Intertek Group Annual Report 2016

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FY2016 Annual Report · Intertek Group

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TOTAL QUALITY.
ASSURED.

ANNUAL REPORT 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

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INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

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OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

CONTENTS

OUR HERITAGE

OUR TQA SERVICES

GLOBAL SCALE

Read more about our rich history
on page 2

Read more on page 30

Read more about the sectors we work in on page 6

already provide to each individual organisation and by cross-
selling between the various components of our integrated
ATIC offering.

Second, we will continue to leverage our global portfolio of
industry leading solutions to win new customer relationships
with new and fast growing local, regional and global companies.

Third, as companies see the value in our Total Quality Assurance
approach, there will also be tremendous growth potential in
convincing corporations that currently conduct this work in-house
to outsource their quality assurance requirements to us.

Fourth, our industry is highly fragmented and we will look at
seizing the right M&A opportunities to enable us to expand our
geographic coverage where needed, providing access to a new
kind of offering or strengthening our existing operations.

Our highly cash-generative earnings model and strong balance
sheet provide the flexibility to accelerate organic growth with
value-enhancing acquisitions.

OUR HIGH QUALITY EARNINGS MODEL
The Intertek earnings model is to provide ATIC solutions with
superior customer service levels to businesses in the three
economic sectors of ‘Products’, ‘Trade’ and ‘Resources’ across
more than 100 countries. These sectors provide the framework
of our high-quality earnings model, and each benefits from its
own set of structural growth drivers.

The Products sector, which currently delivers over 70% of
our profit, comprises consumer goods; electrical and wireless;
building and construction; chemicals and pharmaceuticals;
softlines and hardlines; transportation technologies; food; and
business assurance. We see the sector as continuing to benefit
from corporations’ growing investments in quality and innovation
and anticipate continuing growth in response to rising consumer
demand and a higher regulatory burden.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

CEO’S REVIEW
continued

Specifically, we see two key growth drivers for Intertek
in this sector:

• Growth in stock-keeping units (SKUs) or brands, driven by

increasing numbers of products worldwide, shorter product
life-cycles and the rise of e-commerce. Just consider the speed
of product development over the last 30 years in the mobile
phone sector, as companies have competed for consumer
attention through investments in technology, innovation,
variety and brand development; and

• Growth in the number of tests that need to be taken for
each SKU or brand, driven by rising regulatory standards,
concerns for safety, demand for higher quality and
continuous innovation.

We expect our Products sector to continue growing faster
than GDP as our ATIC services support customers in their
determination to:

• Innovate ahead of their competitors;

• Maintain or improve quality while expanding their

supply chains;

• Meet more demanding regulatory standards;

• Raise the sustainability standards of their products

and processes;

• Sharpen their risk-management focus; and

• Protect their reputations.

Our second key business sector is Trade, which comprises cargo;
agriculture; and government and trade services and accounts
for around 20% of our profit. By drawing on our services,
particularly in the Inspection area, companies have the
assurance of knowing that their cargoes comply with all
relevant regulations and quality standards.

Our Trade business will continue to benefit from ongoing growth
in global trade and the development of stronger regional trade
in Asia, the Indian Ocean, the Mediterranean and the Americas.
We expect this growth to be at a rate similar to global GDP
through the cycle, driven by the increases in global population
and demand from emerging markets that are causing cargo
tonnage, shipping numbers and trading routes to grow.

I am confident about the long-term future of
the ATIC industry. An increased focus on risk
management, continuing growth in global
trade, demand for energy and innovation
and growing demand for quality and
sustainability will all play key roles in
its future development.

Together, these forces represent a compelling opportunity. Just
to take soya exports as an illustrative example, the total quantity
exported grew at a CAGR of 6.2% per annum between 2001 and
2015 – a similar growth rate to those of many other globally
traded agriculture and resource products.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

In Resources, our third business sector, which contributed less
than 10% of our profit, we anticipate long-term growth driven
by increasing demand for global energy to support GDP and
population growth, but we recognise this is a cyclical business
that is currently in the challenging part of the cycle.

We offer both capex and opex services – we can help companies
investing in new capacity and operating existing facilities.

We will also see continued expansion in the different types
of energy consumed, with an increasing role for renewables in
driving sustainability, carbon reduction and cleanliness of supply.

At the Group level, in the medium- to long-term we expect to
deliver GDP plus organic revenue growth that is margin accretive
and strongly cash generative. This will enable us to allocate our
resources in a disciplined fashion, to create further value via
carefully selected capital expenditure and M&A investments that
in turn feed further accelerated margin-accretive revenue growth.

OUR STRATEGIC FRAMEWORK
Our earnings model supports our 5x5 differentiated strategy for
growth, which aims to move the centre of gravity of the company
towards high-growth, high-margin areas in our industry. The
strategy comprises five strategic priorities and five strategic
enablers, targeted at the achievement of five corporate goals
that help us measure progress.

Our five medium- to long-term corporate goals are:

• Fully engaged employees working in a safe environment

• Superior customer service in Assurance, Testing, Inspection

and Certification

• Margin-accretive revenue growth based on GDP+

organic growth

• Strong cash conversion from operations

• Accretive, disciplined capital-allocation policy

Read more about our 5x5 strategy on page 12

Our five strategic priorities are:

• A strong brand proposition that positions Intertek as the
market-leading provider of Quality Assurance services

• Delivering superior service with our Total Quality Assurance
value proposition, building customer loyalty and attracting
new customers

• An effective sales strategy that develops our business by

attracting new clients and growing account penetration with
existing customers, through increasing the focus on the
systematic cross-selling of our ATIC solutions

• Operating a growth- and margin-accretive portfolio strategy,

that delivers focused growth among the business lines,
countries and services with good growth and margin prospects

• Delivering operational excellence in every operation to

drive productivity

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

The five enablers that will support the execution of our
strategy are:

• Our entrepreneurial spirit and decentralised organisation

that underpins our customer-centric culture

• Disciplined performance management, driving margin-accretive

revenue growth with strong cash conversion and strong
returns on capital

• Superior technology, increasing productivity and adding value

to our customers

• Engaging our people through the appropriate reward

strategy and investing in the right capabilities to support
our growth agenda

• Achieving sustainable growth for customers,

employees, shareholders, suppliers and communities and
ensuring we have the right balance between performance
and sustainability

FOCUSED PORTFOLIO STRATEGY
Pursuing a growth- and margin-accretive portfolio is one of
our five strategic priorities. When managing our day-to-day
performance and allocating our capital and people resources,
we will pursue a three-tier portfolio strategy:

First, we will focus on our large businesses with good growth
and margin prospects. These areas of focus are:

• at the Business Line level: Softlines, Hardlines, Electrical

& Wireless, Cargo/AA and GTS

• at the Geographic level: North America and Greater China

Second, we will invest in the fast-growing businesses with
good margin prospects where the focus areas are:

• at the Business Line level: Business Assurance, Agriculture,

Building & Construction, Transportation Technologies
and Food

• at the Geographic level: South Asia, South East Asia,

South America, Middle East and Africa

Third, we will focus on improving the performance:

• at the Business Line level: Industry Services and Minerals

• at the Geographic level: Europe and Australasia

ACCRETIVE DISCIPLINED CAPITAL ALLOCATION
In our view, to deliver shareholder returns on a consistent basis,
the right formula is sustainable earnings growth with accretive
disciplined allocation of capital.

We pursue a disciplined approach to capital allocation that
enables us to reinvest our growing earnings and create
long-term value and sustainable shareholder returns.

The first priority when it comes to capital allocation is investment
to support organic growth. In the medium- to long-term, we will
invest circa 5% of revenue in capital expenditure.

The second priority is to deliver sustainable returns for our
shareholders through the payment of progressive dividends
with a dividend payout ratio of circa 40% of earnings.

The third priority for capital is M&A activity to strengthen our
portfolio in the right growth areas, provided we can deliver good
returns. This means focusing on those existing business lines
or countries with good growth and margin prospects, where we
have leading market positions, or entering new exciting growth
areas, be that geography or services.

The fourth priority is to maintain an efficient balance sheet that
gives us the flexibility to invest in growth with a net debt to
EBITDA ratio of 1.5 to 2 times.

LOOKING AHEAD
We believe that the strength of our results in 2016
demonstrate the attractive nature of our industry, Intertek's
high-quality earnings model and the effectiveness of our 5x5
differentiated strategy for growth.

We are confident about the growth prospects of the global
Quality Assurance market.

We are uniquely positioned to seize these attractive growth
opportunities, underpinned by the increased complexities
of corporate supply chains and the associated challenges
of maintaining a high level of quality assurance end to end.

Leveraging our industry-leading expertise and innovative and
entrepreneurial culture, we service a diversity of industries,
geographies and customers with multiple Total Quality
Assurance solutions with our global network enabling
us to follow the supply chains of our customers wherever
they are in the world.

We have a strong track record of creating sustainable growth
and shareholder value, leveraging our high-margin and highly
cash generative earnings model. We are moving the Company’s
centre of gravity towards our industry’s most attractive growth
and margin areas with a disciplined approach to performance
management and capital allocation.

The strength of Intertek is first and foremost the excellence
of our 42,000 entrepreneurially-minded professionals, who
take immense pride in delivering customer service standards
that exceed expectations. I would like to thank all my colleagues
around the world for their passion and expertise every day that
makes Intertek a trusted partner for its clients.

I am tremendously excited about Intertek’s future as we
continue on our ‘good to great’ journey to deliver our unique
Intertek Customer Promise of Total Quality. Assured.

André Lacroix
Chief Executive Officer

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

INTERTEK EXECUTIVE
MANAGEMENT TEAM

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

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REPORT

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REPORT

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André Lacroix
Chief Executive Officer

See full bio on page 58

Edward Leigh
Chief Financial Officer

See full bio on page 58

Nimer Al-Hafi
Senior Vice President, Group ATIC
Operational Excellence, North-East
Asia and Australasia

Joined Intertek in 1995. Nimer is
responsible for the Group’s ATIC
operational excellence as well as
sustainability and health & safety
programmes, and has responsibility for
North-East Asia and Australasia. Prior to
this, he was responsible for the Group's
Global Customer Service agenda and
President of Intertek’s US Products group
covering testing, inspection, certification,
consulting and quality assurance services,
having started with the Company as an
Engineer in 1995.

Ann-Michele Bowlin
Chief Information Officer

Joined Intertek in 2009. Ann-Michele
is Chief Information Officer and joined
Intertek from Ernst & Young consulting
where she led shared services
transformation programmes. Prior
to Ernst & Young, Ann-Michele held
leadership and operations roles in
technology companies, including
Hotels.com, and in the manufacturing
and services sectors.

Ian Galloway
Executive Vice President, Middle-
East, Africa and Global Trade

Joined Intertek in 2011. Ian is responsible
for the Middle-East, Africa and Global
Trade comprising our business lines of
Government & Trade Services, Cargo &
Analytical Assessment and Agricultural
Services. Prior to assuming his current
role Ian held senior finance and business
roles within Intertek. He has previously
held international roles in finance
management with BG Group in the UK,
Egypt and Tunisia. Ian is a qualified
Chartered Accountant.

Tony George
Executive Vice President,
Human Resources

Rajesh Saigal
Executive Vice President,
South & South East Asia

Joined Intertek in 2015. Tony is
responsible for Human Resources. He has
over 28 years’ experience in HR, General
Management and Business Development
having held senior leadership positions
in international FMCG, chemicals,
telecommunications and retail companies
including Vodafone plc, Starbucks, Diageo
plc and ICI. Prior to joining Intertek, he was
Group HR & Business Development
Director at Inchcape plc.

Joined Intertek in 2007. Rajesh has
responsibility for South & South East Asia.
Prior to this he was Regional Managing
Director for Intertek’s South Asia
operations. He has over 27 years’ general
management and operational experience
with Fortune 500 companies covering
consumer durables, industrial products
and engineering. Before joining Intertek,
Rajesh was CEO South Asia for GEWISS
and General Manager at Honeywell.

Ken Lee
Executive Vice President,
Marketing and Communications

Julia Thomas
Senior Vice President,
Corporate Development

Joined Intertek in 2016. Ken has
responsibility for Intertek’s marketing
as well as internal and external
communications. He joined the company
from Inchcape plc where he spent 13
years in various senior marketing roles,
most recently as Chief Marketing and
Communications Officer. Prior to this he
held marketing leadership positions with
RAC Motoring Services and Hyundai
Car (UK) Ltd.

Jan-Jörg Müller-Seiler
Executive Vice President,
Global Resources

Joined Intertek in 2008. Jan-Jörg has
responsibility for Global Resources
comprising our business lines of Industry
Services and Minerals. Prior to assuming
his current role, Jan-Jörg was President of
Industry Services and Country Managing
Director for Germany, Switzerland and
Austria. Before joining Intertek, he worked
for TÜV SÜD Industrie Service GmbH, as a
member of the Board, with responsibility
for their plant engineering and foreign
business sectors.

Graham Ritchie
Executive Vice President, Europe

Joined Intertek in 2014. Graham is
responsible for Intertek’s operations in
Europe, including Russia, and Central Asia.
Prior to assuming his current role, Graham
was Intertek’s Group Financial Controller.
Before joining the Company he held senior
financial positions at BT Group plc and other
technology services organisations, having
started his career with PwC.

Joined Intertek in 2013. As SVP Corporate
Development, Julia has responsibility
for Intertek’s acquisition and disposal
activities. Before joining Intertek,
Julia spent 12 years in investment
banking with J.P. Morgan Cazenove
and Rothschild, focusing primarily
on mergers and acquisitions.

Mark Thomas
Group General Counsel

Joined Intertek in 2015. Mark has
responsibility for Intertek’s legal, risk and
compliance functions. He joined Intertek
from Inchcape plc where he was Group
General Counsel. Prior to this, Mark was in
private practice with Slaughter and May in
London, advising on a wide range of public
and private M&A transactions, equity and
debt financing, and general corporate
law issues.

Gregg Tiemann
Executive Vice President, Americas

Joined Intertek in 1993. Gregg has
responsibility for the Americas. Prior
to assuming his current role, Gregg was
responsible for the Americas, North Asia
and Australasia as well as the former
Consumer Goods and Commercial &
Electrical divisions, having started as
General Manager of the Los Angeles
laboratory in 1993. Before joining Intertek,
Gregg worked in sales and marketing
for the software industry.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

PRODUCTS

Excellent revenue performance with
double-digit growth benefiting from
robust organic revenue growth and the
contribution from recent acquisitions.

BUSINESS LINES

SERVICES & CUSTOMERS

SOFTLINES

HARDLINES

ELECTRICAL

NETWORK ASSURANCE

BUSINESS ASSURANCE

BUILDING & CONSTRUCTION

TRANSPORTATION TECHNOLOGIES

FOOD

CHEMICALS & PHARMA

HEALTH, ENVIRONMENTAL
& REGULATORY SERVICES

PRODUCT ASSURANCE

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INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016
INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

Our Products-related businesses consist of business lines
that are focused on ensuring the quality and safety of
physical components and products, as well as minimising
risk through assessing the operating processes and quality
management systems of our customers.

As a trusted partner to the world’s leading retailers,
manufacturers and distributors, our Products business
lines support a wide range of industries including textiles,
footwear, toys, hardlines, home appliances, consumer
electronics, information and communication technology,
automotive, aerospace, lighting, building products,
industrial and renewable energy products, food and
hospitality, healthcare and beauty, and pharmaceuticals.

Across these industries we provide a wide range of
ATIC services including, laboratory safety, quality and
performance testing, second-party supplier auditing,
sustainability analysis, product assurance, vendor
compliance, process performance analysis, facility
plant & equipment verification and 3rd party certification.

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

STRATEGY

Our Total Quality Assurance proposition provides a systemic
approach to support the Quality Assurance efforts of our
Products-related customers in each of the areas of their
operations. To do this we leverage our global network of
accredited facilities and world leading technical experts to help
our clients meet high-quality safety, regulatory and brand
standards, develop new products, materials and technologies and
ultimately assist them in getting their products to market quicker,
in order to continually meet evolving consumer demands.

REVENUE

ADJUSTED OPERATING
PROFIT

£1,465.5m

£297.7m

INTERTEK INNOVATIONS

INTERTEK SUPPORTS
MORE EFFICIENT NASAL
DRUG DEVELOPMENT

Intertek launched an innovative technology
offering that provides clients with a new tool
in the development of Orally Inhaled and Nasal
Drug Products, in particular for generic nasal
suspensions, providing generics developers
with a more efficient route to market.

This new technology uses Morphologically-
Directed Raman Spectroscopy ('MDRS'), allowing
direct measurement of Active Pharmaceutical
Ingredient ('API') particle size in the nasal
suspension. This was previously difficult to
achieve without the Raman function as excipient
particles are often a similar size and shape to the
API particles. MDRS allows Raman spectra to be
produced for selected particles, with this additional
chemical information providing robust identification
of both drug and excipient.

Meeting regulatory requirements through cost-
effective and efficient approaches, such as the
inclusion of MDRS data, is of huge interest to
generics developers and should support the
development and approval of more generic
nasal products in the future.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016
INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

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PRODUCTS
continued

Excellent revenue
growth benefiting
from robust organic
revenue growth and
the contribution from
recent acquisitions.

INNOVATION
We continue to invest in innovation within
our Products-related businesses to meet
the evolving needs of our clients:

Our Business Assurance division
has developed a proprietary supplier
management platform known as GSM.
GSM maximises supply chain visibility for
both buyers and suppliers through supply
chain management, evaluation and
improvement. One of our major clients has
asked us to help them mitigate the risks
of their entire global supplier base by
designing an end-to-end Supplier
Qualification Operating System to track
the compliance of these suppliers based
on their code of conduct in the areas of
human rights and labour practices, worker
health and safety, environmental
management and business integrity.

Our Transportation Technologies
business became one of the first facilities
in Europe to be accredited to perform
power certification testing on electric
motors, following a significant investment
we made in our electric vehicle testing
capabilities in the UK. Recognising the
changing landscape of traditional gasoline
and diesel engines, our business
responded swiftly to the evolving needs
of our clients and can now provide both
testing and certification services in the
same location, providing a more efficient
solution for our customers.

FINANCIAL HIGHLIGHTS 2016

2016 PERFORMANCE
Our Products-related businesses delivered
an excellent revenue performance with
double-digit growth rates.

We benefited from a robust organic
revenue growth performance that
delivered organic margin accretion and
the contribution from recent acquisitions
was strong.

Our Softlines business delivered a robust
organic growth performance across our
markets. We continue to benefit from
strong demand from our customers for
chemical testing. We are also leveraging
the investments we have made to support
the expansion of our customers in new
markets and to seize the exciting growth
opportunities in the footwear sector.

Our Hardlines and Toy business
continues to take advantage of our
strong global account relationships, the
expansion of our customers’ supply chain
into new markets and our innovative
technology for factory inspections.
We delivered a robust organic growth
performance across our main markets
of China, Hong Kong, India and Vietnam.

Our Transportation Technologies
business delivered strong organic growth
across our main markets in the USA, UK,
Germany and China. We continue to
capitalise on our clients’ investments in
new powertrains as they strive to adopt
more stringent emissions and fuel
economy standards.

Our Business Assurance business
delivered double-digit organic growth
in our three regions of North America,
Europe and Asia. We continue to benefit
from the increased focus of corporations
on risk management resulting in strong
growth in Supply Chain Audits.

We delivered solid organic growth
in Electrical & Wireless driven by
higher regulatory standards in energy
efficiency and by the increased demand
for wireless devices.

We continue to benefit from the increased
focus of corporations on food safety and
delivered good organic growth in our
Food business.

We saw a solid organic growth in
our Chemicals & Pharma business
as we continue to leverage the structural
growth opportunities in the healthcare
markets in both developed and
emerging economies.

Our Building & Construction
business delivered a robust organic
growth performance driven by the
growing demand for greener and higher
quality buildings and infrastructure in
the US Market. PSI benefited from a good
revenue momentum and delivered the
expected synergies in year one.

2017 OUTLOOK
We expect our Products division to
benefit from good organic growth
at constant currency.

MID- TO LONG-TERM OUTLOOK
Our Products division will benefit from
mid- to long-term structural growth
drivers including product variety, brand
and supply chain expansion, product
innovation and regulation, and on the
increasing quality and sustainability
demand of developed and emerging
economies, the acceleration of
e-commerce as a sales channel, and
the increased corporate focus on risk.

Revenue

Organic revenue

Adjusted operating profit

Adjusted operating margin

2016
£m

2015
£m

Change at
actual
rates

Change at
constant
rates

1,465.5

1,110.6

1,260.7

1,086.6

297.7

20.3%

233.8

21.1%

32.0%

16.0%

27.3%

19.9%

5.5%

16.5%

(80)bps

(60)bps

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

INTERTEK INNOVATIONS

INTERTEK INTRODUCES
REMOTE VIBRATION
MONITORING

Our Building & Construction business has
implemented an innovative remote vibration
monitoring solution for clients in New York City.
Using specialist sensory equipment, vibration levels
caused by construction activity are recorded and
documented during the course of the working day.

Our experts apply data analysis techniques to
interpret the stresses being placed on the building,
and if an event occurs that exceeds a certain
trigger level, an email or text message alert is
automatically sent to the client allowing them to
mitigate their level of current activity.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

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DIRECTORS’
REPORT

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STATEMENTS

OTHER
INFORMATION

TRADE

Our Trade-related businesses
delivered solid organic growth.

BUSINESS LINES

STRATEGY

CARGO & ANALYTICAL ASSESSMENT

GOVERNMENT & TRADE SERVICES

AGRIWORLD

SUSTAINABILITY

SERVICES & CUSTOMERS

Our Trade division consists of business lines with differing
services and customers, but with similar mid- to long-term
structural growth drivers:

– Our Cargo & Analytical Assessment ('Cargo/AA')

business provides cargo inspection, analytical assessment,
calibration and related research and technical services
to the world’s petroleum and biofuels industries.

– Our Government & Trade Services ('GTS')

business provides inspection services to governments
and regulatory bodies to support trade activities that
help the flow of goods across borders, predominantly
in the Middle East, Africa and South America.
– Our Agriculture business provides analytical

and testing services to global agricultural trading
companies and growers.

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INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016
INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

Our Total Quality Assurance proposition assists our
Trade- related customers in protecting the value and
quality of their products during their custody-transfer,
storage and transportation, globally, 24/7. Our expertise,
service innovations and advanced analytical capabilities
allow us to optimise the return on our customers’ cargoes
and help them resolve difficult technical challenges. Our
independent product assessments provide peace-of-mind
to our government clients that the quality of products
imported into the country meet their standards and
import processes.

REVENUE

ADJUSTED OPERATING
PROFIT

£584.5m

£81.8m

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

INNOVATION
Providing innovative solutions is a key
point of differentiation for our Trade-
related businesses:

2016 PERFORMANCE
Our Trade-related businesses delivered
solid organic growth overall with moderate
margin progression at constant currency.

Our Cargo/AA business reported solid
organic growth performance benefiting
from the structural growth drivers in the
Crude Oil and Refined Product global
trading market. As expected we saw
a normalisation of the supply situation
following the build-up of the high level
of inventory we saw in 2015.

The demand for GTS continued to weaken
following the slowdown seen in the
second half of 2015 and was below last
year. The volume of regional trade in the
Middle/East and Africa has reduced given
the economic challenges and uncertainties
in these regions.

Our Agriculture business continues to
benefit from the expansion of the supply
chain of our clients in markets such as
Brazil and Turkey, and delivered a robust
organic growth performance.

2017 OUTLOOK
We expect our Trade-related businesses to
deliver solid organic growth performance
at constant currency.

MID- TO LONG-TERM OUTLOOK
Our Trade division will continue to benefit
from regional and global trade-flow
growth, as well as the increased customer
focus on quality, quantity controls and
supply chain risk management.

Our Agriculture business has recently
developed the Soil Manager App to
Support Local Farmers in Africa. Africa
is home to more than 10 million farmers
with 50% owning a mobile device. The app
allows 24/7 access to a range of services
which can assist with enriching soil fertility
and increase yields whilst minimising input
costs. It is available free of charge from
online app stores, and is an innovative way
for local farmers to connect with qualified
specialists, fertiliser merchants, and even
allowing for direct investments by
sponsors. After submitting test samples,
the results are directly available along with
fertiliser recommendations on the app.
In addition, farmers can connect with a
qualified agronomist to discuss the results,
a service that is often beyond the reach of
small scale farmers in Africa.

In our GTS business, we have developed
a proprietary Workflow ERP system known
as Astra. Following client feedback, we
developed our existing platform to
integrate through EDI into our clients’
logistics operations, in order to provide
them with real time updates on the
process of certification approvals. This
enabled our client to reduce the logistics
cycle by knowing at every stage where
we were up to in the certification process.
This ultimately led to faster product
delivery, a reduction in stock, a shorter
sales cycle, and an improved competitive
position in the market. This was a great
example of our GTS business developing
a bespoke assurance solution to optimise
supply chain processes for their clients.

INTERTEK INNOVATIONS

INTERTEK TAKES
#1 POSITION IN
MEXICO'S FAST
GROWING
ENVIRONMENTAL
MARKET

During 2016, Intertek expanded its
Analytical Assessment offering by
entering into an agreement with the
shareholders of ABC Analitic to form
an environmental services Joint
Venture in Mexico.

ABC Analitic has been a leading
provider of water testing services in
Mexico since 1970, being one of the
pioneering companies to offer
wastewater analysis when the first
regulations for the prevention and
control of water pollution came into
effect. Since then, ABC Analitic has
continued as a market leader in the
provision of its water testing and
analytical services in the key areas
of wastewater, natural and drinking
water analysis.

ABC Analitic is highly complementary
to Intertek's existing environmental
testing business in Mexico, which has
a particular strength in soil testing
and analysis. By bringing the two
businesses together, Intertek will
increase its offering of sustainability
services by become the market leader
in the provision of assurance, testing,
inspection and certification services
to Government environmental
projects, regulators and corporations.

FINANCIAL HIGHLIGHTS 2016

Revenue

Organic revenue

Adjusted operating profit

2016
£m

584.5

582.7

81.8

2015
£m

536.6

536.4

75.7

Change at
actual
rates

Change at
constant
rates

8.9%

8.6%

8.1%

1.6%

1.3%

2.2%

Adjusted operating margin

14.0%

14.1%

(10)bps

10bps

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

RESOURCES

Our Resources-related businesses
faced challenging trading
conditions in 2016.

BUSINESS LINES

INDUSTRY SERVICES

MINERALS

SERVICES & CUSTOMERS

Our Resources division consists of two business lines with
differing services and customers:

– Our Industry Services business uses in-depth

knowledge of the oil, gas, nuclear and power industries
to provide a diverse range of Total Quality Assurance
solutions to optimise the use of customers’ assets
and minimise the risk in their supply chains. Some
of our key services include technical inspection, asset
integrity management, analytical testing and ongoing
training services.

– Our Minerals business provides a broad range of ATIC

service solutions to the mining and minerals exploration
industries, covering the resource supply chain.

30
30

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016
INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

STRATEGY

Our Total Quality Assurance proposition allows us to help
customers gain peace of mind that their exploration projects
will proceed on time with the expected quality standards
and their assets will continue to operate with a lower risk
of technical failure. Our broad range of services allows us
to assist clients in protecting the quantity and quality of
their mined and drilled products, improve safety and
reduce commercial risk in the trading environment.

REVENUE

ADJUSTED OPERATING
PROFIT

£517.0m

£30.2m

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

INNOVATION
During 2016, our Industry Services team
has developed a unique tool, known as
InterPret. InterPret is a suite of software
tools that have been developed in order to
support our client’s needs for the provision
of faster real time information in production
environments. There are three processes
available to our clients within the suite of
InterPret solutions:

• InBlend uses infrared spectra

to predict hydrocarbon composition,
significantly speeding up the laboratory
process allowing customers to assess
every delivery and sample for all known
properties. This helps them maximise
margins and reduce process delays.

• InProcess uses smart data analytics to
analyse large datasets and mitigate
future problems such as shutdowns and
asset failure. For example the analysis
has been used to identify major pump
seal failure and to optimise the
production of diesel at a refinery.

• InFlow can be used to assess

the stability of blended hydrocarbons.
Understanding the interactions in
hydrocarbon blends reduces tank
cleaning and maintenance costs,
promotes efficiency, and reduces
the risk of shutdowns.

2016 PERFORMANCE
Our Resources-related businesses saw
an organic revenue decline of 13.0%
and a slight margin erosion.

The revenue from Capex Inspection
Services was lower than last year driven
by a lower volume of investments and in
exploration activities by our clients and
from price pressure in the industry.

The demand for Opex Maintenance
Services remained stable overall and we
are benefiting from the investments made
in NDT services.

Given the challenging trading conditions
in our Industry Services operations we
continue to be very focused on cost and
capacity management in our Capex
Inspection business.

Continuing the trend seen in the second
half of 2015, we saw a stable level of
demand for testing activities in the
Minerals business.

2017 OUTLOOK
We do not believe that we have reached
the trough in the Resources division and
we expect the trading conditions to
remain challenging.

MID- TO LONG-TERM OUTLOOK
Our Resources division will grow in
the medium to long term as we benefit
from investments in the exploration and
production of oil and minerals to meet the
demand of the growing population around
the world.

INTERTEK INNOVATIONS

INTELLIGENT
PIPELINE
INSPECTION
SERVICES

Intertek’s China-based Intelligent
Pipeline Inspection Services utilise
tools known as "intelligent pigs" to
assess the integrity of assets in a
quick and non-intrusive manner.

Smart pigs are intelligent pipeline
inline inspection tools that examine
the structural integrity of pipeline
systems. An intelligent pig is a
cylindrical device that is placed inside
a pipeline to gather information on
the quality of pipe. As the tool travels
through the pipeline, technicians are
able to track the location of the pig
using GPS and are able to catalogue
important data on the condition of
the pipe.

The results of the intelligent pig’s
findings help determine anomalies
and target areas that likely need to
undergo further examination, repair
or replacement.

FINANCIAL HIGHLIGHTS 2016

Revenue

Organic revenue

Adjusted operating profit

Adjusted operating margin

2016
£m

517.0

478.5

30.2

5.8%

2015
£m

519.1

508.7

33.9

6.5%

Change at
actual
rates

Change at
constant
rates

(0.4)%

(5.9)%

(10.9)%

(70)bps

(8.0)%

(13.0)%

(15.2)%

(50)bps

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

KPIS – MEASURING OUR STRATEGY

Disciplined performance management focused on margin-accretive
revenue growth with strong cash conversion and accretive
capital allocation.

FINANCIAL

The Group uses a variety of key
performance indicators (‘KPIs’) to monitor
performance and measure the financial
impact of the Group’s strategy. Where
applicable, KPIs are based on Adjusted
measures in order to normalise
performance. An explanation and
reconciliation of Reported to Adjusted
performance measures is given on page
42. Non-financial KPIs are shown in the
Sustainability and CSR report on pages
45 to 51.

REVENUE#
(£m)

Revenue growth measures how well the
Group is expanding its business, and
includes currency impacts.

ORGANIC REVENUE AT CONSTANT
EXCHANGE RATES3 (£m)

Revenue growth, excluding currency
movements, acquisitions and disposals.

+18.5%

2,093

2,166

2,567

+0.1%

2,320

2,322

2014

2015

2016

2015

2016

ADJUSTED OPERATING PROFIT#,1
(£m)

ADJUSTED OPERATING MARGIN1
(%)

Measures profitability of the Group
and includes currency impacts.

Margin measures profitability as
a proportion of revenue.

+19.3%

324

343

410

+10bps

15.5%

15.9%

16.0%

2014

2015

2016

2014

2015

2016

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

#. Revenue, Adjusted Operating Profit and Return

on Invested Capital (‘ROIC‘) are re-calculated using
2015 exchange rates to form the basis for
Executive Director remuneration, as described
in more detail on pages 73 to 74.

1. Adjusted operating profit, adjusted operating

margin, adjusted cash flow from operations and
adjusted diluted earnings per share are stated
before Separately Disclosed Items, which are
described on page 42.

2. Dividend per share is based on the interim dividend
of 19.4p (2015: 17.0p) plus the proposed final
dividend of 43.0p (2015: 35.3p).

3. Growth at constant exchange rates compares
both 2016 and 2015 at the average exchange
rates for 2016 , in order to remove the impact
of currency translation from the Group’s growth
figures. Organic measures at constant exchange
rates are used in order to present the Group’s
results excluding the effects of the change in the
scope of consolidation (acquisitions and disposals
over the past two years) and the impact of
currency translation.

4. 2015 ROIC has been prepared using average 2016
exchange rates for Adjusted operating profit and
tax, and year end 2016 exchange rates for
invested capital.

ADJUSTED CASH FLOW FROM
OPERATIONS1 (£m)

Shows the ability of the Group
to turn profit into cash.

ADJUSTED DILUTED EARNINGS
PER SHARE1 (pence)

A key measure of value creation for
the Board and for shareholders.

+21.4%

404

466

565

+19.2%

132.1

140.7

167.7

2014

2015

2016

2014

2015

2016

DIVIDEND PER SHARE2
(pence)

RETURN ON INVESTED CAPITAL AT
CONSTANT EXCHANGE RATES#,4 (%)

Dividend per share measures returns
provided to shareholders.

Measures how effectively the Group
generates profit from its invested capital.

+19.3%

49.1

52.3

62.4

+170 bps

20.0

21.7

2014

2015

2016

2015

2016

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

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
Group’s strategy,
performance, results,
financial condition
and reputation.

RISK FRAMEWORK
The Board has overall responsibility for
the establishment and oversight of the
Group’s risk management framework. This
work is complemented by the Group Risk
Committee, whose purpose is to manage,
assess and promote the continuous
improvement of the Group's risk
management, controls and assurance
systems. This risk governance framework
is described in more detail in the Directors’
Report on pages 62 to 64 and 81 to 85.

The Head of Internal Audit and the Group
General Counsel, who report to the Chief
Financial Officer and Chief Executive
Officer respectively, have accountability
for reporting the key risks that the Group
faces, the controls and assurance
processes in place and any mitigating
actions or controls. Both roles report to
the Audit Committee, attend its meetings
and meet with individual members each
year as required.

Risks are formally identified and recorded in
a risk register for the significant countries
and for each business line and support
function. The risk register is updated at
least twice each year and is used to plan
the Group’s internal audit and risk strategy.

In addition to the risk register, 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 Sales, Operations, IT,
Finance and People.

OPERATIONAL
PRINCIPAL RISK

CONTEXT

POSSIBLE IMPACT

MITIGATION

2016 UPDATE

REPUTATION

Reputation is key to the Group maintaining and
growing its business. Reputation risk can occur in a
number of ways: directly as the result of the actions
of the Group or a group company itself; indirectly
due to the actions of an employee or employees;
or through the actions of other parties, such as
joint venture partners, suppliers, customers or
other industry participants.

• Failure to meet financial performance expectations.
• Exposure to material legal claims, associated costs

and wasted management time.
• Destruction of shareholder value.
• Loss of existing or new business.
• Loss of key staff.

CUSTOMER
SERVICE

A failure to focus on customer needs, to provide
customer innovation or to deliver our services in
accordance with our customers’ expectations and
our customer promise.

• May lead to customer dissatisfaction and

customer loss.

• Gradual erosion of market share and reputation
if competitors are perceived to have better, more
responsive or more consistent service offerings.

• Quality Management Systems; adherence to these is regularly audited

• This risk remains stable compared with 2015.

and reviewed by external parties, including accreditation bodies.

• The Group continues to invest in staff

• Risk Management Framework and associated controls and assurance

development, quality systems and standard

processes, including contractual review and liability caps where appropriate.

processes to prevent operational failures.

• Code of Ethics which is communicated to all staff, who undergo

regular training.

• Zero-tolerance policy with regard to any inappropriate behaviour by any

individual employed by the Group, or acting on the Group’s behalf.

• Whistle-blowing programme, monitored by the Audit Committee, where

staff are encouraged to report, without risk, any fraudulent or other activity

likely to adversely affect the reputation of the Group.

• Relationship management and communication with external stakeholders.

and turnaround time tracking.

• Global and Local Key Account Management ('GKAM'/'LKAM') initiatives

in place.

• Customer feedback meetings.

• Customer claims/complaints reporting.

• Net Promoter Score ('NPS') customer satisfaction, customer sales trends

• This risk remains stable compared with 2015.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

PRINCIPAL RISKS
The Group is affected by a number
of risk factors, some of which, including
macroeconomic and industry specific
cyclical risks, are outside the Group’s
control. Some risks are particular to
Intertek’s operations. The principal risks
of which the Group is aware are detailed
on the following pages including a
commentary on how the Group mitigates
these risks. These risks and uncertainties
do not appear in any particular order
of potential materiality or probability
of occurrence.

There may be other risks that are currently
unknown or 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, capital resources and
its reputation.

LONG-TERM VIABILITY STATEMENT
In accordance with provision C.2.2 of
the UK Corporate Governance Code,
the Directors have assessed the viability
of the Group over a five-year period to
31 December 2021, by carrying out a
robust assessment of the potential
impact of the principal risks and
uncertainties on the Group's current
position, including those that would
threaten the Group’s business model,
future performance, solvency
or liquidity.

The Directors have determined that a
five-year period is an appropriate period
over which to provide the viability
statement of the Group, as the Group’s
strategic review covers a five-year period.

In addition to the bottom-up strategic
review process where the prospects
of each business line are reviewed, a
robust assessment has been made of
the potential operational and financial
impacts on the Group of combinations

of principal risks and uncertainties (as set
out in the following pages) in a number
of severe, but plausible, scenarios, as
well as the effectiveness of any
mitigating actions.

The Group has a broad customer base
across its multiple business lines and in
its different geographic regions, and is
supported by a robust Balance Sheet and
strong operational cash flows. The Board
considers that the diverse nature of
business lines and geographies in which
the Group operates significantly mitigates
the impact that any of these scenarios
might have on the Group’s viability.

Based on this assessment, the Directors
confirm that they have a reasonable
expectation that the Company will be
able to continue in operation and meet its
liabilities as they fall due over the period
to 31 December 2021.

OPERATIONAL

PRINCIPAL RISK

CONTEXT

REPUTATION

Reputation is key to the Group maintaining and

• Failure to meet financial performance expectations.

growing its business. Reputation risk can occur in a

• Exposure to material legal claims, associated costs

number of ways: directly as the result of the actions

and wasted management time.

of the Group or a group company itself; indirectly

due to the actions of an employee or employees;

• Destruction of shareholder value.

• Loss of existing or new business.

or through the actions of other parties, such as

• Loss of key staff.

joint venture partners, suppliers, customers or

other industry participants.

POSSIBLE IMPACT

MITIGATION

2016 UPDATE

• Quality Management Systems; adherence to these is regularly audited

and reviewed by external parties, including accreditation bodies.

• Risk Management Framework and associated controls and assurance

processes, including contractual review and liability caps where appropriate.

• Code of Ethics which is communicated to all staff, who undergo

• This risk remains stable compared with 2015.
• The Group continues to invest in staff

development, quality systems and standard
processes to prevent operational failures.

regular training.

• Zero-tolerance policy with regard to any inappropriate behaviour by any

individual employed by the Group, or acting on the Group’s behalf.

• Whistle-blowing programme, monitored by the Audit Committee, where

staff are encouraged to report, without risk, any fraudulent or other activity
likely to adversely affect the reputation of the Group.

• Relationship management and communication with external stakeholders.

CUSTOMER

SERVICE

A failure to focus on customer needs, to provide

• May lead to customer dissatisfaction and

• Net Promoter Score ('NPS') customer satisfaction, customer sales trends

• This risk remains stable compared with 2015.

customer innovation or to deliver our services in

customer loss.

and turnaround time tracking.

accordance with our customers’ expectations and

• Gradual erosion of market share and reputation

• Global and Local Key Account Management ('GKAM'/'LKAM') initiatives

our customer promise.

if competitors are perceived to have better, more

responsive or more consistent service offerings.

in place.

• Customer feedback meetings.
• Customer claims/complaints reporting.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

PRINCIPAL RISKS AND UNCERTAINTIES
continued

OPERATIONAL
PRINCIPAL RISK

CONTEXT

PEOPLE
RETENTION

The Group operates in specialised sectors and
needs to attract and retain employees with
relevant experience and knowledge in order
to take advantage of all growth opportunities.

OPERATIONAL
HEALTH, SAFETY
AND SECURITY

Any health and safety incident arising from our
activities. This could result in injury to Intertek’s
employees, sub-contractors, customers and/or any
other stakeholders affected.

FACILITIES

INDUSTRY AND
COMPETITIVE
LANDSCAPE

Environment – an adverse impact on the environment
due to inadequate sample storage/disposal, and/or
inappropriate use of materials dangerous to the
environment.

Lease Renewals – a failure to secure the renewal
of a critical lease, or having to agree unfavourable
renewal terms.

Security – loss of a critical site due to natural
disaster/catastrophe, with alternative sites
unavailable/unfeasible.

Restructuring – an adverse impact on operations
caused by restructuring or moving multiple
facilities or locations.

A failure to identify, manage and take advantage
of emerging and future risks. Examples include
the opportunities provided by new markets and
customers, a failure to innovate in terms of service
offering and delivery, the challenge of radically new
and different business models, and the failure to
foresee the impact of, or adequately respond to and
comply with, changing or new laws and regulations.
Macroeconomic factors such as a global/market
downturn and contraction/changing requirements
in certain sectors.

POSSIBLE IMPACT

• Poor management succession.
• Lack of continuity.
• Failure to optimise growth.
• Impact on quality, reputation and

customer confidence.

• Loss of talent to competitors and lost market share.

• Individual or multiple injuries to employees

and others.

• Litigation or legal/regulatory enforcement
action (including prosecution) leading to
reputational damage.
• Loss of accreditation.
• Erosion of customer confidence.

• Environment – environmental damage, potential

litigation and fines, impact on reputation.

• Lease Renewals – loss of key sites, financial impact
in terms of relocation costs, or increased premiums
on renewed leases.

• Security – possible injury or fatality to our people

and general public, inability to deliver key services,
impact on revenue and reputation.

• Restructuring – loss of financial or other internal
controls, loss of revenues, adverse customer
relationship or delivery impacts.

• Failure to maximise revenue opportunities.
• Failure to take advantage of new opportunities.
• Lack of ability to respond flexibly.
• Erosion of market share.
• Impact on share price.
• Failure to respond to macroeconomic factors.
• Sanctions and fines for non-compliance

with new laws, etc.

MITIGATION

2016 UPDATE

• HR strategy policies and systems.

• This risk remains stable compared with 2015.

• Development and reward programme to retain and motivate employees.

• New Remuneration Policy consistent

• Succession planning to ensure effective continuation of leadership

throughout the Group.

and expertise.

• Quality management and associated controls, including safety training,

• This risk remains stable compared with 2015.

appropriate PPE (Personal Protective Equipment), Health & Safety policies

• There were zero work-related fatalities in the

(including due diligence on sub-contractors), meetings and communication.

year for the second year running.

• Avoiding fatalities, accidents and hazardous situations is paramount.

It is expected that Intertek employees will operate to the highest

standards of health and safety at all times and there are controls

in place to reduce incidents.

• Business Continuity Plans (‘BCPs’) and Disaster Recovery Plans (‘DRPs’)

• This risk remains stable compared with 2015.

in place.

• Health & Safety policies, Environmental policy and Sample Storage

policy implemented.

• Regular review of contracts/leases.

• There has been no downtime in operational

activity, except for where tests of BCPs or

DRPs have been conducted.

• GKAM and LKAM initiatives in place.

• Diversification of customer base.

• Focus on new services and acquisitions.

• Tracking new laws and regulations.

• Regular strategic and business line reviews.

• Development of ATIC cross-selling initiatives.

• This risk remains stable compared with 2015.

• The Group’s results have been impacted by the

lower levels of capital expenditure in the energy

sector, driven by lower oil prices, but more than

offset by the diverse nature of the Group and

its ability to grow revenue and manage the

• NPS customer research to understand customer satisfaction.

cost base.

IT SYSTEMS

Systems integrity – Major IT systems integrity issue, or
data security breach, either due to internal or external
factors such as deliberate interference or power
shortages/cuts etc.

• Loss of revenue due to down time.
• Potential loss of sensitive data with associated

legal implications.

• Potential costs of IT systems replacement

Systems functionality – a failure to define the right IT
strategies, maintain existing IT systems or implement
new IT systems with the required functionality and
which are fit for purpose, in each case to support
the Group’s growth, innovation and competitive
customer offering.

and repair.

• Loss of customer confidence.
• Damage to reputation.
• Loss of revenue/profitability if we fail to adopt an

IT investment strategy which supports the Group’s
growth, innovation and customer offering.

• Information systems policy and governance structure.

• Regular system maintenance.

• Backup systems in place.

• Disaster recovery plans that are constantly tested and

improved to minimise the impact if a failure does occur.

• Global Information Security policies in place

(IT, Data Protection, Cyber Security).

• Adherence to IT finance systems controls

(part of Core Mandatory Controls ('CMCs')).

• Adherence to IT general controls and IT finance systems controls.

• Internal and external audit testing.

• This risk remains stable compared with 2015.

• Review of data security performed including

data storage, retention policy, access controls

and encryption.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

OPERATIONAL

PRINCIPAL RISK

CONTEXT

PEOPLE

RETENTION

The Group operates in specialised sectors and

• Poor management succession.

needs to attract and retain employees with

relevant experience and knowledge in order

• Lack of continuity.

• Failure to optimise growth.

to take advantage of all growth opportunities.

• Impact on quality, reputation and

• HR strategy policies and systems.
• Development and reward programme to retain and motivate employees.
• Succession planning to ensure effective continuation of leadership

• This risk remains stable compared with 2015.
• New Remuneration Policy consistent

throughout the Group.

and expertise.

POSSIBLE IMPACT

MITIGATION

2016 UPDATE

OPERATIONAL

Any health and safety incident arising from our

• Individual or multiple injuries to employees

HEALTH, SAFETY

activities. This could result in injury to Intertek’s

and others.

AND SECURITY

employees, sub-contractors, customers and/or any

• Litigation or legal/regulatory enforcement

other stakeholders affected.

action (including prosecution) leading to

customer confidence.

• Loss of talent to competitors and lost market share.

reputational damage.

• Loss of accreditation.

• Erosion of customer confidence.

• Avoiding fatalities, accidents and hazardous situations is paramount.
It is expected that Intertek employees will operate to the highest
standards of health and safety at all times and there are controls
in place to reduce incidents.

• Quality management and associated controls, including safety training,

appropriate PPE (Personal Protective Equipment), Health & Safety policies
(including due diligence on sub-contractors), meetings and communication.

• This risk remains stable compared with 2015.
• There were zero work-related fatalities in the

year for the second year running.

FACILITIES

Environment – an adverse impact on the environment

• Environment – environmental damage, potential

• Business Continuity Plans (‘BCPs’) and Disaster Recovery Plans (‘DRPs’)

due to inadequate sample storage/disposal, and/or

litigation and fines, impact on reputation.

in place.

inappropriate use of materials dangerous to the

• Lease Renewals – loss of key sites, financial impact

• Health & Safety policies, Environmental policy and Sample Storage

policy implemented.

• Regular review of contracts/leases.

• This risk remains stable compared with 2015.
• There has been no downtime in operational
activity, except for where tests of BCPs or
DRPs have been conducted.

• GKAM and LKAM initiatives in place.
• Diversification of customer base.
• Focus on new services and acquisitions.
• Tracking new laws and regulations.
• Regular strategic and business line reviews.
• Development of ATIC cross-selling initiatives.
• NPS customer research to understand customer satisfaction.

• This risk remains stable compared with 2015.
• The Group’s results have been impacted by the

lower levels of capital expenditure in the energy
sector, driven by lower oil prices, but more than
offset by the diverse nature of the Group and
its ability to grow revenue and manage the
cost base.

• Information systems policy and governance structure.
• Regular system maintenance.
• Backup systems in place.
• Disaster recovery plans that are constantly tested and
improved to minimise the impact if a failure does occur.

• Global Information Security policies in place

(IT, Data Protection, Cyber Security).

• Adherence to IT finance systems controls
(part of Core Mandatory Controls ('CMCs')).

• Adherence to IT general controls and IT finance systems controls.
• Internal and external audit testing.

• This risk remains stable compared with 2015.
• Review of data security performed including
data storage, retention policy, access controls
and encryption.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

environment.

Lease Renewals – a failure to secure the renewal

of a critical lease, or having to agree unfavourable

renewal terms.

Security – loss of a critical site due to natural

disaster/catastrophe, with alternative sites

unavailable/unfeasible.

Restructuring – an adverse impact on operations

caused by restructuring or moving multiple

facilities or locations.

in terms of relocation costs, or increased premiums

on renewed leases.

• Security – possible injury or fatality to our people

and general public, inability to deliver key services,

impact on revenue and reputation.

• Restructuring – loss of financial or other internal

controls, loss of revenues, adverse customer

relationship or delivery impacts.

INDUSTRY AND

A failure to identify, manage and take advantage

• Failure to maximise revenue opportunities.

COMPETITIVE

LANDSCAPE

of emerging and future risks. Examples include

• Failure to take advantage of new opportunities.

the opportunities provided by new markets and

• Lack of ability to respond flexibly.

customers, a failure to innovate in terms of service

• Erosion of market share.

offering and delivery, the challenge of radically new

• Impact on share price.

and different business models, and the failure to

• Failure to respond to macroeconomic factors.

foresee the impact of, or adequately respond to and

• Sanctions and fines for non-compliance

comply with, changing or new laws and regulations.

with new laws, etc.

Macroeconomic factors such as a global/market

downturn and contraction/changing requirements

in certain sectors.

IT SYSTEMS

Systems integrity – Major IT systems integrity issue, or

• Loss of revenue due to down time.

data security breach, either due to internal or external

• Potential loss of sensitive data with associated

factors such as deliberate interference or power

legal implications.

shortages/cuts etc.

• Potential costs of IT systems replacement

Systems functionality – a failure to define the right IT

strategies, maintain existing IT systems or implement

new IT systems with the required functionality and

which are fit for purpose, in each case to support

the Group’s growth, innovation and competitive

customer offering.

and repair.

• Loss of customer confidence.

• Damage to reputation.

• Loss of revenue/profitability if we fail to adopt an

IT investment strategy which supports the Group’s

growth, innovation and customer offering.

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

PRINCIPAL RISKS AND UNCERTAINTIES
continued

LEGAL AND REGULATORY
PRINCIPAL RISK

CONTEXT

LITIGATION

Claims resulting from mistakes in Intertek’s work
resulting in disputes with clients and/or other relevant
third parties.

POSSIBLE IMPACT

MITIGATION

2016 UPDATE

• Financial impact (fines by regulators,

suspension of accreditation, compensation).

• Financial impact from defending and settling claims.
• Impact of fines.
• Potential impact on insurance premiums.
• Loss of customer confidence.
• Damage to reputation.
• Impact on share price.

BUSINESS ETHICS Non-compliance with Intertek’s Code of Ethics ('Code')

• Litigation, including significant fines and debarment

• Annual Code of Ethics training and sign-off requirement.

• This risk remains stable compared with 2015.

and/or related laws such as anti-bribery, anti-money
laundering, and fair competition legislation. Non-
compliance could be either accidental or deliberate,
and committed either by our people or sub-contractors
who must also abide by the Code.

from certain territories/activities.

• Reputational damage.
• Loss of accreditation.
• Erosion of customer confidence.
• Impact on share price.

• Effective Quality Management Systems and assurance procedures and

• This risk remains stable compared with 2015.

controls, including contractual review and liability caps where appropriate.

• Compliance personnel have been utilised to

• Claims management policy and process in place.

• Contract review process (including risk review).

• Use of standard Intertek Terms & Conditions.

manage contract reviews and assist the wider

legal framework.

• Ongoing training and education in respect of

• All significant incidents that could potentially result in a claim against the

contractual liabilities being assumed.

Group are immediately reported to compliance officers and logged in an

incident database so that they can be properly managed. The Group

General Counsel reports any significant claims to the Audit Committee.

External legal counsel is appointed where appropriate.

• Insurance liaison – seeking contractual protection from loss or insurance

cover for loss where possible.

• Whistle-blowing programme, monitored by the Group Risk Committee,

• Ongoing annual confirmations ensure that staff

where staff are encouraged to report, without risk, any fraudulent or other

verify compliance with the Code of Ethics.

activity likely to adversely affect the reputation of the Group.

• Local compliance officers perform due diligence

• Zero-tolerance policy with regard to any inappropriate behaviour by any

on sub-contractors that they have signed the

individual employed by the Group, or acting on the Group’s behalf.

Group’s Code.

• The Group employs local people in each country who are aware of local legal

• During 2016, 287 (2015: 249) HR and non-

and regulatory requirements. There are also extensive internal compliance

compliance issues were reported through the

and audit systems to facilitate compliance. Expert advice is taken in areas

whistle-blowing hotline and other routes. All

where regulations are uncertain.

were investigated with 57 (2015: 51)

• The Group continues to dedicate resources to ensure compliance with the

substantiated and corrective action taken.

UK Bribery Act and all other anti-bribery legislation, and internal policy.

FINANCIAL
FINANCIAL RISK

Risk of theft, fraud or financial misstatement by
employees. On acquisitions or investments, the
financial risk or exposure arising from due diligence,
integration or performance delivery failures.

• Financial losses with a direct impact on the bottom

• The Group has financial, management and systems controls in place to

• This risk remains stable compared with 2015.

line.

• Large scale losses can affect financial results.
• Potential legal proceedings leading to costs and

management time.

• Corresponding loss of value and reputation could
result in funding being withdrawn or provided at
higher interest rates.

• Possible adverse publicity.

ensure that the Group’s assets are protected from major financial risks.

• 'Doing Business the Right Way’ established

• Adherence to Authorities Cascade (which sets approval limits for

as core principle within Intertek.

financial transactions).

• Review and update of core mandatory controls

• Legal, financial and other due diligence on M&A and other investments.

for year-end compliance certification.

• A detailed system of financial reporting is in place to ensure that monthly

financial results are thoroughly reviewed. The Group also operates a

rigorous programme of internal audits and management reviews.

Independent external auditors review the Group’s half year results

and audit the Group’s annual financial statements.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

LEGAL AND REGULATORY

PRINCIPAL RISK

CONTEXT

LITIGATION

Claims resulting from mistakes in Intertek’s work

• Financial impact (fines by regulators,

resulting in disputes with clients and/or other relevant

suspension of accreditation, compensation).

third parties.

• Financial impact from defending and settling claims.

• Impact of fines.

• Potential impact on insurance premiums.

• Loss of customer confidence.

• Damage to reputation.

• Impact on share price.

BUSINESS ETHICS Non-compliance with Intertek’s Code of Ethics ('Code')

• Litigation, including significant fines and debarment

and/or related laws such as anti-bribery, anti-money

from certain territories/activities.

laundering, and fair competition legislation. Non-

compliance could be either accidental or deliberate,

• Reputational damage.

• Loss of accreditation.

and committed either by our people or sub-contractors

• Erosion of customer confidence.

who must also abide by the Code.

• Impact on share price.

FINANCIAL

FINANCIAL RISK

Risk of theft, fraud or financial misstatement by

• Financial losses with a direct impact on the bottom

employees. On acquisitions or investments, the

line.

financial risk or exposure arising from due diligence,

• Large scale losses can affect financial results.

integration or performance delivery failures.

• Potential legal proceedings leading to costs and

management time.

• Corresponding loss of value and reputation could

result in funding being withdrawn or provided at

higher interest rates.

• Possible adverse publicity.

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

POSSIBLE IMPACT

MITIGATION

2016 UPDATE

• Effective Quality Management Systems and assurance procedures and

controls, including contractual review and liability caps where appropriate.

• Claims management policy and process in place.
• Contract review process (including risk review).
• Use of standard Intertek Terms & Conditions.
• All significant incidents that could potentially result in a claim against the
Group are immediately reported to compliance officers and logged in an
incident database so that they can be properly managed. The Group
General Counsel reports any significant claims to the Audit Committee.
External legal counsel is appointed where appropriate.

• Insurance liaison – seeking contractual protection from loss or insurance

cover for loss where possible.

• This risk remains stable compared with 2015.
• Compliance personnel have been utilised to

manage contract reviews and assist the wider
legal framework.

• Ongoing training and education in respect of

contractual liabilities being assumed.

• Annual Code of Ethics training and sign-off requirement.
• Whistle-blowing programme, monitored by the Group Risk Committee,

where staff are encouraged to report, without risk, any fraudulent or other
activity likely to adversely affect the reputation of the Group.

• Zero-tolerance policy with regard to any inappropriate behaviour by any

individual employed by the Group, or acting on the Group’s behalf.

• The Group employs local people in each country who are aware of local legal
and regulatory requirements. There are also extensive internal compliance
and audit systems to facilitate compliance. Expert advice is taken in areas
where regulations are uncertain.

• The Group continues to dedicate resources to ensure compliance with the
UK Bribery Act and all other anti-bribery legislation, and internal policy.

• This risk remains stable compared with 2015.
• Ongoing annual confirmations ensure that staff

verify compliance with the Code of Ethics.

• Local compliance officers perform due diligence
on sub-contractors that they have signed the
Group’s Code.

• During 2016, 287 (2015: 249) HR and non-

compliance issues were reported through the
whistle-blowing hotline and other routes. All
were investigated with 57 (2015: 51)
substantiated and corrective action taken.

• The Group has financial, management and systems controls in place to
ensure that the Group’s assets are protected from major financial risks.

• This risk remains stable compared with 2015.
• 'Doing Business the Right Way’ established

• Adherence to Authorities Cascade (which sets approval limits for

as core principle within Intertek.

financial transactions).

• Legal, financial and other due diligence on M&A and other investments.
• A detailed system of financial reporting is in place to ensure that monthly

financial results are thoroughly reviewed. The Group also operates a
rigorous programme of internal audits and management reviews.
Independent external auditors review the Group’s half year results
and audit the Group’s annual financial statements.

• Review and update of core mandatory controls

for year-end compliance certification.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

FINANCIAL REVIEW

FINANCIAL HIGHLIGHTS 2016

+18.5% +8.8%
Revenue up to £2,567m

+19.3%
Dividend per share

+19.3% +10.4%
Adjusted operating profit
up to £410m

+230%
Reported operating profit
up to £369m

+19.2% +9.6%
Adjusted diluted EPS

+171%
Reported diluted EPS

£35m
Acquisitions

Actual

Constant rates

£106m
Organic investment spend

“ This year we delivered double-digit growth
in operating profit at constant currency,
benefiting from a significant contribution
from acquisitions. Cash conversion was
strong as the focus on working capital
initiatives continued to deliver.”

Double-digit revenue growth and
a focus on cost and operational
efficiencies delivered margin
accretion for the Group.

CONSOLIDATED INCOME STATEMENT COMMENTARY
Revenue for the year was £2,567.0m, up 18.5% (up 8.8% at
constant exchange rates), with organic revenue growth of 0.1%
at constant exchange rates.

The Group’s adjusted operating profit was £409.7m, up 19.3%
on the prior year (up 10.4% at constant exchange rates). The
adjusted operating margin was 16.0% compared with 15.9%
in the prior year.

The Products division delivered excellent results with all business
lines contributing to performance. The Trade division delivered
solid revenue growth. The Resources division continued to
be impacted by the reduction in energy capital expenditure
by our clients.

This resulted in the Group’s reported operating profit for the year
being £369.5m (2015: reported operating loss £283.5m, which
was impacted by the one-off impairment to the Industry Services
business line in the Resources division).

NET FINANCING COSTS
The Group had an adjusted net financing cost of £22.4m
(2015: £24.2m) in the year. This comprised £0.9m (2015: £1.0m)
of finance income and £23.3m (2015: £25.2m) of finance
expense. The total interest charge included £nil (2015: £nil)
relating to Separately Disclosed Items.

TAX
The Group effective tax rate on adjusted profit before income
tax was 25.3% (2015: 24.3%). The statutory tax charge, including
the impact of SDIs, of £75.5m (2015: £39.3m), equates to an
effective rate of 21.8% (2015: (12.8%)) and the cash tax on
adjusted results is 24.3% (2015: 22.2%). The statutory tax
charge, excluding the impact of SDIs, is £98.0m (2015: £77.5m).

EARNINGS PER SHARE
The Group delivered adjusted diluted earnings per share (‘EPS’) of
167.7p (2015: 140.7p). Diluted EPS after SDIs was 156.8p (2015:
diluted loss per share of 224.2p), and basic EPS was 158.5p
(2015: basic loss per share of 224.2p).

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

DIVIDEND
The Board recommends a full year dividend of 62.4p per share,
an increase of 19.3%. This recommendation reflects the Group’s
earnings progression, strong financial position and the Board’s
confidence in the Group’s structural growth drivers into the future.

The full year dividend of 62.4p represents a total cost of
£100.7m or 37% of adjusted profit attributable to shareholders
of the Group for 2016 (2015: £84.2m and 37%). The dividend
is covered 2.7 times by earnings (2015: 2.7 times), based on
adjusted diluted earnings per share divided by dividend per share.

RESULTS FOR THE YEAR

Key financials
Revenue
Adjusted Group operating profit
Adjusted diluted EPS
Statutory Group operating profit/(loss)
Statutory diluted EPS
Adjusted cash flow from operations
Dividend per share
Dividends paid in the year

2016
£m
2,567.0
409.7
167.7p
369.5
156.8p
565.3

62.4p
88.0

2015
£m
2,166.3
343.4
140.7p
(283.5)
(224.2)p
465.7

52.3p
80.7

FIVE YEAR PERFORMANCE

ADJUSTED DILUTED EPS1 (pence)

DIVIDEND PER SHARE3 (pence)

+9.4%CAGR2

+13.1%CAGR2

2016

2015

2014

2013

2012

2011

167.7

140.7

132.1

138.6

131.2

107.2

2016

2015

2014

2013

2012

2011

62.4

52.3

49.1

46.0

41.0

33.7

1. Presentation of results: To provide readers with a clear and consistent presentation of the underlying operating performance of the Group’s business, the figures

discussed in this review are presented before Separately Disclosed Items (see note 3 of the financial statements). A reconciliation between Adjusted and Reported
performance measures is set out overleaf.

2. CAGR represents the compound annual growth rate from 2011 to 2016.
3. Dividend per share for 2016 is based on the interim dividend paid of 19.4p (2015: 17.0p) plus the proposed final dividend of 43.0p (2015: 35.3p).

The underlying performance of the business, by division, is shown in the table below:

Products
Trade
Resources
Group total
Net financing costs
Adjusted profit before income tax
Income tax expense
Adjusted profit for the year
Adjusted diluted EPS

Notes
2
2
2

Revenue

Change at
actual rates
%
32.0
8.9
(0.4)
18.5

Change at
constant
rates
%
19.9
1.6
(8.0)
8.8

2016
£m
1,465.5
584.5
517.0
2,567.0

Adjusted operating profit

2016
£m
297.7
81.8
30.2
409.7
(22.4)
387.3
(98.0)
289.3
167.7p

Change at
actual rates
%
27.3
8.1
(10.9)
19.3
(7.4)
21.3
26.5
19.7
19.2

Change at
constant
rates
%
16.5
2.2
(15.2)
10.4

11.6

10.1
9.6

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

FINANCIAL REVIEW
continued

PORTFOLIO ACTIVITIES
In March 2016, the Group announced a new divisional
segmentation into Products, Trade and Resources, and also a new
organisational management structure. The Group also announced
its new 5x5 differentiated strategy for growth, with the aim to
move the centre of gravity of the Company towards high-growth,
high-margin areas in its industry.

The SDIs charge for 2016 comprises amortisation of acquisition
intangibles £14.0m (2015: £21.4m); acquisition costs relating to
successful, active or aborted acquisitions £2.8m (2015: £5.8m);
£21.4m (2015: £6.7m) in relation to restructuring businesses and
making redundancies currently underway; £2.0m (2015: £nil)
relating to the loss on disposal of subsidiaries and associates;
and material claims and settlements of £nil (2015: £3.6m).

2016 RECONCILIATION OF REPORTED TO ADJUSTED
PERFORMANCE MEASURES

£m
Revenue
Operating profit
Operating margin (%)
Net Financing costs
Income tax expense
Profit for the year
Cash flow from
operations
Basic EPS (p)
Diluted EPS (p)

Reported
2,567.0
369.5

14.4%
(22.4)
(75.5)
271.6

543.4
158.5p
156.8p

SDIs
–
40.2
1.6%
–
(22.5)
17.7

21.9
11.0p
10.9p

Adjusted
2,567.0
409.7
16.0%
(22.4)
(98.0)
289.3

565.3
169.5p
167.7p

In 2015, an impairment charge of £577.3m was incurred in
relation to our Industry Services business line in the Resources
division. In addition, an impairment of £12.1m of IT assets related
to computer software was recorded in 2015.

2015 RECONCILIATION OF REPORTED TO ADJUSTED
PERFORMANCE MEASURES

£m
Revenue
Operating (loss)/profit
Operating margin (%)
Net Financing costs
Income tax expense
(Loss)/profit for the year
Cash flow from
operations
Basic EPS (p)
Diluted EPS (p)

Reported
2,166.3
(283.5)
(13.1)%
(24.2)
(39.3)
(347.0)

442.3
(224.2)p
(224.2)p

SDIs
–
626.9
29.0%
–
(38.2)
588.7

23.4
366.1p
364.9p

Adjusted
2,166.3
343.4
15.9%
(24.2)
(77.5)
241.7

465.7
141.9p
140.7p

Further information on Separately Disclosed Items is given in
note 3 to the financial statements.

Of note, this included two strategic priorities relevant to
the operational structure of the business. First, to operate a
portfolio that delivers focused growth amongst the business
lines, countries and services, including a strategic review of
underperforming business units. Second, to deliver operational
excellence in every operation to drive productivity, including
re-engineering of unnecessary processes and layers.

During the year, the Group has implemented various fundamental
restructuring activities, consistent with this new Company
structure and 5x5 strategy, with a resulting charge of £21.4m in
the year. These activities included site consolidations, closure of
non-core business units, re-engineering of underperforming
businesses and the delayering of management structures.
These charges are included in the SDI section below.

SEPARATELY DISCLOSED ITEMS (‘SDIS')
A number of items are separately disclosed in the financial
statements as exclusion of these items provides readers with a
clear and consistent presentation of the underlying operating
performance of the Group’s business. A reconciliation of the
Reported to Adjusted measures is given below.

When applicable, these SDIs include amortisation of acquisition
intangibles, impairment of goodwill and other assets, the profit or
loss on disposals of businesses or other significant fixed assets,
costs of acquiring and integrating acquisitions, the cost of any
fundamental restructuring of a business, material claims and
settlements, significant recycling of amounts from equity to
the income statement and unrealised market gains/losses on
financial assets/liabilities.

Adjusted operating profit excludes the amortisation of acquired
intangible assets, primarily customer relationships, as we do not
believe that the amortisation charge in the Income Statement
provides useful information about the cash costs of running our
business as these assets will be supported and maintained by the
ongoing marketing and promotional expenditure, which is already
reflected in operating costs. Amortisation of software, however,
is included in adjusted operating profit as it is similar in nature to
other capital expenditure. The costs of any restructuring are
excluded from adjusted operating profit where they represent
fundamental changes in individual operations around the Group
as a result of the portfolio activities discussed above, and are
not expected to recur in those operations. The profit and loss
on disposals of businesses or other significant assets and the
costs associated with successful, active or aborted acquisitions
are excluded from adjusted operating profit in order to provide
useful information regarding the underlying performance of the
Group’s operations.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

KEY PERFORMANCE INDICATORS
The Group uses a variety of key performance indicators
(‘KPIs’) to monitor the financial performance of the Group
and operating divisions. The specific metrics are disclosed on
pages 32 to 33.

The rate of return on invested capital (‘ROIC’) measures the
efficiency of Group investments. This is a key measure to
assess the efficiency of investment decisions and is also an
important criterion in the decision-making process when
projects are competing for limited funds.

Reported ROIC in 2016 of 21.7% reflects a full year of the PSI
acquisition and the 2015 impairment charge and compares to
20.0% in the prior year at constant exchange rates. ROIC in
the 2015 Annual Report and Accounts of 16.9% was stated
excluding the impact of the PSI acquisition on 23 November
2015 and excluding the impairment in order to be comparable
to 2014.

ACQUISITIONS AND INVESTMENT
The Group strategy is to invest both organically and by
acquiring or investing in complementary businesses, enabling
it to take advantage of the strong long-term structural growth
drivers in the quality industry and continually offer the latest
technologies and services in the locations demanded by clients.

Acquisitions and investments
The Group completed three (2015: four) acquisitions and
investments in the year with cash consideration of £34.8m,
net of cash acquired of £0.7m.

In January 2016, the Group acquired the Food Institute Trust
– Italia SRL (‘FIT-Italia’), an Italian-based business providing food
quality and safety services to the retail and agricultural sectors.

In October 2016, the Group acquired EWA-Canada Ltd (‘EWA’),
a leading provider of cyber security and assurance services to
a broad range of industries. Its service portfolio includes IT
network security solutions for network carriers, product
security evaluations according to the Common Criteria
standard, network security evaluations, as well as certain
consulting services.

In November 2016, the Group entered into an agreement with
the shareholders of Laboratorios ABC Química Investigación y
Análisis S.A. de C.V. (‘ABC Analitic’) to form an environmental
and food services Joint Venture in Mexico, which will operate
as ‘Intertek+ ABC Analitic’.

These acquisitions and investments provide valuable
additional service lines and new geographic locations for
the Group, and will help drive profitable revenue growth.

Organic investment
The Group also invested £105.5m (2015: £112.2m) organically
in laboratory expansions, new technologies and equipment
and other facilities. This investment represented 4.1% of
revenue (2015: 5.2%).

CASH FLOW AND NET DEBT
Cash flow
The Group relies on a combination of debt and internal cash
resources to fund its investment plans. One of the key metrics
for measuring the ability of the business to generate cash is cash
flow from operations. Due to the cash payments associated with
the SDIs, and to provide a complete picture of the underlying
performance of the Group, adjusted cash flow from operations
is shown below to illustrate the cash generated by the Group:

Cash flow from
operations
Add back: cash flow
relating to SDIs
Adjusted cash flow from
operations
Add back: special
contributions to pension
schemes
Cash flow for cash
conversion
Cash conversion %

2016
£m

2015
£m

Change
%

543.4

442.3

22.9%

21.9

23.4

565.3

465.7

21.4%

2.8

568.1
138.7%

468.5
136.4%

21.3%
230bps

The components of free cash flow are summarised below:

2016
£m
409.7

2015
£m
343.4

Free cash flow
Adjusted operating profit
Add back: depreciation and
amortisation
Movement in working capital
and provisions
26.8
Net capital expenditure
(110.9)
Other*
(109.3)
235.2
Free cash flow
* Other includes exceptionals, special contributions to pension schemes, interest

52.4
(102.5)
(131.0)
318.1

89.5

85.2

paid/received, tax and non-cash items.

FIVE YEAR TREND – ADJUSTED CASH FLOW FROM
OPERATIONS (£m)

+12.4% CAGR1

2016

2015

2014

2013

2012

2011

565.3

465.7

403.7

394.1

345.4

314.8

1. CAGR represents the compound annual growth rate from 2011 to 2016.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

FINANCIAL REVIEW
continued

FOREIGN CURRENCY MOVEMENTS
The Group transacts in over 80 currencies across more than
100 countries, and revenue and profit are impacted by currency
fluctuations. However, the diversification of the Group’s revenue
base provides a partial dilution to this exposure.

At constant exchange rates, revenue grew 8.8% (actual
exchange rates 18.5%) and adjusted operating profit grew
10.4% (actual exchange rates 19.3%).

The exchange rates used to translate the statement of financial
position and the income statement into sterling for the five most
material currencies used in the Group are shown below:

Value of £1
US dollar
Euro
Chinese renminbi
Hong Kong dollar
Australian dollar

Statement of
financial
position rates

Income
statement rates

2016
1.22
1.17
8.51
9.49
1.70

2015
1.48
1.36
9.61
11.48
2.03

2016
1.35
1.23
8.98
10.52
1.83

2015
1.53
1.38
9.62
11.87
2.04

SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements are prepared in accordance
with IFRS as adopted by the EU. Details of the Group’s significant
accounting policies are shown in note 1 to the financial statements.

Edward Leigh
Chief Financial Officer

Net debt
Net debt has decreased from £775.4m at 31 December 2015
to £743.7m at 31 December 2016.

In the year, the Group drew on facilities it had in place at
31 December 2015. During the year US$60m of its existing
bilateral term loan facility and US$75m of Senior Notes were
repaid. The Group has a well-balanced loan portfolio with a
maturity profile as shown below, to enable the funding of
future growth opportunities.

BORROWINGS BY MATURITY PROFILE

38%

Less than two years

Two to ﬁve years

Over ﬁve years

19%

43%

Under existing facilities the Group has available debt headroom
of £412m at 31 December 2016. The components of net debt
at 31 December 2016 are outlined below:

1 January
2016
£m
116.0
(891.4)
(775.4)

Cash flow
£m
(6.3)
169.7
163.4

Exchange
adjustments
£m
49.1
(180.8)
(131.7)

31 December
2016
£m
158.8
(902.5)
(743.7)

Cash
Borrowings
Total net debt

To ensure the Group is not exposed to income statement
volatility in relation to foreign currency translation on its debt,
the Group ensures that any foreign currency borrowings are
matched to the value of its overseas assets in that currency
(an ‘effective’ hedge).

The Group borrows primarily in US dollars and any currency
translation exposures on the borrowings are offset by the
currency translation on the US dollar and US dollar-related
overseas assets of the Group. The composition of the Group’s
gross borrowings in 2016, analysed by currency is as follows:

BORROWINGS BY CURRENCY

84%

USD

Euro

GBP

CAD

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IN THIS SECTION

46 Our business

How our Total Quality value proposition means we are
making a positive contribution to society and the planet.

47 Our people

Our commitment to energising, inspiring and engaging
and the well-being of our people.

50 Our environment

Our impacts on the environment and taking action
to reduce them.

51 Our communities

Engaging and partnering with the local communities
in which we operate.

I am proud to report that following an external review
in December 2016, Intertek, for the first time, became a
constituent of the FTSE4GOOD Index. Inclusion within the
index recognises the progress we have made in our internal
and external sustainability activities, as well as in our Group
reporting on sustainability.

During the year Intertek also formed a Joint Venture with ABC
Analitic in Mexico, creating the market leader in the provision of
Environmental testing services in the country, focused on the
prevention and control of water pollution, further expanding
our sustainability offering to our customers.

Across our business, our people provide Assurance, Testing,
Inspection and Certification ('ATIC') services which assist our
customers in mitigating the environmental impacts of their
products, processes and operations, and in 2016, social and
environmental assessments of entire supply chains were also a
key area of focus for our customers. Our people are passionate
about their work and are proud to be involved in activities which
generate a positive impact for society and the environment.

We are focused on ensuring that our strategy and culture
provides our people with the right platform to grow and develop
their careers, but also allows them to be involved in activities
which are socially responsible and enables them to engage
with the communities in which they live and work.

This report describes Intertek’s sustainability performance for
2016 and highlights some of the work we are doing to help our
customers, partner with our local communities and reduce our
own ecological footprint.

“ Our people are passionate about their work
and are proud to be involved in activities
that generate a positive impact for society
and the environment.”

André Lacroix
Chief Executive Officer

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OUR BUSINESS

Our ATIC services cover almost every industry, from textiles,
toys and electronics, to building, heating, pharmaceuticals,
petroleum products, food, and cargo inspection. Our clients
trust us to ensure the quality and safety of their products,
assets and processes, to protect their brands and gain
competitive advantage.

We work globally with our clients to improve the social, ethical,
safety and environmental impacts of their services, supply chains
and products that are used by their customers every day.
Through the provision of our ATIC service, our vision is to become
the world's most trusted partner for quality assurance. This gives
rise to improving our customers’ performance and helping them
to operate sustainably, overcoming market constraints, improving
processes, reducing risk and supporting their ability to operate
effectively and act responsibly. Here are some examples of the
work that we have done for our customers:

UNDERSTANDING MICROPLASTICS IN THE RIVER RHINE
Intertek has completed a study supporting researchers from the
University of Basel to evaluate plastic debris in the River Rhine.
The study, which was recently published in the journal, Scientific
Reports, represents the first scientific study of microplastics over
the length of a major river. Tiny plastic particles, smaller than five
millimetres, known as microplastics, are found in almost all rivers,
lakes and oceans. They can result from fragmentation of plastic
waste, textile fibres or occur as intermediate products in plastic
production or as small pellets used in personal care products.

The University of Basel researchers collected many samples
from the Rhine and partnered with Intertek’s Basel laboratory
to understand the type and concentration of microplastics
found. Intertek’s polymer testing experts developed a process
which would enable the handling and grouping of the thousands
of particles which make up the samples in a manageable way and
then investigated the many plastic particles using a technique
called infra-red spectroscopy.

This information has given a first insight into the origin and
former use of the plastics debris which, in turn, could help
to reduce the levels of microplastics and prevent harm to the
aquatic biodiversity of the River Rhine. The results revealed
that these microplastics have originated from a wide range of
applications such as packaging, personal care products, office
equipment, vehicle construction and numerous others. We plan
to continue our collaboration with the University of Basel and
to support further characterisation of microplastics and
their origins.

SAFE HYDROGEN REFUELLING STATIONS IN THE US
Intertek has worked with Powertech, Sandia National
Laboratories and The National Renewable Energy Laboratory
to launch a new method of safety and performance testing
and certification of hydrogen fuelling stations in the US. The
Hydrogen Station equipment performance ('HyStEP') device
which is in a mobile unit attached to the back of a vehicle was
so innovative that no standards adequately addressed the safety
hazards it potentially created. This new method of testing is more
efficient than previous methods where individual automotive
manufacturers conducted their own testing to certify the
safety and performance of hydrogen fuelling stations.

To bring the new testing and certifying method to the market,
Intertek facilitated a process known as a Failure Mode, Effects,
and Criticality Analysis ('FMECA') on each HyStEP device. The
purpose of the FMECA is to analyse and assess potential failures
within a process or device for safety hazards and performance,
and the causes and effects of those failures and levels of
performance. After which, it identifies what actions could
be taken to eliminate or reduce the chance of each failure
occurring and performance being improved.

Initially, the HyStEP device has been used for certifying fuelling
stations in California, which currently has the most hydrogen
fuelling stations of any state in the US. Construction is expected
to begin on additional stations in 2017. Intertek is uniquely placed
to harness the opportunities for safety and performance testing
and certification in the alternative fuels industry in the
US market.

WATER QUALITY COMPLIANCE AROUND THE WELSH
COAST
Intertek has led the modelling and compliance for Welsh Water’s
largest ever scientific coastal investigation, an £8m project
across 49 coastal sites around Wales and has also provided
numerous innovative techniques and a state-of-the-art
assessment methodology.

Intertek Energy & Water is working with the Dwr Cymru Welsh
Water ('DCWW') Capital Delivery Alliance supporting an extensive
field data collection programme designed to ensure that data are
suitable for model calibration and compliance investigation. This
data will be combined with outputs from sewerage network
models to feed into Intertek’s state-of-the-art compliance
assessment systems.

We have been working continuously with DCWW for 15 years and
have built an extensive knowledge of the physical processes of
coastal waters, estuaries, river catchments and reservoirs. This
work is a valuable step in extending our understanding of water
quality issues and building on previous solutions in order to meet
the latest regulatory targets.

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RESPONSIBLE INVESTMENT
Delivering sustainable returns is a key enabler of our 5x5 strategy
for growth and incorporates Responsible Investment ('RI').
At Intertek, RI includes the evaluation of Environmental, Social
& Corporate Governance ('ESG') risks as part of the investment
process. ESG due diligence forms a key part of our acquisition
review process as well as when assessing capital expenditure
decisions on new and innovative ATIC services. We ensure
that we have identified potential ESG risks, and have in place
corresponding mitigation plans and remedies. Our investment
process, in line with our overall Group strategy, ensures that
we maintain the right balance between performance
and sustainability.

A further example of our focus on RI for our stakeholders is the
Joint Venture formed with ABC Analitic in Mexico, which expands
our sustainability offering to our customers, for more details see
page 29.

STEWARDSHIP AND GOVERNANCE
At Intertek, the Board of Directors oversees and has the
responsibility for setting the Group’s strategy and performance
and risk management (see pages 56 to 64). The Board
acknowledges the importance of diversity in the boardroom as
a key component of good governance. As at 31 December 2016,
the Board’s composition was 33% female and 67% male and for
the senior leadership group (502 people at the end of 2016), 25%
female and 75% male. To read more about our Board diversity see
page 57.

Sustainability and CSR are integrated into Intertek through
policy distribution and through our Code of Ethics framework. Our
operations and support functions are responsible for identifying
and evaluating risks applicable to their areas of the business and
the design and operation of suitable internal controls (see
‘Principal risks and uncertainties’ on pages 34 to 39). The Board
has overall accountability for Intertek’s sustainability and CSR,
and the Group-wide strategy and implementation are the
responsibility of the Senior Vice-President, Global Customer
Service and ATIC Operational Excellence.

OUR PEOPLE

Our 42,452 people at Intertek work globally for our customers
on a daily basis, driving the performance of our business to be the
world’s most trusted partner for quality assurance. To get there, our
5x5 strategy energises our people to take Intertek to new heights,
deliver our customer promise and to live our own values. We want to
foster a company culture where our people are recognised for being
inspired to find innovative ways to continually develop our business
and are engaged in what we do for our customers. How we give our
people opportunities, how we integrate our people into our mission
and values, and how we engage and inspire our people to deliver our
mission across our global business in a way that our stakeholders
expect, are at the heart of our business.

ENERGISING, INSPIRING, AND ENGAGING
TALENTED PEOPLE
In 2016, we have launched our 10x recognition awards
programme to celebrate the success of our people who have been
energised and inspired to live our values and deliver our customer
promise. The programme recognises the individual contributions
that our people have made to power our 5x5 strategy throughout
our global business. The Executive Management Team collectively
select and award individuals to celebrate their contributions made
for exceptional performance.

At Intertek, we are proud to be an Equal Opportunities Employer
and all qualified applicants are considered for employment
regardless of gender, ethnicity, religion, age, and other protected
characteristics. We believe that this is an important element of
attracting talented people to engage them from the beginning.
We reach out to prospective employees in a variety of ways,
depending on location and role, in compliance with local
regulations for fair recruitment practices and equal opportunities.
We post vacancies via our website (www.intertek.com/careers)
and employ different ways of sourcing talented people, such as
recruitment agencies, social media, printed advertisements,
employee referrals, professional bodies and associations, schools,
colleges and universities. In order to offer people career growth
and progression within the Group, where possible, we fill
vacancies from within the Company first.

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INCLUSION AND DIVERSITY
To live our values and be a global family that is inclusive and
values diversity, we apply all employment policies and practices,
including recruitment, promotion, reward, working conditions,
and performance management related policies, in a way that is
informed, fair and objective. Our inclusion and diversity policy
acts to eliminate discrimination so that our employees are
treated fairly, feel respected and included in our workplaces.
We are committed to maintaining the highest standards of
fairness, respect and safety and adhere to the principles of the
UN Convention on Human Rights and the International Labour
Organization’s core conventions.

MALE:FEMALE BY REGION

8,128

3,646

11,351 8,735

7,240

3,352

Male

Female

11,774
Americas

20,086
Asia

10,592
EMEA (inc. Central)

At 31 December 2016 Intertek employed 42,452 people,
an increase of 2.5% over the previous year.

INTERTEK TOTAL WORKFORCE BY GENDER

37%

63%

Male

Female

Intertek’s gender diversity reflects the industries and
qualification profiles typical of individuals working in the
countries and business lines in which we operate.

REVENUE AND HEADCOUNT
2,054
2,093
34,882
38,407

2,184
36,864

2,166
41,434

2,567
42,452

Revenue (£)

Headcount

Total number of Intertek employees over the last five years in
relation to revenue shows continuing growth in employment
and careers.

INVESTING IN THE GROWTH OF OUR PEOPLE
To seize the exciting growth opportunities of our Total Quality
value proposition we invest in the growth of our people. We want
to provide the potential leaders of Intertek with skills to grow our
business, to hire, inspire, engage and retain the best people to
power our 5x5 strategy. We want our people to grow by learning
new skills to help them advance their careers and deliver our
customer promise. Our talent mapping process is critical to the
future success of our organisation to deliver our strategy and
foster our passionate culture and our values throughout Intertek.

PROFESSIONAL CONDUCT
Intertek has the vision of becoming the world’s most trusted
partner for quality assurance. To achieve this, we work tirelessly
to ensure the work that we do in many markets across the world is
protected against risks by ensuring compliance with local, national
and international laws. Maintaining the trust and confidence of our
customers by assuring the validity and accuracy of reports and
certificates that we deliver through our ATIC services is a top
priority for us.

Intertek is committed to improving its culture of upholding the
highest standards of integrity and professional ethics. All issues
relevant to our Code of Ethics can be raised and discussed openly
and we operate a strict integrity policy of zero-tolerance regarding
breaches of our compliance policy. To support this policy in action,
all people working for or on behalf of Intertek are required to
sign our Code of Ethics upon joining the Company or before
commencing work on our behalf, confirming acceptance of the
high standards expected of them in all business dealings. The
Code sets clear expectations that people working for our
business must act with integrity and in an open, honest, ethical
and socially responsible manner. Intertek employees or people
acting on Intertek's behalf are responsible for applying the Code
in their own job role, their part of the business and location.
To support their continual understanding, they are required
to complete our comprehensive online Code of Ethics training
course annually.

To empower the people who work for Intertek to act, we
have a well-publicised hotline for all employees, contractors
and others representing Intertek, enabling them to confidentially
report suspected misconduct or breaches of the Code. Our whistle-
blowing hotline is run by an independent, external provider, it is
multi-language and accessible to all employees 24 hours a day
either by phone or by email. Those concerned are encouraged
to report any non-compliance, integrity or ethical concerns
using the hotline. Posters are present in all our sites.

2012

2013

2014

2015

2016

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If a report is made to the hotline, it is followed up by Intertek's
Compliance officers. All reports are investigated and, where
required, are escalated immediately, provided there is no conflict
of interest, to the Ethics & Compliance Committee which is chaired
by our Group CEO and also includes our Group Legal Counsel, SVP
Global Customer Service & ATIC Operational Excellence and EVP
Human Resources. This ensures effective resolution both of
individual issues and any systemic or process improvements
which can be made to address them.

During 2016, 163 reports of non-compliance with our Code
of Ethics were made to our hotline. Of those reports, 47 were
substantiated and required remedial action. Of those
substantiated claims:

• there were no substantiated grievances relating to human

rights, labour practices or societal impact breaches;

• there were two environmental incidents;

• there were no reported violations of the rights of indigenous

people; and

• there were no cases of discrimination.

MODERN SLAVERY
As a global provider of quality solutions, including supply chain
assurance and modern slavery audits, for its clients, Intertek is
committed to preventing slavery and human trafficking in its own
corporate activities and to ensuring that its own supply chain is
free from modern slavery.

The Group analyses its supply chain on an ongoing basis as part
of its risk, compliance and ethics framework. We have corporate
policies and governance processes to support our efforts to
address the issues covered by the Modern Slavery Act 2015,
including: the Code of Ethics (with regular refresher training for
all employees); a confidential and external hotline on which
issues can be reported; a labour and human rights policy;
and clear recruitment policies aimed at fair recruitment and
treatment of employees.

Furthermore, to demonstrate our commitment to continued
improvements and achieving an industry-leading standard in this
area, we will work to put in place enhanced policies, procedures
and due diligence processes for suppliers which are aimed more
specifically at evaluating the risk of, and preventing, modern
slavery issues.

HEALTH & SAFETY
Managing the health, safety and welfare of our people, clients and
third parties connected with the business, is a top priority for us
at Intertek. Intertek is committed to the continuous review and
improvement of its health and safety performance and works
towards achieving zero incidents.

As a key element of our commitment to health and safety this
year we have launched our ‘Speak up for Safety’ campaign across
the whole of Intertek. One of our key goals is to ensure that our
colleagues are fully engaged in creating a safe working environment.

Our employees have signed the ‘Speak up for Safety’ pledge to
demonstrate their commitment to lead by example and look out
for the safety of co-workers, customers, and the community. It
also represents the commitment to working safely and bringing
a positive attitude to ensuring that best safety practices are
followed and concerns are voiced. Our people are able to report
all incidents quickly in a standardised way on our Group intranet.

From left to right: Ryan Parks, Ramzi Amawi and Nimer Al-Hafi sign the ‘Speak up
for Safety’ pledge at the Plano, Texas town hall.

During 2016 we achieved a 21% reduction in lost time injuries and
an 8% reduction in medical treatment injuries.

2016
0
0.25

2015
0
0.18

Occupational fatalities
Lost time injuries rate*
Medical treatment
injuries rate*
* Rates refer to the number of lost time injuries and medical treatment injuries

0.35

0.56

2014
1
0.25

0.34

occurring per 200,000 hours worked.

We go to great lengths to train all of our employees on health
and safety matters, including emergency response procedures and
intervention and reporting of accidents, incidents and near misses,
during on-boarding. Where relevant, all employees and contractors
are provided with personal protection equipment when performing
work for the Company.

To ensure that each Intertek location is able to operate safely,
there is a dedicated fire warden, first-aider and health and safety
representative at each Intertek location. These representatives
are empowered to not only investigate incidents and implement
preventive and corrective actions, but also to disseminate safety
information through training and continual improvement
programmes to target specific areas of concern that
are identified.

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ENVIRONMENTAL MANAGEMENT SYSTEMS
Our environmental management systems are geared towards
minimising our impacts on the environment. We carefully plan
what we are going to do, checking throughout the year how
we are impacting the environment to ensure that we are acting
responsibly. Here are some examples of the good work that we
have done in 2016:

• At our site in Mexico City we have implemented a water recycling
system. This supports the water needs of our textile laboratory
which washes clothing as a part of the testing process. The
system reduces our consumption of fresh water, thereby
reducing our demand on local water supplies.

• This year, across 76 sites in the United States, we have launched
a programme to improve our management of non-hazardous
waste. The programme focuses on connecting our sites to local
opportunities for minimising how much waste we send to
landfill and to increase recycling. We have implemented new
performance metrics so that each site can utilise the waste
programme offerings at the local level.

At Intertek, to minimise the risk of harmful and hazardous
substances impacting the environment and harming people and
ecosystems, we operate strict controls to manage the handling,
storage and disposal of harmful and hazardous substances.
Intertek employees are fully trained in the safe handling of such
substances and are provided with appropriate equipment and
clothing to protect themselves and reduce the risk to the
environment. A key element of continuous improvement is the
reporting of incidents which all employees are trained to do.

OUR ENVIRONMENT

At Intertek, we aim to minimise the impact of our operations
on the environment by understanding and mitigating against
our material impacts. In doing so, we can target where we take
action and we do this through reducing energy consumption in
our buildings and facilities, utilising renewable sources of energy,
implementing ‘green’ waste management practices, efficient
water management, minimising business travel, carbon offsetting
and operating quality management systems. To support
this effort, our environmental and climate change policy is
implemented through country management to ensure
compliance with local guidelines and regulations.

For 2016, Intertek’s electricity consumption was reported to be
227,534 MWh (5.55 MWh per employee) and gas consumption
was reported to be 70,556 MWh (1.72 MWh per employee). Our
Greenhouse Gas ('GHG') emissions accounting system has been
implemented using the guidelines of the GHG protocol and
DEFRA. In this report, we are reporting for the annual period
from 1 October 2015 to 30 September 2016. The corresponding
average number of employees for this time period was 40,983.

CO2e1 emissions from activities for which Intertek is responsible
include:

Scope 1

Scope 2
Outside of scope
Total emissions

the combustion of fuel
operation of facilities
purchase of electricity,
heat or steam

Intensity ratios
2016
2015
2014
1. CO2e – Carbon dioxide equivalent.

GHG
Emissions
(tonnes of
CO2e)1
58,283
13,813

126,069
679
198,844

CO2e per
employee
4.85
4.86
5.29

To ensure full completeness of the business’s GHG emissions
globally across our whole business, actual data was compiled for
all the major operating countries. Where necessary, to cover some
sites that were not able to provide actual data, some figures were
extrapolated. Extrapolation was based on equivalent activity data
figures, i.e. electricity and gas consumption, of one employee and
then multiplied by the actual number of people at sites. This was
not the case for minor contributions such as fugitive emissions.
Where sites provided data covering only part of the year these
figures were extrapolated linearly to cover the full year.

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AMERICAS
Intertek employees in Grand Rapids donated supplies to a local
school to help disadvantaged children. The donations came in the
form of rucksacks filled with items such as notebooks, markers,
pens and folders to ensure that they started the school year with
everything they needed to help them learn.

In the wake of hurricane Matthew, Intertek employees in
Arlington Heights, USA, packed 1,700 meals to send to Haiti.
Working with charitable organisations, this was an initiative that
contributed to tackling the risk of hunger in the aftermath of a
natural disaster.

In Mexico and Central America, executives assembled and tested
wheelchairs for children with disabilities. The finished wheelchairs
were presented to the children as a part of the regional annual
management conference.

The Strategic Report was approved by the Board on
6 March 2017.

By order of the Board

André Lacroix
Chief Executive Officer

Global Reporting Initiative (GRI) G4 guidelines provide a
recommended framework and indicators for reporting. A table
outlining the GRI standard disclosures is provided on our corporate
website at www.intertek.com/about/corporate-responsibility/.
All data used for performance indicators is representative of
the GRI Guidelines.

OUR COMMUNITIES

We are committed to the cultural values and the relationships
that we share with the communities in which we operate.
Fostering good relationships supports our standing in the
community and our business. Here, we have selected some
examples from across Intertek of how we have engaged
with our local communities during 2016:

EMEA
Intertek has shown its continued commitment to promoting
Science, Technology, Engineering and Mathematics careers for
the fifth year running. This year, we have sponsored and judged
on the panel of the Aberdeen Schools' Science Fair in the UK.

In France, Intertek employees took part in ‘La Parisienne’ charity
race to join the race against breast cancer. The race course saw
participants run 6.7km through the streets of Paris.

Intertek volunteered to support the Humedica project 'Geschenk
mit Herz' to certify Christmas parcels going to disadvantaged
children in Germany. Every donated parcel had its contents
checked to remove unsuitable gifts, such as breakable items
or toy weapons and to ensure that each child received gifts
appropriate for their age and gender.

APAC
As a part of the 'Swachh Bharat Abhiyan’ Initiative, a government-
led initiative, Intertek India’s ‘Hygiene and Sanitation Improvement
Project' launched in 2015 was completed in 2016. This year,
Intertek has funded and been part of the construction of drainage,
sewage and road systems around the Intertek India Delhi office.
Intertek has also worked with local volunteers to clean streets
as a part of the project.

In Bangladesh, Intertek employees travelled to areas most
affected by the seasonal flooding to support the relief effort.
We distributed food, drinking water, money and other essential
items to support around 255 families affected by the floods.

Intertek volunteers in Indonesia went to Bagan Lalang Beach
near Kuala Lumpur to pick up litter. This activity supports local
biodiversity and makes the beach a better place to visit for the
local community.

In Hong Kong, Intertek volunteers visited elderly people who live
alone during the Mid-Autumn Festival. We delivered festive food
and supplies to help elderly people in poverty during a time when
people come together in the community.

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CHAIRMAN’S STATEMENT

Over the past 12 months, much has been achieved. We have
continued to pursue the strategy outlined by André Lacroix last
March that established the mission, purpose and vision of Intertek
and the values that underpin this strategy.

We have redefined our value proposition shifting our focus to
Total Quality Assurance solutions that provide our customers
with Assurance, Testing, Inspection and Certification services
that deliver more than assuring quality of components, products
and assets to now look at processes and systems. This enables
ever more complex supply chains to operate safely by monitoring,
assessing and managing risk in this rapidly changing world.

2016 PERFORMANCE
I am pleased to report another year of strong progress. The Group
delivered revenue of £2,567m, an increase of 8.8% at constant
exchange rates over the prior year benefiting from the 12 month
contribution of recent acquisitions. Our Products and Trade
businesses delivered good organic growth of 5.5% and 1.3%
respectively at constant exchange rates, while as expected
trading conditions in the Resources sector remained challenging.
Organic revenue growth at constant exchange rates was 0.1%.

" As a global leader in the attractive
Quality Assurance industry, Intertek
is well positioned to seize significant
growth opportunities that will deliver
value for shareholders."

Sir David Reid
Chairman

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

Adjusted operating profit was up 10.4% at constant exchange
rates to £409.7m and we improved our adjusted operating margin
to 16.0%. On an underlying basis, adjusted diluted earnings per
share were 167.7p, up 19.2%. Return on invested capital was 21.7%.

Intertek has a progressive dividend policy and seeks to grow
the dividend each year in a sustainable way while maintaining
a minimum dividend cover of 2.5 times earnings. On 14 October
2016, we paid an interim dividend of 19.4p per share (2015:
17.0p). At the Annual General Meeting, the Board will propose
a final dividend of 43.0p per share, which will make a full year
dividend of 62.4p per share (2015: 52.3p), an increase of 19.3%.

This final dividend will be paid on 2 June 2017 for those
shareholders on the register on 19 May 2017. During 2016,
the share price increased from £27.77 to £34.81, and total
shareholder return was 27.3%.

CASH FLOW AND INVESTMENT
The Group’s focus on strong cash generation continued in 2016,
with adjusted cash flow from operations increasing by 21.4% to
£565m. Cash conversion improved to 139% (2015: 136%).

Capital investment is a key capital allocation priority ensuring
that Intertek is well placed for future growth. Investment in new
laboratories and equipment in the year was £106m, equivalent
to 4.1% of total revenue (2015: £112m, 5.2%).

Net debt at the year end was £744m, a decrease of 4.1% on the
prior year. This has driven a net debt to EBITDA ratio of 1.5 times
in 2016, an improvement on prior year.

ACQUISITIONS AND INVESTMENTS
We continue to focus on strengthening our portfolio of global
and local businesses in growth areas.

In 2016, Intertek completed three acquisitions and investments:
FIT-Italia, an Italian company specialising in providing assurance
services to the retail and agricultural sectors through food quality
and safety assessments; EWA-Canada, a leading cyber security
assurance solutions business that strengthens our Internet of
Things proposition; and a Joint Venture with ABC Analitic, which
establishes Intertek as the environmental quality assurance
market leader in Mexico. The total spend on acquisitions and
investments in 2016 was £34.8m, net of cash acquired.

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INFORMATION

More detail can be found in the Sustainability and CSR Report on
pages 45 to 51.

CULTURE, VALUES AND ETHICS
Values are at the core of Intertek. The way we live these values
and our behaviours are even more important; doing the right
thing is integral to our people and our business. We strive to deal
with our business partners with integrity and respect and treat
them as we would hope and expect to be treated ourselves. We
have robust ethical policies and control procedures which help us
ensure that good business ethics are embedded across the
Group. This is key to our success.

Our decentralised structure encourages fast decision making at
the local level by people who really understand their customers’
needs and can provide great service. We rely on the quality of our
employees around the globe to deliver our strategy for growth.
It is their innovation, entrepreneurial spirit, passion and
commitment that drives our progress. On behalf of the Board,
I would like to thank all of our employees for their continued
dedication and diligence.

LOOKING AHEAD
Structural changes in sourcing and distribution have made
supply chain operations more complex for our customers. The
fundamental strengths of our high-quality business model are
therefore critical in a world that demands greater quality
assurance and gives me confidence that we will continue
to create long-term value for our shareholders.

Sir David Reid
Chairman

Our strong financial position means that we continue to have
the flexibility to consider strategic acquisition opportunities
that bring complementary services to our portfolio and have
the potential to increase shareholder value.

BOARD AND COMMITTEE CHANGES
One of my key roles is to constantly evaluate the balance of
skills, experience, knowledge and independence of the Directors.
The composition of the Board continued to evolve during 2016.
Edward Astle retired at the AGM and I would like to thank Edward
for his valuable contribution to Intertek since December 2009.
You may be aware that, sadly, Mark Williams passed away in
March 2016 after three years on the Board.

We welcomed Andrew Martin to the Board as a Non-Executive
Director and a member of the Audit Committee on 25 May 2016.
Andrew will take over as Chairman of the Audit Committee from
Michael Wareing on 1 March 2017.

GOVERNANCE
As Chairman, I am committed to strong and effective corporate
governance. This enables us to assess business performance and
strategic progress as well as manage existing and emerging risks.
To this end, during the year, we established a Risk Committee,
separate from the Audit Committee, and reporting directly to
the Chief Executive Officer. The work of the Board and its
Committees is set out in the Corporate Governance Report
on pages 56 to 87.

Intertek continues to support diversity in all its forms across the
organisation including the Board. While all Board appointments
are made on merit, we firmly believe in the importance of diversity.
Three of the nine Board members are female. The Board notes the
recommendations of both the Hampton-Alexander Report and
The Parker Review and is following through to ensure the Group
takes the appropriate steps to champion ability and diversity
across the business.

CORPORATE RESPONSIBILITY
Foremost in our approach to corporate responsibility is a continual
focus on sustainable business practices. Not only do we strive to
ensure our own processes are sustainable and adhere to best
practice, our role in helping our customers around the world
improve the social, ethical and environmental impact of their
products, processes, and supply chains, ensures quality, safety
and the reputation of their business and brands.

Another key operating principal is health and safety and we have
policies and processes in place to ensure staff welfare remains
of utmost importance. Our aim is zero lost time accidents and
to achieve this, we are committed to continuous review and
improvement of our health and safety performance to help
identify, assess, prioritise and mitigate risk.

Our employees’ cultural values and relationships with their local
communities is important to them, our business and to our clients.
Throughout the year, our colleagues have led awareness
campaigns, volunteered, participated in fund-raising efforts
and inspired young people.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

CHAIRMAN’S INTRODUCTION

DEAR SHAREHOLDER
In my capacity as Chairman of the Board, I am pleased to
present the Corporate Governance Report for the year ended
31 December 2016. The Board continues to take corporate
governance very seriously and believes that good governance is
key to the long-term success of the Group and we shall continue
to pursue the ‘comply or explain’ approach. The Board remains
committed to improving the governance framework and is well
aware of the need to demonstrate to shareholders that the
Company is properly governed in order to support the delivery
of our strategic and business goals.

COMPLIANCE WITH THE 2014 UK CORPORATE
GOVERNANCE CODE (THE ‘CODE’)
The Company is subject to the principles and provisions of the
Code, which is published by the UK Financial Reporting Council
(‘FRC’). To demonstrate the Board’s proactive approach to
corporate governance, the Company has sought to apply the
latest update of the Code, released in April 2016 (together 'the
Codes'), in advance of its formal application to our reporting year.
A copy of the Codes are available at www.frc.org.uk.

I am pleased to report that throughout the year ended
31 December 2016, the Company has applied the main and
supporting principles, and also complied with the provisions,
of the Codes, except for provision D.2.1. for the period 6 March
to 20 April 2016. Following the sudden death of Mark Williams
on 6 March 2016, the Remuneration Committee consisted of two
independent Non-Executive Directors ('NED'). The Nomination
Committee and the Board evaluated the composition of the
Remuneration Committee and Michael Wareing was subsequently
appointed as a member on 20 April 2016. During this brief time
no meetings were held and no decisions were taken by the
Remuneration Committee. Following Michael Wareing’s
appointment to the Remuneration Committee, the Company
once again complied fully with the Codes for the rest of the year.

CULTURE
We believe that boards should give sufficient time not only to
managing performance and results, but also to understanding the
culture and values that underpin the Company. During the year,
the CEO and his Executive Team spent considerable time and
energy on embedding Intertek’s values within the organisation,
and reinforcing the levels of communication and behaviour that
are expected of everyone to strengthen accountability and
reduce complexity. More detail can be found in the Strategic
report on pages 12 and 13.

IN THIS SECTION

54 Chairman’s introduction

56 Corporate Governance

56 Leadership

57 Effectiveness

58 Board of Directors

62 Accountability

64 Relationship with Shareholders

COMMITTEE REPORTS:

65 Remuneration report

81 Audit Committee

86 Nomination Committee

88 Other statutory information

91 Statement of Directors’ responsibilities

“ We continually strive to have high
standards of corporate governance.”

Sir David Reid
Chairman

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

SUCCESSION PLANNING
My focus continues to be on maintaining a Board that works
effectively and cohesively under my leadership, with the right
range and balance of skills, expertise and attributes to ensure
the continued growth and success of the Group. The Nomination
Committee ensures that it is presented with, and considers, a
broad range of candidates for any new Board appointments.

As announced on 24 February 2016, Edward Astle stepped down
from the Board at the 2016 Annual General Meeting (‘AGM’) after
serving as a valued member of the Board for more than six years.
I would like to take this opportunity to thank him for his service.

It is with profound sadness that the Board pays tribute to
Mark Williams after his death on 6 March 2016. Mark served as a
Non-Executive Director of Intertek since September 2013 and
was a member of the Remuneration and Nomination Committees.
Mark provided invaluable contributions to his fellow Directors and
to management, and is greatly missed.

The Nomination Committee focused on continuing the NED
refreshment programme and on evaluating the composition of
the Board and its Committees and the necessary skills required
to address the evolving and changing needs of the business.
On 26 May 2016 we welcomed Andrew Martin to the Board as a
Non-Executive Director and member of the Audit Committee. He
brings wide-ranging experience, including financial knowledge
gained within large international organisations to our Board.

More information on the role and activity of the Nomination
Committee is detailed on pages 86 and 87.

PERFORMANCE EVALUATION
At the end of the year the Board and each of the Committees
conducted their annual performance evaluation. In accordance
with the requirements of the Codes, we undertook an internally
facilitated assessment. I am pleased to report that the evaluation
concluded that each Director is making significant contributions
to debate and discussion and that the Board and its Committees
operate effectively. Further details on the outcome of the
evaluation and its process can be found on pages 61 and 62.

SHAREHOLDER ENGAGEMENT
Our engagement with shareholders is outlined in the Corporate
Governance report on and in the Remuneration report in the
letter from the Chair to the Remuneration Committee on page 65.

I am interested in hearing the views of our shareholders and
ensuring that the Board takes these into account when
considering the strategic direction of the Group.

BUSINESS FOCUS
We continually strive to have high standards of corporate
governance and the report that follows has been prepared
in order to provide shareholders with a comprehensive
understanding of our governance framework and to meet
the requirements of the Codes, the Listing Rules and the
Disclosure Guidance and Transparency Rules. A fuller
explanation of our compliance can also be found on our
website at www.intertek.com. I hope this provides you with
more information and gives a greater insight into the discussions
held at the Board and its Committee meetings during the year.

Sir David Reid
Chairman

INTERTEK INNOVATIONS

INTERTEK HELPS BRING
RECYCLABLE COFFEE CUP
TO MARKET

Intertek has supported Frugalpac, a pioneering UK
packaging firm, in developing a recyclable coffee
cup. The innovative cup is now being trialled by
some of the world’s major coffee brands.

Intertek helped in assessing the viability of the
proposed recyclable cup by conducting and
managing recycling trials, testing the cup’s
functional performance, and measuring the cup’s
carbon footprint.

As companies develop new innovations, testing,
measuring and proving the environmental impact of
a product is becoming increasingly important, both
to manufacturers and ultimately consumers.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

CORPORATE GOVERNANCE

The Board is responsible to shareholders for ensuring the
sound running of the Company in accordance with best practice
corporate governance. The Codes set out five key areas:
Leadership, Effectiveness, Accountability, Remuneration and
Relations with Shareholders. The disclosures that follow mirror
these sections and together with the Remuneration report, Audit
Committee report and the Nomination Committee report, set out
on pages 65 to 80, 81 to 85, and 86 and 87 respectively describe
how the Company has applied the main and supporting principles
and complied with the provisions of the Codes throughout the year.

LEADERSHIP

THE ROLE OF THE BOARD
The Board is collectively responsible and accountable to
shareholders for providing entrepreneurial leadership of the
Company to ensure that the strategic aims and financial
performance are delivered within a framework of prudent and
effective control systems. Our strategy and progress towards
its delivery are set out in the Strategic report.

The Board has the ultimate responsibility to the Company’s
shareholders for the conduct of the business and also establishes
the Company’s policies. There is a clear division of responsibility
between the running of the Board and the executive
responsibility for running the Company’s business. The Board
Approval Matrix formally outlines the matters specifically
requiring the consent of the full Board. The Board also delegates
specific responsibilities, subject to certain financial limits, to
management and this is governed by the Authorities Cascade,
which is regularly reviewed and updated to meet business needs.
The Board decides and reviews all key policies and regulations for
the Company, its strategy, operating plans, acquisitions, corporate
governance, major investments and disposals, appointment and
removal of Directors, risk management, financial reporting, audit,
sustainability, ethics, the environment and people policies.

The Board also reviews and approves the method and approach
to risk management and internal control systems and the Group’s
risk register. The overall powers of Directors are set out in the
Company’s Articles of Association (‘Articles’) and may be amended
by special resolution of the shareholders. The Board may exercise
all powers conferred on it by the Articles in accordance with the
Companies Act 2006 and other applicable legislation.

ROLES AND RESPONSIBILITIES
In line with the Codes there is a clear division of responsibilities
between the Chairman and the Chief Executive Officer, and these
responsibilities have been formalised in writing. Their key
responsibilities are set out in the following table:

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

Role
Chairman

Responsibility

Name
Sir David Reid • Leadership and governance of the
Board to ensure its effectiveness.

• To ensure that the Directors
receive accurate, timely and
clear information.

• To ensure that there is effective
two-way communication with
shareholders.

• To facilitate the effective

contribution to the Board of
the Non-Executive Directors.
• Hold meetings with the Non-
Executive Directors without
the Executives present.

André Lacroix • Proposes and agrees the strategy

Chief
Executive
Officer

with the Board.

• Run the day-to-day operation
of the business in line with the
agreed strategy and commercial
objectives.

• Be responsible for promoting
and conducting the affairs of
the Company with the highest
standards of ethics, integrity
and corporate governance.

• Lead the Executive Management

Team.

• Provide a sounding board for

the Chairman.

• Be responsible for leading

the Directors’ review of the
Chairman’s performance.
• Be available to meet with

shareholders should they have
concerns that have not been
resolved through normal channels.

Michael
Wareing

Senior
Independent
Non-
Executive
Director

GROUP COMPANY SECRETARY
The Group Company Secretary supports the Chairman in the
delivery of the Board and governance procedures, in particular
with the planning of agendas for the annual cycle of Board and
Committee meetings, the planning of the induction for new
Directors and in ensuring that information is made available to
the Board members on a timely basis. She arranges for the
Non-Executive Directors to meet with investors to discuss
aspects of Intertek's corporate governance arrangements on
request and supervises the arrangements for them to visit
Intertek’s operations to enhance their knowledge and
understanding of the business.

The Group Company Secretary also supports the Board by
providing advice and services, including access to independent
professional advice, at the Group’s expense, and ensures that an
accurate record of all the meetings and Committee meetings is
taken. If a member of the Board has any concerns about the
Company or any of the decisions taken, this would be recorded
in the minutes. No such concerns were raised during the year.

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

The Company has granted an indemnity, to the extent permitted
by law, to each of the Directors and the Group Company Secretary.
Directors’ and Officers’ liability insurance is also in place.
EFFECTIVENESS

As at 31 December 2016, the Board comprised the Chairman, two
Executive Directors and six Non-Executive Directors. Biographical
details of individual Directors are set out on pages 58 and 59.

The Board’s composition gives Intertek an appropriate balance of
skills, experience, independence and knowledge to ensure the
business continues to be run effectively. A key focus is to build an
effective and complementary Board, whose capability is
appropriate for the scale, complexity and strategic positioning of
the Group’s business.

DIVERSITY

33%

67%

Male

Female

COMPOSITION

TENURE NON-EXECUTIVES

Chairman

Executives

Non-Executives

Under 1 year

1 to 3 years

3 to 6 years

16%

17%

67%

The Nomination Committee is responsible for reviewing the
composition of the Board and its Committees and assessing
whether the balance of skill, experience, independence and
knowledge is appropriate to enable them to operate effectively.

On 25 May 2016, Edward Astle stepped down from the Board as
announced earlier in the year and then, on 26 May 2016, Andrew
Martin was appointed to the Board as a Non-Executive Director
and member of the Audit Committee following a selection
process led by the Nomination Committee. More detail on the
process for appointments can be found in the report of the
Nomination Committee on page 86.

EXPERIENCE OF THE BOARD BY NUMBER
Number of Board members with experience in the sector as at
31 December 2016.1

Finance

Government
services

Industries International

Listed
Company

Risk
management

1. When a Director is considered to have experience in multiple sectors, they have

been recognised in all relevant areas.

The Company’s Non-Executive Directors provide a strong,
independent and external insight to the Board’s proceedings and
bring with them wide-ranging experience and knowledge from
previous roles held in other business sectors and industries which
complement the various sectors in which the Company operates.
The Board has reviewed the independence of the Non-Executive
Directors, other than the Chairman, and has determined that all
remain independent in character and judgement.

The Non-Executive Directors are appointed for specified terms
subject to election and re-election by shareholders at the AGM
each year, if the Board, on the recommendation of the Nomination
Committee, deems it appropriate that they remain in office. Any
term beyond six years for a Non-Executive Director is subject to a
particularly rigorous review to ensure the progressive refreshing
of the Board to meet the evolving needs of the Company. The
Letters of Appointment of the Non-Executive Directors, as well as
the Service Agreements of Executive Directors, are available for
inspection at the Company’s registered office and at the AGM.

DIRECTORS’ CONFLICTS OF INTEREST
To assist Directors in complying with their duty to avoid conflicts,
or possible conflicts, a formal procedure is in place. The Directors
are advised of the process for dealing with conflicts of interest
upon appointment and whenever any Director considers that he
or she is, or may be, interested in any contract or arrangement to
which the Company is, or may be, a party, the Director gives due
notice to the Board in accordance with the Companies Act 2006
and the Company’s Articles of Association.

The Conflicts of Interest Register is maintained by the Group
Company Secretary and the Board undertakes an annual review
of each Director’s interests, if any, including outside the Company.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

BOARD OF DIRECTORS

4 Alan Brown

Non-Executive Director

Appointed to the Board as a Non-Executive
Director in April 2011. He is currently Group
Chief Executive Officer of ASCO Group,
an international oilfield support services
business. Alan was Chief Executive Officer
of Rentokil Initial plc for five years until
October 2013. He spent 25 years at
Unilever PLC where he rose through a
variety of finance roles in the UK and
Europe and then general management in
Taiwan and China. His last four years were
as Executive Chairman of Unilever China.
Following this, Alan returned to the UK as
Chief Financial Officer at Imperial Chemical
Industries PLC taking a leading role in the
divestment of the company. Alan is a
Trustee of St Cuthbert's Day Care Centre.

Committees:

Nomination

Audit

Remuneration

1 Sir David Reid
Chairman

Appointed to the Board in December 2011
and became Chairman in January 2012.
Sir David Reid retired as Non-Executive
Chairman of Tesco PLC in November 2011
after serving in that role since April 2004.
Prior to that he was Deputy Chairman of
Tesco PLC and had served on the Tesco
Board since 1985. David is Chairman of
the charity Whizz-Kidz. In February 2012
he was appointed a member of the Global
Senior Advisory Board of Jefferies
International Limited, a global securities
and investment banking group. He was
formerly the Senior Independent Non-
Executive Director of Reed Elsevier
Group PLC (now RELX Group), Chairman
of Kwik-Fit Group Ltd, Non-Executive
Director at Greenalls Group Plc (now
De Vere Group), Legal & General Group
Plc and Westbury plc.

2 André Lacroix

Chief Executive Officer

Appointed to the Board as Chief
Executive Officer in May 2015. André is
an experienced Chief Executive with a
strong track record of delivering long-term
growth strategies and shareholder value
with global companies across diverse
territories. André was previously Group
Chief Executive of Inchcape plc from
2005 to 2015 and prior to this he was
Chairman and Chief Executive Officer
of Euro Disney S.C.A. From 1996 to 2003
he was the President of Burger King
International, previously part of Diageo.
André is currently the Senior Independent
Director of Reckitt Benckiser Group plc.

3 Edward Leigh

Chief Financial Officer

Appointed to the Board as Chief Financial
Officer in October 2014. Joined Intertek
in March 2013 as the Group’s Financial
Controller. Prior to that, Edward spent nine
years at Dixons Retail plc, where he held
several senior financial management
positions, including Divisional & Corporate
Development Finance Director, UK & Ireland
CFO and Group Financial Controller. From
1995 to 2004 Edward held commercial
financial leadership roles at Procter &
Gamble Co. covering the UK and
international markets.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

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REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

5 Dame Louise Makin

Non-Executive Director

R N

Appointed to the Board as a Non-
Executive Director in July 2012. Dame
Louise Makin is currently Chief Executive
Officer of BTG plc, a growing international
specialist healthcare company, a position
she has held since 2004. Before joining
BTG, Louise was at Baxter Healthcare from
2000, holding the roles of Vice President,
Strategy & Business Development Europe,
and from 2001, President of their
Biopharmaceuticals division, where she
was responsible for Europe, Africa and the
Middle East. Prior to her time at Baxter, she
was Director of Global Ceramics at English
China Clay, and in her earlier career, held a
variety of roles at ICI between 1985 and
1998. Louise is a Trustee of The Outward
Bound Trust, an Honorary Fellow of St
John’s College Cambridge, and a Non-
Executive Director of Woodford Patient
Capital Trust plc. She was previously
a Non-Executive Director of Premier
Foods plc.

6 Andrew Martin

Non-Executive Director

Appointed to the Board as a Non-Executive
Director in May 2016. He currently holds a
non-executive directorship with easyJet plc
where he is a member of the Audit,
Nomination and Remuneration Committees
and is Chairman of the Finance Committee.
From 2012 to 2015, Andrew was the Group
Chief Operating Officer for Europe and
Japan for Compass Group PLC and prior to
that served as their Group Finance Director
from 2004 to 2012. Before he joined the

Compass Group, he was the Group Finance
Director at First Choice Holidays plc.
Andrew also previously held senior financial
positions with Forte plc and Granada Group
plc and was a partner at Arthur Andersen.

7 Gill Rider CB

Non-Executive Director

Appointed to the Board as a Non-
Executive Director in July 2015. She
currently holds non-executive
directorships with Pennon Group Plc,
where she chairs the Sustainability
Committee and Charles Taylor Plc where
she chairs their Remuneration Committee.
She is the Senior Independent Director at
both. Gill is also the Chair of Council (Board)
of the University of Southampton and was
the President of the Chartered Institute of
Personnel & Development for the last five
years. Formerly Gill was head of the Civil
Service Capability Group in the Cabinet
Office reporting to the Cabinet Secretary
and prior to that held a number of senior
positions with Accenture culminating in
the post of Chief Leadership Officer for
the global firm. She was previously a
Non-Executive Director of De La Rue plc.

8 Michael Wareing CMG
Senior Independent
Non-Executive Director

R N A

Appointed to the Board as a Non-
Executive Director in April 2011. He is
currently Chairman at Cobham plc and was
previously a Non-Executive Director and
Audit Committee Chairman at Wolseley plc.
Michael has major international and board
level knowledge gained during an

extensive global career up to senior
partner level at KPMG, where his last
position was as International Chief
Executive Officer, which he occupied
for four years until 2009. He has
completed two roles on behalf of the
British Government, namely as the
Economic Development Advisor to the
Government of Afghanistan (2011 to
2015) and as the Prime Minister's Special
Envoy for Reconstruction in Southern
Iraq (2007 to 2009).

9 Lena Wilson CBE

Non-Executive Director

Appointed to the Board as a Non-
Executive Director in July 2012. She is
currently Chief Executive Officer of
Scottish Enterprise, Scotland's national
economic development agency, a member
of Scotland's Financial Services Advisory
Board and Chair of Scotland's Energy Jobs
Taskforce. Prior to this, she was Chief
Executive Officer of Scottish Development
International (Scotland's international
trade and investment arm) and Chief
Operating Officer, Scottish Enterprise.
Lena was also a Senior Advisor to The
World Bank in Washington DC on private
sector development for developing
countries. Lena is an Ambassador for the
Prince and Princess of Wales Hospice and
the Edinburgh Military Tattoo. She served
on the Board of the Prince's Scottish Youth
Business Trust for 10 years.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

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REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

CORPORATE GOVERNANCE
continued

DIRECTORS’ CONFLICTS OF INTEREST (CONTINUED)
Any conflicts of interests are reviewed when a new Director is
appointed, or if a new potential conflict arises. Directors abstain
from voting when there is a vote to approve their own reported
conflicts. During the year, this process operated effectively.

BOARD ACTIVITY DURING THE YEAR
The Chairman, and respective Committee Chairs, develop and
agree a forward agenda for Board and Committee meetings for
the year ahead to ensure that proper oversight of key areas of
responsibility are scheduled regularly and that sufficient time
is allocated during the year for the Board to fully consider
strategic matters.

Papers, including minutes of Board and Committee meetings
held since the previous meeting, are circulated in advance of each
meeting. During 2016, there were five scheduled Board meetings
in addition to frequent ad-hoc contact between Directors to
discuss the Group’s affairs and the development of its business.

Agenda items for 2016 included:

• Updates on Group strategy and commercial objectives;

• Chief Executive’s Business Performance Reports;

• 2016 annual budget;

• Approval of full year results, Annual Report and Accounts,

half year results, the AGM circular and dividends;

• Reports of the activities of the Audit, Remuneration and

Nomination Committees;

• Reappointment of Directors at the 2016 AGM;

• Approval of changes to the composition of the Board and

its Committees;

• Conflicts of interest;

BOARD MEMBERSHIP AND MEETING ATTENDANCE

Number of meetings
held in 2016

Eligible to
attend

Board Members
Sir David Reid
Chairman
André Lacroix
Chief Executive Officer
Edward Leigh
Chief Financial Officer
Edward Astle
Non-Executive Director
(stepped down 25 May 2016)
Alan Brown
Non-Executive Director
Dame Louise Makin
Non-Executive Director
Andrew Martin
Non-Executive Director
(appointed 26 May 2016)
Gill Rider
Non-Executive Director
Michael Wareing
Senior Independent
Non-Executive Director
Mark Williams
Non-Executive Director
(passed away 6 March 2016)
Lena Wilson
Non-Executive Director
When required the Board also met at short notice on a quorate basis.

Attendance

1. Andrew Martin was unable to attend one meeting due to a prior commitment

entered into before his appointment to the Board.

2. Mark Williams missed one meeting due to illness. He passed away on

• Updates on governance, sustainability, legal, risk, internal

6 March 2016.

controls and compliance;

3. Lena Wilson was unable to attend one meeting due to an illness in the family.

• Updates on developments, acquisitions and disposals; and

• Talent mapping and succession planning.

The Non-Executive Directors also receive monthly Business
Performance Reports and information which enables them to
review the performance of the Group and management against
the agreed strategy, budget objectives and prior period
performance. As well as the above, during the year the Board
receives updates on debt financing and investor relations.

Since the year-end, the Board also approved the Annual Report
and Accounts for 2016 and has concluded that, taken as a whole,
they are fair, balanced and understandable. The Notice of Annual
General Meeting was also approved, the payment of a final
dividend to shareholders was recommended and the Board has
received and discussed the report on the effectiveness of the
Board during 2016.

BOARD MEETING ATTENDANCE
The Directors’ attendance at Board meetings during the year is
set out in the following table. Details of the Directors’ Committee
attendance are set out in their respective reports.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

Whenever a Director is unable to attend a meeting, they will
go through the papers, which have been circulated before the
meeting, and give feedback to the Chairman. There are also
meetings held between the Chairman and the Non-Executive
Directors without Executive Directors and management
in attendance.

BOARD VISIT TO CHINA
As part of a familiarisation programme to widen the Board’s
understanding of the Group’s business, the Board visited the
Intertek operations in China in October 2016. The visit provided
an excellent opportunity for Board members to meet with the
China management team and to visit sites in the region. The local
management team presented on the drivers of the local
operations and the opportunities in the region. There was also
time for informal interaction between the Board and senior
management after the meetings. The combination of laboratory
visits and presentations by colleagues was well received and gave
the Board an in-depth view of the business in China and the
environment in which Intertek operates.

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

The Intertek Board visited our operations in China as part of a familiarisation
programme to widen their understanding of our businesses.

Intertek Chairman, Sir David Reid, visited PSI in both Houston, Texas and
Orlando, Florida.

DIRECTORS’ INDUCTION AND DEVELOPMENT
There is a formal induction programme which is tailored to meet
the needs of new Directors. This is managed by the Chairman
and the Group Company Secretary. During the programme, new
Directors receive background information on the Company and
details of Board procedures, Directors’ responsibilities and various
governance related issues. The induction also includes a series of
meetings with other members of the Board, senior members of
management and external advisors.

During the year Andrew Martin undertook his induction programme
including orientation from relevant senior executives from the
operations and other functional areas to ensure the development
of a deeper understanding and knowledge of Intertek. He also
received information about the business operations, internal audit
activities, Group risks and management processes and procedures.
During September 2016, Andrew travelled to various sites and
laboratories in the UK and Europe to visit the operations and meet
local management. Gill Rider also joined him on some of these visits
as part of her induction into the business.

In addition to the Board’s visit to China, the Chairman had the
opportunity to visit the Intertek site in Kista, Sweden. He was
hosted by the Country Manager for the Nordic and Baltic
countries. In October 2016 the Chairman also visited PSI (part
of Intertek’s Building & Construction business) in both Houston,
Texas and Orlando, Florida. The Chairman was hosted by the EVP
Americas, North East Asia and Australasia and the SVP, Building
& Construction and was given an update on current and
future projects.

All Directors are kept up to date with information about Intertek’s
business and there is an ongoing programme of information
dissemination. It is important that the Directors have an
appreciation of the business both in the UK and overseas. During
the year there were presentations from senior management to
the Board and meetings have been held on regional strategy to
increase the understanding of operations, opportunities and risks.
The Group Company Secretary, in conjunction with the Group’s
advisors, monitors legal and governance developments and
Directors are regularly updated on such matters.

PERFORMANCE EVALUATION
The effectiveness of the Board and its Committees is reviewed
annually and an independent externally facilitated review is
conducted every three years. A full externally facilitated Board
evaluation exercise was last conducted in 2015 and reported
on in the 2015 Annual Report and Accounts.

Board, Committee and Directors’ performance cycle

Year 1 2015/2016
Externally facilitated evaluation conducted
by an independent consultant

Year 2 2016/2017
Internal review

Year 3 2017/2018
Internal review

2016 Internal Board and Committee evaluation
The evaluation process was led by the Chairman, with the
support of the Group Company Secretary and entailed:

• the completion of detailed questionnaires by each Board

member;

• discussions on the outcomes and recommendations with

the Chairman and each Board member; and

• following discussion of the results of the evaluation with the
relevant Committee and the Board as a whole, identifying and
agreeing areas for improvement.

Last year’s Effective Board Review 2015 was about transition
from the previous leadership of the Group to a new era of
leadership under the CEO, André Lacroix and his team.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

CORPORATE GOVERNANCE
continued

This year’s Effective Board Review 2016 covers how the Board is
actively progressing and implementing the agreed strategy and
putting in place the strategic initiatives and capability to deliver
sustainable growth and strong returns for our shareholders.
This will move the Group from good to great.

The key findings of this year’s report are very positive:

• The Board continues to go from strength to strength.

• The strategy is now well embedded and the Board is
looking forward to implementation delivering further
value for the business.

• The leadership of the CEO is very strong and making a real

difference, with good early results.

• Despite the significant challenges in the Oil & Gas industry, the
Group results have delivered a strong performance in Revenue,
Earnings and Cash.

• The TSR for the year 2016 has increased by 27.3%,

a strong absolute performance and also strong relative
to Intertek’s peers.

• Governance is seen as strong. Importantly, this year a strong
vote (96%) on the approval of our 2016 Remuneration report
and Policy was achieved.

• Risk management and controls have been revamped and
the CEO has set great 'tone from the top' in this respect.

• Risk Committee has been separated from the Audit & Risk
Committee and reports into the Board but is led by senior
operational management.

• The Board feels that the quality and level of information and
papers are good, and the progress on the strategic agenda is
reviewed and discussed at each meeting. There is good balance
and constructive debate at the meetings. The Board visit to
Intertek’s large and successful business in China was seen as a
highlight. The CEO also encourages Non-Executives to visit lab
sites and management covering the important geographies
and business lines.

• The Board, led by the Chairman, reviews the performance
of our Non-Executives, and also the skills and experience
needed looking forward; and then plans succession and
refreshment accordingly.

• The Board is pleased with the energy and focus on people
in terms of talent planning and management development
thereby increasing our capabilities to be best in class in
Intertek’s sector. This will also provide a stronger platform
and more choice for management succession at both senior
and lower levels.

• The Board supports the way the CEO has raised the bar on
customer focus on sales, service and customer satisfaction
across the business and specifically on the growth platforms
such as total business assurance.

• There is good engagement with shareholders by senior
management and the IR team. The Chairman received
good feedback in January/February 2017 from his visits to
shareholders, who accounted for some 25% of the portfolio.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

Looking forward,

• Our teams are excited and motivated by the strategy and plans

we are making.

• There is significant energy and resolve through our people now
going into the implementation phase of our strategy both on a
twin track basis in the shorter term performance and also the
transformational plans for the medium and longer term.

• Our Board is a good team with a will to succeed. This review
recognised the rapid progress being made and added
constructive builds on how we could continue to improve our
performance on the two key areas critical for our success as a
Group; our People and our Customers.

Chairman and Director evaluation
The Non-Executive Directors, led by the Senior Independent
Non-Executive Director, conducted a performance review of
the Chairman. They considered his leadership, performance and
overall contribution to be of a high standard and he continues
to have their full support.

The Chairman met with each Director to discuss individual
contributions and performance, together with training and
development needs. Following these reviews, the Board remains
satisfied that, in line with the Codes, all Directors are able to
allocate sufficient time to the Company to enable them to
discharge their responsibilities as Directors effectively and
that any current external appointments do not detract from
the extent or quality of time which the Director is able to
devote to the Company.

The Board recommends that shareholders should be supportive
of their election or re-election to the Board at the 2017 AGM.

ACCOUNTABILITY

GOVERNANCE FRAMEWORK
Board Committees
The Group has a clear Governance Framework, as set out in the
diagram on the next page, which explains how authority is
delegated from the Board.

During the year, the Board took the decision to separate out the
responsibility for risk from the former Audit & Risk Committee. The
principal Board Committees now comprise the Audit Committee,
the Nomination Committee and the Remuneration Committee.

Each of the Board’s Committees has received delegated authority
to carry out the business defined in its respective Terms of
Reference. The Board is satisfied that the Terms of Reference
for each of these Committees reflect current best practice and
satisfy the terms of the Codes. The Terms of Reference for these
principal Committees are available on the Intertek website at
www.intertek.com.

At each Board meeting, the Chair of each Committee provides
the Board with a brief summary of the work carried out by their
Committee, if any, between Board meetings and makes
recommendations to the Board for approval.

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

Further information on the responsibilities and activities
of each of the Committees can be found on pages 65 to 80
(Remuneration Committee), pages 81 to 85 (Audit Committee)
and on pages 86 and 87 (Nomination Committee).

The Board also delegates certain responsibilities to management
and this is governed by the Authorities Cascade which is regularly
reviewed and updated to meet business needs.

OPERATIONAL COMMITTEES
Intertek Executive Management Team
The Intertek Executive Management Team, which comprises the
Executive Directors, EVPs and other senior management, meets
regularly to discuss and decide business and operational issues.

The biographical details of the members of the Executive
Management Team can be found on pages 22 and 23.

Investment Committee
The Board delegates certain responsibilities to the Investment
Committee within certain limits as outlined in the Board Approval
Matrix. The Investment Committee is responsible for reviewing
significant contracts, leases and acquisitions, undertaking post
investment appraisal reviews, and overseeing capital expenditure
and investments as defined in the Authorities Cascade, and
forms part of the Intertek Corporate Governance Framework.
The membership of the Investment Committee consists of the
CEO and the CFO. The Committee is supported by the Deputy
Company Secretary.

Group Risk Committee (‘GRC’)
The GRC was established during the year replacing the Risk,
Control & Assurance Committee to complement the work
of the Board. It meets quarterly, and its purpose is: the
management of risk; to develop, oversee and promote the
continuous improvement of the Group’s risk management,
internal controls and assurance framework and the related
procedures and systems; and to oversee the development,
implementation and adoption of any policies, procedures and
systems which are identified as being required to address, or as
a consequence of, Group risks. The GRC provides an integrated,
Group-wide approach to identifying and managing the Group's
emerging and systemic risk environment.

Any breaches of the Group’s systems of internal and risk
management controls that are identified by the Group’s control
review procedures are reported to the GRC and corrective action
is taken.

The GRC comprises the CEO, CFO, EVP Human Resources and the
Group General Counsel.

Ethics & Compliance Committee
In January 2016, the Ethics & Compliance Committee was
established. It meets monthly and is responsible for the
monitoring of ethical, compliance and HSE issues affecting any
part of the Intertek Group. The membership consists of the CEO,
CFO, EVP Human Resources, the Group General Counsel and the
SVP Global Customer Service & ATIC Operational Excellence.

Intertek Group plc Shareholders

Intertek Board of Directors

Audit
Committee

Nomination
Committee

Remuneration
Committee

Group Risk
Committee

Investment
Committee

Executive
Management
Team

Ethics &
Compliance
Committee

Divisional & Country
Management

Support Functions

Risks

Controls

Board Committees

Operational Committees

Reports to the Board through
the CEO

INTERNAL CONTROL AND RISK MANAGEMENT
The Board is responsible for monitoring the Group’s system
of internal control and risk management and for reviewing its
effectiveness so as to be in line with best practice. Risk
management and internal controls are embedded in the running
of each business line, country and support function. The risk
register process follows the global organisation, and risk registers
are produced for the top 30 countries and for each business line
and support function, and then consolidated at Group level. The
GRC reviews the risks and mitigation plans throughout the year,
and the Board approved the final Group Risk Register in December.

A detailed verification programme provides assurance to the
Audit Committee when checking that all the statements made
in the Annual Report and Accounts are accurate. Intertek’s Manual
of Accounting Policies and Procedures is issued to all finance staff
and gives instructions and guidance on all aspects of accounting
and reporting that apply to the Group. Intertek's internal control
environment is defined by the Core Mandatory Controls
Framework, which applies across the Group in all locations. This
policy is reviewed and refreshed on a regular basis to reflect the
changes in the risk, governance and operating environments.

CODE OF ETHICS AND ZERO TOLERANCE APPROACH
The Group's key ethics and integrity policies are set out in the
Code of Ethics, which covers topics such as health and safety,
anti-bribery, integrity, labour and human rights. The Group has a
zero-tolerance policy to any breaches of the Code of Ethics.

Training on the Code of Ethics is provided to all new employees
when they join Intertek, and all employees are required to
complete refresher training annually.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

CORPORATE GOVERNANCE
continued

The Company has also consulted extensively with shareholders in
relation to remuneration leading up to the 2016 AGM.

2016 INVESTOR RELATIONS CALENDAR

March
April

May

Full Year Results 2015
Annual Results Roadshows
Pan-European Business Services Conference
Testing, Inspection & Assurance Conference
Paris Roadshow
Netherlands Roadshow
AGM Trading Update
Nordic Investor Forum
Poland Roadshow
Global Consumer, Technology & Services
Conference
European Select Conference
Half Year Results 2016
Interim Results Roadshows
September Business Services Conference Frankfurt

August

June

October

November
December

Annual Support and Business Services Conference
Strategic Decisions Conference
Testing, Inspection & Certification Conference
Paris Roadshow
Trading Statement
Premium Review Conference
Annual European Business Services Conference
US Roadshow
Copenhagen Roadshow

ANNUAL GENERAL MEETING ('AGM')
This year the AGM will be held on 26 May 2017 at 9.00a.m.
in the Marlborough Theatre, No. 11 Cavendish Square, London,
W1G 0AN. The AGM provides the opportunity for all shareholders
to develop their understanding of the Company’s strategy and
operations, to ask questions of the full Board on the matters
put to the meeting, including the Annual Report and Accounts.
All Board members attend the AGM and, in particular, the Chairs
of the Audit, Nomination and Remuneration Committees are
available to answer questions. The Company proposes a
resolution on each separate issue and does not combine
resolutions inappropriately. The Notice of the AGM (‘Notice’)
is sent to shareholders by e-communications or by post, and
is also available on the website at www.intertek.com.

OTHER DISCLOSURES
Other disclosures required by paragraph 7.2.6 of the Disclosure
Guidance and Transparency Rules and the Companies Act 2006
are set out in the Other statutory information section on pages
88 to 90.

When completing the training, 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. Code
of Ethics training (including the importance of the Labour and
Human Rights Policy) is also provided by the Group Compliance
function as part of its programme of site visits.

The Code of Ethics is available on the Group’s website.

CONFIDENTIAL HOTLINE
Intertek is committed to maintaining a culture where issues of
integrity and professional ethics can be raised and discussed.
There is a global hotline system, which is operated by an
independent third party, providing a web-based system in 24
languages, for the confidential reporting of any suspected or real
breaches in compliance by any employee, contractor, customer or
other stakeholder. There is also a telephone hotline where calls
are answered 24/7 by trained specialists. This underpins the
ethics programme and also helps the business protect itself
against any unethical behaviour. The details of the hotline have
been communicated to staff through the Group’s main intranet
page and by posters at Intertek locations. All reports are notified
immediately to the Ethics & Compliance Committee and
investigated thoroughly, with action taken when required.
Reports of significant matters raised on the hotlines are also
provided to the GRC, if appropriate.

COMPLIANCE
Dedicated compliance officers across the Group’s markets
undertake investigations of issues that arise either from reports
to the hotline system or from other sources, such as routine
compliance questions. The Group Compliance function is
independent of the Group's operational business and reports
directly to the Group General Counsel.

REMUNERATION

The Remuneration report, comprising the Remuneration
Committee Chair’s annual statement and the Annual Report
on Remuneration are set out on pages 65 to 80.

RELATIONSHIP WITH SHAREHOLDERS

SHAREHOLDER ENGAGEMENT
The views and opinions of shareholders are important to the
Company and an ongoing engagement programme for major
shareholders is maintained.

The Chairman and the Senior Independent Non-Executive Director
are available to meet with shareholders. The other Non-Executive
Directors are also available to meet with institutional shareholders
to discuss any matters relating to the Company. The Company’s
website has an investors section which includes a wealth of
information that may be of interest to shareholders and investors.

Intertek's largest shareholders are invited annually to meet with
the Chairman to share their views and discuss any corporate
governance matters. In 2016 shareholders holding more than 52%
of the share register collectively were invited to these meetings.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

REMUNERATION REPORT

DEAR SHAREHOLDER
First, I would like to thank you for the support you have shown
with your votes for both our reward policy and the Remuneration
report for 2015. Your input to the consultations preceding the
Annual General Meeting ('AGM') in May 2016 proved invaluable
and helped us achieve a clear majority for the policy presented on
the following pages. This should now remain in force unchanged
for the next three years.

In the business environment and markets, change continues,
presenting different challenges to the three main economic
sectors (Products, Trade and Resources) in which Intertek
operates. The launch and cascade of Intertek’s 5x5 differentiated
strategy for growth in early 2016, with its clear corporate goals,
strategic priorities and enablers, provides guidance and focus to
managers and employees on improving shareholder returns and
creating new opportunities.

On remuneration, the major change in 2016 was the approach
to the annual incentive. As indicated in last year’s report, we
have reduced the number of measures and aligned the annual
incentive more closely to the delivery of our growth strategy.
From 1 January 2016 the annual incentive has been based solely
on financial performance with three main indicators weighted as
shown below:

The elements specifically required to be audited within the
shaded sections of pages 73 to 77 have been audited by PwC
LLP in compliance with the requirements of the Regulations.

The performance of the 2014 LTIP, which was measured based
on EPS and relative TSR performance over the three-year period
to 31 December 2016, resulted in a payout of 42.35%.

The salary increase for the Executive Directors in 2017 has been
set at an inflation-based 2.0%.

In line with best practice when Edward Leigh was appointed as
CFO, his base salary was positioned behind market levels to reflect
that this was his first appointment as CFO. Having delivered over
two years of performance in this role, the Committee intends to
review the positioning of his base salary during the course of
2017, and we will consult on this matter with shareholders.

Information for André Lacroix for 2015 is for remuneration
from 16 May 2015, the date of his appointment as CEO, unless
stated otherwise.

Finally, I hope you will find that you are able to support the level
of remuneration we have determined for 2016 as submitted for
your approval at this year’s AGM.

• 80% – a matrix based on revenue growth and operating profit

Yours sincerely,

growth; and

• 20% – based on return on invested capital performance.

Intertek delivered a strong performance in revenue, earnings
and cash generation in 2016 with the achievement of 18.5%
growth in revenue at actual rates (8.8% at constant currency),
19.3% growth in adjusted operating profit (10.4% at constant
currency) and strong ROIC at 21.7% against stretching
performance targets.

For the annual bonus, this performance resulted in the
Remuneration Committee approving an overall payout for Group
performance of 70.24% of maximum. As per policy, the proposed
bonus was subject to a quality of earnings review at the end of the
year to ensure that the pay-out was appropriate and commensurate
with the underlying business performance and the Group’s culture
and values.

Gill Rider
Chair of the Remuneration Committee

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

REMUNERATION REPORT
continued

DIRECTORS’ REMUNERATION
POLICY REPORT

The section below sets out the Remuneration policy for
Executive and Non-Executive Directors, which was approved
by a resolution of the shareholders and became effective from
25 May 2016, the date of the 2016 AGM.

The policy remains unchanged. Tables have been updated with
current data.

POLICY OVERVIEW
We continue to focus on ensuring that our remuneration policy is
appropriate for the nature, size and complexity of the Group,
encourages our employees in the development of their careers
and is directed to deliver continued profitable growth.

Our remuneration strategy is to:

• align and recognise the individual’s contribution to help us
succeed in achieving our growth strategy and long-term
business goals;

• attract, engage, motivate and retain the best available people
by positioning total pay and benefits to be competitive in the
relevant market and in line with the ability of the business
to pay;

• reward people equitably for the size of their responsibilities

and performance; and

• motivate high performers to increase shareholder value and

share in the Group’s success.

Each year the Committee approves the overall reward strategy
for the Group and considers the individual remuneration of the
Executive Directors and certain senior executives.

The Committee reviews the balance between base salary and
performance-related remuneration against the key objectives
and targets so as to ensure performance is appropriately
rewarded. This also ensures outcomes are a fair reflection
of the underlying performance of the Group.

As a global service business, our success is critically dependent
on the performance and retention of our key people around
the world. Employment costs represent the major element of
Group operating costs. As a global Group our pay arrangements
take into account both local and international markets and we
operate a global remuneration policy framework to achieve
our reward strategy.

Our peer groups for the majority of our employees consist of
international industrial or business service organisations and
similar-sized businesses. For our more senior executives we base
our remuneration comparisons on a blend of factors, including
sector, job complexity, location, responsibilities and performance,
whilst recognising the Company is listed in the UK.

We believe that a significant proportion of remuneration for
senior executives should be related to performance, with part
of that remuneration being deferred in the form of shares and
subject to continued employment and longer-term performance.
We also believe that share-based remuneration should form a
significant element of senior executives’ compensation, so that
there is a strong link to the sustained future success of the Group.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

REMUNERATION POLICY FOR DIRECTORS
The following table sets out the key aspects of the Remuneration Policy for Directors:

ELEMENT
OF PAY

PURPOSE AND
LINK TO STRATEGY

OPERATION

MAXIMUM
OPPORTUNITY

PERFORMANCE
MEASURES

BASE
SALARY

To attract and retain high
performing Executive Directors
to lead the Group.

BENEFITS

To provide competitive benefits
to ensure the well-being of
employees.

PENSION

To provide competitive
retirement benefits.

ANNUAL
INCENTIVE
PLAN (‘AIP’)

To drive the short-term
strategy and recognise annual
performance against targets
which are based on business
objectives.

The Committee reviews salaries
annually, taking account of the
scale of responsibilities, the
individual’s experience and
performance.
Whilst the Committee takes
benchmarking information into
account, its decisions are based
primarily on the performance of
the individual concerned against
the above factors to ensure that
there is no unjustified upward
ratchet in base salary.

Benefits include, but are not
limited to, annual medicals, life
assurance cover of up to six
times base salary, allowances
in lieu of a company car or
other benefits, private medical
insurance (for the individual
and his dependants) and other
benefits typically provided to
senior executives.
Executive Directors can
participate in the all-employee
share plans operated by the
Company on the same basis as all
other employees.

Executive Directors can elect
to join the Company’s defined
contribution pension scheme,
receive pension contributions
into their personal pension plan
or receive a cash sum in lieu of
pension contributions.

Awards are based on Group
annual financial performance
targets, with performance
targets set annually by the
Committee.
Normally, 50% of any bonus is
paid in cash and 50% deferred
into shares which will vest after
a period of three years subject to
continued employment.
Accrued dividends on deferred
shares during the deferral period
are paid in cash or shares at the
end of the deferral period.
Not pensionable.
Malus and clawback provisions
apply.

Individual performance is taken
into account when salary levels
are reviewed.

There is no prescribed maximum
annual increase.
The Committee is guided by
the general increase for the
employee population but on
occasions may need to recognise
other factors including, but are
not limited to, development in
role, change in responsibility and/
or variance to market levels of
remuneration.

n/a

The total value of these benefits
(excluding the all-employee
plans) will not exceed 12% of
salary.
The maximum opportunity under
any all-employee share plan is in
line with all other employees and
is as determined by the prevailing
HMRC rules.

Up to 30% of salary.

n/a

The maximum opportunity is
200% of salary for all Executive
Directors.
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 success.
The Committee can adjust
upwards the bonus outturn (up
to the maximum set out above)
to recognise very exceptional
circumstances or to recognise
that circumstances have
occurred which were beyond
the direct responsibility of the
executive and the executive
has managed and mitigated the
impact of any loss.

The annual bonus will be
measured against a range of key
Group financial measures.
The current intention is that
none of the bonus will be subject
to non-financial measures or
personal performance measures.
The Committee, however, retains
the discretion to introduce such
measures in the future, up to a
maximum of 20% of the bonus.
Where the Committee were
to introduce such measures, it
would normally consult with the
Company’s largest institutional
shareholders.
The stretch targets, when met,
reward exceptional achievement
and contribution. There is no
bonus pay-out if threshold
targets are not met.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

REMUNERATION REPORT
continued

ELEMENT
OF PAY

PURPOSE AND
LINK TO STRATEGY

OPERATION

MAXIMUM
OPPORTUNITY

PERFORMANCE
MEASURES

LONG-TERM
INCENTIVE
PLAN (‘LTIP’)

To retain and reward Executive
Directors for the delivery of
long-term performance.
To support the continuity of the
leadership of the business.
To provide long-term alignment
of Executives’ interests with
shareholders by linking rewards
to Intertek’s performance.

SHARE
OWNERSHIP
GUIDELINES

To increase alignment between
executives and shareholders.

NON-
EXECUTIVE
DIRECTORS’
FEES

To attract and retain high
calibre Non-Executive Directors
through the provision of market
competitive fees.

Annual grant of conditional
shares which vest after three
years, subject to Company
performance and continued
employment.
Awards may be made in other
forms (e.g. nil-cost options) if
considered appropriate.
The shares will also be subject
to a six-month holding period
after vesting. The Committee
has the discretion to increase
the length of the holding period
in future years.
Performance targets are set
annually for each three-year
performance cycle by
the Committee.
Accrued dividends during the
vesting period to be paid in
cash or shares at vesting, to
the extent that shares vest.
The Committee may adjust and
amend awards in accordance
with the LTIP rules.

Executive Directors are required
to retain any vested shares (net
of tax) under the Group’s share
plans until the guideline is met.
The guideline should be
met within five years of
the guideline being set.

A proportion of the fees
(at least 50%) are paid in cash,
with the remainder used to
purchase shares.
Fees are determined based
on the responsibility and time
committed to the Group’s
affairs and appropriate
market comparisons.
With the exception of
benefits-in-kind arising from
the performance of duties,
no other benefits are provided,
other than to the Chairman,
who receives a car allowance
of £25,000 per annum.

Up to 250% of salary in respect
of any financial year.

LTIP awards are subject to
performance conditions based
on Earning Per Share (‘EPS’)
growth and relative Total
Shareholder Return (‘TSR’).
At least a quarter of each
award will be based on each
of these measures, with the
split determined each year
by the Committee.
25% of an award will vest
for achieving threshold
performance, increasing
pro-rata to full vesting for
the achievement of stretch
performance targets.
Awards under the TSR element
of the LTIP are also subject
to the satisfaction of a
financial underpin.

n/a

CEO: 200% of salary.
CFO: 200% of salary.

As for the Executive Directors,
there is no prescribed maximum
annual increase. The Committee
is guided by the general increase
for the employee population
but on occasions may need
to recognise other factors
including, but not limited to,
change in responsibility and/
or variance to market levels
of remuneration.

CHANGES TO THE POLICY TABLE
There have been no changes to the policy.

SELECTION OF PERFORMANCE METRICS
The annual bonus is based on performance against a mix of financial measures. The mix of financial measures is aligned to the Group’s
Key Performance Indicators (KPIs) and is reviewed each year by the Remuneration Committee to ensure that they remain appropriate
to reflect the priorities for the business in the year ahead. The targets are set for each KPI to encourage continuous improvement and
challenge the delivery of stretch performance.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

The LTIP is based on EPS growth and TSR performance. EPS is a measure of the Group’s overall financial success and TSR provides an
external assessment of the Company’s performance against the market. It also aligns the rewards received by executives with the
returns received by shareholders. A sliding scale of challenging performance targets is set for each measure. The Committee reviews
the choice of performance measures and the appropriateness of the performance targets prior to each LTIP grant. The Committee
reserves the discretion to set different targets for future awards, without consulting with shareholders. The targets for awards
granted under this Remuneration Policy are set out in the Annual Report on Remuneration.

When setting the targets for the annual bonus and the LTIP, the Remuneration Committee takes into account a range of factors,
including the business plan, prior year performance, market conditions and consensus forecasts.

REMUNERATION SCENARIOS FOR EXECUTIVE DIRECTORS
The charts below illustrate how the Executive Directors’ remuneration packages vary at different levels of performance under the
ongoing policy, which will apply in 2017 for both the Chief Executive Officer (‘CEO’) and Chief Financial Officer (‘CFO’):

VALUE OF REMUNERATION PACKAGES AT DIFFERENT LEVELS OF PERFORMANCE

£’000

6,000

5,500

5,000

4,500

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

£5,455

43%

34%

£3,360

35%

28%

£1,265

100%

37%

23%

LTIP award
Bonus
Basic salary, beneﬁts and pension

£1,359

31%

38%

£527

100%

£2,192

38%

24%

Minimum

On-target
A Lacroix, Chief Executive Officer

Maximum

Minimum

On-target
E Leigh, Chief Financial Officer

Maximum

Points relating to the above table:
1. Salary levels are based on those applying on 1 April 2017.
2. The value of taxable benefits is based on the cost of supplying those benefits (as disclosed) for the year ended 31 December 2016.
3. The value of pension receivable by the CEO and CFO in 2017 is taken to be 30% of salary and 20% of salary respectively.
4. The on-target level of bonus is taken to be 50% of the maximum bonus opportunity.
5. The on-target level of the LTIP is taken to be 50% of the face value of the award at grant.
6. Share price movement and dividend accrual have not been incorporated into the values shown above.

APPROACH TO RECRUITMENT AND PROMOTIONS
The remuneration package for a new Executive Director – base salary, benefits, pension, annual bonus and long-term incentive awards
– would be set in accordance with the terms of the Company’s prevailing approved Remuneration Policy at the time of appointment.
The Committee may set the base salary at a value to reflect the calibre, experience and earnings potential of a candidate, subject
to the Committee’s judgement that the level of remuneration is in the Company’s best interest. The maximum level of variable pay
(annual bonus and long-term incentive awards) which may be awarded to a new Executive Director at or shortly following recruitment
shall be limited to 450% of salary. These limits exclude buy-out awards and are in line with the ‘Remuneration Policy for Directors’ set
out previously.

The Committee may offer additional cash and/or share-based elements to take account of remuneration relinquished when leaving the
former employer when it considers these to be in the best interests of the Company (and therefore shareholders) (‘buy-outs’). Any such
awards would reflect the nature, time horizons and performance requirements attaching to the remuneration it is intended to replace.
Where appropriate the Committee retains the flexibility to utilise Listing Rule 9.4.2 for the purpose of making an award to ‘buy out’
remuneration relinquished when leaving the former employer.

For external and internal appointments, the Committee may agree that the Company will meet certain relocation expenses and
continuing allowances as appropriate. Additionally, in the case of any Executive Director being recruited from overseas, or being
recruited by the Company to relocate overseas to perform their duties, the Committee may offer expatriate benefits on an ongoing

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

REMUNERATION REPORT
continued

basis subject to their aggregate value to the individual not
exceeding 50% of salary per annum.

For an internal Executive Director appointment, any variable
pay element awarded in respect of the prior role may be allowed
to pay out according to its terms, adjusted as relevant to take
into account the appointment. In addition, any other ongoing
remuneration obligations existing prior to appointment
may continue.

If a new Chairman or Non-Executive Director is appointed,
remuneration arrangements will be in line with those detailed
in the Remuneration Policy for Non-Executive Directors set
out in the Remuneration Policy for Directors above.

SERVICE CONTRACTS FOR EXECUTIVE DIRECTORS
The service agreements of the Executive Directors are not
fixed-term and are terminable by either the Company or the
Director on 12 months’ notice and make provision, at the Board’s
discretion, for early termination by way of payment of salary and
pension contributions in lieu of 12 months’ notice. In calculating
the amount payable to a Director on termination of employment,
the Board would take into account the commercial interests of
the Company and apply usual common law and contractual
principles. Any payments in lieu of notice may be paid in a lump
sum or may be paid in instalments and reduce if the Director finds
alternative employment. The service contracts are available for
inspection at the Company’s registered office. The Committee
reviews the contractual terms for new Executive Directors to
ensure these reflect best practice. In summary, the contractual
provisions are:

Provision
Notice period
Common law and contractual
principles
Remuneration entitlements

Change of control

Detailed Terms
12 months
Common law and contractual
principles apply
A bonus may be payable
(pro-rata where relevant) and
outstanding Share Awards
may vest (see below)
No Executive Director’s
contract contains provisions
or additional payments in
respect of change of control.
The treatment of bonus
awards and outstanding
Share Awards will be treated
in line with the relevant plan
rules.

The annual bonus may be payable with respect to the period of
the financial year served. Any share-based entitlements granted
to an Executive Director under the Company’s share plans will be
determined based on the relevant plan rules.

The default treatment under the 2011 LTIP is that any
outstanding awards lapse on cessation of employment.
However, in certain prescribed circumstances, such as death,
ill-health, disability, retirement or other circumstances at the
discretion of the Committee, ‘good leaver’ status may be applied.

For good leavers, awards will normally vest on the original vesting
date, subject to the satisfaction of the relevant performance
conditions at that time and reduced pro-rata to reflect the
proportion of the performance period actually served. However,
the Committee has discretion to determine that awards vest at an
earlier date and/or to disapply time pro-rating, although it is
envisaged that this would only be applied in exceptional
circumstances. Any such incidents, where discretion is applied by
the Committee in relation to Executive Directors, will be disclosed
in the following Annual Report on Remuneration.

The default treatment for deferred bonus awards is that any
outstanding awards lapse on cessation of employment.

However, in certain ‘good leaver’ circumstances (as described
under the 2011 LTIP above), awards will vest in full on the original
vesting date, unless (as permitted under the plan rules) the
Committee determines that awards should vest at an earlier date.

In determining whether an Executive should be treated as a good
leaver or not, the Committee will take into account the reasons
for their departure.

LETTERS OF APPOINTMENT FOR NON-EXECUTIVE
DIRECTORS
The Letter of Appointment for each Non-Executive 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 and after rigorous
review the appointment may be renewed for a further period,
usually three years, if the Company and the Director agree and
subject to annual re-election at the AGM. Each letter of
appointment states that if the Company were to terminate
the appointment, the Director would not be entitled to any
compensation for loss of office.

The table below sets out the terms for all the current Non-
Executive Directors of the Board.

Sir David Reid

Alan Brown*

Dame Louise
Makin

Andrew Martin

Date of Appointment
1 December 2011
Reappointed:
1 December 2014
15 April 2011
Reappointed:
14 April 2014
1 July 2012
Reappointed:
1 July 2015
26 May 2016

Gill Rider

1 July 2015

Michael Wareing 15 April 2011
Reappointed:
14 April 2014
1 July 2012
Reappointed:
1 July 2015

Lena Wilson

Notice Period/
unexpired term as at
31 December 2016
One month /
11 months

One month /
3 months

One month /
18 months

One month /
29 months
One month /
18 months
One month /
3 months

One month /
18 months

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

* Alan Brown will be stepping down from the Board on 24 May 2017

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

CONSIDERATION OF EMPLOYMENT CONDITIONS
ELSEWHERE IN THE COMPANY
When setting the Remuneration Policy for Executive Directors,
the Remuneration Committee takes into account the pay and
employment conditions elsewhere within the Group. When
considering the remuneration arrangements for the Executive
Directors for the year ahead, the Committee is informed of salary
increases across the wider group. The Committee also approves
the overall reward strategy in operation across the Group.

The remuneration strategy set out at the beginning of the
Directors’ Remuneration Policy Report reflects the strategy
in place across all employees across the Group. Although this
remuneration strategy applies across the Group, given the size
of the Group and the geographical spread of its operations, the
way in which the Remuneration Policy is implemented varies
across the Group. For example, bonus deferral applies at the more
senior levels within the Group and participation in the LTIP is at
the Remuneration Committee’s discretion and is typically limited
to senior executives employed within the Group.

Given the geographical spread of the Group’s operations, the
Remuneration Committee does not consider it appropriate to
consult employees on the Remuneration Policy in operation for
Executive Directors.

CONSIDERATION OF SHAREHOLDER VIEWS
The Remuneration Committee takes the views of the
Group’s shareholders very seriously and, as highlighted in the
Remuneration Committee Chair's statement, prior to the vote
on the Annual Remuneration Report at the 2016 AGM took
considerable time to engage with and listen to shareholders
on their views and the Remuneration Policy going forward.
The policy that was approved by shareholders at the 2016
AGM reflects the policy discussed with shareholders during
the consultation process.

LEGACY ARRANGEMENTS
For avoidance of doubt, through this approved Directors’
Remuneration Policy Report, authority is given to the Company
to honour any commitments entered into with current or former
Directors (such as the vesting of past share awards) that
were agreed:

(i)

before the policy set out above, or any previous policy, came
into effect;

(ii) at a time when a previous policy approved by shareholders
was in place provided that the payment is in line with the
terms of that policy; and

(iii) at a time when the relevant individual was not a Director of
the Company and the payment was not in consideration for
the individual becoming a Director of the Company.

ANNUAL REPORT ON REMUNERATION

COMMITTEE MEMBERSHIP AND MEETING ATTENDANCE
Membership and attendance at meetings of the Committee
during the year was as follows:

Number of meetings held in 2016

Committee Members
Gill Rider (Committee Chair)
Dame Louise Makin
Michael Wareing1
Mark Williams2
1. Michael Wareing was appointed to the Committee on 20 April 2016.
2. Mark Williams missed one meeting due to illness. He passed away on

Eligible
to attend
4
4
3
1

Attendance
4
4
3
0

6 March 2016.

Throughout the year, the composition of the Committee was in
compliance with the Codes, with the exception of the brief period
between 6 March 2016 and 20 April 2016 when the Committee
consisted of just two members following the sudden death of Mark
Williams. All members are independent Non-Executive Directors.

On appointment, new Committee members receive an appropriate
induction consisting of the review of the Terms of Reference,
previous Committee meeting papers, meetings with senior
personnel and advisors and, as appropriate, meetings
with shareholders.

The Chairman, CEO and the EVP, Human Resources may,
by invitation, attend the Committee meetings, except when
their own remuneration is discussed. No Director is involved in
determining his or her own remuneration. None of the Committee
members has had any personal financial interest, except as
shareholders, in the matters decided. The Group Company
Secretary acts as Secretary to the Committee.

THE ROLE OF THE COMMITTEE
On behalf of the Board, the Committee:

• determines the Company’s policy on the remuneration of the

Chairman, the Executive Directors and other senior executives;

• determines the remuneration packages of the above, including

any compensation on termination of office;

• reviews the remuneration arrangements for the wider
employee population and considers issues relating to
remuneration that may have a significant impact on the Group;

• provides advice to, and consults with, the CEO on major policy
issues affecting the remuneration of other executives; and

• keeps the remuneration policy under review in the light of

regulatory and best practice developments and shareholder
expectations. Due regard is given to the interests of
shareholders and the requirements of the Listing Rules
and associated guidance.

The Terms of Reference of the Committee are available on the
Intertek website at www.intertek.com.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

REMUNERATION REPORT
continued

THE ACTIVITY OF THE COMMITTEE
The Committee met four times during 2016 and considered:

• Executive Director remuneration;

• the salary for senior management and the determination

of the bonus payments for 2016;

• the TSR and EPS performance results for the 2013 to 2015

share plan award cycles;

• the 2016 bonus targets and performance measures;

• share plan awards for 2016 to 2019 and TSR and EPS

performance criteria;

• Remuneration Policy for Directors including outcomes from

consultation and shareholder feedback;

• the remuneration proposals for new senior employees;

• the departure terms for senior executives;

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 Director.

André Lacroix
André is the Senior Independent Non-Executive Director at
Reckitt Benckiser Group plc for which his earnings from 1 January
to 31 December 2016 were £125,000 which he retained.

STATEMENT OF SHAREHOLDER VOTING
At the 2016 AGM, a resolution was proposed to shareholders to
approve both the Remuneration policy and the Remuneration
report for the year ended 31 December 2015. These resolutions
received the following votes from shareholders:

• the review of the Directors’ Remuneration report to ensure
compliance with Remuneration Reporting Regulations;

Remuneration policy:

• the annual Committee agenda schedule;

• the Committee Terms of Reference;

• the annual Committee evaluation;

• 2016 AGM update and Corporate Governance bodies voting

recommendations; and

• updates on Corporate Governance developments.

ADVISORS
To ensure that the Group’s remuneration practices drive and
support achievement of strategies and are market competitive,
the Committee obtains advice from various independent sources.

In 2015, the Committee selected and appointed Deloitte LLP for
their particular expertise both at a local and global level due to
the worldwide operations of the Group. During 2016 the
Committee continued to receive advice from Deloitte LLP and
following review remain satisfied that the advice is objective and
independent. Deloitte provided no other services to the
Committee during the year under review.

Deloitte are members of the Remuneration Consultants Group
and adhere to the Voluntary Code of Conduct in relation to
executive remuneration consulting in the UK.

The fees paid to Deloitte in the year were £81,370. The charges
for services are calculated on the basis of time spent and the
seniority of the personnel performing the work at their
respective rates.

In favour
Against
Total
Withheld
* Percentage of total issued share capital voted.

Votes
116,806,831
4,383,570
121,190,401
1,386,204

Remuneration report:

In favour
Against
Total
Withheld
* Percentage of total issued share capital voted.

Votes
118,265,856
4,304,004
122,569,860
6,746

%
96.38
3.62
75.09*

%
96.49
3.51
75.95*

A further resolution was proposed to approve the Intertek Group
plc Savings-Related Share Option Scheme. This resolution
received the following votes from shareholders:

In favour
Against
Total
Withheld
* Percentage of total issued share capital voted.

Votes
121,288,154
1,158,001
122,446,155
130,452

%
99.05
0.95
75.87*

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

DIRECTORS’ REMUNERATION EARNED IN 2016
The table below summarises Directors’ remuneration received in 2016 and the prior year for comparison.

Base salary
or fees
£’000

Benefits1
£’000

BIK arising
from
performance
of duties6
£'000

Pension
£’000

Annual
bonus2
£’000

Long-term
incentives
£’000

Sub-total
£'000

Other
£'000

Total
£’000

Executive Directors
André Lacroix

Edward Leigh

2016
20157
2016
2015

908
557
406
390

53
20
27
24

–
–
–
–

273
167
82
785

1,282
1,080
573
772

–
–
994
–

2,516
1,824
1,187
1,264

2,906 3
–
–
–

5,422
1,824
1,187
1,264

Non-Executive Directors
Edward Astle

Gill Rider

Alan Brown

Dame Louise Makin

Andrew Martin
Sir David Reid

1
1
–
–
1
1
–
2
3
–
–
7
7
–
4
1
6
Benefits include allowances in lieu of company car, annual medicals, life assurance and private medical insurance, and the use of a car and driver for the CEO.
With respect to the Non-Executive Directors, other than Sir David Reid who receives a car allowance of £25,000 per annum, no other benefits are provided.
2. This relates to the payment of the annual bonus and Deferred Bonus Share Award for the financial year end. Further details of this payment are set out on the

20168
2015
2016
2015
2016
2015
201610
2016
2015
2016
2015
2016
2015
20169
2015
2016
2015

34
71
69
67
68
66
35
320
320
73
32
98
93
21
65
68
68

35
72
69
67
69
67
35
347
348
73
32
105
100
21
69
69
74

–
–
–
–
–
–
–
25
25
–
–
–
–
–
–
–
–

–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–

Michael Wareing

Mark Williams

Lena Wilson

35
72
69
67
69
67
35
347
348
73
32
105
100
21
69
69
74

following pages.
This relates to the vesting of the Mirror award granted on joining. The value shown is based on the share price of £31.12 which was the closing mid-market quotation
on 25 May 2016, the date of vesting.
This relates to the vesting of the 2014 LTIP award. The value shown is based on the share price of £33.71 which is based on the average share price in the fourth
quarter of 2016. The awards were granted on 10 March 2014 prior to Edward Leigh’s appointment as CFO on 1 October 2014.
The pension contributions for Edward Leigh include the sum of £17,140 (2015: £39,600) which was paid into the Intertek Group Personal Pension Plan, which is a
defined contribution scheme.
Certain expenses relating to the performance of a Director’s duties (not included in the Benefits column above) such as travel to and from Company meetings and
related accommodation have now been classified as taxable. In such cases, the Company will ensure that the Director is not out of pocket by settling the related tax via
the PSA. In line with current regulations, these taxable benefits have been disclosed and are shown in the BIK arising from performance of duties column. The figures
shown are the cost of the taxable benefit.
Information for André Lacroix for 2015 is for remuneration from 16 May 2015, on his appointment as CEO.

7.
8. Edward Astle's fees relate to the period until he stepped down from the Board.
9. Mark Williams’s fees relate to the period until he passed away on 6 March 2016.
10. Andrew Martin’s fees relate to the period from 26 May 2016, the date he was appointed to the Board.

ANNUAL BONUS
The annual bonus for 2016 was based solely on financial measures:

• 80% based on a matrix (illustration provided on the following page) based on revenue and operating profit growth

• 20% based return on invested capital (ROIC)

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

REMUNERATION REPORT
continued

Overview of the matrix (80% of the award)

Revenue performance (£m)

Maximum
Target
Threshold
Below threshold

Operating profit performance (£m)

Below
threshold
0%
0%
0%
0%

Threshold
40%
30%
25%
0%

Target
65%
50%
35%
0%

Maximum
100%
75%
60%
0%

Straight line pay-outs occur between each of the points noted above.

The Company’s performance resulted in a Group bonus payout of 70.24%. Performance of individual components is shown below.

2016 Company Performance against bonus targets

Financial measures
Total External Revenue
Operating Profit1

Revenue/Profit Matrix
Return on invested capital

Total

%
Weighting

80%
20%
100%

2016
Target2

2016
Threshold

2016
Actual
£2,310.0m £2,357.0m £2,404.0m £2,350.6m
£380.9m

2016
Maximum

£374.2m

£385.4m

£363.0m

22.0%

22.2%

22.4%

23.6%

1. Calculated using constant 2015 exchange rates. Adjusted results exclude the impact of Separately Disclosed Items.
2. Target is equivalent to 50% pay-out.
3. Percentage achieved against maximum targets.

For 2016, the annual bonus outturn in cash and shares is as follows:

André Lacroix
Edward Leigh

Achieved3

Weighted
achievement

62.8%
100%

50.24%
20.00%
70.24%

Payable in cash
£’000
641.2
286.6

Deferred
Share Award
£’000
641.2
286.6

The Committee has the discretion to adjust the final bonus outcome downwards if it considers short-term performance has been
achieved at the expense of long-term future success. The Committee may also adjust the final bonus outcome upwards to recognise
exceptional circumstances that were beyond the direct responsibility of the Executive Director and the Executive has managed and
mitigated the impact of any loss. The Committee considered the results and did not exercise any discretion in respect of the above
bonus outturn.

Both the cash and share elements of the bonus are subject to malus and clawback. Overpayments may be reclaimed in the event of
performance achievements being found to be significantly misstated.

VESTING OF LTIP SHARE AWARDS
The LTIP Share Awards granted in 2014 are subject to performance for the three-year period ended 31 December 2016.
The performance conditions attached to this award and actual performance against these conditions is as follows:

Metric
Earnings Per Share

Performance condition
Annualised fully diluted, adjusted EPS growth,
calculated on the basis of foreign exchange rates
adopted at the start of the performance cycle

Threshold
target
6%

Stretch
target
14%

Actual
performance
6.92%

Vesting
level
33.62%

Total Shareholder Return Relative TSR performance against the FTSE 31
to 130 (excluding banks and investment trusts)

Median

Total vesting

Upper
quartile

Between
median and
upper quartile1

51.09%

42.35%

1. TSR performance calculation was calculated by Deloitte; Intertek was ranked 39th of the 93 members of the comparator group of companies.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

The LTIP Share Awards granted in 2014 to the Executive Directors were as follows:

Executive Director
André Lacroix
Edward Leigh2
Total vesting

Number of
shares at
grant
–
6,576

Number of
shares based
on accrued
dividends
–
349

Total number
of shares1
–
6,925

Number of
shares
to lapse
–
(3,993)

Number of
shares
to vest
–
(2,932)

Value of
vested
shares
£'000
–
98.9
98.9

1. The 2014 award includes accrual of dividends paid and payable during the vesting period.
2. The value shown is based on the share price of £33.71 which is based on the average share price in the fourth quarter of 2016. The awards were granted on 10 March
2014 prior to Edward Leigh’s appointment as CFO on 1 October 2014.

LTIP SHARE AWARDS GRANTED DURING THE YEAR
The following LTIP (Performance) Share Awards were granted to the Executive Directors on 21 March 2016:

André Lacroix

Edward Leigh

Type of
award
LTIP Share
Award
LTIP Share
Award

Basis of
award
granted
250%
of salary
200%
of salary

Share price
at date
of grant
£
£31.084

Number of
shares over
which award
was granted
71,982

% of face
value that
would vest at
threshold
performance
25%

Face value
of award
£’000
2,237

£31.084

25,736

800

25%

Vesting
determined
by
performance
over
Three
years to
31 December
2018

The LTIP Share Awards granted in 2016 are subject to performance for the three-year period ending 31 December 2018.

The performance conditions attached to this award and the targets are as follows:

Metric
Earnings Per Share

Total Shareholder Return

Performance condition
Annualised fully diluted, adjusted EPS growth, calculated on the
basis of foreign exchange rates adopted at the start of the
performance cycle
Relative TSR performance against the FTSE 31 to 130 (excluding
banks and investment trusts)

Threshold
target
4%

Stretch target
10%

Median

Upper
quartile

SHARE PLAN AWARDS
The table below shows the Directors’ interests in the Intertek Share Plans, all of which are restricted stock units (RSUs):

Type of Award

LTIP Share
Dividend
Mirror share,
Tranche A
Dividend
Mirror share,
Tranche B
Dividend
LTIP Share
Dividend
Deferred
Share
Dividend

31 December
2015
Number
of shares

Granted
in 2016
Number of
shares

Award
price1
£

Dividend
accrued
in 20167

Vested
in 2016
Number
of shares

Lapsed
in 2016
Number
of shares

90,440
612
91,575

1,810
91,574

1,810
–
–
–

–
–
–

–
–

–
71,982
–
17,376

–
–
28.006

–
28.006

–
31.084
–
31.084

–
1,493
–

–
–
(91,575)

–
–

(1,810)
–

1,511
–
1,188
–

–
–
–
–

–
277,821

–
89,358

–
–

286
4,478

–
(93,385)

–
–
–

–
–

–
–
–
–

–
–

31
December
2016
Number
of shares

Date of
vesting

90,440
2,105

Sep 2018

– May 2016

–

91,574 May 2017

3,321

71,982 Mar 2019

1,188

17,376 Mar 2019

286
278,272

André Lacroix
20155

20166

Total

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

REMUNERATION REPORT
continued

SHARE PLAN AWARDS (CONTINUED)
The table below shows the Directors’ interests in the Intertek Share Plans, all of which are restricted stock units (RSUs):

Type of Award

Deferred
Share
Dividend
LTIP
(Performance)

Dividend
Deferred
Share
Dividend
LTIP Share
Dividend
Deferred
Share4
Dividend
LTIP Share5
Dividend
Deferred
Share
Dividend
LTIP Share
Dividend

31 December
2015
Number
of shares

Granted
in 2016
Number of
shares

Award
price1
£

Dividend
accrued
in 20167

Vested
in 2016
Number
of shares

Lapsed
in 2016
Number
of shares

31 December
2016
Number
of shares

1,755

88
1,755

88
1,331

48
6,576
241
5,405

106
32,336
218
–

–
–
–
49,947

–

–
–

–
–
–
–

–
–
–
12,425

–
25,736
–
38,161

34.17

–
34.17

–
30.41

–
30.41
–
25.572

–
24.74
–
31.084

–
31.084
–
–

–

–
–

21
–
108
–

89
–
533
–

(1,755)

–

(88)
–

–
(1,755)

–
–

–
–
–
–

(88)
–

–
–
–
–

204
–
424
1,379

–
–
–
(1,843)

–

–
–

–
1,331

69
6,576
349
5,405

195
32,336
751
12,425

204
25,736
424
85,801

Date of
vesting

May 2016

Mar 2017

Mar 2018

Sep 2018

Mar 2019

Edward Leigh
20132

20143

2015

20166

Total

1. Awards made are based on a share price obtained by averaging the closing share prices for the five dealing days before the date of grant.
2. Awards vested on 25 May 2016, on which date the closing market price of shares was £31.12 having been granted on 20 May 2013 on which date the closing market

price was £33.27. 50% of LTIP (Performance) Awards were subject to EPS and 50% were subject to relative TSR. The EPS threshold level was set at 6% per annum and the
upper target at 16% per annum. Under the TSR condition, the Company’s TSR ranking is measured relative to the FTSE index members 31 to 130 (excluding banks and
investment trusts). The LTIP (Performance) shares did not vest as performance conditions were not met.

3. Awards will vest on 10 March 2017, subject to performance and continued employment, having been granted on 10 March 2014 on which date the closing market price

was £30.46. 50% of the LTIP Share Awards are subject to EPS and 50% are subject to relative TSR. The EPS threshold level was set at 6% per annum and the upper target
at 14% per annum. Under the TSR condition, the Company’s TSR ranking is measured relative to the FTSE index members 31 to 130 (excluding banks and investment
trusts). As set out on page 74, 42.35% of awards will vest.

4. Awards will vest on 9 March 2018, subject to continued employment, having been granted on 9 March 2015 on which date the closing market price was £25.70.
5. Awards will vest on 22 September 2018, subject to performance and continued employment, having been granted on 22 September 2015 on which date the closing

market price was £23.94. 50% of awards are subject to EPS and 50% are subject to relative TSR. The EPS threshold level was set at 4% per annum and the upper target at
10% per annum. Under the TSR condition, the Company’s TSR ranking is measured relative to the FTSE index members 31 to 130 (excluding banks and investment trusts).

6. Awards will vest on 21 March 2019, subject to continued employment, having been granted on 21 March 2016 on which date the closing market price was £31.13.

Awards were made on a share price of £31.084 being the share price obtained by averaging the closing share prices for the five dealing days before the date of grant.
50% of the LTIP Share Awards are subject to EPS and 50% are subject to relative TSR. The EPS threshold level was set at 4% per annum and the upper target at 10% per
annum. Under the TSR condition, the Company’s TSR ranking is measured relative to the FTSE index members 31 to 130 (excluding banks and investment trusts).

7. The dividend shares are accrued on the date the dividend is paid and determined using the closing market price of the shares on that date. The dividend accruals relate to

Share Awards made in lieu of not receiving cash dividends during the vesting period.

MALUS AND CLAWBACK
Malus and clawback will operate, in respect of the 2011 Long Term Incentive Plan in circumstances where there is reasonable evidence of
misbehaviour or material error, conduct considered gross misconduct, breach of any restrictive covenants by participants, conduct which
resulted in (a) significant loss(es) to the Company, failure to meet appropriate standards of fitness and proprietary; a material failure of
management in the Company, a discovery of a material misstatement in the audited consolidated accounts or the behaviour of a Director
has a significant detrimental impact on the reputation of the Group. Clawback can be applied at any time during the clawback period
which is six years from the date of the award unless extended by the Remuneration Committee prior to the expiry of the initial
clawback period.

The Remuneration Committee has the discretion to reduce bonus payments if it believes that short-term performance has been
achieved at the expense of the Group’s long-term future or vice versa. The Remuneration Committee also retains the discretion
to reduce or reclaim payments if the performance achievements are subsequently found to have been significantly mis-stated.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

DIRECTORS’ INTERESTS IN ORDINARY SHARES
The interests of the Directors in the shares of the Company as at the year end, or date of retirement, are set out below. Save as stated
in this report, during the course of the year, no Director nor did any member of his or her immediate family have any other interest in the
ordinary share capital of the Company or any of its subsidiaries. No Directors have any share options.

Beneficially
owned at
31 December
2015 or on
appointment
100,000
1,000
1,443
1,623
546
–
2,828
–
3,801
2,384
530

Beneficially
owned at
31 December
2016 or on
ceasing to
be a Director1
249,494
1,976
1,628
1,808
715
–
3,356
249
3,973
2,575
699

Outstanding
LTIP Share
Awards²
162,422
64,648
–
–
–
–
–
–
–
–
–

Outstanding
Deferred
Shares/ Mirror
Awards
108,950
19,161
–
–
–
–
–
–
–
–
–

Outstanding
Share Award
dividends
6,900
1,992
–
–
–
–
–
–
–
–
–

Shareholding
as a % of
salary3
951
17
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a

Shareholding
Guideline
met?
Yes
No
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a

André Lacroix4
Edward Leigh5
Edward Astle6
Alan Brown
Dame Louise Makin
Andrew Martin7
Sir David Reid
Gill Rider
Michael Wareing
Mark Williams8
Lena Wilson

1. No changes in the above Directors’ interests have taken place between 31 December 2016 and the date of this report.
2. Subject to performance conditions.
3. Based on a share price of £34.81 as at 31 December 2016 and applies to the annual salary for 2016.
4. Appointed 16 May 2015 with the guideline to hold 200% of base salary in shares by 16 May 2020.
5. Appointed on 1 October 2014 with the guideline to hold 150% of base salary in shares by 1 October 2019. This guideline was increased to 200% in the Remuneration

policy approved by shareholders on 25 May 2016 and must be met by 25 May 2021.

6. Stepped down from the Board on 25 May 2016.
7. Appointed on 26 May 2016.
8. Passed away on 6 March 2016.

PAYMENTS TO PAST DIRECTORS
Wolfhart Hauser (ceased to be a Director on 15 May 2015)
As set out in the 2015 Annual report and Accounts, on 4 January 2016 the following awards granted to Wolfhart Hauser vested at a
share price of £27.48. All shares vested are to be held by Wolfhart until the original vesting dates.

Award Date
5 March 2013
10 March 2014
9 March 2015

Type
Deferred shares
Deferred shares
Deferred shares

Number of shares
20,689
10,507
12,585

Dividend Shares Closing price on day of award
£34.40
£30.46
£25.70

1,039
385
248

The dividend shares are accrued on the date the dividend is paid and determined using the closing market price of the shares on that
date. The dividend accruals relate to Share Awards made in lieu of not receiving cash dividends during the vesting period.

All 41,378 LTIP (Performance) Share Awards that were granted to Wolfhart on 5 March 2013, on which date the closing market price was
£34.40, lapsed on 7 March 2016 as the performance criteria was not met. The applicable performance criteria was based 50% on EPS
and 50% on TSR. The EPS threshold level was set at 6% per annum and the upper target at 16% per annum. Under the TSR condition,
the Company’s TSR ranking was measured relative to the FTSE index members 31 to 130 (excluding banks and investment trusts).

19,580 of the 46,991 LTIP (Performance) Share Awards granted to Wolfhart on 10 March 2014, on which date the closing market price
was £30.46, lapsed when he left office. 907 dividend shares also lapsed in relation to those awards. 452 dividend shares were awarded
for dividends paid in 2016 in relation to the remaining 27,411 LTIP (Performance) Share Awards.

Award Date
10 March 2014

Type

LTIP (Performance) share

Number of shares
27,411

Dividend Shares Closing price on day of award
£30.46

1,268

PAYMENTS FOR LOSS OF OFFICE
No payments were made in respect of loss of office during the year ended 31 December 2016.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

REMUNERATION REPORT
continued

PERCENTAGE CHANGE IN REMUNERATION LEVELS
The table below shows the average movement in salary and annual bonus for UK employees between the 2015 and 2016 financial
year ends. On taking up his appointment as CEO on 16 May 2015, André Lacroix’s salary was £895,000 for 2015. In 2016, his salary
was increased to £912,900.

CEO (A Lacroix1)
Average pay based on Intertek’s UK employees

Salary
2.0%
3.5%

Bonus
(25.8%)
(15.0%)

Benefits
65.6%
4.1%

1. The percentage change for bonus and benefits for André Lacroix are based on actual amounts earned in 2016 and an annualised comparative for 2015.

RELATIVE IMPORTANCE OF THE SPEND ON PAY
The table below shows the movement in spend on staff costs between the 2015 and 2016 financial years, compared to dividends.

Staff costs*
Dividends
* Staff costs are shown at actual rates, which include a 10.2% foreign exchange impact. Excluding the foreign exchange impact, staff costs increased by 8.2%.

2016
£m
1,140.6
88.0

2015
£m
956.2
80.7

% change
19.3%
9.0%

PERFORMANCE GRAPH
Consistent with prior years, the graph below shows the TSR in respect of the Company over the last eight financial years, compared
with the TSR for the full FTSE 100 Index. TSR, reflecting the change in the value of a share and dividends paid, can be represented by
the value of a notional £100 invested at the beginning of a period and its change over that period.

TSR PERFORMANCE

600

500

400

300

200

100

2008

INTERTEK GROUP – TOT RETURN IND REB#(ITRK(RI))

REB#(FTSE100(RI))REB#(FTSE100(RI))

2009

2010

2011

2012

2013

2014

2015

2016

CEO TOTAL REMUNERATION
The total remuneration figures for the CEO during each of the past eight financial years are shown in the table below. Consistent with
the calculation methodology for the single figure for total remuneration, the total remuneration figure includes the total annual bonus
and Deferred Share Award based on that year’s performance and LTIP Share Awards based on the three-year performance period
ending in the relevant year. The annual bonus pay-out and LTIP award vesting level as a percentage of the maximum opportunity
are also shown for each of these years.

Total remuneration £’000
Annual bonus (%)
LTIP award vesting (%)

Year ended 31 December

2009
2,451
100
100

2010
3,164
96.6
100

2011
4,554
92.3
100

2012
5,298
83.1
100

2013
3,195
34.6
81.8

2014
2,011
38.4
25.2

2015
W Hauser
876
90.6
–

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

2015
A Lacroix

2016
1,824 5,422
96.6 70.24
–

–

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

CEO TOTAL REMUNERATION
The graph below shows the total remuneration of the Intertek CEO over the eight year period from 2009 to 2016.

Mirror awards
LTIP (share price increase)4

LTIP (award share price)3

Annual Bonus
Pension

Beneﬁts
Salary

CEO TOTAL REMUNERATION FIGURE

£’000

6,000

5,000

4,000

3,000

2,000

1,000

2009

2010

2011

2012

2013

2014

2015 (WH)1

2015 (AL)2

2016

1. Shows W Hauser remuneration based on period to 15 May 2015.
2. Shows A Lacroix remuneration for the period from appointment as CEO on 16 May 2015.
3. LTIP (award share price) shows the proportion of the LTIP value received which resulted from the share price on the award date.
4. LTIP (share price increase) shows the proportion of the LTIP value received which resulted from increase in the share price over the vesting period.

REMUNERATION DECISIONS TAKEN IN RESPECT OF THE FINANCIAL YEAR ENDING 31 DECEMBER 2017
Base salary
Following a review of each individual’s performance in the year, the Remuneration Committee approved salary increase of 2.0% for the
Executive Directors. This is in line with the increase provided to UK employees in the Group.

The Executive Directors’ salaries are:

André Lacroix
Edward Leigh

Base salary
from
1 April 2016
£’000
913
408

Base salary
from
1 April 2017
£’000
931
416

% increase
2.0%
2.0%

Annual Bonus and LTIP awards to be granted in 2017
For 2017, the annual bonus opportunity expressed as a percentage of base salary will be 200% for the CEO and CFO. The Committee
has determined that for 2017 the basis for calculating the Annual Bonus will be unchanged from the previous year – 80% will be based
on a matrix based on revenue and operating profit growth, and 20% will be based on ROIC.

Annual Bonus will continue to be subject to a quality of earnings review at the end of the year to ensure that pay-outs are appropriate
based on the underlying performance of the Group and to ensure that any awards are commensurate with the Group’s culture and values.

The Committee has chosen not to disclose, in advance, the performance targets for the forthcoming year as these include items
which the Committee considers commercially sensitive. In accordance with good governance, the Committee is however committed to
providing insightful and transparent disclosure to our shareholders. In this regard, and in line with the Investment Association’s position
regarding bonus target disclosure, the Committee will disclose the performance targets for the annual incentive in the following year.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

REMUNERATION REPORT
continued

For 2017, the LTIP opportunity for the CEO and CFO will be 250% and 200% of salary respectively with targets based on the Group
Remuneration Policy as below:

Metric
Earnings Per share

Total Shareholder Return

Performance condition
Annualised fully diluted, adjusted EPS growth calculated on
the basis of foreign exchange rates adopted at the start of
the performance cycle
Relative TSR performance against the FTSE 31 to 130
(excluding banks and investment trusts)

Threshold
target
4%

Stretch
target
10%

Median

Upper
quartile

NON-EXECUTIVE DIRECTORS’ FEES
As detailed in the Remuneration policy, fees for the Non-Executive Directors are determined by the Board, based on the responsibility
and time committed to the Group’s affairs and appropriate market comparisons. Individual Non-Executive Directors do not take part in
discussions regarding their own fees. A summary of current fees is as follows:

Board membership
Chairman
Non-Executive Director
Senior Independent Non-Executive Director
Committee membership
Chair Audit Committee
Chair Remuneration Committee
Chair Nomination Committee
Member Audit Committee
Member Remuneration Committee
Member Nomination Committee

2016
£’000

320
58
12

20
15
–
10
7.5
2.5

2017
£’000

320
58
12

20
15
–
10
7.5
2.5

Pursuant to the policy of aligning Directors’ interests with those of shareholders, £10,000 of the fees paid to the Non-Executive
Directors and £30,000 of the fees paid to the Chairman are used each year to purchase shares in the Company.

APPROVAL OF THE DIRECTORS’ REMUNERATION REPORT
The Directors’ Remuneration report, including both the Directors’ Remuneration policy report and Annual Report on Remuneration,
was approved by the Board on 6 March 2017.

Gill Rider
Chair of the Remuneration Committee

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

AUDIT COMMITTEE

DEAR SHAREHOLDER
Our last financial year has once again seen more regulatory
changes. I am pleased to present this year’s report of the Audit
Committee (‘Committee’) which aims to outline the activities and
the responsibilities of the Committee, on behalf of the Board, in
responding to these changes and in scrutinising the conduct of
the business, its management and auditors to protect the
interests of our shareholders.

The Board and the Committee devoted significant time to assess
our current approach to managing the Group’s risk, controls and
compliance. In order to respond dynamically to our changing risk
environment, it was agreed to establish a separate Group Risk
Committee during the year that reports into the Board through
the CEO. Delegating the management of risk to the Group Risk
Committee is intended to enable an integrated, group-wide
approach to identifying and managing emerging and systemic
risks responsively and providing an immediate improvement in
the quality of risk reporting and monitoring. The Committee
continues to review the Company's internal control and risk
management systems.

The Terms of Reference of the Audit Committee have been
reviewed and updated, and are available on the Company’s
website at www.intertek.com.

Following the audit tender during 2015 and the appointment
of PricewaterhouseCoopers LLP (‘PwC’) in May 2016, the
Committee oversaw a smooth transition from the previous
auditor, KPMG Audit Plc (‘KPMG’). The process included the
attendance of PwC at Committee meetings before their formal
appointment, supplemented by detailed audit planning activities
at all the Group’s material operating sites and the review of
KPMG’s audit files at major locations.

During the year the Committee also ensured that separate
meetings with the CFO, Group General Counsel, Group Audit
Director and the external auditor without management present
took place in order to provide a forum for any issues to be raised.

The internal evaluation of the performance of the Committee was
conducted during the year and it was shown that the Committee
is able and effective in discharging its duties in accordance with
its Terms of Reference and the requirements of the Codes.

As announced during the year, Andrew Martin has succeeded me
as Chairman of this Committee with effect from 1 March 2017.

COMMITTEE MEMBERSHIP AND MEETING ATTENDANCE
Membership and attendance at meetings of the Committee
during the year was as follows:

Number of meetings
held in 2016

Committee Members
Michael Wareing (Committee Chair)
Edward Astle1
Alan Brown
Andrew Martin2
Lena Wilson
1. Edward Astle stepped down from the Committee on 25 May 2016.
2. Andrew Martin was appointed to the Committee on 26 May 2016.
3. Andrew Martin was unable to attend one meeting due to a prior commitment

Attendance
5
3
5
13
44

Eligible to
attend
5
3
5
2
5

entered into before his appointment.

4. Lena Wilson was unable to attend one meeting due to an illness in the family.

Throughout the year, the composition of the Committee was
in compliance with the Codes and all members are independent
Non-Executive Directors. The Board determined that Michael
Wareing, Andrew Martin and Alan Brown have recent and relevant
financial experience. The Committee as a whole has competence
relevant to the sectors in which Intertek operates and their
biographies are set out on pages 58 and 59.

On appointment new Committee members receive an appropriate
induction, consisting of the review of the Terms of Reference,
previous Committee meeting papers, information on the
Company’s financial and operational risks and also have access to
and meetings with senior management and the Group’s internal
and external auditors.

The business of the Committee is linked to the Group’s financial
calendar of events and the timetable for the annual audit. At the
invitation of the Committee, the Chairman, CEO, CFO, Group
Financial Controller, Group General Counsel and the Group Audit
Director attended the meetings. The audit partner and audit lead
from KPMG attended meetings held prior to 25 May 2016 and
PwC attended all meetings held during the year. Other senior
executives were invited to attend the Committee meetings
as required.

ROLE AND RESPONSIBILITY OF THE COMMITTEE
Our role and responsibilities, as authorised by the Board, are set
out in the Terms of Reference of the Committee and fall into the
categories below:

Financial reporting
• Monitor the integrity of the financial statements and
their compliance with UK statutory requirements.

• Review significant financial reporting issues and

judgements and accounting policies and compliance
with accounting standards.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

AUDIT COMMITTEE
continued

Narrative reporting
• Where requested by the Board, to review the Annual Report
and Accounts, and advise the Board on whether, taken as a
whole, it is fair, balanced and understandable, and provides
the information necessary for shareholders to assess the
Company’s position and performance, business model
and strategy.

Internal control and risk management systems
• Review the adequacy and effectiveness of the internal financial

controls and internal control and risk management systems.

• Review and approve the statements to be included in
the Annual Report concerning internal controls and
risk management.

Internal audit
• Monitor the effectiveness of the internal audit function.

• Agree internal audit plans and review reports of the internal

audit work.

• Review and monitor management’s responsiveness to control

observations made by the internal auditor.

External audit
• Consider and make recommendations to the Board, to be put to

shareholders for approval at the AGM, in relation to the
appointment, re-appointment and removal of the Company’s
external auditor.

• Oversee the relationship with the external auditor.

• Ensure that at least once every 10 years the audit services

contract is put out to tender.

• Monitor and review the independence and performance of

the external auditor and evaluate their effectiveness.

SIGNIFICANT ISSUES CONSIDERED BY THE COMMITTEE
In preparation for each year-end, the Committee reviews the
significant accounting policies, estimates and judgements to
be applied in the financial statements and discusses their
application with management. The external auditor also
considers the appropriateness of these assessments as
part of the external audit.

In accordance with the Codes, the external auditor prepares
a report for the Committee on both the half year and full year
results, which summarises the approach to key risks in the
external audit and highlights any issues arising out of their work
on those risks, or any other work undertaken on the audit. During
the year, the Committee reviewed and considered the following
areas of judgement to be exercised in the application of the
accounting policies:

Claims
From time to time the Group is involved in various claims and
lawsuits incidental to the ordinary course of business. The
Committee considered the claims provision which reflects the
estimates of amounts payable in connection with identified claims
from customers, former employees and others. The Committee
noted that once claims have been notified the finance teams liaise
with the business to determine whether a provision is required,

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

based on IAS 37 ‘Provisions, Contingent liabilities and Contingent
assets‘ (‘IAS 37‘).

The level of provision is subsequently reviewed on a regular basis
with the Group General Counsel, taking into account the advice of
external legal counsel. The Group General Counsel briefs the
Committee on the latest status of key claims and the level of
provision. The Committee, following assurance from management
and review of the report presented by the external auditor,
considered and agreed that the claims provision was appropriate
given the size, status and number of claims reported in the year.

Taxation
The determination of profits subject to tax is calculated
according to complex laws and regulations, the interpretation
and application of which can be uncertain. In addition, deferred
tax assets and liabilities require judgement in determining the
amounts to be recognised, with consideration given to the timing
and level of future taxable income. The main areas of judgement
in the Group tax calculation are the expected central tax
provisions for the full year and the recognition of the UK deferred
tax asset. Twice a year, the Committee receives a report from
management providing an evaluation of existing risks and tax
provisions which is reviewed and rigorously challenged by the
Committee. The Committee also considered reports presented
by the external auditor before determining that the levels of
tax provisioning were appropriate.

Restructuring
In reviewing the provision for restructuring, the Committee
reviewed details of each of the activities pursued as part of the
restructuring to ensure that the appropriate level of provision is
put in place. The Committee also sought confirmation from the
external auditor that the restructuring plan met the criteria for
recognising a provision under IAS 37 before determining that
the provision was appropriate.

Accounting for acquisitions
In November 2015, the Group made the significant acquisition
of PSI in the US. The provisional recognition of goodwill, intangible
assets, other assets and liabilities and estimates of the fair value of
consideration transferred were based on a number of assumptions.
In 2016, management concluded its final assessment of these
assets and liabilities and presented an update to the Committee.
The Committee reviewed management’s final accounting paper on
the acquisition, and taken into account the report presented by the
external auditor, before determining that the acquisition accounting
is appropriate.

Impairment
The Group’s strategy includes acquisition-led growth to
generate new services and expand into new locations. These
acquisitions, being in the service sector, can generate significant
goodwill that benefits the Group as a whole and specifically the
business to which the acquisition relates. Goodwill, aggregated
at the business line level, must be tested annually for impairment
under IAS 36 ‘Impairment’ (‘IAS 36‘), or when there are indicators
of impairment. These indicators include poor performance
compared to budget.

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

ACTIVITIES DURING THE YEAR
During the year the Committee discussed the following items. Items starred below were discussed at the Board in December.

Audit Committee agenda items 2016

Financial statements and reports
Full year results 2015
Annual Report and Accounts 2015
Management highlights memorandum
Going concern assessment
Fair, balanced and understandable assessment
Review of significant accounting policies
Half year results 2016
Risk Register and Viability Statement process
External audit
PwC 2016 audit plan
Audit fee proposal 2016
PwC engagement letter
Non-audit fees review of policy, spend and budget
Non-audit services update
PwC pre year-end accounting and controls update
KPMG highlights/review memorandum
PwC half year review
KPMG effectiveness
Letter of representation to the auditors
Independence confirmation and transition plan and update for non-audit work
Update on audit transition
Internal Control Environment
2017 Internal Audit plan and Charter
Internal audit reports
(including internal audit review 2015 and internal audit update)
Internal audit effectiveness review
Compliance and operational risk report
Key claims report
Core Mandatory Controls update and Assurance Map
Other
Impairment review
2016 Rolling Committee agenda
Review, approval and endorsement of Treasury Policy
2015 Evaluation of the Committee

Feb
•
•
•
•
•

•

•
•
•

•

•
•

•
•
•
•

May

Jul

Dec

•
•

•

•
•

•

•
•
•

•

•
•

•
•
•

•

•
•

•

•
•
*
*
•

•

The Committee reviewed the impairment consideration and
calculations prepared by management considering the trading
assumptions, the discount rates used as well as the sensitivities
included by management, details of which are contained in note
9 to the financial statements. The Committee also took into
account the work undertaken by the external auditor in respect
of impairment and is satisfied that no impairment is required
against any cash generating unit (‘CGU’).

The significant issues considered by the Committee in relation to
the financial statements were consistent, with the exception of
restructuring, with those identified by the external auditor in
their report on pages 145 to 150.

FAIR, BALANCED AND UNDERSTANDABLE ASSESSMENT
Further to the request of the Board, the Committee has reviewed
the Annual Report and Accounts with the intention of providing
advice to the Board on whether, as required by the Codes, the
Annual Report and Accounts, taken as a whole, is fair, balanced
and understandable and provides the necessary information for
shareholders and other readers of the Annual Report and
Accounts to assess the Group’s position and performance for
2016, its business model and strategy.

In justifying this statement, the Committee has considered the
robust process that underpins it, which includes:

• Clear guidance and instruction given to all contributors,

including at business line level;

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

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REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

AUDIT COMMITTEE
continued

• Revisions as a result of regulatory requirements were

monitored on a regular basis;

• Pre year-end discussions held with the external auditor in

advance of the year-end reporting process;

• Pre year-end input provided by senior management and

corporate functions;

• A verification process dealing with the factual content of the

reports to ensure accuracy and consistency;

• Comprehensive review by the senior management team to

ensure overall consistency and balance;

• Review conducted by external advisors and the external
auditor on best practice with regard to the content and
structure of the Annual Report and Accounts;

• Review and consideration of the Annual Report and Accounts

by the Committee; and

• Final sign-off provided by the Board.

The results are presented to the Committee to ensure
compliance with the Codes. The Committee challenges
judgemental statements to ensure that they are reasonable
within the context of the report. This process enabled the
Committee, and then the Board, to confirm that the 2016
Annual Report and Accounts, taken as a whole, is fair, balanced
and understandable and provides the information necessary for
shareholders to assess the Company’s position, performance,
business model and strategy.

EXTERNAL AUDITOR
Independence
The independence of the external auditor is critical for the
integrity of the audit. The Committee is satisfied that PwC are
fully independent from the Company’s management and free from
conflicts of interest. A control process was in place throughout
the year to assist the exit arrangements made in respect of
non-audit services that continued into 2016.

The continued independence of the external auditor is
achieved through:

• The annual approval of the policy for the engagement of

external auditors for audit and non-audit services;

• Setting limits and a cap for non-audit spend for the

external auditor;

• An annual review of the auditor's performance in conducting

the external audit; and

• Where appropriate, audit tendering and rotation.

Effectiveness of the external audit
In line with previous years a review was conducted into the
effectiveness of the external audit as part of the year-end
process. A survey assessed the effectiveness of the KPMG audit
across its three main stages; Planning, Fieldwork and Reporting
for the 2015 year-end. The survey was sent to those within the
Group who were involved in the audit process seeking their views
on the service provided.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

At the meeting held in May 2016 the Committee considered in
detail the feedback received from the internal review, KPMG’s
performance and independence and concluded that the overall
audit process was effective. PwC’s effectiveness for the 2016
audit of the Group will be reviewed by the Committee in May 2017.

Audit tendering
Following a comprehensive tender carried out in 2015, PwC
were appointed the Company’s external auditor for the 2016
audit replacing KPMG who had been the auditor for a number of
years. The Committee has recommended to the Board that PwC
continues to act as Auditor to the Group, and resolutions will
be put to shareholders at the AGM to be held on 26 May 2017
proposing the reappointment of PwC and for the Committee, on
behalf of the Board, to be authorised to determine the Auditor’s
remuneration. The Company has complied with the Statutory
Audit Services for Large Companies Market Investigation Order,
published by the CMA.

Audit and non-audit fees
The Company has set out a policy on the provision of non-audit
work by the external auditor to make sure that the auditor’s
independence is safeguarded. The policy was reviewed during
the year in light of the transition of auditor and revised guidance
from the FRC. The policy is consistent with the FRC Ethical
Standard and is designed to ensure that the provision of such
services does not create a threat to the external auditor's
independence and objectivity.

It identifies certain types of engagement that the external
auditor shall not undertake, including internal audit and actuarial
services relating to the preparation of accounting estimates for
the financial statements, appraisal or valuation services, tax
services in relation to marketing, planning or opining in favour
of a transaction and any other services that, locally, are prohibited
through regulation. For 2016 only, a transitional amount had
been set by the Committee to assist the completion of agreed
hand-over tasks.

In the event that specific engagement arises in the future,
the policy is designed to ensure that the external auditor is only
appointed to provide a non-audit service where it is considered to
be the most suitable supplier of the service. This will require the
approval by the Chair of the Committee and the CFO, and will be
limited to a maximum of 35% of the annual external audit fee.

A summary of the fees paid for non-audit services is set out
below and further information is contained in note 4 to the
financial statements on page 103:

AUDIT FEE BREAKDOWN FOR SERVICES PROVIDED BY PWC
IN 2016 AND BY KPMG IN 2015

Total non-audit fees
– audit related services
– tax services
– other non-audit services
Audit fee
% of audit fee

2016
£m
0.2
0.1
0.1
–
3.1
6%

2015
£m
0.6
–
0.4
0.2
2.5
25%

OVERVIEW

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REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

INTERNAL CONTROLS AND REPORTING
In order to provide assurance that the Intertek controls and
policy framework is being adhered to, a self-certification exercise
is undertaken across the Group’s global operations. This process
is facilitated by the Legal, Risk and Compliance function and the
internal control framework has been subject to a thorough review
this year to support the continued development of the Group’s
control environment. An online questionnaire requesting
confirmation of adherence to controls, financial and operational,
is sent to all Intertek country and finance operations. Where
corrective actions are needed, the country is required to provide
an outline and a confirmed timeline. These items are monitored
closely to ensure timely completion.

PRIORITIES FOR 2017
The priorities for the Committee over the next 12 months are
as follows:

• Continue to monitor the new external auditor and facilitate

their understanding of the business;

• Ensure that the audit continues to evolve and align with the

changes in the business and strategic objectives;

• Continue to monitor the impact of external economic factors

on the Group and its financial position; and

• Monitor any relevant changes in the corporate governance

and regulatory arena.

GOING CONCERN
The Directors have a reasonable expectation that the Group
has adequate resources for a period of at least 12 months from
the date of signing the Annual Report and Accounts, and have
therefore assessed that the going concern basis of accounting is
appropriate in preparing the financial statements and that there
are no material uncertainties to disclose.

This conclusion is based on a review and an assessment of the
levels of facilities expected to be available to the Group, based on
levels of cash held, Group Treasury funding projections, and the
Group’s financial projections for a period to 31 December 2021.
With the exception of £82m of facilities maturing in 2017, all
the current borrowing facilities are expected to be available
at 31 December 2017.

In making this assessment, management has considered the
covenants attached to the Group’s borrowing facilities and
performed downside scenarios on the Group’s financial
projections of 10% and 20% reduction in EBITDA forecast.
Even in these circumstances, there is significant headroom
on the debt covenants.

After making diligent enquiries the Directors have a reasonable
expectation based upon current financial projections and bank
facilities available, that the Group has adequate resources to
continue in operation. Accordingly they continue to adopt the
going concern basis in preparing the Group’s financial statements.

Michael Wareing
Chair of the Audit Committee

A consolidated assessment is made at regional level for approval.
An evaluation is then undertaken with EVPs following which a
Company-wide position is submitted to the CEO and the CFO.
A final summary assessment is provided to the Committee. The
self-assessment exercise has been reviewed during the year to
ensure global coverage and to reflect Intertek operational and
financial structure, and in order to enhance the alignment of the
self-assessment to the assurance process. The Committee can
confirm that it reviewed the Group’s internal controls and risk
management systems and concluded that there was a sound
and effective control environment in place across the Group
during 2016 and up to the date upon which these financial
statements were approved. No significant failings or
weaknesses had been identified.

AUDIT STRATEGY
The Audit Strategy was presented to the Committee during the
year. The strategy has focused on ensuring that the programme
is annually strengthened and continues to evolve and is enhanced
to reflect the size and global reach of the Intertek Group. PwC
based their risk assessment, strategy and approach on their
understanding of the business and the gaining of a deeper
understanding of the Intertek business has been a key focus
during the year. It has been important to ensure that the Intertek
audit team has the right expertise in the right places. To achieve
this, the PwC team has been structured to mirror the way Intertek
is structured, with local teams for each location, regional teams
who will liaise with Intertek’s regional CFOs and Group oversight
of regional accountability.

INTERNAL AUDIT
The annual Internal Audit plan is reviewed and approved by the
Committee. Where there is no internal expertise to perform a
specialised audit, a third-party auditor with the requisite skills
is appointed to undertake the audit, the findings of which are
reported to the Committee. In its quarterly reports to the
Committee, Internal Audit provided summaries of each audit
performed, with commentary on the robustness of risk
management activities and internal control design and operating
effectiveness. In 2016 there was a varied plan of work across
key risk areas, including reviews of businesses, functions and
projects, as well as regular follow-up activities.

As part of its annual programme, the Committee reviewed the
effectiveness of the Group Internal Audit function.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

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REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

NOMINATION COMMITTEE

COMMITTEE MEMBERSHIP AND MEETING ATTENDANCE
Membership and attendance at meetings of the Committee
during the year was as follows:

Number of meetings
held in 2016

Committee members
Sir David Reid (Committee Chair)
Edward Astle1
Dame Louise Makin
Michael Wareing
Mark Williams2
1. Edward Astle stepped down from the Committee on 25 May 2016.
2. Mark Williams missed one meeting due to illness. He passed away on

Eligible to
attend
4
2
4
4
1

Attendance
4
2
4
4
0

6 March 2016.

The Group Company Secretary attends all the meetings of
the Committee.

THE ACTIVITY OF THE COMMITTEE DURING THE YEAR
The Committee’s programme of work for the year was as follows:

• Considered and discussed the results of the external annual

review into the effectiveness of the Committee.

• Reviewed and appointed recruitment consultants.

• Reviewed the composition of each Committee and approved
the appointment of Michael Wareing as a member of the
Remuneration Committee.

• Reviewed the shortlist of candidates for the position of

Non-Executive Director.

• Recommended to the Board that Andrew Martin be appointed
as a Non-Executive Director to the Board and a member of the
Audit Committee with effect from 26 May 2016.

SUCCESSION PLANNING ON THE BOARD
The Committee annually reviews the Board’s effectiveness and
composition in relation to long-term succession planning, including
the review of plans in place for the orderly and progressive
refreshing of the Board. In particular, the Committee considers the
balance of skills, experience and independence of the Board when
considering new appointments and oversees the preparation of
a detailed role specification that is provided to an independent
search firm to assist in the identification of the right candidates.

At the end of 2015 it was agreed, to ensure the ongoing
refreshing of the skills on the Board, to commence a search
for a new Non-Executive Director.

DEAR SHAREHOLDER
In my role as Chair, I am pleased to present the report of the
Nomination Committee (‘Committee’). This year the Committee
has continued its work on succession planning and the ongoing
review of the composition of the Board and its Committees.

Following a rigorous selection process the Committee was
pleased to recommend the appointment of Andrew Martin to the
Board as a Non-Executive Director and a member of the Audit
Committee with effect from 26 May 2016. His wide-ranging
experience and financial background is a strong and
complementary addition to our Board.

As announced during the year, Andrew succeeded Michael
Wareing as Chair of the Audit Committee on 1 March 2017.
Michael remains the Senior Independent Director and a member
of the Audit and Remuneration Committees.

The Committee continues to ensure that the composition of
the Board retains the right balance of skills, experience, industry
and technical knowledge and diversity to provide the quality of
leadership necessary to implement the strategy and achieve
the strategic objectives necessary for the long-term success
of the Company.

Main responsibilities of the Committee:

• Review the structure, size and composition of the Board and

its Committees.

• Identify, review and nominate candidates to fill Board

vacancies.1

• Evaluate the balance of skills, knowledge, experience and

diversity on the Board and Committees.

• Review the results of the performance evaluation process that

relates to the composition of the Board and Committees.

• Review the time commitment required from Non-Executive

Directors.

1. Neither the Chairman nor the CEO participates in the recruitment of their

own successor.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

The Committee engaged Egon Zehnder, an external search
agency with no other connection to the Company, to assist
with the selection process and spent time to prepare the role
specification. In addition to the specific skills, knowledge and
experience deemed necessary, the specification contained
criteria such as competency and personal qualities that would
be required for this position. The Committee also considered the
current balance of skills, knowledge and experience on the Board
and whether the candidate would be able to allocate sufficient
time to the Company to discharge their responsibilities.

Having reviewed all the profiles presented, Egon Zehnder prepared
a long list of candidates, which was reviewed before a shortlist of
candidates was drawn up and interviews were held. Following a
rigorous selection process, the Committee, having considered the
relative merits and fit of each candidate, made a recommendation
to the Board, which was accepted, to appoint Andrew Martin as an
independent Non-Executive Director with effect from 26 May
2016. His biography is available on page 59. A resolution will be
proposed at the forthcoming AGM for his election.

DIVERSITY
As described above it is the Company’s policy, in line with the
Codes, that proposed appointments to the Board, and succession
planning, are based on merit, judged against objective criteria,
whilst also making the best use of differences in culture, gender,
skills, background, regional and industry experience and other
qualities. All of these factors are considered by the Committee
in determining the composition of the Board as outlined on the
previous page.

An analysis of the diversity of the senior leadership group and
other employees as at 31 December 2016 is set out on pages
47 and 48 respectively.

As at 31 December 2016, Intertek had three female members
on the Board of nine (representing 33%).

Whilst the Board’s wish is to maintain at least 33% female
representation at Board level, in line with the revised
recommendation by Lord Davies, the need to ensure the
progressive refreshing of the Board to maintain the correct
balance of skills, knowledge and experience remains paramount.

Sir David Reid
Chair of the Nomination Committee

INTERTEK INNOVATIONS

UK'S HIGHEST CAPACITY
ELECTRIC AND HYBRID
VEHICLE DRIVELINE TEST
FACILITY

During 2016 Intertek opened the UK's highest
capacity electric and hybrid vehicle driveline test
facility at Intertek's Milton Keynes test laboratory.

The new state-of-the-art facility at Intertek's
automotive engine testing laboratory hosts some
of the UK's highest capacity electric vehicle driveline
testing equipment, including high capacity battery
simulators and the latest exhaust emissions
measurement systems in order to support the
European automotive industry's continued push
into driveline electrification.

This new facility cements Intertek Milton Keynes'
position as the European centre of excellence for
low carbon and electric vehicle development, which
supports the increased demand for electric and
hybrid vehicles, tougher rules on air quality
emissions and CO2 reduction in future vehicles.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

OTHER STATUTORY INFORMATION

In accordance with the requirements of the Companies Act 2006
(‘Act’) and the Disclosure Guidance and Transparency Rules (‘DTR’)
of the Financial Conduct Authority (‘FCA’), the following section
describes the matters that are required for inclusion in the
Directors’ report and were approved by the Board. Further details
of matters required to be included in the Directors’ report that are
incorporated by reference into this report are set out below.

DIRECTORS
The Directors who held office during the year are set out below:

Sir David Reid
André Lacroix
Edward Leigh
Edward Astle

Alan Brown
Dame Louise Makin
Andrew Martin

Gill Rider
Michael Wareing

Mark Williams

Lena Wilson

Chairman
Chief Executive Officer
Chief Financial Officer
Non-Executive Director
(stepped down 25 May 2016)
Non-Executive Director
Non-Executive Director
Non-Executive Director
(appointed 26 May 2016)
Non-Executive Director
Senior Independent
Non-Executive Director
Non-Executive Director
(passed away 6 March 2016)
Non-Executive Director

The biographies of the Directors at the date of this report are set
out on pages 58 and 59.

ARTICLES OF ASSOCIATION
The Company’s Articles of Association contain provisions relating
to the retirement, election and re-election of Directors but, in
accordance with best practice, all Directors who wish to continue
to serve will stand for election or re-election at the Annual
General Meeting (‘AGM’).

The Articles of Association set out the internal regulation of the
Company and cover such matters as the rights of shareholders,
the appointment or removal of Directors and the conduct of the
Board and general meetings. Copies are available upon request
from the Group Company Secretary and are available at the
Company’s AGM. Further powers are granted by members in
general meeting and those currently in place are set out in detail
in the appropriate section of this report.

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. In accordance with the Articles of
Association, the Company has executed deed polls of indemnity
for the benefit of Directors of the Company.

These provisions which are deemed to be qualifying third-party
indemnity provisions (as defined by section 234 of the Act), were
in force during the financial year ended 31 December 2016, for
the benefit of the Directors and, at the date of this report, remain

in force in relation to certain losses and liabilities which they may
incur (or have incurred) in connection with their duties, powers
or office.

DIRECTORS’ INTERESTS
Other than the Directors’ Service Agreements or letters of
appointment, 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 Agreements or
letters of appointment and the Directors’ interests in shares and
Share Awards of the Company, in respect of which transactions
are notifiable to the Company under Rule 3 of the DTR of the FCA
are disclosed in the Remuneration report on pages 65 to 80.

DIRECTORS’ POWERS
The Directors are responsible for the strategic management of
the Company and their powers to do so are determined by the
provisions of the Act and the Company’s Articles of Association.

DIVIDEND
The Directors are recommending a final dividend of 43.0p per
ordinary share (2015: 35.3p) making a full year dividend of 62.4p
per ordinary share (2015: 52.3p) which will, if approved at the
AGM, be paid on 2 June 2017 to shareholders on the register at
the close of business on 19 May 2017.

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 15 to the financial statements.

The holders of ordinary shares are entitled to receive dividends
when declared, to receive the Company’s Annual Report and
Accounts, to attend and speak at general meetings of the Company,
to appoint proxies and exercise voting rights. A waiver of dividend
exists in respect of 493,629 shares held by the Intertek Group
Employee Share Ownership Trust (‘Trust’) as at 31 December 2016.
Details of the shares purchased by the Trust during the year are
outlined within note 15 to the financial statements. 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. The Directors’ powers are conferred on them by UK
legislation and by the Company’s Articles of Association.

No ordinary shares carry any special rights with regard to control
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 holder 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.

Shares are admitted to trading on the London Stock Exchange
and may be traded through the CREST system.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

ALLOTMENT OF SHARES
At the AGM held in 2016 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.

It is the Directors’ intention to seek renewal of this authority in
line with guidance issued by the Investment Association. The
resolution will be set out in the Notice of AGM.

At the AGM in 2016 the Directors were also 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 Act. It is
intended that this authority be renewed, at the forthcoming AGM.

In line with guidance issued by the Pre-Emption Group it is the
Board’s intention to propose an additional special resolution to be
passed at the AGM to allow the Company to allot equity securities
up to a further 5% of the Company’s issued share capital for
transactions which the Board determines to be an acquisition or
other capital investment, as defined by the Pre-Emption Group’s
Statement of Principles. In the event that this additional 5%
disapplication of pre-emption right is used the Company will
outline the reason for its use and the consultation process they
have undertaken within six months of the date that it is used.

PURCHASE OF OWN SHARES
Shareholders also approved the authority for the Company to buy
back up to 10% of its own ordinary shares by market purchase
until the conclusion of the AGM to be held this year. 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 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 10 year period
under the relevant share plan rules.

SIGNIFICANT AGREEMENTS – CHANGE OF CONTROL
The Company is not a party to significant agreements which
take effect, alter or terminate upon a change of control following
a takeover bid apart from a number of credit facilities with banks
together with certain senior notes issued by the Company. The
total amount owing under such credit facilities and senior note
agreements as at 31 December 2016 is shown in note 14 to the
financial statements. These agreements contain clauses such
that, in the event of a change of control, the Company can offer
to or must repay all such borrowings together with accrued
interest, fees and other sums owing as required by the
individual agreements.

The rules of the Company’s incentive plans contain clauses
relating to a change of control resulting from a takeover and in
such an event awards would vest subject to the satisfaction of
any associated performance criteria.

MATERIAL INTERESTS IN SHARES
Up to 28 February 2017, being the latest practicable date before
the publication of this report, 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 Rule 5 of the DTR of the FCA. There have
been no changes since the year-end.

Shareholder
BlackRock Inc.
MFS Investment Management
Mawer Investment Management Ltd
Marathon Asset Management LLP

At the date of notification

Number of
voting rights
11,865,413
9,547,182
8,110,417
8,050,509

% of voting
rights
7.35
5.92
5.03
4.99

EMPLOYMENT
Information about the Group’s employees, employment of
disabled persons and employment practices is contained within
the Sustainability and CSR report on pages 47 to 49. Information
on employee share schemes appears in note 17 to the
financial statements.

GREENHOUSE GAS EMISSIONS (‘GHG’)
Information about the Group’s Greenhouse Gas emissions is given
in the Sustainability and CSR report on page 50.

POLITICAL DONATIONS
At the AGM in 2016 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 Act) not exceeding £90,000.
During the year the Group did not make such political donations
(2015: £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.

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 Act). Further information is
contained in the Notice of AGM.

BRANCHES
The Company, through various subsidiaries has established
branches in a number of different countries in which the business
operates. The list of subsidiaries is available on pages 134 to 139.

AUDITOR
The auditor, PricewaterhouseCoopers LLP, have expressed their
willingness to continue in office. Upon the recommendation of
the Audit Committee, resolutions to reappoint them as auditor
and to determine their remuneration will be proposed at the
forthcoming AGM.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

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REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

OTHER STATUTORY INFORMATION
continued

For the purposes of LR 9.8.4C R, the information required to be
disclosed by LR 9.8.4 R can be found in the following locations:

Topic
1.
2.

Amount of interest capitalised
Any information required by
LR 9.2.18 R (Publication of
unaudited financial information)
Details of long-term incentive
schemes
Waiver of emoluments by a
Director
Waiver of future emoluments by
a Director
Non pre-emptive issues of equity
for cash
Information required by (6) above
for any unlisted major subsidiary
undertaking of the Company
Company participation in a
placing by a listed subsidiary
Any contracts of significance

10. Any contracts for the provision
of services by a controlling
shareholder

Location
Not applicable
Not applicable

Directors’ Remuneration
report (pages 65 to 80)
Not applicable

Not applicable

Other statutory information
(page 89)
Not applicable

11. Shareholder waivers of dividends Other statutory information

12. Shareholder waivers of future

dividends

13. Agreements with controlling

shareholders

(page 88)
Other statutory information
(page 88)
Not applicable

FINANCIAL INSTRUMENTS
Details about the Group’s use of financial instruments are
outlined in note 14 to the financial statements.

ANNUAL GENERAL MEETING
The Notice of AGM, which is to be held on 26 May 2017,
is available for download from the Company’s website at
www.intertek.com/investors. The Notice details the business
to be conducted at the meeting and includes information
concerning the deadlines for submitting proxy forms and
in relation to voting rights.

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 auditor
is unaware and each Director has taken all the steps that he or
she ought to have taken as a Director of the Company to make
themselves aware of any relevant audit information and to
establish that the Company’s auditor is aware of that information.

ANNUAL REPORT AND ACCOUNTS AND COMPLIANCE WITH
LISTING RULE (‘LR’) 9.8.4 R
The Board has prepared a Strategic report (pages 2 to 51) which
provides an overview of the development and performance of
the Company’s business during the year ended 31 December
2016 and its position at the end of that year, and which covers
likely future developments in the business of the Company
and Group.

For the purposes of compliance with DTR 4.1.5 R(2) and DTR
4.1.8 R, the required content of the ‘Management Report’ can be
found in the Strategic report and this Directors’ report, including
the sections of the Annual Report and Accounts incorporated
by reference.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

STATEMENT OF DIRECTORS’
RESPONSIBILITIES

RESPONSIBILITY STATEMENT OF THE DIRECTORS IN
RESPECT OF THE ANNUAL FINANCIAL REPORT
Each of the Directors, whose name and functions are listed on
pages 58 and 59, confirm that to the best of their knowledge:

• the financial statements, prepared in accordance with the
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;

• the Directors’ report includes a fair review of the development

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; and

• the Company’s 2016 Annual Report and Accounts, taken as a
whole, is fair, balanced and understandable, and provides the
information necessary for shareholders to assess the Group’s
position and performance, business model and strategy.

The Directors’ report comprising pages 52 to 93 and the Group
Strategic report comprising pages 2 to 51 have been approved
by the Board and signed on its behalf by:

André Lacroix
Chief Executive Officer
6 March 2017

Registered Office
33 Cavendish Square
London
W1G 0PS

Registered Number: 04267576

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
(‘IFRSs’) as adopted by the EU and applicable law and have
elected to prepare the Parent Company financial statements in
accordance with UK Accounting Standards, including FRS 101
Reduced Disclosure Framework.

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:

• select suitable accounting policies and then apply

them consistently;

• make judgements and estimates that are reasonable

and prudent;

• for the Group financial statements, state whether they have
been prepared in accordance with IFRSs as adopted by the EU;
• for the Parent Company financial statements, state whether
applicable UK Accounting Standards have been followed,
subject to any material departures disclosed and explained in
the Parent Company financial statements; and

• prepare the financial statements on the going concern basis
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 are sufficient to show and explain the Parent
Company’s transactions and 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 Strategic report, Directors’ report,
Directors’ Remuneration report and Corporate Governance
Statement that complies 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
website. Legislation in the UK governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

CONTENTS

93 Consolidated income statement
94 Consolidated statement of comprehensive income
95 Consolidated statement of financial position
96 Consolidated statement of changes in equity
97 Consolidated statement of cash flows
98 Notes to the financial statements
140
141

Intertek Group plc – Company balance sheet
Intertek Group plc – Company statement of
changes in equity

142 Notes to the Company financial statements

NOTES TO THE FINANCIAL
STATEMENTS

Note

Significant accounting policies
Operating segments and presentation of results
Separately Disclosed Items
Expenses and auditor’s remuneration
Employees
Taxation
Earnings per ordinary share
Property, plant and equipment
Goodwill and other intangible assets

98 1
100 2
103 3
104 4
104 5
105 6
108 7
109 8
111 9
115 10 Acquisitions
117 11 Trade and other receivables
118 12 Trade and other payables
118 13 Provisions
119 14 Borrowings and financial instruments
126 15 Capital and reserves
127 16 Employee benefits
131 17 Share schemes
132 18 Subsequent events
132 19 Capital management
133 20 Non-controlling interest
133 21 Related parties
133 22 Contingent liabilities
134 23 Principal Group Companies

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2016
Revenue
Operating costs
Group operating profit/(loss)

Finance income
Finance expense
Net financing costs

Profit/(loss) before income tax
Income tax expense
Profit/(loss) for the year

Attributable to:
Equity holders of the Company
Non-controlling interest
Profit/(loss) for the year

Notes
2

14
14

6
2

Earnings per share**
Basic
Diluted
* See note 3.
** Earnings per share on the adjusted results is disclosed in note 7.

7
7

Adjusted
results
£m
2,567.0
(2,157.3)
409.7

Separately
Disclosed
Items*
£m
–
(40.2)
(40.2)

Total
2016
£m
2,567.0
(2,197.5)
369.5

Adjusted
results
£m
2,166.3
(1,822.9)
343.4

Separately
Disclosed
Items*
£m
–
(626.9)
(626.9)

Total
2015
£m
2,166.3
(2,449.8)
(283.5)

0.9
(23.3)
(22.4)

387.3
(98.0)
289.3

272.7
16.6
289.3

–
–
–

(40.2)
22.5
(17.7)

(17.7)
–
(17.7)

0.9
(23.3)
(22.4)

347.1
(75.5)
271.6

255.0
16.6
271.6

158.5p
156.8p

1.0
(25.2)
(24.2)

319.2
(77.5)
241.7

228.2
13.5
241.7

–
–
–

(626.9)
38.2
(588.7)

(588.7)
–
(588.7)

1.0
(25.2)
(24.2)

(307.7)
(39.3)
(347.0)

(360.5)
13.5
(347.0)

(224.2)p
(224.2)p

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME

For the year ended 31 December 2016
Profit/(loss) for the year
Other comprehensive income
Remeasurements on defined benefit pension schemes
Income tax recognised in other comprehensive income
Items that will never be reclassified to profit or loss
Foreign exchange translation differences of foreign operations
Net exchange loss on hedges of net investments in foreign operations
Gain/(loss) on fair value of cash flow hedges
Tax on items that are or may be reclassified subsequently to profit or loss
Items that are or may be reclassified subsequently to profit or loss
Total other comprehensive expense for the year
Total comprehensive income/(expense) for the year

Total comprehensive income/(expense) for the year attributable to:
Equity holders of the Company

Non-controlling interest
Total comprehensive income/(expense) for the year

Notes
2

16
6

14
14

2016
£m
271.6

(5.2)
–
(5.2)
279.5
(194.1)
14.3
2.8
102.5
97.3
368.9

347.2

21.7
368.9

2015
£m
(347.0)

(2.2)
–
(2.2)
2.0
(33.1)
–
3.0
(28.1)
(30.3)
(377.3)

(391.8)

14.5
(377.3)

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2016
Assets
Property, plant and equipment
Goodwill
Other intangible assets
Investments in associates
Deferred tax assets
Total non-current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Current tax receivable
Total current assets

Total assets

Liabilities
Interest bearing loans and borrowings
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
Non-controlling interest

Total equity

Notes

2016
£m

Restated
2015
£m

8
9
9

11
14

12
13

14
6
16
12
13

443.3
586.1
198.8
0.3
48.3
1,276.8
19.1
651.8
175.6
23.0
869.5

365.3
471.1
160.4
0.3
42.7
1,039.8
16.1
583.5
141.1
15.6
756.3

2,146.3

1,796.1

(103.4)
(55.8)
(406.8)
(34.0)
(600.0)
(815.9)
(48.7)
(31.8)
(33.7)
(13.8)
(943.9)

(121.8)
(52.6)
(356.6)
(30.7)
(561.7)
(794.7)
(51.7)
(26.9)
(17.3)
(4.4)
(895.0)

(1,543.9)

(1,456.7)

602.4

339.4

1.6
257.8
35.3
273.0
567.7
34.7

1.6
257.8
(58.0)
110.2
311.6
27.8

602.4

339.4

The financial statements on pages 93 to 139 were approved by the Board on 6 March 2017 and were signed on its behalf by:

André Lacroix
Chief Executive Officer

Edward Leigh
Chief Financial Officer

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Attributable to equity holders of the Company

Other reserves

Notes

Share
capital
£m
1.6

Share
premium
£m
257.8

Translation
reserve
£m
(32.3)

Other
£m
6.4

Retained
earnings
£m
547.1

Total
before
non-
controlling
interest
£m
780.6

Non-
controlling
interest
£m
26.1

Total
equity
£m
806.7

–
–
–

–

–
–
–
–
–

–
–
–

–

–
–
–
–
–

–
(32.1)
(32.1)

–

–
–
–
–
–

–
–
–

–

–
–
–
–
–

(360.5)
0.8
(359.7)

(360.5)
(31.3)
(391.8)

13.5
1.0
14.5

(347.0)
(30.3)
(377.3)

(80.7)

(13.3)

(94.0)

(0.7)
(5.2)
(3.0)
12.9
(0.5)

0.5
–
–
–
–

(0.2)
(5.2)
(3.0)
12.9
(0.5)

–
1.6

–
257.8

–
(64.4)

–
6.4

(77.2)
110.2

(77.2)
311.6

(12.8)
27.8

(90.0)
339.4

1.6

257.8

(64.4)

6.4

110.2

311.6

27.8

339.4

–
–
–

–

–
–
–
–
–
–
–

–
–
–

–

–
–
–
–
–
–
–

–
79.0
79.0

–
14.3
14.3

255.0
(1.1)
253.9

255.0
92.2
347.2

16.6
5.1
21.7

271.6
97.3
368.9

–

–
–
–
–
–
–
–

–

–
–
–
–
–
–
–

(88.0)

(16.3)

(104.3)

–
(8.6)
–
(6.4)
(5.2)
16.6
0.5

1.5
–
–
–
–
–
–

1.5
(8.6)
–
(6.4)
(5.2)
16.6
0.5

–
1.6

–
257.8

–
14.6

–
20.7

(91.1)
273.0

(91.1)
567.7

(14.8)
34.7

(105.9)
602.4

For the year ended 31 December 2016
At 1 January 2015
Total comprehensive income for the year
(Loss)/profit
Other comprehensive income
Total comprehensive income for the year
Transactions with owners of the

company recognised directly in equity
Contributions by and distributions to the

owners of the company

Dividends paid
Adjustment arising from changes in

non-controlling interest

Purchase of own shares
Tax paid on Share Awards vested*
Equity-settled transactions
Income tax on equity-settled transactions
Total contributions by and distributions

to the owners of the company

At 31 December 2015

At 1 January 2016
Total comprehensive income for the year
Profit
Other comprehensive income
Total comprehensive income for the year
Transactions with owners of the

company recognised directly in equity
Contributions by and distributions to the

owners of the company

Dividends paid
Adjustment arising from changes in

20
15
17
17
6

non-controlling interest

20
Put option liability over non-controlling interest 10
15
Issue of share capital
15
Purchase of own shares
17
Tax paid on Share Awards vested*
17
Equity-settled transactions
Income tax on equity-settled transactions
6
Total contributions by and distributions

to the owners of the company

At 31 December 2016
*

The tax paid on share awards vested is related to settlement of the tax obligation on behalf of employees by the Group via the sale of a portion of the
equity-settled shares.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2016
Cash flows from operating activities
Profit/(loss) for the year
Adjustments for:
Depreciation charge
Amortisation of software
Amortisation of acquisition intangibles
Impairment of goodwill and other assets
Equity-settled transactions
Net financing costs
Income tax expense
(Profit)/loss on disposal of Subsidiary
Loss/(profit) on disposal of Associate
(Profit)/loss on disposal of property, plant, equipment and software
Operating cash flows 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, plant, equipment and software
Interest received
Acquisition of subsidiaries, net of cash acquired
Consideration paid in respect of prior year acquisitions
Purchase of non-controlling interest
Sale/(Purchase) of Subsidiary
(Purchase)/Sale of associate
Acquisition of property, plant, equipment and software
Net cash flows used in investing activities

Cash flows from financing activities
Purchase of own shares
Tax paid on share awards vested
Drawdown of borrowings
Repayment of borrowings
Dividends paid to non-controlling interest
Equity dividends paid
Net cash flow used in financing activities

Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at 1 January
Exchange adjustments
Cash and cash equivalents at 31 December

Notes

2016
£m

2015
£m

8
9
9
8,9
17
14
6

10
13
20

8,9

20
15

14
14
14
14

271.6

(347.0)

76.4
13.1
14.0
–
16.6
22.4
75.5
(0.4)
2.4
(0.1)
491.5
–
28.8
21.9
4.0
(2.8)
543.4
(29.7)
(94.1)
419.6

3.0
1.0
(34.8)
(2.0)
–
2.0
(3.4)
(105.5)
(139.7)

(6.4)
(5.2)
0.2
(170.5)
(16.3)
(88.0)
(286.2)

(6.3)
116.0
49.1
158.8

75.1
10.1
21.4
589.4
12.9
24.2
39.3
–
–
0.2
425.6
(1.0)
(10.8)
24.9
6.4
(2.8)
442.3
(26.4)
(70.8)
345.1

1.3
1.0
(231.3)
–
(0.3)
–
1.1
(112.2)
(340.4)

(5.2)
(3.0)
169.0
(63.5)
(13.3)
(80.7)
3.3

8.0
119.5
(11.5)
116.0

The notes on pages 98 to 139 are an integral part of these consolidated financial statements.

Cash outflow relating to Separately Disclosed Items was £21.9m for year ended 31 December 2016 (2015: £23.4m).

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

NOTES TO THE FINANCIAL STATEMENTS

1 Significant accounting policies
BASIS OF PREPARATION
Accounting policies applicable to more than one section of the financial statements are shown below. Where accounting policies relate
to a specific note in the financial statements, they are set out within that note, to provide readers of the financial statements with a
more useful layout to the financial information presented.

Statement of compliance
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 2016 consolidate those of the Company and its subsidiaries
(together referred to as the Group) and include the Group’s interest in associates. 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 Parent
Company financial statements present information about the Company as a separate entity and not about its Group. The Company has
elected to prepare its Parent Company financial statements in accordance with UK GAAP; these are presented on pages 140 to 144.

IFRSs announced but not yet effective
The following IFRSs have been announced, but are not yet effective, in the preparation of these financial statements. Their adoption is
not expected to have a material effect on the financial statements, unless otherwise indicated. Certain of these standards and
interpretations will, when adopted, require addition to, or amendment of, disclosures in the accounts.

IFRS 15 Revenue from contracts with customers (effective 1 January 2018) – management has completed its initial analysis of this standard
and to date its adoption is not expected to have material impact on the timing of revenue recognition based on the Group’s current revenue
streams. However, the impact of adopting this standard cannot be reliably estimated until this work is complete and is expected to primarily
affect the revenue recognised on long-term projects where time incurred is billed at agreed rates on a periodic basis, or staged payment
invoicing occurs, requiring an assessment of percentage completion.

IFRS 16 Leases (not yet endorsed by the EU, effective 1 January 2019) – IFRS 16 requires lessees to recognise a lease liability reflecting
future lease payments and a right-of-use asset for lease contracts, subject to limited exceptions for short-term leases and leases of
low value assets. The quantitative impact of IFRS 16 on the Group’s net assets and results is in the process of being assessed, and
management has collated its initial data set to determine the impact on the Group. IFRS 16 is expected to have a material impact on the
balance sheet as both assets and liabilities will increase, and is also expected to have a material impact on key components within the
income statement, as operating lease rental charges will be replaced by depreciation and finance costs. Please refer to Note 8 to the
financial statements which gives an indication of the Group's total operating lease commitments. IFRS 16 will not have any impact on
the underlying commercial performance of the Group nor the cash flows generated in the year.

IFRS 9 Financial Instruments (effective 1 January 2018) – whilst management has performed an initial review, the potential impact of
this new standard will be quantified closer to the date of adoption.

Measurement convention
The financial statements are prepared on the historical cost basis except as discussed in the relevant accounting policies.

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 £0.1m.

Changes in accounting policies
The accounting policies set out in these financial statements have been applied consistently to all years presented. A number of new
standards, amendments to standards and interpretations are effective for annual periods beginning on or after 1 January 2016, but do
not have a significant effect on the consolidated financial statements of the Group.

Revision of disclosure
Following an agenda decision by the IFRS Interpretations Committee in March 2016 regarding offsetting and cash pool arrangements,
the Group has revised the disclosure of its cash pooling arrangements in the comparative balance sheet at 31 December 2015.

This revision has had the effect of increasing both cash and cash equivalents and interest bearing loans and borrowings by £25.1m at
31 December 2015. There is no change to the results or cash flows for the period to 31 December 2015. The impact at 1 January 2015
amounted to £42.9m.

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 the available debt facilities. As a result of these reviews the Board remains satisfied
with the Group’s funding and liquidity position and believe that the Group is well placed to manage its business risks successfully. In
addition, on the basis of its forecasts, both base case and stressed, and available facilities, which are described in note 14, the Board
has concluded that the going concern basis of preparation continues to be appropriate.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

1 Significant accounting policies (continued)

BASIS OF CONSOLIDATION
Subsidiaries
Subsidiaries are those entities controlled by the Group. Control exists when the Group has power to direct the relevant activities,
exposure to variable returns from the investee and the ability to use its power over the investee to affect the amount of investor
returns. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control
commences until the date that control ceases.

For purchases of non-controlling interest in subsidiaries, the difference between the cost of the additional interest in the subsidiary
and the non-controlling interest’s share of the assets and liabilities reflected in the consolidated statement of financial position at the
date of acquisition, is reflected directly in shareholders’ equity.

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 losses are eliminated in the same way
as unrealised gains, but only to the extent that there is no evidence of impairment.

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 (for example cash, trade receivables, trade payables) 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 generally recognised in the income statement. 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. For the policy on hedging
of foreign currency transactions see note 14.

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.
Exchange differences arising from the translation of foreign operations are taken directly to equity in the translation reserve. They are
released to the income statement upon disposal. For the policy on net investment hedging see note 14.

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
Australian dollar

Assets and liabilities
Actual rates

Income and expenses
Cumulative average rates

31 Dec 2016
1.22
1.17
8.51
9.49
1.70

31 Dec 2015
1.48
1.36
9.61
11.48
2.03

2016
1.35
1.23
8.98
10.52
1.83

2015
1.53
1.38
9.62
11.87
2.04

USE OF JUDGEMENTS AND ESTIMATES
The preparation of financial statements in conformity with IFRSs requires management to make judgements and estimates 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.

JUDGEMENTS
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.

Income and deferred tax
The tax on profits is determined according to complex tax laws and regulations. Where the effect of these laws and regulations
is unclear, judgements are used in determining the liability for the tax to be paid. Deferred tax assets and liabilities require management
judgement in determining the amounts to be recognised, with consideration given to the timing and level of future taxable income. The
main areas of judgement in the Group tax calculation are the tax provisions for the full year and the recognition of the UK deferred tax
asset; see note 6.

Basis of consolidation
Judgement is applied when determining if the Group controls a subsidiary. In assessing control, the Group considers whether it has
power over the investee to affect the amount of investor returns; see above ‘Basis of consolidation’ policy.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

NOTES TO THE FINANCIAL STATEMENTS
continued

1 Significant accounting policies (continued)
Intangible assets
When the Group makes an acquisition, management determines whether any intangible assets should be recognised separately from
goodwill, and the amounts at which to recognise those assets; see note 9.

Restructuring
In making a provision and classifying costs as restructuring, management has used its judgement to assess the specific circumstances
of each local and regional restructuring proposal, including an estimate of future costs and timing of completion.

Put option over non-controlling interest
The calculation of the fair value of put options over the non-controlling interest in the Group’s businesses in the relevant countries
required the use of judgement in the application of key assumptions around the future performance of those businesses; the risk
adjusted discount rate taking into account the risk free rate and the gross domestic product growth in those countries.

ESTIMATES
Discussed below are key assumptions concerning the future, and other key sources of estimation at the reporting date, that could have
a risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year.

Claims
In making provision for claims, management bases its estimate 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; see note 13.

Impairment of goodwill
The Group determines on an annual basis whether goodwill is impaired. This requires an estimation of the future cash flows of the cash
generating units to which the goodwill is allocated; see note 9.

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 13.

Employee post-retirement benefit obligations
For material defined benefit plans, the actuarial valuation includes assumptions such as discount rates, return on assets, salary
progression and mortality rates; see note 16.

Recoverability of trade receivables
Trade receivables are reflected net of an estimated provision for impairment losses. This provision considers the past payment history
and the length of time that the debt has remained unpaid; see note 11.

Accounting policies relating to a specific note in the financial statements are set out within that note as follows:

Revenue
Separately Disclosed Items
Taxation
Property, plant and equipment
Goodwill and other intangible assets
Trade and other receivables
Trade and other payables
Provisions
Borrowings and financial instruments
Capital and reserves
Employee benefits
Share schemes
Non-controlling interest

Note
2
3
6
8
9
11
12
13
14
15
16
17
20

2 Operating segments and presentation of results
ACCOUNTING POLICY
Revenue
Revenue represents the total amount receivable for services rendered, excluding sales related taxes and intra-group transactions.

Revenue from services rendered on short-term projects is generally recognised in the income statement when the relevant service is
completed, usually when the report of findings is issued.

100

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

2 Operating segments and presentation of results (continued)

Revenue (continued)
On long-term projects the Group records transactions as sales on the basis of value of work done, with the corresponding amount
being included in trade receivables if the customer has been invoiced or in accrued income if billing has yet to be completed. Long-term
projects consist of two main types: (a) time incurred is billed at agreed rates on a periodic basis, such as monthly; or (b) staged payment
invoicing occurs, requiring an assessment of percentage completion, based on services provided and revenue accrued accordingly.

Expenses are recharged to clients where permitted by the contract. Payments received in advance from customers are recognised in
deferred income where services have not yet been rendered.

OPERATING SEGMENTS
The Group is organised into business lines, which are the Group’s operating segments and are reported to the CEO, the chief operating
decision maker.

Since 1 January 2016, following the change in Group strategy, the approach to reporting and performance management that the CEO
uses to make decisions about operating matters has changed from the previous five divisions to the three divisions set out below. The
segment information for earlier periods has been restated to conform to these changes. The changes have been made as the business
lines within the new divisions demonstrate similar mid- to long-term structural growth drivers.

As part of this change the former Consumer Goods, Commercial & Electrical and Chemicals & Pharmaceuticals divisions have been
mostly aggregated into the Products division; the former Commodities division has primarily moved to the Trade division and the former
Industry & Assurance division has primarily moved to Resources. Certain business lines within those former segments have also been
reallocated to better align to the structural growth drivers of each division. This has had a consequential effect on the allocation of
goodwill to CGUs (see note 9).

The costs of the corporate head office and other costs which are not controlled by the three divisions are allocated appropriately.

Inter-segment pricing is determined on an arm’s length basis. There is no significant seasonality in the Group’s operations.

Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

The performance of the segments is assessed based on adjusted operating profit which is stated before Separately Disclosed Items.
A reconciliation to operating profit by division and Group profit for the year is included overleaf.

The principal activities of the divisions, and the customers they serve, are as follows:

Products – Our Products-related division consists of business lines that are focused on ensuring the quality and safety of physical
components and products, as well minimising risk through assessing the operating process and quality management systems of
our customers.

As a trusted partner to the world’s leading retailers, manufacturers and distributors, our Products business lines support a wide range
of industries including textiles, footwear, toys, hardlines, home appliances, consumer electronics, information and communication
technology, automotive, aerospace, lighting, building products, industrial and renewable energy products, food and hospitality,
healthcare and beauty, and pharmaceuticals.

Across these industries we provide a wide range of ATIC services including laboratory safety, quality and performance testing,
second-party supplier auditing, sustainability analysis, products assurance, vendor compliance, process performance analysis, facility
plant & equipment verification and 3rd party certification.

Trade – Our Trade division consists of three Global business lines with differing services and customers, but similar mid- to long-term
structural growth drivers:

Our Cargo & Analytical Assessment ('Cargo/AA') business provides cargo inspection, analytical assessment, calibration and related
research and technical services to the world’s petroleum and biofuels industries.

Our Government & Trade Services ('GTS') business provides inspection services to governments and regulatory bodies to support trade
activities that help the flow of goods across borders, predominantly in the Middle East, Africa and South America.

Our Agriculture business provides analytical and testing services to global agricultural trading companies and growers.

Resources – Our Resources division consists of two business lines with differing services and customers:

Our Industry Services business uses in-depth knowledge of the oil, gas, nuclear and power industries to provide a diverse range of
Total Quality Assurance solutions to optimise the use of customers' assets and minimise the risk in their supply chains. Some of our
key services include technical inspection, asset integrity management, analytical testing, and ongoing training services.

Our Minerals business provides a broad range of ATIC service solutions to the mining and minerals exploration industries, covering the
resource supply chain.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016 101

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

NOTES TO THE FINANCIAL STATEMENTS
continued

2 Operating segments and presentation of results (continued)
The results of these divisions for the year ended 31 December 2016 are shown below:

Year ended 31 December 2016

Revenue
from
external
customers
£m
1,465.5
584.5
517.0
2,567.0

Products
Trade
Resources
Total
Group operating profit
Net financing costs
Profit before income tax
Income tax expense
Profit for the year
* Depreciation and software amortisation of £89.5m includes unallocated charges of £0.5m.

Year ended 31 December 2015

Revenue
from
external
customers
£m
1,110.6
536.6
519.1
2,166.3

Depreciation
and
software
amortisation*
£m
(56.6)
(18.6)
(13.8)
(89.0)

Depreciation
and
software
amortisation*
£m
(45.4)
(17.4)
(13.2)
(76.0)

Adjusted
operating
profit
£m
297.7
81.8
30.2
409.7
409.7
(22.4)
387.3
(98.0)
289.3

Adjusted
operating
profit
£m
233.8
75.7
33.9
343.4
343.4
(24.2)
319.2
(77.5)
241.7

Separately
Disclosed
Items
£m
(16.7)
(6.4)
(17.1)
(40.2)
(40.2)
–
(40.2)
22.5
(17.7)

Separately
Disclosed
Items
£m
(20.4)
(5.1)
(601.4)
(626.9)
(626.9)
–
(626.9)
38.2
(588.7)

Operating
profit
£m
281.0
75.4
13.1
369.5
369.5
(22.4)
347.1
(75.5)
271.6

Operating
profit/(loss)
£m
213.4
70.6
(567.5)
(283.5)
(283.5)
(24.2)
(307.7)
(39.3)
(347.0)

GEOGRAPHIC SEGMENTS
Although the Group is managed through a divisional structure, which operates on a global basis, under the requirements of IFRS 8 the
Group must disclose any specific countries that are important to the Group’s performance. The Group considers the following to be the
material countries in which it operates; the United States, China (including Hong Kong) and the United Kingdom.

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.

United States
China (including Hong Kong)
United Kingdom
Other countries and unallocated
Total

Revenue from external
customers

Non-current assets

2016
£m
836.1
485.0
173.7
1,072.2
2,567.0

2015
£m
609.1
422.6
171.7
962.9
2,166.3

2016
£m
648.5
61.5
105.1
413.5
1,228.6

2015
£m
552.8
51.0
131.9
304.1
1,039.8

MAJOR CUSTOMERS
No revenue from any individual customer exceeded 10% of total Group revenue in 2015 or 2016.

102

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

3 Separately Disclosed Items
ACCOUNTING POLICY
Adjusted results
In order to present the performance of the Group in a clear, consistent and comparable format, certain items are disclosed separately on
the face of the income statement.

Separately Disclosed Items are items which by their nature or size, in the opinion of the Directors, should be excluded from the adjusted
result to provide readers with a clear and consistent view of the business performance of the Group and its operating divisions.

When applicable, these items include amortisation of acquisition intangibles; impairment of goodwill and other assets; the profit or loss
on disposals of businesses or other significant fixed assets; costs of acquiring and integrating acquisitions; the cost of any fundamental
restructuring; material claims and settlements; significant recycling of amounts from equity to the income statement; and unrealised
gains/losses on financial assets/liabilities.

SEPARATELY DISCLOSED ITEMS
The Separately Disclosed Items are described in the table below:

Operating costs:
Amortisation of acquisition intangibles
Acquisition costs
Restructuring costs
Loss on disposal of businesses
Impairment of goodwill and other assets
Material claims and settlements
Total operating costs
Net financing costs
Total before income tax
Income tax credit on Separately Disclosed Items
Total

(a)
(b)
(c)
(d)
(e)
(f)

2016
£m

(14.0)
(2.8)
(21.4)
(2.0)
–
–
(40.2)
–
(40.2)
22.5
(17.7)

2015
£m

(21.4)
(5.8)
(6.7)
–
(589.4)
(3.6)
(626.9)
–
(626.9)
38.2
(588.7)

(a) Of the amortisation of acquisition intangibles in the current year, £3.9m (2015: £13.4m) relates to the customer contracts

and customer relationships acquired with the purchase of Moody International Limited (‘Moody’) in 2011, and £5.0m (2015: £0.4m)
relates to the customer relationships acquired with the purchase of PSI Group in 2015.

(b) Acquisition costs comprise £2.5m (2015: £5.2m) for transaction costs in respect of current year acquisitions, and £0.3m

in respect of prior years’ acquisitions (2015: £0.6m).

(c) During the year, the Group has implemented various fundamental restructuring activities, consistent with the new Company

structure and 5x5 strategy. These activities included site consolidations, closure of non-core business units, re-engineering of
underperforming businesses and the delayering of management structures.

(d) Three small non-core businesses were disposed of in 2016.

(e) In 2015, £589.4m of impairment of goodwill and other assets comprised £577.3m for the Industry Services CGU and £12.1m

in respect of computer software.

(f) Material claims and settlements relate to a commercial claim that is separately disclosable due to its nature.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016 103

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

NOTES TO THE FINANCIAL STATEMENTS
continued

4 Expenses and auditor’s remuneration
An analysis of operating costs by nature is outlined below:

Employee costs
Depreciation and software amortisation
Impairment of goodwill and other assets
Other expenses
Total

Certain expenses are outlined below, including fees paid to the auditors of the Group:

Included in profit for the year are the following expenses:
Property rentals
Lease and hire charges – fixtures, fittings and equipment
(Profit)/loss on disposal of property, fixtures, fittings, equipment and software

Auditor’s remuneration:
Audit of these financial statements
Amounts receivable by the auditors and their associates in respect of:
Audit of financial statements of subsidiaries pursuant to legislation
Total audit fees payable pursuant to legislation
Audit-related services
Taxation compliance services
Taxation advisory services
Other
Total

5 Employees
Total employee costs are shown below:

Employee costs
Wages and salaries
Equity-settled transactions
Social security costs
Pension costs (note 16)
Total employee costs

Details of pension arrangements and equity-settled transactions are set out in notes 16 and 17 respectively.

Average number of employees by division
Products
Trade
Resources
Central
Total average number for the year ended 31 December
Total actual number at 31 December

The total remuneration of the Directors is shown below:

Directors’ emoluments
Directors’ remuneration
Amounts charged under the long-term incentive scheme
Company contributions to the defined contribution schemes
Total Directors’ emoluments

104

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

2016
£m

2015
£m

1,140.6
89.5
–
967.4
2,197.5

956.2
85.2
589.4
819.0
2,449.8

2016
£m

76.6
21.2
(0.1)

2016
£m

0.5

2.6
3.1
0.1
0.1
–
–
3.3

2016
£m
971.9
15.2
108.3
45.2
1,140.6

2016
22,427
9,468
7,598
2,078
41,571
42,452

2016
£m
7.3
0.1
–
7.4

2015
£m

65.6
17.1
0.2

2015
£m

0.5

2.0
2.5
–
0.3
0.1
0.2
3.1

2015
£m
814.3
12.9
89.4
39.6
956.2

2015
19,712
9,269
7,836
2,118
38,935
41,434

2015
£m
4.6
–
0.2
4.8

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

6 Taxation
ACCOUNTING POLICY
Income tax for the year comprises current and deferred tax. Income tax is recognised in the same primary statement as the accounting
transaction to which it relates.

Current tax
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.

The Group recognises liabilities for anticipated tax issues based on estimates of the additional taxes that are likely to become due.
Amounts are accrued based on management’s interpretation of specific tax law and the likelihood of settlement. Where the outcome
of discussions with tax authorities is different from the amount initially recorded, this difference will impact the tax provisions in the
period the determination is made.

Deferred tax
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, except for:

• recognition of consolidated goodwill;
• the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting

nor taxable profit; and

• differences relating to investments in subsidiaries, branches, associates and interest in joint ventures, the reversal of which is under

the control of the Group and where it is probable that the difference will 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 that have been enacted or substantively enacted at the balance sheet date, for the periods when the
asset is realised or the liability is settled. 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 taxable entities which 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. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced
to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset
to be utilised.

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.

TAX EXPENSE
The Group operates across many different tax jurisdictions. Income and profits are earned and taxed in the individual countries in
which they occur.

The income tax expense for the profit before tax for the year ended 31 December 2016 is £75.5m (2015: £39.3m). The Group’s
consolidated effective tax rate for the year ended 31 December 2016 is 21.8% (2015: 12.8%).

The income tax expense for the adjusted profit before tax for the year ended 31 December 2016 is £98.0m (2015: £77.5m).
The Group’s adjusted consolidated effective tax rate for the 12 months ended 31 December 2016 is 25.3% (2015: 24.3%).

Differences between the consolidated effective tax rate of 21.8% and notional statutory UK rate of 20.0% include, but are not limited
to: the mix of profits; the effect of tax rates in foreign jurisdictions; non-deductible expenses; the effect of utilised tax losses; and
under/over provisions in previous periods.

The Group receives tax incentives in certain jurisdictions, resulting in a lower tax charge to the income statement. Without these
incentives the adjusted effective tax rate would be 28.0% (2015: 26.7%). The Group’s tax rate is affected by its financing arrangements
that are in place to fund business operations in overseas territories. There is no guarantee that these reduced rates will continue to be
applicable in future years (see note 22).

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016 105

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

NOTES TO THE FINANCIAL STATEMENTS
continued

6 Taxation (continued)

Tax charge
The total income tax charge, comprising the current tax charge and the movement in deferred tax, recognised in the income statement
is analysed as follows:

Current tax charge for the period
Adjustments relating to prior year liabilities
Current tax
Deferred tax movement related to current year
Deferred tax movement related to prior year
Deferred tax movement
Total tax in income statement

Tax on adjusted result
Tax on Separately Disclosed Items
Total tax in income statement

2016
£m
86.4
(0.3)
86.1
(0.9)
(9.7)
(10.6)
75.5

98.0
(22.5)
75.5

2015
£m
72.6
(2.6)
70.0
(35.1)
4.4
(30.7)
39.3

77.5
(38.2)
39.3

Reconciliation of effective tax rate
The following table provides a reconciliation of the UK statutory corporation tax rate to the effective tax rate of the Group on profit
before taxation.

Profit/(loss) before taxation
Notional tax charge at UK standard rate 20.0% (2015: 20.25%)
Differences in overseas tax rates
Tax on dividends
Non-deductible expenses
Tax exempt income
Impairment losses with no tax effect
Movement in unrecognised deferred tax
Adjustments in respect of prior years
Other*
Total tax in income statement
*The Other category contains R&D tax credits £0.9m (2015: £0.9m).

2016
£m
347.1
69.4
11.0
10.1
4.7
(5.6)
–
(1.7)
(10.1)
(2.3)
75.5

2015
£m
(307.7)
(62.3)
(2.6)
7.0
3.5
(3.9)
97.3
0.5
1.8
(2.0)
39.3

During 2015, the UK Government announced a phased reduction in the main rate of corporation tax from 20% to 18% over a period of
three years from 1 April 2017. In 2016, the UK Government announced a further reduction in the UK corporation tax rate to 17% from
1 April 2020 and was substantively enacted in September 2016.

Income tax recognised in other comprehensive income (‘OCI’)
As noted in the accounting policy, tax is recognised in the same place as the relevant accounting charge. The income tax recognised on
items recorded in other comprehensive income is shown below:

Before tax
2016
£m

Tax credit
2016
£m

Net of tax
2016
£m

Before tax
2015
£m

Tax credit
2015
£m

Net of tax
2015
£m

Foreign exchange translation differences of

foreign operations

Net exchange (loss)/gain on hedges of net investments

in foreign operations

Gain on fair value of cash flow hedges
Remeasurements on defined benefit pension schemes
Deferred tax assets recognised in other comprehensive

income

Total other comprehensive income for the year

279.5

(194.1)
14.3
(5.2)

–
94.5

–

–
–
–

2.8
2.8

279.5

2.0

(194.1)
14.3
(5.2)

2.8
97.3

(33.1)
–
(2.2)

–
(33.3)

–

–
–
–

3.0
3.0

2.0

(33.1)
–
(2.2)

3.0
(30.3)

106

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

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REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

6 Taxation (continued)
Income tax recognised directly in equity
As noted in the accounting policy, tax is recognised in the same place as the relevant accounting charge. The income tax on items
recognised in equity is shown below:

Equity-settled transactions

Before tax
2016
£m
16.6

Tax credit
2017
£m
0.5

Net of tax
2016
£m
17.1

Before tax
2015
£m
12.9

Tax charge
2015
£m
(0.5)

Net of tax
2015
£m
12.4

DEFERRED TAX
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:

Assets
2016
£m
0.8
9.9
1.4
6.0
46.5
24.9
89.5

Assets
2015
£m
0.4
19.1
1.3
4.3
29.2
11.8
66.1

Liabilities
2016
£m
(72.0)
(15.3)
–
–
(2.6)
–
(89.9)

Liabilities
2015
£m
(67.6)
(5.6)
–
–
(1.9)
–
(75.1)

Net
2016
£m
(71.2)
(5.4)
1.4
6.0
43.9
24.9
(0.4)

Net
2015
£m
(67.2)
13.5
1.3
4.3
27.3
11.8
(9.0)

Intangible assets
Property, fixtures, fittings and equipment
Pensions
Equity-settled transactions
Provisions and other temporary differences
Tax value of losses
Total
As shown on balance sheet:
Deferred tax assets*
Deferred tax liabilities*
Total
*

42.7
(51.7)
(9.0)
The deferred tax by category shown above is not netted off within companies or jurisdictions. The balance sheet shows the net position within companies or jurisdictions.
The difference between the two asset and liability totals is £41.1m, but the net liability of £0.4m is the same in both cases.

48.3
(48.7)
(0.4)

Movements in deferred tax temporary differences during the year
The movement in the year in deferred tax assets and liabilities is shown below:

Intangible assets
Property, fixtures, fittings and equipment
Pensions
Equity-settled transactions
Provisions and other temporary differences
Tax value of losses
Total

1 January
2016
£m
(67.2)
13.5
1.3
4.3
27.3
11.8
(9.0)

Exchange
adjustments
£m
(12.1)
(3.1)
–
–
6.6
2.6
(6.0)

Acquisitions
£m
(2.7)
–
–
–
5.0
–
2.3

1 January
2015
£m
(50.6)
2.4
1.0
4.6
28.5
3.5
(10.6)

Exchange
adjustments
£m
(3.0)
(0.7)
–
0.1
0.6
(0.3)
(3.3)

Acquisitions
£m
(26.2)
–
–
–
–
–
(26.2)

Recognised
in income
statement
£m
10.8
(15.8)
0.4
1.0
5.0
9.2
10.6

Recognised
in income
statement
£m
12.6
11.8
0.3
(0.8)
(1.8)
8.6
30.7

Recognised
in equity
and OCI
£m
–
–
(0.3)
0.7
–
1.3
1.7

Recognised
in equity
and OCI
£m
–
–
–
0.4
–
–
0.4

31 December
2016
£m
(71.2)
(5.4)
1.4
6.0
43.9
24.9
(0.4)

31 December
2015
£m
(67.2)
13.5
1.3
4.3
27.3
11.8
(9.0)

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016 107

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REPORT

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REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

NOTES TO THE FINANCIAL STATEMENTS
continued

6 Taxation (continued)
UNRECOGNISED DEFERRED TAX ASSETS
Deferred tax assets have not been recognised in respect of the items shown below. The numbers shown are the gross temporary
differences, and to calculate the potential deferred tax asset it is necessary to multiply these by the tax rates in each case:

Property, fixtures, fittings and equipment
Pensions
Intangibles
Equity-settled transactions
Provisions and other temporary differences
Tax losses
Total

2016
£m
46.6
23.9
24.6
–
15.0
77.8
187.9

2015
£m
46.4
18.4
22.8
–
12.1
71.9
171.6

Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profits will be
available in certain jurisdictions against which the Group can utilise the benefits from them.

There is a temporary difference of £296.2m (2015: £206.1m) 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.

7 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. Diluted earnings per share is calculated by adjusting the weighted
average number of ordinary shares in issue on the assumption of conversion of all potentially dilutive ordinary shares. Potential ordinary
shares shall be treated as dilutive when, and only when, their conversion to ordinary shares would decrease earnings per share or
increase loss per share from continuing operations. Basic loss per share in 2015 is therefore equal to diluted loss per share.

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 other Separately
Disclosed Items. It has been calculated to allow shareholders a better understanding of the trading performance of the Group. Details
of the adjusted earnings per share are set out below:

2016
£m
255.0
17.7
272.7

160.9
1.7
162.6

158.5p
(1.7)p
156.8p

169.5p
(1.8)p
167.7p

2015
£m
(360.5)
588.7
228.2

160.8
1.4
162.2

(224.2)p
–
(224.2)p

141.9p
(1.2)p
140.7p

Profit/(loss) attributable to ordinary shareholders
Separately Disclosed Items after tax (note 3)
Adjusted earnings
Number of shares (millions)
Basic weighted average number of ordinary shares
Potentially dilutive share awards
Diluted weighted average number of shares

Basic earnings/(loss) per share
Potentially dilutive share awards
Diluted earnings/(loss) per share

Adjusted basic earnings per share
Potentially dilutive share awards
Adjusted diluted earnings per share

108

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OTHER
INFORMATION

8 Property, plant and equipment
ACCOUNTING POLICY
Property, plant and equipment
Owned assets
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.
Cost includes expenditure that is directly attributable to the acquisition of the asset.

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 in the Group’s statement of financial position.

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 expected lease term and their useful lives. Land is not depreciated.

The estimated useful lives are as follows:

Freehold buildings and long leasehold buildings
Short leasehold buildings
Fixtures, fittings, plant and equipment

50 years
Term of lease
3 to 10 years

Depreciation methods, residual values and the useful lives of assets are reassessed at each reporting date.

Impairment
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 to determine the level of any impairment.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016 109

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FINANCIAL
STATEMENTS

OTHER
INFORMATION

NOTES TO THE FINANCIAL STATEMENTS
continued

8 Property, plant and equipment (continued)
PROPERTY, PLANT AND EQUIPMENT
The property, plant and equipment employed by the business is analysed below:

Cost
At 1 January 2015
Exchange adjustments
Additions
Disposals
Businesses acquired (note 10)
At 31 December 2015
Depreciation
At 1 January 2015
Exchange adjustments
Charge for the year
Impairments (note 9)
Disposals
At 31 December 2015

Net book value at 31 December 2015

Cost
At 1 January 2016
Exchange adjustments
Additions
Disposals
Businesses acquired (note 10)
At 31 December 2016
Depreciation
At 1 January 2016
Exchange adjustments
Charge for the year
Disposals
At 31 December 2016
Net book value at 31 December 2016

Fixtures,
fittings,
plant and
equipment
£m

Land and
buildings
£m

70.7
3.2
2.1
(0.4)
6.8
82.4

16.3
0.5
2.8
1.3
(0.1)
20.8

61.6

82.4
15.6
0.1
(0.6)
0.8
98.3

20.8
5.4
3.5
(0.2)
29.5
68.8

766.8
(7.2)
93.3
(14.6)
13.9
852.2

457.9
(2.6)
72.3
34.3
(13.4)
548.5

303.7

852.2
158.8
85.9
(20.6)
3.3
1,079.6

548.5
101.8
72.9
(18.1)
705.1
374.5

Total
£m

837.5
(4.0)
95.4
(15.0)
20.7
934.6

474.2
(2.1)
75.1
35.6
(13.5)
569.3

365.3

934.6
174.4
86.0
(21.2)
4.1
1,177.9

569.3
107.2
76.4
(18.3)
734.6
443.3

Fixtures, fittings, plant and equipment include assets in the course of construction of £26.9m at 31 December 2016 (2015: £34.9m),
mainly comprising laboratories under construction. These assets will not be depreciated until they are available for use.

The net book value of land and buildings comprised:

Freehold
Long leasehold
Short leasehold
Total

2016
£m
62.7
2.4
3.7
68.8

2015
£m
55.5
2.3
3.8
61.6

110

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OTHER
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8 Property, plant and equipment (continued)
Commitments
Operating lease payments
Payments made under operating leases are recognised in the income statement on a straight-line basis over the expected 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.

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

Land and
buildings
2016
£m
65.2
119.9
74.0
259.1

Other
2016
£m
6.1
8.1
0.8
15.0

Total
2016
£m
71.3
128.0
74.8
274.1

Land and
buildings
2015
£m
51.5
84.5
62.6
198.6

Other
2015
£m
5.0
5.0
–
10.0

Total
2015
£m
56.5
89.5
62.6
208.6

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 the financial statements amounted to £4.6m (2015: £4.4m).

9 Goodwill and other intangible assets
ACCOUNTING POLICY
Goodwill
Goodwill arises on the acquisition of businesses. Goodwill represents the difference between the cost of acquisition and the Group’s
interest in the fair value of the identifiable assets and liabilities acquired.

Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash generating units (‘CGUs’) and is not
amortised but is tested annually for impairment.

Acquisitions on or after 1 January 2010
From 1 January 2010, the Group has prospectively applied IFRS 3 ‘Business Combinations (revised 2008)’.

Business combinations are accounted for using the acquisition method at the acquisition date, which is the date on which control
is obtained.

The Group measures goodwill as the fair value of the consideration transferred less the net recognised amount (generally fair value)
of the identifiable assets acquired and liabilities assumed, all measured as of the acquisition date.

Costs related to the acquisition, other than those associated with the issue of debt or equity securities, are expensed as incurred.
Costs relating to acquisitions are shown in Separately Disclosed Items.

Any contingent consideration payable is recognised at fair value at the acquisition date with subsequent changes recognised in profit
or loss.

If at the reporting date the fair values of the acquiree’s identifiable assets, liabilities and contingent liabilities can only be established
provisionally, then these values are used. Adjustments to the fair values can be made within 12 months of the acquisition date and are
taken as adjustments to goodwill.

Acquisitions between 1 January 2004 and 31 December 2009
For acquisitions between 1 January 2004 and 31 December 2009, goodwill represents the excess of the cost of the acquisition
over the Group’s interest in the recognised amount (generally fair value) of the identifiable assets, liabilities and contingent liabilities
of the acquiree.

Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurred in connection with
business combinations were capitalised as part of the cost of the acquisition.

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.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016 111

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STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

NOTES TO THE FINANCIAL STATEMENTS
continued

9 Goodwill and other intangible assets (continued)
Other intangible assets
When the Group makes an acquisition, management review the business and assets acquired to determine whether any intangible
assets should be recognised separately from goodwill. If, based on management’s judgement, 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.

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.

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
Trade names
Licences
Covenants not to compete

Up to 7 years
Up to 10 years
Up to 5 years
Up to 5 years
Contractual life
Contractual life

Impairment
Goodwill is not subject to amortisation and is tested annually for impairment and when circumstances indicate that the carrying value
may be impaired.

Other intangible assets are subject to amortisation and are reviewed for impairment whenever events or changes in circumstances
indicate that the amount carried in the statement of financial position may be less than its recoverable amount.

Any impairment is recognised in the income statement. Impairment is determined for goodwill by assessing the recoverable amount of
each asset or group of assets, i.e. cash generating unit, to which the goodwill relates. A CGU represents an asset grouping at the lowest
level for which there are separately identifiable cash flows.

The recoverable amount of an asset or a CGU 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 estimation process is complex due to the inherent risks
and uncertainties and if different estimates were used this could materially change the projected value of the cash flows. An impairment
loss in respect of goodwill is not reversed.

112

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OTHER
INFORMATION

9 Goodwill and other intangible assets (continued)
INTANGIBLES
The intangibles employed by the business are analysed below:

Cost
At 1 January 2015
Exchange adjustments
Additions
Disposals
Businesses acquired (note 10)
At 31 December 2015
Amortisation and impairment losses
At 1 January 2015
Exchange adjustments
Charge for the year
Disposals
Impairment
At 31 December 2015
Net book value at 31 December 2015

Cost
At 1 January 2016
Exchange adjustments
Additions
Disposal
Businesses acquired (note 10)
At 31 December 2016
Amortisation and impairment losses
At 1 January 2016
Exchange adjustments
Charge for the year
Disposal
Impairment
At 31 December 2016
Net book value at 31 December 2016

Other intangible assets

Goodwill
£m

Customer
relationships
£m

Licences
£m

Other
acquisition
intangibles
£m

Computer
software
£m

792.8
14.6
–
–
157.9
965.3

12.9
(0.1)
–
–
481.4
494.2
471.1

965.3
144.0
–
–
29.3
1,138.6

494.2
58.3
–
–
–
552.5
586.1

232.3
3.7
–
–
59.8
295.8

124.0
1.4
21.1
–
60.3
206.8
89.0

295.8
44.9
–
(0.4)
10.8
351.1

206.8
18.3
13.5
(0.3)
–
238.3
112.8

8.1
0.2
–
–
–
8.3

7.7
0.2
0.2
–
–
8.1
0.2

8.3
1.1
–
–
–
9.4

8.1
1.1
0.2
–
–
9.4
–

17.1
0.4
–
–
5.7
23.2

16.2
0.4
0.1
–
–
16.7
6.5

23.2
(4.3)
–
–
–
18.9

16.7
1.4
0.3
–
–
18.4
0.5

103.0
4.9
16.8
(0.1)
1.4
126.0

37.7
1.5
10.1
(0.1)
12.1
61.3
64.7

126.0
22.5
19.5
(0.5)
–
167.5

61.3
7.5
13.1
(0.5)
0.6
82.0
85.5

Total
£m

360.5
9.2
16.8
(0.1)
66.9
453.3

185.6
3.5
31.5
(0.1)
72.4
292.9
160.4

453.3
64.2
19.5
(0.9)
10.8
546.9

292.9
28.3
27.1
(0.8)
0.6
348.1
198.8

Other intangible assets
The other acquisition intangibles of £0.5m (2015: £6.5m) consist of covenants not to compete and know-how. The average remaining
amortisation period for customer relationships is seven years (2015: seven years).

Computer software net book value of £85.5m at 31 December 2016 (2015: £64.7m) includes software in construction of £32.0m
(2015: £30.5m).

Goodwill
Goodwill arising from acquisitions in the current and prior year has been allocated to reportable segments as follows:

Products
Trade
Resources
At 31 December

2016
£m
15.0
14.3
–
29.3

2015
£m
141.3
–
16.6
157.9

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016 113

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REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

NOTES TO THE FINANCIAL STATEMENTS
continued

9 Goodwill and other intangible assets (continued)
The total carrying amount of goodwill by operating segment is as follows, which is also used for the assessment of the Group’s
impairment review. Following the change in Group strategy described in Note 2, where the former Consumer Goods, Commercial &
Electrical and Chemicals & Pharmaceuticals divisions have been mostly aggregated into the Products division; the former Commodities
division has primarily moved to the Trade division and the former Industry & Assurance division has primarily moved to Resources,
certain business lines within those former segments have also been reallocated to better align to the structural growth drivers of each
division. This has had a consequential effect on the allocation of goodwill to CGUs. As such, the prior year goodwill allocation has been
represented to reflect those changes.

As a result of the above realignment, Industry Services has been redefined to include Exploration & Production. For reference, the
goodwill of Industry Services of £13.0m in 2015 comprised £9.0m for Industry Services and £4.0m for Exploration & Production.

Industry Services
Business Assurance
Food & Agriculture Services
Cargo & Analytical Assessment
Government & Trade Services
Minerals
Softlines
Hardlines

2016
£m
15.8
12.2
17.1
54.6
0.9
40.7
6.2
5.8

Represented
2015
£m
13.0
10.7
14.0
35.7
0.7
34.1
5.9
4.4

3.5
Product Assurance
43.9
Electrical & Wireless
32.0
Transportation Technologies
197.9
Building & Construction
75.3
Chemicals & Pharma/Health, Environmental & Regulatory
471.1
Net book value at 31 December*
* 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

4.3
71.6
38.5
235.9
82.5
586.1

year is stated at closing exchange rates.

Impairment review
In order to determine whether impairments are required, the Group estimates the recoverable amount of each operating segment
or 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. A discount factor is applied to obtain a value in use which is the recoverable amount.

Key assumptions
The key assumptions include the rate of revenue and profit growth within each of the territories and business lines in which the Group
operates. These are based on the Group’s approved budget and five-year Strategic Plan. The long-term growth rate is also key since it is
used in the perpetuity calculations. Finally, the discount rate used to bring the cash flow back to a present value varies depending on
the location of the operation and the nature of the operations. The estimated future cash flows are discounted to their present value
using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

The calculation of the value in use is sensitive to long-term growth rates and discount rates. Long-term growth rates predict growth
beyond the Group’s planning cycle, and range from 1.7% to 2.5% (2015: 1.7% to 3.5%). The discount rate for each CGU reflects the
Group’s weighted average cost of capital adjusted for the risks specific to the CGU. Pre-tax discount rates ranged from 9.5% to 12.4%
(2015: 10.2% to 12.7%).

Sensitivity analysis
None of the reasonable downside sensitivity scenarios on key assumptions would cause the carrying amount of each CGU to exceed its
recoverable amount. The sensitivities modelled by management include:

(i)

Assuming revenues decline each year by 1% in 2018 to 2021 from the 2017 budgeted revenues, with margins increasing with base
assumptions.

(ii) Assuming zero growth in operating profit margins in 2017 to 2021 with revenues increasing per base assumptions.

(iii) Assuming an increase in the discount rates used by 1%.

Management considers that the likelihood of any or all of the above scenarios occurring is low.

114

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REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

10 Acquisitions
ACQUISITIONS IN 2016
On 3 October 2016, the Group completed the acquisition of EWA-Canada Ltd, a leading provider of cyber security and assurance
services for products, equipment and networks across multiple industries, for an estimated purchase price of £25.1m (£25.0m net of
cash acquired), generating goodwill of £18.8m.

On 8 January 2016, the Group acquired FIT Italia SRL, an Italian company specialising in providing assurance services to the retail and
agricultural sectors through food quality and safety assessments. On 11 November 2016, the Group entered into an agreement with
Laboratorios ABC Quimica, Investigacion y Analisis, S.A. de C.V ('ABC') to form an environmental services Joint Venture in Mexico. ABC is
a leading provider of water testing and analytical services. Cash consideration for these two ventures was £17.9m (£17.3m net of cash
acquired) generating goodwill of £15.5m.

Provisional details of the net assets acquired and fair value adjustments are set out in the following tables. These analyses are
provisional and amendments may be made to these figures in the 12 months following the date of acquisition.

EWA-Canada Ltd

Total
Property, plant and equipment
Goodwill
Other intangible assets
Trade and other receivables
Trade and other payables
Deferred tax liabilities
Net assets acquired

Other acquisitions

Total
Property, plant and equipment
Goodwill
Other intangible assets
Trade and other receivables
Trade and other payables
Provisions for liabilities and charges
Deferred tax liabilities
Attributable to Non-Controlling Interest
Net assets acquired

Book value
prior to
acquisition
£m
0.7
–
–
3.0
(2.1)
–
1.6

Book value
prior to
acquisition
£m
3.4
–
–
3.8
(2.5)
(0.2)
–
(1.1)
3.4

2016

Provisional
fair value
adjustments
£m
–
18.8
6.3
–
–
(1.7)
23.4

2016

Provisional
fair value
adjustments
£m
–
15.5
4.4
(2.0)
(3.0)
–
(1.0)
–
13.9

Fair value
to Group on
acquisition
£m
0.7
18.8
6.3
3.0
(2.1)
(1.7)
25.0

Fair value
to Group on
acquisition
£m
3.4
15.5
4.4
1.8
(5.5)
(0.2)
(1.0)
(1.1)
17.3

Goodwill and intangible assets
The total goodwill arising on acquisitions made during 2015 was £34.3m. Goodwill in respect of 2015 acquisitions decreased by £5.0m.
The goodwill arising represents the value of the assembled workforce and the benefits the Company expects to gain from increasing
its presence in the relevant sectors in which the acquired businesses operate. The intangible assets of £10.7m primarily represent the
value placed on customer relationships and the deferred tax thereon was £2.7m.

Consideration paid
The total cash consideration paid for the acquisitions in the year was £35.5m (2015: £237.2m), with further contingent consideration
payable of £7.5m. Cash consideration includes cash and debt acquired of £0.7m. The estimated purchase price was £42.3m.

Put option over non-controlling interest
An earnout arrangement exists resulting in a put option over the minority shareholding related to ABC. This put option is exercisable at
certain points through to 2019. The net present value of the put option liability has been recognised as a non-current financial liability
under IAS 39.

Contribution of acquisitions to revenue and profits
In total acquisitions made during 2016 contributed revenues of £6.8m and a net profit after tax of £1.0m from their respective dates
of acquisition to 31 December 2016. The Group revenue and profit after tax for the year ended 31 December 2016 would have been
£2,590.2m and £274.8m respectively if all the acquisitions were assumed to have been made on 1 January 2016.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016 115

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REPORT

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REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

NOTES TO THE FINANCIAL STATEMENTS
continued

10 Acquisitions (continued)
ACQUISITIONS IN 2015
On 23 November 2015, the Group completed the acquisition of Professional Service Industries, Inc., for a purchase price of £220.9m
(£216.2m net of cash acquired), generating goodwill of £140.1m. PSI is a provider of industry-leading testing and assurance services to
the commercial and civil construction markets and non-destructive testing for onshore pipelines in the USA.

On 3 February 2015, the Group acquired Adelaide Inspection Services Pty Ltd, an Australian-based business providing non-destructive
testing and associated services to the power generation, construction, oil, gas and mining industries. On 10 September 2015, the
Group acquired Dansk Institut for Certificering A/S, a Danish company that provides business assurance services to a wide range of
industries including Hospitality, Transport and Food. On 8 October 2015, the Group acquired MT Group LLC and Materials Testing Lab,
Inc, (together ‘MT’), a leading provider in the US of materials testing and inspection services to the building industry. Cash consideration
for these three acquisitions was £18.1m (£16.9m net of cash acquired) generating goodwill of £12.8m.

The fair value adjustments 12 months from the date of acquisition were:

Professional Service Industries, Inc.

Other acquisitions

Total
Property, plant and equipment
Goodwill
Other intangible assets
Inventories
Trade and other receivables
Trade and other payables
Deferred tax liabilities
Net assets acquired

Book value
prior to
acquisition
£m
15.9
108.1
66.1
50.7
(24.6)
–
(26.8)
189.4

Book value
prior to
acquisition
£m
1.0
–
–
0.2
4.8
(2.4)
–
3.6

2016

Fair value
adjustments
£m
3.8
32.0
0.1
(0.5)
(1.6)
(12.6)
5.6
26.8

2016

Fair value
adjustments
£m
–
12.8
0.7
–
–
–
(0.2)
13.3

Fair value
to Group on
acquisition
£m
19.7
140.1
66.2
50.2
(26.2)
(12.6)
(21.2)
216.2

Fair value
to Group on
acquisition
£m
1.0
12.8
0.7
0.2
4.8
(2.4)
(0.2)
16.9

Book value
prior to
acquisition
£m
15.9
108.1
66.1
50.7
(24.6)
–
(26.8)
189.4

Book value
prior to
acquisition
£m
1.0
–
–
0.2
4.8
(2.4)
–
3.6

2015

Provisional
fair value
adjustments
£m
3.8
38.0
0.1
(0.8)
(2.7)
(13.2)
0.8
26.8

2015

Provisional
fair value
adjustments
£m
–
11.8
0.7
–
–
–
(0.2)
12.3

Fair value
to Group on
acquisition
£m
19.7
146.1
66.2
49.9
(27.3)
(13.2)
(26.0)
215.4

Fair value
to Group on
acquisition
£m
1.0
11.8
0.7
0.2
4.8
(2.4)
(0.2)
15.9

116

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

11 Trade and other receivables
ACCOUNTING POLICY
Trade receivables are recognised initially at the value of the invoice sent to the customer and subsequently at the amounts considered
recoverable (amortised cost).

Estimates are used in determining the level of receivables that will not, in the opinion of the Directors, be collected. Based on historical
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, and 25% of
balances six to 12 months old. 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.

TRADE AND OTHER RECEIVABLES
Trade and other receivables are analysed below:

Trade receivables
Other receivables
Prepayments and accrued income
Fixed assets held for resale
Total trade and other receivables

2016
£m
472.8
60.0
118.9
0.1
651.8

2015
£m
413.7
57.9
111.8
0.1
583.5

Trade receivables are shown net of an allowance for impairment losses of £23.9m (2015: £20.0m) and are all expected to be recovered
within 12 months. Impairment on trade receivables charged as part of operating costs was £7.8m (2015: £6.9m).

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 who
are internationally dispersed.

The ageing of trade receivables at the reporting 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

2016
£m
399.9
49.0
27.5
20.3
496.7
(23.9)
472.8

2015
£m
342.0
50.1
26.5
15.1
433.7
(20.0)
413.7

Included in trade receivables under three months of £399.9m (2015: £342.0m) are trade receivables of £218.5m (2015: £185.1m)
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
Acquisitions
Cash recovered
Impairment loss recognised
Receivables written off
At 31 December

There were no material individual impairments of trade receivables.

2016
£m
20.0
3.1
–
0.8
7.8
(7.8)
23.9

2015
£m
18.3
(0.7)
1.6
0.6
6.9
(6.7)
20.0

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016 117

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

NOTES TO THE FINANCIAL STATEMENTS
continued

12 Trade and other payables
ACCOUNTING POLICY
Trade payables
Trade payables are recognised at the value of the invoice received from a supplier. The carrying value of trade payables is considered
approximate to fair value.

Put option over non-controlling interest
Put options held by non-controlling interests that arise on acquisition are recognised initially at the present value of the redemption
amount. They are subsequently measured at amortised cost using the effective interest method. The discount is unwound through the
Income Statement as a finance charge.

TRADE AND OTHER PAYABLES
Trade and other payables are analysed below:

Trade payables
Other payables
Accruals and deferred income
Total trade and other payables

Current
2016
£m
107.3
25.5
274.0
406.8

Current
2015
£m
64.7
41.6
250.3
356.6

Non-current
2016
£m
–
26.1
7.6
33.7

Non-current
2015
£m
–
9.5
7.8
17.3

The Group’s exposure to liquidity risk related to trade payables is disclosed in note 14.

The key assumptions in arriving at the value of the put options over shares held by non-controlling interests are the performance of
those businesses; the risk adjusted discount rate taking into account the risk free rate and the gross domestic product growth in the
countries of those underlying businesses.

13 Provisions
ACCOUNTING POLICY
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.

PROVISIONS

At 1 January 2016
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 2016
Included in:
Current liabilities
Non-current liabilities
At 31 December 2016

Contingent
consideration
£m
4.4
0.7
–
7.9
1.0
(0.2)
–
13.8

–
13.8
13.8

Claims
£m
18.5
0.7
5.6
–
(0.6)
(1.2)
(3.5)
19.5

19.5
–
19.5

Other
£m
12.2
0.5
22.8
–
–
(1.0)
(20.0)
14.5

14.5
–
14.5

Total
£m
35.1
1.9
28.4
7.9
0.4
(2.4)
(23.5)
47.8

34.0
13.8
47.8

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 £19.5m (2015: £18.5m) 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 22.

The other provision of £14.5m (2015: £12.2m) includes restructuring provisions. The timing of the cash outflow is uncertain, but
is likely to be within one year.

118

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

14 Borrowings and financial instruments
ACCOUNTING POLICY
Net financing costs
Net financing costs comprise interest expense on borrowings, facility fees, interest receivable on funds invested, net foreign exchange
gains or losses, interest income and expense relating to pension assets and liabilities and gains and losses on hedging instruments that
are recognised in the income statement. Interest income and interest expense are recognised as they accrue using the effective
interest rate method.

Loans and receivables
Loans and receivables comprise trade and other receivables. Loans and receivables are recognised initially at fair value and
subsequently at amortised cost less impairment losses (including bad debt provision).

Cash and cash equivalents
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.

Non-derivative financial liabilities
Trade and other payables are recognised initially at fair value and subsequently at their amortised cost.

Interest-bearing borrowings are initially recognised at fair value less 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.

The fair value of put option liabilities over non-controlling interests is calculated using a present value calculation, incorporating observable
and non-observable inputs. This valuation technique has been adopted as it most closely mirrors the contractual arrangement.

Derivative financial instruments
The Group uses derivative financial instruments, including interest rate swaps and forward exchange contracts, 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 speculative purposes.

Derivative financial instruments are recognised initially and subsequently at fair value; attributable transaction costs are recognised in
profit or loss when incurred. The gain or loss on re-measurement to fair value at each period end is recognised immediately in the
income statement except where derivatives qualify for hedge accounting.

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.

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.

Hedging
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 in the
same caption as the foreign exchange on the related item.

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. The Group has external borrowings denominated in foreign currencies which are used to hedge the net investment
in its foreign operations.

Cash flow hedges
Cash flow hedges comprise derivative financial instruments designated in a hedging relationship to manage interest rate risk to which
the cash flows of certain assets and liabilities are exposed. The effective portion of changes in the fair value of the derivative that is
designated and qualifies for hedge accounting is recognised in other comprehensive income. The ineffective portion is recognised
immediately in the income statement. Amounts accumulated in equity are reclassified to the income statement in the period in which
the hedged item affects profit or loss. However, where a forecasted transaction results in a non-financial asset or liability, the
accumulated fair value movements previously deferred in equity are included in the initial cost of the asset or liability.

Impairment
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.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016 119

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

NOTES TO THE FINANCIAL STATEMENTS
continued

14 Borrowings and financial instruments (continued)
Net financing costs
Net financing costs are shown below:

Recognised in income statement
Finance income
Interest on bank balances
Total finance income
Finance expense
Interest on borrowings
Net pension interest cost (note 16)
Foreign exchange differences on revaluation of net monetary assets and liabilities
Facility fees and other*
Total finance expense*
Net financing costs*
* Includes £nil (2015: £nil) relating to SDIs.

Analysis of net debt

Cash and cash equivalents per the Statement of Financial Position
Overdrafts
Cash per the Statement of Cash Flows

The components of net debt are outlined below:

2016
£m

0.9
0.9

(26.7)
(0.8)
5.7
(1.5)
(23.3)
(22.4)

2016
£m
175.6
(16.8)
158.8

2015
£m

1.0
1.0

(26.2)
(0.8)
3.1
(1.3)
(25.2)
(24.2)

2015
£m
141.1
(25.1)
116.0

Cash
Borrowings:
Revolving credit facility US$800m 2021
Bilateral term loan facilities US$100m 2018
Bilateral term loan facilities US$60m 2016
Senior notes US$75m 2016
Senior notes US$100m 2017
Senior notes US$20m 2019
Senior notes US$150m 2020
Senior notes US$15m 2021
Senior notes US$140m 2022
Senior notes US$40m 2023
Senior notes US$125m 2024
Senior notes US$40m 2025
Senior notes US$75m 2026
Other*
Total borrowings
Total net debt
*

Other borrowings of £4.8m (2015: £6.2m) and facility fees.

1 January
2016
£m
116.0

Cash flow
£m
(6.3)

Exchange
adjustments
£m
49.1

31 December
2016
£m
158.8

(253.8)
(67.5)
(40.4)
(50.6)
(67.4)
(13.5)
(101.2)
(10.1)
(94.5)
(27.0)
(84.4)
(27.0)
(50.6)
(3.4)
(891.4)
(775.4)

73.5
–
41.8
52.6
–
–
–
–
–
–
–
–
–
1.8
169.7
163.4

(61.9)
(14.3)
(1.4)
(2.0)
(14.4)
(2.9)
(21.5)
(2.1)
(20.0)
(5.7)
(17.9)
(5.7)
(10.7)
(0.3)
(180.8)
(131.7)

(242.2)
(81.8)
–
–
(81.8)
(16.4)
(122.7)
(12.2)
(114.5)
(32.7)
(102.3)
(32.7)
(61.3)
(1.9)
(902.5)
(743.7)

120

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

14 Borrowings and financial instruments (continued)

Cash
Borrowings:
Revolving credit facility US$800m 2020
Bilateral term loan facilities US$100m 2017
Bilateral term loan facilities US$60m 2016
Senior notes US$100m 2015
Senior notes US$75m 2016
Senior notes US$100m 2017
Senior notes US$20m 2019
Senior notes US$150m 2020
Senior notes US$15m 2021
Senior notes US$140m 2022
Senior notes US$40m 2023
Senior notes US$125m 2024
Senior notes US$40m 2025
Senior notes US$75m 2026
Other*
Total borrowings
Total net debt

BORROWINGS
Borrowings are split into current and non-current as outlined below:

Senior term loans and notes
Other borrowings
Total borrowings

Analysis of debt
Debt falling due:
In one year or less
Between one and two years
Between two and five years
Over five years
Total borrowings

1 January
2015
£m
119.5

Cash flow
£m
8.0

Exchange
adjustments
£m
(11.5)

31 December
2015
£m
116.0

(124.1)
(25.8)
(38.6)
(64.4)
(48.3)
(64.4)
(12.9)
(96.7)
(9.7)
(90.2)
(25.8)
(80.6)
(25.8)
(48.3)
2.6
(753.0)
(633.5)

Current
2016
£m
81.8
4.8
86.6

(123.9)
(39.8)
–
63.5
–
–
–
–
–
–
–
–
–
–
(6.2)
(106.4)
(98.4)

(5.8)
(1.9)
(1.8)
0.9
(2.3)
(3.0)
(0.6)
(4.5)
(0.4)
(4.3)
(1.2)
(3.8)
(1.2)
(2.3)
0.2
(32.0)
(43.5)

(253.8)
(67.5)
(40.4)
–
(50.6)
(67.4)
(13.5)
(101.2)
(10.1)
(94.5)
(27.0)
(84.4)
(27.0)
(50.6)
(3.4)
(891.4)
(775.4)

Current
2015
£m
90.5
6.2
96.7

Non-current
2016
£m
815.9
–
815.9

Non-current
2015
£m
794.7
–
794.7

2016
£m

86.6
81.1
391.3
343.5
902.5

2015
£m

96.7
134.2
367.0
293.5
891.4

Description of borrowings
Total undrawn committed borrowing facilities as at 31 December 2016 were £412.0m (2015: £286.0m).

US$800m revolving credit facility
The Group’s principal bank facility comprises a US$800m multi-currency revolving credit facility. In July 2016, US$672m of the facility
was extended to June 2021. Advances under the facility bear interest at a rate equal to LIBOR, or their local currency equivalent, plus
a margin, depending on the Group’s leverage. Drawings under this facility at 31 December 2016 were £242.2m (2015: £253.8m).

Bilateral term loan facility 1
On 21 December 2012 the Group signed a US$20m bilateral term loan which was increased on 4 April 2014 to US$40m. This facility
was further increased in November 2015 to US$100m, and the maturity of this facility was also extended to November 2018.
Advances under this facility bear interest at a rate equal to LIBOR plus a margin. Drawings under this facility at 31 December 2016
were £81.8m (2015: £67.5m).

Bilateral term loan facility 2
On 21 December 2012 the Group signed a US$20m bilateral term loan which was increased on 4 April 2014 to US$60m. The extended
maturity of this facility was March 2016. Advances under this facility bore interest at a rate equal to LIBOR plus a margin. Drawings
under this facility at 31 December 2016 were £nil (2015: £40.4m).

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016 121

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

NOTES TO THE FINANCIAL STATEMENTS
continued

14 Borrowings and financial instruments (continued)
BORROWINGS (CONTINUED)
Private placement bonds
In December 2008 the Group issued US$75m of senior notes. The notes, which were repaid on 10 June 2016, paid a fixed annual
interest rate of 8.0%.

In December 2010 the Group issued US$250m of senior notes. These notes were issued in two tranches with US$100m repayable on
15 December 2017 at a fixed annual interest rate of 3.2% and US$150m repayable on 15 December 2020 at a fixed annual interest
rate of 3.91%.

In October 2011 the Group issued US$265m of senior notes. These notes were issued in three tranches with US$20m repayable on
18 January 2019 at a fixed annual interest rate of 3.0%, US$140m repayable on 18 January 2022 at a fixed annual interest rate
of 3.75% and US$105m repayable on 18 January 2024 at a fixed annual interest rate of 3.85%.

In February 2013 the Group issued US$80m of senior notes. These notes were issued in two tranches with US$40m repayable on
14 February 2023 at a fixed annual interest rate of 3.10% and US$40m repayable on 14 February 2025 at a fixed annual interest rate
of 3.25%.

In July 2014 the Group issued US$110m of senior notes. These notes were issued in four tranches with US$15m repayable on 31 July
2021 at a fixed annual interest rate of 3.37%, US$20m repayable on 31 July 2024 at a fixed annual interest rate of 3.86%, US$60m
repayable on 31 October 2026 at a fixed annual interest rate of 4.05% and US$15m repayable on 31 December 2026 at a fixed annual
interest rate of 4.10%.

FINANCIAL RISKS
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 below, and in the Strategic Report – Financial Review that starts on page 34.

Credit risk
Exposure to credit risk
Credit risks arise mainly from the possibility that customers may not be able to settle their obligations as agreed. The Group monitors
the creditworthiness of customers on an ongoing basis. The Group’s credit risk is diversified due to the large number of entities,
industries and regions that make up the Group’s customer base.

The carrying amount of financial assets represents the maximum credit exposure. At the reporting date this was as follows:

Trade receivables, net of allowance (note 11)
Cash and cash equivalents
Total

2016
£m
472.8
158.8
631.6

The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was as follows:

Asia Pacific
Americas
Europe, Middle East and Africa
Total

2016
£m
131.5
180.4
160.9
472.8

2015
£m
413.7
116.0
529.7

2015
£m
111.5
160.2
142.0
413.7

Counterparty risk
Cash and cash equivalents and available borrowing facilities are at risk in the event that the counterparty is not able to meet its
obligations in regards to the cash held or facilities available to the Group. The Group also enters into transactions with counterparties
in relation to derivative financial instruments. If the counterparty was not able to meet its obligations, the Group may be exposed to
additional foreign currency or interest rate risk.

The Group, wherever possible, enters into arrangements with counterparties who have robust credit standing, which the Group defines
as a financial institution with a credit rating of at least investment grade. The Group has existing banking relationships with a number
of ‘relationship banks’ that meet this criterion, and seeks to use their services wherever possible while avoiding excessive concentration
of credit risk. Given the diverse geographic nature of the Group’s activities, it is not always possible to use a relationship bank. Therefore
the Group has set limits on the level of deposits to be held at non-relationship banks to minimise the risk to the Group. It is also Group
policy to remit any excess funds from local entities back to Intertek Group Treasury in the UK. Given the controls in place, and based on a
current assessment of our banking relationships, management does not expect any counterparty to fail to meet its obligations.

122

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

14 Borrowings and financial instruments (continued)
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its obligations as and when they fall due. The Group’s policy is to:

• ensure sufficient liquidity is available to Group companies in the amounts, currencies and locations required to support the Group’s

operations;

• ensure the Group has adequate available sources of funding to protect against unforeseen internal and external events; and
• avoid excess liquidity which restricts growth and impacts the cost of financing.

To ensure this policy is met, the Group monitors cash balances on a daily basis, projects cash requirements on a rolling basis and funds
itself using debt instruments with a range of maturities.

The following are the contractual cash flows of financial liabilities/(assets) including interest (for floating rate instruments, interest
payments are based on the interest rate at 31 December 2016):

2016
Non-derivative financial liabilities
Senior term loans and notes
Other loans
Trade payables (note 12)
Put option liability over non-controlling

interest

Derivative financial liabilities/

(assets)

Forward exchange contracts:
Outflow
Inflow

Total

2015
Non-derivative financial liabilities
Senior term loans and notes
Other loans
Trade payables (note 12)

Derivative financial liabilities/

(assets)

Forward exchange contracts:
Outflow
Inflow

Total

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

897.7
4.8
107.3

1,031.8
4.8
107.3

13.1
–
103.9

8.6

9.6

–

94.9
4.8
3.1

–

142.8
–
0.3

–

1,018.4

1,153.5

117.0

102.8

143.1

–
(8.0)
(8.0)
1,010.4

658.1
(666.1)
(8.0)
1,145.5

657.9
(665.9)
(8.0)
109.0

0.2
(0.2)
–
102.8

–
–
–
143.1

535.7
–
–

9.6

545.3

–
–
–
545.3

245.3
–
–

–

245.3

–
–
–
245.3

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

885.2
6.2
64.7

956.1

1,014.7
6.2
64.7

1,085.6

52.9
–
63.2

116.1

–
(1.6)
(1.6)
954.5

423.4
(425.0)
(1.6)
1,084.0

366.5
(367.7)
(1.2)
114.9

62.8
6.2
1.5

70.5

56.9
(57.3)
(0.4)
70.1

173.0
–
–

173.0

–
–
–
173.0

420.5
–
–

420.5

–
–
–
420.5

305.5
–
–

305.5

–
–
–
305.5

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016 123

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

NOTES TO THE FINANCIAL STATEMENTS
continued

14 Borrowings and financial instruments (continued)

Interest rate risk
The Group’s objective is to manage the risk to the business from movements in interest rates, and to provide stability and predictability
of the near term (12 month horizon) interest expense. Under the Group’s Treasury policy, management may fix the interest rates on up
to 80% of the Group’s debt portfolio for the period of the current financial year. The Group’s debt portfolio beyond this period is to be
managed within the range of a 20%-60% fixed to floating rate ratio. To do this the Group uses hedging instruments where considered
appropriate. A cash flow hedge is in place in respect of a borrowing that is repayable in 2020.

Sensitivity
At 31 December 2016, it is estimated that the impact on variable rate net debt of a general increase of 3% in interest rates would
be a decrease in the Group’s profit before tax of approximately £9.3m (2015: £4.5m). This analysis assumes all other variables
remain constant.

Foreign currency risk
The Group’s objective in managing foreign currency risk is to safeguard the Group’s financial assets from economic loss due to
fluctuations in foreign currencies, and to protect margins on cross currency contracts and operations. To achieve this, the Group’s policy
is to hedge its foreign currency exposures where appropriate.

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.

The foreign currency profiles of cash, trade receivables and payables subject to translation risk and transaction risk, at the reporting
date were as follows:

2016
Cash
Trade receivables (note 11)
Trade payables (note 12)

2015
Cash
Trade receivables (note 11)
Trade payables (note 12)

Carrying
amount
£m
158.8
472.8
107.3

116.0
413.7
64.7

Sterling
£m
4.1
44.8
14.6

US dollar
£m
7.6
158.6
30.8

Chinese
renminbi
£m
55.0
44.9
14.9

Hong Kong
dollar
£m
1.0
14.0
3.7

6.2
37.7
11.0

13.6
138.1
15.3

16.4
37.6
9.0

2.2
11.2
2.1

Euro
£m
0.5
44.5
11.2

1.3
40.9
8.8

Other
currencies
£m
90.6
166.0
32.1

76.3
148.2
18.5

124

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

14 Borrowings and financial instruments (continued)
RECOGNISED ASSETS AND LIABILITIES
Changes in the fair value of forward foreign 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.

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 2016 was £857.7m (2015: £888.2m).

A foreign exchange loss of £194.1m (2015: loss £33.1m) was recognised in the translation reserve in equity on translation of these
loans to sterling.

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 2016 by approximately £20.8m (2015: £15.9m). This analysis assumes all other
variables remain constant.

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.

Book value
2016
£m

Fair value
2016
£m

Book value
2015
£m

Fair value
2015
£m

158.8
472.8
8.0
639.6

116.0
413.7
1.6
531.3

Financial assets
Cash and cash equivalents
Trade receivables (note 11)
Forward exchange contracts*
Total financial assets
Financial liabilities
Interest bearing loans and borrowings*
Trade payables (note 12)
Put option liability over non-controlling interest
Total financial liabilities
*

900.6
64.7
–
965.3
Interest bearing loans and borrowing, and derivative liabilities are categorised as Level 2 under which the fair value is measured using inputs other than quoted prices
observable for the liability, either directly or indirectly.

909.9
107.3
8.6
1,025.8

902.5
107.3
8.6
1,018.4

891.4
64.7
–
956.1

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016 125

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

NOTES TO THE FINANCIAL STATEMENTS
continued

15 Capital and reserves
ACCOUNTING POLICY
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.

Own shares held by the Employee Share Ownership Trust (‘ESOT’)
Transactions of the Group sponsored ESOT are included in the Group financial statements. In particular, the Trust’s purchases of shares
in the Company are debited directly in equity to retained earnings.

Share capital

Group and Company
Allotted, called up and fully paid:
Ordinary shares of 1p each at start of year
Share Awards
Ordinary shares of 1p each at end of year
Shares classified in shareholders’ funds

2016
Number

161,361,777
24,998
161,386,775

2016
£m

1.6
–
1.6
1.6

2015
£m

1.6
–
1.6
1.6

The holders of ordinary shares are entitled to receive dividends and are entitled to vote at general meetings of the Company.

During the year, the Company issued 24,998 (2014: nil) ordinary shares in respect of all share plans.

Purchase of own shares for trust
During the year ended 31 December 2016, the Company financed the purchase of 200,000 (2015: 200,126) of its own shares with an
aggregate nominal value of £2,000 (2015: £2,001) for £6.4m (2015: £5.2m) which was charged to retained earnings in equity and was
held by the ESOT. This trust is managed and controlled by an independent offshore trustee. During the year, 221,309 shares were
utilised to satisfy the vesting of share awards and share options (note 17). At 31 December 2016, the ESOT held 493,629 shares
(2015: 514,938 shares) with an aggregate nominal value of £4,936 (2015: £5,149). The associated cash outflow of £6.4m (2015:
£5.2m) has been presented as a financing cash flow.

Dividends
Amounts recognised as distributions to equity holders:
Final dividend for the year ended 31 December 2014
Interim dividend for the year ended 31 December 2015
Final dividend for the year ended 31 December 2015
Interim dividend for the year ended 31 December 2016
Dividends paid

2016
£m

–
–
56.8
31.2
88.0

2016
Pence per
share

–
–
35.3
19.4
54.7

2015
£m

53.3
27.4
–
–
80.7

2015
Pence per
share

33.1
17.0
–
–
50.1

After the reporting date, the Directors proposed a final dividend of 43.0p per share in respect of the year ended 31 December 2016,
which is expected to amount to £69.4m. This dividend is subject to approval by shareholders at the Annual General Meeting and
therefore, in accordance with IAS 10: Events after the reporting date, it has not been included as a liability in these financial
statements. If approved, the final dividend will be paid to shareholders on 2 June 2017.

RESERVES
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.

Other
This reserve includes a merger difference that arose in 2002 on the conversion of share warrants into share capital, as well as the cash
flow hedge reserve.

126

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

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REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

16 Employee benefits
ACCOUNTING POLICY
Pension schemes
Defined contribution plans
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.

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 material 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. The fair value of any plan assets are deducted.

In calculating the defined benefit deficit, 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.

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.

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, Hong Kong and Switzerland. The United
Kingdom and Hong Kong schemes are funded schemes, with assets held in separate trustee administered funds and the Switzerland
scheme is an insured scheme. The schemes in the United Kingdom and Hong Kong were closed to new entrants in 2002 and 2000,
respectively. Other funded defined benefit schemes are not considered to be material and are therefore accounted for as if they were
defined contribution schemes.

The Group recognises all actuarial remeasurements in each year in equity through the consolidated statement of comprehensive income.

In June 2011, the International Accounting Standards Board issued revisions to IAS 19 Employee Benefits (‘IAS 19’) that provide
changes in the recognition, presentation and disclosure of post-employment benefits. The Group has adopted the revised accounting
standard from 1 January 2013.

TOTAL PENSION COST
The total pension cost included in operating profit for the Group was:

Defined contribution schemes
Defined benefit schemes – current service cost and administration expenses
Pension cost included in operating profit (note 5)

2016
£m
(41.6)
(3.6)
(45.2)

2015
£m
(36.3)
(3.3)
(39.6)

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 (‘United Kingdom Scheme’) was carried out
as at 1 April 2013, and for accounting purposes has been updated to 31 December 2015 for IAS 19 purposes. The last full actuarial
valuation of the Hong Kong scheme was carried out as at 31 December 2013, for local accounting purposes but this has been updated
to 31 December 2015 for IAS 19 purposes. The Swiss scheme was actuarially valued for IAS 19 purposes at 31 December 2013 and
for accounting purposes has been updated to 31 December 2015 for IAS 19 purposes. The average duration of the schemes are 20
years, 10 years and 15 years for the United Kingdom, Hong Kong and Switzerland schemes respectively.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016 127

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

NOTES TO THE FINANCIAL STATEMENTS
continued

16 Employee benefits (continued)
DEFINED BENEFIT SCHEMES
The cost of defined benefit schemes
The amounts recognised in the income statement were as follows:

Current service cost
Scheme administration expenses
Net pension interest cost (note 14)
Total charge

2016
£m
(3.0)
(0.5)
(0.8)
(4.3)

2015
£m
(2.9)
(0.4)
(0.8)
(4.1)

The current service cost and scheme administration expenses are included in operating costs in the income statement and pension
interest cost and interest income are included in net financing costs.

Included in Other Comprehensive Income:

Remeasurements arising from:
Demographic assumptions
Financial assumptions
Experience adjustment
Asset valuation
Other
Total

2016
£m

4.1
(26.1)
4.1
12.9
(0.2)
(5.2)

2015
£m

0.7
(0.5)
(0.5)
(1.6)
(0.3)
(2.2)

Company contributions
The Company assessed the triennial actuarial valuation and its impact on the scheme funding plan in 2017 and future years. In 2017
the Group expects to make normal contributions of £0.8m (2016: £0.8m) and a special contribution of £2.8m (2016: £2.8m) to the
United Kingdom Scheme. The next triennial valuation (due as at 1 April 2016) is currently underway and will conclude after the date
of signature of these financials statements. This will include a review of the company’s future contribution requirements.

The Hong Kong Scheme has an annual actuarial valuation, identifying the funding requirements for 2017.

Pension liability for defined benefit schemes
The amounts recognised in the statement of financial position for defined benefit schemes were as follows:

United
Kingdom
Scheme
£m
105.9
(129.8)
(23.9)

Hong Kong
Scheme
£m
21.9
(26.8)
(4.9)

Switzerland
Scheme
£m
15.7
(18.7)
(3.0)

2016
£m
120.9
3.7
1.9
2.8
0.6
(5.2)
6.2
12.9
(0.5)
0.2
143.5

Total
£m
143.5
(175.3)
(31.8)

2015
£m
120.1
3.7
1.6
2.8
0.5
(7.5)
1.5
(1.6)
(0.4)
0.2
120.9

Fair value of scheme assets
Present value of funded defined benefit obligations
Deficit in schemes

The fair value changes in the scheme assets are shown below:

Fair value of scheme assets at 1 January
Interest income
Normal contributions by the employer
Special contributions by the employer
Contributions by scheme participants
Benefits paid
Effect of exchange rate changes on overseas schemes
Remeasurements
Scheme administration expenses
Contribution to fund scheme administration expenses
Fair value of scheme assets at 31 December

128

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

16 Employee benefits (continued)
ASSET ALLOCATION
Investment statements were provided by the Investment Managers which showed that, as at 31 December 2015 the invested assets
of the United Kingdom Scheme totalled £105.9m (2015: £89.4m) and of the Hong Kong Scheme totalled £21.9m (2015: £17.6m)
broken down as follows:

Asset class
Equities
Property
Bonds
Absolute Return Fund*
Liability Driven Investment**
Cash
Total

United Kingdom Scheme

Hong Kong Scheme

2016
£m
50.4
8.6
–
25.2
16.4
5.3
105.9

2015
£m
41.8
8.4
–
23.0
13.0
3.2
89.4

2016
£m
14.0
–
7.9
–
–
–
21.9

2015
£m
11.3
–
6.2
–
–
0.1
17.6

The Absolute Return Fund aims to provide positive investment returns in all conditions over the medium to long term. The investment managers have a wide investment
remit and look to exploit market inefficiencies through active allocation to a diverse range of market positions. The Fund uses a combination of traditional assets and
investment strategies based on derivatives and is able to take long- and short-term positions in markets.

** The LDI Fund provides the hedge against adverse movements in inflation and interest rates. It seeks to match the sensitivity of the Scheme’s liability cash flow

to changes in interest rates and inflation; it is invested in gilts, swaps, futures, repo contracts and money market instruments.

The United Kingdom Scheme had no bank account assets as at 31 December 2016 (2015: £0.1m).

All invested assets of the United Kingdom and Hong Kong Schemes are unquoted. The Switzerland Scheme is fully insured.

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 schemes
Remeasurements
Defined benefit obligations at 31 December

Principal actuarial assumptions:

Discount rate
Inflation rate (based on CPI)
Rate of salary increases
Rate of pension increases:
CPI subject to a maximum of 5% p.a.
Increases subject to a maximum of 2.5% p.a.

2016
£m
147.8
3.0
4.5
0.3
(5.2)
7.6
17.3
175.3

2015
£m
145.4
2.9
4.5
0.5
(7.5)
1.7
0.3
147.8

United Kingdom Scheme

Hong Kong Scheme

Switzerland Scheme

2016
%
2.7
2.4
3.4

2.4
1.9

2015
%
3.7
2.5
3.3

2.5
1.9

2016
%
1.9
n/a
4.0

n/a
n/a

2015
%
1.6
n/a
4.0

n/a
n/a

2016
%
0.4
n/a
1.0

n/a
n/a

2015
%
0.8
n/a
1.0

n/a
n/a

The retirement arrangement in Hong Kong pays a lump sum to members instead of a pension and the Switzerland Scheme is an
insured plan.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016 129

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

NOTES TO THE FINANCIAL STATEMENTS
continued

16 Employee benefits (continued)
Life expectancy assumptions at year end for:

Male aged 40
Male aged 65
Female aged 40
Female aged 65
*

United Kingdom Scheme
2015
47.2
22.2
49.1
24.5

2016
49.4
22.2
51.5
24.2

Hong Kong Scheme*

Switzerland Scheme

2016
n/a
n/a
n/a
n/a

2015
n/a
n/a
n/a
n/a

2016
42.8
19.8
45.4
21.9

2015
41.6
18.9
44.6
21.4

The retirement arrangement in Hong Kong pays a lump sum to members instead of a pension at the point of retirement. Since the amount of the lump sum is not related to
the life expectancy of the member, the post-retirement mortality is not a relevant assumption for the Hong Kong Scheme.

The table above shows, for the United Kingdom Scheme, the number of years a male or female is expected to live, assuming they were aged either 40 or 65 at
31 December. The mortality tables adopted in 2016 for the United Kingdom Scheme are the S2PA projected by year of birth, based on the CMI 2015 mortality projection
model with a 1.25% long-term annual rate for future improvement. In 2015 the S1PA tables were used, based on the CMI 2013 mortality projection model. For the
Switzerland Scheme, the mortality table adopted for 2016 is the BVG2015, an update to the BVG 2010, an industry standard in Switzerland which is based on
statistical evidence of major Switzerland pension funds.

SENSITIVITY ANALYSIS
The table below sets out the sensitivity on the United Kingdom and Hong Kong pension assets and liabilities as at 31 December 2016
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

UK Scheme

Hong Kong Scheme

Liabilities
£m
129.8
123.5
136.6
136.4
123.6

Increase/
(decrease)
in deficit
£m
–
(6.3)
6.8
6.6
(6.2)

Liabilities
£m
26.8
26.2
27.4
26.8
26.8

Increase/
(decrease)
in deficit
£m
–
(0.6)
0.6
–
–

The United Kingdom Scheme is also subject to the mortality assumption. If the mortality tables used are rated up/down one year, the
value placed on the liabilities increases by £5.9m and decreases by £5.9m respectively.

FUNDING ARRANGEMENTS
United Kingdom Scheme
The trustees use the Projected Unit credit method with a three-year control period. Currently the scheme members pay contributions
at the rate of 8.5% of salary. The employer pays contributions of 16.4% of salary, plus £0.2m per year to fund scheme expenses, and is
due to make an additional contribution of £2.8m in 2017 to reduce the deficit disclosed by the 2013 valuation.

Hong Kong Scheme
The Trustees use the Attained Age funding method. The last actuarial valuation was as at 31 December 2013. Scheme members do
not contribute to the scheme. The employer pays contributions of 8.5% of salaries including 0.6% in respect of scheme expenses.

Funding Risks
The main risks for the Schemes are:

Investment return risk:

Investment matching risk:

Longevity risk:

If the assets underperform the returns assumed in setting the funding targets then additional contributions
may be required at subsequent valuations.
The Schemes invest significantly in equities, whereas the funding targets are closely related to the returns on
bonds. If equities fall in value relative to the matching asset of bonds, additional contributions may be required.
If future improvements in longevity exceed the assumptions made for Scheme funding then additional
contributions may be required.

Role of Third Parties
The United Kingdom Scheme is managed by Trustees on behalf of its members. The Trustees take advice from appropriate third parties
including investment advisors, actuaries and lawyers as necessary.

130

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

17 Share schemes
ACCOUNTING POLICY
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 Deferred Share Awards is
adjusted to reflect expected and actual levels of vesting for service conditions. The expense of the LTIP Share Awards is calculated
using the Black-Scholes method and is adjusted for the probability of EPS 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 awards granted since 7 November 2002.

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 (‘2002 Plan’) and the Intertek Group plc 2002 Approved Share Option Plan (‘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.

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

2016

2015

Weighted
average
exercise
price
–
–
–
–
–

Number of
options
–
–
–
–
–

Weighted
average
exercise
price
778p
778p
762p
–
–

Number of
options
44,286
(26,008)
(18,278)
–
–

There were no share options outstanding at the start of the year. In 2015, the weighted average share price of the Company at the
date of exercise of share options was 2,501p.

SHARE PLANS
2011 Long Term Incentive Plan
The Deferred Bonus Plan 2005 was replaced in 2011 with the Intertek 2011 Long Term Incentive Plan (the 'LTIP'). Deferred Share
Awards (previously Share Awards) and LTIP Share awards (previously Performance Awards) have been granted under this plan. The first
awards were granted on 7 April 2006. The awards under these plans vest three years after grant date, subject to fulfilment of the
performance conditions.

2016

Restated#
2015

Outstanding Awards
At beginning of year
Granted*/#
Vested**
Forfeited
At end of year
*
** Of the 271,383 awards vested in 2016, 24,998 were satisfied by the issue of shares and 158,860 by the transfer of shares from the ESOT (see note 15). The balance of

LTIP
Total
Share
awards
Awards
1,687,430
879,491
779,569
399,994
(271,383)
–
(334,311)
(235,766)
817,586 1,043,719 1,861,305

Deferred
Share
Awards
851,376
317,383
(334,269)
(26,551)
807,939

LTIP
Share
Awards
649,280
455,806
(54,511)
(171,084)
879,491

Includes 12,015 Deferred Share Awards (2015: 3,798) and 16,522 LTIP Share awards (2015: 3,026) granted in respect of dividend accruals.

Total
awards
1,500,656
773,189
(388,780)
(197,635)
1,687,430

Deferred
Share
Awards
807,939
379,575
(271,383)
(98,545)

87,525 awards represented a tax liability of £3.5m which was settled in cash on behalf of employees by the Group, of which £3.2m was settled by the Company.
# In 2015, 91,575 shares were included in error as Deferred Share Awards granted, when they related to 2015 Mirror Share Awards. The correct 2015 Deferred Share

Awards granted number has been restated in the table above.

Deferred Share Plan
On 9 March 2015 the Remuneration Committee approved the adoption of the Intertek Deferred Share Plan (the ‘DSP’). Awards may be
granted under the DSP to employees of the Group (other than the Executive Directors of the Company) selected by the Remuneration
Committee over existing, issued ordinary shares of the Company only. The DSP was adopted primarily to allow for the deferral of a
proportion of selected employees annual bonus into shares in the Company, but may also be used for the grant of other awards (such as
incentive awards and buy-out awards for key employees) in circumstances that the Remuneration Committee deems appropriate. The
initial award under the DSP had a two-year vesting period; any subsequent awards will normally have a three-year vesting period. Awards
may be made subject to performance conditions and are subject to normal good and bad leaver provisions and malus and clawback.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016 131

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

NOTES TO THE FINANCIAL STATEMENTS
continued

17 Share schemes (continued)

2016

2015

Outstanding Awards
At beginning of year
Granted*
Vested**
Forfeited
At end of year
*
** Of the 24,376 awards vested in 2016, 12,955 were satisfied by the transfer of shares from the ESOT (see note 15). The balance of 11,421 awards represented a tax

Includes 1,642 Deferred Share Awards (2015: 659) granted in respect of dividend accruals.

Deferred Share
Awards
–
101,886
–
–
101,886

Deferred Share
Awards
101,886
40,927
(24,376)
(900)
117,537

Total
Awards
101,886
40,927
(24,376)
(900)
117,537

Total
awards
–
101,886
–
–
101,886

liability of £0.4m which was settled in cash on behalf of employees by the Company.

Mirror Share Awards
On 20 May 2015, André Lacroix was granted conditional rights to acquire 183,149 shares under a one-off arrangement as a condition
of his recruitment as CEO of the Company. The award comprised two parts, tranche A and B, with tranche A vesting on 20 May 2016
and tranche B vesting on 20 May 2017. 93,385 shares vested in 2016, which included 1,810 shares granted in respect of dividend
accruals. 49,494 awards were satisfied by the transfer of shares from the ESOT (see note 15) and the balance of 43,891 awards
represented a tax liability of £1.3m which was settled in cash by the Company. Further details are shown in the Remuneration report
on pages 63 to 77.

Equity-settled transactions
During the year ended 31 December 2016, the Group recognised an expense of £16.6m (2015: £12.9m), of which £1.4m (2015: £nil)
related to restructuring SDIs. The fair values and the assumptions used in their calculations are set out below:

Fair value at measurement date (pence)
Share price (pence)
Expected volatility
Risk free interest rate
Time to maturity (years)

Deferred
Share
Awards (DSP)
3,376
3,376
n/a
n/a
1-3

Deferred
Share
Awards (DSP)
2,570
2,570
n/a
n/a
2

2016 Awards

LTIP Share
Awards EPS
element
3,113
3,113
n/a
n/a
3

LTIP Share
Awards TSR
element
2,073
3,113
23.4%
0.5%
3

Share
Awards
3,113
3,113
n/a
n/a
3

2015 Awards

Share
Awards
2,570
2,570
n/a
n/a
3

LTIP Share
Awards EPS
element
2,394
2,394
n/a
n/a
3

LTIP Share
Awards TSR
element
1,317
2,394
21.0%
0.9%
3

The expected volatility is based on the historical volatility, adjusted for any expected changes to future volatility due to publicly
available information.

All Share Awards are granted under a service condition. Such condition is not taken into account in the fair value measurement at grant
date. The LTIP Share Awards (TSR element) are granted under a performance related market condition and as a result this condition is
taken into account in the fair value measurement at grant date.

18 Subsequent events
No post balance sheet events were identified between 31 December 2016 and the date of signing this report.

19 Capital management
The Directors determine the appropriate capital structure of Intertek; specifically how much capital is raised from shareholders (equity)
and how much is borrowed from financial institutions (debt) in order to finance the Group’s activities. These activities include ongoing
operations as well as acquisitions as described in note 10.

132

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FINANCIAL
STATEMENTS

OTHER
INFORMATION

19 Capital management (continued)
The Group’s policy is to maintain a robust capital base (including cash and debt) to ensure the market and key stakeholders
retain confidence in the capital profile. Debt capital is monitored by Group Treasury assessing the liquidity buffer on a short and longer-
term basis as discussed in note 14. The Group uses key performance indicators, including return on invested capital and adjusted diluted
earnings per share to monitor the capital position of the Group to ensure it is being utilised effectively. The dividend policy also forms
part of the Board’s capital management policy, and the Board ensures there is appropriate earnings cover for the dividend proposed at
both the interim and year end.

20 Non-controlling interest

ACCOUNTING POLICY
Acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners and therefore no
goodwill is recognised as a result of such transactions.

NON-CONTROLLING INTEREST
An analysis of the movement in non-controlling interest is shown below:

At 1 January
Exchange adjustments
Share of profit for the year
Adjustment arising from changes in non-controlling interest
Dividends paid to non-controlling interest
At 31 December

2016
£m
27.8
5.1
16.6
1.5
(16.3)
34.7

2015
£m
26.1
1.0
13.5
0.5
(13.3)
27.8

21 Related parties
IDENTITY OF RELATED PARTIES
The Group has a related party relationship 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 KEY MANAGEMENT PERSONNEL
Key management personnel compensation, including the Group’s Directors, is shown in the table below:

Short-term benefits
Post-employment benefits
Equity-settled transactions
Total

2016
£m
8.5
0.6
4.5
13.6

2015
£m
6.9
0.5
1.1
8.5

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.

22 Contingent liabilities

Guarantees, letters of credit and performance bonds

2016
£m
31.4

2015
£m
23.6

LITIGATION
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 Group maintains
appropriate insurance cover to provide protection from the small number of significant claims it is subject to from time to time.

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.
In some jurisdictions the Group receives tax incentives (see note 6) which are subject to renewal and review and reduce the amount of
tax payable. 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 these financial statements.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016 133

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DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

NOTES TO THE FINANCIAL STATEMENTS
continued

23 Principal Group companies
The principal subsidiaries whose results or financial position, in the opinion of the Directors, principally affect the figures of the Group
have been shown below. All the subsidiaries shown were consolidated with Intertek Group plc as at 31 December 2016. Unless otherwise
stated, these entities are wholly-owned subsidiaries and the address of the registered office is Academy Place, 1-9 Brook Street,
Brentwood, Essex, CM14 5NQ, United Kingdom for all related undertakings included in this note.

Company name
Intertek Testing Services Shenzhen Limited (iv)
Intertek Testing Services Limited Shanghai (iii)
Intertek USA, Inc. (v)
Intertek Testing Services NA, Inc. (vi)
Intertek Testing Services Holdings Limited (i)
Intertek Finance plc
Intertek Testing Services Hong Kong Limited (vii)
Testing Holdings USA Inc. (viii)
Intertek USD Finance Limited
Intertek Holdings Limited (i)
Labtest Hong Kong Limited (ix)
Intertek Technical Services, Inc. (ii)(x)
RCG-Moody International Limited
(i) Directly owned by Intertek Group plc.
(ii) Ownership held in Ordinary and Preference shares.
(iii)

Country of Incorporation
and principal place of operation
China
China
USA
USA
England
England
Hong Kong
USA
England
England
Hong Kong
USA
England

Activity
Trading
Trading
Trading
Trading
Holding
Finance
Trading
Holding
Finance
Finance
Trading
Trading
Holding

Equity shareholding 85%, Company controlled by the Group based on management’s assessment; Registered office address is: Room 1605, No 201,
NanQuan North Road, Pudong, Shanghai, China.

(iv) Registered office address is: Room A201, No.1, Qianwan Yi Road, Qianhai Shenzhen-Hongkong Cooperation Zone, Shenzhen, China.
(v) Registered office address is: CT Corporation System, 5615 Corporate Blvd., Suite 400B, Baton Rouge LA 70808, United States.
(vi) Registered office address is: 3933 US Route 11, Cortland, NY, 13045, United States.
(vii) Registered office address is: 2/F Garment Centre, 576 Castle Peak Road, Kowloon, Hong Kong.
(viii) Registered office address is: Corporation Trust Center, 1209 Orange Street, Wilmington, DE, 19801, United States.
(ix) Registered office address is: 11/F, Unit IJK, Garment Centre, 576 Castle Peak Road, Kowloon, Hong Kong.
(x) Registered office address is: 25025 I-45 North, Suite #111, The Woodlands TX 77380, United States.

GROUP COMPANIES
In accordance with section 409 of the Companies Act 2006 a full list of related undertakings is set out below. Related undertakings
comprise subsidiaries, partnerships, associates, joint ventures and joint arrangements. The above principal subsidiaries have not been
duplicated in the list below. Unless otherwise stated the share capital disclosed comprises ordinary shares which are indirectly held by
Intertek Group plc as at the year end 31 December 2016. No subsidiary undertakings have been excluded from the consolidation.

FULLY OWNED SUBSIDIARIES
0949491 B.C. Limited
1620-400 Burrard Street, Vancouver BC V 6C 3A6, Canada
4th Strand, LLC
3000 Northwoods Parkway, Suite 330, Norcross GA 30071, United States
Adelaide Inspection Services Pty Limited
Level 3, 235 St Georges Terrace, Perth WA 6000, Australia
Ageus Solutions Inc.
505 March Road, Suite 100, Kanata ON K2K 2V6, Canada
Alta Analytical Laboratory, Inc. (i)
2 Riverway, Suite 500, Houston TX 77056, United States
Amtac Certification Services Limited
Architectural Testing Holdings, Inc.
2711 Centerville Road, Suite 400, Wilmington DE 19808, United States
Architectural Testing, Inc.
130, Derry Court, York PA 17406, United States
Atlantic Verification Cape (Proprietary) Limited
Noland House, River Park, Mowbray, 7700, South Africa
Caleb Brett Ecuador S.A.
Centro Commercial Mall del Sol, Av. Joaquín Orrantia González y Juan Tanca Marengo,
Torre B, Piso 5, Oficina 505, Guayaquil, Ecuador
Cantox US Inc.
100 Davidson Avenue, Suite #102, Somerset, NJ 08873, United States
Capcis Limited
Center for the Evaluation of Clean Energy Technology, Inc.
3933 US Route 11, Cortland, NY 13045, United States
Charon Insurance Limited
Thomas Miller (Bermuda) Ltd, Canon’s Court, 22 Victoria Street, Hamilton,
HM12, Bermuda

Coscomply (i)
ZAC Ecopark 2, 27400, Heudeboville, France
Electrical Mechanical Instrument Services (UK) Limited
Unit 19 & 20 Wellheads Industrial Centre, Dyce, Aberdeen, AB21 7GA, Scotland
Electronic Warfare Associates-Canada, Ltd
1223 Michael St, Suite 200, Ottawa ON K1J 7T2, Canada
Entela-Taiwan, Inc.
4700 Broadmoor Avenue SE, Suite 200, Kentwood MI 49512, United States
Esperanza Guernsey Holdings Ltd.
PO Box 472, St Julian’s Court, St Julian's Avenue, St Peter Port, GY1 6AX, Guernsey
Esperanza International Services (Southern Africa) (Pty.) Limited
Charter House, 13 Brand Road, Glenwood, Durban, South Africa
FIT Italia SRL
Via Mozzi 4/6, 24127, Bergamo, Italy
Four Front Research (India) Pvt Limited (ii)
Plot# 847, 5th Floor, Near Electricity Substation, Ayyappa Society Road, Madhapur,
Hyderabad, Andhra Pradesh, 500081, India
Gellatly Hankey Marine Services (M) Sdn. Bhd.
Unit 30-01 Level 30, Tower A, Vertical Business Suite, Avenue 3, Bangsar South,
No. 8, Jalan Kerinchi, 59200 Kuala Lumpur, Malaysia
Genalysis Laboratory Services Pty Limited (vi)
Level 3, 235 St Georges Terrace, Perth WA 6000, Australia
Geotechnical Services Pty Limited
Level 3, 235 St Georges Terrace, Perth WA 6000, Australia
Global X-Ray & Testing Corporation
P.O. Box 1536, Morgan City LA 70380, United States
Global X-Ray Holdings, Inc. (v)
112 East Service Road, Morgan City LA 70381, United States
Hawks Acquisition Holding, Inc
Corporation Service Company, 2711 Centerville Rd. Suite 400 Wilmington,
DE New Castle County DE 19808, United States

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23 Principal Group companies (continued)
FULLY OWNED SUBSIDIARIES (CONTINUED)
Hi-Tech Holdings, Inc.
CT Corporation System, 1200 S.Pine Island Road, Plantation FL 33324, United States
Hi-Tech Testing Service, Inc.
CT Corporation System, 1999 Bryan Street Suite 900, Dallas TX 75201, United States
H.P. White Laboratory Inc.
3114 Scarboro Road, Street MD 21154, United States
Inspection Services (US), LLC
Corporation Trust Center, 1209 Orange Street, Wilmington, DE, 19801,
United States
Inteco Group Services Limited (i)
Akara Building Suite #8, 24th De Castro Street, Wickhams Cay 1, Road Town,
Tortola, British Virgin Islands
International Cargo Services, Inc. (i)
c/o CT Corp, 8550 United Plaza Blvd, Baton Rouge LA 70809, United States
International Inspection Services Limited
33/37 Athol Street, Douglas, IM1 1LB, Isle of Man
Intertek (Mauritius) Limited
2 Palmerston Road, Pheonix, Mauritius
Intertek (Schweiz) AG
TechCenter, Kaegenstrasse 18, 4153 Reinach, Switzerland
Intertek Academy A/S
Vejstruprodvej 31–33, 6093, Sjolund, Denmark
Intertek Argentina Certificaciones S.A. (iii)
Cerrito 1136 3rd floor CF, Ciudad Autónoma de, Buenos Aires, C1010AAX, Argentina
Intertek Aruba N.V.
Lago Heights Straat 28A, San Nicolas, Aruba
Intertek Asset Integrity Management, Inc.
1710 Sens Road, La Porte, TX 77571, United States
Intertek ATI SRL
266-268 Calea Rahovei Street, Building 61, 1st Floor, Sector 5, Bucharest, Romania
Intertek Australia Holdings Pty Limited
Level 3, 235 St Georges Terrace, Perth WA 6000, Australia
Intertek Azeri Limited
2236 Mirza Davud Str., Xatai District, Baku, AZ 1026, Azerbaijan
Intertek BA EOOD
24A Akad. Metodi Popov Str., Floor 5, Sofia, 1113, Bulgaria
Intertek Bangladesh Limited
Phoenix Tower, Plot–407 (3rd Floor), Tejgaon I/A, Dhaka, Bangladesh
Intertek Belgium NV
Kruisschansweg 11, 2040 Antwerp, Belgium
Intertek Burkina Faso Ltd Sarl (i)
Ouagadougou, Secteur 13, Parcelle 21, Lot 11 Section EO Arrondissement de
Nongr'Masson, Ouagadougou 11 Burkina Faso, 11 GP 1429, Burkina Faso
Intertek C&T Australia Holdings PTY Ltd (i)
Level 3, 235 St Georges Terrace, Perth WA 6000, Australia
Intertek C&T Australia Pty Ltd (i)
Level 3, 235 St Georges Terrace, Perth WA 6000, Australia
Intertek Caleb Brett (Uruguay) S.A.
Cerrito 507, 4th Floor, Of. 46 and 47, Montevideo, 11000, Uruguay
Intertek Caleb Brett Chile S.A.
Coyancura 2283, Piso 12, Providencia, Santiago, Chile
Intertek Caleb Brett Colombia S.A.
Calle 97, No.19A–57, Bogota, Colombia
Intertek Caleb Brett El Salvador S.A. de C.V.
Recinto Industrial de RASA zona industrial de Acajutla, Sonsonate, El Salvador
Intertek Caleb Brett Germany GmbH
Witternstrasse 14, 21107, Hamburg, Germany
Intertek Caleb Brett Panama, Inc. (i)
Zona Procesadora para la Exportacion de Albrook, Building 6, Ancon Panama,
Panama
Intertek Caleb Brett Venezuela C.A.
2a AV El Mirador Edif. Saragon Palace Piso, PH-602/603 La Campina, Caracas,
1050, Venezuela
Intertek Canada Newco Limited
1829 32nd Avenue, Lachine QC H8T 3JI, Canada
Intertek Capacitacion Chile Spa
Coyancura 2283, Piso 12, Providencia, Santiago, Chile
Intertek Capital Resources Limited
Intertek Certification AB
Torshamnsgatan 43, Box 1103, Kista, S-164 22, Sweden
Intertek Certification AS
Leif Weldings vei 8, 3208 Sandfjord, Norway

Intertek Certification France
67 Boulevard Bessières, 75017, Paris, France
Intertek Certification GmbH
Marie-Bernays-Ring 19a, 41199 Monchengladbach, Germany
Intertek Certification International Sdn. Bhd.
6-L12-01, Level 12, Tower 2, Menara PGRM, No. 6 & 8 Jalan Pudu Ulu, Cheras, 56100
Kuala Lumpur, Malaysia
Intertek Certification Japan Limited
Nihonbashi N Bldg, 1-4-2, Nihonbashi – Horidomecho, Chuo-ku, Tokyo, 103-0012,
Japan
Intertek Certification Limited
Intertek Commodities Botswana (Proprietary) Limited (i)
First Floor, Time Square, Plot 134 Independence Avenue, Gaborone, Botswana
Intertek Commodities Mozambique Lda
Rua 1233, NR 72 R/C, Distrito Urbano 1, Maputo, Mozambique
Intertek Consulting & Training (UK) Limited
Northpoint Aberdeen Science & Energy Park, Exploration Drive, Bridge of Don,
Aberdeen, AB23 8HZ, United Kingdom
Intertek Consulting & Training (USA), Inc.
201 Energy Parkway, Suite 240, Lafayette LA 70508, United States
Intertek Consulting & Training Colombia Limitada
Calle 97, No.19A – 57, Bogota, Colombia
Intertek Consulting & Training Egypt
46 B Street #7, Maadi, Cairo, Egypt
Intertek Consulting AB
Torshamnsgatan 43, Box 1103, KISTA, S-164 22, Sweden
Intertek Consumer Goods GmbH
Würzburger Strasse, 152, 90766 Furth, Germany
Intertek Curacao N.V
Barendslaan #3, Rio Canario Willemstad, Curacao, Netherlands Antilles
Intertek de Guatemala SA
46 Calle 21-53 Zona 12, Expobodega 46, Edificio 10, Guatemala Ciudad, Guatemala
Intertek de Nicaragua S.A.
Zona Franca Astro KM 47, Carretera Tipitapa Masaya, Nave 20, Managua, Nicaragua
Intertek Denmark A/S
Dokhavnsvej 3, 4400, Kalundborg, Denmark
Intertek Deutschland GmbH
Stangenstr.1, 70771 Leinfelden-Echterdingen, Germany
Intertek DIC A/S
Vejstruprodvej 31–33, 6093, Sjolund, Denmark
Intertek do Brasil Laboratorios Ltda (85%)
Alameda Tocantins No 630, Galpao 5, Alphaville Centro Industrial e Empresarial,
Barueri, CEP 06455 – 020, Brazil
Intertek Egypt for Testing Services
2nd Floor, Block 13001, Piece 15, Street 13, First Industrial Zone,
(Beside Abou Ghali Motors), Elobour City, Cairo, Egypt
Intertek Engineering Service Shanghai Limited
Room 308A, 3rd Floor, No. 1 Building, No.1287, Shangcheng Road,
Pulot Free Trade Zone, Shanghai, China
Intertek Engineering Services (Wuhu) Ltd
No. 65 Chang Ye Street, YinHu District, Wuhu, China
Intertek Evaluate AB
Torshamnsgatan 43, Box 1103, Kista, S-164 22, Sweden
Intertek Finance Ireland Unlimited Company
8th Floor, Block E, Iveagh Court, Harcourt Road, Dublin 2, Ireland
Intertek Finance No. 2 Ltd
Intertek Finland OY
Teknoublevardi 3-5, FI-01530 Vantaa, Finland
Intertek Fisheries Certification Limited
Intertek Food Services GmbH
Olof-Palme-Strasse 8, 28719 Bremen, Germany
Intertek France
ZAC Ecopark 2, 27400, Heudeboville, France
Intertek Fujairah FZC
P.O. Box 1307, Fujairah, United Arab Emirates
Intertek Genalysis (Zambia) Limited
Plot No 25/26 Nkwazi House, Nkwazi and Cha Cha Cha Roads, PO Box 31014,
Lusaka, Zambia
Intertek Genalysis Madagascar SA
Saint Denis Terrain II, Parcel 2 Ambatofotsy, Ampandrianomby, Madagascar
Intertek Genalysis SI Ltd
c/o Baoro & Associates, Top Floor, Y. Sato Building, Point Cruz, Honiara City,
Solomon Islands

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016 135

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STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

NOTES TO THE FINANCIAL STATEMENTS
continued

23 Principal Group companies (continued)
FULLY OWNED SUBSIDIARIES (CONTINUED)
Intertek Genalysis South Africa Pty Limited
Level 3, 235 St Georges Terrace, Perth WA 6000, Australia
Intertek Ghana Limited
A&A Complex, Block B, Ground Floor, Osu Badu Street, Accra, Ghana
Intertek Global (Iraq) Limited (i)
Intertek Global International LLC
Building 242, Office No.3, C-Ring Road, PO Box 47146, Doha, Qatar
Intertek Global Limited
1st Floor, Liberation House, Castle Street, St Helier, JE1 1GL, Jersey
Intertek Health Sciences Inc.
2233 Argentia Road, Suite # 201, Mississauga ON L5N 2X7, Canada
Intertek Holding Deutschland GmbH
Stangenstr.1, 70771 Leinfelden-Echterdingen, Germany
Intertek Holdings France
ZAC Ecopark 2, 27400 Heudebouville, France
Intertek Holdings Italia SRL
Via Guido Miglioli 2/A, Cernusco sul Naviglio, 20063, Milano, Italy
Intertek Holdings Nederland B.V.
Leerlooierstraat 135, 3194AB Hoogvliet, Rotterdam, Netherlands
Intertek Holdings Norge AS
Oljeveien 2, Tananger, 4056, Norway
Intertek Hungary Kft. (ii)
Ground Floor 3, Szilágyi Erzsébet alley 1., Budapest, 1024, Hungary
Intertek Ibérica Spain S.L.
Alda. Recalde, 27-5., 48009, Bilbao, Vizcaya, Spain
Intertek India Private Limited
E-20, Block B1, Mohan Co-operative Industrial Area, Mathura Road, New Delhi,
110044, India
Intertek Industrial Services GmbH
Marie-Bernays-Ring 19a, 41199 Monchengladbach, Germany
Intertek Industry and Certification Services (Thailand) Limited.
539/2 Gypsum Metropolitan Tower, 11C Fl., Sri-Ayudhaya Road, Tanon – Phayathai
Subdistrict, Khet Ratchathewi, Bangkok, 10400, Thailand
Intertek Industry Services (PTY) LTD
3 EL Wak Street, Vereeniging, 1930, Gauteng, South Africa
Intertek Industry Services (S) Pte Ltd
2 International Business Park, #10-09/10, The Strategy, 609930, Singapore
Intertek Industry Services Brasil Ltda
Alameda Mamore 503, Alphaville, Barueri-SP, 06454-040-SP, Brazil
Intertek Industry Services Colombia Limited
Calle 93B No.19–35/37 Office 501, Bogota, Colombia
Intertek Industry Services Japan Limited
Nihonbashi N Bldg, 1-4-2, Nihonbashi – Horidomecho, Chuo-ku, Tokyo, 103-0012,
Japan
Intertek Industry Services Romania Srl
266-268 Calea Rahovei Street, Building 63, 8th Floor, Sector 5, Bucharest, Romania
Intertek Industry WLL
Office # 24, Building 400, Road 3207, Mahooz, Block 332, Manama,
Kingdom of Bahrain
Intertek Inspection Services Ltd
2561 Avenue Georges V, Montreal-Est Québec H1L 6S4, Canada
Intertek Inspection Services Scandinavia AS
Leif Weldings vei 8, 3208 Sandfjord, Norway
Intertek Inspection Services UK Limited
Intertek Insurance Surveyors and Loss Assessors
Private Limited (ii)
E-20, Block B1, Mohan Co-operative Industrial Area, Mathura Road, New Delhi,
110044, India
Intertek International France
67 Boulevard Bessières, 75017, Paris, France
Intertek International Guinee S.A.R.L. (i)
Conakry Republique de Guinee, Compte Bancaire: 52481.369.10 0 (SGBG),
Conakry, Guinea

Intertek International Inc.
24900 Pitkin Road, Site 200, The Woodlands TX 77386, United States
Intertek International Kazakhstan, LLC
4 Khakimov Str., Atyrau City, 060005, Kazakhstan
Intertek International Limited
Intertek International LLC
Matbuotchilar street, 32. Office No.502, Tashkent, 100060, Uzbekistan
Intertek International Ltd Egypt
69, Road 161, Intersection with Road 104, Ground Floor, Maadi, Cairo, Egypt
Intertek International Nederland BV
Leerlooierstraat 135, 3194AB Hoogvliet, Rotterdam, Netherlands
Intertek International Niger SARL
BP 2769, 2nd Floor Lot 792 Block Q, Independance Boulevard, Rue GM-20, Niger
Intertek International Suriname N.V.
Prins Hendrikstraat 49, Paramaribo, Suriname
Intertek International Tanzania Limited
Minazini Street, Kilwa Road 5, Dar es Salaam, Tanzania, United Republic of Tanzania
Intertek Italia SpA
Via Guido Miglioli 2/A, Cernusco sul Naviglio, 20063, Milano, Italy
Intertek Japan K.K.
Pier City Shibaura Building, 4F, 3-18-1, Kaigan, Minato-ku, Tokyo, 108-0022, Japan
Intertek Kalite Servisleri Limited Sirketi
Icerenkoy mahallesi Eski Uskudar Yolu cadessi, VIP Center No: 10, Kat 12, Daire 13,
Atasehir, Istanbul, Turkey
Intertek Korea Industry Service Ltd
Yeouido Dept Bldg #916, 36-2, Yeouido-Dong, Youngdeungpo-Gu, Seoul, 150-749,
Republic of Korea
Intertek Labtest S.A.R.L
Route 110, (par Chefchaouni), Lot Saadi no. 20, Q.I. Aïn Sebaâ 20 250, 4eme Etage,
Casablanca, Morocco
Intertek Ltd
Borco Administration Bldg, West Sunrise Highway, Freeport, Grand Bahama, Bahamas
Intertek Management Services (Australia) Pty Ltd
Level 3, 235 St Georges Terrace, Perth WA 6000, Australia
Intertek Med SARL AU
Zone Franche Logistique Tanger Med, Plateau Bureaux 4, Lot 130, Tanger, Morocco
Intertek Medical Diagnostic Testing Centre (Shanghai) Co. Ltd
Room 101, 1F, No 6 Building, 1218 Wan Rong Road, Zha Bei District, Shanghai, China
Intertek Minerales Services SARL (i)
Rue KM 10, Route de Kouroussa S/P Karifamoriah, Commune Urbaine de
Kankan, Guinea
Intertek Minerals Limited
Osu Badu Street, Airport Residential Area, Accra, Greater Accra, CP8196, Ghana
Intertek Myanmar Limited
Classic Strand Cono, No.693/701, Room (4-A), (4th Floor), Merchant Road,
Pabedan Township, Yangon, Myanmar
Intertek Nederland B.V.
Leerlooierstraat 135, 3194 AB Hoogvliet Rt, Rotterdam, The Netherlands
Intertek Nominees Limited
Intertek Overseas Holdings Limited
Intertek Overseas Holdings, Eritrea Limited (i)
3rd Floor, Warsay Avenue, P.O. Box 4588, Asmara, Eritrea
Intertek Pakistan (Private) Limited
Intertek House, Shams Centre, 172-S, P.E.C.H.S, Block No.2, Tariq Road,
Karachi, Pakistan
Intertek Poland sp.z o.o.
Cyprysowa 23 B, 02-265, Warsaw, Poland
Intertek Poland-Certification Sp. z.o.o. w likwidacji (ii)
Ul. Mickiewicza, 18A , 60-833, Poznan, Poland
Intertek Polychemlab B.V.
Koolwaterstofstraat 1, 6161 RA, Geleen, Netherlands
Intertek Portugal, Unipessoal Lda
Rua Antero de Quental, 221-Sala 102, 4455-586, Perafita-Matosinhos, Portugal
Intertek Quality Services Ltd (i)
Intertek Resource Solutions (Trinidad) Limited
#91-92 Union Road, Marbella, Trinidad, Trinidad and Tobago
Intertek Resource Solutions, Inc.
24900 Pitkin Rd., Ste. 200, The Woodlands TX 77386, United States

136

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STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

23 Principal Group companies (continued)
FULLY OWNED SUBSIDIARIES (CONTINUED)
Intertek Rus JSC
8, 2nd Brestskaya Str., 125047, Moscow, Russian Federation
Intertek S.R.O
Sokolovská 131/86, Karlín, Praha 8, 186 00, Czech Republic
Intertek Saudi Arabia Limited (i)
Intertek Saudi Arabia Limited
Southern Olaya Center, Office No. 213, Makkah Al-Mukaramah Street, P.O. Box 2526,
Al-Khobar, 31952, Saudi Arabia
Intertek ScanBi Diagnostics AB
Box 166, SE-230 53, Alnarp, Sweden
Intertek Secretaries Limited (i)
Intertek Semko AB
Torshamnsgatan 43, Box 1103, Kista, S-164 22, Sweden
Intertek Services (Pty) Ltd
151 Monument Road, Aston Manor, 1619, South Africa
Intertek Servicios C.A. (i)
Res. San Ignacio, Calle San Ignacio de Loyola con Avenue Francisco de Miranda,
Local 3, Chacao, Caracas, Venezuela
Intertek Settlements Limited (i)
Intertek Statius N.V.
Man 'O' War #B3, Oranjestad, St. Eustatius, Netherlands Antilles
Intertek Surveying Services (USA), LLC
3033 Chimney Rock Road, Suite 625, Houston TX 77056, United States
Intertek Surveying Services UK Limited
Redshank House, Alness Point Business Park, Alness, Highland, IV17 OUP, Scotland
Intertek Technical Inspections Canada Inc. (iv)
1829 32nd Avenue, Montreal H8T 3J1, Canada
Intertek Technical Services PTY Limited
Level 3, 235 St Georges Terrace, Perth WA 6000, Australia
Intertek Testing & Certification Limited
Intertek Testing and Inspection Services UK Limited
Intertek Testing Management Limited
Intertek Testing Services (Australia) Pty Limited
Level 3, 235 St Georges Terrace, Perth WA 6000, Australia
Intertek Testing Services (Cambodia) Company Limited
13AC, Street 337, Sangkat Boeung Kak I, Khan Tuol Kork, Phnom Penh, Cambodia
Intertek Testing Services (East Africa) Pty Limited
Djibouti Free Zone, Room 19, Rue De Venice, P.O. Box 6419, Djibouti, Republique de
Djibouti, South Africa
Intertek Testing Services (Fiji) Limited
c/- BDO, Level 10, FNPF Place, 343 Victoria Parade, Suva, Fiji
Intertek Testing Services (Guangzhou) Ltd
3F Hengyun Building, 235 Kaifa Ave, Guangzhou Economic & Technological
Development District, Guangzhou, 510730, China
Intertek Testing Services (ITS) Canada Ltd.
105-9000 Bill Fox Way, Burnaby BC V5J 5J3, Canada
Intertek Testing Services (Japan) K. K.
Nihonbashi N Bldg, 1-4-2, Nihonbashi – Horidomecho, Chuo-ku, Tokyo,
103-0012, Japan
Intertek Testing Services (NZ) Limited
3 Kepa Road, Ruakaka, Northland, 0171, New Zealand
Intertek Testing Services (Shanghai FTZ) Co., Ltd
Build T52-8, No. 1201, Gui Qiao Road, Jinqiao Development Area, Pudong District,
Shanghai, 201206, China
Intertek Testing Services (Singapore) Pte Ltd.
80 Bendemeer Road #03-02, Hyflux Innovation Centre, 339949, Singapore
Intertek Testing Services (Thailand) Limited
1285/5 Prachachuen Road, Wong-Sawang Sub-District, Bangsue District,
Bangkok, 10800, Thailand
Intertek Testing Services Argentina S.A.
Cerrito 1136, piso 3ro, Frente. Ciudad Autonoma de Buenos Aires, (C1010AAX),
Argentina
Intertek Testing Services Bolivia S.A.
Calle Chichapi # 2125, Santa Cruz, de la Sierra, Bolivia
Intertek Testing Services Caleb Brett Egypt Limited
Intertek Testing Services Center LLC
Office 165-N, Letter A, 21 Rozenshteina Street, 198095, Saint Petersburg,
Russian Federation

Intertek Testing Services Chongqing Co., Limited
1-2/F, Building #3, 5 Gangcheng East Ring Road, Jiangbei District, Chongqing, China
Intertek Testing Services de Honduras, S.A.
Edificio la Pradera, locales 5 y 6. 1-2 Ave, 1 calle, Puerto Cortes, Barrio el Centro,
Honduras
Intertek Testing Services De Mexico, S.A. De C.V. (iii)
Poniente 134, No 660 Industrial Vallejo, Mexico DF CP, 02300, Mexico
Intertek Testing Services Environmental Laboratories Inc. (i)
Lexis Document Services, 15 East North Street, Dover, Delaware, 19901,
United States
Intertek Testing Services International (Hong Kong) Limited
11/F, Unit IJK, Garment Centre, 576 Castle Peak Road, Kowloon, Hong Kong
Intertek Testing Services International AB (i)
Box 1103, Kista, 16422, SE, Sweden
Intertek Testing Services Korea Limited
1st Fl., Aju Digital Tower, 284-56, Seongsu-dong 2-ga, Seongdong-gu,
Seoul 133-120, Republic of Korea
Intertek Testing Services NA Limited
1829 32nd Avenue, Lachine QC H8T 3JI, Canada
Intertek Testing Services NA Sweden AB (i)
c/o Intertek Semko AB, Box 1103, Kista, 16422, Sweden
Intertek Testing Services Namibia (Proprietary) Limited
15th Floor, Frans Indongo Gardens, Dr Frans Indongo Street, Windhoek, Namibia
Intertek Testing Services Pacific Limited
11/F, Unit IJK, Garment Centre, 576 Castle Peak Road, Kowloon, Hong Kong
Intertek Testing Services Peru S.A.
Jr. Mariscal Jose de la Mar No. 200 Urb., Res. El Pino, San Luis, Lima, Peru
Intertek Testing Services Philippines, Inc.
Intertek Building, 2307 Chino Roces Avenue Extension, Metro Manila, Makati City,
1231, Philippines
Intertek Testing Services Taiwan Limited
8F No. 423 Ruiguang Rd, Neihu District, Taipei, 11492, Taiwan
Intertek Testing Services Tianjin Limited
2-F, No. 7 GuiYuan Road, Yi Shang Hu Tong Building, Hua Yuan High-tech Industry
Park, Tianjin, China
Intertek Timor, S.A.
Hotel Timor, Colmera, Vera Cruz, Dili, Timor-Leste
Intertek Torton Limited
11/F, Unit IJK, Garment Centre, 576 Castle Peak Road, Kowloon, Hong Kong
Intertek Training Malaysia Sdn. Bhd.
6-L12-01, Level 12, Tower 2, Menara PGRM, No. 6 & 8 Jalan Pudu Ulu, Cheras,
56100 Kuala Lumpur, Malaysia
Intertek Trinidad Limited
#91-92 Union Road, Marabella, Trinidad and Tobago
Intertek UK Holdings Limited
Intertek Ukraine
Chernomorskogo Kazachestva, 115, Office 507, Odessa, 65003, Ukraine
Intertek USA Finance LLC
c/o CSC Services of Nevada, Inc., 2215-B Renaissance Dr, Las Vegas NV 89919,
United States
Intertek Vietnam Limited
3rd & 4th floor, Au Viet Building, No. 01 Le Duc Tho Str., Mai Dich Ward,
Cau Giay District, Hanoi City, Vietnam
Intertek West Africa SARL
Rue du Canal de Vridi Face Appontement, SIAP, Abidjan, 15 BP 882, Cote d'Ivoire
Intertek West Lab AS
Oljev 2, 4056 Tananger, 1124 Sola, Norway
ITS (PNG) Limited
Section 27 Allotment 27, Voco Point, Lae, Morobe Province, Papua New Guinea
ITS Hong Kong NA, Limited (i)
2/F Garment Centre, 576 Castle Peak Road, Kowloon, Hong Kong
ITS Labtest Bangladesh Limited
Phoenix Tower, Plot – 407 (3rd Floor), Tejgaon I/A, Dhaka, Bangladesh
ITS Testing Holdings Canada Limited (Canada)
3771 North Fraser Way, Suite 17, Burnaby BC V5J 5G5, Canada
ITS Testing Services (UK) Limited
Labtest International Inc.
2107 Swift Drive, No 200, Oak Brook, Illinois, 60523, United States

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016 137

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

NOTES TO THE FINANCIAL STATEMENTS
continued

23 Principal Group companies (continued)
FULLY OWNED SUBSIDIARIES (CONTINUED)
Lintec Testing Services Limited
Louisiana Grain Services, Inc. (i)
c/o CT Corp, 8550 United Plaza Blvd, Baton Rouge LA 70809, United States
Mace Land Company, Inc.
3114 Scarboro Road, Street MD 21154, United States
Management & Industrial Consultancy (i)
59 Road No.104, Second Floor, Maadi, Cairo, Egypt
Management Systems International Limited (i)
Material Testing Lab, Inc.
145 Sherwood Avenue, Farmingdale NY 11735, United States
Materials Testing & Inspection Services Limited
McPhar Geoservices (Philippines) Inc. (i)
Building 7 & 8 Philcrest 1 Compound, Km23 West Service Road, Bo. Cupang ,
Muntinlupa City, Philippines
Melbourn Scientific Limited
Melbourn Scientific, Saxon Way, Melbourn, Hertfordshire, Royston, SG8 6DN,
United Kingdom
Metoc Limited
Midwest Engineering Services, Inc.
CT Corporation System, 8020 Excelsior Dr. Suite 200, Madison WI 53717,
United States
Moody Algerie SARL
Cité SERBAT, Bat. B2/C2, N°03, Garidi 1, 16051, Kouba, Wilaya d'Alger, Algeria
Moody Energy Technical Service Co Ltd
Rm. A201, B-2 East 3rd, Ring Road North Road, Chaoyang District, Beijing, 100027,
China
Moody International (Holdings) Limited
Moody International (India) Private Limited
E-20, Block B1, Mohan Co-operative Industrial Area, Mathura Road, New Delhi,
110044, India
Moody International (Malaysia) Sdn. Bhd.
6-L12-01, Level 12, Tower 2, Menara PGRM, No. 6 & 8 Jalan Pudu Ulu, Cheras,
56100 Kuala Lumpur, Malaysia
Moody International (Russia) Limited
Moody International Angola Ltda
Rua de Macau, Edifico ex Edil Apto 1, Res de Chao Esq. C.P 215, Cabinda, Angola
Moody International Certification India Limited
E-20, Block B1, Mohan Co-operative Industrial Area, Mathura Road, New Delhi,
110044, India
Moody International de Argentina SA
Cerrito 1136, 2nd Floor, CF, Buenos Aires, C1010AAX, Argentina
Moody International Holdings LLC
24900 Pitkin Rd., Ste. 200, The Woodlands TX 77386, United States
Moody International LLC (i)
18A Kikvidze str., 01133, Kiev, Ukraine
Moody International Philippines Inc. (i)
Intertek Building, 2310 Chino Roces Avenue Extension, Metro Manila, Makati City,
1231, Philippines
Moody International Scandinavia AB (i)
Box 1103, Kista, 16422, SE, Sweden
Moody Shanghai Consulting Ltd
1F, No. 5 Building, 912 Bibo Road, Zhangjiang Hi-Tech Park, Shanghai, 201203, China
Moody United Certification Limited (i)
2F, No. 5 Building, 912 Bibo Road, Pudong, Shanghai, 201203, China
MT Group LLC
145 Sherwood Avenue, Farmingdale NY 11735, United States
MT Operating of New Jersey LLC
145 Sherwood Avenue, Farmingdale NY 11735, United States
MT Operating of New York LLC
145 Sherwood Avenue, Farmingdale NY 11735, United States
NDT Services Limited
Northern Territory Environmental Laboratories Pty Ltd (i)
Level 3, 235 St Georges Terrace, Perth WA 6000, Australia

Paulsen & Bayes-Davy Ltd
11/F, Unit IJK, Garment Centre, 576 Castle Peak Road, Kowloon, Hong Kong
Petroleum Services of Union Lab Sdn. Bhd.
Suite C-7-10 (B), Level 9, Block C, UE3 Corporate Offices, Menara Uncang Emas,
No 85 Jalan Loke Yew, Taman Miharja, 55200 Kuala Lumpur, Malaysia
Pittsburgh Testing Laboratory, Inc
PSI, 850 Poplar Street, Pittsburgh PA 15220, United States
Professional Service Industries Holding, Inc.
Corporation Trust Center, 1209 Orange Street, Wilmington, DE, 19801,
United States
Professional Service Industries (Canada) Inc. (i)
200 Bay Street, Suite 3800, Royal Bank Plaza, South Tower, Toronto ON M5J 2J7,
Canada
Professional Service Industries, Inc.
Corporation Trust Center, 1209 Orange Street, Wilmington, DE, 19801,
United States
PSI Acquisitions, Inc.
Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington
19808, United States
PT. Moody Technical Services
Graha STR 3rd floor, Suite#302, Jl. Ampera Raya No. 11, Jakarta, 12550, Indonesia
PT. RCG Moody
Graha STR 3rd floor, Suite#302, Jl. Ampera Raya No. 11, Jakarta, 12550, Indonesia
RCG Moody International Uruguay S.A.
Cerrito 507, 4th Floor, Off. 46, 47, Montevideo 11000, Uruguay
S.A.R.L. Intertek OCA France
Route Industrielle – Centre Routier, 76600, Gonfreville L'Orcher, France
Schindler & Associates (L.C.) (i)
24900 Pitkin Rd., Ste. 200, The Woodlands TX 77386, United States
Shanghai Orient Intertek Testing Services Company Limited
Build T52-8, No. 1201, Gui Qiao Road, Jinqiao Development Area, Pudong District,
Shanghai, 201206, China
Shanghai Tianxiao Investment Consultancy Company Limited
Room 520, No. 5-6, Lane 1218, WanRong Road, ZhaBei District, Shanghai, China
Technical Company for Testing and Conformity Services & Systems LLC
Gates No. 1/2/6, Building 73/ Area 903, Karadah, Al Rusafa, Baghdad, Iraq
Testing Holdings Sweden AB
Torshamnsgatan 43, Box 1103, Kista, S-164 22, Sweden
Tradegood Singapore Pte. Ltd. (i)
80 Bendemeer Road #03-02, Hyflux Innovation Centre, 339949, Singapore
Tradegood WFOE – Beijing Rui Gu Information Consultancy Company Ltd (i)
Room 802, Information Building, Linyin North Road No.13, Pinggu District,
Beijing City, 101200, China
Tradegood.com International Limited
11/F, Unit IJK, Garment Centre, 576 Castle Peak Road, Kowloon, Hong Kong
UAB Intertek Lithuania (ii)
Jogailos 9, Vilnius, Lithuania
Van Sluys & Bayet NV
Kruisschansweg 11, 2040 Antwerp, Belgium
White Land Company, Inc.
3114 Scarboro Road, Street MD 21154, United States
Wilson Inspection X-Ray Services, Inc.
Michael E Wilson, 6010 Edgewater Dr., Corpus Christi TX 78412, United States
Wisco SE Asia PTE Limited (i)
80 Bendemeer Road #03-02, Hyflux Innovation Centre, 339949, Singapore
Yickson Enterprises Limited
11/F, Unit IJK, Garment Centre, 576 Castle Peak Road, Kowloon, Hong Kong
Youngever Holdings Ltd.
171 Main Street, Road Town, P.O. Box 4041, Tortola, VG 1110, British Virgin Islands

138

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OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

23 Principal Group companies (continued)
RELATED UNDERTAKINGS WHERE THE EFFECTIVE
INTEREST IS LESS THAN 100%
Caleb Brett Abu Dhabi LLC (49%)
CB UAE (Private) Ltd, c/o Al Nahiya Group, PO Box 3728, Abu Dhabi,
United Arab Emirates
Euro Mechanical Instrument Services LLC (49%)
PO Box 46153, Abu Dhabi, United Arab Emirates
International Inspection Services LLC (70%)
PO Box 193, Al Hamriyah, Muscat, PC 131, Oman
Intertek (Qeshm Island) Limited (51%)
Unit 107, Goldis Building, Valiasr Boulevard, Qeshm Island, Islamic Republic of Iran
Intertek Angola LDA (99%)
282 Rua Amilcar Cabral no.147 2nd floor, Apartment Z, Luanda, Angola
Intertek do Brasil Inspecoes Ltda (99%)
Av Eng. Augusto Barata s/n, Alamoa, Santos, SP, CEP11095-650, Brazil
Intertek ETL SEMKO KOREA Limited (90%)
5F, Intertek building, Gongdan-ro, 160beon-gil 3, Gunpo-si, Gyeonggi-do, 15845,
Republic of Korea
Intertek Kimsco Co. Ltd.(vii) (50%)
Intertek Building, 3, Gongdan-ro, 160beon-gil, Gunpo-si, Gyeonggi-do, 15845,
Republic of Korea
Intertek Lanka (Private) Limited (70%)
Intertek House, No: 282, Kaduwela Road, Battaramulla, Sri Lanka
Intertek Libya Technical Services and Consultations Company Spa (65%)
PO Box 3788, Al Shaat Road, Souq Al-Juma, Tripoli, Libya
Intertek Life Bridge (Shanghai) Testing Services Co., Ltd. (80%)
Room 401, Building #5-6, Lane 1218, WanRong Road, JinAn District, Shanghai,
Shandong, China
Intertek Robotic Laboratories Pty Limited(vii) (50%)
15 Davison Street, Maddington WA 6109, Australia
Intertek Test Hizmetleri Anonim Sirketi (85%)
Merkez Mahallesi, Sanayi Cad. No.23, Altindag Plaza, Yenibosna-34197,
Istanbul, Turkey
Intertek Testing Services (Hangzhou) Limited (70%)
No. 16, First Street South, Hangzhou Economic Development Zone, Hangzhou,
Zhejiang Province, 310018, China
Intertek Testing Services (South Africa) (Proprietary) Limited (75%)
5th Floor, Charter House, 13 Brand Road, Glenwood, Durban, South Africa
Intertek Testing Services Nigeria Limited (65.93%)
No. 2 Bombay Crescent, Apapa, Lagos, Nigeria
Intertek Testing Services Wuxi Ltd (70%)
No. 8 Fubei Road, Xishan Economic Development Zone, Wuxi, Jiangsu, 214101, China
ITS (Subic Bay), Inc. (99%)
Area 8 – 10, Lots 11/12 Boton Wharf, Argonaut Highway, Subic Bay, Freeport Zone,
Olongapo City, Philippines
ITS Caleb Brett Deniz Survey A S(viii) (50%)
Ulus Mah. Oz Topuz cad. no.32, Besiktas, Istanbul, 34340, Turkey
ITS Testing Services Holdings (M) Sdn Bhd (49%)
Unit 30-01, Level 30, Tower A, Vertical Business Suite, Avenue 3, Bangsar South,
No.8, Jalan Kerinchi, 59200 Kuala Lumpur, Malaysia

ITS Testing Services (M) Sdn Bhd (74%)
Unit 30-01 Level 30, Tower A, Vertical Business Suite, Avenue 3, Bangsar South,
No. 8, Jalan Kerinchi, 59200 Kuala Lumpur, Malaysia
Laboratorios ABC Química, Investigación y Análisis(vii) (10%)
Jacarandas No. 19, Colonia San Clemente, Delegación Álvaro Obregón, Mexico City,
C.P. 01740, México, Ciudad de México
Laboratory Services International Rotterdam B.V (75%)
Pittsburghstraat 9, 3047 BL, Rotterdam, Netherlands
Lynx Diagnostics Inc.(viii) (50%)
#220, 8 Perron Street, St Albert AB T8N 1E4, Canada
Moody International Bangladesh Limited (99.9%)
House 6, Road 17/A, Block E, Ground Floor, Banani, Dhaka, 1213, Bangladesh
Moody International Certification Limited (40%)
Brivibas iela 85, Riga, LV-1001
Moody International Certification Ltd (40%)
53, Nautic, Triq l-Ortolan, San Gwann, SGN 1943, Malta
Moody International Holdings Chile Ltda (99%)
Coyancura 2283, Piso 12, Providencia, Santiago, Chile
Moody International SA (35%)
4 Rue Des Brasseurs, Zone 3 Abidjan, Cote d'Ivoire
Moody International Lanka (Private) Ltd. (99.9%)
no. 5, St Albans Place, Colombo – 4, Sri Lanka
PT Citrabuana Indoloka (viii) (50%)
Jl. Raya Bogor KM 28, RT/RW. 04/07, Kel. Pekayon, Kec. Pasar Rebo, Jakarta Timur,
13710, Indonesia
PT. Intertek Utama Services (viii) (50%)
Jl. Raya Bogor KM. 28, RT/RW. 04/07, Kel. Pekayon, Kec. Pasar Rebo, Jakarta Timur,
13710, Indonesia
Qatar Calibration Services LLC (49%)
Petrotec, PO Box 16069, 8th Floor, Toyota Tower, Doha, Qatar
RCG Moody International de Venezuela S.A. (i) (99%)
Res Morgana, p_4, #04, Av.Andres Bello, Fco de Miranda, Los Polos Grandes,
Caracas, Venezuela
Shanghai Moody Management & Technical Services Co. Ltd (90%)
Room 225, No. 14 at Lane No. 1700 Luo Shan Road, Shanghai, China
Societe Tunisienne d’Inspection Caleb Brett SARL (51%)
67 rue Ech-Chem, Tunis, 1002, Tunisia
UzIntertek Testing Services LLC (51%)
Abdulla Kodiriy Str., C-4, House 24,100017, Tashkent, Uzbekistan

ASSOCIATES
Intertek Riyadh Geotechnique and Foundations Laboratory (51%)
Buildings Number 1 and 2, Khamra Area, Mikaish 2, Jeddeh, Saudi Arabia
Decernis LLC (20%)
1250 Connecticut Avenue, NW, Suite 200, Washington WA DC 20036,
United States

(i) Dormant Company.
(ii)
In Liquidation.
(iii) Ownership held in class of A shares and B shares.
(iv) Ownership held in class of A shares and E shares.
(v) Ownership held in ordinary and preference shares.
(vi) Shares held in Class A, B, C, D, E and F.
(vii) Ownership held in class I Series B shares and class II Series B shares.
(viii) Intertek shares joint control over the company under a shareholders’

agreement, and its rights to the profit, assets and liabilities of the company are
dependent on the performance of the Group’s brands rather than the effective
equity ownership of the company.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016 139

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REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

INTERTEK GROUP PLC – COMPANY BALANCE SHEET

As at 31 December 2016
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 one year
Other creditors

Net assets

Capital and reserves
Called up share capital
Share premium
Profit and loss account
Shareholders’ funds

Notes

2016
£m

2015
£m

(d)

318.1

308.1

(e)

(f)

(g)
(g)
(g)

124.5
57.9
182.4
0.5
182.9

(13.2)
(13.2)
169.7
487.8

(26.4)
(26.4)
461.4

1.6
257.8
202.0
461.4

124.5
66.9
191.4
1.0
192.4

(30.6)
(30.6)
161.8
469.9

(55.2)
(55.2)
414.7

1.6
257.8
155.3
414.7

The profit for the financial year was £129.4m (2015: £21.8m).

The financial statements on pages 140 to 144 were approved by the Board on 6 March 2017 and were signed on its behalf by:

André Lacroix
Chief Executive Officer

Edward Leigh
Chief Financial Officer

140

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

INTERTEK GROUP PLC – COMPANY STATEMENT
OF CHANGES IN EQUITY

At 1 January 2015
Total comprehensive income for the year
Profit
Total comprehensive income for the year
Transactions with owners of the company recognised

directly in equity

Contributions by and distributions to the owners of

the company

Dividends paid
Purchase of own shares
Tax paid on Share Awards vested
Equity-settled transactions
Total contributions by and distributions to the owners of the

company

At 31 December 2015

At 1 January 2016
Total comprehensive income for the year
Profit
Total comprehensive income for the year
Transactions with owners of the company recognised

directly in equity

Contributions by and distributions to the owners of

the company

Dividends paid
Purchase of own shares
Tax paid on Share Awards vested
Equity-settled transactions
Total contributions by and distributions to the owners of the

company

At 31 December 2016

Notes

Share
capital
£m
1.6

Share
premium
£m
257.8

Retained
earnings
£m
208.3

21.8
21.8

(80.7)
(5.2)
(1.8)
12.9

(74.8)
155.3

Total
equity
£m
467.7

21.8
21.8

(80.7)
(5.2)
(1.8)
12.9

(74.8)
414.7

–
–

–
–
–
–

–
257.8

257.8

155.3

414.7

–
–

–
–
–
–

129.4
129.4

(88.0)
(6.4)
(4.9)
16.6

(b)

(c)

(d)

(b)

(c)

(d)

–
–

–
–
–
–

–
1.6

1.6

–
–

–
–
–
–

–
1.6

–
257.8

(82.7)
202.0

(82.7)
461.4

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016 141

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STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

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
These financial statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework
(‘FRS 101’). The amendments to FRS 101 (2014/15 Cycle) issued in July 2015 and effective immediately have been applied.

In preparing these financial statements, the Company applies the recognition, measurement and disclosure requirements of
International Financial Reporting Standards as adopted by the EU (‘Adopted IFRSs’), but makes amendments where necessary in order
to comply with Companies Act 2006 and has set out below where advantage of the FRS 101 disclosure exemptions has been taken.

In these financial statements, the Company has applied the exemptions available under FRS 101 in respect of the following disclosures:

• a Cash Flow Statement and related notes;
• Comparative period reconciliations for share capital;
• Disclosures in respect of transactions with wholly owned subsidiaries;
• Disclosures in respect of capital management;
• the effects of new but not yet effective IFRSs;
• an additional balance sheet for the beginning of the earliest comparative period following the retrospective change

in accounting policy;

• Disclosures in respect of the compensation of Key Management Personnel; and
• Certain disclosures required by IFRS 13 Fair Value Measurement and the disclosures required by IFRS 7 Financial Instrument

Disclosures on the basis that the consolidated financial statements include the equivalent disclosures.

As the consolidated financial statements include the equivalent disclosures, the Company has also taken the exemptions under
FRS 101 available in respect of IFRS 2 Share Based Payments in respect of group settled share based payments.

The Company proposes to continue to adopt the reduced disclosure framework of FRS 101 in its next financial statements.

Under Section 408 of the Companies Act 2006 the Company is exempt from the requirement to present its own profit and
loss account.

The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these
financial statements.

Foreign currencies
Transactions in foreign currencies are recorded to the Company’s functional currency, sterling, 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
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the profit and loss account except to the
extent that it relates to items recognised directly in equity or other comprehensive income, in which case it is recognised directly in
equity or other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or
substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition
of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business
combination; 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.

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.

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OTHER
INFORMATION

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.

Share-based payments
Intertek Group plc runs a share ownership programme that allows Group employees to acquire shares in the Company. Details of the
share schemes are given in note 17 of the Group financial statements.

(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.

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

2016
£m
56.8
31.2
88.0

2015
£m
53.3
27.4
80.7

The aggregate amount of dividends proposed and recognised as liabilities as at 31 December 2016 is £nil (2015: £nil). The aggregate
amount of dividends proposed and not recognised as liabilities as at 31 December 2016 is £69.4m (2015: £57.0m).

(D) INVESTMENT IN SUBSIDIARY UNDERTAKINGS

Cost and net book value
At 1 January
Additions due to share-based payments
Recharges of share-based payments to subsidiaries
At 31 December

2016
£m

308.1
16.6
(6.6)
318.1

2015
£m

300.9
12.9
(5.7)
308.1

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 £16.6m (2015: £12.9m).
Details of the principal operating subsidiaries are set out in note 23 to the Group financial statements.

The Company had two direct subsidiary undertakings at 31 December 2016; 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.
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.

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OTHER
INFORMATION

NOTES TO THE COMPANY FINANCIAL STATEMENTS
continued

(E) DEBTORS DUE AFTER MORE THAN ONE YEAR

Amounts owed by Group undertakings

2016
£m
124.5

2015
£m
124.5

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) CREDITORS DUE AFTER MORE THAN ONE YEAR

Amounts owed to Group undertakings

2016
£m
26.4

2015
£m
55.2

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.

(G) STATEMENT OF CHANGES IN EQUITY
Details of share capital are set out in note 15 and details of share-based payments are set out in note 17 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 £88.0m (2015: £80.7m), was £129.4m (2015: £21.8m) which was
mainly in respect of dividends received from subsidiaries.

The Company has sufficient distributable reserves to pay dividends for a number of years, and when required the Company can receive
dividends from its subsidiaries to further increase distributable reserves.

The Group settled in cash the tax element of the Share Awards vested in 2016 amounting to £5.2m of which the Company settled
£4.9m (2015: £1.8m).

During the year ended 31 December 2016, the Company purchased, through its Employee Benefit Trust, 200,000 (2015: 200,126) of
its own shares with an aggregate nominal value of £2,000 (2015: £2,001) for £6.4m (2015: £5.2m) which was charged to profit and
loss in equity.

(H) RELATED PARTY TRANSACTIONS
Details of related party transactions are set out in note 21 of the Group financial statements.

(I) 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 £5.9m at 31 December 2016 (2015: £10.5m).

From time to time, in the normal course of business, the Company may give guarantees in respect of certain liabilities of
subsidiary undertakings.

(J) POST BALANCE SHEET EVENTS
Details of post balance sheet events relevant to the Company and the Group are given in note 18 of the Group financial statements.

144

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REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
OF INTERTEK GROUP PLC

REPORT ON THE FINANCIAL STATEMENTS
OUR OPINION
In our opinion:

• Intertek Group Plc’s group financial statements and company
financial statements (the “financial statements”) give a true
and fair view of the state of the group’s and of the company’s
affairs as at 31 December 2016 and of the group’s profit and
cash flows for the year then ended;

• the group financial statements have been properly prepared in
accordance with International Financial Reporting Standards
(“IFRSs”) as adopted by the European Union;

• the company financial statements have been properly prepared

in accordance with United Kingdom Generally Accepted
Accounting Practice; and

• the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006 and, as
regards the group financial statements, Article 4 of the
IAS Regulation.

WHAT WE HAVE AUDITED
The financial statements, included within the Annual Report,
comprise:

OUR AUDIT APPROACH
Overview
Materiality
• Overall group materiality: £17.3 million which represents 5% of

profit before tax.

Audit Scope
• We performed full scope audit procedures over 73 legal entities
and performed specific audit procedures on a further 13 entities
covering 26 territories in total.

• The Group audit team held regular meetings with component
teams, and visited the UK, US, China and Hong Kong teams, to
understand and supervise the work of these local teams and to
make sure that we had a full and comprehensive understanding
of the results of their work – particularly insofar as it related to
the identified areas of focus.

• Taken together, the components at which audit work has been
performed accounted for 87% of the group’s revenue and 84%
of the group’s statutory profit before tax.

Areas of focus
• Carrying value of goodwill and intangible assets

• Valuation of current and deferred tax balances

• the consolidated statement of financial position as at

• Completeness and valuation of customer claims

31 December 2016;

• Presentation and valuation of acquisitions

• the company balance sheet as at 31 December 2016;

• the consolidated income statement and consolidated

statement of comprehensive income for the year then ended;

The scope of our audit and our areas of focus
We conducted our audit in accordance with International
Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”).

• the consolidated statement of cash flows for the year

then ended;

• the consolidated statement of changes of equity for the year

then ended;

• the company statement of changes of equity for the year then

ended; and

• the notes to the financial statements, which include a
summary of significant accounting policies and other
explanatory information.

The financial reporting framework that has been applied in the
preparation of the group financial statements is IFRSs as adopted
by the European Union, and applicable law. The financial reporting
framework that has been applied in the preparation of the company
financial statements is United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards,
comprising FRS 101 “Reduced Disclosure Framework”), and
applicable law.

We designed our audit by determining materiality and assessing
the risks of material misstatement in the financial statements.
In particular, we looked at where the directors made subjective
judgements, for example in respect of significant accounting
estimates that involved making assumptions and considering
future events that are inherently uncertain. As in all of our audits
we also addressed the risk of management override of internal
controls, including evaluating whether there was evidence of bias
by the directors that represented a risk of material misstatement
due to fraud.

The risks of material misstatement that had the greatest effect on
our audit, including the allocation of our resources and effort, are
identified as “areas of focus” in the table below. We have also set out
how we tailored our audit to address these specific areas in order to
provide an opinion on the financial statements as a whole, and any
comments we make on the results of our procedures should be read
in this context. This is not a complete list of all risks identified by
our audit.

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OTHER
INFORMATION

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
OF INTERTEK GROUP PLC continued

AREA OF FOCUS

HOW OUR AUDIT ADDRESSED THE AREA OF FOCUS

Carrying value of goodwill and
intangible assets
Refer to the Audit Committee report on pages 82
to 83 and to note 9 to the financial statements.

The Group had £586.1m of goodwill and a further
£198.8m of intangible assets recognised on the
balance sheet at 31 December 2016. The carrying
values of goodwill and intangibles are contingent
on future cash flows of the underlying Cash
Generating Units (“CGUs”) and there is a risk that,
if these cash flows do not meet the directors’
expectations, the assets will be impaired.

Accounting standards require management to
perform an annual assessment of the carrying
value of goodwill, and other intangible assets are
assessed where there are indications that they are
impaired. As this assessment is based on the future
value in use, future cash flows must be estimated,
which can be highly judgemental and could
significantly impact the carrying value of the assets.

We evaluated future cash flow forecasts, and the process by which they were
drawn up, including comparing them to the latest Board approved budgets,
and testing the underlying calculations. We identified no issues in this testing.

We used our in-house valuation specialists to evaluate the methodology used
to calculate the value in use of the CGUs, and key assumptions including:

• the discount rate by comparing the cost of capital for the Group with

comparable organisations; and

• the long term growth rates by comparing these to publicly available

market data on projected growth rates in key territories such as the UK,
USA and China.

We concluded that they were within the range of reasonable assumptions
based on this information.

We performed sensitivity analysis around these assumptions. Having
ascertained the extent of change in those assumptions that either individually
or collectively would be required for an impairment to arise, we considered the
likelihood of such a movement occurring.

Our testing did not identify any indicators of impairment, and that the
assumptions were reasonable and would require significant downside changes
before any impairment would be triggered.

In addition we assessed the appropriateness of the CGUs used in the
impairment assessment, the useful economic lives of the intangible assets
and the related disclosures, and concluded that these were appropriate.

Valuation of current and deferred
tax balances
Refer to the Audit Committee report on page 82
and to note 6 to the financial statements.

We involved our in-house tax specialists in our testing of the appropriateness
of the techniques, estimates and judgements taken in relation to deferred
taxation and in respect of uncertain tax positions recognised in the financial
statements.

Provisions in relation to potential tax exposure are
subject to judgement and require the selection of
estimation techniques and determination of
estimates, either of which could influence the
current or deferred tax positions. The Group
operates in a large number of jurisdictions,
which increases the risk of non-compliance
with international tax legislation and introduces
complex transfer pricing considerations.

In addition the Group has provisions for uncertain
tax positions relating to both historic and current
tax arrangements. The recognition and
measurement of these items in the financial
statements is judgemental, and we focused on
the directors’ forecasts of future profits against
which to utilise accumulated losses, and the
technical interpretation of taxation law in respect
to transactions giving rise to deferred tax assets
and uncertain tax positions.

In assessing uncertain tax positions, we obtained management’s calculations
and evaluated the methodology and assumptions used.

In understanding and evaluating the directors’ technical interpretation of tax
law in respect of specific transactions that gave rise to uncertain tax positions
we evaluated:

• third party tax advice received by the Group;
• the status of recent and current tax authority audits and enquiries;
• the outturn of previous claims;
• judgemental positions taken in tax returns and current year estimates; and
• changes in tax legislation, or interpretation of existing legislation by local

tax authorities.

In assessing the recoverability of deferred tax assets, we considered the
likelihood of the Group being able to generate sufficient future taxable profits
against which to offset accumulated losses, and tested:

• key inputs to the calculation including revenue and profit assumptions, in

line with our work over the carrying value of goodwill; and

• the directors’ ability to accurately forecast future profits where the tax

assets will not be recoverable in the foreseeable future.

The procedures above did not identify any issues with regards to the valuation
of deferred tax assets and provisions for uncertain tax positions.

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OTHER
INFORMATION

AREA OF FOCUS

HOW OUR AUDIT ADDRESSED THE AREA OF FOCUS

Completeness and valuation of customer claims
Refer to the Audit Committee report on page 82 and
to note 13 to the financial statements.

As an assurance provider, the Group can be subject to
claims from customers and consumers relating to its
work, and the geographically diverse nature of the
Group means there is a risk that one or more
significant claims are omitted from the centrally
maintained claims register.

Where customer claims may give rise to a future
liability, the Directors are required to recognise either
a liability or a contingent liability in the financial
statements. As the actual cost is often unknown,
management must exercise their judgement in
calculating the liability.

Presentation and valuation of acquisitions
Refer to the Audit Committee report on pages
82 and to note 10 in the Consolidated Financial
Statements.

The Group’s strategy is to use acquisitions to augment
organic revenue growth, and during the year made
three acquisitions: FIT Italia SRL, EWA-Canada Ltd and
Laboratorios ABC Quimica, Investigacion y Analisis, S.A
de C.V.. In addition, the 12-month hindsight period for
reassessing the acquisition of Professional Service
Industries, Inc closed during the year.

Judgement is required in determining the amount of
consideration paid and the valuation of assets and
liabilities acquired. In addition, the disclosure
requirements in respect of acquisitions are extensive.

Where relevant obtained confirmations from the Group’s external legal
counsels of the existence and details of open claims. Confirmations were sent
to both the lawyers associated with the key claims but also additional lawyers
who Intertek have interacted with throughout the year.

We met with legal counsel to discuss certain open or threatened claims to
understand the likelihood of an adverse judgement and the potential
magnitude of the claim.

We obtained and read the relevant sections of the Group’s insurance
documents, and confirmed that any liability cap had been appropriately applied
to the calculation of provision held against those claims.

Through our work, we did not identify any material claims that had not
been recorded centrally and provided for, or for which the provision was
not appropriate.

For these transactions we obtained and read the sale and purchase
agreements (“SPAs”) in order to gain an understanding of the key terms of
each transaction.

In testing acquisitions during the year we:

• tested that the consideration paid by the Group was consistent with the

terms of the SPAs;

• assessed the appropriateness of the directors’ identification of intangible
assets acquired by reference to the SPAs, due diligence reports and other
supporting documentation, to identify any assets listed;

• obtained the directors’ calculation of the fair value of intangible assets

acquired, and where material corroborated the inputs and assumptions to
supporting evidence; and,

• verified that the accounting treatment for each transaction, and any

resulting liabilities, is consistent with the accounting standard requirements.

We noted no exceptions through performing these procedures.

For PSI, which was acquired in 2015, in order to test the directors’ final
assessment of the purchase price allocation, we:

• obtained evidence from internal and external advisors in relation to the fair

value of liabilities recognised on acquisition, to evaluate whether the
valuation remained appropriate, or that any adjustments were supported;
• evaluated whether all fair value adjustments, and any resulting impact, had

been appropriately recognised and accounted for.

Based on the evidence obtained, we did not identify any indications that the
fair value adjustments identified by management were inappropriate.

We also reviewed the disclosures in the financial statements and are
satisfied that they are in line with the requirements of the relevant
accounting standards.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016 147

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REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
OF INTERTEK GROUP PLC continued

How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial
statements as a whole, taking into account the geographic
structure of the group, the accounting processes and controls,
and the industry in which the group operates.

The Group is split into 3 reporting segments: Products, Trade
and Resources and the operations are spread across over 100
countries and over 500 legal entities. The results are not
consolidated at a country or regional level, so we determined that
the most appropriate level at which to scope our audit was the
legal entity level.

When determining our scope, the key financial measure used is
profit before tax. Due to the disaggregation of the group’s results
across the various entities, we identified only two individually
financially significant legal entities, both within China. As a result
we instructed our component team to perform audits of the
complete financial information of these entities.

We then considered the 45 countries in which PwC are appointed
statutory auditors. Of these, 22 accounted for the majority of
external profit, and we therefore focused our considerations on
these territories. Within these countries, we then excluded any
legal entities with no external balances, such as intermediary
holding companies, and those entities with highly immaterial
revenue, leaving 59 legal entities for which we instructed our
local teams to perform audits of the complete financial
information for the purpose of the group audit.

In certain territories, notably the US, there is no statutory audit
requirement and so we considered whether procedures needed
to be performed to supplement our coverage. Due to the number
of entities within the US and Canada we selected 14 entities in
those countries, representing those with the largest contribution
to group profit, over which we performed audits of the complete
financial information. We also identified a further 13 entities in
other countries over which we instructed specific audit
procedures to be performed over revenue and receivables to
supplement coverage over these key financial line items.

In total we performed procedures over 86 legal entities in 26
countries, which together accounted for 87% of the Group’s
revenue and 84% of the Group’s profit before tax.

Members of the Group audit team visited US, China, Hong Kong
and UK component teams in the year in order to understand and
supervise the audit approach in those locations and we held a
series of planning workshops for all in scope component teams
to inform them of our audit approach and strategy.

This, together with additional procedures performed at the Group
level (including audit procedures over material head office entities,
tax, legal claims, impairment assessments and consolidation
adjustments), gave us the evidence we needed for our opinion
on the Group financial statements as a whole.

Materiality
The scope of our audit was influenced by our application of
materiality. We set certain quantitative thresholds for materiality.

These, together with qualitative considerations, helped us to
determine the scope of our audit and the nature, timing and
extent of our audit procedures on the individual financial
statement line items and disclosures and in evaluating the effect
of misstatements, both individually and on the financial
statements as a whole.

Based on our professional judgement, we determined materiality
for the financial statements as a whole as follows:

Overall group materiality £17.3 million
How we determined it
Rationale for benchmark
applied

5% of profit before income tax
We believe that profit before tax is the
primary measure used by the shareholders
in assessing the performance of the group.
This is a generally accepted benchmark and
the users of the accounts consider it to be
a key measure of the performance of the
business.

We agreed with the Audit Committee that we would report to
them misstatements identified during our audit above £900,000
as well as misstatements below that amount that, in our view,
warranted reporting for qualitative reasons.

Going concern
Under the Listing Rules we are required to review the directors’
statement, set out on page 85, in relation to going concern. We
have nothing to report having performed our review.

Under ISAs (UK & Ireland) we are required to report to you if we
have anything material to add or to draw attention to in relation
to the directors’ statement about whether they considered it
appropriate to adopt the going concern basis in preparing the
financial statements. We have nothing material to add or to
draw attention to.

As noted in the directors’ statement, the directors have
concluded that it is appropriate to adopt the going concern basis
in preparing the financial statements. The going concern basis
presumes that the group and company have adequate resources
to remain in operation, and that the directors intend them to do
so, for at least one year from the date the financial statements
were signed. As part of our audit we have concluded that the
directors’ use of the going concern basis is appropriate. However,
because not all future events or conditions can be predicted,
these statements are not a guarantee as to the group’s and
company’s ability to continue as a going concern.

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FINANCIAL
STATEMENTS

OTHER
INFORMATION

OTHER REQUIRED REPORTING
CONSISTENCY OF OTHER INFORMATION AND COMPLIANCE WITH APPLICABLE REQUIREMENTS

COMPANIES ACT 2006 REPORTING

In our opinion, based on the work undertaken in the course of the audit:

• the information given inthe Strategic Report and the Directors’ Report for the financial year for which the financial statements are

prepared is consistent with the financial statements; and

• the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.

In addition, in light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we
are required to report if we have identified any material misstatements in the Strategic Report and the Directors’ Report. We have
nothing to report in this respect.

ISAS (UK & IRELAND) REPORTING
Under ISAs (UK & Ireland) we are required to report to you if, in our opinion:
• information in the Annual Report is:

– materially inconsistent with the information in the audited financial

statements; or

– apparently materially incorrect based on, or materially inconsistent with, our
knowledge of the group and company acquired in the course of performing
our audit; or

– otherwise misleading.

• the explanation given by the directors on page 83, in accordance with provision
C.1.1 of the UK Corporate Governance Code (the “Code”), as to why the Annual
Report does not include a statement that they consider the Annual Report
taken as a whole to be fair, balanced and understandable and provides the
information necessary for members to assess the group’s and company’s
position and performance, business model and strategy is materially
inconsistent with our knowledge of the group and company acquired in the
course of performing our audit.

• the section of the Annual Report on page 82, as required by provision C.3.8 of
the Code, describing the work of the Audit Committee does not appropriately
address matters communicated by us to the Audit Committee.

We have no exceptions to report.

THE DIRECTORS’ ASSESSMENT OF THE PROSPECTS OF THE GROUP AND OF THE PRINCIPAL RISKS THAT WOULD
THREATEN THE SOLVENCY OR LIQUIDITY OF THE GROUP

Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw attention to in relation to:

• the directors’ confirmation on page 35 of the Annual Report,

in accordance with provision C.2.1 of the Code, that they have carried out a
robust assessment of the principal risks facing the group, including those that
would threaten its business model, future performance, solvency or liquidity.

• the disclosures in the Annual Report that describe those risks and explain how

they are being managed or mitigated.

• the directors’ explanation on page 35 of the Annual Report, in accordance with
provision C.2.2 of the Code, as to how they have assessed the prospects of the
group, over what period they have done so and why they consider that period to
be appropriate, and their statement as to whether they have a reasonable
expectation that the group will be able to continue in operation and meet
its liabilities as they fall due over the period of their assessment, including
any related disclosures drawing attention to any necessary qualifications
or assumptions.

We have nothing material to add or to draw
attention to.

Under the Listing Rules we are required to review the directors’ statement that they have carried out a robust assessment of the
principal risks facing the group and the directors’ statement in relation to the longer-term viability of the group. Our review was
substantially less in scope than an audit and only consisted of making inquiries and considering the directors’ process supporting
their statements; checking that the statements are in alignment with the relevant provisions of the Code; and considering whether
the statements are consistent with the knowledge acquired by us in the course of performing our audit. We have nothing to report
having performed our review.

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016 149

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REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
OF INTERTEK GROUP PLC continued

ADEQUACY OF ACCOUNTING RECORDS AND INFORMATION
AND EXPLANATIONS RECEIVED
Under the Companies Act 2006 we are required to report to you
if, in our opinion:

• we have not received all the information and explanations we

require for our audit; or

WHAT AN AUDIT OF FINANCIAL STATEMENTS INVOLVES
An audit involves obtaining evidence about the amounts
and disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error.
This includes an assessment of:

• adequate accounting records have not been kept by the

company, or returns adequate for our audit have not been
received from branches not visited by us; or

• the company financial statements and the part of the

Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns.

We have no exceptions to report arising from this responsibility.

DIRECTORS’ REMUNERATION
Directors’ remuneration report – Companies Act 2006
opinion
In our opinion, the part of the Directors’ Remuneration Report to
be audited has been properly prepared in accordance with the
Companies Act 2006.

Other Companies Act 2006 reporting
Under the Companies Act 2006 we are required to report to you
if, in our opinion, certain disclosures of directors’ remuneration
specified by law are not made.

We have no exceptions to report arising from this responsibility.

CORPORATE GOVERNANCE STATEMENT
Under the Listing Rules we are required to review the part of
the Corporate Governance Statement relating to ten further
provisions of the Code.

We have nothing to report having performed our review.

RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS
AND THE AUDIT
OUR RESPONSIBILITIES AND THOSE OF THE DIRECTORS
As explained more fully in the Statement of Director's
responsibilities set out on page 91, 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 and express an opinion on the
financial statements in accordance with applicable law and ISAs
(UK & Ireland). Those standards require us to comply with the
Auditing Practices Board’s Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only
for the company’s members as a body in accordance with Chapter
3 of Part 16 of the Companies Act 2006 and for no other
purpose. We do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other person to
whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.

• whether the accounting policies are appropriate to the group’s
and the company’s circumstances and have been consistently
applied and adequately disclosed;

• the reasonableness of significant accounting estimates made

by the directors; and

• the overall presentation of the financial statements.

We primarily focus our work in these areas by assessing the
directors’ judgements against available evidence, forming
our own judgements, and evaluating the disclosures in the
financial statements.

We test and examine information, using sampling and other
auditing techniques, to the extent we consider necessary to
provide a reasonable basis for us to draw conclusions. We obtain
audit evidence through testing the effectiveness of controls,
substantive procedures or a combination of both.

In addition, we read all the financial and non-financial information
in the Annual Report to identify material inconsistencies with the
audited financial statements and to identify any information that
is apparently materially incorrect based on, or materially
inconsistent with, the knowledge acquired by us in the course of
performing the audit. If we become aware of any apparent
material misstatements or inconsistencies we consider the
implications for our report. With respect to the Strategic Report
and Directors’ Report, we consider whether those reports include
the disclosures required by applicable legal requirements.

Ian Chambers
(Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors

London
6 March 2017

The maintenance and integrity of the Intertek Group plc website is the responsibility
of the directors; the work carried out by the auditors does not involve consideration
of these matters and, accordingly, the auditors accept no responsibility for any
changes that may have occurred to the financial statements since they were
initially presented on the website.

• Legislation in the United Kingdom governing the preparation and dissemination

of financial statements may differ from legislation in other jurisdictions.

150

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016

OVERVIEW

STRATEGIC
REPORT

DIRECTORS’
REPORT

FINANCIAL
STATEMENTS

OTHER
INFORMATION

SHAREHOLDER AND CORPORATE INFORMATION

SHAREHOLDERS’ ENQUIRIES
Any shareholder with enquiries relating to their shareholding
should, in the first instance, contact our Registrar, Equiniti, using
the address on this page.

ELECTRONIC SHAREHOLDER COMMUNICATIONS
Shareholders who would prefer to view documentation
electronically can elect to receive automatic notification by
email each time the Company distributes documents, instead
of receiving a paper version of such documents. Registering for
electronic communication is very straightforward and can be done
via Shareview, at www.shareview.co.uk. Shareview is Equiniti’s
suite of online services that helps shareholders manage their
holdings and gives access to a wide range of useful information.

There is no fee for using this service and you will automatically
receive confirmation that a request has been registered. Should
you wish to change your mind or request a paper version of any
documents in the future, you may do so by contacting the
Registrar by email or by post.

The facility allows shareholders to view details about their
holdings, submit a proxy vote for shareholder meetings, complete
a change of address and provide dividend mandates online, so
that dividends can be paid directly into a nominated bank account.

Shareholders can also find out what to do if a share certificate is
lost, as well as download forms in respect of share transfers.

SHAREGIFT
If you have a small shareholding which is uneconomical to sell,
you may want to consider donating it to ShareGift. The Orr
Mackintosh Foundation operates this charity share donation
scheme. Details of the scheme are available from:

ShareGift at www.sharegift.org
T: +44 (0) 20 7930 3737

SHARE PRICE INFORMATION
Information on the Company’s share price is available from the
Company’s website at www.intertek.com.

FINANCIAL CALENDAR
Financial year end
Results announced
Ex-dividend date for final dividend
Record date for final dividend
Annual General Meeting
Final dividend payable
Interim results announced
Ex-dividend date for interim dividend
Record date for interim dividend
Interim dividend payable

31 December 2016
7 March 2017
18 May 2017
19 May 2017
26 May 2017
2 June 2017
1 August 2017
28 September 2017
29 September 2017
13 October 2017

All future dates are indicative and subject to change.

INVESTOR RELATIONS
E: investor@intertek.com
T: +44 (0)20 7396 3400

REGISTRARS
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
T: 0371 384 2653 (UK)*
T: +44 121 415 7047 (outside UK)

* Lines are open 8.30a.m. to 5.30p.m. Monday to Friday, excluding bank holidays.

AUDITOR
PricewaterhouseCoopers LLP
1 Embankment Place
London WC2N 6RH
T: +44 (0)20 7583 5000

BROKERS
J.P.Morgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
T: +44 (0) 20 7588 2828

Goldman Sachs International
Peterborough Court
133 Fleet Street
London EC4A 2BB
T: +44 (0)20 7774 1000

REGISTERED OFFICE
Intertek Group plc
33 Cavendish Square
London W1G 0PS
T: +44 (0)20 7396 3400
F: +44 (0)20 7396 3480
www.intertek.com

Registered number: 04267576

ISIN: GB0031638363

LEI: 2138003GAT25WW1RN369

London Stock Exchange Support Services
FTSE 100
Symbol: ITRK

INTERTEK GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016 151

INTERTEK GROUP PLC
33 Cavendish Square
London
W1G 0PS
United Kingdom
Tel +44 20 7396 3400
Fax +44 20 7396 3480
info@intertek.com
intertek.com

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