.7 2008 £m 383.7 3.3 37.6 16.3 440.9 Details of the remuneration of the Directors are set out in the Remuneration Report. Details of pension arrangements and equity-settled transactions are set out in notes 23 and 25 respectively. Average number of employees by activity Consumer Goods Commercial & Electrical Oil, Chemical & Agri Analytical Services Industrial Services Minerals Central* Total average number for the year ended 31 December Total actual number at 31 December *IT staff reallocated from divisions to form part of the newly created central IT function, in addition to new staff recruited in the year. 2009 8,843 3,507 8,627 1,352 765 1,323 163 2008 7,895 3,259 8,866 1,166 287 1,141 65 24,580 25,183 22,679 23,841 www.intertek.com Intertek Annual Report 2009 87 7 Net financing costs Recognised in income statement Finance income Interest on bank balances Dividend income on available-for-sale financial assets Expected return on pension assets (note 23) Net change in fair value of available-for-sale financial assets transferred from equity Foreign exchange differences on revaluation of net monetary assets and liabilities Change in fair value of financial instruments held for trading (forward exchange contracts) Change in fair value of financial instruments held for trading (interest rate swaps) Total finance income Finance expense Interest on borrowings Pension interest cost (note 23) Ineffective portion of cash flow hedges Foreign exchange differences on interest accruals Change in fair value of financial instruments held for trading (forward exchange contracts) Net change in fair value of cash flow hedge transferred from equity Foreign exchange differences on revaluation of net monetary assets and liabilities Facility fees and other Total finance expense Net financing costs Recognised directly in other comprehensive income Foreign currency translation differences of foreign operations Net exchange gain/(loss) on hedges of net investment in foreign operations Effective portion of changes in fair value of cash flow hedges Net change in fair value of cash flow hedge transferred to profit or loss Net change in fair value of available-for-sale financial assets Net change in fair value of available-for-sale financial assets transferred to profit or loss Income tax on income and expense above recognised directly in equity Finance (expense)/income recognised directly in other comprehensive income, net of tax Attributable to: Equity holders of the Company Minority interest Finance (expense)/income recognised directly in other comprehensive income, net of tax Recognised in: Hedging reserve Translation reserve and minority interests Retained earnings Finance (expense)/income recognised directly in other comprehensive income, net of tax 2009 £m 2008 £m 1.0 0.1 3.3 1.1 – 2.0 0.2 7.7 16.1 3.7 – – – 0.2 4.7 0.5 25.2 17.5 2009 £m (35.4) 27.2 1.3 0.2 1.1 (1.1) (0.4) (7.1) (6.5) (0.6) (7.1) 1.5 (8.2) (0.4) (7.1) 1.6 – 4.1 – 7.4 – – 13.1 13.7 3.9 0.1 0.8 3.5 – – 0.6 22.6 9.5 2008 £m 138.4 (110.9) (3.7) – – – 0.1 23.9 20.4 3.5 23.9 (3.7) 27.5 0.1 23.9 88 Intertek Annual Report 2009 Notes to the ﬁnancial statements 8 Income tax expense UK corporation tax at 28.0% (2008: 28.5%) Double taxation relief UK taxation Overseas taxation Adjustments relating to prior year liabilities Current tax Deferred tax – origination and reversal of temporary differences Total tax in income statement 2009 2009 2009 2009 £m (2.7) (1.5) (4.2) 58.6 (0.3) 54.1 (8.6) 45.5 2008 Before tax £m 2008 Tax credit/ (expense) £m 2008 £m (3.4) (0.7) (4.1) 47.8 (1.8) 41.9 (5.5) 36.4 2008 Net of tax £m Income tax recognised in other comprehensive income Foreign exchange translation differences of foreign operations Net exchange gain/(loss) on hedges of net investments in foreign operations Effective portion of changes in fair value of cash flow hedges Net change in fair value of cash flow hedges transferred to profit or loss Net change in fair value of available-for-sale financial assets Actuarial gains and losses on defined benefit pension schemes Total other comprehensive income for the year Income tax recognised directly in equity Equity-settled transactions Total tax income/(expense) recognised directly in equity Before tax £m (35.4) 27.2 1.3 0.2 – (2.5) (9.2) 2009 Before tax £m 4.9 4.9 Tax expense £m Net of tax £m – (35.4) 138.4 – 138.4 – (0.4) – – (0.8) (1.2) 2009 Tax credit £m 1.4 1.4 27.2 0.9 0.2 – (3.3) (10.4) 2009 Net of tax £m 6.3 6.3 (110.9) (3.7) – – (12.3) 11.5 2008 Before tax £m 3.3 3.3 – 1.1 – – (1.0) 0.1 2008 Tax expense £m (0.1) (0.1) (110.9) (2.6) – – (13.3) 11.6 2008 Net of tax £m 3.2 3.2 Reconciliation of effective tax rate Reconciliation of the notional tax charge at UK standard rate of corporation tax of 28.0% (2008: 28.5%). Profit before taxation Notional tax charge at UK standard rate 28.0% (2008: 28.5%) Differences in overseas tax rates Tax on dividends Non-deductible expenses Tax exempt income Losses brought forward utilised Current year losses not recognised Accelerated capital allowances and temporary differences not recognised Brought forward accelerated capital allowances and temporary differences utilised Recognition of previously unprovided accelerated capital allowances and temporary differences Recognition of previously unprovided losses Adjustments in respect of prior years Total tax in income statement 2009 £m 2008 £m 169.2 138.6 47.4 (10.6) 6.0 4.8 (0.6) (4.2) 1.5 4.4 0.3 (2.9) (0.3) (0.3) 45.5 39.5 (2.8) 1.0 3.2 (1.6) (0.3) 1.1 1.8 (2.1) (1.3) (0.3) (1.8) 36.4 During the year there was a current tax credit of £0.8m on equity-settled transactions (2008: credit of £0.1m) and deferred tax charge of £0.6m on pension deficit, interest rate swaps and equity-settled transactions (2008: charge of £0.1m) charged directly to equity (see note 14). The effective tax rate was 26.9% (2008: 26.3%). The main reason for the increase in the effective tax rate was a change in the mix of profits and an increasing dividend withholding tax burden. www.intertek.com Intertek Annual Report 2009 89 9 Earnings per ordinary share The calculation of earnings per ordinary share is based on profit attributable to ordinary shareholders of the Company and the weighted average number of ordinary shares in issue during the year. In addition to the earnings per share required by IAS 33: Earnings Per Share, an adjusted earnings per share has also been calculated and is based on earnings excluding the effect of amortisation of acquisition intangibles, goodwill impairment and non-recurring costs. It has been calculated to allow shareholders to have a better understanding of the trading performance of the Group. Details of the adjusted earnings per share are set out below: Profit attributable to ordinary shareholders Adjusting items: Amortisation of acquisition intangibles Impairment of goodwill Non-recurring costs Adjusted earnings Tax impact on adjusting items Adjusted earnings after tax impact Number of shares (millions) Basic weighted average number of ordinary shares Potentially dilutive share options* Diluted weighted average number of shares Basic earnings per share Options Diluted earnings per share Basic adjusted earnings per share after tax impact Options Diluted adjusted earnings per share after tax impact 2009 £m 114.7 12.8 – 9.5 137.0 (5.6) 131.4 158.4 2.8 161.2 72.4p (1.2)p 71.2p 83.0p (1.5)p 81.5p 2008 £m 93.8 9.6 0.5 6.7 110.6 (3.7) 106.9 157.7 1.7 159.4 59.5p (0.6)p 58.9p 67.8p (0.7)p 67.1p * The weighted average number of shares used in the calculation of the diluted earnings per share for the year to 31 December 2009, excludes nil (2008: 780,343) contingently issuable shares as the performance conditions were not met. 90 Intertek Annual Report 2009 Notes to the ﬁnancial statements 10 Property, plant and equipment Cost At 1 January 2008 Exchange adjustments Additions Disposals Businesses acquired (note 24) At 31 December 2008 Depreciation At 1 January 2008 Exchange adjustments Charge for the year Disposals At 31 December 2008 Net book value at 31 December 2008 Net book value at 1 January 2008 Cost At 1 January 2009 Exchange adjustments Additions Disposals Businesses acquired (note 24) At 31 December 2009 Depreciation At 1 January 2009 Exchange adjustments Charge for the year Disposals At 31 December 2009 Net book value at 31 December 2009 Fixtures, fittings and equipment £m Land and buildings £m 27.1 10.1 2.1 – 4.2 43.5 3.9 1.4 0.8 – 6.1 37.4 23.2 43.5 (2.5) 7.3 – – 48.3 6.1 (0.4) 1.7 – 7.4 40.9 249.2 92.1 61.8 (5.7) 5.7 403.1 123.2 51.6 35.8 (4.9) 205.7 197.4 126.0 403.1 (22.6) 38.4 (11.9) 0.4 407.4 205.7 (12.8) 45.7 (11.2) 227.4 180.0 Total £m 276.3 102.2 63.9 (5.7) 9.9 446.6 127.1 53.0 36.6 (4.9) 211.8 234.8 149.2 446.6 (25.1) 45.7 (11.9) 0.4 455.7 211.8 (13.2) 47.4 (11.2) 234.8 220.9 Fixtures, fittings and equipment includes assets in the course of construction of £7.0m at 31 December 2009, (2008: £7.8m), comprising mainly of laboratories under construction. These assets will not be depreciated until they are brought into use. There are no significant borrowing costs capitalised within any qualifying assets (2008: £nil). The net book value of land and buildings comprised: Freehold Long leasehold Short leasehold Total 2009 £m 37.9 0.1 2.9 40.9 2008 £m 34.1 0.6 2.7 37.4 www.intertek.com Intertek Annual Report 2009 91 11 Goodwill and other intangible assets Cost At 1 January 2008 Exchange adjustments Additions Disposals Businesses acquired (note 24) At 31 December 2008 Amortisation and impairment losses At 1 January 2008 Exchange adjustments Charge for the year Impairment charge At 31 December 2008 Net book value at 31 December 2008 Net book value at 1 January 2008 Cost At 1 January 2009 Exchange adjustments Additions Disposals Businesses acquired (note 24) At 31 December 2009 Amortisation and impairment losses At 1 January 2009 Exchange adjustments Charge for the year Disposals At 31 December 2009 Net book value at 31 December 2009 Goodwill £m Customer relationships £m Licences £m Other intangible assets Other acquisition intangibles £m Computer software £m 160.3 43.3 – – 53.4 257.0 11.9 2.5 – 0.5 14.9 242.1 148.4 257.0 (9.0) – – 24.4 272.4 14.9 (0.3) – – 14.6 257.8 27.9 10.2 – – 9.9 48.0 6.0 3.1 5.7 – 14.8 33.2 21.9 48.0 (2.4) – – 4.5 50.1 14.8 (0.7) 9.3 – 23.4 26.7 5.1 0.7 – – 2.9 8.7 1.5 0.3 1.1 – 2.9 5.8 3.6 8.7 (0.5) – – – 8.2 2.9 (0.2) 1.5 – 4.2 4.0 7.6 2.1 – – 5.7 15.4 4.8 1.4 2.8 – 9.0 6.4 2.8 15.4 (0.7) – – – 14.7 9.0 (0.5) 2.0 – 10.5 4.2 10.5 5.9 3.7 (0.2) – 19.9 3.8 3.4 2.9 – 10.1 9.8 6.7 19.9 (2.0) 7.1 (0.2) – 24.8 10.1 (1.1) 4.0 (0.2) 12.8 12.0 Total £m 51.1 18.9 3.7 (0.2) 18.5 92.0 16.1 8.2 12.5 – 36.8 55.2 35.0 92.0 (5.6) 7.1 (0.2) 4.5 97.8 36.8 (2.5) 16.8 (0.2) 50.9 46.9 The other acquisition intangibles of £4.2m (2008: £6.4m) consist of covenants not to compete of £1.3m (2008: £2.1m), know-how of £2.3m (2008: £3.2m) and guaranteed income of £0.6m (2008: £1.1m). The average remaining amortisation period for customer relationships is 3.3 years (2008: 4.1 years). Computer software net book value of £12.0m at 31 December 2009 (2008: £9.8m) includes software in construction of £5.8m (2008: £2.2m). Borrowing costs capitalised within software in the course of construction is £nil (2008: £0.1m). 92 Intertek Annual Report 2009 Notes to the ﬁnancial statements 11 Goodwill and other intangible assets (continued) Goodwill arising from acquisitions in the current and prior year has been allocated to operating segments as follows: Consumer Goods Commercial & Electrical Oil, Chemical & Agri Analytical Services Industrial Services Minerals Total goodwill The total carrying amount of goodwill by operating segment is as follows: Consumer Goods Commercial & Electrical Oil, Chemical & Agri Analytical Services Industrial Services Minerals 2009 £m 1.2 2.6 – – 20.4 0.2 24.4 2009 £m 23.5 57.6 23.4 81.8 34.4 37.1 2008 £m 13.6 13.0 0.5 8.0 10.7 7.6 53.4 2008 £m 23.3 59.8 24.4 86.0 16.2 32.4 Total goodwill net book value at 31 December* 257.8 242.1 * All goodwill is recorded in local currency. Additions during the year are converted at the exchange rate on the date of the transaction and the goodwill at the end of the year is stated at closing exchange rates. Cash generating units At 31 December 2008, the carrying amount of goodwill was £242.1m allocated across 45 cash generating units (CGUs). Each acquired legal entity was treated as a separate CGU unless it was subsumed into an existing Intertek legal entity. As a result of the “Intertek as One” internal Group-wide initiative, various levels of restructuring occurred during 2008 and 2009 which have been noted below. Intertek as One was designed to facilitate greater cohesion and integration within the Group, to encourage significant cross-selling and to share common clients amongst operating units and globally. The restructuring was considered as part of the annual goodwill impairment test which included a re-assessment of not only the constitution of the CGUs but also the allocation of goodwill across those CGUs and operating segments (as required under the newly adopted standard, IFRS 8 – Operating Segments). (cid:115)(cid:0) (cid:0)(cid:38)(cid:82)(cid:79)(cid:77)(cid:0)(cid:17)(cid:0)(cid:42)(cid:65)(cid:78)(cid:85)(cid:65)(cid:82)(cid:89)(cid:0)(cid:18)(cid:16)(cid:16)(cid:24)(cid:12)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:0)(cid:87)(cid:65)(cid:83)(cid:0)(cid:82)(cid:69)(cid:83)(cid:84)(cid:82)(cid:85)(cid:67)(cid:84)(cid:85)(cid:82)(cid:69)(cid:68)(cid:0)(cid:73)(cid:78)(cid:84)(cid:79)(cid:0)(cid:83)(cid:69)(cid:86)(cid:69)(cid:78)(cid:0)(cid:79)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:68)(cid:73)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:8)(cid:80)(cid:82)(cid:69)(cid:86)(cid:73)(cid:79)(cid:85)(cid:83)(cid:76)(cid:89)(cid:0)(cid:70)(cid:79)(cid:85)(cid:82)(cid:9)(cid:26)(cid:0)(cid:35)(cid:79)(cid:78)(cid:83)(cid:85)(cid:77)(cid:69)(cid:82)(cid:0)(cid:39)(cid:79)(cid:79)(cid:68)(cid:83)(cid:12)(cid:0)(cid:35)(cid:79)(cid:77)(cid:77)(cid:69)(cid:82)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:6)(cid:0)(cid:37)(cid:76)(cid:69)(cid:67)(cid:84)(cid:82)(cid:73)(cid:67)(cid:65)(cid:76)(cid:12)(cid:0) Oil, Chemical & Agri, Government Services, Analytical Services, Industrial Services and Minerals. (cid:115)(cid:0) (cid:0)(cid:52)(cid:72)(cid:69)(cid:0)(cid:39)(cid:79)(cid:86)(cid:69)(cid:82)(cid:78)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:51)(cid:69)(cid:82)(cid:86)(cid:73)(cid:67)(cid:69)(cid:83)(cid:0)(cid:68)(cid:73)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(cid:0)(cid:87)(cid:65)(cid:83)(cid:0)(cid:82)(cid:69)(cid:83)(cid:84)(cid:82)(cid:85)(cid:67)(cid:84)(cid:85)(cid:82)(cid:69)(cid:68)(cid:0)(cid:65)(cid:84)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:69)(cid:78)(cid:68)(cid:0)(cid:79)(cid:70)(cid:0)(cid:18)(cid:16)(cid:16)(cid:24)(cid:12)(cid:0)(cid:66)(cid:69)(cid:73)(cid:78)(cid:71)(cid:0)(cid:73)(cid:78)(cid:84)(cid:69)(cid:71)(cid:82)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:73)(cid:78)(cid:84)(cid:79)(cid:0)(cid:47)(cid:73)(cid:76)(cid:12)(cid:0)(cid:35)(cid:72)(cid:69)(cid:77)(cid:73)(cid:67)(cid:65)(cid:76)(cid:0)(cid:6)(cid:0)(cid:33)(cid:71)(cid:82)(cid:73)(cid:12)(cid:0)(cid:83)(cid:85)(cid:67)(cid:72)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:0) operated in six divisions effective 1 January 2009. (cid:115)(cid:0) (cid:0)(cid:37)(cid:70)(cid:70)(cid:69)(cid:67)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:17)(cid:0)(cid:42)(cid:65)(cid:78)(cid:85)(cid:65)(cid:82)(cid:89)(cid:0)(cid:18)(cid:16)(cid:16)(cid:25)(cid:12)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:77)(cid:65)(cid:78)(cid:65)(cid:71)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:82)(cid:69)(cid:80)(cid:79)(cid:82)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:83)(cid:84)(cid:82)(cid:85)(cid:67)(cid:84)(cid:85)(cid:82)(cid:69)(cid:0)(cid:87)(cid:65)(cid:83)(cid:0)(cid:82)(cid:69)(cid:79)(cid:82)(cid:71)(cid:65)(cid:78)(cid:73)(cid:83)(cid:69)(cid:68)(cid:0)(cid:83)(cid:85)(cid:67)(cid:72)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:77)(cid:65)(cid:78)(cid:65)(cid:71)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:87)(cid:65)(cid:83)(cid:0)(cid:77)(cid:79)(cid:82)(cid:69)(cid:0)(cid:85)(cid:78)(cid:73)(cid:70)(cid:73)(cid:69)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:65)(cid:0)(cid:82)(cid:69)(cid:71)(cid:73)(cid:79)(cid:78)(cid:65)(cid:76)(cid:0) and country basis, and senior management was responsible for divisional results globally. The internal reporting systems were also changed to support the new reporting structure. Previously, lines of responsibilities and ultimately decision-making were held at a more local level whereas in 2009, lines of responsibilities and decision-making were held at a global divisional level. The impact of the above restructuring has led to greater global operational control across divisions, improved management of global customer accounts, and more effective integration of acquired businesses into existing Intertek operations (which previously had more local, independent control over decision-making). The above review has led to a change in the composition of the CGUs and also to a change in the level at which management monitors goodwill. There are now eight CGUs which generate cash inflows which are largely independent of other CGUs and to which goodwill has been allocated. www.intertek.com Intertek Annual Report 2009 93 11 Goodwill and other intangible assets (continued) Impairment Review The following table shows how the total Group goodwill of £257.8m (2008: £242.1m) is split into eight CGUs. Cash generating units (CGUs) Consumer Goods Commercial & Electrical Oil, Chemical & Agri Analytical Services – Materials & Pharmaceutical Testing Analytical Services – Upstream Industrial Services – Systems Certification Industrial Services – Technical Services Minerals Total goodwill net book value at 31 December 2009 £m 23.5 57.6 23.4 57.5 24.3 3.2 31.2 37.1 2008 £m 23.3 59.8 24.4 62.2 23.8 3.3 12.9 32.4 257.8 242.1 In order to determine whether impairments are required the Group estimates the recoverable amount of each CGU. The calculation is based on projecting future cash flows over a five year period and using a terminal value to incorporate expectations of growth thereafter. The terminal value is calculated using a perpetuity model which assumes long term growth rate on the operating cash flows of between 2% and 5% reflecting the long term GDP growth forecasts in the various regions in which the respective CGUs operate. A discount factor is applied to obtain a ‘value in use’ which is the recoverable amount, unless the fair value less costs to sell the respective CGU is an amount in excess of the ‘value in use’. The value in use calculation includes estimates about the future financial performance of the CGUs. The approved budget for the following financial year forms the basis for the cash flow projections for a CGU. The cash flow projections in the four financial years following the budget year reflect management’s conservative expectations of the medium term operating performance of the CGUs and growth prospects in the various CGU’s markets and regions. Key assumptions The key assumptions in the value in use calculations are the revenue and operating margin growth rates which directly influence the forecasted operating cash flows, as well as the discount rate applied. In determining the key assumptions, management have taken into account the current economic climate and the resulting impact on expected growth and discount rates. The calculation of the value in use is sensitive to the following key assumptions: (i) Operating cash flow One of the key drivers of the operating cash flow is revenue. The 2010 revenue figures for each CGU are based on the 2010 approved budget. For the years 2011 to 2014, the likely organic growth rates were assessed for each region in the CGU, taking account of past experience and the GDP growth prospects. The average growth rates ranged from 3.5% to 8.4% (2008: 5%). In all cases it is considered the assumed growth rates are conservative. The other key driver of the operating cash flow is operating margin. The assumed weighted average operating margin growth rates, which are considered conservative, ranged from a decline of 3.2% to a growth of 5% (2008: 5%) reflecting management assessment of current and future market environment of the sectors and countries in which the CGUs operate. (ii) Discount rate applied The discount rate applied to a CGU represents a pre tax rate that reflects the Group’s weighted average cost of capital adjusted for the risks specific to the CGU. The discount rates applied to the CGU were in the range of 10.6% to 14.5% (2008: 10.9%). Sensitivity Analysis There are no reasonable possible changes in the key assumptions that would cause the carrying amount of each CGU to exceed its recoverable amount. Management has also considered the effect of the following extreme scenarios which management considers the likelihood of any or all occuring is low. (i) Assuming revenues decline each year by 1% in 2011 to 2014 from the 2010 budgeted revenues, with margins increasing with base assumptions, all CGUs continue to show sufficiency of headroom with the exception of Minerals which shows a deficit of £6.8m. (ii) Assuming 0% growth in operating margins in 2011 to 2014, with revenues increasing per base assumptions, all CGUs continue to show positive headroom. (iii) Assuming an increase in the discount rate of 1%, all CGUs continue to show positive headroom. For Minerals, currently, the price of commodities such as gold, uranium and other strategic metals remains high and this should continue to encourage exploration by the mining companies. Intertek has the expertise and capacity to take advantage of an upturn in activity. The Minerals division has reduced costs in 2009 and will concentrate on improving margins in those areas which are underperforming. In view of this, management believe that on the basis of reasonable assumptions used in the impairment review, there is no impairment in the Minerals CGU. 94 Intertek Annual Report 2009 Notes to the ﬁnancial statements 11 Goodwill and other intangible assets (continued) In 2008, an impairment charge of £0.5m was recognised within administrative expenses in the Commercial & Electrical division in respect of the goodwill of Intertek Testing and Certification Limited. This was necessitated by lower than expected trading results. The goodwill impairment was based on a calculation of the recoverable amount based on value-in-use, using projected cash flows for this business, discounted by a pre-tax rate of 10.9%. The charge of £0.5m represented the shortfall of the recoverable amount to the carrying value. The carrying amount of goodwill after the impairment was £5.5m. There are no intangible assets with indefinite lives. 12 Investment in associates Cost At 1 January Additions Disposals Exchange adjustments At 31 December Share of post-acquisition reserves At 1 January Share of profit for the year Disposals Exchange adjustments At 31 December Net book value at 31 December 2009 £m 1.1 – (0.8) (0.2) 0.1 0.2 – (0.1) – 0.1 0.2 2008 £m 0.6 0.1 – 0.4 1.1 – 0.2 – – 0.2 1.3 On 28 October 2009, the Group disposed of its 40% interest in Allium LLC, a company registered in the USA. The Group’s interest in Allium LLC of £0.9m was sold for a consideration of £0.9m. The loss on sale, adjusted for exchange, was £nil. The net book value at 31 December 2009 was wholly comprised of a 49% interest in Euro Mechanical Instrument Services LLC, Abu Dhabi. Summary financial information on associates (100% basis) as at 31 December is set out below: 2009 2008 *Excluding goodwill and intangibles of £nil (2008: £2.5m). 13 Other investments Available-for-sale financial assets Assets* £m Liabilities £m 0.5 14.5 0.1 13.1 Equity £m 0.4 1.4 Revenues £m 0.5 23.1 Profit/(loss) £m – 0.4 2009 £m – 2008 £m 4.4 The Group’s equity investment, listed on the Australian Securities Exchange, was sold on a piecemeal basis during the year for £5.7m. The profit on disposal of the investment was £nil, after an exchange adjustment of £0.2m was realised in the year. The net change in fair value recycled from reserves was £1.1m, see note 7. 14 Deferred tax assets and liabilities Recognised deferred tax assets and liabilities Deferred tax assets and liabilities are attributable to the following: Intangible assets Property, fixtures, fittings and equipment Pensions Equity-settled transactions Interest rate swaps Provisions and other temporary differences Tax value of losses Set-off of tax Total Assets 2009 £m – 2.6 0.4 3.2 0.9 16.4 2.5 (3.4) 22.6 Assets 2008 £m Liabilities 2009 £m Liabilities 2008 £m – 1.5 1.2 1.7 1.3 14.6 1.6 (6.2) 15.7 (8.7) (1.8) (0.1) – – (0.3) – 3.4 (7.5) (10.3) (2.2) – – – (0.1) – 6.2 (6.4) Net 2009 £m (8.7) 0.8 0.3 3.2 0.9 16.1 2.5 – 15.1 Net 2008 £m (10.3) (0.7) 1.2 1.7 1.3 14.5 1.6 – 9.3 www.intertek.com Intertek Annual Report 2009 95 14 Deferred tax assets and liabilities (continued) Unrecognised deferred tax assets Deferred tax assets have not been recognised in respect of the following items: Deductible temporary differences Pensions Tax losses Property, fixtures, fittings and equipment Equity-settled transactions Total 2009 £m 4.8 4.7 18.1 3.4 0.9 31.9 2008 £m 2.4 4.2 30.6 8.6 – 45.8 Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profits will be available against which the Group can utilise the benefits from them. There is a temporary difference of £11.7m (2008: £9.7m) which relates to unremitted post-acquisition overseas earnings. No deferred tax is provided on this amount as the distribution of these retained earnings is under the control of the Group and there is no intention to either repatriate from or sell the associated subsidiaries in the foreseeable future. 1 January 2009 £m Exchange adjustments £m Acquisitions £m Recognised in income statement £m Recognised 31 December 2009 £m in equity* £m Intangible assets Property, fixtures, fittings and equipment Pensions Equity-settled transactions Interest rate swaps Provisions and other temporary differences Tax value of losses Total *See note 8. Intangible assets Property, fixtures, fittings and equipment Pensions Equity-settled transactions Interest rate swaps Provisions and other temporary differences Tax value of losses Total *See note 8. 15 Inventories Raw materials and consumables Work in progress Finished goods Total inventories (10.3) (0.7) 1.2 1.7 1.3 14.5 1.6 9.3 0.2 – – – – (1.7) 0.1 (1.4) (0.4) – – – – (0.4) – (0.8) 1.8 1.5 (0.1) 0.9 – 3.7 0.8 8.6 – – (0.8) 0.6 (0.4) – – (0.6) (8.7) 0.8 0.3 3.2 0.9 16.1 2.5 15.1 1 January 2008 £m Exchange adjustments £m Acquisitions £m Recognised in income statement £m (2.5) (2.1) 2.1 1.9 0.2 6.6 0.4 6.6 (2.5) – – – – 3.0 0.1 0.6 (3.0) (0.5) – – – 0.1 0.1 (3.3) (2.3) 1.9 0.1 – – 4.8 1.0 5.5 Recognised 31 December 2008 £m in equity* £m – – (1.0) (0.2) 1.1 – – (0.1) 2009 £m 6.3 0.7 0.6 7.6 (10.3) (0.7) 1.2 1.7 1.3 14.5 1.6 9.3 2008 £m 6.6 1.1 0.5 8.2 The amount of inventory recognised as an expense in 2009 was £10.2m (2008: £6.9m). All inventories are expected to be recovered within 12 months. The amount of inventory written off in 2009 was £nil (2008: £nil). 96 Intertek Annual Report 2009 Notes to the ﬁnancial statements 16 Trade and other receivables Trade receivables Other receivables Prepayments and accrued income Total trade and other receivables 2009 £m 203.7 25.3 36.9 265.9 2008 £m 219.4 27.0 38.0 284.4 Trade receivables are shown net of an allowance for impairment losses of £9.9m (2008: £10.0m) and are all expected to be recovered within 12 months. Impairment on trade receivables charged as part of costs of sales was £6.2m (2008: £4.4m). There is no material difference between the above amounts for trade and other receivables and their fair value, due to their short-term duration. There is no concentration of credit risk with respect to trade receivables as the Group has a large number of customers which are internationally dispersed. The Group’s exposure to credit and currency risks and further details on impairment losses related to trade and other receivables are disclosed in note 26. 17 Interest bearing loans and borrowings Senior term loans and notes Other borrowings Total borrowings Analysis of debt Debt falling due: In one year or less (senior term loans) Between one and two years (senior term loans) Between two and five years (senior term loans, notes and £3.4m of other borrowings) Over five years (senior notes and £0.3m of other borrowings) Total borrowings Current 2009 £m Current Non-current 2009 £m 2008 £m Non-current 2008 £m 8.2 – 8.2 14.0 – 14.0 323.7 3.7 327.4 2009 £m 8.2 198.5 19.0 109.9 335.6 403.7 3.9 407.6 2008 £m 14.0 44.3 222.0 141.3 421.6 Description of borrowings In December 2004, the Group refinanced its existing £300.0m secured facility with a £300.0m non-secured facility. In August 2007, an additional £100.0m tranche was added making a total facility of £400.0m. In June 2008, the Group amended the facility to allow a further £120.0m to be borrowed under the same facility. Of this £120.0m, £75.0m was committed from three further banks to make a syndicate of 13 banks. The committed i.e. contractually obligated amount of debt facilities from these 13 banks was £365.1m as at 31 December 2009. The facility was originally for five years expiring on 15 December 2009, with two one-year extension options to extend this up to a further two years. The facility was extended by a year in 2005 and by a further year in 2006. The facility now expires in December 2011. The facility comprises four tranches. Facility A is a £14.0m multi-currency term loan, now repaid in full. Facility B is a £225.0m multi-currency revolving credit facility, available up to 15 December 2011. Facility C is a 364 day, £48.0m multi-currency revolving credit facility (original £80.0m less repayments to 31 December 2009 of £32.0m), with the option to convert this, at any time by written notice, into a term loan expiring 364 days from the date of notice. This amount has been included in debt falling due in less than one year. Facility D is a £92.1m multi-currency term loan facility (original £100.0m less repayments to 31 December 2009 of £7.9m) available up to 15 December 2011. Advances under the facilities bear interest at a rate equal to LIBOR, or other local currency equivalent, plus a margin. The margin over LIBOR for facility B is in the range of 0.4% to 0.6% in accordance with a leverage grid. As at 31 December 2009, the margin was 0.45%. The margin over LIBOR for facility C is in the range of 1.1% to 1.5% in accordance with a leverage grid. As at 31 December 2009, the margin was 1.2%. The margin over LIBOR for facility D is in the range of 0.3% to 0.5% in accordance with a leverage grid. As at 31 December 2009, the margin was 0.35%. In June 2008, US$100.0m was raised by way of a senior note issue. This debt is repayable on 26 June 2015 and the interest rate is fixed at 5.54%. In December 2008, a further US$100.0m was raised by way of a second senior note issue. This debt is repayable in two tranches with US$25.0m repayable on 21 January 2014 and the interest rate is fixed at 7.50% and the second US$75.0m repayable on 10 June 2016 and the interest rate is fixed at 8.00%. The undrawn committed borrowing facilities, which can be drawn down at any time, mature in December 2011 and amounted to £153.2m (2008: £97.8m), having taken into account £5.3m (2008: £8.9m) facility for letters of credit. In January 2010, the Group successfully negotiated a US$60.0m bilateral, multi-currency revolving credit facility with the Bank of China, London Branch, available up to 25 January 2013. www.intertek.com Intertek Annual Report 2009 97 18 Trade and other payables Trade payables Other payables* Accruals and deferred income Total trade and other payables Current 2009 £m 54.4 17.0 115.5 186.9 Current Non-current 2009 £m 2008 £m Non-current 2008 £m 54.0 20.5 109.9 184.4 – 3.6 – 3.6 – 3.4 – 3.4 *There is £0.5m (2008: £1.8m) of contingent consideration included within other payables. The Group’s exposure to liquidity risk related to trade payables is disclosed in note 26. All trade payables are expected to be paid within 12 months. 19 Provisions At 1 January 2009 Exchange adjustments Provided in the year: in respect of current year acquisitions in respect of prior year acquisitions Released during the year Utilised during the year* At 31 December 2009 Included in: Current liabilities Non-current liabilities At 31 December 2009 Contingent consideration £m 11.4 (1.2) – 6.9 4.6 (1.3) (8.9) 11.5 11.5 – 11.5 Claims £m 11.6 (0.4) 8.0 – – (0.5) (2.9) 15.8 15.8 – 15.8 Other £m 3.6 – 2.8 – – – (2.2) 4.2 3.0 1.2 4.2 Total £m 26.6 (1.6) 10.8 6.9 4.6 (1.8) (14.0) 31.5 30.3 1.2 31.5 *In addition to the £8.9m, another £1.3m was also paid which was accrued within other payables at 31 December 2008. Contingent consideration represents the additional amounts payable on acquisitions which are uncertain in amount, since they are based on the acquired businesses achieving agreed future performance targets. They are expected to be settled within 12 months of the balance sheet date. From time-to-time, the Group is involved in various claims and lawsuits incidental to the ordinary course of its business. The outcome of such litigation and the timing of any potential liability cannot be readily foreseen, as it is often subject to legal proceedings. Based on information currently available, the Directors consider that the cost to the Group of an unfavourable outcome arising from such litigation is unlikely to have a materially adverse effect on the financial position of the Group in the foreseeable future. The provision for claims of £15.8m (2008: £11.6m) represents an estimate of the amounts payable in connection with identified claims from customers, former employees and other plaintiffs and associated legal costs. The timing of the cash outflow relating to the provisions is uncertain but is likely to be within one year. Details of contingent liabilities in respect of claims are set out in note 28. The other provision of £4.2m (2008: £3.6m) comprises £2.5m (2008: £2.3m) for restructuring in the Oil, Chemical & Agri division (2008: integration of the Government services division into the Oil, Chemical & Agri division) and £1.7m (2008: £1.3m) in relation to onerous contracts. 98 Intertek Annual Report 2009 Notes to the ﬁnancial statements 20 Capital and reserves Authorised share capital Authorised share capital was abolished under the UK Companies Act 2006 with effect from 1 October 2009 and the necessary amendments to the Company’s Articles of Association were approved by shareholders at the 2009 Annual General Meeting. At 31 December 2008, the authorised ordinary share capital of Intertek Group plc was £2.0m divided into 200,000,000 ordinary shares of 1p each. At 31 December 2008, the authorised zero coupon redeemable preference shares of Intertek Group plc was £105.5m divided into 105,478,482 preference shares of £1 each. Issued shared capital Group and Company Allotted, called up and fully paid: Ordinary shares of 1p each at start of year Employee share option schemes – options exercised (note 25) Deferred Bonus Share Plan (note 25) Ordinary shares of 1p each at end of year Shares classified in shareholders’ funds 2009 Number 2009 £m 2008 £m 157,805,493 569,428 336,288 158,711,209 1.6 – – 1.6 1.6 1.6 – – 1.6 1.6 The holders of ordinary shares are entitled to receive dividends as declared from time-to-time and are entitled to vote at general meetings of the Company. During the year, the Company issued 569,428 ordinary shares in respect of the share options exercised, for consideration of £3.6m settled in cash and issued 336,288 shares under the Long Term Incentive Plan for £nil consideration. Preference shareholders have the right to a return of capital on winding up but receive no priority over ordinary shareholders with respect to repayment of capital paid up and have no further rights to participate in the profits or assets of the Company. The Employee Share Ownership Trust (ESOT) is managed and controlled by an independent offshore trustee. The total ESOT costs charged to the Group profits for 2009 were £9,700 (2008: £6,500). The ESOT did not hold any shares of the Company at 31 December 2009 (2008: nil). Translation reserve The translation reserve comprises foreign currency differences arising from the translation of the financial statements of foreign operations as well as the translation of liabilities that hedge the Group’s net investment in foreign operations. Hedging reserve The hedging reserve comprises the effective portion of the cumulative net change in the fair value of the cash flow hedging instruments related to hedged transactions that have not yet occurred. Fair value reserve The fair value reserve comprises the cumulative net change in fair value of available-for-sale financial assets until the investments are derecognised or impaired. Other This relates to a merger difference that arose in 2002 on the conversion of share warrants into share capital. Dividends Amounts recognised as distributions to equity holders: Final dividend for the year ended 31 December 2007 Interim dividend for the year ended 31 December 2008 Final dividend for the year ended 31 December 2008 Interim dividend for the year ended 31 December 2009 Dividends paid 2009 2009 2008 2008 £m Pence per share £m Pence per share – – 21.7 13.0 34.7 – – 13.7 8.2 21.9 19.2 11.2 – – 30.4 12.2 7.1 – – 19.3 After the balance sheet date, the Directors proposed a final dividend of 17.3p per share in respect of the year ended 31 December 2009, which is expected to amount to £27.5m. This dividend is subject to approval by shareholders at the Annual General Meeting and therefore, in accordance with IAS 10: Events after the Balance Sheet Date, it has not been included as a liability in these financial statements. If approved, the final dividend will be paid to shareholders on 18 June 2010. www.intertek.com Intertek Annual Report 2009 99 21 Minority interests At 1 January Exchange adjustments Share of profit for the year Additions Purchase of minority interests Dividends paid to minority interests At 31 December 2009 £m 16.0 (0.6) 9.0 – (0.1) (6.3) 18.0 2008 £m 11.6 3.5 8.4 0.7 (2.1) (6.1) 16.0 On 12 February 2009, the Group acquired an additional 34% interest in Intertek Metering and Measurement Limited (IMML) (formerly known as Rhomax-ITS Limited) for £0.6m in cash, increasing its ownership from 66% to 100%. The total net assets of IMML on the date of acquisition was £0.4m. The Group recognised a decrease in minority interest of £0.1m and a decrease in retained earnings of £0.5m. The purchase of minority interests of £2.1m in 2008 relates to the acquisition in November 2008 of the outstanding 15% interest in Intertek Testing Services Shenzhen Limited, a company registered in China for a cash consideration of £1.9m. The company is now a wholly owned subsidiary of the Group. 22 Commitments At 31 December, the Group had future unprovided commitments under non-cancellable operating leases due as follows: Within one year In the second to fifth years inclusive Over five years Total 2009 2009 2009 2008 2008 2008 Land and buildings £m 32.4 53.9 29.3 115.6 Other £m 5.0 5.0 – Total £m 37.4 58.9 29.3 Land and buildings £m 29.0 54.1 31.6 10.0 125.6 114.7 Other £m 5.6 4.8 – 10.4 Total £m 34.6 58.9 31.6 125.1 The Group leases various laboratories, testing and inspection sites, administrative offices and equipment under lease agreements which have varying terms, escalation clauses and renewal rights. Contracts for capital expenditure which are not provided in these accounts amounted to £6.4m (2008: £4.7m). 23 Employee benefits Pension schemes The Group operates a number of pension schemes throughout the world. In most locations, these are defined contribution arrangements. However, there are significant defined benefit schemes in the United Kingdom and one in Hong Kong. The United Kingdom schemes are the Intertek Pension Scheme and the Capcis Limited Pension and Life Assurance Scheme that came into the Group through the acquisition of the Umitek group in January 2007. These are funded schemes, with assets held in separate trustee administered funds. Other funded defined benefit schemes are not considered to be material and are therefore accounted for as if they were defined contribution schemes. The schemes in the United Kingdom and Hong Kong were closed to new entrants in 2002 and 2000, respectively. The Group recognises any actuarial gains and losses in each year in equity through the consolidated statement of comprehensive income. (a) The total pension cost included in operating profit for the Group was: Defined contribution schemes Defined benefit schemes – current service cost Pension cost included in operating profit (note 6) 2009 £m 17.8 2.0 19.8 2008 £m 14.4 1.9 16.3 (b) The pension cost for the defined benefit schemes was assessed in accordance with the advice of qualified actuaries. The last full triennial actuarial valuation of The Intertek Pension Scheme in the United Kingdom was carried out as at 1 April 2007, but this has been updated to 31 December 2009 for IAS 19 purposes. The last full triennial actuarial valuation of the Capcis Limited Pension and Life Assurance Scheme in the UK was also carried out as at 1 April 2007 and this has been updated to 31 December 2009 for IAS 19 purposes. The last full actuarial valuation of the Hong Kong scheme was carried out as at 31 December 2008, for local accounting purposes but this has been updated to 31 December 2009 for IAS 19 purposes. 100 Intertek Annual Report 2009 Notes to the ﬁnancial statements 23 Employee benefits (continued) The Group is currently making additional contributions into the pension schemes with the overall objective of paying off the deficits in line with actuaries’ recommendations. The amounts recognised in the balance sheet were as follows: Fair value of scheme assets Present value of funded defined benefit obligations Net liability in the balance sheet The amounts recognised in the income statement were as follows: Current service cost Pension interest cost (note 7) Expected return on scheme assets (note 7) Total charge 2009 £m 73.0 (92.5) (19.5) 2008 £m 58.6 (77.1) (18.5) 2009 £m (2.0) (3.7) 3.3 (2.4) 2007 £m 66.6 (73.9) (7.3) 2008 £m (1.9) (3.9) 4.1 (1.7) The current service cost is included in administrative expenses in the income statement and pension interest cost and expected return on scheme assets are included in net financing costs. (c) Changes in the fair value of scheme assets: Fair value of scheme assets at 1 January Expected return on scheme assets Normal contributions by the employer Special contributions by the employer Contributions by scheme participants Benefits paid Effect of exchange rate changes on overseas plan Actuarial gains/(losses) Fair value of scheme assets at 31 December (d) Changes in the present value of the defined benefit obligations were as follows: Defined benefit obligations at 1 January Current service cost Interest cost Contributions by scheme participants Benefits paid Effect of exchange rate changes on overseas plan Actuarial losses/(gains) Defined benefit obligations at 31 December (e) Actuarial losses recognised directly in the consolidated statement of comprehensive income: Cumulative loss at 1 January Recognised losses in the year Cumulative loss at 31 December (f) Company contributions 2009 £m 58.6 3.3 2.2 2.0 0.5 (3.5) (1.8) 11.7 73.0 2009 £m 77.1 2.0 3.7 0.5 (3.5) (1.5) 14.2 92.5 2009 £m (13.3) (2.5) (15.8) 2008 £m 66.6 4.1 1.5 3.0 0.6 (3.0) 3.2 (17.4) 58.6 2008 £m 73.9 1.9 3.9 0.6 (3.0) 4.9 (5.1) 77.1 2008 £m (1.0) (12.3) (13.3) In 2010, the Group expects to make normal contributions of £1.0m (2009: £1.1m) to the UK pension schemes and £0.6m (2009: £1.4m) to the Hong Kong pension scheme. Additionally, in February 2010, the Group made a special contribution of £1.2m (2009: £2.0m) to the UK pension schemes. www.intertek.com Intertek Annual Report 2009 101 23 Employee benefits (continued) (g) Fair value of scheme assets in each category: Value of £1 Equities Bonds Cash/other (h) The pension deficit of each scheme at 31 December 2009 was as follows: Fair value of scheme assets Present value of funded defined benefit obligations Deficit in schemes (i) Principal actuarial assumptions: Discount rate Inflation rate Rate of salary increases Rate of pension increases Annualised expected return on scheme assets United Kingdom Schemes Hong Kong Scheme 2009 71% 24% 5% 2008 68% 28% 4% 2009 68% 31% 1% 2008 59% 39% 2% The Capcis Limited Pension and Life Assurance Scheme £m Intertek Hong Kong Retirement Scheme £m 4.7 (6.0) (1.3) 12.9 (14.4) (1.5) The Intertek Pension Scheme £m 55.4 (72.1) (16.7) Total £m 73.0 (92.5) (19.5) United Kingdom Schemes Hong Kong Scheme Weighted average 2009 2008 2009 2008 2009 2008 5.50% 3.70% 4.20% 3.60% 6.83% 6.00% 3.00% 3.50% 2.90% 5.96% 2.60% n/a 3.00% n/a 7.90% 1.10% n/a 3.00% n/a 7.30% 5.00% 3.70% 4.00% 3.60% 7.02% 4.80% 3.00% 3.40% 2.90% 6.20% The expected rates of return on scheme assets are determined by reference to relevant indices which take into account the current level of expected returns on risk free investments, the historical level of risk premium associated with equities and the expectation for future returns on such assets. The overall expected rate of return is calculated by weighting the individual rates in accordance with the anticipated balance in the plan’s investment portfolio. Where investments are held in bonds and cash, the expected long-term rate of return is taken to be the yields generally prevailing on such assets at the balance sheet date. A higher rate of return is expected on equity investments. This is based on an out-performance assumption over gilt yields. The actual return on scheme assets was as follows: Actual return (j) Life expectancy assumptions at year end for: Male aged 40 Male aged 65 Female aged 40 Female aged 65 United Kingdom Schemes Hong Kong Scheme 2009 £m 10.9 2008 £m (9.5) 2009 £m 4.1 2008 £m (3.8) United Kingdom Schemes Hong Kong Scheme* 2009 48.5 22.3 51.1 24.7 2008 48.4 22.2 51.0 24.6 2009 n/a n/a n/a n/a 2008 n/a n/a n/a n/a * The retirement arrangement in Hong Kong pays lump sums to members instead of pensions at the point they retire. Since the amount of the lump sum is not related to the life expectancy of the members, the post-retirement mortality is not a relevant assumption for the Hong Kong scheme. The table above shows the number of years a male or female is expected to live, assuming they were aged either 40 or 65 at 31 December. The 2009 mortality tables adopted are the PNA00 projected by year of birth, with an allowance for the medium cohort effect and a minimum improvement of 1% (the same tables were used in 2008). 102 Intertek Annual Report 2009 Notes to the ﬁnancial statements 23 Employee benefits (continued) (k) Sensitivity analysis The table below sets out the sensitivity on the pension assets and liabilities as at 31 December 2009 of the two main assumptions. Change in assumptions No change 0.25% rise in discount rate 0.25% fall in discount rate 0.25% rise in inflation 0.25% fall in inflation (l) History of experience gains and losses: Fair value of scheme assets Defined benefit obligations Deficit Experience (losses)/gains on scheme liabilities Experience gains/(losses) on scheme assets Liabilities £m 92.5 88.1 97.1 95.0 90.0 2008 £m 58.6 (77.1) (18.5) 0.4 (17.4) Assets £m 73.0 73.0 73.0 73.0 73.0 2007 £m 66.6 (73.9) (7.3) 1.5 2.1 2009 £m 73.0 (92.5) (19.5) (1.8) 11.7 Increase/ (decrease) in deficit £m – (4.4) 4.6 2.5 (2.5) 2005 £m 55.0 (72.8) (17.8) (0.5) 4.3 Deficit £m 19.5 15.1 24.1 22.0 17.0 2006 £m 56.4 (71.6) (15.2) 1.6 1.3 24 Acquisitions The Group made three acquisitions during the year, all of which were paid for in cash. Provisional details of net assets acquired and fair value adjustments are set out below. The analysis is provisional and amendments may be made to these figures in the 12 months following the date of each acquisition, with a corresponding adjustment to goodwill. Property, plant and equipment Goodwill* Other intangible assets Trade and other receivables Trade and other payables Tax payable Deferred tax liability Net assets acquired Cash outflow (net of cash acquired) Contingent and deferred consideration (note 19) Total consideration Book value prior to acquisition £m Fair value adjustments £m Fair value to Group on acquisition £m 0.4 – – 10.6 (3.6) (0.7) (0.4) 6.3 – 20.4 4.5 – – – (0.4) 24.5 0.4 20.4 4.5 10.6 (3.6) (0.7) (0.8) 30.8 23.9 6.9 30.8 * Total goodwill additions per note 11 of £24.4m is made up of £20.4m in respect of 2009 acquisitions above and £4.0m in respect of the 2008 acquisitions (see note 24(f)). www.intertek.com Intertek Annual Report 2009 103 24 Acquisitions (continued) (a) WISco Enterprises LP The largest acquisition was the purchase on 13 February 2009, of 100% of the share capital of the WISco group of companies (WISco), the largest of which is registered in the USA. WISco specialises in providing third-party inspection, expediting and coordination services to customers in the oil and gas industry. Cash consideration, inclusive of expenses, was £20.5m. Cash acquired within the business was £0.4m. This acquisition expands the Intertek technical inspection business, providing it with a global platform and network. Details of net assets acquired and fair value adjustments are set out below: Property, plant and equipment Goodwill Other intangible assets Trade and other receivables Trade and other payables Net assets acquired Cash outflow (net of cash acquired) Contingent consideration Total consideration Book value prior to acquisition £m Fair value adjustments £m Fair value to Group on acquisition £m – – – 6.2 (1.7) 4.5 – 12.4 3.2 – – 15.6 – 12.4 3.2 6.2 (1.7) 20.1 20.1 – 20.1 The goodwill of £12.4m represents the benefit that Intertek expects to gain from leveraging the relationship with WISco customers and gain global contracts for a combined service offering. The other intangible assets of £3.2m represent the value placed on client relationships. The profit after tax for the period 1 January 2009 to 12 February 2009 was £0.2m. The profit attributable to the Group from the date of acquisition to 31 December 2009 is £1.0m. (b) Aptech Engineering Services, Inc. The Group acquired 100% of the share capital of Aptech Engineering Services, Inc., (Aptech) a company based in California, USA, on 10 February 2009, for an initial cash consideration, inclusive of expenses, of £3.9m and additional consideration of up to £6.9m payable contingent on the achievement of specified profit targets. Cash acquired within the business was £0.4m. Aptech is a full-service engineering consultancy company that specialises in the life management of facilities, equipment, and infrastructure for clients in energy- related industries. This acquisition will strengthen the service offering of Intertek’s Industrial Services division. Details of net assets acquired and fair value adjustments are set out below: Property, plant and equipment Goodwill Other intangible assets Trade and other receivables Trade and other payables Tax payable Deferred tax liability Net assets acquired Cash outflow (net of cash acquired) Contingent consideration Total consideration Book value prior to acquisition £m Fair value adjustments £m Fair value to Group on acquisition £m 0.2 – – 4.4 (1.9) (0.7) (0.4) 1.6 – 8.0 1.2 – – – (0.4) 8.8 0.2 8.0 1.2 4.4 (1.9) (0.7) (0.8) 10.4 3.5 6.9 10.4 The goodwill of £8.0m represents the opportunity for Intertek to enter the US market for risk based inspection and specialist asset integrity services. The other intangible assets of £1.2m represent value placed on client relationships and the deferred tax thereon was £0.4m. The profit after tax for the period 1 January 2009 to 9 February 2009 was £0.1m. The profit attributable to the Group from the date of acquisition to 31 December 2009 is £0.9m. 104 Intertek Annual Report 2009 Notes to the ﬁnancial statements 24 Acquisitions (continued) (c) Other acquisitions The other acquisition was that of the business and assets of Sagentia Catella AB (Sagentia). Sagentia, acquired on 30 April 2009, is an independent testing laboratory based in Sweden providing battery testing, battery forensics and battery application advisory services. The cash consideration was £0.3m representing acquisition of fixed assets for £0.2m and £0.1m for intangibles relating to the value placed on customer relationships. The profit after tax for the period 1 January 2009 to 29 April 2009 was £8,000. The profit attributable to the Group from the date of acquisition to 31 December 2009 was £30,000. (d) Acquisition of minority interest On 12 February 2009, the Group acquired an additional 34% interest in Intertek Metering and Measurement Limited (IMML) (formerly known as Rhomax-ITS Limited) for £0.6m in cash, increasing its ownership from 66% to 100%. The total net assets of IMML on the date of acquisition was £0.4m. The Group recognised a decrease in minority interest of £0.1m and a decrease in retained earnings of £0.5m. (e) Contribution of acquisitions to revenue and profits The acquisitions made during the year contributed combined revenues of £24.1m and attributable profits of £1.9m to the Group from their respective dates of acquisition to 31 December 2009. The Group revenue and attributable profit for the year ended 31 December 2009 would have been £1,247.0m and £124.0m respectively if all the acquisitions were assumed to have been made on 1 January 2009. (f) Details of 2008 acquisitions The Group made 14 acquisitions during 2008, all of which were paid for in cash. The net assets acquired and fair value adjustments are set out below: Property, plant and equipment Goodwill* Other intangible assets Inventories and work in progress Trade and other receivables Trade and other payables* Tax payable Deferred tax liability Net assets acquired Cash outflow (net of cash acquired) Contingent and deferred consideration* Total consideration Book value prior to acquisition £m Fair value adjustments £m Fair value to Group on acquisition £m 7.2 – – 1.5 8.9 (6.1) (0.9) (0.3) 10.3 2.7 56.2 18.5 (0.2) (0.2) (1.0) (0.2) (3.0) 72.8 9.9 56.2 18.5 1.3 8.7 (7.1) (1.1) (3.3) 83.1 67.8 15.3 83.1 * The 2008 reported figures have been adjusted for movements in 2009. Goodwill has been increased by £4.0m, from the previously reported figure of £52.2m to £56.2m as contingent and deferred consideration increased by £3.6m from the previously reported figure of £11.7m to £15.3m and there were £0.4m of fair value adjustments to trade and other payables increasing the previously reported figure of £6.7m to £7.1m. The £3.6m increase in consideration comprised an additional £4.6m provision offset by a £1.3m release as shown in note 19 and the remaining £0.3m increase is included in trade and other payables (note 18). The other intangible assets of £18.5m represent the value placed on client relationships and certification marks. The fair value adjustment of £2.7m brings the property, plant and equipment to its approximate market value on acquisition. The £0.2m relates to impairment provision against inventories and the £0.2m relates to additional allowance for doubtful receivables. The £1.0m represents additional accruals and liabilities recognised on acquisition. The £0.2m represents additional tax liabilities recognised and £3.0m relates to deferred tax liability on intangibles. (i) The largest acquisition was the purchase on 24 September 2008, of 100% of the share capital of HP White Laboratory Inc, a company incorporated in the USA, which provides ballistic resistance testing of protective equipment and which also tests ammunition and firearms. This acquisition will strengthen the service offering of Intertek’s Commercial & Electrical division. Initial cash consideration, inclusive of expenses, was £20.2m and additional contingent consideration of £1.5m was estimated to be payable at 31 December 2008. There was an increase of £2.6m to the consideration payable in 2009, of which £0.3m was included in trade and other payables. This acquisition fits within Intertek’s Life Safety Services strategy by not only expanding its capability in the personal protective equipment sector but more importantly enabling it to enter the ballistic testing services market. www.intertek.com Intertek Annual Report 2009 105 24 Acquisitions (continued) Details of net assets acquired and fair value adjustments are set out below: Property, plant and equipment Goodwill Other intangible assets Inventories and work in progress Trade and other receivables Trade and other payables Net assets acquired Cash outflow (net of cash acquired) Contingent consideration Total consideration Book value prior to acquisition £m Fair value adjustments £m Fair value to Group on acquisition £m 1.0 – – 0.6 0.6 (0.1) 2.1 2.8 13.1 6.5 (0.1) (0.1) – 22.2 3.8 13.1 6.5 0.5 0.5 (0.1) 24.3 20.2 4.1 24.3 The goodwill of £13.1m represents the opportunity for Intertek to establish a market leading position in ballistics testing and to become firmly established in the military and defence service sectors. The other intangible assets of £6.5m represent the value placed on client relationships, accreditations and non-compete agreements. The fair value adjustment of £2.8m arises from the revaluation of land and buildings based on a professional valuation. The fair value adjustments in respect of inventories and trade receivables represent impairment provisions against these assets. The profit after tax for the period 1 January 2008 to 23 September 2008 was £1.1m. The profit attributable to the Group from the date of acquisition to 31 December 2008 was £0.4m. (ii) On 9 April 2008, the Group acquired 100% of the share capital of Hi-Cad Technical Services Ltd (Hi-Cad), a company registered in the UK, which provides specialist 3D data capture and measurement services, primarily to customers in the upstream and downstream oil and petroleum industry in the UK and the US. This acquisition strengthens Intertek’s Industrial Services division and the development of asset integrity management services. Consideration paid, inclusive of expenses, was £14.0m and additional contingent consideration of £3.0m is estimated to be payable based on the future performance of Hi-Cad. Cash acquired within the business was £1.0m. Details of net assets acquired and fair value adjustments are set out below: Property, plant and equipment Goodwill Other intangible assets Inventories and work in progress Trade and other receivables Trade and other payables Tax payable Deferred tax liability Net assets acquired Cash outflow (net of cash acquired) Contingent consideration Total consideration Book value prior to acquisition £m Fair value adjustments £m Fair value to Group on acquisition £m 0.4 – – 0.1 3.1 (2.2) (0.2) (0.3) 0.9 – 12.2 4.5 – – (0.3) – (1.3) 15.1 0.4 12.2 4.5 0.1 3.1 (2.5) (0.2) (1.6) 16.0 13.0 3.0 16.0 The goodwill of £12.2m represents the knowledge and expertise of the Hi-Cad workforce and the benefit that Intertek will gain from being able to offer a cohesive vendor assessment and quality inspection service to its customers globally. The other intangible assets of £4.5m represent the value placed on client relationships, know-how and an exclusive software distributorship. The fair value adjustment of £0.3m relates to additional accruals. The deferred tax liability fair value adjustment of £1.3m arises on intangibles. The profit after tax for the period 1 January 2008 to 8 April 2008 was £0.2m. The profit attributable to the Group from the date of acquisition to 31 December 2008 was £0.9m. 106 Intertek Annual Report 2009 Notes to the ﬁnancial statements 24 Acquisitions (continued) (iii) On 13 February 2008, the Group acquired 100% of CML Biotech Ltd (CML), a UK registered holding company for the Commercial Microbiology Group, for an initial cash consideration, inclusive of expenses, of £8.3m. Additional contingent consideration of £1.4m was estimated to be payable at 31 December 2008 based on the future performance of CML but was reduced by £0.2m in 2009. CML provides laboratory and consultancy services and sells testing kits related to the measurement and management of bacteria in the upstream oil and gas industries. This acquisition will strengthen the service offering of Intertek’s Analytical Services division. Details of net assets acquired and fair value adjustments are set out below: Property, plant and equipment Goodwill Other intangible assets Inventories and work in progress Trade and other receivables Trade and other payables Tax payable Deferred tax liability Net assets acquired Cash outflow (net of cash acquired) Contingent consideration Total consideration Book value prior to acquisition £m Fair value adjustments £m Fair value to Group on acquisition £m 0.8 – – 0.1 1.4 (0.9) – – 1.4 – 7.0 1.9 – – – (0.3) (0.5) 8.1 0.8 7.0 1.9 0.1 1.4 (0.9) (0.3) (0.5) 9.5 8.3 1.2 9.5 The goodwill of £7.0m represents the knowledge and expertise of the CML workforce and the benefit that Intertek will obtain from expanding the suite of expert services that the Group can deliver as a partner to the oil and gas exploration industries globally. The other intangible assets of £1.9m represent value placed on client relationships. The fair value tax adjustment of £0.3m relates to a provision for additional tax liabilities. The deferred tax liability fair value adjustment of £0.5m arises on intangibles. The profit after tax for the period 1 January 2008 to 12 February 2008 was £0.1m. The profit attributable to the Group from the date of acquisition to 31 December 2008 was £0.4m. (iv) On 4 April 2008, the Group acquired 100% of 4-Front Research Limited, a holding company of a group of companies registered in the UK, France and India. Cash consideration paid, inclusive of expenses, was £7.3m and cash acquired within the business was £0.9m. Additional contingent consideration of £2.3m was estimated to be payable at 31 December 2008 based on the future performance of 4-Front Research. This was increased by £1.5m in 2009. 4-Front Research provides analytical support for clinical research studies on cosmetic, personal care, functional food and over-the-counter pharmaceutical and medical products. With seven sites in England and sites in Hyderabad, India and Paris, France, 4-Front will form part of Intertek’s Consumer Goods division. Details of net assets acquired and fair value adjustments are set out below: Property, plant and equipment Goodwill Other intangible assets Inventories and work in progress Trade and other receivables Trade and other payables Tax payable Deferred tax liability Net assets acquired Cash outflow (net of cash acquired) Contingent consideration Total consideration Book value prior to acquisition £m Fair value adjustments £m Fair value to Group on acquisition £m 0.5 – – 0.4 0.7 (0.5) (0.1) – 1.0 – 8.2 1.7 – – (0.2) – (0.5) 9.2 0.5 8.2 1.7 0.4 0.7 (0.7) (0.1) (0.5) 10.2 6.4 3.8 10.2 www.intertek.com Intertek Annual Report 2009 107 24 Acquisitions (continued) The goodwill of £8.2m represents the additional value that Intertek will gain from adding new high-value services to support its consumer healthcare customers and from having a strategic position in the developing market for consumer healthcare products in India and other Asian countries. The other intangible assets of £1.7m represent value placed on client relationships. The fair value adjustment of £0.2m relates to additional accruals. The deferred tax liability of £0.5m arises on intangibles. The profit after tax for the period 1 January 2008 to 3 April 2008 was £0.1m. The profit attributable to the Group from the date of acquisition to 31 December 2008 was £0.3m. (v) The other 10 acquisitions during the year were as follows: Electrical Mechanical Instrument Services (UK) Ltd (EMIS), a UK registered company, was 100% acquired on 3 January 2008, for consideration, inclusive of expenses, of £1.2m. Cash acquired within the business was £0.4m. EMIS provides calibration services to the oil and gas industries in the UK and the Middle East. Epsilon Technical Services Ltd, a UK registered company was 100% acquired on 5 February 2008, for initial cash consideration, inclusive of expenses, of £2.1m. No contingent consideration is expected to be payable. Epsilon provides safety and advisory services to companies with products for use in potentially explosive atmospheres. Bioclin Research Laboratories Ltd, a company registered in the Republic of Ireland, was 100% acquired on 8 February 2008, for initial cash consideration, inclusive of expenses, of £2.8m. Cash acquired within the business was £0.4m. Additional contingent consideration of £0.6m was estimated to be payable based on Bioclin’s performance in 2008. An additional £0.2m consideration became payable in 2009. Bioclin provides product quality testing and bio-analytical services to pharmaceutical, medical device and biotechnology companies, in Ireland and internationally. The Limburg Water Board of The Netherlands outsourced all laboratory activities of Waterschapsbedrijf Limburg to Intertek with effect from 3 March 2008, for a minimum period of five years and transferred employees to Intertek. Total consideration, inclusive of expenses, was £1.6m. Intertek will provide extended analytical testing and consultancy services in the areas of environmental science, regulation and complex analysis of silt, soil and water. 100% of a company registered in the Philippines, was acquired on 2 April 2008, for cash consideration, inclusive of expenses, of £3.0m. Cash acquired within the business was £0.2m. This company operates the largest commercial assay laboratory in the Philippines and offers geophysical surveys and inspection services to the minerals industries. Applica GmbH, a food testing company, based in Germany was 100% acquired on 15 July 2008, for an initial cash consideration, inclusive of expenses, of £3.1m and a contingent consideration of £0.6m payable in March 2009 dependent on financial performance. Cash acquired within the business was £0.3m. Transworld Laboratories (Ghana) Limited, a company incorporated in the Republic of Ghana, was 100% acquired on 24 October 2008, for a cash consideration, inclusive of expenses, of £2.2m. The company provides analytical testing services to the minerals and exploration industry. An additional fair value adjustment of £0.4m was made in 2009 being recognition of additional accruals and liabilities. Eko-Lab Sp. z.o.o, a company registered in Poland was 100% acquired on 27 November 2008, for an initial cash consideration, inclusive of expenses, of £2.1m and a contingent consideration of £1.4m dependent on future financial performance. The company provides testing services for the food, pharmaceutical and cosmetics industry. The assets and the audit and inspection business of RQA, operating in the food industry in the USA, was acquired on 30 December 2008, for an initial cash consideration of £0.9m and a contingent consideration of £0.9m based on future financial performance. In 2009, after exchange adjustment, there was a reduction in consideration payable of £1.1m. Porst & Partner GmbH, a company registered in Germany, was 100% acquired on 31 December 2008, for a cash consideration, inclusive of expenses, of £2.2m. An additional consideration of £0.6m became payable in 2009. The company provides chemical analysis of harmful substances in leather, textiles, toys and hard goods. 108 Intertek Annual Report 2009 Notes to the ﬁnancial statements 24 Acquisitions (continued) The table below sets out the analysis of the net assets acquired and the fair value to the Group in respect of the ten acquisitions described above. Property, plant and equipment Goodwill Other intangible assets Inventories and work in progress Trade and other receivables Trade and other payables Tax payable Deferred tax liability Net assets acquired Cash outflow (net of cash acquired) Contingent consideration Total consideration Book value prior to acquisition £m Fair value adjustments £m Fair value to Group on acquisition £m 4.5 – – 0.3 3.1 (2.4) (0.6) – 4.9 (0.1) 15.7 3.9 (0.1) (0.1) (0.5) 0.1 (0.7) 18.2 4.4 15.7 3.9 0.2 3.0 (2.9) (0.5) (0.7) 23.1 19.9 3.2 23.1 The other intangible assets of £3.9m represent £2.8m for the value attributable to client relationships, £0.9m for guaranteed income and £0.2m for know-how. The other significant fair value adjustment of £0.7m relates to the deferred tax liability arising on the intangibles. The goodwill of £15.7m arises as follows: EMIS Epsilon Bioclin Waterschapsbedrijf Limburg* Minerals company in the Philippines Applica Transworld Eko-Lab RQA* Porst & Partner Total *No goodwill arose on these acquisitions. £m 0.4 1.8 2.3 – 2.0 2.1 2.4 2.7 – 2.0 15.7 The goodwill of £15.7m represents the value to the Group of acquiring presence and increasing penetration in industry sectors and countries, value of the highly skilled workforce and the economies of scale gained by integrating these businesses. The profit after tax for the period 1 January 2008 to the respective dates of purchase for these acquisitions was £1.3m. The profit attributable to the Group from these acquisitions from their respective dates of purchase to 31 December 2008 was £0.8m. (vi) All the acquisitions made during the year contributed revenues of £26.0m and profits of £2.8m to the Group from their respective dates of acquisition to 31 December 2008. The Group revenue and profit for the year ended 31 December 2008 would have been £1,019.8m and £105.9m respectively if all the acquisitions were assumed to have been made on 1 January 2008. www.intertek.com Intertek Annual Report 2009 109 25 Share schemes (a) Share option schemes The Company established a share option scheme for senior management in March 1997. The maximum number of options that can be granted under the scheme have been allocated and that scheme has been discontinued. In May 2002, the Intertek Group plc 2002 Share Option Plan (the 2002 Plan) and the Intertek Group plc 2002 Approved Share Option Plan (the Approved Plan) were established for employees to be granted share options at the discretion of the Remuneration Committee. These plans have also been discontinued and the last grants under these plans were made in September 2005. (i) The number and weighted average exercise prices of share options are as follows: At beginning of year Exercised Forfeited Outstanding options at end of year Exercisable at end of year 2009 2009 2008 2008 Weighted average exercise price Number of options Weighted average exercise price Number of options 642p 1,392,623 (569,428) 634p (9,738) 773p 654p 2,026,004 (405,884) 632p (227,497) 768p 646p 813,457 642p 1,392,623 646p 813,457 642p 1,392,623 The weighted average share price of the Company at the date of exercise of share options was 1,040p (2008: 971p). The options outstanding at the year end have an exercise price in the range of 359p to 778p and a weighted average contractual life of 4.7 years. (ii) The outstanding options at 31 December 2009 are exercisable as follows: Option Scheme 2002 Plan Approved Plan Total Number of options outstanding Exercise Price per share Exercisable between 56,495 51,003 10,231 178,011 6,108 420,606 5,525 727,979 6,371 1,894 17,484 262 23,069 1,000 34,548 850 85,478 813,457 437p 359p 462p 523.5p 607p 778p 711p 437p 380p 359p 462p 523.5p 607p 778p 711p 30 May 2005 7 April 2006 12 September 2006 7 April 2007 14 September 2007 7 April 2008 13 September 2008 30 May 2005 17 July 2005 7 April 2006 12 September 2006 7 April 2007 14 September 2007 7 April 2008 13 September 2008 30 May 2012 7 April 2013 12 September 2013 7 April 2014 14 September 2014 7 April 2015 13 September 2015 30 May 2012 17 July 2012 7 April 2013 12 September 2013 7 April 2014 14 September 2014 7 April 2015 13 September 2015 110 Intertek Annual Report 2009 Notes to the ﬁnancial statements 25 Share schemes (continued) (b) Deferred Bonus Share Plan As explained in the Remuneration Report on page 56, deferred and matching shares are awarded under this plan. The first awards were granted on 7 April 2006. The awards under this plan vest three years after grant date, subject to fulfilment of the performance conditions. At beginning of year Granted Vested Forfeited 2009 2009 Deferred Matching shares shares 2009 Total shares 866,571 784,098 (220,907) (72,807) 535,056 1,401,627 513,240 1,297,338 (336,288) (115,381) (135,159) (62,352) 2008 2008 Deferred shares 490,126 427,876 (9,400) (42,031) Matching shares 273,028 262,028 – – 2008 Total shares 763,154 689,904 (9,400) (42,031) Outstanding share awards at end of year 1,356,955 870,563 2,227,518 866,571 535,056 1,401,627 Details of the share option schemes and the Deferred Bonus Share Plan are shown in the Remuneration Report on pages 56 and 57. (c) Equity-settled transactions In accordance with IFRS 2, the fair value of services received in return for shares and share options granted to employees, is measured by reference to the fair value of shares and share options granted. The estimate of the fair value of the services received is measured based on the Monte Carlo formula, a financial model used to calculate the fair value of shares and share options. During the year ended 31 December 2009, the Group recognised an expense of £4.9m (2008: £3.3m) in respect of outstanding share and share option awards granted from 7 November 2002 onwards. The fair values and the assumptions used in their calculations are set out below: Deferred shares Matching shares Deferred shares Matching shares Deferred shares Matching shares Deferred shares Matching shares Share awards Date of shares awarded Fair value at measurement date (pence) Share price (pence) Expected volatility Dividend yield Risk free interest rate Time to maturity (years) 7 April 2006 795.9 827.6 n/a 1.4% n/a 3 7 April 2006 435.0 827.6 21.6% 1.4% 4.4% 3 10 April 2007 887.6 931.0 n/a 1.6% n/a 3 10 April 2007 498.8 931.0 21.4% 1.6% 5.4% 3 11 Mar 2008 906.9 959.5 n/a 1.9% n/a 3 11 Mar 2008 619.8 959.5 22.8% 1.9% 3.9% 3 10 Mar 2009 & 2 April 2009 839.3 899.5 n/a 2.3% n/a 3 10 Mar 2009 & 2 April 2009 697.8 899.5 29.1% 2.3% 1.8% 3 The expected volatility is based on the historic volatility, adjusted for any expected changes to future volatility due to publicly available information. The deferred and matching shares, under the Deferred Bonus Share Plan, are granted under a service condition. Such condition is not taken into account in the fair value measurement at grant date. The matching shares, under the Deferred Bonus Share Plan, are granted also under a performance related market condition and as a result this condition is taken into account in the fair value measurement at grant date. 26 Financial instruments Details of the Group’s treasury controls, exposures and the policies and processes for managing capital and credit, liquidity, interest rate and currency risk are set out in the Directors’ Report – Financial Review on page 38 and Principal Risks and Uncertainties on pages 38 to 41. (a) Credit risk (i) Exposure to credit risk The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the balance sheet date was as follows: Available-for-sale financial assets Trade receivables, net of allowance Cash and cash equivalents Total 2009 £m – 203.7 134.2 337.9 2008 £m 4.4 219.4 113.3 337.1 www.intertek.com Intertek Annual Report 2009 111 26 Financial instruments (continued) The maximum exposure to credit risk for trade receivables at the balance sheet date by geographic region was as follows: Americas Europe, Middle East and Africa Asia Pacific Total (ii) Impairment losses The ageing of trade receivables at the balance sheet date was as follows: Under 3 months Between 3 and 6 months Between 6 and 12 months Over 12 months Gross trade receivables Allowance for impairment Trade receivables, net of allowance 2009 £m 73.9 71.8 58.0 2008 £m 77.8 75.3 66.3 203.7 219.4 2009 £m 173.5 22.7 10.8 6.6 213.6 (9.9) 203.7 2008 £m 188.3 24.6 10.5 6.0 229.4 (10.0) 219.4 Included in trade receivables under three months of £173.5m (2008: £188.3m) are trade receivables of £101.1m (2008: £104.0m) which are not yet due for payment under the Group’s standard terms and conditions of sale. The movement in the allowance for impairment in respect of trade receivables during the year was as follows: Impairment allowance for doubtful trade receivables At 1 January Exchange differences Cash recovered Impairment loss recognised Receivables written off At 31 December 2009 £m 10.0 (0.6) (0.4) 6.2 (5.3) 9.9 2008 £m 6.4 1.6 (0.1) 4.4 (2.3) 10.0 There were no significant individual impairments of trade receivables. Credit risks arise mainly from the possibility that customers may not be able to settle their obligations as agreed. The Group assesses periodically the creditworthiness of customers. The Group’s credit risk is diversified due to the large number of entities that make up the Group’s customer base and the diversification across many different industries and geographic regions. Allowance for impairment is based on the risk profile of the trade receivable based on the likelihood of the amount being recovered. Based on historic default rates, reflecting the track record of payments by the Group’s customers, the Group believes that no impairment allowance is necessary in respect of trade receivables which are less than six months outstanding, unless there are specific circumstances such as the bankruptcy of a customer which would render the trade receivable irrecoverable. The Group provides fully for all trade receivables over 12 months old as these are considered likely to be irrecoverable. Where recovery is in doubt, a provision is made against the specific trade receivable until such time as the Group believes the amount to be irrecoverable. At that time the trade receivable is written off. (iii) Counterparty Transactions involving derivative financial instruments are with counterparties who have sound credit ratings. Given this, management does not expect any counterparty to fail to meet its obligations. 112 Intertek Annual Report 2009 Notes to the ﬁnancial statements 26 Financial instruments (continued) (b) Liquidity risk The table below provides information about the contractual maturities and interest rate profile of the Group’s senior term loans and notes at 31 December 2009. Liabilities 2009 Floating rate (USD) Average interest rate Fixed rate (USD) Average interest rate Floating rate (GBP) Average interest rate Floating rate (AUD) Average interest rate Total 2010 £m 8.2 1.4% – – – – – – 8.2 2011 £m 2012/2013 £m 78.3 0.8% – – 94.0 0.9% 26.2 4.4% 198.5 – – – – – – – – – 2014 £m – – 15.6 7.5% – – – – 15.6 2015+ £m – – 109.6 6.6% – – – – 109.6 Carrying amount £m 86.5 – 125.2 – 94.0 – 26.2 – 331.9 Of the other borrowings of £3.7m (2008 £3.9m), £3.4m (2008: £3.6m) relates to a variable rate loan denominated in Australian dollars with a contractual maturity of November 2013 and £0.3m (2008: £0.3m) relates to a fixed rate loan of 7.49% denominated in Australian dollars with a contractual maturity of November 2027. The current variable rate on the loan is 4.6% (2008: 6.2%). The table below provides information about the contractual maturities and interest rate profile of the Group’s senior term loans at 31 December 2008. Liabilities 2008 Floating rate (USD) Average interest rate Fixed rate (USD) Average interest rate Floating rate (HKD) Average interest rate Floating rate (SEK) Average interest rate Floating rate (GBP) Average interest rate Floating rate (EUR) Average interest rate Floating rate (JPY) Average interest rate Total 2009 £m – – – – – – – – 14.0 2.9% – – – – 14.0 2010 £m 30.2 3.2% – – 14.1 3.2% – – – – – – – – 44.3 2011 £m 99.2 3.4% – – 22.2 2.2% 16.0 2.7% 38.0 3.3% 35.2 3.5% 11.4 1.3% 222.0 2012 £m – – – – – – – – – – – – – – – 2013+ £m – – 137.4 6.7% – – – – – – – – – – 137.4 Carrying amount £m 129.4 – 137.4 – 36.3 – 16.0 – 52.0 – 35.2 – 11.4 – 417.7 www.intertek.com Intertek Annual Report 2009 113 26 Financial instruments (continued) The following are the contractual maturities of financial liabilities including interest: Carrying amount £m Contractual cash flows £m Six months or less £m 6-12 months £m 1-2 years £m 2-5 years £m More than five years £m 2009 Non-derivative financial liabilities Senior term loans and notes Other loans Trade payables Derivative financial liabilities Interest rate swaps used for hedging Forward exchange contracts: Outflow Inflow Total 2008 Non-derivative financial liabilities Senior term loans and notes Other loans Trade payables Derivative financial liabilities Interest rate swaps used for hedging Forward exchange contracts: Outflow Inflow 331.9 3.7 54.4 390.0 3.0 – – 3.0 417.7 3.9 54.0 475.6 4.5 – – 4.5 385.5 4.5 54.4 444.4 5.6 0.1 54.4 60.1 13.7 0.1 – 13.8 209.5 0.2 – 209.7 3.0 1.2 1.2 0.6 28.4 (28.4) 3.0 28.4 (28.4) 1.2 61.3 – – 1.2 15.0 – – 0.6 210.3 393.0 447.4 Carrying amount £m Contractual cash flows £m Six months or less £m 6-12 months £m 1-2 years £m 2-5 years £m 507.6 5.2 54.0 566.8 16.0 0.1 54.0 70.1 16.0 0.1 – 16.1 61.9 0.2 – 62.1 5.3 1.2 1.5 1.9 17.5 (17.5) 5.3 17.5 (17.5) 1.2 71.3 – – 1.5 17.6 – – 1.9 64.0 39.7 3.6 – 43.3 – – – – 117.0 0.5 – 117.5 – – – – 43.3 117.5 More than five years £m 157.1 4.1 – 161.2 – – – – 256.6 0.7 – 257.3 0.7 – – 0.7 Total 480.1 572.1 258.0 161.2 Cash flow hedges The following table indicates the periods in which the cash flows associated with derivatives that are cash flow hedges are expected to occur and expected to impact the profit or loss. Interest rate swaps used for hedging – liabilities 2009 2008 Expected Carrying amount cash outflows £m £m Six months or less £m 6-12 months £m 1-2 years £m 2-5 years £m 3.0 4.5 3.0 5.3 1.2 1.2 1.2 1.5 0.6 1.9 – 0.7 More than five years £m – – 114 Intertek Annual Report 2009 Notes to the ﬁnancial statements 26 Financial instruments (continued) (c) Interest rate risk (i) Hedging The Group adopts a policy of ensuring that between 33% and 67% of its exposure to changes in interest rates on borrowings is on a fixed rate basis. Interest rate swaps denominated in various currencies and an interest rate cap have been entered into to achieve an appropriate mix of fixed and floating rate exposure within the Group’s policy. The swaps mature over the next two years and have fixed swap rates ranging from 1.1% to 4.8%. At 31 December 2009, the Group had interest rate swaps with a notional contract amount of £88.5m (2008: £136.6m) and an interest rate cap with a notional value of £nil (2008: £19.6m). The Group designates interest rate swaps as hedging instruments in cash flow hedges and states them at fair value. The net fair value of swaps at 31 December 2009, was £3.0m (2008: swaps and caps £4.5m) comprising liabilities of £3.0m (2008: £4.5m). These amounts were recognised as fair value derivatives. Under the interest rate swap agreements, the Group agrees with other parties to exchange, at specified intervals, the difference between fixed rate and floating rate interest amounts calculated by reference to an agreed notional principal amount. (ii) Profile The information about the contractual maturities and interest rate profile of the Group’s borrowings is shown in section (b) liquidity risk. The interest rate profile of the Group’s short-term deposits and cash at 31 December 2009 is set out below: Assets 2009 Short-term deposits and cash*: Sterling US dollar Chinese renminbi Hong Kong dollar Euro Other currencies Total cash and cash equivalents Effective interest rates At floating interest rates £m Total carrying amount and fair value £m Interest free £m 0.4% 0.2% 0.5% 0.1% 0.3% Various 5.2 31.7 41.5 6.7 7.7 16.1 108.9 0.7 3.6 – 0.4 1.3 19.3 25.3 5.9 35.3 41.5 7.1 9.0 35.4 134.2 *Short-term deposits are overnight deposits bearing interest at rates fixed daily in advance. The interest rate profile of the Group’s short-term deposits and cash at 31 December 2008 was as follows: Assets 2008 Short-term deposits and cash*: Sterling US dollar Chinese renminbi Hong Kong dollar Euro Other currencies Total cash and cash equivalents Effective interest rates At floating interest rates £m Total carrying amount and fair value £m Interest free £m 1.0% 0.3% 1.5% 0.3% 1.5% Various 5.7 22.0 33.5 4.3 8.5 29.4 103.4 0.5 1.9 0.7 0.1 1.2 5.5 9.9 6.2 23.9 34.2 4.4 9.7 34.9 113.3 *Short-term deposits are overnight deposits bearing interest at rates fixed daily in advance. (iii) Sensitivity At 31 December 2009, it is estimated that a general increase of 3% in interest rates would decrease the Group’s profit before tax by approximately £0.5m (2008: £2.6m). Interest rate swaps have been included in this calculation. This analysis assumes all other variables remain constant. www.intertek.com Intertek Annual Report 2009 115 26 Financial instruments (continued) (d) Foreign currency risk The net assets of foreign subsidiaries represent a significant portion of the Group’s shareholders’ funds and a substantial percentage of the Group’s revenue and operating costs are incurred in currencies other than sterling. Because of the high proportion of international activity, the Group’s profit is exposed to exchange rate fluctuations. Two types of risk arise as a result: (i) translation risk, that is, the risk of adverse currency fluctuations in the translation of foreign currency operations and foreign assets and liabilities into sterling and (ii) transaction risk, that is, the risk that currency fluctuations will have a negative effect on the value of the Group’s commercial cash flows in various currencies. (i) Profile The foreign currency profile of the trade receivables and payables at the balance sheet date were as follows: 2009 Trade receivables Trade payables 2008 Trade receivables Trade payables Carrying amount £m 203.7 54.4 Sterling £m 25.4 7.2 219.4 54.0 26.4 7.7 US dollar £m 60.9 13.1 64.8 12.8 Chinese renminbi £m Hong Kong dollar £m 19.4 11.5 23.8 11.0 8.9 3.5 11.7 4.1 Euro £m 28.0 6.4 30.5 7.7 Other currencies £m 61.1 12.7 62.2 10.7 (ii) Recognised assets and liabilities Changes in the fair value of forward exchange contracts that economically hedge monetary assets and liabilities in foreign currencies and for which no hedge accounting is applied are recognised in the income statement. At 31 December 2009, the fair value of forward exchange contracts was £nil (2008: £nil). (iii) Hedge of net investment in foreign subsidiaries The Group’s foreign currency denominated loans are designated as a hedge of the Group’s investment in its respective subsidiaries. The carrying amount of these loans at 31 December 2009 was £237.9m (2008: £365.7m). A foreign exchange gain of £27.2m (2008: loss of £110.9m) was recognised in the translation reserve in equity on translation of these loans to sterling. (iv) Sensitivity It is estimated that a general increase of 10% in the value of sterling against the US dollar (the main currency impacting the Group) would have decreased the Group’s profit before tax for 2009 by approximately £15.8m (2008: £10.8m). A 10% increase has been used to reflect the degree of volatility in the exchange rate in recent months. The forward exchange contracts have been included in this calculation. This analysis assumes all other variables remain constant. (e) Fair values The table below sets out a comparison of the book values and corresponding fair values of all the Group’s financial instruments by class. Financial assets Cash and cash equivalents Trade receivables Available-for-sale asset Financial liabilities Interest bearing loans and borrowings Interest rate swaps used for hedging Trade payables Book value 2009 £m Fair value 2009 £m Book value 2008 £m Fair value 2008 £m 134.2 203.7 – 337.9 335.6 3.0 54.4 393.0 134.2 203.7 – 337.9 349.8 3.0 54.4 407.2 113.3 219.4 4.4 337.1 421.6 4.5 54.0 480.1 113.3 219.4 4.4 337.1 414.3 4.5 54.0 472.8 116 Intertek Annual Report 2009 Notes to the ﬁnancial statements 26 Financial instruments (continued) (f) Fair value hierarchy The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows: (cid:115)(cid:0) (cid:44)(cid:69)(cid:86)(cid:69)(cid:76)(cid:0)(cid:17)(cid:26)(cid:0)(cid:81)(cid:85)(cid:79)(cid:84)(cid:69)(cid:68)(cid:0)(cid:80)(cid:82)(cid:73)(cid:67)(cid:69)(cid:83)(cid:0)(cid:8)(cid:85)(cid:78)(cid:65)(cid:68)(cid:74)(cid:85)(cid:83)(cid:84)(cid:69)(cid:68)(cid:9)(cid:0)(cid:73)(cid:78)(cid:0)(cid:65)(cid:67)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:77)(cid:65)(cid:82)(cid:75)(cid:69)(cid:84)(cid:83)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:73)(cid:68)(cid:69)(cid:78)(cid:84)(cid:73)(cid:67)(cid:65)(cid:76)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:83)(cid:0)(cid:79)(cid:82)(cid:0)(cid:76)(cid:73)(cid:65)(cid:66)(cid:73)(cid:76)(cid:73)(cid:84)(cid:73)(cid:69)(cid:83) (cid:115)(cid:0) (cid:44)(cid:69)(cid:86)(cid:69)(cid:76)(cid:0)(cid:18)(cid:26)(cid:0)(cid:73)(cid:78)(cid:80)(cid:85)(cid:84)(cid:83)(cid:0)(cid:79)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:84)(cid:72)(cid:65)(cid:78)(cid:0)(cid:81)(cid:85)(cid:79)(cid:84)(cid:69)(cid:68)(cid:0)(cid:80)(cid:82)(cid:73)(cid:67)(cid:69)(cid:83)(cid:0)(cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:69)(cid:68)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:73)(cid:78)(cid:0)(cid:44)(cid:69)(cid:86)(cid:69)(cid:76)(cid:0)(cid:17)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:79)(cid:66)(cid:83)(cid:69)(cid:82)(cid:86)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:0)(cid:79)(cid:82)(cid:0)(cid:76)(cid:73)(cid:65)(cid:66)(cid:73)(cid:76)(cid:73)(cid:84)(cid:89)(cid:12)(cid:0)(cid:69)(cid:73)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:68)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:76)(cid:89)(cid:0)(cid:79)(cid:82)(cid:0)(cid:73)(cid:78)(cid:68)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:76)(cid:89)(cid:0) (cid:115)(cid:0) (cid:44)(cid:69)(cid:86)(cid:69)(cid:76)(cid:0)(cid:19)(cid:26)(cid:0)(cid:73)(cid:78)(cid:80)(cid:85)(cid:84)(cid:83)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:0)(cid:79)(cid:82)(cid:0)(cid:76)(cid:73)(cid:65)(cid:66)(cid:73)(cid:76)(cid:73)(cid:84)(cid:89)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:78)(cid:79)(cid:84)(cid:0)(cid:66)(cid:65)(cid:83)(cid:69)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:79)(cid:66)(cid:83)(cid:69)(cid:82)(cid:86)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:77)(cid:65)(cid:82)(cid:75)(cid:69)(cid:84)(cid:0)(cid:68)(cid:65)(cid:84)(cid:65)(cid:0)(cid:8)(cid:85)(cid:78)(cid:79)(cid:66)(cid:83)(cid:69)(cid:82)(cid:86)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:73)(cid:78)(cid:80)(cid:85)(cid:84)(cid:83)(cid:9) 31 December 2009 Interest rate swaps used for hedging Total 31 December 2008 Available-for-sale financial asset Interest rate swaps and caps used for hedging Total Level 1 £m – – Level 2 £m (3.0) (3.0) Level 3 £m – – Level 1 £m Level 2 £m Level 3 £m 4.4 – 4.4 – (4.5) (4.5) – – – Total liabilities £m (3.0) (3.0) Total assets/ (liabilities) £m 4.4 (4.5) (0.1) The major methods and assumptions used in estimating the fair values of the Group’s financial instruments are summarised below. (i) Interest rate swaps and caps used for hedging Bank valuations are used to estimate the fair value of interest rate swaps and caps used for hedging. Valuations are tested by considering the equivalent swap and cap rate as at 31 December and calculating the difference in interest earned at this rate compared to the original swap and cap rates. (ii) Forward exchange contracts The fair value of forward exchange contracts is based on their quoted market price, if available. If a quoted market price is not available, the fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk free interest rate. (iii) Interest bearing loans and borrowings The fair value of the floating interest bearing loans and borrowings is equal to the book value, since the floating interest rates were reset just prior to the year end. The fair value of the fixed interest bearing loans and borrowings has been calculated based on the present value of future principal and interest cash flows discounted at the market rate at the reporting date. (iv) Trade receivables and payables For trade receivables and payables with a remaining life of less than one year, the notional amount is deemed to reflect the fair value. All others are estimated as the present value of future cash flows discounted at the market rate of interest at the reporting date. (v) Available-for-sale financial assets The fair value of available-for-sale financial assets is determined by reference to their quoted closing bid price at the reporting date. (vi ) Interest rates used for determining fair value Prevailing market interest rates at the reporting date are used to discount future cash flows to determine the fair value of financial assets and liabilities. 27 Analysis of net debt Cash Borrowings Total net debt 1 January 2009 £m 113.3 (421.6) (308.3) Cash flow £m Exchange 31 December 2009 £m adjustments £m 27.0 58.7 85.7 (6.1) 27.3 21.2 134.2 (335.6) (201.4) The Group’s exposure to interest rate risk, currency risk and a sensitivity analysis for financial assets and liabilities are disclosed in note 26. www.intertek.com Intertek Annual Report 2009 117 28 Contingent liabilities Guarantees, letters of credit and performance bonds 2009 £m 5.8 2008 £m 8.9 Litigation From time to time, the Group is involved in various claims and lawsuits incidental to the ordinary course of its business, including claims for damages, negligence and commercial disputes regarding inspection and testing and disputes with employees and former employees. The Group is not currently party to any legal proceedings other than ordinary litigation incidental to the conduct of business. The outcome of litigation to which the Intertek Group companies are party cannot be readily foreseen as in some cases the facts are unclear or further time is needed to properly assess the merits of the case. However, based on information currently available, the Directors consider that the cost to the Group of an unfavourable outcome arising from such litigation is unlikely to have a materially adverse effect on the financial position of the Group in the foreseeable future. Tax The Group operates in more than 100 countries and is subject to a wide range of complex tax laws and regulations. At any point in time it is normal for there to be a number of open years in any particular territory which may be subject to enquiry by local authorities. Where the effect of the laws and regulations is unclear, estimates are used in determining the liability for the tax to be paid on past profits which are recognised in the financial statements. The Group considers the estimates, assumptions and judgements to be reasonable but this can involve complex issues which may take a number of years to resolve. The final determination of prior year tax liabilities could be different from the estimates reflected in the financial statements. 29 Related parties Identity of related parties The Group has a related party relationship with its associates (see note 31) and with its key management. Transactions between the Company and its subsidiaries and between subsidiaries have been eliminated on consolidation and are not discussed in this note. Transactions with associates As stated in note 12, the Group holds a 49% interest in the associate Euro Mechanical Instrument Services LLC (Abu Dhabi), a company registered in the United Arab Emirates. The Group disposed of its 40% interest in the associate, Allium LLC, a company registered in the US on 28 October 2009. Allium LLC and its subsidiaries manufacture testing equipment which it sells to certain Intertek Group companies. In 2009 up to the date of sale on 28 October, sales by Allium Group companies to Intertek Group companies amounted to £0.3m (2008: £0.6m). Intertek Group companies had lent dollar equivalent £nil to Allium LLC as at 31 December 2009 (2008: £1.9m). Interest on these loans was charged during 2009 up to the date of disposal at an average rate of 5.2% (2008: 5.6%). Intertek Group companies owed £nil at 31 December 2009 (2008: £0.1m) to Allium LLC in respect of purchases of testing equipment. Euro Mechanical Instrument Services LLC (Abu Dhabi) provides calibration services to the oil industry. This company had no material transactions with Intertek Group companies in the year. Transactions with key management personnel Key management personnel compensation, including the Group’s Executive Directors, is shown in the table below: Short-term benefits Post-employment benefits Equity-settled transactions Total 2009 £m 5.6 0.3 1.5 7.4 2008 £m 5.1 0.3 1.5 6.9 More detailed information concerning Directors’ remuneration, shareholdings, pension entitlements, share options and other long-term incentive plans is shown in the audited part of the Remuneration Report. Apart from the above, no member of key management had a personal interest in any business transactions of the Group. 118 Intertek Annual Report 2009 Notes to the ﬁnancial statements 30 Post balance sheet events (a) In January 2010, the Group successfully negotiated a US$60.0m bilateral, multi-currency revolving credit facility with the Bank of China, London Branch, available up to 25 January 2013. (b) At a Board meeting on 8 March 2010, the Directors proposed a dividend of 17.3p per ordinary share, which if approved, is payable to shareholders on 18 June 2010. 31 Principal operating subsidiaries and associated companies The Group comprises 219 subsidiary companies and one associated company. As permitted by Section 410 (1) of the Companies Act 2006, only the holding companies and the principal subsidiaries whose results or financial position, in the opinion of the Directors, principally affect the figures of the Group in 2009 and 2008 have been shown below. A full list of subsidiaries will be attached to the Company’s Annual Return filed with the Registrar of Companies. All the subsidiaries were consolidated at 31 December 2009. Company name Country of incorporation Activity by division* Group Company Percentage of ordinary shares held in 2009 and 2008 Intertek Testing Services Holdings Limited Intertek Holdings Limited Intertek Testing Services UK Limited Intertek Finance plc Intertek Testing Management Limited Intertek International Limited ITS Testing Services (UK) Limited ITS Testing Holdings Canada Limited Intertek Testing Services Limited Shanghai Intertek Testing Services Shenzhen Limited Testing Holdings France EURL Testing Holdings Germany GmbH ITS Hong Kong Limited Yickson Enterprises Limited Intertek Testing Services Taiwan Limited Intertek Holdings Nederland BV Testing Holdings Sweden AB Semko AB ITS NA Inc Intertek USA Inc Testing Holdings USA Inc Genalysis Laboratory Services Pty Ltd England and Wales England and Wales England and Wales England and Wales England and Wales England and Wales England and Wales Canada China China France Germany Hong Kong Hong Kong Taiwan Netherlands Sweden Sweden USA USA USA Australia Holding company Holding company Holding company Finance Management company OCA, IS OCA, AS Holding company CG, C&E, OCA, IS, M CG, C&E, IS Holding company Holding company CG, C&E, OCA, IS Holding company CG, C&E, OCA Holding company Holding company C&E C&E, IS OCA, AS, IS Holding company M 100 100 100 100 100 100 100 100 85 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 – – – – – – – – – – – – – – – – – – – – Associates Country of incorporation Principal activity by division* Group Company Allium LLC EMIS, Abu Dhabi (acquired 2008) USA United Arab Emirates CG OCA –** 49 – – * Consumer Goods (CG), Commercial & Electrical (C&E), Oil, Chemical & Agri (OCA), Analytical Services (AS), Industrial Services (IS) and Minerals (M). ** In 2009, the Group disposed of the 40% ownership of Allium LLC. Percentage of shares held in 2009 and 2008 www.intertek.com Intertek Annual Report 2009 119 Intertek Group plc – Company Balance Sheet As at 31 December 2009 Fixed assets Investments in subsidiary undertakings Current assets Debtors due after more than one year Debtors due within one year Cash at bank and in hand Creditors due within one year Other creditors Net current assets Total assets less current liabilities Creditors due after more than one year Other creditors Net assets Capital and reserves Called up share capital Share premium Profit and loss account Shareholders’ funds Notes 2009 £m 2008 £m (d) 289.6 284.7 (e) (f) 20.6 0.8 21.4 0.8 22.2 8.8 1.5 10.3 0.3 10.6 (g) (0.3) (3.2) 21.9 311.5 7.4 292.1 (0.1) 311.4 (4.2) 287.9 1.6 253.5 56.3 311.4 1.6 249.9 36.4 287.9 (h) (i) (i) (i) The financial statements on pages 119 to 122 were approved by the Board on 8 March 2010 and were signed on its behalf by: Wolfhart Hauser Director Bill Spencer Director 120 Intertek Annual Report 2009 Notes to the Company ﬁnancial statements (a) Accounting policies – Company The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Company’s financial statements. Basis of preparation The financial statements have been prepared in accordance with applicable United Kingdom Accounting Standards and under the historical cost accounting rules. Under Section 408 of the Companies Act 2006 the Company is exempt from the requirement to present its own profit and loss account. The Company is exempt from the requirement to prepare a cash flow statement on the grounds that it is included in the consolidated accounts which it has prepared. Foreign currencies Transactions in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated into sterling at the rates of exchange prevailing at the balance sheet date. All foreign exchange differences are taken to the profit and loss account. Taxation The charge for taxation is based on the profit for the year and takes into account taxation deferred because of timing differences between the treatment of certain items for taxation and accounting purposes. Deferred tax is recognised, without discounting, in respect of all timing differences between the treatment of certain items for taxation and accounting purposes, which have arisen but not reversed by the balance sheet date, except as otherwise required by FRS 19. Deferred tax assets in respect of timing differences are only recognised to the extent that it is more likely than not there will be suitable taxable profits to offset the future reversal of these timing differences. Classification of financial instruments issued by the Company Financial instruments issued by the Company are treated as equity (i.e. forming part of shareholders’ funds) only to the extent that they meet the following two conditions: (i) they include no contractual obligations upon the Company to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Company; and (ii) where the instrument will or may be settled in the Company’s own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the Company’s own equity instruments, or is a derivative that will be settled by the Company’s exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments. To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so classified takes the legal form of the Company’s own shares, the amounts presented in these financial statements for called up share capital and share premium account exclude amounts in relation to those shares. Finance payments associated with financial liabilities are dealt with as part of interest payable and similar charges. Finance payments associated with financial instruments that are classified as part of shareholders’ funds are dealt with as appropriations in the reconciliation of movements in shareholders’ funds. Dividends on shares presented within shareholders’ funds Dividend income is recognised in profit or loss on the date that the Company’s right to receive payment is established. Dividends unpaid at the balance sheet date are only recognised as a liability at that date to the extent that they are appropriately authorised and are no longer at the discretion of the Company. Unpaid dividends that do not meet these criteria are disclosed in the notes to the financial statements. Investments in subsidiaries Investments in subsidiaries are stated at cost less any provisions for impairment. Intercompany financial guarantees When the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies in the Group, the Company considers these to be insurance arrangements and accounts for them as such. In this respect the Company treats the guarantee contract as a contingent liability, until such time as it becomes probable that the Company will be required to make a payment under the guarantee. www.intertek.com Intertek Annual Report 2009 121 (a) Accounting policies – Company (continued) Share-based payments Intertek Group plc runs a share ownership programme that allows Group employees to acquire shares in the Company. In order to encourage share ownership, a share option scheme for senior management was established in March 1997. This option programme was discontinued in 2006 and was replaced by a new Long Term Incentive Plan. The fair value of options and share awards granted to employees of the Company is recognised as an employee expense with a corresponding increase in equity. As the Company has no employees, there is no recognition of an employee expense nor the corresponding increase in equity. However, the Company grants options and awards over its own shares to the employees of its subsidiaries and therefore the Company recognises an increase in the cost of investment in its subsidiaries, equivalent to the equity-settled share-based payment charge recognised in its subsidiary’s financial statements, with the corresponding credit being recognised directly in equity. The fair value is measured at grant date and is spread over the period during which the employee becomes unconditionally entitled to the options. The fair value granted is measured using the Monte Carlo model. This method, in calculating the fair value, takes into account various factors including the expected volatility of the shares, the dividend yield and the risk free interest rate. The fair value of shares granted under the Long Term Incentive Plan is also measured using the Monte Carlo model and is spread over the period during which the employee becomes unconditionally entitled to the shares. See note 25 in the Group financial statements for further information on the share schemes. (b) Profit and loss account Amounts paid to the Company’s auditor and their associates in respect of services to the Company, other than the audit of the Company’s financial statements, have not been disclosed as the information is required instead to be disclosed on a consolidated basis. The Company does not have any employees. Details of the remuneration of the Directors are set out in the Remuneration Report. (c) Dividends The aggregate amount of dividends comprises: Final dividend paid in respect of prior year but not recognised as a liability in that year Interim dividends paid in respect of the current year Aggregate amount of dividends paid in the financial year 2009 £m 21.7 13.0 34.7 2008 £m 19.2 11.2 30.4 The aggregate amount of dividends proposed and recognised as liabilities as at 31 December 2009 is £nil (2008: £nil). The aggregate amount of dividends proposed and not recognised as liabilities as at 31 December 2009 is £27.5m (2008: £21.7m). (d) Investment in subsidiary undertakings Cost and net book value At 1 January Additions Additions due to share-based payments At 31 December 2009 £m 2008 £m 284.7 – 4.9 289.6 280.9 0.5 3.3 284.7 The Company has granted options over its own shares and made share awards to the employees of its direct and indirectly-owned subsidiaries, and as such, the Company recognises an increase in the cost of investment in subsidiaries of £4.9m (2008: £3.3m). Details of the principal operating subsidiaries are set out in note 31 to the Group financial statements. The Company had three direct subsidiary undertakings at 31 December 2009. Intertek Testing Services Holdings Limited and Intertek Holdings Limited, both of which are holding companies, are incorporated in the United Kingdom and registered in England and Wales. The company also owns a segregated account in the insurance captive of the Group, Leeward Insurance Company Limited which is registered in Bermuda. All interests are in the ordinary share capital and all are wholly owned. In the opinion of the Directors, the value of the investments in subsidiary undertakings is not less than the amount at which the investments are stated in the balance sheet. There is no impairment to the carrying value of these investments. 122 Intertek Annual Report 2009 Notes to the Company ﬁnancial statements (e) Debtors due after more than one year Amounts owed by Group undertakings 2009 £m 20.6 The amounts owed by Group undertakings represent long-term loans due in two to five years, which carry interest based on the denomination of the borrowing currency. (f) Debtors due within one year Corporation tax Amounts owed by Group undertakings (g) Creditors due within one year Amounts owed to Group undertakings Accruals and deferred income (h) Creditors due after more than one year Amounts owed to Group undertakings 2009 £m 0.4 0.4 0.8 2009 £m 0.1 0.2 0.3 2009 £m 0.1 The amounts owed to Group undertakings represent long-term loans due in two to five years, which carry interest based on the denomination of the borrowing currency. (i) Reconciliation of movements in shareholders’ funds At 1 January 2008 Profit for the financial year Dividends paid Credit in relation to share-based payments Shares issued At 31 December 2008 Profit for the financial year Dividends paid Credit in relation to share-based payments Shares issued At 31 December 2009 Share capital £m Share premium £m Profit and loss £m 1.6 – – – – 1.6 – – – – 1.6 247.3 – – – 2.6 249.9 – – – 3.6 253.5 31.4 32.1 (30.4) 3.3 – 36.4 49.7 (34.7) 4.9 – 56.3 2008 £m 8.8 2008 £m 0.4 1.1 1.5 2008 £m 3.0 0.2 3.2 2008 £m 4.2 Total £m 280.3 32.1 (30.4) 3.3 2.6 287.9 49.7 (34.7) 4.9 3.6 311.4 Details of share capital are set out in note 20 and details of share options are set out in note 25 to the Group financial statements. A profit and loss account for Intertek Group plc has not been presented as permitted by Section 408 of the Companies Act 2006. The profit for the financial year, before dividends paid to shareholders of £34.7m (2008: £30.4m) was £49.7m (2008: £32.1m) which was mainly in respect of dividends received from subsidiaries. (j) Related party transactions Details of related party transactions are set out in note 29 of the Group financial statements. (k) Contingent liabilities The Company is a member of a group of UK companies that are part of a composite banking cross guarantee arrangement. This is a joint and several guarantee given by all members of the Intertek UK cash pool, guaranteeing the total gross liability position of the pool which was £11.4m at 31 December 2009 (2008: £17.7m). From time-to-time, in the normal course of business, the Company may give guarantees in respect of certain liabilities of subsidiary undertakings. www.intertek.com Intertek Annual Report 2009 123 Independent Auditors’ Report to the members of Intertek Group plc We have audited the ﬁnancial statements of Intertek Group plc for the year ended 31 December 2009 on pages 70 to 122. The ﬁnancial reporting framework that has been applied in the preparation of the Group ﬁnancial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU. The ﬁnancial reporting framework that has been applied in the preparation of the Parent Company ﬁnancial statements is applicable law and UK Accounting Standards (UK Generally Accepted Accounting Practice). Opinion on other matters prescribed by the Companies Act 2006 In our opinion: (cid:115)(cid:0)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:80)(cid:65)(cid:82)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:7)(cid:0)(cid:50)(cid:69)(cid:77)(cid:85)(cid:78)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:50)(cid:69)(cid:80)(cid:79)(cid:82)(cid:84)(cid:0)(cid:84)(cid:79)(cid:0)(cid:66)(cid:69)(cid:0)(cid:65)(cid:85)(cid:68)(cid:73)(cid:84)(cid:69)(cid:68)(cid:0)(cid:72)(cid:65)(cid:83)(cid:0) been properly prepared in accordance with the Companies Act 2006; and (cid:115)(cid:0)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:73)(cid:78)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:71)(cid:73)(cid:86)(cid:69)(cid:78)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:7)(cid:0)(cid:50)(cid:69)(cid:80)(cid:79)(cid:82)(cid:84)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:108)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:89)(cid:69)(cid:65)(cid:82)(cid:0) for which the ﬁnancial statements are prepared is consistent with the ﬁnancial statements. This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors As explained more fully in the Directors’ Responsibilities Statement set out on page 68, the Directors are responsible for the preparation of the ﬁnancial statements and for being satisﬁed that they give a true and fair view. Our responsibility is to audit the ﬁnancial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors. Scope of the audit of the ﬁnancial statements A description of the scope of an audit of ﬁnancial statements is provided on the APB’s web-site at www.frc.org.uk/apb/scope/UKP. Opinion on ﬁnancial statements In our opinion: (cid:115)(cid:0) (cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:108)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:83)(cid:84)(cid:65)(cid:84)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:71)(cid:73)(cid:86)(cid:69)(cid:0)(cid:65)(cid:0)(cid:84)(cid:82)(cid:85)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:70)(cid:65)(cid:73)(cid:82)(cid:0)(cid:86)(cid:73)(cid:69)(cid:87)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:83)(cid:84)(cid:65)(cid:84)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0) the Group’s and of the Parent Company’s affairs as at 31 December 2009 and of the Group’s proﬁt for the year then ended; (cid:115)(cid:0) (cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:0)(cid:108)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:83)(cid:84)(cid:65)(cid:84)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0)(cid:66)(cid:69)(cid:69)(cid:78)(cid:0)(cid:80)(cid:82)(cid:79)(cid:80)(cid:69)(cid:82)(cid:76)(cid:89)(cid:0)(cid:80)(cid:82)(cid:69)(cid:80)(cid:65)(cid:82)(cid:69)(cid:68)(cid:0)(cid:73)(cid:78)(cid:0) accordance with IFRSs as adopted by the EU; (cid:115)(cid:0) (cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:48)(cid:65)(cid:82)(cid:69)(cid:78)(cid:84)(cid:0)(cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:0)(cid:108)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:83)(cid:84)(cid:65)(cid:84)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0)(cid:66)(cid:69)(cid:69)(cid:78)(cid:0)(cid:80)(cid:82)(cid:79)(cid:80)(cid:69)(cid:82)(cid:76)(cid:89)(cid:0) prepared in accordance with UK Generally Accepted Accounting Practice; (cid:115)(cid:0) (cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:108)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:83)(cid:84)(cid:65)(cid:84)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0)(cid:66)(cid:69)(cid:69)(cid:78)(cid:0)(cid:80)(cid:82)(cid:69)(cid:80)(cid:65)(cid:82)(cid:69)(cid:68)(cid:0)(cid:73)(cid:78)(cid:0)(cid:65)(cid:67)(cid:67)(cid:79)(cid:82)(cid:68)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0) the requirements of the Companies Act 2006; and, as regards the Group ﬁnancial statements, Article 4 of the IAS Regulation. Matters on which we are required to report by exception We have nothing to report in respect of the following: Under the Companies Act 2006 we are required to report to you if, in our opinion: (cid:115)(cid:0) (cid:0)(cid:65)(cid:68)(cid:69)(cid:81)(cid:85)(cid:65)(cid:84)(cid:69)(cid:0)(cid:65)(cid:67)(cid:67)(cid:79)(cid:85)(cid:78)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:82)(cid:68)(cid:83)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0)(cid:78)(cid:79)(cid:84)(cid:0)(cid:66)(cid:69)(cid:69)(cid:78)(cid:0)(cid:75)(cid:69)(cid:80)(cid:84)(cid:0)(cid:66)(cid:89)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:48)(cid:65)(cid:82)(cid:69)(cid:78)(cid:84)(cid:0) Company, or returns adequate for our audit have not been received from branches not visited by us; or (cid:115)(cid:0) (cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:48)(cid:65)(cid:82)(cid:69)(cid:78)(cid:84)(cid:0)(cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:0)(cid:108)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:83)(cid:84)(cid:65)(cid:84)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:80)(cid:65)(cid:82)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0) Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns; or (cid:115)(cid:0) (cid:0)(cid:67)(cid:69)(cid:82)(cid:84)(cid:65)(cid:73)(cid:78)(cid:0)(cid:68)(cid:73)(cid:83)(cid:67)(cid:76)(cid:79)(cid:83)(cid:85)(cid:82)(cid:69)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:68)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:7)(cid:0)(cid:82)(cid:69)(cid:77)(cid:85)(cid:78)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:83)(cid:80)(cid:69)(cid:67)(cid:73)(cid:108)(cid:69)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0)(cid:76)(cid:65)(cid:87)(cid:0) are not made; or (cid:115)(cid:0) (cid:0)(cid:87)(cid:69)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0)(cid:78)(cid:79)(cid:84)(cid:0)(cid:82)(cid:69)(cid:67)(cid:69)(cid:73)(cid:86)(cid:69)(cid:68)(cid:0)(cid:65)(cid:76)(cid:76)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:73)(cid:78)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:69)(cid:88)(cid:80)(cid:76)(cid:65)(cid:78)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:87)(cid:69)(cid:0) require for our audit. Under the Listing Rules we are required to review: (cid:115)(cid:0) (cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:7)(cid:0)(cid:83)(cid:84)(cid:65)(cid:84)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:12)(cid:0)(cid:83)(cid:69)(cid:84)(cid:0)(cid:79)(cid:85)(cid:84)(cid:0)(cid:79)(cid:78)(cid:0)(cid:80)(cid:65)(cid:71)(cid:69)(cid:0)(cid:21)(cid:18)(cid:12)(cid:0)(cid:73)(cid:78)(cid:0)(cid:82)(cid:69)(cid:76)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:84)(cid:79)(cid:0)(cid:71)(cid:79)(cid:73)(cid:78)(cid:71)(cid:0) concern; and (cid:115)(cid:0) (cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:80)(cid:65)(cid:82)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:35)(cid:79)(cid:82)(cid:80)(cid:79)(cid:82)(cid:65)(cid:84)(cid:69)(cid:0)(cid:39)(cid:79)(cid:86)(cid:69)(cid:82)(cid:78)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:51)(cid:84)(cid:65)(cid:84)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:7)(cid:0) Report relating to the Company’s compliance with the nine provisions of the June 2008 Combined Code speciﬁed for our review. P Korolkiewicz (Senior Statutory Auditor) for and on behalf of KPMG Audit Plc, Statutory Auditor Chartered Accountants 8 Salisbury Square London EC4Y 8BB 8 March 2010 Financial Calendar Financial year end Results announced Annual General Meeting Ex-dividend date for ﬁ nal dividend Record date for ﬁ nal dividend Final dividend payable Interim results announced Interim dividend payable 31 December 2009 8 March 2010 14 May 2010 2 June 2010 4 June 2010 18 June 2010 2 August 2010 November 2010 124 Intertek Annual Report 2009 Shareholder Information Shareholders’ Enquiries and Electronic Communications www.shareview.co.uk Any shareholders with enquiries relating to their shareholding should, in the ﬁ rst instance, contact our Registrars, Equiniti. Shareholders who would prefer to view documentation electronically can elect to receive automatic notiﬁ cation by email each time the Company distributes documents, instead of receiving a paper version of such documents, by registering a request at the website, www.shareview.co.uk. There is no fee for using this service and you will automatically receive conﬁ rmation that a request has been registered. Should you wish to change your mind or request a paper version of any document in the future, you may do so by contacting the Registrar by email or by post. To access www.shareview.co.uk, you will need to have your shareholder reference available when you ﬁ rst log in, which may be found on your dividend voucher, share certiﬁ cate or form of proxy. The facility also allows shareholders to view their holding details, ﬁ nd out how to register a change of name or what to do if a share certiﬁ cate is lost, as well as download forms in respect of changes of address, dividend mandates and share transfers. Share dealing service A share dealing service for the purchase or sale of shares in Intertek is available through J.P. Morgan Cazenove, whose details are as follows: J.P. Morgan Cazenove (postal service) 20 Moorgate London EC2R 6DA t: +44 20 7155 5328 ShareGift The Orr Mackintosh Foundation operates a charity share donation scheme for shareholders with small parcels of shares whose value makes it uneconomic to sell them. Details of the scheme are available from: ShareGift at www.sharegift.org t: +44 20 7930 3737. Share price information Information on the Company’s share price is available from the investor pages of www.intertek.com. Our Business Corporate Information 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 25,000 people in more than 100 countries around the world. Board of Directors Vanni Treves, Chairman* David Allvey* Edward Astle* (appointed 1 September 2009) Gavin Darby* (appointed 1 September 2009) Christopher Knight* Debra Rade* Wolfhart Hauser, Chief Executive Officer Mark Loughead, Chief Operating Officer William Spencer, Chief Financial Officer * Non-Executive Directors Company Secretary Fiona Evans Investor Relations E: investor@intertek.com T: +44 20 7396 3400 Registrars Equiniti The Causeway Worthing West Sussex BN99 6DA T: 0871 384 2653 T: +44 121 415 7047 (outside UK) Auditors KPMG Audit Plc PO Box 486 8 Salisbury Square London EC4Y 8BB T: +44 20 7311 1000 Registered Office Intertek Group plc 25 Savile Row London W1S 2ES T: +44 20 7396 3400 F: +44 20 7396 3480 www.intertek.com Registered number: 4267576 ISIN: GB0031638363 London Stock Exchange Support Services FTSE 100 Symbol: ITRK Brokers J.P. Morgan Cazenove 20 Moorgate London EC2R 6DA T: +44 20 7588 2828 Goldman Sachs International Peterborough Court 133 Fleet Street London EC4A 2BB T: +44 20 7774 1000 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. Designed by 35 Communications. Cover photograph by Charlie Fawell. 38113_Cover.indd 4-3 5/3/10 05:01:56 Intertek Group plc 25 Savile Row London W1S 2ES United Kingdom t: +44 20 7396 3400 f: +44 20 7396 3480 e: info@intertek.com www.intertek.com I n t e r t e k G r o u p p l c A n n u a l R e p o r t 2 0 0 9 Success through quality Annual Report 2009 38113_Cover.indd 2-1 5/3/10 05:01:49

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