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
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Success
through
quality
Annual Report 2009
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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.
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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
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(cid:115)(cid:0)(cid:0)(cid:52)(cid:79)(cid:84)(cid:65)(cid:76)
(cid:115)(cid:0)(cid:0)(cid:52)(cid:82)(cid:65)(cid:108)(cid:0)(cid:71)(cid:85)(cid:82)(cid:65)
(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)
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(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
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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
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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:
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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:
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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.
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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.
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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
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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)
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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
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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
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in 2009 and minor issues were corrected as part of the process.
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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
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for 30 years, (during twelve of which he was Senior Partner). He has been
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02 Wolfhart Hauser (60)
Chief Executive Officer
Appointed to the Board as Chief Executive Officer in March 2005 after
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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
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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
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of Management Accountants and a member of the Association of
Corporate Treasurers.
04 David Allvey (64)
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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
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05 Edward Astle (56)
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He is currently Pro-Rector of Commercial Development at Imperial College
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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
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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
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Gavin’s operational and management experience spans the consumer goods
and technology sectors, having held senior executive positions at Coca-Cola
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(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
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(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
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(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
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Gregg worked in sales and marketing for the software industry.
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(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
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10 Marc Hoffer
Division Executive Vice President
Minerals
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(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
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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:
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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
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Committee and the Audit and Risk Committee, each included two
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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
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in compliance with the Code.
The Board
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ensuring that the Company is appropriately managed and that it
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meet its obligations to its shareholders and others, to lead the
Group within a framework of prudent and effective controls which
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strategic objectives and to ensure that the appropriate financial and
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(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.
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David Allvey, who is also the Senior Independent Director,
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on page 43.
Matters reserved for the Board
The Group has identified a number of key areas that are subject
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management can be reviewed and monitored. A board matrix is
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delegated limits;
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delegated authority to executive management, subject to certain
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Board meetings
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table on page 49. Also on several occasions, the Chairman met with
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without the Chairman being present. If a Director has any concerns
about the Group or a proposed action, then such concerns are
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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
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at which point he met the independence criteria as set out in the
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its agenda; ensuring that the Directors receive accurate, timely
and clear information; ensuring effective communication with
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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
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Directors’ annual consideration of the Chairman’s performance
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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
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Directors represented less than half the Board. In order to refresh
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Astle and Gavin Darby, were appointed to the Board. Following
these additional appointments, and the retirement of Richard
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The Board considers David Allvey, Edward Astle, Gavin Darby,
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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,
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(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
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viewpoint and valuable expertise to the Board through his extensive
knowledge of the business and industry.
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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
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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
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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
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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
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(Accounts and Reports) Regulations 2008 (the Regulations) and the
Combined Code on Corporate Governance (the Code) and has been
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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:
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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.
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conditions and deciding that Earnings per share (EPS) was not an
appropriate measure for deferred bonus awards made in 2009
or 2010.
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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
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the business on 31 March 2010. Details of Bill Spencer’s
arrangements on departure are set out on page 58. Details of
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disclosed in next year’s Remuneration Report.
54 Intertek Annual Report 2009
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Remuneration Report
Policy
Our remuneration strategy remains to:
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(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)
(cid:38)(cid:79)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:80)(cid:85)(cid:82)(cid:80)(cid:79)(cid:83)(cid:69)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:82)(cid:69)(cid:84)(cid:69)(cid:78)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:76)(cid:73)(cid:78)(cid:75)(cid:0)(cid:82)(cid:69)(cid:87)(cid:65)(cid:82)(cid:68)(cid:0)(cid:67)(cid:76)(cid:69)(cid:65)(cid:82)(cid:76)(cid:89)(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:7)(cid:0)(cid:73)(cid:78)(cid:84)(cid:69)(cid:82)(cid:69)(cid:83)(cid:84)(cid:83)(cid:12)(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:79)(cid:70)(cid:0)(cid:82)(cid:69)(cid:87)(cid:65)(cid:82)(cid:68)(cid:0)(cid:68)(cid:69)(cid:84)(cid:69)(cid:82)(cid:77)(cid:73)(cid:78)(cid:69)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0)(cid:66)(cid:85)(cid:83)(cid:73)(cid:78)(cid:69)(cid:83)(cid:83)(cid:0)(cid:83)(cid:85)(cid:67)(cid:67)(cid:69)(cid:83)(cid:83)(cid:0)(cid:72)(cid:65)(cid:83)(cid:0)(cid:65)(cid:0)(cid:86)(cid:65)(cid:76)(cid:85)(cid:69)(cid:0)(cid:68)(cid:69)(cid:80)(cid:69)(cid:78)(cid:68)(cid:69)(cid:78)(cid:84)(cid:0)(cid:79)(cid:78)(cid:0)(cid:79)(cid:85)(cid:82)(cid:0)(cid:83)(cid:72)(cid:65)(cid:82)(cid:69)(cid:0)(cid:80)(cid:82)(cid:73)(cid:67)(cid:69)(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:84)(cid:72)(cid:69)(cid:0)(cid:68)(cid:69)(cid:70)(cid:69)(cid:82)(cid:82)(cid:65)(cid:76)(cid:0)(cid:80)(cid:69)(cid:82)(cid:73)(cid:79)(cid:68)(cid:14)
Fixed
(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)
(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:84)(cid:72)(cid:69)(cid:0)(cid:74)(cid:79)(cid:66)(cid:0)(cid:72)(cid:79)(cid:76)(cid:68)(cid:69)(cid:82)(cid:14)(cid:0)(cid:55)(cid:69)(cid:0)(cid:84)(cid:65)(cid:82)(cid:71)(cid:69)(cid:84)(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:70)(cid:79)(cid:82)(cid:0)(cid:70)(cid:85)(cid:76)(cid:76)(cid:89)(cid:0)(cid:67)(cid:79)(cid:77)(cid:80)(cid:69)(cid:84)(cid:69)(cid:78)(cid:84)(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:84)(cid:0)
(cid:84)(cid:72)(cid:69)(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:77)(cid:65)(cid:82)(cid:75)(cid:69)(cid:84)(cid:0)(cid:77)(cid:69)(cid:68)(cid:73)(cid:65)(cid:78)(cid:14)
(cid:48)(cid:82)(cid:79)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:70)(cid:79)(cid:82)(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:82)(cid:69)(cid:109)(cid:69)(cid:67)(cid:84)(cid:0)(cid:84)(cid:72)(cid:69)(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:77)(cid:65)(cid:82)(cid:75)(cid:69)(cid:84)(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:0)(cid:80)(cid:65)(cid:83)(cid:84)(cid:0)(cid:79)(cid:66)(cid:76)(cid:73)(cid:71)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:14)
(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
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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
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Intertek’s business.
Other than Vanni Treves, who has the benefit of a company car, and
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insurance policy in accordance with the terms of his previous
employment contract with the Company, no other benefits-in-kind
are provided.
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(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
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will not be entitled to any compensation for loss of office.
Vanni Treves and David Allvey are each engaged by the Group as
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commencing 29 May 2002. Both appointments were renewed for
three years at the end of their second three-year period.
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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
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(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
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(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
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(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.
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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
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Remuneration Report
The Committee
On behalf of the Board, the Committee:
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(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)
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(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
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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)
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(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
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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) (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:110)(cid:0)(cid:34)(cid:85)(cid:83)(cid:73)(cid:78)(cid:69)(cid:83)(cid:83)(cid:0)(cid:67)(cid:79)(cid:77)(cid:66)(cid:73)(cid:78)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:8)(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:12)(cid:0)(cid:69)(cid:78)(cid:68)(cid:79)(cid:82)(cid:83)(cid:69)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:37)(cid:53)(cid:0)(cid:73)(cid:78)(cid:0)(cid:42)(cid:85)(cid:78)(cid:69)(cid:0)(cid:18)(cid:16)(cid:16)(cid:25)(cid:9)(cid:0)
(cid:115)(cid:0) (cid:0)(cid:41)(cid:33)(cid:51)(cid:0)(cid:18)(cid:23)(cid:0)(cid:8)(cid:50)(cid:69)(cid:86)(cid:73)(cid:83)(cid:69)(cid:68)(cid:9)(cid:0)(cid:110)(cid:0)(cid:35)(cid:79)(cid:78)(cid:83)(cid:79)(cid:76)(cid:73)(cid:68)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:83)(cid:69)(cid:80)(cid:65)(cid:82)(cid:65)(cid:84)(cid:69)(cid:0)(cid:70)(cid:73)(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:8)(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:66)(cid:69)(cid:71)(cid:73)(cid:78)(cid:78)(cid:73)(cid:78)(cid:71)(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:12)(cid:0)
endorsed by the EU in June 2009)
(cid:115)(cid:0) (cid:0)(cid:33)(cid:77)(cid:69)(cid:78)(cid:68)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:84)(cid:79)(cid:0)(cid:41)(cid:38)(cid:50)(cid:51)(cid:0)(cid:23)(cid:0)(cid:110)(cid:0)(cid:41)(cid:77)(cid:80)(cid:82)(cid:79)(cid:86)(cid:73)(cid:78)(cid:71)(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:65)(cid:66)(cid:79)(cid:85)(cid:84)(cid:0)(cid:70)(cid:73)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:73)(cid:78)(cid:83)(cid:84)(cid:82)(cid:85)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:8)(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: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)
endorsed by the EU in November 2009)
(cid:115)(cid:0) (cid:0)(cid:33)(cid:77)(cid:69)(cid:78)(cid:68)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:84)(cid:79)(cid:0)(cid:41)(cid:33)(cid:51)(cid:0)(cid:19)(cid:25)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:41)(cid:38)(cid:50)(cid:41)(cid:35)(cid:0)(cid:25)(cid:0)(cid:110)(cid:0)(cid:37)(cid:77)(cid:66)(cid:69)(cid:68)(cid:68)(cid:69)(cid:68)(cid:0)(cid:36)(cid:69)(cid:82)(cid:73)(cid:86)(cid:65)(cid:84)(cid:73)(cid:86)(cid:69)(cid:83)(cid:0)(cid:8)(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:19)(cid:16)(cid:0)(cid:42)(cid:85)(cid:78)(cid:69)(cid:0)(cid:18)(cid:16)(cid:16)(cid:25)(cid:12)(cid:0)(cid:69)(cid:78)(cid:68)(cid:79)(cid:82)(cid:83)(cid:69)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)
EU in November 2009)
(cid:115)(cid:0) (cid:0)(cid:33)(cid:77)(cid:69)(cid:78)(cid:68)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:84)(cid:79)(cid:0)(cid:41)(cid:38)(cid:50)(cid:51)(cid:0)(cid:18)(cid:0)(cid:110)(cid:0)(cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:0)(cid:67)(cid:65)(cid:83)(cid:72)(cid:13)(cid:83)(cid:69)(cid:84)(cid:84)(cid:76)(cid:69)(cid:68)(cid:0)(cid:83)(cid:72)(cid:65)(cid:82)(cid:69)(cid:13)(cid:66)(cid:65)(cid:83)(cid:69)(cid:68)(cid:0)(cid:80)(cid:65)(cid:89)(cid:77)(cid:69)(cid:78)(cid:84)(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:8)(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: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)
not yet endorsed by the EU)
(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)(cid:51)(cid:84)(cid:65)(cid:78)(cid:68)(cid:65)(cid:82)(cid:68)(cid:83)(cid:0)(cid:18)(cid:16)(cid:16)(cid:25)(cid:0)(cid:8)(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:12)(cid:0)(cid:78)(cid:79)(cid:84)(cid:0)(cid:89)(cid:69)(cid:84)(cid:0)
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.
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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.
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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.
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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
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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
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Success
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Annual Report 2009
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