Helping the world to
Build Back Ever Better
Annual Report 2020
Highlights
Resilient revenue
performance, robust
margin and strong
cash generation
demonstrating the
strengths of our
business model,
its geographic and
business line diversity,
our disciplined approach
to performance
management and
importantly, our
strongly cash-generative
earnings model.
1. Definitions of the above metrics and constant rates are set
out on page 24
2. Adjusted operating profit, adjusted operating profit margin,
adjusted diluted earnings per share (‘EPS’) and adjusted free
cash flow are non-GAAP measures. Adjusted measures are
stated before Separately Disclosed Items, which are described
in note 3 to the financial statements. Reconciliations
between statutory and adjusted measures, as well as return
on invested capital and cash conversion, are shown in the
Financial review.
3. Dividend per share for 2020 is based on the interim dividend
paid of 34.2p (2019: 34.2p) plus the proposed final dividend of
71.6p (2019: 71.6p).
Intertek Group plc Annual Report and Accounts 2020
Financial
Resilient FY financial performance, ahead of
earnings and cash expectations
H2 2020 adjusted operating profit of
£259.5m with record adjusted operating
margin of 18.4%, up 60bps YoY at
constant rates
Excellent cash conversion of c.150% drives
a record adjusted free cash flow of £435.6m,
up 10.2% YoY
Strong balance sheet with financial net debt
of £419.9m, down £209.5m YoY; financial
net debt to EBITDA of 0.7x
Highly cash-generative and carbon-light
earnings model delivers strong adjusted ROIC
of 21.6%, down 190bps YoY at constant rates
Sustainable returns to shareholders with FY
2020 dividend of 105.8p, in line with 2019
Statutory operating profit of £378m, down
20.7% YoY at constant rates
Statutory net profit after tax of £263m,
down 19.8% at constant rates and 21.3%
at actual rates
Sustainability
We were included in the FTSE4Good
Index for the fourth year running
Intertek participated in CDP’s
Climate Change Programme
58% reduction in lost time incidents
We are an accredited living wage
employer in the UK
2020 is our first carbon neutral year
Continuous focus on sustainability including
targeting Net Zero emissions by 2050
£2,742m
Revenue
(2019: £2,987m)
£2,736m
Like-for-like revenue1
(2019: £2,983m)
£428m
Adjusted operating profit1,2
(2019: £524m)
15.6%
Adjusted operating margin1,2
(2019: 17.5%)
£378m
Statutory operating profit
(2019: £486m)
13.8%
Statutory operating margin
(2019: 16.3%)
170.9p
Adjusted diluted earnings per share1,2
(2019: 212.5p)
152.4p
Statutory diluted earnings per share
(2019: 192.6p)
£436m
Adjusted free cash flow2
(2019: £395m)
21.6%
Return On Invested Capital1,2
(2019: 23.7%)
105.8p
Dividend per share3
(2019: 105.8p)
Financial statementsDirectors’ reportStrategic report Our purpose is
to bring quality,
safety and
sustainability
to life
Our role has never
been more important.
As the only company globally
with a Total Quality Assurance
offering – comprising Assurance,
Testing, Inspection and Certification
solutions – we’re uniquely placed to
keep businesses powering ahead,
no matter the obstacles they face.
The pandemic has brought to life Intertek’s purpose-
led role in society as never before. We are working
with customers, both new and existing, using our
scale and expertise to help them address their
challenges with leading-edge, innovative solutions.
We’ve proved this in 2020, helping our customers
confront and resolve real issues in a way that’s
making it easier and safer for them to operate. And,
as our customers continue to face unprecedented
challenges, we’re always there to support them
and Build Back Ever Better.
In this year’s report
Find out how our industry-leading
Total Quality Assurance enables companies
to power ahead safely and swiftly,
wherever they are in the world.
intertek.com
Strategic report
01 Welcome to Intertek
02
Building Back Ever Better
02 A force for good
03
‘Ever Better’ solutions
04 Safer, more diversified supply chains
05 Better personal safety and wellbeing
06
Low carbon economy
07 More than an idea
08 Business model
08 What we do
09 How we do it
13 The value we create
Investment case
Chief Executive Officer’s review
14
16
24 Key performance indicators
26 Sustainability
42 Operating reviews
42
Products
46 Trade
48
Resources
Financial review
Principal risks and uncertainties
50
56
64 Our stakeholders
64
Section 172 statement
Directors’ report
72 Chairman’s introduction
74 Board of Directors
77 Direct reports to the CEO
78 Corporate governance
94 Nomination Committee report
98 Audit Committee report
105 Remuneration Committee report
131 Other statutory information
134 Statement of Directors’ responsibilities
Financial statements
135 Consolidated income statement
136 Consolidated statement of comprehensive income
137 Consolidated statement of financial position
138 Consolidated statement of changes in equity
140 Consolidated statement of cash flows
141 Notes to the financial statements
184
Intertek Group plc – Company balance sheet
185
Intertek Group plc – Company statement of changes
in equity
186 Notes to the Company financial statements
189
Independent Auditors’ Report
197 Shareholder and corporate information
Intertek Group plc Annual Report and Accounts 2020
01
Financial statementsDirectors’ reportStrategic report Building Back Ever Better
A force
for good
In challenging times, our
mission-critical solutions are
needed more than ever.
Since the onset of the COVID-19
pandemic, the issues facing the
world today have been felt more
acutely than ever. What’s more,
there is a growing realisation that
global issues are interconnected,
affecting individual lives in many
indirect but significant ways.
In a year that has tested people and businesses
around the world, Intertek has responded with
speed and innovation, proving itself to be an agile
and resilient business. We have stayed operational
across the world through the depths of the
pandemic and played a critical role in mitigating
risks for our clients.
This has underlined the importance of Intertek’s
purpose-led role in making sense of these changes.
We are throwing light on the choices we all have
to make now, and how that will determine not just
how companies will act in the future, but where
the whole world goes next.
02
Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Building Back Ever Better
Continued
‘Ever Better’
solutions
New normal. New opportunities.
Old thinking can’t solve new
problems. That’s why we draw
on our unique global population
of Total Quality Assurance experts,
their entrepreneurial spirit and our
decentralised culture, to create
exciting and innovative solutions
to emerging needs.
Their focus is on what really matters when it
comes to building a sustainable future for all: higher
standards of personal safety, health and wellbeing
for everybody; low carbon societies; and more
traceable and resilient supply chains.
The events of 2020 have made the need for risk-
based Quality Assurance all the more compelling.
With a focus on our 5x5 ‘Ever Better’ strategy,
disciplined performance management, and the
passion and expertise of our 43,769 people, we
have already developed leading-edge innovations
to meet some of the world’s toughest challenges.
These include Total Sustainability Assurance, our
end-to-end sustainability offering, and Protek™, the
first assurance programme to safeguard systems
and processes, facilities, materials, surfaces,
products and – above all – people.
CarbonClear™ delivers unique clarity on the
carbon impact of end-to-end operations, while
SourceClear™ is a new technology platform
providing visibility and traceability across the
full range of supply chain relationships.
We expect the theme of Building Back Ever Better
to guide the actions of governments, companies,
institutions, regulators and consumers, especially
in three important areas:
• management, boards and shareholders will want
to build safer supply chains
• consumers, governments and corporations will
want to offer better personal safety
• the world will need to invest in and build a low
carbon society.
As the challenges that our customers face evolve,
so do we. And our priority today isn’t simply to help
customers recover from the impact of COVID-19.
It’s to empower them to prosper as never before,
building a sustainable future for all.
You can see how Intertek is addressing these three
areas on the following pages.
Safer, more
diversified
supply chains
Read more about our ‘Ever
Better’ solutions on page 04
Better
personal safety
and wellbeing
Read more about our ‘Ever
Better’ solutions on page 05
Low carbon
economy
Read more about our ‘Ever
Better’ solutions on page 06
Intertek Group plc Annual Report and Accounts 2020
03
Financial statementsDirectors’ reportStrategic report Building Back Ever Better
Continued
Safer, more diversified
supply chains
We give companies better insight into every layer of their
supply chains – reducing risk, improving traceability,
sharpening intelligence and increasing resilience.
Our role
Delivering end-to-end, risk-based, supply-
chain assurance is our core business at
Intertek: underpinning supply resilience,
minimising reputational risk and driving
ethical and sustainable business practices.
SourceClear™
Independent certification with Intertek SourceClear™
gives customers instant credibility and traceability of
sustainable production, preferred raw materials, social
and environmental practices that maximise positive
impacts throughout the supply chain.
>
Read the full case study on page 45
More and more companies are
making purchasing decisions
based on who they trust to
address responsible sourcing
issues. They are looking
for reassurance as to how
products are made, selection
of preferred materials, and
that’s what SourceClear™
gives them.”
Simona Romanoschi
Business Assurance
Innovation VP
04
Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Building Back Ever Better
Continued
Better personal safety
and wellbeing
We are helping to create a world where higher standards
of health and personal safety, hygiene and wellbeing are
the norm, enabled by better understanding and more
targeted investment.
Our role
Empowering customers with innovative
health, safety and wellbeing solutions is a
key aspect of our vision to make the world
a better and a safer place. More than ever,
companies are turning to our expertise in
this area: driven by passion, delivered with
pace and precision.
Health, safety and wellbeing in the workplace, in
public spaces and at home is the number one concern
for businesses, employees and consumers. Intertek
Protek™ safeguards people everywhere, bringing
peace of mind to companies in every industry.
>
Read the full case study on page 43
Whether they’re in hotels,
restaurants, schools, transport,
retail or another kind of
business, Protek™ provides the
procedures our clients need to
reassure their customers and
demonstrate the importance
they place on health and
safety.”
Chase Eastman
Vice President, E-Commerce &
Courseware – Alchemy Systems
Intertek Group plc Annual Report and Accounts 2020
05
Financial statementsDirectors’ reportStrategic report Building Back Ever Better
Continued
Low carbon
economy
As people, companies and countries everywhere
increasingly shape greener strategies, we’re helping our
customers participate and transact confidently in the
sustainability revolution transforming our world.
Our role
We help companies meet growing
stakeholder expectations on clear and
transformative sustainable objectives,
trusted industry benchmarks, consistent
performance improvement, and certify
results with total transparency, assured.
CarbonClear™
Intertek CarbonClear™ is a breakthrough global
programme that brings companies, beginning in the
energy sector, unique clarity on the carbon impact
of their end-to-end operations. Ultimately, this will
also empower countries, companies and consumers
to cut their carbon footprints, by making informed
buying decisions about the carbon impact of their
energy resources.
>
Read the full case study on page 49
Companies and countries are moving
faster than ever to invest in, and be
leaders of, sustainability and the
energy transition. CarbonClear™
is a vital tool for energy investors,
regulators, consumers and
producers to converge financial and
sustainability goals, commercialise
low-carbon investments, and
demonstrate certified progress in
the race to net zero emissions.”
Malissa Boudreaux
Senior Vice President,
World of Energy
06
Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Building Back Ever Better
Continued
More than
an idea
We’re building a movement
Building Back Ever Better. Four simple words, but a world of meaning.
It’s why we do what we do. It’s why we form close partnerships and
share ideas. It’s why we work so hard to tackle the real issues that matter
to our customers, and to the people we deal with across our operations.
It combines our well-established ‘Ever Better’ philosophy with a call to
action for the whole world. We believe a unified approach from leaders and
innovators can harness the complexity of our connected world, and the
risks that come with it. We are leading by example and inspiring others –
thinking more sustainably, innovating collaboratively – and the value of
the risk-based Quality Assurance we provide has never been greater.
In a year that has been dominated by a pandemic that has gripped the
world, it’s about so much more than just getting back what we may
have lost. It’s about inspiring a global movement. It’s about building
something that’s greater than before. And it’s about doing that
‘Ever Better’, together. #BBEB
>
Watch our Building Back Ever Better video, available from 30 March 2021,
at intertek.com/bbeb
The world has changed.
But what if instead of
settling for a new normal,
we take responsibility for
tomorrow, and build back
better? Our 43,800
employees are working
to bring a new global
society to life, with
sustainability, safety and
wellbeing at its heart.”
André Lacroix
Chief Executive Officer
Intertek Group plc Annual Report and Accounts 2020
07
Financial statementsDirectors’ reportStrategic report Business model
What
we do
Intertek has always been a
purpose-led business. Today,
that purpose is to make the
world a better, safer and more
sustainable place for all. Now,
and for future generations.
As the world changes, operating safely, sustainably
and delivering quality products and services
becomes more difficult. Supply chains are rapidly
growing in both size and complexity, bringing
unprecedented levels of risk. In these challenging
times, companies need a trusted partner, and we
provide our clients with a risk-based approach to
Quality Assurance. Our global network of 43,769
colleagues helps address the complex quality, safety
and sustainability challenges that corporations face.
Our Purpose
Bringing quality, safety and
sustainability to life.
Our Vision
To be the world’s most trusted
partner for Quality Assurance.
Total Quality Assurance
The work we do covers everything from testing
toys to inspecting power stations, and from
certifying vaccines to providing end-to-end
Quality Assurance. Our innovation-led, end-
to-end Total Quality Assurance (‘TQA’) value
proposition is designed to support our clients
24/7. It provides a fully integrated portfolio of
Assurance, Testing, Inspection and Certification
(‘ATIC’) services to give our customers complete
peace of mind for their products, services and
operating systems.
But the ATIC solutions we offer go beyond the
quality and safety of a corporation’s physical
components, products and assets. They go
to the heart of the reliability of their operating
processes and quality management. We call
it Total Quality Assurance because it enables
our clients to mitigate risk at every stage of
their operations.
Our TQA customer promise
To become the most trusted partner for Quality
Assurance, we have made a promise to our
customers: Intertek’s unrivalled TQA expertise
is delivered consistently with precision, pace and
passion. This is what makes us different. Our
clients can rely on the consistent quality and
accuracy of our work; the speed of our response,
as we deliver rapid and accurate feedback;
backed up by our desire and belief in what we do.
That means our clients can operate with total
peace of mind and power ahead safely.
‘Ever Better’
As a company we are committed to becoming
‘Ever Better’ in everything we do. That means
we’re not simply seeking ways to constantly
improve our operations for enhanced efficiency
and effectiveness. It means we’re researching
and innovating to improve our services, enabling
our 300,000 clients to become ‘Ever Better’ too.
Our ATIC services
Assurance
Enabling our customers
to identify and mitigate
intrinsic risk in their
operations, their supply
and distribution chains
and quality management
systems.
Testing
Evaluating how our
customers’ products
and services meet and
exceed quality, safety,
sustainability and
performance standards.
Inspection
Validating the
specifications, value
and safety of our
customers’ raw materials,
products and assets.
Certification
Formally confirming
that our customers’
products and services
meet all trusted external
and internal standards.
RESEARCH &
DEVELOPMENT
CONSUMER
MANAGEMENT
RAW MATERIALS
SOURCING
Our
TQA value
proposition:
Our unique TQA value
proposition offers end-
to-end ATIC solutions
across a company’s
entire value chain.
DISTRIBUTION &
RETAIL CHANNELS
COMPONENT
SUPPLIERS
08
Intertek Group plc Annual Report and Accounts 2020
TRANSPORTATION
MANUFACTURING
Financial statementsDirectors’ reportStrategic report Our global network
Business model
Continued
How
we do it
The world of our customers is
changing, becoming complex and
interconnected with increased risks
to quality, safety and sustainability.
We support the growth of our
clients with our TQA proposition
by building trusted relationships,
listening to their needs to
develop the right insights and
using meaningful data to create
innovative TQA solutions.
With 43,769 employees in our global network,
based in more than 100 countries, we keep close
to our customers and understand their challenges.
1,000+
Laboratories and offices
43,800
Employees
3,000+
Auditors
100+
Countries
100,000+
Audits
80+
Languages
Intertek Group plc Annual Report and Accounts 2020
09
Financial statementsDirectors’ reportStrategic report Business model
Continued
Our ‘Ever Better’ approach
Our core strength is, and always
will be, our people. The way
our colleagues combine passion
and innovation with customer
commitment sets us apart. This is a
vital element of our entrepreneurial,
customer-centric culture.
Our people, values and culture
Our decentralised operating culture is built around
strong values. These values are inspirational
and help us to drive sustainable growth for all.
They guide our behaviours every single day,
underpinning the way we work, guiding decision-
making and connecting colleagues across
the world.
Our strategy and culture give our people the
right platform, not only to grow and develop their
careers, but also to become involved in socially
responsible activities that further support our
purpose to make the world a better place by
bringing quality, safety and sustainability to life.
10
Intertek Group plc Annual Report and Accounts 2020
Using data insight to drive innovation
We have access to world-class customer intelligence
site-by-site from anywhere across our global
network. This data, along with customer feedback
and the insight generated from our TQA Experts,
tells us what our customers need and want,
allowing us to provide them with faster and more
effective solutions.
Why we do it
We are passionate about our purpose. The world
is changing fast, and, at Intertek, we know we are
uniquely placed to help our clients adapt, seize
and drive the opportunities created by a more
sustainably aware and driven society.
We are born to make the world ‘Ever Better’. What
we do has an impact on every aspect of modern
life, from the way we grow as individuals to how we
thrive as a society. This vital role is shaping a better,
safer and more sustainable world to which we all
aspire. This will be our legacy and our future.
>
View our Sustainability Report at intertek.com/about/our-
responsibility for how our people responded to the pandemic
Our Values
• We are a global family
that values diversity
• We always do the right thing,
with precision, pace and passion
• We trust each other and
have fun winning together
• We own and shape our future
• We create sustainable growth.
For all
Building trusted client relationships
We aim to consistently deliver a superior customer
experience and build trusted relationships. Key to
this is regular engagement with our customers.
Around the world, through our Net Promoter Score
(‘NPS’) programme, we carry out 6,000+ customer
interviews every single month. The NPS measures
the percentage of customers likely to recommend
our services, helping us to understand our customers
and deliver superior service at every Intertek site.
Real-time insights from the NPS programme
are fed back to senior management every day,
allowing us to continually measure performance,
gain insights, drive improvement and deliver our
TQA Customer Promise. We capture key metrics at
every site monthly and, when a project is complete,
our TQA Experts talk to our customers about their
experience, the solution itself and the quality of
customer service, to maintain high quality and
disciplined performance management.
Our considered and focused approach
to innovation uses a three-tiered method.
Core
Building on the strengths of existing
products and services
From our ‘Core’ focus, we seek to build on the
strengths of our existing products and services,
continually improving them for our existing
markets and customers. As part of breakthrough
innovation Protek™, which focuses on health,
hygiene, safety and risk management, we have
launched POSI-CHECK to help in the Prevention
of the Spread of Infection (‘POSI’) in restaurants,
supermarkets, schools and other facilities.
Adjacent
Expanding into fast-growing and
high-margin markets
We aim to develop new products and
services for rapid-growth, high-margin markets
that are ‘Adjacent’ to those we already serve.
Responding to demand during the pandemic, we
further developed our Remote Video Inspection
(‘RVI’) service, part of our market-leading Inview
virtual assurance solution, which uses remote
live video-streaming and smartphone technology
to carry out mission-critical inspection services
across the oil and gas supply chain.
Breakthrough
Developing innovative products
and services
We aim to develop ‘Breakthrough’ products and
services that enable us to create new attractive
markets and target emerging customer needs.
In 2020 these included CarbonClear™, the
world’s first independent carbon-intensity
certification programme, and SourceClear™, a
new technology platform that provides visibility
and traceability across the full range of supply-
chain relationships.
Financial statementsDirectors’ reportStrategic report Business model
Continued
Our sectors
By focusing on the three sectors
of Products, Trade and Resources,
we concentrate the full power
of our innovation capabilities
into these attractive growth
and high-margin sectors.
Products
Ensuring the quality and safety of
physical components and products, and
risk assessment of operating processes
and quality management systems.
Trade
Protecting the value and quality of
products during custody-transfer,
storage and transportation, via
analytical assessment, inspection and
technical services.
Resources
Optimising the use of assets in oil,
gas, nuclear and power industries and
minimising risk in their supply chains
through technical inspection, asset
integrity management, analytical
testing and ongoing training services.
£468m
Revenue (17% of Group)
(8.5%) at actual rates
(6.3%) at constant rates
£29m
Adjusted Operating Profit
(7% of Group)
£593m
Revenue (22% of Group)
(12.8%) at actual rates
(9.9%) at constant rates
£47m
Adjusted Operating Profit
(11% of Group)
£1,682m
Revenue (61% of Group)
(6.4%) at actual rates
(5.7%) at constant rates
£352m
Adjusted Operating Profit
(82% of Group)
Structural growth drivers
• Growth in brands, SKUs and e-commerce
• Faster innovation cycle
• Higher demand for healthy and sustainably
sourced products
• Increased focus on safety, performance
and quality
• Increased demand for smart products
• Emerging markets growing middle class
Structural growth drivers
• Population growth and social mobility
• GDP growth
• Development of regional trade
• Improvements in transport infrastructure
• Increased need for end-to-end traceability
• Increased focus on Operational Sustainability
Structural growth drivers
• Population growth and social mobility
• Investment in E&P, storage and transportation
• Total Energy with diversified portfolio
• Accelerated transition to renewable energies
• Increased focus on Operational Sustainability
• Digital supply chain management
Corporate Assurance
growth drivers:
• Growing need for ATIC risk-based
Quality Assurance
• Increasing regulation
• Greater demand for People Assurance
• Importance of supply intelligence
and resiliency
• More focus on Corporate Sustainability
• Ever more vital role of Enterprise
CyberSecurity
Intertek Group plc Annual Report and Accounts 2020
11
Financial statementsDirectors’ reportStrategic report Business model
Continued
Our high-quality
earnings model
Based on the delivery of our unique
TQA value proposition, the virtuous
economics of our earnings model –
high-margin, strongly cash-generative,
capital-light and carbon-light, delivering
strong pricing power – is at the very
core of what makes us successful.
Our ability to profitably deliver ATIC services to
customers operating in the structurally attractive
Products, Trade and Resources economic sectors
is based on our capital-light business model and
entrepreneurial culture.
This model enables us to respond quickly to new
growth opportunities. To maximise returns, we
continue to invest in high-growth, high-margin areas
and maintain a disciplined capital allocation. As a
result we have achieved strong free cash flow and
negative working capital.
12
Intertek Group plc Annual Report and Accounts 2020
GDP+ organic
revenue growth
in real terms
Investments in
high-growth and
high-margin
sectors
Intertek
Virtuous
Economics
Margin-accretive
revenue growth
Disciplined
capital allocation
Strong free
cash flow
Financial statementsDirectors’ reportStrategic report Business model
Continued
Stakeholder types
The value
we create
Delivering ‘Ever Better’ value for
our stakeholders. We aim to create
meaningful and sustainable long-term
value for a broad range of stakeholders.
> To understand how we engage with our
stakeholders, and how the Board oversees that
engagement, please see our Section 172(1)
statement on page 64
Customers
People
Investors
We deliver innovative and bespoke Assurance,
Testing, Inspection and Certification solutions
to our customers for their operations and
supply chains.
Why they are important to us
Our customers are at the centre of everything we do,
and delivering the highest standards of customer service
is crucial to us becoming the world’s most trusted
TQA partner.
How do we engage them?
We continuously engage and build our relationships
with customers, and closely analyse our NPS data.
In 2020 we stepped up our customer communications
to provide support through the pandemic, addressing
emerging needs, and operational and supply chain
challenges.
Our experts embody our TQA culture, ensuring
the quality, safety and sustainability of products
and services used by millions around the world.
Our investor stakeholders include all groups that
have an interest in the success and sustainability
of our global business.
Why they are important to us
Why they are important to us
Our people are our most valuable asset and are critical to
our success. Customer-centric and passionate about what
they do, they deliver sustainable value through unmatched
expertise and quality of work for our customers every day.
How do we engage them?
The work our people do is deeply meaningful to our world.
Our leaders support all colleagues to deliver our Core
Purpose, pursue their aspirations and enjoy a rewarding
career with us. We try to create a high performance,
growth-oriented and caring culture with clear transparent
communication and regular recognition. We ensure that each
colleague has a personal growth plan that is progressed.
Delivering for our investors drives our ongoing success,
enabling us to deliver for all stakeholders in the long term.
How do we engage them?
We engage with existing and potential investors to help
them understand the Group’s business model, strategy,
financial performance and outlook.
The programme is wide-ranging and includes regular
trading updates, investor conferences and roadshows
throughout the year for investors and sell-side analysts.
Suppliers
Communities
Our suppliers provide products and services, and
help us manage and track the performance in our
supply chains.
Why they are important to us
Strong supplier relationships allow us to operate by
‘Doing Business the Right Way’, and create value for
our business, through a better, more resilient, dedicated
service, and preferential pricing.
We are focused on achieving a positive impact
within the communities where we operate,
supporting local causes and partnering
with charities.
Why they are important to us
The services we provide to our customers, including our
sustainability and growth innovations, generate direct and
indirect benefits for our communities.
How do we engage them?
How do we engage them?
We partner with our suppliers to find sustainable ways
of using resources efficiently. We carry out regular
compliance and risk assessments to build strategic
supplier partnerships.
Our ethical procurement practices have been adopted
widely across the Group and we work with suppliers who
share our sustainability objectives.
Our businesses regularly engage with and contribute to
our communities, and many colleagues support local and
charitable causes.
These activities reflect the diversity of our community
stakeholders and our people.
Government and regulators
We comply with all global, regional and
local regulations.
Why they are important to us
Compliance with local laws and regulations is an important
part of being a responsible employer and business. We are
committed to engaging constructively with governments
and regulators to support the wider community.
How do we engage them?
We engage with national and local governments and
regulators to share our intentions, understand their
concerns, and find mutually beneficial solutions.
We do this through membership meetings of industry
bodies as well as the publication of White papers.
Intertek Group plc Annual Report and Accounts 2020
13
Financial statementsDirectors’ reportStrategic report Investment case
Well
positioned
for growth
We have a proven history of growth,
innovation, disciplined portfolio
management and operational excellence.
This, alongside the energy, agility and
innovation of our colleagues around the
world, is why we are uniquely well
positioned to capitalise on the growth
opportunities ahead and drive sustainable
value creation for stakeholders.
14
Intertek Group plc Annual Report and Accounts 2020
Sustainable
shareholder value
Our track record of shareholder value creation is
strong, and the sustainability of our results is a
tribute to the quality of our earnings model, the
trusted relationships we have with our clients,
the strength of our TQA customer service, the
leading expertise of our 43,769 colleagues, and our
passionate and customer-centric culture. In a year
that has been challenging for so many corporates,
we have continued to invest in our business
and we have strengthened further our financial
position, with a financial net debt at year end
£210m lower than in 2019.
The sustainability of our performance has
underpinned our growth, creating exceptional
value for our shareholders and the consistent
payment of dividends. We have achieved this
through the powerful compounding effect, year
after year, of our earnings model’s virtuous
economics: margin-accretive revenue growth,
strong cash generation and disciplined investment.
Investing for growth
We invest in high-margin, high-return
sectors and in companies where
we see opportunities for margin
enhancement.
Global ATIC market
Our unique offering means we are well placed
to take advantage of the huge growth
opportunities in the global ATIC market.
£250bn
Global ATIC market
Exciting growth
opportunities
As our customers’ operations and supply chains
become more complex and they face new market
forces as the world recovers from COVID-19, they
also face unprecedented levels of risk across every
element of their businesses. This has created even
greater growth opportunities in the market for
Intertek’s TQA services, and attractive industry-
consolidation opportunities, as the world needs our
services even more, and we look to help customers
Build Back Ever Better.
We estimate that only US$50 billion of the
US$250 billion ATIC market is currently outsourced,
presenting further opportunity to capture a share
of the US$200 billion of work currently managed
in-house. If anything, the pandemic has led
corporations to reassess what is core and non-
core to ensure the efficiency and sustainability of
their operations – and this will inevitably lead to a
reappraisal of what they need to outsource. The
future market potential could be even greater than
this, as it is also driven by new risks emerging from
the continued rise in operational complexity and
multi-tiered supply chains. With our unique offering
and current network serving 300,000 clients around
the world, we are in the ideal position to attract a
substantial share of this market potential.
Untapped potential
$200bn
Currently in - house
$50bn
Currently
ou t sourced
Portfolio strategy
Intertek’s focus is on high-margin, high-return
sectors. This guides where we invest for growth
in terms of our scale businesses – those companies
where we expect the fastest growth to come
from or where we see opportunities for margin
improvement – and targeted, value-enhancing
acquisitions. Our M&A focus is on companies with
attractive growth and margin prospects, strong IP
and market positions and a highly cash-generative
business model.
We underpin this with our highly disciplined approach
to performance management, based on a unique
dashboard of leading and lagging indicators. It
addresses a range of key financial metrics, from
revenue growth, margin and customer profitability
to capital allocation and investments in growth.
Our operational metrics include leading indicators
such as marketing leads, customer retention and
customer acquisitions.
Financial statementsDirectors’ reportStrategic report Investment case
Continued
High-quality
earnings model
At the very core of what makes us successful
is our high-margin, cash-generative earnings
model, based on the delivery of our unique
TQA value proposition. Our ability to profitably
deliver ATIC services to customers operating in
the structurally attractive Products, Trade and
Resources economic sectors is based on our
capital-light business model and entrepreneurial
culture, which enable us to respond quickly to
new growth opportunities.
To maximise returns, we continue to invest
in high-growth, high-margin areas and maintain
a disciplined approach to capital allocation.
Innovating to help businesses
navigate a pandemic
There is no question that the world changed
in 2020 – people and corporates have faced
challenges like never before in the face of
COVID-19. And Intertek has been at the forefront
of the response, helping our clients adapt to new
conditions and bolster their business continuity
plans. We have launched a range of innovative
products and services, designed to provide the
practical support and visionary guidance they
need to deal with the effects of the pandemic.
>
Read more about these innovations in our
operating reviews on pages 42 to 49
Customer-led innovation
Operational excellence
Innovation fuelled
by insight
Our regular programme
of customer interviews
provides the insight and
data needed to constantly
innovate.
6,000+
customer interviews
every month
>
Read more on page 10
The real fuel for innovation is insight – a deep
understanding of what our customers need and
want. Through our NPS programme, we carry out
6,000+ customer interviews every month and,
with the ability to access world-class customer
intelligence site-by-site from anywhere across
our global network, we have a continuous stream
of data to develop our insight and develop new
ATIC solutions.
We are constantly learning from our customers,
using their extensive feedback to help us
deliver ‘Ever Better’ solutions to their
evolving requirements.
During the pandemic, we have rapidly launched
new services and industry changing innovations,
such as Protek™ and CarbonClear™. We have also
supported the Pharma industry in the development
of vaccines, provided end-to-end testing and
certification for PPE, and introduced priority
testing services for life-saving medical equipment.
We take a disciplined approach to performance
management, measuring progress against a range
of operational metrics and using data intelligence
to understand our customer service levels and
turnaround times. All this creates a positive
atmosphere where our people feel fully engaged in
a safe working environment, and it is a measure of
the strength of our operations that Intertek stayed
fully operational throughout the pandemic.
This approach, alongside a dedicated focus on
quality across every site, is crucial to our continuous
improvement, underpinning our operational and
health and safety excellence, and ultimately ensuring
that our customers receive a superior service.
Intertek Group plc Annual Report and Accounts 2020
15
Financial statementsDirectors’ reportStrategic report Chief Executive Officer’s review
Helping the
world to Build
Back Ever Better
André Lacroix
Chief Executive Officer
16
Intertek Group plc Annual Report and Accounts 2020
A big thank you
Ever since I joined Intertek in 2015, the most
important part of my review has come where I can
take a moment to thank my colleagues around the
world for their outstanding contribution during
the year. Never has this been more the case than
in 2020, a year like no other when in the face of
unparalleled challenges, Intertek’s amazing people
worked tirelessly to ensure our operations across
the world could keep supporting our clients, helping
global supply chains to operate safely.
It was an extraordinary performance, and I thank
each and every one of them from the bottom of
my heart. The indomitable spirit that drove them is
the same that has made us a leader in our industry
for so long. No matter the challenges Intertek has
faced – during 2020, or during the 130 years of
our evolution – we have always exercised our spirit
of innovation, the passion of our people and our
unmatched customer commitment to realise our
purpose of making the world an ever better, safer
and more sustainable place for all.
Thanks to these qualities, we entered 2020 with
a very strong record of sustainable growth across
our entire history, and particularly over the previous
five years.
Our five-priority response
Given what was about to happen, the strength of
our track record and culture was particularly valuable
and important. From early in the year, as we know,
businesses across the world were rapidly affected
by the pandemic. It caused significant disruption to
the supply chains of our clients, restricting global
mobility and impacting the global economy.
The agility of our people and our business as a whole
was vital. We quickly refocused the organisation and
implemented a decisive, five-priority response to
the situation. Our financial results are testament to
the success of these actions, and to the strength
Outline results
£2,742m
Revenue
(8.2%) at actual rates
15.6%
Adjusted Margin
(190bps) at actual rates
170.9p
149%
Adjusted Diluted EPS
(19.6%) at actual rates
Cash conversion
+2,200bps at actual rates
21.6%
ROIC
(210bps) at actual rates
105.8p
Dividend
In line with prior year
of our high-quality earnings model: strong pricing
power driving strong margins and a high cash-
generation while enabling Intertek to operate in
an exceptionally capital- and carbon-light manner.
Our first priority is always health and safety. We
swiftly created a comprehensive, global COVID-19
Employee Health & Wellbeing policy, which we have
updated regularly throughout as we have learned
more about best practice in managing the virus.
The policy is publicly available on our website.
Our second priority is superior customer service.
We are a customer-centric organisation and
understand that what we do every day to ensure
our customers’ supply chains operate safely, securely
and efficiently is mission-critical. Our clients were
facing unprecedented challenges and since day one,
we have increased the frequency with which we
communicate and kept our operations open 24/7,
to ensure we can react and respond to customer
needs quickly.
Financial statementsDirectors’ reportStrategic report Chief Executive Officer’s review
Continued
As a result, we have rapidly been able to bring a
range of innovations to market, including exciting
new services like Protek™, SourceClear™ and
CarbonClear™ – I describe all of these and more in
later pages. What they all have in common is their
ability to confront and resolve real issues in a way
that makes it easier and safer for our customers
to operate.
Many of our employees have also gone beyond
the normal call of duty and responded fast to
help in any way they could, like creating hand
sanitisers in countries including China, India, the
Philippines, Turkey, the UK and the Netherlands
to keep customers and colleagues safe. Colleagues
in Intertek Indonesia provided some of the worst
affected countries with 200,000 face masks, and
our UK Food business line team has been working
seven days a week to collect, register and process
samples, safely and in line with tight customer
deadlines. In Azerbaijan, our people have helped
to buy relief packages for suffering families, and
our facilities team in Bangladesh set up a virtual
hospital. These are just a few examples of our
people’s actions across the world.
Our third priority is margin discipline. We took
new steps to protect our margin during the crisis,
building further on the disciplined approach to
pricing and cost that we have focused on over the
years. Actions included a pause on all recruitment,
a six-month delay to the 2020 annual salary
increase, and participation in a range of government
support schemes. Such initiatives mean we will have
the ability to support our clients fully once their
operations are back to normal.
Our fourth priority is cash discipline and we continue
to be highly focused around cash collection.
Our operational focus on cash is delivering strong
free cash flow which is further strengthening
our robust balance sheet. We continue to take a
disciplined approach to capital allocation, investing in
high-growth and high-margin sectors, as well
as implementing our progressive dividend policy.
Our fifth priority is purpose-led employee
engagement. With many of our people working
remotely during lockdown restrictions, it has never
been more important to stay connected every day.
Our world-class digital internal communications
platform has enabled us to reach out frequently to
everybody in the organisation, and their response
has been universally exceptional. A central part of
our internal communication narratives was purpose-
led, reminding all of us about the meaning of what
we do at Intertek. Indeed, Intertek provides mission-
critical solutions to make sure that the world’s
supply chains can operate fully and safely.
Our results in 2020
Our results for 2020 demonstrate that in the
COVID-19 era, the need for risk-based Quality
Assurance has never been greater for all our
stakeholders. The pandemic brought to life, as
never before, the great importance of Intertek’s
purpose-led role in society. Amid the unprecedented
pressures affecting so many companies, the
strength of our strategy, people and end-to-end
systemic approach has been emphasised by the
continuing resilience of our revenue performance
and our strong cash flow.
Key highlights of our 2020 performance:
• Resilient FY financial performance, ahead of
earnings and cash expectations
• H2 2020 adjusted operating profit of £259.5m
with record adjusted operating margin of 18.4%,
up 60bps YoY at constant rates
• Statutory operating profit of £378.2m, down
20.7% YoY at constant rates
• Excellent cash conversion of c.150% drives
a record adjusted free cash flow of £435.6m,
up 10.2% YoY
Performance by business
• Strong balance sheet with financial net debt of
£419.9m, down £209.5m YoY; financial net debt
to EBITDA of 0.7x
• Highly cash-generative and carbon-light earnings
model delivers strong adjusted ROIC of 21.6%,
down 190bps YoY at constant rates
• Sustainable returns to shareholders with
FY 2020 dividend of 105.8p, in-line with 2019
Products
• Carbon neutral in 2020 and continuous focus
on sustainability; targeting net zero emissions
by 2050
• Strongly positioned for growth: COVID-19
recovery, increased corporate focus on risk
and M&A growth opportunities.
Sir David Reid steps down as Chairman
In 2020 we announced that Sir David Reid
would retire on 31 December after serving nine
years on the Intertek Board as Chairman and
Non-Executive Director. I would like to thank
David for the significant contribution he has
made to Intertek’s development and growth
during his tenure with our Board. We will miss
his wise counsel and experience and wish him
every success and enjoyment for his future
retirement. Andrew Martin succeeded David as
Chairman of the Board, read more on page 72.
Our three sectors
The attractive structural growth drivers in
each of our three market sectors – Products, Trade
and Resources – enabled us to deliver a resilient
financial performance during an unprecedented
global pandemic.
Trade
Resources
£1,682m
Revenue
(6.4%) at actual rates
(5.7%) at constant rates
20.9%
Adjusted Margin
(170bps) at actual rates
(160bps) at constant rates
£593m
Revenue
(12.8%) at actual rates
(9.9%) at constant rates
7.9%
Adjusted Margin
(480bps) at actual rates
(460bps) at constant rates
£468m
Revenue
(8.5%) at actual rates
(6.3%) at constant rates
6.2%
Adjusted Margin
(10bps) at actual rates
(10bps) at constant rates
Intertek Group plc Annual Report and Accounts 2020
17
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Continued
Our 5x5 strategy
Our 5 strategic priorities
Our 5 strategic enablers
Our long-term 5x5 strategy for
growth remains consistent and has
informed our operational priorities
in response to the COVID-19
pandemic.
Differentiated
brand proposition
We are focused on
developing a strong and
differentiated brand, to
position Intertek as the
global market leader in
Total Quality Assurance
(‘TQA’).
Superior
customer service
Delivering the highest
standards of customer
service is at the heart
of our journey to being
the world’s most trusted
TQA partner.
Living our customer-
centric culture
Strong spirit of
entrepreneurship,
a customer-focused
mindset and
engagement at all levels
of the organisation.
Disciplined
performance
management
Financial and non-
financial metrics and
processes focusing
on margin-accretive
revenue growth and
strong cash conversion.
Our goals
1
3
Fully engaged
employees working in
a safe environment.
2
Superior
customer service in
Assurance, Testing,
Inspection and
Certification.
Margin-accretive
revenue growth
based on GDP+
organic growth.
4
Strong cash
conversion from
operations.
5
Accretive,
disciplined capital
allocation policy.
18
Intertek Group plc Annual Report and Accounts 2020
Effective
sales strategy
Driving continuous
improvement in margin-
accretive revenue growth
demands a structured
and disciplined approach
to sales effectiveness
that is increasing leads
and conversion rates.
Growth and margin-
accretive portfolio
Prioritising investments
with high-growth and
high-margin prospects
which help us to deliver
maximum value.
Superior technology
Improving the customer
experience, leveraging
back office synergies
and delivering superior
business intelligence.
Energising
our people
Through investments
in their capabilities,
providing a fully
aligned reward system
and promoting internal
growth.
Operational excellence
An ‘Ever Better’ approach to
continuously improving our
efficiency and productivity
through quality management
and operational excellence.
Delivering
sustainable results
Providing growth for our
customers and shareholders
and recognising the
importance of sustainability
for the wider community.
While we inevitably experienced some impact from
disrupted client supply chains and factory closures
in our Products sector, our leading positions across
multiple industries have helped us to deliver a
resilient like-for-like revenue decline of (5.9%) at
constant rates. Some delays to audits and product
launches were offset by a number of positive
developments, including increased demand for
testing personal protective equipment and medical
devices, growth in e-commerce and associated
services and increased demand for ATIC (Assurance,
Testing, Inspection, Certification) services in areas
like supply chain assurance, energy efficiency and
sustainability services.
In our Trade sector, the defensive strengths of our
AgriWorld business enabled us to report a like-for-
like revenue decline of (9.9%) at constant rates.
This was despite the reduced level of demand for
oil and gas which impacted our Caleb Brett business,
as well as the challenging trading conditions for
Government & Trade Services.
Our Resources business delivered a resilient
performance, despite the impact of lockdown in
many territories on our Opex Maintenance Services
and the reduction of our clients’ capex investment
in the second half, while our Minerals business
delivered robust revenue growth helping the sector
achieve a like-for-like revenue decline of (6.1%)
at constant rates.
These assets are built around our five strategic
priorities of our 5x5 Differentiated Strategy for
Growth on which we have continued to focus
in 2020.
The growth
opportunities ahead
The first pandemic in our global, highly connected
world has radically increased the complexity facing
Financial statementsDirectors’ reportStrategic report Chief Executive Officer’s review
Continued
organisations everywhere. It is not as though life
was simple for corporations before the pandemic
given the intertwined network of mega-trends they
faced – from multiple geopolitical risks on a global
basis, through to the rapid impact of social media on
world opinion, the accelerating application of AI and
automation, the energy transition, wealth inequality,
increasing safety issues and more.
Now, this complexity is set to continue and
accelerate further, as the economic, infrastructure
and social impacts of the pandemic remain long after
the immediate threat of the virus has receded. But
I firmly believe that the post-pandemic world will
ultimately emerge as a better and a safer place for
all. And I believe that Intertek has a fundamental
role to play in making this happen.
Intertek is a world leader in the US$250 billion
Quality Assurance market, with a proven, high-
quality business model and a global network of
customer-focused operations and highly engaged
subject matter experts.
The uninterrupted support our teams provide in local
markets has never been needed more, servicing our
clients with precision, pace and passion as the world
recovers. The mission-critical services we provide
will help to drive this recovery, playing an ever-more
important role in society as a source of good for
everyone and an important home of innovation
for industries across the world. We are a force for
good in society, helping our clients manage risk and
deliver their sustainability agenda, while remaining
internally focused on delivering sustainability
excellence based on our ten Total Sustainability
Assurance (‘TSA’) standards. Today, just 20% of the
Quality Assurance market is outsourced, providing
us with extremely attractive growth prospects
as we innovate with ever greater pace to meet
fast-increasing demand for the truly end-to-end
Total Quality Assurance (‘TQA’) solutions that only
Intertek is uniquely placed to provide. We continue to
look at M&A opportunities in attractive high-margin
and high-growth areas and we believe that the
post-pandemic world will also offer us significant
new growth opportunities through industry
consolidation.
All the sectors we address are presenting us
with a wide array of structural growth drivers,
and these are only set to diversify and increase
further in the post-pandemic world. Our Products
sector, for example, is ideally positioned to
leverage faster innovation by companies across
the world, growing numbers of brands and SKUs,
and increasing demand for Smart products. In our
Trade sector, social mobility and requirements
for traceability and operational sustainability are
growing fast, fuelling the need for our services. In
Resources, increasing needs for digital supply chain
management, renewable energies and exploration
& production are similarly driving demand. And
the need for end-to-end corporate services, from
CyberSecurity to risk-based Quality Assurance and
people assurance, ensures that Intertek will stay
front-of-mind for major corporations across
the world.
In short, having withstood more than 130 years’
worth of challenges – including world wars,
economic recessions and even depressions –
Intertek is now proving its ability to respond
positively and effectively to the biggest and most
challenging crisis of our time. We are well placed to
meet the growing demand for the mission-critical
services and solutions that are essential in helping
to bring about a better and safer world for all as
we recover from this crisis.
Solutions that are enabling our customers to
operate safely, efficiently and with total peace of
mind as we help them to Build Back Ever Better.
To do so, we are focusing our innovative efforts on
three core priority areas: supporting supply chains;
ensuring better personal safety for everybody; and
helping the world to lower its carbon intensity.
See page 2 for further details.
The key assets that
set us apart
Our Purpose, Vision and Values are vital assets,
which guide and support all our thinking and
activities. They are centred on our people, our
unrivalled global population of TQA Experts. They
are our core strength, combining passion, innovation
and customer commitment in a way that sets us
apart and sustains our entrepreneurial spirit and
decentralised operating culture. They embody every
day all the other key assets that distinguish us.
These include:
• Our TQA Customer Promise: Intertek’s
Total Quality Assurance expertise, delivered
consistently with precision, pace and passion,
enabling our customers to power ahead safely
• Our high-margin, cash-generative Earnings
Model, based on our capital-light business model
and entrepreneurial culture, which enable us to
respond rapidly to new growth opportunities
• Our ATIC Customer Value Proposition: providing
our customers with the quality and safety
controls that are more important today than at
any time in the past as their operations and value
chains grow more complex and exposed to risk:
• A: the end-to-end assessment and Assurance
of quality and safety processes
– enabling our customers to identify and
mitigate intrinsic risk in their operations,
their supply and distribution chains and
their quality-management systems
• TIC: providing quality and safety controls
– Testing: evaluating how customers’
products and services exceed quality, safety,
sustainability and performance standards
–
Inspection: validating the specification,
value and safety of our customers’ raw
materials, products and assets
– Certification: formally confirming our
customers’ products and services meet all
trusted external and internal standards.
These factors combine to drive our commitment to
enabling the world to become a better and a safer
place both during and following the pandemic.
To do so, we have focused on leveraging the spirit
of innovation that runs through our organisation,
continually strengthening our existing products
and services while also introducing exciting new
solutions to meet emerging needs. We take a
three-pronged approach to innovation:
• from the core: evolving existing solutions
and creating new ones to broaden our service
offerings to clients in the sectors where we
are already established;
•
in adjacent sectors: leveraging our expertise
in one sector by adapting existing solutions to
meet identified needs in an adjacent market; and
• targeting new markets: creating entirely new
solutions for markets in which we are currently
not involved.
Our ‘Ever Better’ approach to innovation, driven by
our customer-centric TQA Experts, is supporting our
clients to thrive by delivering pioneering solutions
for today and tomorrow.
Intertek Group plc Annual Report and Accounts 2020
19
Financial statementsDirectors’ reportStrategic report Chief Executive Officer’s review
Continued
A purpose-led organisation
Through our unique range of products and services,
our high-margin, cash-generative earnings model
consistently delivers value for all our stakeholders.
• Consumers, governments, companies and
regulators will want better personal safety
• The way we will operate and invest post-
COVID-19 will help build a low carbon society.
By allowing independent validation of factors such
as recycled content, organic materials and good
practice during manufacturing, it enables accurate
and verified labelling, helping consumers to make
well-informed buying decisions.
This success is based on the energy and
enthusiasm with which our people react to our
meaningful Purpose of Bringing Quality, Safety
and Sustainability to Life.
Our Vision is to be the world’s most trusted partner
for Quality Assurance, underpinned by our
shared Values:
• We are a global family that values diversity
• We always do the right thing. With precision,
pace and passion
• We trust each other and have fun winning
together
• We own and shape our future
• We create sustainable growth. For all.
Helping our clients to
Build Back Ever Better
2020 will be remembered as the year when a global
external event forced everyone to rethink how
to operate and make the world a safer place.
We are convinced that the world will be a better
and safer place post-COVID-19.
We expect the theme of ‘Build Back Ever Better’
to guide the actions of governments, companies,
investors, regulators and consumers. The learnings
of the global pandemic we faced in 2020 will be in
three areas:
• Managements, Boards and shareholders will
want to see their companies operate with a safer
supply chain
20
Intertek Group plc Annual Report and Accounts 2020
The demand for our services and the experience of
our customers across the world clearly demonstrate
that the global need for Total Quality Assurance is
stronger than ever. And more than ever, our clients
are calling for our support, energy, expertise and
relentless focus on overcoming the challenges
they face.
We know there is much more we can do to build
back an ‘Ever Better’ world by helping to make the
supply chains of our clients safer, by ensuring better
personal safety for everyone in society and by
helping the world to lower its carbon intensity
and get to net zero fast.
Safer supply chains
Supply chain assurance is in Intertek’s DNA. It
became even more important during the pandemic,
with strengthened growth drivers ranging from
faster access to supplies, improved intelligence,
increased demand for supply resilience, end-to-end
traceability and more. During the year we drew on
our expertise and intimate customer understanding
to create a more risk-free trading environment for
our clients everywhere.
New services included SourceClear™, a new
technology platform that provides visibility
and traceability across the full range of supply-
chain relationships, enabling companies to track
sustainable material claims throughout all stages
of trade and production in the supply chain. In this
way, it empowers our customers to demonstrate
their sustainability commitments by managing and
certifying verifiable product and materials data and
transactions across all supply chain participants.
We brought Fast-Tek to market, a comprehensive
solution for the key global accounts of our Trade
customers, which enables our customers to move
their goods more quickly through global supply chains.
As more industries undergo profound shifts at an
even faster pace, the need for creative solutions
underpinned by research, design and Quality
Assurance expertise, has never been more relevant.
Our Maison Centre of Excellence in Florence,
Italy is our new innovative experiential space where
science meets luxury, and will bring together –
virtually or face-to-face – our industry experts,
forward-thinking fashion brands, industry leaders,
academics and a host of textile industry participants
to collaborate and to take bold new ideas and turn
them into reality, reshaping the future in a more
sustainable way.
Developments to existing supply chain Assurance
services included a significant upgrade to our
market-leading supply chain compliance solution
with the launch of Inlight 2.0. Inlight™ uses
integrated learning to help organisations better
understand their supply chains and protect their
brands. Inlight 2.0 builds on this by providing
enhanced analytics that give clients live dashboards
of supplier performance, trends, risks and
opportunities. This enables them to analyse risks at
every point, from the sourcing of raw materials, to
regulatory compliance and end-use by consumers.
Responding to demand during the pandemic, we also
further developed our Remote Video Inspection
(‘RVI’) service, part of our market-leading Inview
virtual assurance solution, which uses remote
live video-streaming and smartphone technology
to carry out mission-critical inspection services
across the oil and gas supply chain. With some
companies restricting access to their sites, our
RVI solutions enable inspectors to remain home
based while leading inspections of client premises.
This is enabling global customers to maintain
business continuity, supply chain requirements
and manufacturing schedules.
Better personal safety
Our view, supported by research and strengthened
by the pandemic, is that health, safety and wellbeing
constitute the number one concern for the entire
world. Companies everywhere are having to abide
by increasingly stringent health, safety, wellbeing
and associated risk-management standards,
creating important structural growth opportunities
for Intertek moving forward. During 2020, we
responded positively to this trend, providing
governments and clients with pandemic-related
assurance solutions and developing many truly
ground-breaking innovations.
Building Back Ever Better
Watch our Building Back Ever Better
video, available from 30 March 2021,
at intertek.com/bbeb
Financial statementsDirectors’ reportStrategic report Chief Executive Officer’s review
Continued
Intertek Protek™, for example, which we launched
at the beginning of May 2020, is the world’s first
industry-agnostic, end-to-end health, safety
and wellbeing assurance programme for people,
workplaces and public spaces. The Protek™ portfolio
comprises four sets of specialist services:
• Protek™ People Assurance: an on-demand
training and certification programme to ensure
employees are up-to-date with essential health
and safety topics;
• Protek™ Business Assurance: end-to-end
auditing of all procedures and systems to
ensure clients can demonstrate safety;
• Protek™ Facilities Assurance: audit and
inspection services for facilities including
hotels, retail outlets, travel hubs, schools and
workplaces, where people will look for visible
signs of safety verification; and
• Protek™ Materials & Surfaces: complete
workplace and public space testing solutions
to ensure employee and customer safety.
Our Protek™ experts were also closely involved
in the publication of Travel Truth and Lies
Unmasked, a COVID-safe travel tips eBook written
in association with New York Times best-selling
author, Martin Lindstrom. The book contains
practical advice and guidance covering many areas,
to help the world as it starts to travel again.
The book is free-to-download from our website
intertek.com/protek/travel-unmasked-ebook
The reactions of our clients around the world to
Protek™ have been very positive. It is very much in
line with what the world needs right now, and we
already have many thousands of customers for our
solutions in markets across the world. Our new
Protek™ POSI-CHECK audit solution, for example,
helps in the Prevention of the Spread of Infection
(‘POSI’) and has been designed to formulate and
monitor an effective response to infections in hotels
and restaurants. Its primary aim is to help hospitality
clients ensure the safety of their staff and guests
as global travel accelerates once again when the
pandemic has been brought under control. The
CEO of Club Med, specialists in luxury all-inclusive
holidays, posted a personal ‘welcome back’ video
message to its guests, reassuring them of the
health and safety measures which have been
implemented at their resorts by Intertek’s
Protek™ solution.
We continued to expand the range of solutions
from our Intertek Alchemy business, the leading
provider of training and engagement solutions
for frontline workers. This included the launch of
Alchemy Playbook™, a mobile application that
reduces unplanned downtime for manufacturers by
identifying and reallocating workers to fill any gaps
in the production caused by a key employee being
absent. This has proved particularly important
during the pandemic.
We have also been quick to develop a wide range
of other services in response to the pandemic,
leveraging our leadership in areas including the
testing of ventilators, protective clothing and other
forms of PPE. Intertek is becoming established as
a global PPE market leader, with full testing and
inspection capabilities in all key regions.
Among other related initiatives, we also increased
our testing capacity and speed of services for hand
sanitisers, germicides and surface disinfectants.
We built a leading position in germicidal products,
strengthened our support to pharma companies for
vaccine development, and further developed our
CyberSecurity audit solution for people working
from home.
Low carbon society
With a tipping point having been reached,
sustainability is the movement of our time, and the
expectations of all stakeholders have changed as
people across the world are deliberately choosing
to lead greener ‘stay local’ lifestyles. This move
has accelerated during the pandemic, with remote
working, distance learning and online shopping all
gaining traction as never before. We built on our
position as the industry-leading provider of Total
Sustainability Assurance (‘TSA’) solutions during
the year with new launches that help our clients
and their customers mitigate their risks and carbon
footprint. As a world leader in sustainability services,
and a purpose-led organisation, we believe it is
important for us to ensure that our own standards
are as high as those we provide for our clients. As
such our sustainability reporting follows the TSA
ten Corporate Sustainability Certification standards.
You can read the detail of our activities in this area
during 2020 in our separate Sustainability Report.
We started to scale up our Cyber Assured
Programme, the unique CyberSecurity testing
and certification programme providing continuous
vulnerability monitoring for connected products,
increasingly important given the rise in home-
working, online shopping, etc. Intertek Cyber
Assured enables manufacturers to ensure their
products meet security best practices and emerging
regulatory requirements, clearly demonstrating a
high level of security to regulators and consumers.
enabling producers to reduce carbon-intensity
and participate in the transition to a low-carbon
economy. Ultimately, it will provide consumer
transparency, drive buying decisions and enable
producers to exercise a price advantage. Critically of
course, decarbonising the production of oil & gas is
an imperative for the sector and such transparency
is a fundamental factor in investment decisions.
‘Ever Better’ Intertek
Our focus on our role in the global
recovery from the pandemic is
incredibly important to everybody at
Intertek. It draws on our commitment
to innovation, growth, cost control,
performance management and
sustainability. And it acknowledges
that the world needs Intertek
more than ever – our insight, our
innovation, our expertise and
our passion.
Free-to-download
from our website
intertek.com/protek/
travel-unmasked-
ebook
In a major breakthrough innovation, we launched
CarbonClear™, the world’s first independent
carbon-intensity certification programme. It gives
oil & gas producers the ability both to evaluate
emissions across every stage of exploration and
production and to validate the carbon impact of
producing one barrel of oil equivalent. This brings
unique clarity to their cradle-to-gate operations,
Intertek Group plc Annual Report and Accounts 2020
21
Financial statementsDirectors’ reportStrategic report Chief Executive Officer’s review
Continued
Our five corporate goals have consistently driven our
activities over the last five years, and have become
more important than ever for us during – and after –
the COVID-19 pandemic:
• Fully engaged employees working in a safe
environment
• Superior customer service in Assurance, Testing,
Inspection and Certification
• Margin-accretive revenue growth based on GDP+
like-for-like growth
• Strong cash conversion from operations
• Accretive, disciplined capital allocation policy.
Once again, during 2020 we have made strong
progress on our five strategic priorities (see below),
which are empowered by our unique set of
strategic enablers:
•
living our customer-centric culture, built on a
strong spirit of entrepreneurship, a customer-
focused mindset and engagement at all levels
of the organisation;
• disciplined performance management, built on
financial and non-financial metrics and processes
focusing on margin-accretive revenue growth
and strong cash conversion;
• superior technology, improving the customer
experience, leveraging back office synergies
and delivering superior business intelligence;
• energising our people through investments in
their capabilities, providing a fully aligned reward
system and promoting internal growth; and
• delivering sustainable results, providing growth
for our customers and shareholders, recognising
the importance of sustainability for the wider
community and achieving the right balance
between performance and sustainability.
Our five strategic priorities
Our differentiated brand proposition
Intertek is positioned globally as the leading supplier
of truly end-to-end Total Quality Assurance. We
have achieved global consistency on our TQA brand
proposition and identity across more than 100
countries. At a time when the need for a better and
a safer world has never been greater, we have been
quick to address ATIC opportunities arising from
emerging new growth drivers and created stand-out
product brands for our market-leading innovations.
Superior customer service
Our commitment to outperforming our competition
on the quality of our customer service is driven by a
straightforward business imperative: to build loyalty
from our existing clients and win new customers.
We recognised the huge operational challenges
customers faced during the pandemic and have
raised our game even further. We are continuously
communicating to understand and respond to their
needs and drawing on the metrics and insights from
the 6,000+ NPS (Net Promoter Score) customer
interviews we hold every month has enabled
us to constantly improve our quality of delivery
and develop innovative new and improved ATIC
solutions, including unique offerings like Protek™
and CarbonClear™.
Effective sales strategy
Existing clients are the most productive source of
new business opportunities, and we maintained
our focus during 2020 on increasing account
penetration into new parts of our customers’
businesses. The end-to-end nature of our ATIC
portfolio is delivering unique opportunities in
this area, supporting the cross-selling of new
and existing services. In addition, our emphasis
during the year on safer supply chains, health and
safety, and the low-carbon society opened many
opportunities with new customers across the world.
Growth and margin-accretive portfolio
To achieve the sustainable growth we target, we
prioritise those business lines, geographies and
service areas where the solutions we provide are
of the greatest value to customers and prospects.
This enables us to invest in those areas that
demonstrate the greatest potential for delivering
attractive returns, in terms of both business growth
and good margins. During 2020, in the face of the
pandemic, we maintained our disciplined focus
on how we allocate resource, capital and people,
ensuring that we continued to strengthen the core
of our business during a time of unprecedented
challenges. The Group’s centre of gravity continues
to move towards the high-growth and high-margin
sectors that in turn feed further accelerated margin-
accretive revenue growth.
Operational excellence
Continuous improvement is essential to drive the
operational excellence that underpins sustainable
growth. To achieve this, we operate strict
performance management controls to improve
the consistency of all activities and processes,
so ensuring we achieve the highest standards
of efficiency and productivity. We have in place
a holistic view of performance at all our locations
across the world, enabling us to apply our ‘Ever
Better’ approach to every part of the business,
with metrics on key financials such as revenue
growth, margin, cash conversion, pricing power and
capital allocation; and operational indicators such as
customer retention and acquisition rates, marketing
leads, the sales funnel, our health and safety
performance and NPS.
Highly cash-generative and carbon-light
earnings model
The power of our earnings model has massively
contributed to Intertek’s ranking as the FTSE’s
leading company in terms of dividend progression
between 2003 and 2019, with a CAGR of 17%.
This has been achieved thanks to our highly cash-
generative and carbon-light earnings model, based
on our investments in high-growth, high-margin
areas, disciplined capital allocation, strong free
cash flow and margin-accretive revenue growth.
Now, with our people across the world drawing
on our strategic enablers to deliver against our
priorities and so achieve our goals, Intertek is
destined to make the world a better, safer and
more sustainable place for all.
The services we offer have never been more
mission-critical than now and in the years to come.
Our position as the FTSE’s leading company in
terms of dividend growth emphasises our superb
performance throughout the 21st Century.
But I believe our best years are still ahead of us.
Sustainability excellence
Intertek is bringing quality, safety and sustainability
to life and delivering sustainable value for all
stakeholders. We support our client’s sustainability
agenda with our operational sustainability
assurance solutions, our global audits to verify
their ESG disclosures and our industry leading
corporate certification programme. Sustainability
is central to everything we do internally at
Intertek, and I am pleased to report that the
Group was carbon neutral in 2020 and that
we are committed to further progress on our
sustainability agenda moving forward, including
targeting net zero emissions by 2050.
Intertek has been a force for good for over 130
years, bringing quality and safety to life with
a pioneering spirit. Sustainability is central to
everything we do at Intertek and we are passionate
about making Intertek ‘Ever Better’, every day.
In 2020, we have made significant progress
to deliver sustainability excellence in every
operation within the Group, including:
22
Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Chief Executive Officer’s review
Continued
• driven our sustainability agenda deeper into the
organisation by inspiring our people to create
local sustainability initiatives;
• developed an Environmental Sustainability
Dashboard down to site level to give our
people the visibility and ownership of their
own environmental data; and
• evaluated ourselves against our own TSA
standards and improved our understanding
of how we can be truly Best-in-Class.
Our commitment to net zero emissions
In line with our commitment to reducing the
carbon footprint of our direct operations, we
continue to focus on improving our energy
efficiency, purchasing energy from clean sources
such as renewables and investing in on-site
renewable energy generation at our locations.
In 2017, we set ourselves the target of reducing
GHG emissions per employee by 5% by 2023,
and we are well on track to achieve that.
We have a carbon-light earnings model. Our
average carbon intensity over the last three years
was 4.5 tonnes of CO2 per employee, which is low
compared to the all-industry average of 12.3 tonnes
of CO2 per employee (Intertek research based on
publicly available information for 2018/19).
In addition, we have bought carbon credits to
offset our direct operational Scope 1, 2 and 3
GHG emissions, making 2020 our first carbon
neutral year. The credits we have bought help
to fund verified carbon off-setting projects
that have a meaningful benefit to communities
in which we operate, including a hydropower
project in Pakistan, an electricity generation
project in Turkey, a wind power project in India
and a forest conservation project in Brazil.
Further, we have signed up to the Science Based
Target initiative which means that we are formally
committed to setting independently verified
science-based GHG emission reduction targets. Our
aim is for our Science Based Target to be aligned to
limiting global temperature rise to below 1.5°C and
reaching net zero emissions no later than 2050.
Intertek has also joined the UN Race to Zero
campaign – a global effort from the United Nations
Framework Convention on Climate Change that
calls for a resilient, zero-carbon recovery from the
COVID-19 pandemic and is aligned with our own
ambitious agenda to Build Back Ever Better.
Sustainability means more than net zero
Sustainability is central to our 5x5 differentiated
strategy for growth. Internally, we are focused
on sustainability excellence in every operation.
We believe that ‘Doing Business the Right
Way’ with a systemic approach is the only
way to deliver our corporate goals and create
sustainable value creation for all stakeholders.
To do that, we follow precise processes and
standard operating procedures in ten areas
which form our Corporate Sustainability
Certification standards. They are:
• Quality & Safety
• Financial
• Environment
• People & Culture
• Governance
• Enterprise Security
• Risk Management
• Communities
• Compliance
• Communications
& Disclosures
In line with our Sustainability standard on
Communications & Disclosures, we have made
the disclosures in our 2020 Annual Report
broad based to provide total transparency.
We have also set and embedded our targets
to go beyond net zero in those areas in our
business model that are central to delivering
sustainable value for all our stakeholders. Our
beyond net zero sustainability targets are:
• 6,000 NPS interviews per month
• Women in 30% of senior management roles
by 2025
• Total Recordable Incidents rate below 0.5 per
200,000 hours worked
• 100% attendance of eligible employees at
Compliance training
• Voluntary permanent turnover rate less than 15%
• Group Engagement Index score of 90%.
Future focus and outlook
Our structural growth prospects appear ever-more
compelling as health, safety, wellbeing, transparency
and sustainability grow in importance for companies
and individuals alike. Intertek’s continued strong
performance during the pandemic and the
associated global economic downturn highlights
the unprecedented importance of our role.
Our success in launching innovative new
products and services, and the continuing
emergence of powerful growth drivers,
also demonstrates the significant scale
of the available growth opportunities.
The quality of our results in 2020 illustrates
the heightened relevance of our purpose,
the underlying strength of our strategy and
the resilience of our high-quality and cash-
generative compounder earnings model.
Into 2021 and the years ahead, we are committed
to further leveraging these strengths and targeting
new opportunities to grasp a greater share of
the ATIC market. Society has changed. We are in
the ‘new normal’ and are observing new trends
and behaviours and demands for products and
services that didn’t exist prior to the pandemic.
Consumers want more sustainable products, supply
chain simplicity, visibility and traceability of goods,
new solutions for hygiene, health and wellbeing,
as well as lower carbon emissions. Employers are
being tasked with developing and providing new
tech and virtual remote-working solutions.
The world needs Intertek more than ever, with
the unrivalled expertise of our people, our focus
on delivering risk-based Total Quality Assurance
solutions, and our proven track record of innovating
and anticipating the growing needs of our clients
as the world around them grows more complex. We
provide mission-critical ATIC solutions to enable
the world’s supply chains to operate fully and
safely, given the increased expectations from all
stakeholders to live in a better and safer society.
André Lacroix
Chief Executive Officer
Building Back Ever Be(cid:16) er
Sustainability Report 2020
>
View our separate Sustainability Report at
intertek.com/about/our-responsibility
Intertek Group plc Annual Report and Accounts 2020
23
Financial statementsDirectors’ reportStrategic report Key performance indicators
Strong returns
on invested
capital
Disciplined performance
management focused on margin-
accretive revenue growth with
strong cash conversion and accretive
capital allocation to drive strong
returns on invested capital.
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 provide a meaningful
and consistent year-on-year comparison. An explanation and reconciliation of
statutory to adjusted performance measures is given on page 52.
Non-financial KPIs are shown in the Sustainability Report on pages 40 and 41.
24
Intertek Group plc Annual Report and Accounts 2020
Definitions
• Constant rates (‘CCY’): Growth at constant
exchange rates compares both 2020 and 2019
figures at the average and year end exchange
rates for 2020, in order to remove the impact
of currency translation from the Group’s
growth figures.
• Like-for-like: Like-for-like growth measures are
calculated by including acquisitions following their
12-month anniversary of ownership and removing
the historical contribution of any business
disposals/closures.
• Operating profit: Revenue less operating costs.
• Operating margin: Operating profit divided
by revenue.
• Return On Invested Capital (‘ROIC’): Adjusted
profit after tax (see income statement on page
135) divided by invested capital.
• Invested capital: Net assets excluding tax
balances, financial net debt and net pension
liabilities.
• Diluted earnings per share: Profit for
the year attributable to equity shareholders of
the Company divided by the diluted weighted
average number of shares (see note 7 to the
financial statements).
• Cash flow from operations: See Group
cash flow statement (page 140 to the
financial statements).
Adjusted actual rates
Adjusted constant rates
2020 Adjusted
2019 Adjusted
Statutory actual rates
Statutory
1. Revenue, adjusted operating profit and ROIC are recalculated using
2019 exchange rates to form the basis for Executive Director
remuneration, as described in more detail on page 122.
2. Adjusted operating profit, adjusted operating margin, adjusted cash
flow from operations, adjusted free cash flow and adjusted diluted
earnings per share are stated before Separately Disclosed Items,
which are described on page 52. There is no difference between
adjusted and statutory revenue.
3. Dividend per share is based on the interim dividend of 34.2p (2019:
34.2p) plus the proposed final dividend of 71.6p (2019: 71.6p).
4. 2019 ROIC has been prepared using 2020 average exchange rates
for adjusted operating profit and adjusted tax, and year end 2020
exchange rates for invested capital. 2019 ROIC at actual rates
was 23.7%.
Financial statementsDirectors’ reportStrategic report Key performance indicators
Continued
Revenue1 (£m)
Revenue growth measures how well the Group is expanding its
business and includes currency impacts.
Like-for-like revenue (£m)
Revenue growth, including acquisitions following their 12-month
anniversary of ownership and excluding the historical contribution of
any business disposals/closures excluding acquisitions and disposals.
Cash flow from operations2 (£m)
Shows the ability of the Group to turn profit into cash.
(8.2%)
(6.7%)
(8.3%)
(6.8%)
(3.5%)
(4.2%)
2020
2019
2,742
2020
2,736
2020
685
705
2,987
2019
2,983
2019
715
731
Operating profit1,2 (£m)
Measures profitability of the Group and includes currency impacts.
Operating margin1,2 (%)
Measures profitability as a proportion of revenue.
Return on invested capital at constant rates1,4 (%)
Measures how effectively the Group generates
profit from its invested capital.
(18.4%)
(17.0%)
(22.1%)
(190bps)
(190bps)
(250bps)
(210bps)
(190bps)
2020
2019
378
428
2020
13.8
15.6
2020
486
524
2019
16.3
17.5
2019
Diluted earnings per share2 (pence)
A key measure of value creation for the Board and for shareholders.
Dividend per share3 (pence)
Measures returns provided to shareholders.
Adjusted free cash flow2 (£m)
Shows the ability of the Group to turn profit into cash.
(19.6%)
(18.1%)
(20.9%)
Flat
152.4
170.9
2020
105.8
2020
2020
2019
192.6
212.5
2019
105.8
2019
395
Intertek Group plc Annual Report and Accounts 2020
25
21.6
23.5
10.2%
436
Financial statementsDirectors’ reportStrategic report Sustainability
Living up
to our own
sustainability
standards
As a leading provider of sustainability services,
we report our sustainability progress against our
own ten Total Sustainability Assurance (‘TSA’)
Corporate Sustainability Certification standards
with which we audit our clients.
Working with our clients
to Build Back Ever Better
The unprecedented challenges of COVID-19 have
sharpened our collective focus on the biggest
global risks we all face. The enormous difficulties
and personal losses caused by the pandemic have
highlighted as never before, that helping to make
the world a better, safer and more sustainable
place must be a priority.
At Intertek we are determined to play our part in
accelerating the transition to a more sustainable
approach, for all businesses, including our own. We
are ideally positioned to have a positive global impact
through the mission-critical solutions we provide and
help our customers Build Back Ever Better.
26
Intertek Group plc Annual Report and Accounts 2020
Quality & Safety
Provides assurance
through management
systems certification,
risk assessment, internal
audits and continual
improvement of processes.
People & Culture
Verifies that the systems
and processes are in place
to attract, train and retain
the right employees
by demonstrating a
supportive, transparent
and fair company culture.
Communities
Monitors commitment to
making a positive impact
on local communities as
well as global activities.
Governance
Looks to build an
accountable and diverse
governance structure,
in addition to more
transparent stakeholder
engagement.
Risk Management
Verifies an organisation’s
insurance coverage, risk
processes, controls and
reporting, in addition
to verifying a plan for
business continuity
and disaster recovery.
Compliance
Seeks to verify principles
with integrity. It also outlines
senior management
accountability, compliance
monitoring and
whistleblower policies.
Financial
Helps organisations to create
long-term plans, forecasts
and strategic management of
finances while still managing
monthly reporting and
budgetary control.
Environment
Guides and contributes
toward efforts against
climate change, management
of resources, proactive
protection and restoration of
ecosystems, waste reduction
and compliance with current
environmental regulations.
Enterprise Security
Aims to manage and
control IP assets and cyber
risk, while protecting data,
privacy and physical
assets.
Communications
& Disclosures
Defines metrics, internal and
external communications
procedures for maintaining
external transparency.
Our sustainability progress in 2020
Sustainability is central to our 5x5 differentiated
strategy for growth. We believe that ‘Doing Business
the Right Way’ with a systemic approach is the
only way to deliver our corporate goals and create
sustainable value for all stakeholders.
Looking ahead
For us, the next year is about more than just
recovering from the impacts of COVID-19. It’s
about being part of a global ‘Build Back Ever Better’
movement in which we work together to create
something bigger and better for everybody.
For the second year, we are reporting our own
sustainability activities against Intertek’s ten TSA
Corporate Sustainability Certification standards.
You can read about how we apply these standards
in the summary of our sustainability activities on the
following pages and in more detail in the separate
2020 Sustainability Report.
Our sustainability journey is about more than
achieving net zero. The ten TSA Corporate
Sustainability Certification standards, on which our
programme is based, go beyond ESG and recognise
that truly sustainable solutions must address the
important aspects of every company – environment,
products, processes, facilities, assets, systems,
corporate policies and stakeholder engagement.
Our journey is well underway. This is the moment
when, working with and for everyone, we can play
our role in building an ‘Ever Better’, safer and more
sustainable world.
Read more about our sustainability
efforts in our separate 2020 Sustainability
Report and on our website at intertek.com/
about/our-responsibility
Building Back Ever Be(cid:16) er
Sustainability Report 2020
Financial statementsDirectors’ reportStrategic report Sustainability Continued
Quality & Safety
The principles of quality and
safety, part of Intertek’s purpose
and operations, are cornerstones of
sustainability. They sit at the heart
of the support Intertek has provided
to clients for over 100 years.
Business resilience
Our global network in more than 100 countries
keeps us close to our customers. As a large global
organisation we also face risks that the business
will be affected by something that is outside of
our control. Natural disasters, pandemics, terrorism,
political unrest, serious fires, cyber-attacks and
extreme weather are just some of the risks that
we have to consider.
Processes are in place at all levels of the business to
mitigate disruption. Our response to the COVID-19
pandemic demonstrates how our business is
constantly adapting both its business environment
as well as its service offerings to continue to offer
the necessary services to clients while protecting
the health and safety of employees.
Customer focus
To become the most trusted partner for Quality
Assurance, we have made a promise to our
customers: Intertek Total Quality Assurance
expertise, delivered consistently with precision,
pace and passion, enabling our customers to
power ahead safely.
Intertek has a strong focus on customers, at
all levels of the organisation and our customer
relationship management is integrated into our
approach through a key account management
structure and dedicated sales teams. Our Marketing
& Sales Operations team works closely with
business lines and country leadership to drive
continued improvements.
Listening to our customers
Since 2015, we have used the Net Promoter
Score (‘NPS’) process to listen to our customers,
conducting 6,000+ interviews each month.
These insights give us a deep understanding
of what our customers need and want, fuelling
innovations through insights.
Capturing the right
data to optimise operations
Identifying and managing risks that can impact
our service quality is key to ensuring customer
satisfaction. Our 5x5 metrics tool and processes
enable the collection and review of performance
metrics across the areas of sales, customers, people,
finance and operational excellence providing every
Intertek site and team leader with 360º insight into
their business to guide their decision-making.
Supply chains
We are committed to ‘Doing Business the Right
Way’. Our suppliers have an important part to play
in contributing to our sustainability. In 2019 we
adopted the Intertek Sustainable Procurement policy
which sets out principles of how our own employees
should act when managing supplier relationships,
as well as our expectations of our suppliers on key
sustainability issues.
Intertek Group plc Annual Report and Accounts 2020
27
Financial statementsDirectors’ reportStrategic report Sustainability Continued
People & Culture
Intertek’s first corporate goal is
to have fully engaged employees
working in a safe environment. We
truly value our people. We embrace
diversity, inclusion and equality, and
our success is based on a culture of
trust among colleagues globally.
Our People Strategy is all about energising our
colleagues to take our business to new heights.
Employee engagement, human rights and worker
health and wellness are core to the long-term
success of our business. We strive for a sustainable
workforce that is stable, engaged and committed
to the organisation, our goals and objectives.
We respect and protect the rights of our
people across operations and throughout our
business relationships.
Ensuring the health, safety
and wellbeing of our employees
At Intertek we consider the health, safety and
wellbeing of our employees, clients and third parties
connected with our business to be of paramount
importance. Only through having fully engaged
employees working in a safe environment are
we able to deliver our Customer Promise.
Our aim is to encourage a culture of proactive Health
and Safety (‘H&S’) awareness, industry best practice
and continuous improvement to increase H&S
performance. Our Group-wide ‘General Safe Working
Guidelines’ provide the basis for a common and
aligned H&S standard for all Intertek sites.
28
Intertek Group plc Annual Report and Accounts 2020
Group
Hazard Observation
Near Miss
First Aid
Lost Time Incidents
Medical Treatment Incidents
Fatalities
Total Recordable Incident
Rate ('TRIR')1
2020
13,279
2,852
1,000
65
108
–
0.40
2019
14,610
2,491
1,347
155
125
–
0.61
% change
-9%
14%
-26%
-58%
-14%
–
-21bps
We are committed to the continuous review and
improvement of our H&S performance and have now
set a new target for our TRIR to equal or be less than
0.5, which is set at an industry-leading level. This new
target will be part of the next phase of our health and
safety cultural journey and support our continued
aim to achieve zero lost time incidents.
This year we created a range of new health and
wellbeing content to support our people. Local
campaigns across the year have focused on further
developing mental and physical health awareness.
1. Rate refers to the number of lost time incidents, medical treatment incidents and fatalities occurring per 200,000 hours worked.
This includes a dedicated fire warden, first aider
and H&S representative at each location. These
representatives are empowered not only to
investigate incidents and implement preventative
and corrective actions, but also to disseminate
safety information through training and targeting
continuous improvement.
Our global network of H&S ‘Champions’ has continued
to support continuous improvement. By improving
our H&S communication network we not only have
a known contact person in each country and location
but also a means of channelling and disseminating
information and programmes globally.
The Intertek H&S agenda continues to be
underpinned by our rigorous approach taken to
reporting and analysis, with dedicated reporting each
month for country and business lines supplemented
by inclusion in the 5x5 analysis for every site.
21bps reduction
in Total Recordable Incident Rate vs. 2019
The Group reacted with precision and pace to
the global pandemic and the implications for our
employees, forming a Group COVID-19 response team
as well as regional teams with the ability to escalate
urgent questions and plans for review and approval. To
support our employees further we launched a new and
enhanced Group wide Health & Safety policy, including
required actions for essential employees, business
continuity planning for smart home working and
policies on social distancing, hygiene and sanitation
as well as personal protective equipment and
temperature checks.
The 2020 decline in Hazard Observations principally
reflects the lower activity levels across some of our
sites due to COVID-19, with the second quarter being
the key driver of the year-on-year change. The impact
was also reflected in the level of First Aid incidences
which encouragingly, and in line with Lost Time
Incidents and Medical Treatment Incidents, declined
year-on-year more than Hazard Observations. The
decline in Lost Time and Medical Treatment Incidents
was broad based by geography and business line.
The incident decrease year-on-year links through
to the Total Recordable Incident Rate (‘TRIR’) which
was down 21bps on 2019 at 0.40.
Read more in the separate 2020 Sustainability Report
on page 20.
COVID-19
In many ways, the COVID-19 pandemic has been a
sustainability crisis. It has challenged the business
resilience and continuity plans of many corporations,
disrupted supply chains and had significant impacts
on people and communities around the world.
For us, the health, safety and wellbeing of our
people is a sustainability issue and indeed is
always our first priority. We swiftly created a
comprehensive, global COVID-19 Employee Health
& Wellbeing policy, which we have updated regularly
as the situation developed and we have learned
more about best-practice in managing the virus.
The policy is publicly available on our website.
A number of employees have become ill during the
pandemic and it is a matter of great sadness for the
whole of the Intertek family that we lost colleagues
to the virus. Support was given to the families of
these colleagues and to their grieving colleagues
and our thoughts are with them.
Financial statementsDirectors’ reportStrategic report Sustainability Continued
Talent attraction, reward & recognition
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 on our website (intertek.com/careers)
and employ various ways of sourcing talented
people. These include recruitment agencies, social
media, printed advertisements, employee referrals,
professional bodies and associations, schools,
colleges and universities. We are committed to
recruit talent local to our operations where possible.
To offer people career growth and progression
within the Group, we seek wherever possible to
fill vacancies from within the business first.
Talent management
To seize the exciting growth opportunities arising
from our Total Quality Assurance (‘TQA’) value
proposition, we continually invest in the growth of
our people. We aim to hire, inspire, engage and retain
the best people to power our 5x5 strategy, providing
the skills to grow our business.
We fully recognise the importance of employee
engagement in driving sustainable performance
for all stakeholders. In order to measure our
employee engagement, we follow the Intertek
TQA Engagement Index which is based on the
key drivers of sustainable value creation within
our differentiated ATIC business model and which
measures engagement on a monthly basis in every
operation with the following metrics: Net Promoter
Score, Customer Retention, Quality, Voluntary
Permanent Employee Turnover and Total Recordable
Incident Rate. For 2020, our Group Engagement
Index score was 89% and our target is to achieve
an Engagement Index of 90% moving forward.
During 2020 our Voluntary Permanent Employee
Turnover improved from 13.8% in 2019 to 8.7%
in 2020, which is well within acceptable industry
standards. As we progress our People Strategy we
will aim to keep this rate below 15%.
With an ‘Ever Better’ mindset we encourage our
people to continuously learn new skills that help
advance their careers and deliver our TQA Customer
Promise. Our talent-planning process is critical
to our future success in delivering our strategy
and fostering our culture and values throughout
Intertek. The Board as a whole is responsible for
ensuring that appropriate human resources are
in place to achieve our long-term strategy and
deliver sustainable performance. Global talent
and succession planning for the Leadership Team
are discussed regularly. Read more on the Board’s
engagement with employees on pages 85 to 88.
In employment-related decisions, we comply with
all applicable anti-discrimination requirements in the
relevant jurisdictions. We have zero tolerance for
discrimination and harassment.
Reward
Reward plays a key role in attracting, motivating
and retaining talent. Intertek is compliant with
minimum wage and mandatory social contributions
requirements in all jurisdictions where we operate.
At Intertek, remuneration for all employees follows
the same policy and principles as for the senior
executives. The Remuneration Committee has
oversight of this and you can find more information
in the Remuneration Report on pages 107 to 114.
We depend on local management to define and
maintain competitive compensation practices that
appeal to both existing and future talent.
All employees are remunerated in accordance with
local policies and guidelines. The remuneration
comprises elements which are fixed and in some
cases, variable. The fixed elements are base salary
and benefits including pensions, where applicable.
The variable elements include incentives, both
short and long-term.
Skills development
We believe in personal growth for every employee
and we know that when each of us is growing and
developing, we move faster along our good-to-
great journey. Over the years we have made great
progress with our Leadership Development agenda.
Today we have in place many Group-wide
programmes to support this agenda including talent
planning processes, the 10X Journey that provides
structure for individual growth planning, our 10X
Energies that help define winning behaviours and
‘10X Way!’ training to help address key development
and training needs. There are many more
programmes across the business, providing in-house
and external learning opportunities.
All Group employees have access to our ‘10X Way!’
platform or an alternative Learning Management
Systems. Employees can complete their onboarding,
access our ‘10X Way!’ training, and complete
mandatory Code of Ethics and compliance,
CyberSecurity and Core Mandatory Controls training.
216,000 e-learning training hours
completed through our Learning Management
Systems
As we operate across a wide range of sectors,
different types of technical training, education and
support are required, including apprenticeships and
internship programmes, as well as college degrees
and professional qualifications.
At Intertek our leaders strive to be of the highest
quality in the industry and we believe in the spirit of
‘Ever Better’ and know that the ability our leaders
have to develop and grow employees in their teams
is one of the biggest factors that will influence the
exciting growth journey we have ahead of us.
100% of our employees have been offered,
as a minimum, yearly discussions on growth and
development. All employees receive adequate
coaching, development and training to ensure
they are fully competent to carry out their role.
Protecting human rights
We are committed to ensuring that our
employees are subject to fair working practices
and are treated with respect. Within our business,
the rights of our employees are respected by
the implementation of our Labour and Human
Rights policy and Code of Ethics. Intertek’s
policies and codes are based on and fully respect
the International Bill of Human Rights and the
International Labour Organization’s declaration
on Fundamental Principles and Rights at Work and
the Children’s Rights and Business Principles.
Our Code of Ethics training aims to educate all
employees about potential integrity issues, including
human rights, bribery, corruption, non-discrimination
and employee relations. The Code of Ethics contains
clear guidance on the grievance mechanisms and
whistleblowing procedures that we have in place.
Further information can be found on page 34.
Our Modern Slavery Act Statement, outlining the
steps we are taking internally, in our supply chain
and through partnerships and advocacy to avert
modern slavery and human trafficking is available
on our website.
For our Modern Slavery Act Statement,
visit our website at intertek.com/about/
compliance-governance
Intertek Group plc Annual Report and Accounts 2020
29
Financial statementsDirectors’ reportStrategic report Sustainability Continued
People & Culture
Inclusion,
diversity &
gender equality
Embracing all talents
At Intertek, achieving ‘Ever Better’
performance depends on being
constantly open to pioneering new
ideas that enable us to improve what
we do and how we do it. For us, this
means having an organisation that is
truly diverse and inclusive in ways
that extend far beyond the ‘standard’
measurements of race, nationality
and gender.
Intertek has a history that goes back over 130 years,
evolving from the combined growth of a number
of innovative companies from around the globe.
Diversity has always been at the heart of who we
are and will continue to provide the power behind
our success in the future. With team members from
over 100 countries, all with different backgrounds,
cultures and beliefs – our diverse workforce makes
us the leading company we are today.
We demonstrate that we are an inclusive and
diverse global family by applying all employment
policies and practices in a way that is informed, fair
and objective. This covers all policies relating to
recruitment, promotion, reward, working conditions
and performance management.
Our Inclusion and Diversity policy facilitates a
culture of inclusiveness where people are able
to perform at their best, where their views,
opinions and talents are respected, harnessed
and not discriminated against. We are committed
to maintaining the highest standards of fairness,
respect and safety.
As a business we want to ensure that we have
the right capabilities to deliver our strategy. We
recognise the value that individuals of different
backgrounds and capabilities bring to the business.
Our diverse workforce helps us to understand,
communicate and trade with our vast client base
through their understanding of local issues and
culture. They add value in assuring our services are
tailored to our customer needs, which underpins
sales growth, customer retention and satisfaction.
30
Intertek Group plc Annual Report and Accounts 2020
We recognise the importance of gender diversity,
in management and across all levels of our business.
In line with the Hampton-Alexander Review, as well
as supporting gender diversity on our Board, we
contributed our data on the gender balance across
our senior executive team and their direct reports:
20201
20191
Male Female
Male Female
Board
Executive
Management
Team (‘Exec’)2
Direct reports (‘DR’)
Combined:
Exec + DR
7
9
83
92
4
2
26
28
7
10
88
98
3
4
21
25
1 Data relating to the Board and the Exec and DR is as at 31 December
and as at 31 October of each year, respectively.
2 As defined by the Hampton-Alexander Review. This comprises the
CEO, Heads of Global functions and EVPs.
Senior management nationalities – countries of origin
Intertek TQA Experts by region
11,209
8,168
3,041
20,716
12,305 8,411
11,844
8,217
3,627
Americas
Asia
EMEA
(inc. Central)
Male
Female
Revenue and headcount
2,166
2,742
41,434 42,452 43,905 44,720 45,653 43,769
2,567
2,769
2,801
2,987
Total
UK
US
India
Germany
China
Hong Kong
Canada
France
Australia
Vietnam
Bangladesh
Ireland
Sweden
Other nationalities
205
40
39
23
13
11
8
7
7
7
7
6
4
4
29
2015
2016
2017
2018
2019
2020
Revenue (£m)
Headcount
TQA Experts by gender
28,982 15,738 28,974 16,679 28,690 15,079
2019
2020
2018
Male
Female
Financial statementsDirectors’ reportStrategic report Sustainability Continued
We will continue to promote and endorse fair,
consistent and thoughtful working practices that
are in accordance with our values. At Intertek we
are proud to be an equal opportunities employer.
We consider all qualified applicants for employment
regardless of gender, ethnicity, religion, age,
disabilities and other protected characteristics.
We also ensure that men and women are paid
equally for doing equivalent roles and we are
committed to a number of measures to ensure we
provide an energising workplace, free of any gender
bias, where employees can flourish based on their
talent and effort. To strengthen this, we ensure
that our shortlists of external hire candidates have
a balance of gender diversity.
We remain committed to equality, and provide
flexible working where possible and provide
mentorship to women to address the gap in gender
numbers at senior levels. It is vital that our workforce
represents the best available talent, reflects the
communities in which we operate and is free of
gender or other biases.
Our UK gender pay gap report is
published on our website at
intertek.com/about/our-responsibility
Our ‘Embracing Diversity’ model
We promote diversity in all its forms, including
gender parity, sexual orientation and disability, as
well as having an ethnic and social makeup that
reflects broader society.
2020 update
The technical expertise needed in many parts of our
complex business is acquired over several years which
is reflected in a relatively high average age in parts of
our Group. The overall average age is 40.
Our goals
We will continue to develop proactive
approaches to recruitment to ensure
we have an age-diverse and balanced
employee age profile.
Diversity measured
Talent across
all generations
We value all of our colleagues,
regardless of age, and have practices
in place to develop and retain workers
of all ages.
Diversity measured
2020 update
Gender diversity
We are determined to
develop and retain more
women in senior roles.
• 6.3% increase in women in senior
management roles since 2017.
• Our Board hired an additional
female director in 2020, giving
us a total of four, or 36%.
Our goals
Improving gender balance is critical for us.
We continue to focus on gender diversity
by attracting, developing and retaining
more talented women, particularly at senior
levels. The percentage of women in senior
management roles has continually increased
over the last four years and we have now
set a goal to increase this to 30% by 2025.
Diversity measured
2020 update
Cultural diversity
(arising from country of origin)
Cultural diversity supports
our global business and is
key to our success.
Our global workforce is representative
of the countries in which we operate and
our senior leadership is representing 34
different nationalities.
Our goals
We are committed to cultural diversity
and will ensure that Intertek’s colleagues
are representative of the countries
where we do business.
Intertek Group plc Annual Report and Accounts 2020
31
Financial statementsDirectors’ reportStrategic report Sustainability Continued
Communities
Governance
Our global business spans more
than 100 countries and we have
a responsibility to make a positive
and lasting impact on our local
communities.
We contribute in many ways. We provide
employment opportunities, volunteer, fund
education programmes and support charities to
benefit local communities and neighbourhoods.
Each of our countries and business lines define their
own sustainability agendas, which are tied to the
Group’s priorities, aligned to the UN Sustainable
Development Goals and focus on their local
operations and communities.
As a sustainable organisation,
Intertek embeds responsibility across
the entire organisation to build an
accountable and diverse governance
structure.
Our Board of Directors is responsible for the
overall stewardship of the Group and delivery
against strategy, through our Group Leadership
Team. This includes overseeing sustainability and
corporate responsibility. They also discuss and
review the risks and opportunities sustainability
presents for the Group.
The Sustainability Operating Committee is
responsible for advancing our sustainability
initiatives internally, and our external sustainability
services for our clients.
Read more about our approach to corporate
governance, the work of the Intertek Board and its
Committees in the Directors’ report on pages 71
to 134.
Material topics
We recognise the importance of determining and
prioritising the key sustainability topics relevant
to the business and our stakeholders. In 2019 we
conducted an independent materiality assessment
to ensure we are addressing current views and
emerging trends. This year, we considered the
material topics identified against the external trends
shaping our operating environment and concluded
that there were no significant changes from the
previous reporting period in the list of material topics
and topic boundaries.
Risk Management
Managing risk is key to our
organisation being sustainable. We
build resilience through systemic risk
management. This helps assure a
strong culture of risk-based business
management guided by sustainability
objectives, including understanding
and managing our supply chain
partner risks.
Risk management is embedded throughout our
organisation using a framework of divisional,
regional and functional risk committees. These
committees meet quarterly to identify, monitor and
assess the risks within their area of responsibility.
The risk committees report to our Group Risk
Committee which in turn provides a report on risk
and mitigation actions to the Board.
You can read more about how we consider
key sustainability topics in our separate 2020
Sustainability Report.
32
Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Sustainability Continued
Risks and opportunities
associated with climate change
The business landscape has evolved significantly
over the past few years as attitudes shift and new
legislation is introduced to reflect the changing
times. Consistent with scientific reports, we
recognise that a failure to rapidly decarbonise our
economies will lead to increasingly volatile and
severe weather-related events with significant
economic consequences. While climate change
affects nearly all economic sectors, the level and
type of exposure and the impact of climate-related
risks differs by sector, industry, geography, and
organisation. Our own operations may not be as
energy intensive or resource depleting as some
other industries, but as a multinational company
we acknowledge our exposure to various types
and degrees of local, regulatory, physical and socio-
economic risks associated with climate change.
Task Force on Climate-Related
Financial Disclosures
The Task Force on Climate-related Financial
Disclosures (‘TCFD’) is a market-driven initiative
shaping the increased response measures to
climate-related financial risks. Mitigating and
managing the risks and opportunities associated
with climate change is fundamental for Intertek.
Risk and opportunity assessment
The disclosures made in this report and within
our CDP disclosure cover some of the TCFD
recommendations. This year we have focused on
identifying the gaps and setting a timetable for
full implementation during 2021.
More information is available in our Environment
section on page 35.
For Intertek, climate-related risks (e.g. extreme
weather patterns, water shortages, floods, or
other natural disasters) could give rise to business
interruptions in our operations or in our supply chain
and impact our customers.
To analyse our Group-level climate-related risks
considering countries, business lines and functions,
we use our integrated risk management framework.
This has resulted in us including climate-related
risks (the risk associated with a failure to respond to
climate events or climate-related regulation) within
our ‘Industry and competitive landscape’ principal
risk (see page 59) and reflecting it within our longer-
term viability assessment on that basis.
Climate-related opportunities for us relate mainly
to the development of services that support our
customers in tackling climate-related risks. As these
opportunities are identified, they are analysed by
our relevant business lines and innovation teams,
which in turn develop appropriate strategies.
Read more about our processes, the role of the
Board and the Audit Committee in the Directors’
report on pages 71 to 134, together with the
Group’s principal risks and uncertainties on pages
56 to 63.
Compliance
We continue to develop a best
practice compliance programme to
ensure Intertek operates with the
highest standards of compliance and
ethical business practices, including
through our supply chain partners.
‘Doing Business the Right Way’
We are committed to maintaining the total
confidence of our stakeholders. One of the Group’s
primary business objectives is to help our customers
meet quality standards for virtually any market in
the world and protect them against risk by ensuring
compliance with local, national and international laws.
The accuracy and validity of reports and certificates
that we provide are therefore important factors
which contribute to our success. Integral to this is
‘Doing Business the Right Way’; our internal risk,
control, compliance and quality programme.
Our Compliance programme ensures:
• that our people have the processes, tools and
training they need, and work to ensure a safe and
inclusive environment;
• the services we provide and the contracts we
enter into are delivered with integrity and in line
with our commitment to Total Quality;
• every colleague commits to the highest
standards of professional conduct; and
• we deliver sustainable growth by managing
our risks and doing the right thing for the
longer term.
Internal Audit is responsible for reviewing and
assessing Intertek’s business processes and
provides independent and objective assurance and
advice that adds value and improves our internal
control systems and operations.
Public policy
Our Government & Public Affairs function interacts
with trade associations and governmental
authorities to provide input into industry and
regulatory improvements in product safety,
quality and risk assurance. Any interactions
with governments, governmental authorities or
regulators are reviewed by our Group Legal & Risk
functions to ensure that we comply fully with all
laws and regulations.
Ethics, integrity and professional conduct
Our commitment to the highest standards of
integrity and professional ethics is embedded in
the Group’s culture through the integrity principles
set out in our Code of Ethics (‘Code’). It sets clear
expectations that people working for our business
must act at all times with integrity and in an open,
honest, ethical and socially responsible manner. The
Code also covers health and safety, anti-bribery,
anti-competitive practices, labour and human rights.
The Board, as a whole, oversees the implementation
of human rights commitments and supports human
rights as defined in the Code.
We have a culture in which all issues relevant to our
professional conduct and the Code can be raised and
discussed openly without recrimination. We operate
a strict zero-tolerance policy regarding any breach
of our Code and any behaviour that fails to meet our
expected standards of integrity as a trusted leader
in the Quality Assurance industry.
To support this policy in action, all people working
for, or on behalf of, Intertek are required to sign the
Code upon joining the Group or before commencing
work on our behalf. This confirms their acceptance
of the high standards expected of them in all
business dealings.
Our Code of Ethics is available on
our website at intertek.com/about/
compliance-governance
Intertek Group plc Annual Report and Accounts 2020
33
Financial statementsDirectors’ reportStrategic report Sustainability Continued
100%
of our colleagues are required to complete
our Code of Ethics training
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.
Every year, to support the continuing understanding
in this area, all of our people are required to
complete our comprehensive training course.
This training covers the Code and other important
professional conduct areas, such as data security
and operational controls. When completing the
training, all employees are required to sign a
certificate confirming their understanding that
any breaches of the Code will result in disciplinary
action that may include summary dismissal of
the employee concerned.
Whistleblowing hotline
To empower our people and stakeholders to voice
any concerns about breaches of the Code or any
of our policies (including our Labour and Human
Rights Policy and Modern Slavery Policy), we have
a well-publicised hotline which can be used by all
employees, contractors and others representing
Intertek, or by third parties such as our customers
or people who are affected by our operations.
This whistleblowing hotline is run by an
independent, external provider. It is multi-language
and is accessible by phone and by email 24 hours a
day. Those concerned are encouraged to report any
conduct, compliance, integrity or ethical concerns
using the hotline. Information posters are present
in all of our sites.
34
Intertek Group plc Annual Report and Accounts 2020
If a report is made to the hotline, it is followed up by
Intertek’s Compliance officers. Our Group Compliance
function, which is independent of our operational
businesses and reports directly to our Group General
Counsel, fully investigates all reports received.
Provided there is no conflict of interest, all reports
are also notified immediately to our Group Ethics &
Compliance Committee, which consists of our CEO,
CFO, EVP for HR and Group General Counsel. This
ensures the effective resolution both of individual
issues and of any systemic or process improvements
that can be made to address them.
During 2020, 97 reports of non-compliance with the
Code were made to our hotline. Of those reports,
27 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 no environmental incidents;
• there were no anti-trust incidents reported;
• there were no reported violations of the rights
of indigenous people; and
• there were no cases of discrimination.
Six confirmed incidents were identified through
our hotline where employees were disciplined or
dismissed due to non-compliance with our anti-
corruption policy.
Financial
Value distribution
At Intertek we have a holistic
approach to financial planning and
execution, supported by rigorous
internal policies and procedures
which are reviewed and updated
regularly.
16.3%
1.9%
5.5%
9.4%
Our five-year strategic plan is underpinned by
a bottom-up budgeting and planning process.
During the year, forecast financial performance is
monitored on a weekly basis and actual performance
is reported and reviewed on a monthly basis. This
regular reporting and monitoring cycle is critical to
delivery of disciplined performance management.
Indirect economic impact
and the value we create
We aim to create meaningful and sustainable
long-term value for a broad range of stakeholders.
We achieve this by providing services and managing
our operations and supply chain in such ways
that we can contribute to the mitigation of global
negative impacts.
As a global business operating in over 100 countries,
we have many indirect economic impacts on the
communities in which we operate.
As well as providing direct employment, we support
local livelihoods through indirect employment and
business opportunities. We provide positive societal
benefits, through profit generation, paying of local
and regional taxes and wages and providing training
and development programmes.
Providers of Equity
capital (Dividends)
Employees
66.9%
Direct Taxes paid
Providers of loan capital
(interest paid)
Reinvested in Group
Our approach to tax
Intertek’s approach to managing the Group’s tax
affairs and the risks associated with them is set
out in our Tax Strategy document. It is guided
by an overall adherence to corporate and social
responsibility in the countries in which we operate,
while serving the interests of our customers,
employees, creditors and stakeholders. The Tax
Strategy document is approved by the Board of
Directors and is subject to periodic review, with
any necessary significant changes submitted
for approval by the Board.
Access our Tax Strategy document on
our website at intertek.com/about/
compliance-governance
Financial statementsDirectors’ reportStrategic report Sustainability Continued
Environment
All of us have a responsibility to
protect the future of the planet.
At Intertek, we look to understand
our organisation’s impacts on the
environment and mitigate them in
regard to climate change, use of
resources, ecosystems and waste
management and reduction.
Climate Change
Our stakeholders are increasingly concerned about
the consequences of the climate crisis and are
looking to us for more sustainable solutions. Intertek
plays an important role in raising awareness of
climate change and national resource constraints
among our employees, suppliers and customers.
As such, our aim is to improve operational and
natural resource efficiency in a consistent manner
across all our sites.
Governance
Environmental governance flows from the Board to
every Intertek site. We monitor site-level activities
across a range of environmental metrics and work
with our sites to reduce energy consumption and
limit Greenhouse Gas (‘GHG’) emissions.
Task Force on Climate-related
Financial Disclosures (‘TCFD’)
Intertek is committed to implementing the
recommendations of the TCFD. During 2020 we
conducted a review of our position against the
11 recommendations of the TCFD and established
a cross-functional working group to implement
the required governance and strategy for climate-
related risks and opportunities, and the metrics and
targets used to assess and manage these.
Governance
Our governance around climate-
related risk and opportunities.
2020 update
2021 priorities
Governance for managing
climate-related risks and
opportunities across the Group
is incorporated into our existing
governance framework as
shown on page 84.
Continue to enhance reporting
to the Board and the Leadership
Team.
Strategy
The process used to identify, assess
and manage climate-related risks.
Risk management
The actual and potential impacts of
climate-related risks and opportunities
on our business, strategy and
financial planning.
Metrics and targets
The metrics and targets used to
assess and manage relevant climate-
related risks and opportunities.
Identify any inherent climate-
related risks with the potential
to have a substantive financial
or strategic impact on the
business in the short, medium
and long-term.
Use climate-related scenario
analysis to inform our strategy.
Update and expand climate risk
assessments.
Investigate reporting challenges
on additional Scope 3 GHG
reporting.
Prepare future targets.
We have identified climate-
related opportunities as part
of sustainability services
innovations. Our Sustainability
Operating Committee oversees
the development of our
climate-related strategy.
To analyse our Group-level
climate-related risks considering
countries, business lines and
functions, we use our integrated
risk management framework
(see page 34 in our separate
2020 Sustainability Report).
Environmental and climate-
related risks are also tracked as
part of our insurance process.
GHG metrics can be found on
pages 36 and 37.
We are well on track to achieve
our 2017 carbon intensity
reduction target.
Intertek Group plc Annual Report and Accounts 2020
35
Financial statementsDirectors’ reportStrategic report Sustainability Continued
Our carbon emissions reduction targets
Intertek clients depend on our safety, quality and
environmental expertise to ensure their products
meet global market expectations. Intertek will
continue to strive for emissions reductions internally
as the world’s leading Total Quality Assurance
(‘TQA’) provider.
We first set a target in 2017 to reduce our CO2
emissions per employee by 5% year-on-year up
to 2023, and we are well on track to achieve that.
Recognising the importance of bold ambitions,
we are setting targets to improve environmental
performance across our operations, and to clearly
demonstrate our commitment we are aligning our
business with the most ambitious aim of the Paris
Agreement, to limit global temperature rise to 1.5°C
above pre-industrial levels and reach net zero by
2050 for the best chance of avoiding the worst
impacts of climate change.
We are working with our teams around the world on
this and will communicate our targets and action
plans once these have been validated.
Intertek’s part in a low carbon economy
We recognise that we need to play our part within
the move to a low carbon economy. To make real
change happen, we believe all our people need to
have ownership of their carbon footprint and be
empowered and inspired to take ambitious actions
to reduce it – our Sustainability Excellence approach.
1
2
3
4
Identify
Sustainability
champion
or team
Evaluate
baseline
performance
Establish
target setting
Develop 10X
action plans
5
6
7
Implementation Performance
tracking
Reporting and
Recognition
At some of our sites, we have carried out energy
audits, which have already led to energy efficiency
improvements, including the roll-out of LED lighting
at numerous sites and trials of new technologies.
We are exploring on-site energy generation through
various projects. In addition, we will source certified
renewable energy, where possible and economic
to do so.
Our UK business has transitioned 95% of utility
suppliers to renewable energy.
Global energy use¹
by source (MWh)
Standard electricity
Renewable electricity
Vehicle fuels energy
2020
2019
253,849
263,676
7,487
40,146
–
–
Non-transport fuels energy
66,518
69,871
(natural gas)
1. UK portion of total energy use was 6.8% (2019: 5.5%).
Environmental management
The delivery of our sustainability strategy is
supported by our Group-wide Quality Management
System – which is aligned with internationally
recognised standards on health, safety and the
environment. We operate this across 80% of our
operations and, in 2020, 65 sites achieved or
maintained one or both ISO 14001 and ISO 45001
(OSHAS 18001) certifications.
At Intertek we take an ‘Ever Better’ approach to
ensure our data is wholly accurate and consistent
year-on-year. Data collection continues to improve,
with over 130 users adding site level data every
month to our Global Sustainability Environmental
software platform.
In 2020, we implemented emissions dashboards
which allow the regional teams at our sites to
understand their total carbon emissions and what
is causing them, and to put in place initiatives at site
level to improve their metrics and manage their
own environmental impact.
To support this effort, our Environmental and
Climate Change policy has been updated and is
implemented by country management to ensure
compliance with local guidelines and regulations.
Our activities across the world are diversified,
with a spread of both laboratories and offices. Our
carbon emissions intensity is higher in businesses
that are more capital intensive such as our global
laboratory network, while our audit and office-based
operations, have much lower capital intensity.
This year we have seen a drop in our UK market-
based Scope 2 emissions due to the transition
to renewable electricity. As we continued to
operate throughout the pandemic (with most of
our operations classed as essential services) the
impact of COVID-19 on emissions from Employee
Commuting was limited.
We continued our efforts to expand our disclosures
for material Scope 3 emissions and have disclosed
Business Travel for the first time. As a result of
lockdowns and travel restrictions due to COVID-19
in the second half of the reporting period, emissions
disclosed are approximately half of what Intertek
would normally expect.
Our annual environmental reporting cycle ran from
1 October 2019 to 30 September 2020. Intertek’s
reporting complies with the methodologies outlined
by the GHG Protocol ‘Corporate Accounting and
Reporting Standard’, ISO 140064-1 and the UK
Government’s ‘Environmental Reporting Guidelines:
including mandatory Greenhouse Gas emissions
reporting guidance’.
Further details on our methodology for reporting
and the criteria used can be found within our Basis
of Reporting, available on our website at intertek.com/about/
our-responsibility
36
Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Sustainability Continued
Scope
Emissions
Scope 1 Direct GHG emissions
Emissions from activities for operations which Intertek owns or
controls including the combustion of fuel and operation of facilities
tonne CO2e1
Global (excl. UK)
UK
2020
60,686
2,439
2019
62,520
2,431
Scope 2 Indirect GHG emissions Emissions from the purchase of electricity, heat and steam
Global (excl. UK)
119,679
125,213
External assurance
In 2018 we appointed Ernst & Young to provide
independent assurance of our environmental
performance. Their Assurance Statement for 2020
describes the work undertaken and their conclusion
for the reporting period.
purchased for our use (location-based)
UK
3,188
3,480
> The full Ernst & Young Assurance Statement can be found in
the separate 2020 Sustainability Report on page 43.
Emissions from the purchase of electricity, heat and steam
purchased for our use (market-based)
Global (excl. UK)
123,200
128,841
UK
2,151
5,329
Scope 3
Employee Business Travel (Air travel only)2
Employee Commuting
Global (excl. UK)
UK
11,289
956
–
–
Global (excl. UK)
56,670
64,1403
Fuel- and Energy-Related Activities Not Included in Scope 1 or Scope 2
Global (excl. UK)
UK
UK
Absolute CO2e (market-based)
Carbon off-setting4
Intensity ratios – Scope 1, 2 and 3 emissions
Operational emissions5
CO2 per employee (location-based)
CO2 per employee (market-based)
CO2 per £m revenue6 (market-based)
Employee commuting
CO2 per employee commuting
Average number of employees during the reporting period
2,475
6,974
271
2,956
7,392
296
267,111
273,764
267,111
–
4.29
4.34
71.39
4.50
4.62
–
1.31
1.503
45,092
44,775
1. CO2e – Carbon dioxide equivalent.
2. Please refer to our Basis of Preparation document for full details of
scope. Business travel data was collected for the first time in 2020.
3. The prior year total Employee Commuting emissions were 74,332
(reported) vs. 67,096 (restated).
This is a result of increased attention to detail and diligence in the
collection of data.
4. Carbon offsetting through the acquisition and surrender of
emissions units on the voluntary markets.
5.
Intensity ratios are based on the total of Scope 1, Scope 2 and Scope
3 Fuel- and Energy-Related Activities.
6. Revenue for the FY 2020 as shown on page 25.
Intertek Group plc Annual Report and Accounts 2020
37
Financial statementsDirectors’ reportStrategic report Tropical Forest
Conservation Project, Brazil
The project protects tropical rainforest
in the Acre region of Brazil from logging
and encroaching cattle ranches, with the
objective of generating net positive climate,
community and biodiversity benefits.
The project fosters economic opportunities for
local communities through sustainable farming
and the sale of acai berries and medicinal
plants, promotes environmental stewardship,
and provides health services and educational
courses. Combined, these activities help
discourage deforestation in the wider region.
Landfill Gas Extraction and
Electricity Generation Project,
Turkey
This project captures and converts waste gas,
methane, and uses it to power turbines that
feed electricity into Turkey’s grid.
In addition to reducing GHG emissions the project
improves air quality, local groundwater and
has generated local and regional employment
with much of the investment spent locally.
Sustainability Continued
Voluntary off-setting projects
Hydropower Project, Pakistan
As well as cutting our emissions, we have used
carbon credits to offset our direct operational Scope
1, 2 and 3 GHG emissions, making 2020 our first
carbon neutral year.
We have chosen credible and verified carbon
off-setting projects that provide social benefits in
communities where we have an impact in addition to
carbon abatement.
The project is a run-of-river hydropower scheme
without any dam, new storage, displacement/
resettlement of human habitation, change in
the hydrological regime or any other adverse
environmental impact.
Wind Power Project, India
This project involves the bundling of 396
Wind Turbine Generators sponsored by 201
individual investors with a total installed capacity
of 236,050MW. The energy produced displaces
fossil fuel generated grid power or, when supply
is intermittent, power supplied by diesel back-up
generator sets. In addition to the Greenhouse
Gas emission saving, the project generates
employment through direct labour and by
enabling economic development in the region.
38
Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Sustainability Continued
Enterprise Security
Intertek has robust measures in place
to protect its people, processes
and data.
At Intertek we have adopted a risk-based security
framework, based on international best practices
to protect customers, employees and Intertek data.
Our framework is based on clear policies,
standards and supporting guidelines. We support
our operations and ultimately our customers by
facilitating growth and change with:
• scalable, flexible IT solutions and services;
• streamlining operations and improving
processes and productivity to reduce costs
of IT infrastructure and applications; and
•
innovations, enhancing service delivery and
strengthening internal and external customer
relationships.
Data protection
We believe that all our people and all our
customers have the right to data privacy,
and so we have adopted the best practices
and standards set out in the General Data
Protection Regulation (‘GDPR’) across all of
our markets and operations, and in relation to
all individuals whose personal data we obtain
and use (not just individuals in the EEA). Our
Group Data Protection Policy is aligned with
the GDPR requirements to set out the minimum
data protection standards we apply throughout
our operations so that we use all personal
data transparently, fairly and securely.
> Read more on our approach to Enterprise
Security in our separate 2020 Sustainability Report
Communications
& Disclosures
Engagement with our shareholders
and wider stakeholder groups plays
a key role throughout our global
business, including at Board level.
It helps us to understand the impact
of our decisions on stakeholder, and
provides insight into their needs
and concerns. It underpins good
governance, which is embedded
throughout our business.
Reporting approach
We are committed to providing stakeholders with
accurate and timely updates on our sustainability
activities and performance and make every effort
to produce a report that is balanced and transparent
and meets their needs.
Reporting on our sustainability performance
indicators in a consistent and accurate manner
is essential for transparent reporting. We prepare
them in line with our own framework of the ten Total
Sustainability Assurance Corporate Certification
Standards as well as other additional frameworks.
An index of our sustainability targets and our
disclosures – against SASB, GRI and our own
more comprehensive TSA standards – is available
on our website at intertek.com/about/our-responsibility
Details of how we have engaged with, and
taken into consideration, the interests of those
stakeholders who are material to the long-term
success of our business can be found on page 13
and in the section 172 statement on pages 64 to 70
of this report.
Communication guidance and policies
Our Corporate Communications & Public Relations
team look after the Group’s communications to
the Group’s corporate stakeholders. This includes
communications to the Group’s investors, the
London Stock Exchange, financial media and the
financial analysts that track and analyse the Group’s
financial performance. Internally, the team helps
to support local country marketing teams with
corporate data and advice.
The media plays an important role in defining the
way Intertek is perceived by its stakeholders. Our
media policy sets out procedures with respect to
the public release of information by employees
to the media.
Internal communications
We share the mission, values and success of the
Group with our people and develop a supportive and
inspiring workplace culture worldwide. This involves
regular and consistent engagement with our people
through employee communications. The Intertek
Group intranet is the internal communication hub
of Intertek keeping colleagues connected and
helping them share knowledge across more than
100 countries.
Intertek Group plc Annual Report and Accounts 2020
39
Financial statementsDirectors’ reportStrategic report Sustainability Continued
Group non-financial information statement
The table below is intended to help our stakeholders
understand our position on key non-financial matters in
line with the reporting requirements contained in sections
414CA and 414CB of the Companies Act 2006. Most of our
reporting on these topics and KPIs is contained in our Strategic
report. More detail can also be found in our separate 2020
Sustainability Report which is available on our website.
Reporting
requirement
Description, implementation, due diligence,
outcomes and additional information
Environment
Environment – pages 35 to 38
Employees
Social matters
Nomination Committee report –
pages 94 to 97
Compliance – pages 33 and 34
Quality & Safety – page 27
People & Culture – pages 28 to 31
Communications & Disclosures –
page 39
Communities – page 32
Human rights
People & Culture – pages 28 to 31
Anti-corruption
and anti-bribery
Description of
principal risks and
impact of business
activity
Description of the
business model
Principal risks and uncertainties –
pages 56 to 63
Compliance – pages 33 and 34
People & Culture – pages 28 to 31
Principal risks and uncertainties –
pages 56 to 63
Our Business model including our High
Quality Earnings Model –
pages 08 to 13
40
Intertek Group plc Annual Report and Accounts 2020
Non-financial key performance
indicators
We measure our success by tracking both
non-financial and financial key performance
indicators that reflect our strategic priorities.
This year, we have also reviewed the
sustainability areas that are most material
and relevant to our stakeholders and we have
set ourselves targets in those areas that are
aligned to our corporate strategy:
Health and safety
Total Lost Time Incident Frequency Rate
Cases where one of our colleagues is away from
work for one or more shifts as a result of a work-
related injury or illness.
Why we measure it
A reduction in lost time incidents is an important
measure of the effectiveness of our safety
culture. It also lowers rates of absenteeism
and costs associated with work-related injuries
and illnesses.
Customer satisfaction
Customer focus
Average number of NPS interviews
carried out each month.
Why we measure it
Customers are our priority. Since 2015, we have
used the Net Promoter Score (‘NPS’) process to
listen to our customers. These insights give us a
deep understanding of what our customers need
and want, fuelling our innovations.
2020 update and targets
2020 update and targets
Total Recordable Incident Rate (’TRIR’)
Average NPS interviews per month
5,500
6,000
7,000
7,000
6,000
0.8
0.7
0.6
0.5
0.4
0.3
0.2
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
Target: TRIR of less than 0.5 per 200,000 hours worked.
Target: We will continue to aim to conduct at least 6,000 NPS
interviews per month.
Financial statementsDirectors’ reportStrategic report Sustainability Continued
Environment
Employees
Diversity & Inclusion
Compliance
Operational emissions intensity ratio
GHG intensity ratio relating to our Scope 1, 2 and
Energy-Related Scope 3 emissions per employee.
Why we measure it
We measure our carbon emissions to reduce our
impact on the environment and increase operational
efficiency. We track both location-based and
marked-based Scope 2 emissions.
Voluntary permanent employee
turnover and employee engagement
Voluntary permanent leavers are employees who
choose to leave the Group themselves. This does
not include employees on a fixed term contract.
Intertek ATIC Engagement Index – based on the
key drivers of sustainable value creation and which
measures engagement on a monthly basis in every
operation with the following metrics: Net Promoter
Score, Customer Retention, Quality, Voluntary
Permanent Employee Turnover and Total Recordable
Incident Rate.
Why we measure it
Ensuring employees are engaged is essential to
talent retention and we measure and monitor
this closely at a global and local level through
our voluntary turnover rate.
Gender balance
Percentage of women in senior management roles
(Leadership Team1 and their direct reports).
Why we measure it
We promote diversity in all its forms, including
gender parity, sexual orientation and disability,
as well as having an ethnic and social makeup that
reflects broader society. Achieving better gender
balance is a driver of progress.
1. As defined by the Hampton-Alexander Review to allow year-
on-year comparison. This comprises the CEO, Heads of Global
functions and EVPs.
Compliance training
Completion of annual compliance training by eligible
employees1 (online or face-to-face, when available)
during the training window.
Why we measure it
Our commitment to the highest standards of
integrity and professional ethics is embedded in
the Group’s culture through the integrity principles
set out in our Code of Ethics. Every year, to support
continuing understanding in this area, all of our
people are required to complete our comprehensive
training course.
1. Eligible employees include those with access to the ‘10X Way!’
training platform and those receiving compliance training face-to-
face. This includes employees who are on parental or other forms of
long-term leave who accordingly do not complete the training in the
period of their leave. New joiners complete training throughout the
year as part of their induction.
2020 update and targets
2020 update and targets
2020 update and targets
2020 update and targets
Operational emissions intensity
4.80
4.60
4.40
4.20
4.00
2017
2018
2019
2020
C02 per employee (location-based)
C02 per employee (market-based)
Target: Recognising the importance of bold ambitions, we are
setting targets to improve environmental performance across our
operations, and to clearly demonstrate our commitment we are
aligning our business with the most ambitious aim of the Paris
Agreement, to limit global temperature rise to 1.5°C above
pre-industrial levels and reach net zero by 2050.
Women in senior management
Training completion by eligible employees
82.9
17.1
79.7
20.3
79.3
20.7
76.7
23.3
93%
94%
96%
Employee voluntary
turnover (% of
permanent employees)
Group Engagement
Index score
2018
2019
2020
14.9
13.8
8.7
89%
Target: We aim to keep our voluntary permanent turnover rate below
15% and increase our Group Engagement Index to 90%.
2017
2018
2019
2020
2018
2019
2020
Male
Female
Target: We aim to increase the proportion of women in
senior leadership roles to 30% by 2025.
Target: We aim to achieve 100% completion of our annual compliance
training by eligible employees.
Intertek Group plc Annual Report and Accounts 2020
41
Financial statementsDirectors’ reportStrategic report
Operating reviews
Products
Resilient revenue
performance
Business lines
Softlines
Hardlines
Electrical & Connected World
Business Assurance
Transportation Technologies
Food
Chemicals & Pharma
Building & Construction
Revenue
£1,681.6m
Adjusted operating
profit
£351.6m
Statutory
operating profit
£319.5m
42
Intertek Group plc Annual Report and Accounts 2020
Intertek value proposition
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, the
division supports 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; people assurance; process
performance analysis; facility plant and equipment
verification; and third-party certification.
Strategy
Our Total Quality Assurance value 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.
2020 performance
Our Products business delivered a resilient revenue
performance, benefitting from its defensive
strengths, with a robust margin of 20.9%.
Our Products-related businesses delivered a revenue
performance of £1,681.6m, down 5.7% at constant
rates with a LfL revenue performance of 5.9%
below prior year. We delivered an adjusted operating
profit of £351.6m, down 12.4% at constant rates.
Adjusted operating profit margin was down 160bps
at constant rates.
In H2 2020, our Products-related businesses
benefitted from a strong rebound in ATIC demand
and delivered a revenue performance of £881.3m,
up 12% on H1 2020 at constant currency. We
delivered an H2 2020 adjusted operating profit of
£216.1m, up 61% on H1 2020, and an H2 2020
adjusted operating margin of 24.5%, up 760bps
on H1 2020.
•
In H2 2020, our Softlines business delivered a
mid-single digit decline in LfL revenue, resulting in
a double-digit decline in LfL revenue on a full year
basis. In the last six months, our global Softlines
business benefitted from continuous growth
in e-commerce, increased demand for testing
protective equipment and the reduction in the
lockdown restrictions in some of our markets.
However, our performance was impacted by
continued store closures in Western Europe and
North America and some retailers delaying the
launch of new products due to the disruption of
their supply chains in the first half of the year.
• Our Hardlines business saw improved
momentum in the second half with a low single
digit decline in LfL revenue, resulting in mid-single
digit decline in LfL revenue on a full year basis. In
H2 2020, our Hardlines business benefitted from
continuous growth in e-commerce, increased
consumer demand for home furniture and toys
and the easing of lockdown restrictions in
some of our markets, while closures of stores in
Western Europe and North America continued.
• Our Electrical & Connected World business
delivered robust LfL revenue growth in H2 2020,
resulting in a solid LfL revenue performance in
2020. In the last six months, our Electrical and
Connected World business saw an increased level
of ATIC activities driven by increased demand for
higher regulatory standards in energy efficiency,
the strong growth in testing and certification
of medical devices, the increased testing
requirements for 5G and a greater corporate
focus on CyberSecurity.
Financial highlights 2020
Revenue
Like-for-like revenue
Adjusted operating profit
Adjusted operating margin
Statutory operating profit
Statutory operating margin
2020
£m
2019
£m
Change at
actual
rates
Change at
constant
rates
1,681.6
1,796.7
1,676.2
1,794.5
(6.4%)
(6.6%)
(5.7%)
(5.9%)
351.6
20.9%
319.5
19.0%
405.4
(13.3%)
(12.4%)
22.6%
(170bps)
(160bps)
381.5
(16.3%)
21.2%
(220bps)
Financial statementsDirectors’ reportStrategic report Operating reviews Continued
• Our Business Assurance business delivered
a solid LfL revenue performance in H2 2020,
resulting in a mid-single digit decline in LfL
revenue on a full year basis. The easing of
lockdown restrictions in the second half has
driven a rebound in the number of ISO audits in
some of our operations, while we continue to
benefit from attractive growth in supply chain
assurance, the continuous focus on ethical
supply, the increased needs of corporations for
sustainability assurance and the strong growth
in our People Assurance segment.
• Our Building & Construction business
delivered a mid-single digit LfL revenue decline
in the last six months, resulting in a low single
digit LfL revenue decline on a full year basis. We
continue to benefit from the growing demand for
more environmentally friendly and higher quality
buildings, as well as strong investments in large
infrastructure projects, although the temporary
reduction of building and construction activities
we saw in Q2 due to lockdown restrictions in
some of our North America markets continued
in the second half.
• Our Transportation Technologies business
delivered a double-digit LfL revenue decline in
H2 2020, resulting in a double-digit negative
revenue in 2020. The lower demand for testing
activities we saw in Western Europe and North
America in Q2 continued in H2 2020, which was
partially offset by the continued investments of
our clients in new powertrains to lower CO2/NOx
emissions and increase fuel efficiency.
• Our Food business delivered a good LfL revenue
growth performance in H2 resulting in a solid
revenue performance on a full year basis. In H2
2020, we benefitted from the resumption of the
supply operations of our clients in most markets,
from sustained demand for food safety testing
activities and increased demand for hygiene
and safety audits in factories, hospitality and
retail locations.
•
In H2 2020, we saw a mid-single digit LfL
decline in revenue in our Chemicals & Pharma
business, resulting in a high single digit LfL
decline in revenue on a full year basis. In the last
six months, we saw an improvement in demand
for regulatory assurance and chemical testing in
some of our operations in America and Western
Europe while, given the importance of COVID-19,
the Pharma industry continues to reprioritise
their R&D investments, delaying testing projects
for our laboratories.
2021 outlook
In 2021, we expect all of our Products business lines
other than Transportation Technologies to deliver
YoY revenue growth.
Mid- to long-term growth outlook
Our Products division will benefit from mid- to long-
term structural growth drivers, including brand and
SKU expansion, a faster innovation cycle, increased
focus on safety, performance & quality, demands
for smart products, a higher demand for healthy and
sustainably sourced products, and the middle class
growth of emerging markets.
Case study
Safeguarding
health, safety
and wellbeing
Launched during the pandemic in 2020, Protek™
is the world’s first end-to-end health, safety
and wellbeing assurance programme for people,
workplaces and public spaces across any industry.
Responding to urgent customer needs arising
from COVID-19, and drawing on Intertek’s unique
approach to Total Quality and Building Back Ever
Better, Protek™ provides Audit/ISO certifications,
product testing, PSI facility health management,
and COVID-19 surface checks that provide peace
of mind to businesses around the world. Our
top-selling Protek™ service is the POSI-CHECK
audit solution, which helps in the Prevention of
the Spread of Infection (‘POSI’), and is designed
to formulate and monitor an effective response
to communicable infections at a time when this
a major concern for so many businesses.
In 2020, through Intertek Protek™, we worked with
a number of organisations, including TUI Group
German hotels. Intertek played a key role in helping
TUI develop its ‘ten-point plan’ to re-open its hotels,
and provided a training and inspection programme for
their staff that includes training materials, webinars,
checklists and customer information. The POSI-CHECK
audit assessed their ability to prevent the spread of
infection through policies, procedures, infrastructure,
and dedicated resources and personnel. The TUI hotels
in Germany that underwent auditing were certified
within a two-week period. They all passed with very
strong scores, highlighting the vast amount of work
the hotel management teams had done to meet
government guidelines and POSI best practices.
We have also teamed up with New York Times best-
selling author and behavioural psychologist, Martin
Lindstrom, to launch a COVID-safe travel tips e-book
titled ‘Travel Truth and Lies Unmasked’. The book is
based on unique industry insights and interviews with
pilots, airlines and hotel chains, as well as input from
our own subject matter experts.
Intertek Group plc Annual Report and Accounts 2020
43
Financial statementsDirectors’ reportStrategic report Vaccine development and testing solutions
for the pharma industry
• What it is: We work across many complex
biologic and oligonucleotide modalities such
as mRNA therapeutics or vaccines, and are key
players supporting industry with strategic,
Good Manufacturing Practice (‘GMP’) compliant
analytical and formulation solutions tailored
to the molecule’s development stage and
formulation. We also have one of the largest
GMP facilities in Europe for inhaled medicine
development and have supported multiple
COVID-19 treatment development projects
including five mRNA vaccines.
• Customer benefit: Working with the world’s
leading pharma companies, we deploy our
30+ years’ experience in inhaled product
development, biologics characterisation and
rapid development strategies, helping our clients
to meet accelerated development timelines. We
provide strategic partnerships involving short
or long-term solutions for bioanalysis, inhaled
formulation development, characterisation and
quality control testing support, stability studies,
and clinical trials manufacturing.
Operating reviews Continued
Innovation
We continue to invest in innovation to deliver
a superior customer service in our Products-
related businesses.
POSI-CHECK – Prevention of the Spread
of Infection
• What it is: Our POSI-CHECK audit solution
was created to support organisations and
help them Build Back Ever Better as the world
recovers from the COVID-19 pandemic. It is
designed to formulate and monitor an effective
response to communicable infections in busy
establishments, such as manufacturing facilities,
hotels, restaurants, supermarkets, universities
and schools.
• Customer benefit: Our TQA Experts work with
our clients’ staff and management teams to
implement POSI protocols at their facilities. We
provide the tools they need to maintain a level of
infection control, and the dedicated POSI-CHECK
certification they earn helps to demonstrate their
commitment to the health and safety of their
people, and their guests and customers.
44
Intertek Group plc Annual Report and Accounts 2020
Priority testing service for life-saving
medical equipment
• What it is: We have launched a ‘First-In-
Queue’ Priority testing service for critical care
devices, such as ventilators, respirators, PPE,
CPAP machines and other in-demand medical
products. Our laboratories across North America
have made it their top priority to ensure these
devices receive immediate attention so they
can be tested, certified, and delivered quickly
to healthcare workers.
• Customer benefit: We have the TQA expertise,
and the best-in-class capabilities and customer
service to support our clients in developing and
manufacturing medical equipment. They also
benefit from our strong connections with the
trade associations and regulatory agencies to
help ensure the seamless manufacturing and
supply of PPE and medical devices.
Protective clothing and other PPE –
end-to-end testing and certification
• What it is: As a global market leader in
safeguarding the quality and safety of personal
protective equipment (‘PPE’), Intertek has
decades of experience in Assurance, Testing,
Inspection and Certification of face masks,
respirators, gowns, protective clothing, safety
goggles, gloves and more. We are proud to
provide unrivalled support to PPE manufacturers,
buyers and governments around the world
through our PPE Centres of Excellence with
strong technical expertise, and helping in the
global fight against COVID-19 by facilitating the
delivery of critical supplies to the people who
need them urgently.
• Customer benefit: We offer 24/7 support
through around the globe, to deliver end-to-end
Quality Assurance of PPE, from raw materials
sourcing, to production, to retail and distribution.
We support our consumer products customers
that are transitioning to producing PPE by
helping them navigate testing and certification
requirements to ensure their products meet
regulatory requirements and provide the
protection they claim. We also offer innovative
solutions (e.g. the Intertek Mask Label Scheme)
to help promote PPE regulatory compliance and
increase transparency, building trust between
buyers, sellers and consumers in the PPE
supply chains.
Financial statementsDirectors’ reportStrategic report Operating reviews Continued
Development of germicidal products –
safety, performance, and microbial efficacy
inherent risk and integrated eLearning for
suppliers.
• What it is: Germicidal products are used in a
variety of places: healthcare facilities, homes,
schools, offices, and other public spaces. They
render bacteria and viruses inactive, but these
products are quite complex, meaning there are
several considerations to ensure their safety,
performance, and microbial efficacy. There is
also no single standard that is specific to all
germicidal products.
• Customer benefit: While it is largely up to
manufacturers and their testing partners to
identify applicable standards for germicidal
products, Intertek has been working with
customers to provide evaluation and certification
services to assist with product development,
and to ensure they meet regulatory requirements
and protect the health and safety of users.
Inlight 2.0 – managing increasingly complex
supply chain risks
• What it is: First launched in 2017, Intertek
Inlight™ provides the platform, expertise and
people that enable organisations to better
understand their supply chain risks and protect
their brand. Our 2020 upgrade, Inlight 2.0, adds
new and enhanced features to its market-leading
supply chain compliance solution, offering
organisations enhanced analytics, in-depth
• Customer benefit: Inlight 2.0 is a cost-
effective solution for global companies who
require trusted information about the identities,
capabilities and compliance of their supplier
partners. Inlight 2.0 allows users more flexibility
and customisation to their unique supply chain
programmes, including live dashboards of
their suppliers’ performance, trends, risks
and opportunities.
Shared audit programme – dedicated to the
food industry
• What it is: Our new shared audit programme is
built on a trusted partnership between Intertek
and Roquette, a global leader in plant-based
ingredients for products in the Food, Nutrition
and Health markets. It allows several food
companies to evaluate the same supplier
simultaneously through a single third-party
audit, while maintaining the same high standards
of quality and safety.
• Customer benefit: This shared approach
provides multiple benefits to food companies,
by introducing the concept of shared audits to
the food industry. As part of the service, we offer
a top-quality, time-optimised audit performed by
one of our experts, a tailored audit report, and an
audit solution that is fully adapted to the current
worldwide health situation.
Case study
SourceClear™
visibility and
traceability across
the supply chain
Launched in 2020, SourceClear™
helps organisations of all sizes
track sustainable material claims
throughout all stages of trade and
production in their supply chain.
Intertek experts provide independent certification of
facilities and materials claims and manage the end-
to-end process for scope certificates and transaction
certificates against Textile Exchange standards:
Recycled Claim Standard (‘RCS’), Global Recycled
Standard (‘GRS’) and Organic Content Standard (‘OCS’).
SourceClear™ enables transparency and assurance
that organisations are taking proactive measures to
be more sustainable through responsible sourcing of
preferred raw materials that minimise environmental
impacts, and promoting environmental and social good
practices in the value chain.
Brands and retailers can confidently demonstrate
sustainability commitments through independent
certification of material claims and accurate labelling
of products.
Intertek Group plc Annual Report and Accounts 2020
45
Financial statementsDirectors’ reportStrategic report Operating reviews
Trade
Robust recovery in H2
with good increase in
demand for ATIC services
Business lines
Caleb Brett
Government & Trade Services
AgriWorld
Revenue
£592.6m
Adjusted operating
profit
£47.1m
Statutory
operating profit
£42.1m
46
Intertek Group plc Annual Report and Accounts 2020
Intertek value proposition
Our Trade division consists of three
global business lines with differing
services and customers, but similar
mid- to long-term structural
growth drivers:
• Our Caleb Brett 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 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 AgriWorld business provides analytical and
testing services to global agricultural trading
companies and growers.
Strategy
Our Total Quality Assurance value 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.
2020 performance
Our Trade business benefitted from our strong
customer relationships and the defensive strengths
of our agriculture services.
We delivered a resilient revenue of £592.6m with a
LfL revenue performance of 9.9% below prior year
at constant rates and an adjusted operating profit
of £47.1m, down 42.6% at constant rates. Adjusted
operating margin of 7.9% was down 460bps versus
last year.
In H2 2020, our Trade-related businesses saw a
good sequential improvement in demand, resulting
in a revenue performance of £297.9m, up 4% on H1
2020 at constant currency. We delivered an H2 2020
adjusted operating profit of £27.0m, up 40% on H1
2020, and an H2 2020 adjusted operating margin of
9.1%, up 240bps on H1 2020 at constant currency.
• Our Caleb Brett business saw continued
momentum in H2 2020 with a high single digit
decline in LfL revenue, resulting in a high single
digit LfL revenue decline on a full year basis. In the
second half, our Caleb Brett business benefitted
from an improvement of global mobility and a
rebound of the global economy in H2.
• Our Government & Trade Services business
provides certification services to governments
in the Middle East and Africa to facilitate the
import of goods into their markets, based on
acceptable quality and safety standards. We saw
a double-digit decline in LfL revenue in H2 2020
and on a full year basis, due to the disruption of
manufacturing in China in Q1 and the lockdown
Financial highlights 2020
Revenue
Like-for-like revenue
Adjusted operating profit
Adjusted operating margin
Statutory operating profit
Statutory operating margin
activities in the Middle East and Africa impacting
cross-border trade flows in both Q2 and H2.
• Our AgriWorld business delivered robust LfL
revenue growth in H2 2020 resulting in solid LfL
revenue growth on a full year basis. Following
a stable performance in H1 2020, we saw an
increase in demand for inspection activities
driven by an easing of the lockdown restrictions
in most of our markets.
2021 outlook
In 2021, we expect our Trade division revenue to be
broadly flat.
Mid- to long-term growth outlook
Our Trade division will continue to benefit from
population growth and social mobility, GDP growth,
the development of regional trade, improvements
in transport infrastructure, the increased need for
end-to-end traceability and the increased focus
on Operational Sustainability.
Innovation
We continue to invest in innovation to deliver a superior
customer service in our Trade-related businesses:
2020
£m
592.6
592.6
47.1
7.9%
42.1
7.1%
2019
£m
679.4
679.4
86.6
Change at
actual
rates
Change at
constant
rates
(12.8%)
(12.8%)
(9.9%)
(9.9%)
(45.6%)
(42.6%)
12.7%
(480bps)
(460bps)
82.0
(48.7%)
12.1%
(500bps)
Financial statementsDirectors’ reportStrategic report Operating reviews Continued
Fast-Tek – global solution
that gets trade moving faster
Fuel testing technology – new Cetane
Rating Unit in Shanghai
• What it is: Intertek’s Fast-Tek is a customised
global trade solution that provides high-speed
certification of shipments to get trade moving
faster. It offers an enhanced Total Quality
Assurance customer experience – enabling the
optimised and efficient registration and assessment
of products, streamlining our clients’ administrative
processes and minimising complexity.
• What it is: Intertek Caleb Brett has expanded
its testing capabilities in its Shanghai laboratory
with the installation of a new Cetane Rating Unit,
capable of determining and certifying the ignition
quality of diesel fuels. It is the only one of its kind
anywhere in China, and will help with the Chinese
Government’s focus on a nationwide fuel quality
programme to prevent and control air pollution.
• Customer benefit: Our in-house labs and
inspectors support our clients with Fast-Tek
registration, expediting the inspection and
certification process, without compromising
compliance or quality. This enables them to get
their goods moving through their supply chains
more quickly, and can help to reduce overheads,
both in the administrative burden and the
associated costs of certification.
• Customer benefit: The new CFR F5 XCP engine
puts Caleb Brett at the forefront of fuel testing
technology and will support our customers now
and in the future as China moves to improving
the environment and living standards. It will also
help to ensure the integrity of the fuel supply
chain from refinery to the pump, and will support
local oil majors and all independent refineries to
assure their fuel quality monitoring processes.
Digitised Assurance – partnership with
UK-based blockchain platform VAKT
Cotton DNA testing – improving the
process and product quality
• What it is: Intertek Caleb Brett has joined VAKT,
the world-leading post-trade management
platform, powered by an innovative blockchain
platform that digitises the global commodities
trading industry. Our operational system has
been electronically integrated with the VAKT
platform, allowing us to provide assurance
services, such as identifying double entries and
turnaround time, and de-risking quality issues
related to the transposition of data.
• Customer benefit: VAKT’s platform will enable
Intertek customers to identify double entries,
improve turnaround times, and receive inspection
results seamlessly. Intertek Caleb Brett will provide
Quantity and Quality services to their consortium
members, leveraging its vast experience in helping
companies ensure the quality and safety of their
products, processes and systems.
• What it is: Intertek AgriWorld has improved
the way we provide assurance on the hybrid
cotton materials that cotton breeding companies
produce and market. We do this in our specialist
laboratories, using DNA testing to determine
a DNA fingerprint for various cotton hybrids.
Ultimately, this helps farmers access pure hybrid
seeds, improving the overall production process
and product quality.
• Customer benefit: Our clients’ production
material can be checked using our DNA
fingerprint information, which represents a
substantial improvement for breeding companies.
Previously, they had to plant the seeds and
wait for the plant to flower before they could
determine the purity of a hybrid being tested.
The testing process was time-intensive and had
a significant margin of error, as the determination
was made visually.
Case study
Inview – interact
remotely and safely
with our technical
inspection experts
accelerating inspection turnaround time. Any issues
detected in the course of an Inview inspection can
be brought to the customer’s instant attention and
full inspection records (including video and images
can be made available for internal assessment and
auditing purposes. As inspections are conducted
remotely rather than in person, Inview supports
public health and wellbeing by reducing any on-site
exposure. All Inview inspections are performed to
the highest standards and follow the same strict
quality procedures as those performed by our
on-site inspectors.
Inview is a remote inspection solution that
enables Intertek to deliver more efficient and
COVID-safe inspections, supporting a cohesive
approach to quality, compliance, safety and
sustainability. Customers can access Inview
using a regular smart phone or other smart
device. In a trade context, Inview can be used
to deliver inspections in relation to shipment
certificates of conformity or commercial
inspections.
In a trade environment where speed is of
the essence, Inview enables faster access to
Intertek’s Government and Trade Services
team of qualified technical inspection experts,
Intertek Group plc Annual Report and Accounts 2020
47
Financial statementsDirectors’ reportStrategic report Operating reviews
Resources Intertek value proposition
Our Resources division consists of
two business lines with differing
services and customers, but both
demonstrating similar cyclical
growth characteristics:
Stable revenue performance
Business lines
Industry Services
Minerals
Revenue
£467.5m
Adjusted operating
profit
£29.0m
Statutory
operating profit
£16.6m
48
Intertek Group plc Annual Report and Accounts 2020
• 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 from exploration and resource
development, through to production, shipping
and commercial settlement.
Strategy
Our Total Quality Assurance value proposition allows
us to help customers gain peace of mind that their
projects will proceed on time and their assets will
continue to operate with a lower risk of technical
failure or delay. 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.
2020 performance
We benefitted from the strength of our business
model in Resources, enabling us to deliver a resilient
performance in revenue and margin.
Our Resources-related businesses delivered a
revenue performance of £467.5m with a LfL revenue
change of (6.1%) at constant rates and an adjusted
operating profit of £29.0m, down 8.2% at constant
rates, enabling us to deliver a margin of 6.2%, down
YoY by 10bps.
2021 outlook
In 2021, we expect revenue in our Resources
divisions to be below last year.
•
•
In H2 2020, Resources delivered a stable revenue
performance at constant currency compared to
the first six months. We delivered an H2 2020
adjusted operating profit of £16.4m, up 28% on
H1 2020 at constant currency, and an H2 2020
adjusted operating margin of 7.1%, up 160bps
on H1 2020 at constant currency.
In H2 2020 we saw a reduction in Exploration
and Production investments by our clients
in some of our markets such that our Capex
Inspection Services business delivered a high
single digit negative LfL revenue performance in
the last six months, resulting in a low single digit
LfL revenue decline in 2020.
• We saw a double-digit negative revenue
performance in Opex Maintenance Services
in the second half, as well as in H1 2020, as
the lockdown restrictions and the cost-saving
initiatives of our clients have impacted the
demand for our inspection services.
• We delivered robust revenue growth in our
Minerals business in 2020, as we saw increased
demand for testing and inspection activities.
Mid- to long-term growth outlook
Our Resources division will grow in the medium-
to long-term as we benefit from population growth
and social mobility, investment in Exploration &
Production, Storage and Transportation, Total
Energy and diversified portfolios, accelerated
transition to renewable energies, increased focus
on Operational Sustainability, and digital supply
chain management.
Innovation
We continue to invest in innovation to deliver
a superior customer service in our Resources
-related businesses:
Speeding up the X-Ray diffraction
assessments of iron ores
• What it is: Intertek’s X-Ray Diffraction Analysis
(‘XRD’) investigates crystalline material structure,
including atomic arrangement, crystallite size,
and imperfections. Our Minerals team has
recently developed a unique batching method
to considerably speed up the X-Ray diffraction
Financial highlights 2020
Revenue
Like-for-like revenue
Adjusted operating profit
Adjusted operating margin
Statutory operating profit
Statutory operating margin
2020
£m
467.5
467.1
29.0
6.2%
16.6
3.6%
2019
£m
510.9
509.4
32.2
6.3%
22.3
4.4%
Change at
actual
rates
Change at
constant
rates
(8.5%)
(8.3%)
(9.9%)
(6.3%)
(6.1%)
(8.2%)
(10bps)
(10bps)
(25.6%)
(80bps)
Financial statementsDirectors’ reportStrategic report Operating reviews Continued
assessments of iron ores from a preset analysis
in the quantitative software to the off-line
calculation and tabulation of results
and subsequent report writing.
• Customer benefit: The batching method
delivers a more cost-effective service for our
iron ore customers by reducing the amount of
time analysing and organising the results, thus
allowing for improved efficiencies in delivering
results. Furthermore, the batching process has
been extended to other ores routinely analysed
by X-Ray diffraction.
Scaling-up our Remote Video
Inspection (‘RVI’) solution
• What it is: Intertek’s remote inspection
service involves secure live-streamed audio-
video conferencing, even in low bandwidth
connectivity, as well as advanced functionalities
that assist the inspection process, such as
on-screen telestration (where an operator can
draw a freehand sketch over a moving or still
video image), document sharing, camera zoom
and flash-light control, on-screen chat, screen
captures and annotations.
• Customer benefit: RVI solutions minimise
disruptions to businesses by helping our global
customers maintain supply chain and operational
timelines, even when health and safety
restrictions challenge business continuity.
The remote video inspections, driven by
Intertek’s expert and experienced technical
personnel located around the world, enable
us to safely deliver quality control and Quality
Assurance activities.
RiskAware – addressing the cost of quality
• What it is: Intertek RiskAware is an innovative
and proactive data-driven approach to risk-
based inspection that helps global equipment
purchasing customers minimise the total cost
of their Quality Assurance and quality control
activities. By using data analytics to pin-point
higher impact risks areas within their inspection
programme, our clients can optimise their supply
chain strategy.
• Customer benefit: Risks such as component
failure, delayed production opportunity costs,
and project cost escalation due to delays caused
by the late arrival of equipment, can all be
mitigated through robust and proactive quality
control programmes, complemented by the
vendor surveillance activities we offer and
overall assessment and monitoring of supply
chain suppliers.
WindAware – improving wind turbine
reliability, performance and safety
• What it is: Managing the life of a wind turbine
generator is a constant challenge. Operators
need a tool that provides organised, readily
available integrity data. Intertek developed
WindAware, a cloud-based software solution to
help owners and operators manage their asset
and O&M data, maintain reliability and safety,
and minimise costly equipment failures.
• Customer benefit: WindAware allows users
to efficiently track, trend and report components’
inspection, service, repair, replacement,
and failure history, from construction to
decommissioning. Utilising this information,
gathered via a mobile device, helps wind farm
owners make fast cost-effective real-time
decisions, optimising asset performance and
life, and reducing risk.
The CarbonClear™ Certification is designed for the
transparency, precision, and assurance of carbon
emissions performance. We were delighted to award
our first Certification in July 2020 to Lundin Energy,
one of Europe’s leading independent oil and gas
companies, for its Edvard Grieg field in the central
North Sea. Along with providing businesses with
credibility and assurance, we also see CarbonClear™
as a catalyst for accelerating investment and
performance in carbon footprint reduction across the
energy sector, helping our clients to Build Back Ever
Better, and reducing emissions for current and
future generations.
Case study
Independent
carbon intensity
certification
CarbonClear™ is our breakthrough global
programme that provides companies with
independent carbon intensity certification
across their entire oil and gas production
portfolio.
Intertek Group plc Annual Report and Accounts 2020
49
Financial statementsDirectors’ reportStrategic report Financial review
We have delivered a resilient financial
outcome in 2020 reflecting the
strength of our disciplined approach
to performance management.
Our cash performance, in particular,
was strong and we achieved the
significant milestone of negative
working capital, enabling us to
deliver record FCF generation.
Ross McCluskey
Chief Financial Officer
Highlights
£2,742m
Revenue down (8.2%) (6.7%)
£428m
Adjusted operating profit down
(18.4%) (17.0%)
15.6%
Adjusted operating margin down
(190bps) (190bps)
105.8p
Dividend per share in line with PY
£435.6m
Adjusted Free Cash Flow up 10.2%
£378m
Statutory operating profit down
(22.1%) (20.7%)
13.8%
Statutory operating margin down
(250bps) (240bps)
152.4p
Statutory diluted EPS down (20.9%)
(19.4%)
Negative
Working Capital
21.6%
Return on Invested Capital down
(190bps)
50
Intertek Group plc Annual Report and Accounts 2020
Actual rates
Constant rates
Consolidated income statement commentary
Revenue for the year was £2,741.7m, down 8.2% (down 6.7%
at constant rates), with like-for-like revenue down 6.8% at
constant rates.
The Group’s like-for-like revenue reflected 5.9% decline in the Products
division, 9.9% decline in the Trade division and 6.1% in the Resources
division at constant rates.
The Group’s adjusted operating profit was £427.7m, down 18.4% on
the prior year (down 17.0% at constant rates). The adjusted operating
margin was 15.6%, a decrease of 190bps from the prior year at
constant rates, reflecting the impact of COVID-19 on the business.
The Group’s statutory operating profit was £378.2m (2019: £485.8m).
The Group’s statutory profit for the year after tax was £262.6m
(2019: £333.6m).
In March 2016, the Group announced its 5x5 differentiated strategy
for growth and our implementation continued in 2020, and after
five years we have now completed our final year of our portfolio
and organisational reviews. In line with this, a £19.0m restructuring
cost has been recognised in Separately Disclosed Items (‘SDIs’) in the
year, which impacted 14 business units in the year, taking the total
programme to 103.
Net financing costs
The adjusted net financing costs decreased to £34.9m (2019:
£39.4m) in the year. Adjusted net financing costs pre-foreign
exchange movements decreased by £7.4m in the year to £29.3m
(2019: £36.7m), with continued strong underlying cash generation.
Foreign exchange movements resulted in a loss of £5.6m in the year
(2019: £2.7m loss). Statutory net financing costs of £34.3m included
£0.6m income (2019: £1.3m charge) relating to SDIs.
Tax
The Group effective tax rate on adjusted profit before income
tax was 25.5% (2019: 24.5%). The adjusted tax charge was £100.2m
(2019: £118.8m).
The statutory tax charge, including the impact of SDIs, of £81.3m
(2019: £111.5m), equates to an effective rate of 23.6% (2019: 25.1%).
The cash tax on adjusted results was 23.3% (2019: 23.1%).
Financial statementsDirectors’ reportStrategic report Financial review Continued
Results for the year1
Key financials
Adjusted
Revenue
Operating profit
Diluted EPS
Profit after tax
Cash flow from operations
Statutory
Revenue
Operating profit
Diluted EPS
Profit after tax
Cash flow from operations
Dividend per share
Dividends paid in the year
2,741.7
2,987.0
427.7
524.2
170.9p
212.5p
2020
2019
2018
292.6
705.1
366.0
730.6
2017
2016
2015
2,741.7
2.987.0
378.2
152.4
262.6
685.2
485.8
192.6p
333.6
715.3
Five-year performance – Adjusted Diluted EPS1 (pence)
2020
£m
2019
£m
+4.0% CAGR3
Dividend per share2 (pence)
+15.1% CAGR3
170.9
2020
212.5
2019
198.3
2018
191.6
2017
167.7
2016
140.7
2015
105.8
105.8
99.1
71.3
62.4
52.3
1. Presentation of results: To provide readers with a clear and consistent presentation of the underlying operating performance of the Group’s business, some figures discussed in this review are
presented as adjusted, before Separately Disclosed Items (see note 3 to the financial statements). A reconciliation between adjusted and statutory performance measures is set out overleaf.
Following the adoption of IFRS 16 on 1 January 2019, figures before this date are on an IAS 17 basis.
2. Dividend per share for 2020 is based on the interim dividend paid of 34.2p (2019: 34.2p) plus the proposed final dividend of 71.6p (2019: 71.6p).
105.8p
105.8p
3. CAGR represents the compound annual growth rate from 2015 to 2020.
170.4
163.2
The underlying performance of the business, by division, is shown in the table below:
Earnings per share
The Group delivered adjusted diluted earnings per share (‘EPS’) of
170.9p (2019: 212.5p), down 19.6% year-on-year. Statutory diluted
EPS after SDIs was 152.4p (2019: 192.6p), and basic EPS was 153.6p
(2019: 194.5p).
Dividend
Reflecting the Group’s strong cash generation in 2020 and reduced
leverage, the Board recommends a full year dividend of 105.8p per
share, in-line with prior year.
The full year dividend of 105.8p represents a total cost of £170.8m
or 62% of adjusted profit attributable to shareholders of the Group
for 2020 (2019: £170.8m and 50%). The dividend is covered 1.6 times
by earnings (2019: 2.0 times), based on adjusted diluted earnings per
share divided by dividend per share.
Products
Trade
Resources
Group total
Net financing costs
Adjusted profit before income tax
Adjusted income tax expense
Adjusted profit for the year
Adjusted diluted EPS (pence)
2020
£m
1,681.6
592.6
467.5
2,741.7
Notes
2
2
2
14
6
7
Revenue
Change at
2020 actual
rates
%
Change at
constant
rates
%
Adjusted operating profit
Change at
2020 actual
rates
%
Change at
constant
rates
%
2020
£m
351.6
47.1
29.0
(5.7)
(9.9)
(6.3)
(6.4)
(12.8)
(8.5)
(8.2)
(13.3)
(45.6)
(9.9)
(12.4)
(42.6)
(8.2)
(17.0)
(6.7)
427.7
(18.4)
(34.9)
392.8
(100.2)
292.6
170.9p
(19.0)
(17.4)
(20.1)
(19.6)
(18.5)
(18.1)
Intertek Group plc Annual Report and Accounts 2020
51
Financial statementsDirectors’ reportStrategic report Financial review Continued
5x5 strategy implementation
In March 2016, the Group announced its 5x5 differentiated strategy
for growth, with the aim to move the centre of gravity of the Group
towards high-growth, high-margin areas in its industry, which included
two strategic priorities relevant to the operational structure of
the business:
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. Reconciliations of the statutory to adjusted
measures are given below.
• to operate a portfolio that delivers focused growth amongst the
business lines, countries and services, including a strategic review
of underperforming business units; and
• to deliver operational excellence in every operation to drive
productivity, including re-engineering of unnecessary processes
and layers and the refinement of our organisational structure.
During the year, the Group has continued to implement certain
non-recurring action plans identified through the portfolio review in
specific country and/or business line combinations, consistent with
the 5x5 strategy, with a resulting charge of £19.0m in the year. These
activities included the termination of certain business lines in some
countries; the closure and consolidation of business line locations
in certain countries; the reorganisation of various management
structures either in-country or across multiple countries in a region;
or the fundamental reorganisation of global business lines including
direct staff, management and support function structures.
Restructuring charges are included in the SDI section below, in
instances where they have been specifically identified as part of
the portfolio review, are non-recurring and meet the IAS 37 criteria,
in contrast to restructuring costs for ongoing standard cost-efficiency
and cost-saving opportunities, which are incurred within
adjusted results.
Government grants
In 2020, the Group participated in a range of government support
schemes and received £22.5m (H1: £9.3m, H2: £13.2m) (2019: £5.0m
(H1: £1.9m, H2: £3.1m)) in government grants, recognised within
expenses, with the increase driven by the COVID-19 pandemic.
Pensions
The Group’s net pension liabilities decreased to £12.1m (2019:
£13.4m) driven by periodic updates to our actuarial assumptions.
In 2019, the Group recorded a £5.8m pension curtailment gain
on the closure of the Hong Kong defined benefit scheme.
52
Intertek Group plc Annual Report and Accounts 2020
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
related to acquisition activity; the cost of any fundamental restructuring
of a business; material claims and settlements; significant recycling
of amounts from equity to the income statement; unrealised market
or fair value gains or losses on financial assets or liabilities, including
contingent consideration; and significant legislative changes.
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 as part of our 5x5 differentiated strategy for growth
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 impairment of goodwill and other
assets that by their nature or size are not expected to recur, 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.
The SDIs charge for 2020 comprises amortisation of acquisition
intangibles of £28.1m (2019: £29.1m); acquisition costs relating to
successful, active or aborted acquisitions of £2.4m (2019: £1.6m);
restructuring costs (as described above) of £19.0m (2019: £13.3m);
gain on disposal of subsidiaries and associates of £nil (2019: £1.8m);
release of claims provisions of £nil (2019: £4.6m); and GMP
equalisation adjustment of £nil (2019: £0.8m).
Further information on Separately Disclosed Items is given in
note 3 to the financial statements.
2020 reconciliation of statutory
to adjusted performance measures1
£m
Revenue
Operating profit
Operating margin (%)
Net financing costs
Income tax expense
Profit for the year
Cash flow from operations
Basic EPS (pence)
Diluted EPS (pence)
Statutory
SDIs
Adjusted
2,741.7
378.2
13.8%
(34.3)
(81.3)
262.6
685.2
153.6p
152.4p
–
2,741.7
49.5
1.8%
427.7
15.6%
(0.6)
(34.9)
(18.9)
(100.2)
30.0
19.9
18.6p
18.5p
292.6
705.1
172.2p
170.9p
2019 reconciliation of statutory
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 (pence)
Diluted EPS (pence)
Statutory
SDIs
Adjusted
2,987.0
–
2,987.0
485.8
16.3%
(40.7)
(111.5)
333.6
715.3
194.5p
192.6p
38.4
1.2%
1.3
(7.3)
32.4
15.3
20.1p
19.9p
524.2
17.5%
(39.4)
(118.8)
366.0
730.6
214.6p
212.5p
Financial statementsDirectors’ reportStrategic report Financial review Continued
Acquisitions and investment
One of the key corporate goals of the Group’s 5x5 strategy is
delivering an accretive, disciplined capital-allocation policy.
As a result, the Group invests both organically, and by acquiring or
investing in complementary businesses to strengthen our portfolio in
the locations demanded by clients. This approach enables the Group to
focus on those existing business lines or countries with good growth
and margin prospects where we have market-leading positions or to
enter new exciting growth areas offering the latest technologies
and Quality Assurance services.
Acquisitions
The Group completed no acquisitions in the year. In 2019 the Group
completed one acquisition for cash consideration of £17.0m, net of
cash acquired of £1.0m.
Organic investment
The Group also invested £79.8m (2019: £116.8m) organically in
laboratory expansions, new technologies (including software) and
equipment and other facilities. This investment represented 2.9%
of revenue (2019: 3.9%).
Key performance indicators
The Group uses a variety of key performance indicators (‘KPIs’)
to monitor the financial performance of the Group and its operating
divisions. The specific metrics and associated definitions are
disclosed on pages 24 to 25.
Like-for-like revenue at constant currency is presented to show the
Group’s revenue excluding the effects of the change in the scope of
the consolidation (acquisitions following their 12-month anniversary
of ownership, and remove the historical contribution of any business
disposals/closures) and removing the impact of currency translation
from the Group’s growth figures.
Like-for-like revenue at
constant currency
Reported revenue
less: Acquisitions/
disposals revenue
Like-for-like revenue
Impact of foreign
exchange movements
Like-for-like revenue at
constant currency
2020
£m
2019
£m
Change
%
2,741.7
2,987.0
(8.2)
(5.8)
(3.7)
2,735.9
2,983.3
(8.3)
–
(47.1)
2,735.9
2,936.2
(6.8)
The rate of Return On Invested Capital (‘ROIC’), defined as adjusted
operating profit less adjusted taxes divided by invested capital,
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.
ROIC in 2020 of 21.6% compares to 23.5% in the prior year at
constant exchange rates (2019: 23.7% at actual exchange rates).
Return On Invested Capital
at constant currency
Adjusted operating profit
2020
£m
427.7
2019
£m
515.1
less: Adjusted tax1
(109.1)
(126.2)
Adjusted profit after tax
318.6
388.9
Change
%
(17.0)
13.5
(18.1)
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 conversion
Cash flow from operations
add back: Cash flow relating
to SDIs
2020
£m
685.2
19.9
2019
£m
715.3
15.3
Change
%
(4.2)
30.1
Adjusted cash flow from
705.1
730.6
(3.5)
operations
add back: Special
contributions to pension
schemes
Repayment of lease liability
Cash flow for cash conversion
2.0
2.0
–
(72.0)
635.1
(69.7)
662.9
3.3
(4.2)
Cash conversion %
148.5%
126.5%
2,200bps
Invested capital2
ROIC %
1,475.4
1,654.3
(10.8)
Free cash flow reconciliation
21.6%
23.5%
(190bps)
Cash generated from operations
2020
£m
685.2
2019
£m
715.3
1. Calculated by applying the adjusted effective tax rate (2020: 25.5%, 2019: 24.5%)
to adjusted operating profit.
2. Net assets excluding tax balances, net financial debt and net pension liabilities.
less: Net capital expenditure
(72.2)
(114.3)
add back: Interest received
less: Interest paid
less: Income tax paid
less: Lease liabilities paid
Free cash flow
add back: SDI cash outflow
Adjusted free cash flow
1.1
(34.8)
(91.6)
(72.0)
415.7
19.9
435.6
1.2
(40.7)
(111.8)
(69.7)
380.0
15.3
395.3
Intertek Group plc Annual Report and Accounts 2020
53
Financial statementsDirectors’ reportStrategic report Financial review Continued
Net debt
Net financial debt has decreased from £629.4m at 31 December 2019
to £419.9m at 31 December 2020, primarily reflecting the continued
strong underlying cash generation of the Group in 2020. Including the
IFRS 16 lease liability, total net debt was £644.1m at 31 December
2020 (2019: £875.4m).
In January 2020, the Group renewed its existing revolving credit
facility, increasing to US$850m and maturing in 2025. In January
2021, the facility was extended to 2026. In December 2020, the
Group repaid US150m of senior notes and also issued US$200m
of senior notes. These new notes were issued in two tranches with
US$120m repayable on 2 December 2023 and US$80m repayable on
2 December 2025. At 31 December 2020, total undrawn committed
borrowing facilities were £494.0m (2019: £326.2m).
The Group has a well-balanced loan portfolio to enable the funding
of future growth opportunities with a maturity profile as shown
opposite.
Working capital
During 2020, we have continued our working capital focus and
through disciplined performance management working capital has
reduced by £104.7m to negative £4.0m. Working capital has declined
to (0.1%) of revenue, reflecting 350bps improvement year-on-year,
contributing to continued strong cash conversion.
Adjusted free cash flow (£m)
11.0% CAGR1
Borrowings by maturity profile
(At 31 December 2020)
435.6
9%
2020
2019
2018
2017
2016
2015
1. CAGR represents the compound annual growth rate from 2015 to 2020.
Five-year trend – Working capital as % of revenue
(890) bps1
2020
2019
2018
2017
2016
2015
395.3
372.6
358.5
340.0
258.6
(0.1)
3.4
3.9
5.0
7.1
8.8
2%
89%
Less than one year
Over five years
One to five years
Under existing facilities, the Group has available debt headroom
of £494.0m at 31 December 2020. The components of net debt
at 31 December 2020 are outlined below:
1 January
2020
£m
Cash and
non-cash
movements
£m
Exchange
adjustments
£m
31 December
2020
£m
Cash1
Borrowings2
Financial net
debt
Lease liabilities2
Net debt
213.0
(842.4)
(629.4)
(246.0)
(875.4)
(21.7)
229.4
207.7
21.1
228.8
(7.9)
183.4
9.7
1.8
0.7
2.5
(603.3)
(419.9)
(224.2)
(644.1)
1. As disclosed in note 14, cash includes cash and cash equivalents less overdrafts.
2. Borrowings include £2.2m of non-cash movements related to amortisation of facility
fees (see note 14 of the financial statements). Lease liabilities include £50.9m of
non-cash movements.
54
Intertek Group plc Annual Report and Accounts 2020
1. Reduction in working capital as a percentage of revenue from 2015 to 2020.
2. Working capital is defined under the statement of financial position within the
financial statements.
3. Following the adoption of IFRS 16 on 1 January 2019, figures before this date are on an IAS
17 basis.
Financial statementsDirectors’ reportStrategic report Financial review Continued
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 2020, analysed
by currency, is as follows:
Borrowings by currency
4%
17%
USD
EUR
AUD
CHF
1%
78%
Foreign currency movements
The Group transacts in over 80 currencies across more than 100
countries, and revenue and profit are impacted by the currency
fluctuations. However, the diversification of the Group’s revenue
base provides a partial dilution to this exposure.
At constant rates, revenue declined 6.7% (actual rates 8.2%) and
adjusted operating profit declined 17.0% (actual rates 18.4%).
The exchange rates used to translate the statement of financial
position and the income statement into the Group’s functional
currency, sterling, for the five most material currencies used in
the Group are shown below:
Statement of financial
position rates
Income
statement rates
Value of £1
US dollar
Euro
Chinese renminbi
Hong Kong dollar
Australian dollar
2020
1.35
1.10
8.81
10.47
1.78
2019
2020
2019
1.31
1.17
9.17
10.18
1.87
1.28
1.13
8.88
9.96
1.87
1.28
1.14
8.82
10.00
1.84
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.
Ross McCluskey
Chief Financial Officer
Intertek Group plc Annual Report and Accounts 2020
55
Financial statementsDirectors’ reportStrategic report 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.
Changes to principal risks
Our principal risks continue to evolve in response to our changing risk
environment. For the past two years, we have included Brexit as a
standalone principal risk based on the significant uncertainty around
the future of the relationship between the UK and EU. Based on our
assessment of the risks and impacts on our operations since the end
of the Brexit transition period, we have removed Brexit as a principal
risk this year. However, we continue to monitor the impact of the new
trading, customs and border arrangements, including on our clients’
and their supply chains – and have reflected this accordingly within
our Industry & Competitive Landscape risk.
This year, based on our current assessment of its materiality, we
have also included the risk of climate change within our Industry &
Competitive Landscape risk. We continue to monitor the potential
operational, strategic, regulatory and reputational impact of climate
change and the environment.
Principal risks and uncertainties
Managing
assurance
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.
>
Read more on page 58
56
Intertek Group plc Annual Report and Accounts 2020
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 80 to 81.
The Group Audit Director 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 which is
owned by each of the Group’s divisional, regional and functional risk
committees. Risk registers are updated throughout the year by these
risk committees and are used to plan the Group’s internal audit and
risk strategy.
In addition to the risk registers, 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.
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.
Financial statementsDirectors’ reportStrategic report Principal risks and uncertainties Continued
Long-term viability statement
In accordance with provision 31 of the UK Corporate Governance
Code, the Directors have assessed the viability of the Group over
a five-year period to 31 December 2025, 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. This is documented on the following pages.
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.
Furthermore, the Directors believe the five-year period appropriately
reflects the average business cycles of the business lines in which
the Group operates, particularly in relation to capital expenditure
investment horizons.
In addition to the bottom-up strategic review process where the
prospects of each business line are reviewed, an assessment has
been made of the potential operational and financial impacts on the
Group of the principal risks and uncertainties outlined in the following
pages. The Directors have also assessed certain combinations of these
principal risks and uncertainties in a number of severe, but plausible,
scenarios, as well as the effectiveness of any mitigating actions as set
out in the table opposite. The Directors have assessed climate change
will not have a meaningful impact on the viability of the Group over
the five-year period to 31 December 2025.
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 2025. The statement on going concern is in the
Directors’ report on page 100.
Scenario
Regulatory
environment
change
Customer service issue
Ethical and/or quality
breach
IT systems breach
Associated principal risks
Description
• Industry and competitive landscape
• Customer service
• Regulatory and political landscape
• People retention
• Reputation
• COVID-19
• Industry and competitive landscape
• Customer service
• Business ethics
• People retention
• Reputation
• Third-party relations
• COVID-19
• Customer service
• Business ethics
• People retention
• Financial risk
• Health, safety and wellbeing
• Reputation
• Third-party relations
• COVID-19
• Customer service
• People retention
• IT systems and data security
• Reputation
• Third-party relations
• COVID-19
Failure to identify, understand and respond to
regulatory or political changes results in loss of
revenue, profitability, market share and/or adversely
changes the competitive landscape.
Failure to respond/adapt to a customer service issue
leads to a loss of key customers and detrimentally
impacts reputation.
An ethical and/or quality breach leads to litigation
(including significant fines and debarment from certain
territories/activities), reputational damage, loss of
accreditation and erosion of customer confidence.
A serious data security/IT systems breach
results in a significant financial penalty and
a loss of reputation among customers.
Intertek Group plc Annual Report and Accounts 2020
57
Financial statementsDirectors’ reportStrategic report Principal risks and uncertainties Continued
Possible impact
Mitigation
2020 update
• Failure to meet financial performance
• Quality Management Systems; adherence to these is regularly audited
expectations.
• Exposure to material legal claims, associated
and reviewed by external parties, including accreditation bodies.
• Risk Management Framework and associated controls and assurance
costs and wasted management time.
processes, including contractual review and liability caps where appropriate.
• Destruction of shareholder value.
• Loss of existing or new business.
• Loss of key staff.
• Code of Ethics which is communicated to all staff, who undergo
regular training.
• Zero-tolerance approach with regard to any inappropriate behaviour by
any individual employed by the Group, or acting on the Group’s behalf.
• Whistleblowing 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.
This risk remains stable compared
with 2019. The Group continues to
invest in staff development, quality
systems and standard processes
to prevent operational failures.
• May lead to customer dissatisfaction and
• Net Promoter Score (‘NPS’) customer satisfaction, customer sales trends
customer loss.
and turnaround time tracking.
• Gradual erosion of market share and reputation
• Global and Local Key Account Management (‘GKAM’/’LKAM’) initiatives
This risk remains stable compared
with 2019.
if competitors are perceived to have better, more
responsive or more consistent service offerings.
in place.
• Customer feedback meetings.
• Customer claims/complaints reporting.
• 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.
• 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 2019.
and expertise.
Operational
Principal risk
01 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.
02 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.
03 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.
58
Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Principal risks and uncertainties Continued
Principal risk
Possible impact
Mitigation
2020 update
• Individual or multiple injuries to employees
• Quality management and associated controls, including safety training,
and others.
• Litigation or legal/regulatory enforcement action
(including prosecution) leading to reputational
damage.
• Loss of accreditation.
• Erosion of customer confidence.
• Wellbeing – individual or multiple instances
of stress-related issues and/or illnesses,
absenteeism, and related impacts on morale.
appropriate PPE (Personal Protective Equipment), Health & Safety policies
(including due diligence on sub-contractors), meetings and communication.
• 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 planning.
• Employee wellbeing programme.
The health and safety element of
this risk remains stable compared with
2019. The risk related to wellbeing
has increased as a result of COVID-19,
which has affected both our people
and their ways of working.
• 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.
• 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-selling initiatives.
• NPS customer research to understand customer satisfaction.
• Using innovation to respond to the COVID-19 pandemic.
This risk remains stable compared
with 2019.
The Group continues to invest in
innovation and to adapt our service
delivery to meet our clients changing
needs.
04 Health, safety and wellbeing
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. Wellbeing
impacts on our people resulting from the
COVID-19 pandemic and other similar events.
05 Industry and competitive landscape
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; the failure to
foresee the impact of, or adequately respond
to and comply with, changing or new laws
and regulations; a failure to anticipate and
address the operational, strategic, regulatory
and reputational impact of climate change
and environmental factors; and a failure to
identify and take advantage of the impact
of post-Brexit changes to our clients’
operations and supply chains.
Macroeconomic factors such as a global/
market downturn and contraction/changing
requirements in certain sectors.
Intertek Group plc Annual Report and Accounts 2020
59
Financial statementsDirectors’ reportStrategic report Principal risks and uncertainties Continued
Principal risk
Possible impact
Mitigation
2020 update
• Poor quality work.
• Ethical issues.
• Lack of control over services being provided via
third parties.
• Failing to agree optional terms, including pricing
with suppliers.
• Contracting with suppliers whose sustainability,
ethical, cyber or other standards cause a risk to
Intertek, its reputation or its operations.
• Third-party appointment and due diligence processes.
• Standard third-party contracts.
• Third-party lease reviews.
• Vendor/supplier financial diligence.
• Supplier Code of Conduct.
• Annual reviews of quality and pricing.
• Training on Code of Ethics for key third parties.
• Supply chain risk review as part of compliance with Modern Slavery Act.
This risk remains stable
compared with 2019.
• Loss of revenue due to down time.
• Potential loss of sensitive data with associated
legal implications, including regulatory sanctions
and potential fines.
• Information systems policy and governance structure.
• Regular system maintenance.
• Backup systems in place.
• Disaster recovery plans that are constantly tested and improved
• Potential costs of IT systems’ replacement
to minimise the impact if a failure does occur.
and repair.
• Global Information Security policies in place (IT, Data Protection,
• 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.
CyberSecurity).
• Adherence to IT finance systems controls (part of Core Mandatory
Controls (‘CMCs’)).
• Adherence to IT general controls.
• Internal and external audit testing.
• Processes to ensure compliance with GDPR.
This risk remains stable
compared with 2019.
06 Third-party relations
A failure to optimally manage the way in
which we work with third parties (including
landlords, suppliers, sub-contractors or
agents) from a financial, commercial, risk,
governance, security or sustainability
perspective. Poorly established and
maintained relationships could increase the
chances of poor quality work, ethical issues
and a lack of control over the services
Intertek is providing via third parties.
07 IT systems and data security
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.
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.
Data security: a failure to adequately
protect the Group’s confidential information,
customer confidential information or the
personal data of the Group’s employees,
customers or other stakeholders.
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Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Principal risks and uncertainties Continued
Principal risk
08 COVID-19
The risk caused by the ongoing coronavirus
pandemic. The virus is a potential risk to: (1)
the health and safety of our people; (2) the
ability of our and our customers’ businesses
to operate normally; and (3) global supply
chains and the flow of goods and services.
Possible impact
Mitigation
2020 update
• We are closely monitoring our people’s health, safety and security and
relevant regulatory requirements.
• We have implemented, and continually revise, the Group’s COVID-19 Health
and Safety Policy, which covers extensive hygiene control and prevention
measures for our office and field-based people.
• We have made changes to operational procedures to redirect work to
Intertek facilities in unaffected locations.
• We are engaging closely with our customers to support their needs.
• We have put in place temporary travel restrictions into and out of
China and Hong Kong.
• We have working groups at the Group, regional and local levels to monitor
the situation and put appropriate mitigation action and continuity plans
in place.
• We have implemented a remote inspection approach to ensure compliance
with the COVID-19 Health and Safety Policy across all of our sites.
We believe this risk remains similar
to the prior year. Although global
vaccination programmes and
other factors (such as rapid mass
testing and improved treatments
and therapies) may reduce this
risk during 2021, there remains
significant uncertainty on the timing
and availability of vaccine rollouts
globally and the potential for ongoing
government lockdown and other
restrictions.
We continue to work closely with
our clients to prioritise the health and
safety of our and their people and
to maximise business continuity.
• There is a health and safety risk to our people
who come into contact with confirmed cases.
• In affected areas, there is a risk that the ability
of our people to work as normal is impacted
by mandatory health and safety restrictions,
including quarantine and travel restrictions
in certain cases.
• There is a risk that the ability of our people to
perform field-based work (audits and inspections)
continues to be affected by control and
prevention measures that we and our clients
are taking, or are subject to.
• In affected areas, there is risk of disruption to our
normal operations both as a consequence of the
issues faced by our people and of the impact to
our clients’ operations and production levels.
• There is a risk that an ongoing situation
could continue to disrupt global supply chains,
which could lead to a need to refocus our service
offering or delivery locations to align optimally
with customer requirements and to remain
competitive.
• There is a risk that our 2021 performance will be
affected by the disruption to the supply chains of
our clients and any impact it may have on global
trade activities.
Intertek Group plc Annual Report and Accounts 2020
61
Financial statementsDirectors’ reportStrategic report Principal risks and uncertainties Continued
Legal and Regulatory
Principal risk
09 Regulatory and political landscape
A failure to identify and respond
appropriately to a change in law and/or
regulation, or to a political decision, event or
condition which could impact demand for the
Group’s services or the Group’s ability to
grow, innovate and/or provide a competitive
customer offering in any existing or new
industry sector or market.
10 Business ethics
Non-compliance with Intertek’s Code of
Ethics (‘Code’) 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.
Possible impact
Mitigation
2020 update
• Loss of revenue, profitability and/or market share.
• Increase to costs of operations, reduction
• Monitoring of regulatory environment and political developments.
• Analysis of impact of regulatory and political changes on operational
This risk remains stable compared
with 2019.
in profitability.
SOPs and Group policies.
• Reduction in the attractiveness of investment
• Membership of relevant associations, e.g. TIC Council with related
in specific businesses, sectors or markets and/or
adverse change in the competitive landscape.
advocacy and liaison activities including in relation to developing climate-
related or environmental regulations.
• Litigation, including significant fines and
debarment from certain territories/activities.
• Reputational damage.
• Loss of accreditation.
• Erosion of customer confidence.
• Impact on share price.
• Annual Code of Ethics training and sign-off requirement.
• Whistleblowing 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.
• Enhanced processes for engagement with suppliers and third parties.
• Zero-tolerance approach 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 2019.
Ongoing annual confirmations ensure
that staff verify compliance with the
Code of Ethics.
Local compliance officers perform
due diligence on sub-contractors
to check that they have signed the
Group’s Code.
During 2020, 99 (2019: 168) non-
compliance issues were reported
through the whistleblowing
hotline and other routes. All were
investigated, with 27 (2019: 40)
substantiated and corrective
action taken.
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Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Principal risks and uncertainties Continued
Financial
Principal risk
11 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.
Possible impact
Mitigation
2020 update
• Financial losses with a direct impact on the
bottom line.
• Large-scale losses can affect financial results.
• Potential legal proceedings leading to costs
and/or management time.
• Corresponding loss of value and reputation could
result in funding being withdrawn or provided
at higher interest rates.
• Possible adverse publicity.
• The Group has financial, management and systems controls in place to
ensure that the Group’s assets are protected from major financial risks.
• Adherence to Authorities Grid (which sets approval limits for financial
transactions).
• Stringent controls on working capital and cash collection.
• Legal, financial and other due diligence on M&A and other investments.
• Monitoring adherence to our Core Mandatory Controls and tracking of
remediations by our compliance and finance controls teams and using
our framework of risk committees.
• 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.
This risk remains stable compared
with 2019.
Review and update of Core
Mandatory Controls for year
end compliance certification.
Intertek Group plc Annual Report and Accounts 2020
63
Financial statementsDirectors’ reportStrategic report Our stakeholders
Section
172
statement
In accordance with their duties under section 172(1)
of the Companies Act 2006, the Board of Directors
individually and collectively confirm that during the
year under review, they have acted in a way that they
consider, in good faith, is most likely to promote the
long-term success of the Company for the benefit
of its members as whole, whilst having due regard
to the matters set out in section 172(1) (a) to (f)
of the Companies Act 2006, being:
a) the likely consequences of any decision in the long term;
b) the interests of the Company’s employees;
c) the need to foster the Company’s business
relationships with suppliers, customers and others;
d) the impact of the Company’s operations on the
community and the environment;
e) the desirability of the Company maintaining a
reputation for high standards of business conduct; and
f) the need to act fairly between members of the Company.
64
Intertek Group plc Annual Report and Accounts 2020
Examples of some of the principal decisions taken by the
Board during the year, an explanation of the outcome of the decision
and the matters which the Directors had regard to when reaching
such decisions, are set out in the following section.
For more information about:
• the attractive nature of our industry, Intertek’s high-quality
earnings model and the effectiveness of our 5x5 differentiated
strategy for growth, see pages 8 to 15 in our Strategic report;
• the exciting structural growth drivers in the global Quality
Assurance market post-COVID-19, which now includes a wide
array of new opportunities in many areas which have become
even more compelling during 2020 as health, safety, wellbeing and
sustainability grow in importance for companies and individuals
alike, see page 11 in our Strategic report; and
• why we consider Intertek to be sustainable, see pages 26 to 41,
and our Company to be viable and a going concern, see page 57 of
the Strategic report and page 100 of the Audit Committee report.
Long-term success
We, as a Board, clearly understand our responsibility to deliver
long-term sustainable success and returns for our shareholders,
underpinned by the highest standard of corporate governance,
conduct and integrity. We collectively review, discuss and annually
agree the Group’s strategic review which covers a period of five years
and is then linked to the viability statement as outlined on page 57.
Intertek has been delivering pioneering safety solutions to companies
for over 130 years and in that time has had to navigate multiple
challenges on a local and global basis. As a business, we have learned
a lot over the past 12 months and by acting with speed, flexibility and
innovation to support our clients, we have lived up to our philosophy
of becoming ‘Ever Better’ in everything we do and delivering services
that are mission-critical to support the wider society as a whole.
Our business can only grow and prosper over the long term if we
understand and respect the views and needs of our customers, our
people and the communities in which we operate, as well as our
suppliers and the shareholders to whom we are accountable.
(A) The likely consequences of any decision in the long term
The importance of having due regard to stakeholders in the context of
decision-making is brought to the Board’s attention regularly. At the
front of every Board and Committee agenda, the section 172(1) duties
of the Board, including our purpose, customer promise, vision and
board promise, are outlined as a reminder before each meeting.
Strategic planning discussions are supported by our purpose to bring
quality, safety and sustainability to life and to make the world a better,
safer and more sustainable place whilst looking at the long term
structural drivers and the emerging trends shaping the future of
the world to ensure that the business continues to evolve to meet
the changing needs of all stakeholders.
Financial statementsDirectors’ reportStrategic report Section 172 statement Continued
Principal decisions
We define principal decisions taken by the Board as those decisions that are of a strategic nature and that are significant to any of our key stakeholder groups. As outlined in the FRC Guidance on Strategic reports,
we include decisions related to capital allocation and dividend policy.
For Board consideration
Stakeholders affected
How stakeholders affected were considered
The principal decision and outcome(s)
Whether the 2020 final and interim
dividend should be paid in line with
our dividend policy.
• Shareholders
• Employees
• Communities
• Governments
Implementation of a global COVID-19
Health and Safety (‘HSE’) policy
which prioritises the health and
safety of our employees.
• Employees
• Customers
• Suppliers
• Communities
• Governments
Introducing innovative products
which addressed Health, Safety and
Wellbeing in the workplace, in public
places, on public transport, at home
and in our environment generally.
• Communities
• Customers
• Environment
• Suppliers
• Government & Regulators
The Board carefully reviewed the performance of the Group in Q1 and
then at the half year, together with the 2020 outlook for the profit
and loss account and the balance sheet.
They also considered the impact of this decision on our shareholders,
many of whom are pension funds which then has a bearing on
individuals in the wider community together with the tax paid on such
dividends. Many of our employees are themselves also shareholders
and these payments reflected the strong nature of the company they
work for.
The Board recommended a full year dividend of 105.8p per share,
an increase of 6.8%, with payment of a final dividend of 71.6p to
shareholders in June 2020 and an interim dividend of 34.2p
in October 2020.
This recommendation reflected the Group’s earnings progression,
strong financial position and balance sheet and the Board’s
confidence in the Group’s structural growth drivers into the future.
The Board concluded that it was in the long-term interest of the
Company to proceed with the payment of the dividends.
Our main priority is always to ensure the health and safety of our
employees. By implementing a policy which applies Group-wide, we
ensured that employees were exercising safe practices throughout
the pandemic.
This also had a subsequent impact on customers, suppliers and
society as a whole, with employees demonstrating such safe
practices and protocols in their interactions with these stakeholders
and ensuring the continuing provision of necessary and vital services
by Intertek.
A COVID-19 HSE policy across the Group globally was introduced in
May 2020, which has subsequently been updated. The policy was
developed on the basis of fact-based and balanced decisions and
the measures were put in place with a view to minimising the risks
that our people, customers and suppliers face during this pandemic.
Extensive communications were rolled out to all Intertek locations to
make everyone aware of the measures they needed to put in place.
Intertek will always follow any mandatory requirements that
government or local authorities put in place, but beyond that we
were able to, and continue to, maintain business as usual and our
operations continued to run smoothly while maintaining safe
working practices.
Following research undertaken, we considered how communities
could be appropriately safeguarded in a manner which is irrelevant of
industry or geography, whilst also enabling our customers to continue
to deliver their services without disrupting the global supply chains.
In April 2020, POSI-CHECK was launched. This solution helps hoteliers,
restaurants and more to demonstrate that they are effectively
managing the prevention of the spread of infection, to open safely
and continue to be safe long into the future.
Protek™, the world’s first industry-agnostic, end-to-end Health,
Safety and Wellbeing Audit, Inspection, Testing and Certification
Assurance programme for people, workplaces and public spaces,
was launched in May 2020. It is a comprehensive service offering,
providing audits, training and service solutions across People,
Systems & Processes, Facilities, Materials & Surfaces and Products.
Intertek Group plc Annual Report and Accounts 2020
65
Financial statementsDirectors’ reportStrategic report Section 172 statement Continued
Board engagement with
stakeholders (matters B, C, D & F)
In the table on the next page we have set out our key stakeholder
groups, how they are linked to our strategy and risks, their material
issues and concerns, why and how the Board engages with them,
and the outcome of the engagement. We understand the need to
tailor our approach to engagement with each stakeholder group to
maintain positive and beneficial relationships and to understand
their needs and interests. In this way, we can take account of these
interests in our boardroom discussions and understand the impact of
our decision-making on each stakeholder group, which in turn ensures
we can continue to provide services that our clients need, collaborate
effectively with our colleagues, make a positive impact to local
communities and deliver robust returns and long-term sustainable
value for our investors.
Strategic priorities
Our strategic enablers
Differentiated
brand proposition
Superior
customer service
Effective
sales strategy
Growth and margin-
accretive portfolio
Operational
excellence
Living our customer-
centric culture
Disciplined
performance management
Principal risks
01 Reputation
02 Customer service
03 People retention
04 Health, safety and wellbeing
05 Industry and competitive landscape
Superior technology
06 Third-party relations
Energising
our people
Delivering
sustainable results
07 IT systems and data security
08 Coronavirus (COVID-19)
09 Regulatory and political landscape
10 Business ethics
11 Financial risk
>
Read more on page 18
>
Read more on page 18
>
Read more on pages 56 to 63
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Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Section 172 statement Continued
Link to strategy & risk
Their material issues/concerns
Why and how the Board engages
Outcome of engagement
Further reading
Customers
Principal risks
01 02 03 04
05 06 07 08
09 10 11
People
Principal risks
01 03 04
07 08 10
• Global supply chain disruption.
• Mission-critical ATIC services.
• Uninterrupted customer service.
• Safety in workplaces.
We offer our customers a unique risk-based approach to Quality
Assurance, supporting them to thrive in an increasingly complex world.
It is their changing needs that drive our approach to innovation and we
are constantly learning from their feedback so that we can deliver
‘Ever Better’ solutions to their developing requirements.
Customer-centric entrepreneurial culture putting the customer first.
Regular reports to the Board.
Data Intelligence Benchmarking by site, service, and customer.
Net Promoter Score listening to c.6,000 customers per month.
• Rapidly brought innovations
to market.
• Adapted delivery of services to
ensure first-in-queue for urgent
health products.
• Development of remote service
capabilities.
>
Read more on pages
16 to 23
Our engagement with
customers
• Safe laboratory and office
working environments.
• Employee engagement and
wellbeing and mental health
support during the pandemic.
• Job security.
• Ethical practices.
We recognise our employees’ contribution to the success of our
customers’ products, services and operations. They drive our growth,
delivering global solutions locally to build strong local relationships,
in local languages and fuelled by their deep understanding of
local culture and customer priorities. We have an experienced,
entrepreneurial, diverse workforce with outstanding talent for
innovation, which enables us to deliver our services with precision,
pace and passion.
Employee health and safety has been our number one priority
throughout the pandemic. The Board reviewed the findings
from an Intertek Employee Health and Safety Survey.
Weekly updates to the Board on the COVID-19 situation across
the Group to closely monitor our people’s health and wellbeing
using a ‘5-category’ system.
Updates on our people at every board meeting and extensive
discussions on people, talent planning and culture throughout
the year.
Understanding the uncertainty the pandemic has brought to
employees and the wider community.
• Specific COVID-19 HSE policy
adopted globally.
>
Read more on pages
85 to 88
• Best practices to engage with
remote-working employees.
Our engagement with
employees
• World-class digital
communication platform,
WhatsIn, to ensure collaboration
and connection across the
Group.
• Daily Intertek Hero videos
recognising our colleagues
and their contributions.
• Decisions taken to pay
dividends.
• No restructurings due to
COVID-19 undertaken to ensure
our subject matter experts are
retained for the long term
within the business to deliver
future growth.
Intertek Group plc Annual Report and Accounts 2020
67
Financial statementsDirectors’ reportStrategic report
Section 172 statement Continued
Link to strategy & risk
Their material issues/concerns
Why and how the Board engages
Outcome of engagement
Further reading
Suppliers
Principal risks
01 04 06
07 08 10
Investors
Principal risks
01 02 03 04
05 06 07 08
09 10 11
• The viability of Intertek
as a customer.
• The quality of products and their
own supply chains.
• How to deliver services remotely
in line with local restrictions due
to the pandemic.
As a global company, we have a strong agenda on sourcing
responsibly and are passionate about ensuring our supply chain
operates likewise and improves the lives of workers, their
communities and the environment, and in making a positive
contribution to human rights. We work with suppliers all over the
world and we are committed to treating them fairly and maintaining
the highest standards of respect and integrity in how we conduct
ourselves every day, everywhere and in every situation.
Operating by ‘Doing the Business the Right Way’.
Managing supplier relationships and assessing their labour practices,
anti-bribery, corruption and sustainability.
Regular reports on Risk, Control, Compliance and Quality to the Board.
Reviewing the culture operating across the business.
>
Read more on pages
13 and 27
Our engagement with
suppliers
• The ongoing focus on ‘Doing
Business the Right Way’ and annual
Code of Ethics training across
the Group.
• Introduction of the Intertek
Sustainable Procurement Policy
demonstrating our commitment to
an ethical, sustainable approach
to the supply chain.
• Long-term strategy
and business model.
• Financial performance.
• Governance.
• Sustainability.
• Risk management.
We are responsible to the Company’s shareholders for the proper
conduct and success of the business and our shareholders play an
important role in monitoring and safeguarding the governance of the
Group. We do everything for the benefit of our shareholders, whether
they are large institutions or private shareholders, financially through
the returns we generate for them and reputationally through the way
we operate.
The Chairman holds a meeting with shareholders to discuss corporate
governance annually.
A shareholder consultation was undertaken following the vote
on the Remuneration Policy at the 2020 AGM.
Feedback from all such meetings with shareholders is given
to the Board.
Regular investor relations updates to the Board.
All members of the Board attend the AGM.
• The feedback from the meetings
the Chairman had with shareholders
was positive and the shareholders
continue to be supportive of
Intertek’s strategy, the
management and the Board.
• The outcome from the shareholder
engagement on remuneration is
outlined in the letter from the Chair
of the Remuneration Committee
on pages 105 to 107.
• Decisions to pay dividends.
• Focus on carbon emission
reduction plans.
>
Read more on page 89
Investor engagement
>
Read more on pages
50 to 55
Financial performance and
the returns delivered to our
shareholders in 2020
>
Read more on pages
35 to 38
Environment in our
Sustainability section
68
Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report
Section 172 statement Continued
Link to strategy & risk
Their material issues/concerns
Why and how the Board engages
Outcome of engagement
Further reading
Communities
Principal risks
01 03 04
06 07 08
10
• Safety in the workplace, in public
places, on public transport
and at home due to COVID-19.
• Local employment.
• The environment and our impact.
We are committed to supporting the communities in which we
operate and wider society as a whole. Our sustainability, growth and
innovations, as well as the services we provide to our customers,
generate direct and indirect benefits for communities in which
we operate.
We considered the research undertaken during 2020 that highlighted
the concerns of communities on returning to workplaces, using public
places and transport. The Board then supported the rapid
development of tools to provide assurance to the wider community.
>
Read more on pages
32 and 35 to 38
Impact on communities and
the environment in our
Sustainability section
• We launched POSI-CHECK which
helps hoteliers, restaurants, etc.,
demonstrate that they are
effectively managing the
prevention of the spread of
infection and Protek™, an end-to-
end Health, Safety and Wellbeing
Audit, Inspection, Testing and
Certification Assurance programme.
• Our eBook, Travel Truth and Lies
Unmasked, which was published
during the year and made available
in different languages, is a free
guide to help people think about
how they can mitigate health risks
while travelling. It was made freely
available on our website for
everyone to download.
Governments and Regulators
Principal risks
04 05 06
07 08 09
10 11
• Compliance with local laws
and regulations.
• Impact on wider society and
on the environment.
• Safety in the workplace, in public
places, on public transport and at
home due to COVID-19.
• Quality of products being used
by key workers.
‘Doing Business the Right Way’ is part of who we are and as a
responsible business, we are dedicated to engaging positively with
governments and regulators to ensure we are supporting the wider
community and complying with global, regional and local regulations.
Regular reports to the Board on Risk, Control, Compliance, Quality and
Corporate Governance.
The regular review of the viability of the business and the risks it
faces and mitigation action plans.
‘Doing Business the Right Way’.
Annual review of Modern Slavery and publication of our statement.
• The annual revision and update to
the Core Mandatory Controls to
ensure that the business operates
under essential controls in line with
local requirements and the
expectations of doing business.
• The annual Code of Ethics training
which is updated each year.
• The introduction of new services
and cooperation with governments
to deliver key services.
>
Read more on pages
13 and 35 to 38
Environment in our
Sustainability section
Intertek Group plc Annual Report and Accounts 2020
69
Financial statementsDirectors’ reportStrategic report
Section 172 statement Continued
(E) The desirability of the Company maintaining
a reputation for high standards of business conduct
The accuracy and validity of reports and certificates that we provide
and maintaining the trust and confidence of our customers, their
customers and others impacted by our work, are important factors
which contribute to our success. Integral to this is ‘Doing Business
the Right Way’ and our internal risk, control, compliance and quality
programme. This means living our values, having the highest standards
of ethics and integrity in how we conduct ourselves every day,
everywhere and in every situation.
We understand the importance of incorporating sustainability
principles into our quality and safety management policies and
systems: how we capture data to drive operational excellence;
consistently improving our services to our customers; adopting the
Intertek Sustainable Procurement policy; and ensuring the health
and safety of our people.
For more information about:
• how we carry on business responsibly, see pages 2 to 13 of the
Strategic report;
The programme includes:
• our safety priorities, policies and performance, see page 27 in the
Sustainability section; and
• our system of internal control including our management of risk,
see pages 80 and 107 of the Corporate Governance report.
• processes, tools and training to ensure that our people work
in a safe and inclusive environment;
• the services we provide and the contracts we enter into
are delivered with integrity and in line with our commitment
to Total Quality;
• a commitment from every colleague to the highest standards
of professional conduct; and
•
information about managing our risks and doing the right
thing for the longer term to deliver our sustainable growth.
The Strategic report was approved by
the Board on 1 March 2021.
On behalf of the Board
André Lacroix
Chief Executive Officer
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Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Corporate
Governance
Chairman’s introduction
to corporate governance
pages 72 to 73
This report has been prepared
in order to provide stakeholders
with a comprehensive
understanding of our
governance framework.”
Andrew Martin
Chairman
1
Board Leadership
and Company Purpose
2
Division of
Responsibilities
3
Composition,
Succession and Evaluation
4
Audit, Risk
and Internal Control
5
Remuneration
A. Effective and entrepreneurial Board
78
F. Roles and responsibilities
B. Purpose, values, strategy and culture 78
G. Independence
C. Governance framework and Board
activities in 2020
D. Stakeholder relations
E. Workforce engagement
81
85
85
H. External commitments
and conflicts of interest
I. Group Company Secretary support
93
90
91
91
J. Board appointments
K. Board skills, experience
and knowledge
L. Board evaluation
92
92
92
M. Financial reporting;
external auditor and internal audit
N. Fair, balanced and
understandable assessment
O. Internal financial controls;
risk management
100
103
103
P. Linking remuneration
with purpose, values and strategy
Q. Remuneration Policy review;
Changes to the Policy
R. Performance outcomes
in 2020; strategic targets
108
107
122
Intertek Group plc Annual Report and Accounts 2020
71
Financial statementsDirectors’ reportStrategic report
Chairman’s introduction
As COVID-19 spread
across the world, our
number one priority was
the health, safety and
wellbeing of our people
and our stakeholders
more widely.”
Andrew Martin
Chairman
72
Intertek Group plc Annual Report and Accounts 2020
There is no question that 2020 and the first few months of 2021
have been very challenging. As I think about the events of the past
12 months, I am pleased with Intertek’s response. The Company
moved fast, establishing five critical priorities that have guided
our approach to the pandemic.
As COVID-19 spread across the world, our number one priority
was the health, safety and wellbeing of our people and our
stakeholders more widely. Our people have reacted with dedication
and hard work to the exceptional circumstances and uncertainty
and we are very proud of their support for their communities and
their work with our customers.
Evidence of the passion, innovation and customer-centric
culture fostered by André and his leadership team is Protek™.
Working together with colleagues around the globe, Intertek
quickly developed Protek™, launching the total health, safety and
wellbeing assurance service for people, workplaces and public
spaces on 1 May 2020.
As well as evidence of the inherent attractiveness of our industry,
our high quality earnings model and 5x5 strategy, I firmly believe
the Group’s performance is a demonstration of the commitment of
our employees to our Purpose, to implementing our Vision, to living
our Values, and ultimately to delivering our Goals. As we continue
to navigate the challenges of COVID-19, our people are responding
and adapting effectively to this new world. On behalf of the Board,
I would like to express our sincere thanks to them.
Dear shareholder
The Board has developed a promise
that defines our work and purpose
at Intertek.
Financial performance
Against this backdrop, I am pleased by the resilience of the business
with revenues of £2.7bn, down 6.7% at constant currency. Reflecting
our decision to provide uninterrupted customer service throughout
the pandemic, margins declined but remained a robust 15.6%. Our cash
performance was strong. After investing £80m in capital expenditure,
we generated free cash flow of £436m, from which we returned
£170m to shareholders through cash dividends. Net financial debt at
the end of the year was £420m, compared to £629m at December
2019. Our high-quality earnings model delivered a return on invested
capital, a key performance indicator, of 21.6%.
Dividend
Our dividend policy aims to deliver sustainable dividend growth over
time, based on a target dividend payout ratio of circa 50%. Reflecting
the Group’s strong cash generation in 2020 and reduced leverage, the
recommended final dividend is 71.6p bringing the full-year dividend to
105.8p, which is in-line with 2019, and the dividend payout ratio to 62%.
Sustainability
Sustainability remains at the core of everything we do at Intertek.
Our people are as passionate about supporting our clients to make
a difference as they are about our own sustainability journey.
This year, Intertek has continued to innovate sustainability solutions
for our clients and we are particularly pleased that Intertek issued the
world’s first CarbonClear™ certificate, an independent verification of
upstream carbon intensity, to Lundin Energy in July 2020. By validating
the carbon footprint of each barrel of oil equivalent, Intertek can help
to drive consumer transparency and support the decarbonisation of oil
and gas globally.
In our own operations, we have reduced our carbon footprint by
improving our energy efficiency and use of renewable energy, and we
are delighted that this progress, together with carbon offsets, makes
2020 Intertek’s first carbon neutral year. In addition, the Company has
taken the ambitious step of signing up to the Science Based Targets
initiative in order to develop independently verified, science-based
emissions targets with the aim of achieving Net Zero emissions by
2050. You can find further details of our sustainability innovations,
initiatives and reporting on pages 26 to 41.
Financial statementsDirectors’ reportStrategic report Chairman’s introduction Continued
Our Board promise
Turning to corporate governance matters, you will have seen that last
year we set out the Board’s promise that establishes a framework for
my Board colleagues and I, as we provide leadership, support, challenge
and an objective, independent and constructive view on strategy, the
business and resource allocation. The Board’s promise can be found
on page 74.
Compliance with the 2018 UK
Corporate Governance Code (‘Code’)
This report has been prepared in order to provide stakeholders with a
comprehensive understanding of our governance framework and to
meet the requirements of the Code, the Listing Rules (‘LR’) and the
Disclosure Guidance and Transparency Rules (‘DTR’). Page 71 sets
out how this Governance section has been structured around the
Code Principles.
The Board confirms that during 2020, the Company has consistently
applied the principles of good corporate governance contained in the
Code and has complied with the provisions apart from the following:
• Provision 19 stipulates that the chair should not remain in post
beyond nine years from the date of their first appointment to
the Board. Sir David Reid’s nine-year term as Chairman expired
on 30 November 2020. To facilitate and ensure a smooth
transition in the succession of the Chairman role, and given that
the appointment of Andrew Martin would not come into effect
until 1 January 2021, the Nomination Committee and the Board
approved a one-month extension to his term. As a result,
Sir David’s tenure exceeded the recommended nine years under
the Code by one month.
• Provision 38 stipulates that the pension contribution rates for
Executive Directors should be aligned with that of the workforce.
The pension contribution for all new Executive Directors
appointed to the Board since 2018 has been aligned with that of
the workforce. However, the pension contribution of the current
CEO, who was appointed in 2015 and prior to the establishment of
provision 38 in the Code, is not presently aligned to the workforce.
More information on the steps being taken to address this are
outlined in the Remuneration Committee report on page 105.
A more detailed explanation of our compliance can also be found
on our website at intertek.com.
Diversity & inclusion
Our Board promise, our strong governance, values and high ethical
standards help define behaviours and the way we work together. They
ensure we value and respect each other, and embrace diversity and
equality. We are focused on inclusion, ensuring that the business has the
right capabilities from different backgrounds to ensure we understand
local issues and norms that help add value to our business. I am delighted
that we continue to make good progress – the number of women TQA
Experts has increased for the fourth consecutive year, while we are
strong believers in having our local businesses run by local people.
In October 2020, we announced that Ross McCluskey is to step down
as Group Chief Financial Officer and from the Board on 1 April 2021,
to take up a new operational role in the business. His replacement is
Jonathan Timmis from Reckitt Benckiser. Jonathan is expected to join
Intertek and take up his role on 1 April 2021.
We continue to bring in new skills and experience to the Board. We have
been joined by two new Non-Executive Directors: Tamara Ingram, who
joined the Board in December 2020 and brings a deep understanding
of brands and digital strategy; and Lynda Clarizio, who joined the Board
in March 2021 and brings extensive experience in technology and data.
The Board continues to be mindful of the Hampton-Alexander and
Parker reviews. We are strong advocates of the various initiatives
across the business that drive diversity and inclusion at all levels.
These are in the best interests of our people and our business
supporting the long-term sustainable success of Intertek.
Employee engagement
You may remember that the whole Board agreed to have responsibility
for employee engagement. Given the impact of COVID-19, Board
members have been unable to physically visit many of our operations
in the 100 plus countries around the globe in which Intertek operates.
However, Board meetings have continued to take place, uninterrupted
throughout the period, with agendas as planned, and extra Board
meetings were held at the height of the crisis. Virtual communication
has been extensive, right across the business and staying connected
across a large international business has been key to maintaining high
levels of motivation and commitment. COVID-19 protocols permitting,
as part of the Board’s annual programme, our intention is to visit our
operations as soon as it is safe to do so.
Board evaluation
An internal evaluation of the Board, its Committees and each individual
Director was carried out in 2020. The evaluation concluded that
the Board and its Committees: are performing effectively, with clear
and appropriate terms of reference, policies and processes; have the
necessary information and resources provided and time allocated for
discussions to function effectively; and have an appropriate balance of
skills, experience and knowledge to encourage challenge and debate.
More information can be found on pages 92 and 93.
Succession planning
There has been considerable change in the Board. After a
comprehensive process described in more detail in the Nomination
Committee’s report on pages 94 to 97, my predecessor Sir David Reid
retired at the end of December 2020, after nine years as Chairman.
David provided great leadership of the Board and consistently provided
wise counsel to his colleagues. We will miss him as Chairman and wish
him all the very best for the future.
Lena Wilson stepped down on 31 January 2021 as a Non-Executive
Director and a member of the Audit and Nomination Committees.
Louise Makin will be stepping down on 30 June 2021 as a Non-
Executive Director and member of the Audit and Nomination
Committees. I am pleased that Jean-Michel Valette is replacing
me as Chair of the Audit Committee.
I would like to welcome Tamara and Lynda as our new Non-Executive
Directors and thank both Lena and Louise for their excellent, diligent
and valued contributions over their tenure.
Directors’ Remuneration Policy
We are presenting a new Directors’ Remuneration Policy for approval by
shareholders at the 2021 Annual General Meeting following the views
expressed by shareholders on the vote on the Directors’ Remuneration
Policy at the 2020 Annual General Meeting. We responded accordingly
and there has been significant engagement with our shareholders and
other stakeholders on remuneration matters and all feedback has been
reviewed and taken into consideration. Details of the new policy are set
out in the Directors’ Remuneration report on pages 107 to 114.
It is important that we maintain the support and confidence in the
business of our shareholders and all of our stakeholders. Through
transparent and regular dialogue, we seek to enable a clear
understanding of our business and to hear their views.
As we transition to a ‘new normal’ post the pandemic, Intertek’s
performance discipline and execution remain strong and we are
confident that the business is well-positioned to capitalise on the
opportunities that are already emerging. The structural trends in our
industry are attractive and the Board and Executive Leadership Team
will ensure that Intertek is focused on high quality, sustainable long-
term value creation for the benefit of all stakeholders.
Once again, on behalf of the Board, I would like to thank all of our people
right across the business, for their continued hard work and commitment.
Intertek Group plc Annual Report and Accounts 2020
73
Financial statementsDirectors’ reportStrategic report Board of Directors
Committees:
Audit
Nomination
Remuneration
Committee Chair
Board promise
We recognise our responsibility to
all stakeholders and will strive to
ask the questions that matter and
make the right decisions.
We will be forward looking and
use our diverse perspectives and
insights to promote Intertek’s
purpose of bringing Quality,
Safety and Sustainability to life.
We will inspire our people to
take client relationships and our
performance to greater heights
and to create sustainable growth
for all.
A
N
R
1 Andrew Martin
Chairman
Appointed to the Board in May 2016;
appointed Chairman in January 2021
Nationality:
Ethnicity: White
Tenure: 4.5 years
Independent: Yes
2 André Lacroix
N
Chief Executive Officer
3 Ross McCluskey
Chief Financial Officer
Appointed to the Board in May 2015
Appointed to the Board in August 2018
Nationality:
Ethnicity: White
Tenure: 5.5 years
Independent: N/A
Nationality:
Ethnicity: White
Tenure: 2.5 years
Independent: N/A
Current principal external appointments:
Non-Executive Chairman of Hays plc and a Non-Executive
Director of the John Lewis Partnership Board.
Key strengths:
Wide-ranging and extensive financial background.
Extensive experience of the travel, hospitality and
support services sectors.
Experience:
Andrew was the Group Chief Operating Officer for
Europe and Japan for Compass Group PLC until 2015,
and prior to that, he served as their Group Finance
Director for eight years. Before he joined the Compass
Group, he was the Group Finance Director at First
Choice Holidays plc (now TUI Group). Andrew also
previously held senior financial positions with Forte
plc and Granada Group plc and was a partner at
Arthur Andersen.
He was previously a Non-Executive Director of easyJet
plc and Chair of their Finance Committee until
August 2020.
Current principal external appointments: None.
Current principal external appointments: None.
Key strengths:
Excellent track record of delivering long-term growth
strategies and shareholder value globally across
diverse territories.
Strong leadership skills.
Experience:
From 2005 to 2015, André was Group CEO of Inchcape
plc, during which time he strengthened its position in
the global automotive market with a track record of
delivering double-digit earnings growth with strong
cash generation and created significant shareholder
value as its market capitalisation more than doubled
during his tenure as Chief Executive.
He was previously Chairman and Chief Executive
Officer of Euro Disney S.C.A., President of Burger King
International’s operations and formerly the Senior
Independent Director of Reckitt Benckiser Group plc
from October 2008 to December 2018.
Key strengths:
Varied and broad international finance and auditing
experience.
Strong track record as a finance executive.
Extensive accounting experience across a range
of businesses.
Experience:
Ross was the Group’s Financial Controller from August
2016 and has been a driving force in the performance
management of the business. From 2002 to 2011,
he worked within the investment banking sector
specialising in mergers and acquisitions, and holding
roles at J.P. Morgan, Gleacher Shacklock LLP and
Greenhill & Co. Immediately prior to joining Intertek,
Ross spent five years at Inchcape plc, where he held
senior operational finance positions, including Finance
Director of Inchcape’s Australasian and UK businesses.
74
Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Board of Directors Continued
4 Graham Allan
Senior Independent
Non-Executive Director
Appointed to the Board in October 2017
N R
Nationality:
Ethnicity: White
Tenure: 3 years
Independent: Yes
Current principal external appointments:
Non-Executive Director of InterContinental Hotels
Group plc, Associated British Foods plc and Kuwait
Food Company Americana KSCC (privately owned).
Chairman of Bata International (privately owned).
Key strengths:
Extensive international consumer and retail experience.
Wide-ranging knowledge of the Asian market.
Strong management knowledge and extensive
board-level experience.
Experience:
Graham was Group Chief Executive of Dairy Farm
International Holdings Limited, an Asian retailer
headquartered in Hong Kong, from 2012 to 2017.
In 1992, he joined Yum! Restaurants International
(formerly PepsiCo Restaurants International) where
he held several senior positions before assuming
the role of President and CEO in 2013, leading the
development of global brands KFC, Pizza Hut and Taco
Bell in more than 120 international markets. Prior
to his tenure at Yum! Restaurants, he worked as
a consultant including at McKinsey & Co Inc.
He was previously a Non-Executive Director
of Yonghui Superstores Co. Ltd in China and a
Commissioner of Hero Group, an Indonesian retailer.
5 Gurnek Bains
6 Lynda Clarizio
Non-Executive Director
N R
Non-Executive Director
7 Tamara Ingram OBE
Non-Executive Director
Appointed to the Board in July 2017
Appointed to the Board in March 2021
Appointed to the Board in December 2020
Nationality:
Ethnicity: Asian
Tenure: 3.5 years
Independent: Yes
Nationality:
Ethnicity: White
Tenure: Just appointed
Independent: Yes
Nationality:
Ethnicity: White
Tenure: 2 months
Independent: Yes
Current principal external appointments:
Managing Partner of Global Future Partnership LLP.
Key strengths:
Wide-ranging experience working with senior leaders
internationally providing an important voice on people.
Experience:
Gurnek was the co-founder of YSC Ltd, a premier
global business psychology consultancy. He led the
business as Chief Executive Officer and Chairman for
25 years to a position of global pre-eminence, and
a client base comprising over 40% of the FTSE 100.
Gurnek has worked extensively with multinational
organisations in the areas of culture change, vision
and values, executive coaching and assessment,
board development and strategic talent development.
He has a doctorate in Psychology from Oxford
University.
Current principal external appointments:
Non-Executive Director of CDW Corporation and Emerald
Holding, Inc (both US listed companies), and OpenSlate
and Resonate Networks, Inc. (privately owned).
Current principal external appointments:
Non-Executive Director of Marsh & McLennan Companies,
Inc. and Marks and Spencer Group plc.
Key strengths:
Strong track record of leadership in complex
organisations.
Significant experience in digital measurement and
broader technology.
Extensive board-level experience.
Experience:
Lynda was President of U.S. Media at Nielsen Holdings
plc, a global measurement and data analytics
company, where she worked from 2013 to 2018. Her
prior experience includes CEO, President and other
leadership positions at AppNexus, Inc., INVISION, Inc.,
AOL Inc. and Advertising.com. She previously was a
partner in the law firm Arnold & Porter, where she
practised law from 1987 to 1999.
She is a Director of Human Rights Trust, a non-profit
international human rights organisation.
Key strengths:
A long-standing leadership career in advertising,
marketing and digital communication.
A deep understanding of consumer brands and digital
strategy.
Experience:
Tamara has held leadership roles within WPP since
2005, and was the Global Chair of Wunderman
Thompson (a subsidiary of WPP plc). Her executive
experience includes senior roles at Kantar Group,
McCann Erickson and Saatchi & Saatchi UK, where she
held the roles of CEO and Executive Chair. Tamara was
previously a Non-Executive Director of Sage Group plc
and Serco Group plc.
Intertek Group plc Annual Report and Accounts 2020
75
Financial statementsDirectors’ reportStrategic report
Board of Directors Continued
Former Directors who served during
the year
Sir David Reid retired as Chairman of the
Board on 31 December 2020.
Lena Wilson stepped down from the Board on
31 January 2021.
8 Dame Louise Makin
Non-Executive Director
9 Gill Rider CB
10 Jean-Michel Valette
A N
Non-Executive Director
A R
Non-Executive Director
A
Appointed to the Board in July 2012
Appointed to the Board in July 2015
Appointed to the Board in July 2017
Nationality:
Ethnicity: White
Tenure: 8.5 years
Independent: Yes
Nationality:
Ethnicity: White
Tenure: 5.5 years
Independent: Yes
Nationality:
Ethnicity: White
Tenure: 3.5 years
Independent: Yes
Current principal external appointments:
Non-Executive Director and Chair Designate of Halma
plc. Non-Executive Director of Theramex Group Ltd and
Atotech Ltd.
Current principal external appointments:
Chair of Pennon Group plc and Pro-Chancellor of the
University of Southampton.
Current principal external appointments:
Chairman of Sleep Number Corporation and Lead Director
of The Boston Beer Company, both of which are US listed
companies.
Key strengths:
Extensive background in international chemicals and
healthcare industries.
Strong leadership and board experience.
Experience:
Louise has held numerous senior roles including Chief
Executive Officer of BTG plc from 2004 to 2019 and
Vice President, Strategy & Business Development
Europe and President of the Biopharmaceuticals
division at Baxter Healthcare.
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.
Previously, Louise was a Non-Executive Director of
Woodford Patient Capital Trust plc and Premier Foods
plc. She is currently Chair of The 1851 Trust and a
Trustee of The Outward Bound Trust.
Key strengths:
Successful global experience on the people agenda.
Extensive experience as a Non-Executive Director.
Strong experience on remuneration and sustainability
issues.
Experience:
Formerly, Gill was head of the Civil Service Capability
Group in the Cabinet Office, reporting to the Cabinet
Secretary. Prior to that, she held a number of senior
positions with Accenture, culminating in the post of
Chief Leadership Officer for the global firm. Previously
Gill was a Non-Executive Director of De La Rue plc
and, until January 2020, Senior Independent Director
of Charles Taylor Plc, where she also chaired their
Remuneration Committee.
She is currently President of the Marine Biology
Association and was also previously President of the
Chartered Institute of Personnel & Development.
Key strengths:
Extensive knowledge of the US market.
Strong leadership and board-level experience.
Experience:
Jean-Michel has more than 30 years’ experience
in management, US public company corporate
governance, strategic planning and finance.
Previously, he was Chairman of Peet’s Coffee and Tea,
Inc., a US beverage company which was listed at the
time. He was also appointed as Managing Director at
the Robert Mondavi Winery before becoming Chair.
In his earlier career, Jean-Michel was President and
Chief Executive Officer of Franciscan Estates, Inc.,
a premium wine company.
He currently serves as an independent adviser in the
US to select branded consumer companies.
He has an MBA from Harvard Business School.
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Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Direct reports to the CEO
Global functions
Tony George
Executive Vice President,
Human Resources
Ken Lee
Executive Vice President,
Marketing and Communications
Geographies
Fred Bai
CEO, Greater China
Global business lines
Sandeep Das
Regional Managing Director,
South Asia
Gavin Campbell
President, Transportation
Technologies
Ian Galloway
Executive Vice President, Global
Trade
Timo Lieber
Vice President, Group ATIC
Innovation
Ross McCluskey
Group Chief Financial Officer
Colm Deasy
Regional Managing Director,
Asia Pacific
Ian Galloway
Executive Vice President, Middle
East and Africa
Christina Law
President, Global Softlines and
Hardlines
Bertrand Mallet
Executive Vice President,
Industry Services
Julia Thomas
Senior Vice President,
Corporate Development
Mark Thomas
Group General Counsel and Head
of Risk & Compliance
Graham Ritchie
Executive Vice President,
Europe
Gregg Tiemann
Executive Vice President,
Americas
Calin Moldovean
President, Business Assurance
and Food Services
Saranpal Rai
Sr. Vice President, Electrical
Intertek Group plc Annual Report and Accounts 2020
77
Financial statementsDirectors’ reportStrategic report Board Leadership and
Company Purpose
Effective and entrepreneurial board
Our Board comprises a Chairman, CEO, CFO and seven independent
Non-Executive Directors. We all have differing skills, a wide range of
diverse experience and extensive knowledge built up over a period
of time in our professional careers which enables the Board to fully
understand the strategic business drivers of Intertek but also the
risks and exposures associated with the multiple sectors and regions
in which the Company operates. The need for an effective and
entrepreneurial board to provide the right leadership has never been
more important; our combined experience of dealing with economic
crises over the past 30 years has helped to inform and qualify us to
effectively manage the inevitable impact of the COVID-19 pandemic
on the business, to ensure the long-term sustainable success of the
Company is not hindered. As such, our collective experiences have
enabled us to preserve the long-term value of the business for our
shareholders, our people and our customers, as well as the wider
community as a whole for years to come.
The governance of Intertek is the responsibility of the Board, with the
support of the Group Company Secretary, and provides the framework
of authority and accountability that operates throughout the Company
to ensure the needs of all stakeholders are considered and met.
Good governance requires the Board to lead, guide and support the
business in its ongoing quest for long-term sustainability and viability
through strategic planning and part of the governance structure in
place is the development, implementation and monitoring of the 5x5
differentiated strategic plan for growth throughout the year. This is an
ongoing process which is reviewed annually by the Board and involves
a thorough review of the progress being made on the implementation
of the strategy and the five year business plan. The strategic review
involves a 360˚ review of the Intertek value proposition, the 5x5
strategy, updates on the competitive environment and regulatory
changes. The changes to the economic environment, the long-term
structural drivers and emerging trends shaping the world are discussed,
as well as, the resulting impact on Intertek, together with the strategic
initiatives for the year.
78
Intertek Group plc Annual Report and Accounts 2020
The
Intertek value
proposition
Strategic
initiatives for
the year
The 5x5
strategy
The strategic
review involves a
360˚ review of:
Updates on
the competitive
environment
Emerging
trends shaping
the world
Long-term
structural
drivers
Regulatory
changes and
changes to
the economic
environment
We are also responsible for ensuring that the appropriate financial
resources and people with the right skills and behaviours are in place
to achieve the long-term strategy and deliver long-term sustainable
performance. Further information on our strategy and progress
towards delivering our strategic aims is set out in the Strategic report
on pages 8 to 25 and further information on the activities of the Board
is outlined in the table on pages 82 and 83.
Purpose, values, strategy and culture
Intertek has a rich cultural heritage which reaches back over 130
years to some of the world’s leading pioneers in the Quality Assurance
industry and our pioneering forefathers include giants of innovation
such as Thomas Edison. Their legacy and spirit lives on today
throughout Intertek and in our people as we continue to drive
the global development of the Quality Assurance industry. We have
established a purpose of ‘Bringing quality, safety and sustainability to
life’ which resonates strongly throughout Intertek; a purpose which
our people are rightly very proud to embody and incorporate when
meeting the needs and wishes of our stakeholders. Our purpose is
underpinned by a strong set of clear values, as outlined on page 10,
which are true to who we are and are the foundations that drive the
right cultural behaviours across the Group. To deliver this, we employ
people with the right potential, attitude, intellect and entrepreneurial
spirit, we introduce them to our culture of excellence and innovation
and our exacting customer-focused service standards. By aligning
the quality of our people with our high-performance culture, we can
deliver our promise to customers and build long-term and mutually
rewarding relationships.
The Board, with the Leadership Team, sets the corporate culture
that defines our purpose and establishes an environment where
values are appreciated and respected, encouraging all of our people
to ‘Do Business the Right Way’. Our culture and values have been,
and remain, the core foundations of Intertek. Our 10X culture is one
of entrepreneurial spirit and high performance, where we are totally
focused on our customers, as outlined in the Strategic report on
pages 2 to 23.
Financial statementsDirectors’ reportStrategic report Board Leadership and
Company Purpose Continued
Board oversight of culture
During the year, we held a board session on culture and we monitored and developed further insights on the culture that is operating within
the business throughout the year by reviewing the following:
Area
Link to culture
View from the top
Globally aligned
reward and incentive
schemes
Health & wellbeing
Town halls were introduced and established as a means to allow the dissemination of information to employees across
the Group and to enable local leadership to communicate the right behaviours and cultural expectations, as well as
peer nominated awards for demonstrating our 10X energies. Town halls occur monthly at every Intertek location
globally; they are monitored as it is a Core Mandatory Control and thus reported to the Audit Committee. The 10X
growth, coaching, training and people planning and the focus on recognition at all levels ensure that the values and
culture are driven right down through the organisation.
Our long-term incentive schemes are aligned so as to drive the right behaviours and values of our business, globally.
More information is outlined in the Remuneration Committee report on pages 105 to 130.
Due to the importance we place on safety within Intertek, we have updates at every board meeting on Health &
Safety statistics across the Group to monitor trends year-on-year and ensure that the right practices are being
followed. There have been weekly emails to the Board to closely monitor our people’s health and wellbeing using a
‘5-category’ system, with ‘net’ data to reflect the number of people in each category excluding those who have now
recovered or returned to work due to COVID-19.
Ethics and
compliance reports
Updates at every board meeting on all hotline and whistleblowing reports and analysis by issue type. This enables the
Board to determine if there are any trends which need further analysis or investigation. Everyone in the organisation
completes annual training on the Intertek Code of Ethics to demonstrate our understanding of, and commitment to,
the highest standards of business conduct. For more information see overleaf.
Key claims reports
Updates at every board meeting on all legal claims and a review of the significant legal claims by the Audit Committee
to monitor the trends and types of claims.
Internal audit reports Updates at every Audit Committee meeting on internal audit reports, the areas of non-compliance with the Core
Mandatory Controls and actions taken to address the non-compliance together with trend analysis to underscore that
we are ‘Doing Business the Right Way’.
Acquisitions
The presentations given in the virtual overseas board meeting in October 2020 clearly demonstrated to the Board
how the acquisition of Alchemy had enhanced and made the culture within Intertek richer.
Employees’ perspective on our culture
Visits to locations across the world to see the culture operating in situ
and receiving the views direct from employees including:
10X culture means bringing positive
energy to the system that I’m part of,
sharing a vision, inspiring others to
make a difference and thinking about
the legacy we want to leave, serving
the team to grow better together.”
Francesco Russian
Sales Director South East Europe
Electrical
10X is about being a better team, employee, leader, company than we
were yesterday, last week, last month, quarter, year etc. It is striving
to be better with each of our processes, projects, inspections from
authorities, management reviews, oversight meetings. Constantly
striving for improvements to leave a mark behind that says: this is
how good we were then. But look now: we are great. And we can be
even better. All this within the framework of our values. So 10X is not
just about what we do to strive to be better, but also how we do it
(our values, behaviours, code of ethics etc.).”
Nakisa Harmes
Managing Director and Head of
Notified Body Sweden
Intertek Group plc Annual Report and Accounts 2020
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Financial statementsDirectors’ reportStrategic report Board Leadership and
Company Purpose Continued
Internal control and risk
management
Compliance, whistleblowing and fraud
Intertek is committed to maintaining a culture where issues of integrity
and professional ethics can be raised and discussed, which is aligned
to our values to always do the right thing with precision, pace and
passion. This also forms part of our 5x5 differentiated strategy for
growth. The Group’s key ethics and integrity policies are set out in
the Code of Ethics and a detailed description of the topics covered by
the Code of Ethics, its operation during the year and the outcomes
of these policies are contained in the Sustainability section in the
Strategic report on pages 33 and 34. All third parties working for, or
on behalf of Intertek, are required, as a condition of engagement, to
document their acceptance and understanding of the Intertek Code of
Ethics, and Intertek Anti-Bribery Policy before commencing work on our
behalf. It is the responsibility of each third party acting on Intertek’s
behalf to understand and apply these two Intertek Policies in their
part of the business.
Whistleblowing is the responsibility of the Board and the Group
has a whistleblowing process, which includes a global hotline
system enabling all employees, contractors, suppliers and others to
confidentially report suspected misconduct or breaches of the Code
of Ethics. This is supported by dedicated Compliance Officers across
the Group’s markets who undertake the investigation of issues that
arise from reports to the hotline system or from other sources, such as
routine compliance questions. The Board receives quarterly reporting
on whistleblowing and integrity issues. The Group Compliance function
is independent of the Group’s operational business and reports directly
to the Group General Counsel.
The Board is ultimately responsible for monitoring the Group’s system
of internal control and risk management and ensuring its effectiveness.
Monitoring and reviewing the effectiveness of the Group’s internal
and risk management controls is discharged by the Audit Committee
and they report to the Board on its evaluation of the systems in place.
The Board confirms that it has completed a robust assessment of the
Group’s emerging and principal risks and that the Company has fully
complied with the Financial Reporting Council’s (‘FRC’) Guidance on
Risk Management, Internal Control and Related Financial and Business
Reporting. Further information on the framework, its effectiveness
and on our financial risk management systems can be found in the
Audit Committee report on page 103.
Risk management and internal controls are embedded in the running of
each division, business line, country and support function and oversight
is provided by divisional, regional and functional risk committees. Each
risk committee in turn reports to the Group Risk Committee (‘GRC’). The
Group identifies and tracks its risk environment using a risk register
process whereby the risk committees produce a register of emerging
risks in their area of responsibility which are then consolidated at Group
level. The GRC uses the Group Risk Footprint for the year under review,
with associated mitigation action plans as its baseline, to then add
new risks and/or plans, facilitated by the GRC’s quarterly risk review
process. At each Board meeting, the Group General Counsel presents
an integrated risk, control, compliance and quality report including
a review of:
• the Group’s emerging risk environment, the status of the quarterly
emerging risk mitigation action plans and the new quarterly
emerging risk mitigation plans;
• the specific systemic risks including quarterly hotline and
whistleblowing reports, key claims and unlimited liability
contracts; and
• the Group’s systemic risk environment, the status of the quarterly
systemic risk mitigation action plans and the new quarterly
systemic risk mitigation plans.
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Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Our governance framework
Our Board of Directors
The Board has the ultimate and collective responsibility to promote
the long-term sustainable success of the Company, ensuring that
value is created for shareholders and contributes to wider society
through its entrepreneurial and innovative leadership of Intertek.
Our Board consistently acts with integrity, leads by example and
promotes the culture to ensure dissemination throughout the
Company. It sets the strategic aims of the Company, its purpose,
customer promise, vision and values in alignment with our culture
as outlined in the Strategic report on page 10.
The Board recognises the importance of its obligations under section
172 of the Companies Act 2006 to engage with, and consider, key
and relevant stakeholders as part of its decision-making process.
More information on the principal decisions made by the Board are
on page 65.
The activities of the Board during 2020 and how the Board’s
governance contributes to the delivery of Intertek’s strategy is
outlined on pages 82 and 83.
The Board delegates certain matters to its three principal
Committees to carry out business as defined in their respective
Terms of Reference. The remit, authority and composition of each
Committee are clearly laid out and reviewed regularly to ensure
that the support provided to the Board is effective. The Board also
maintains the Board Approval Matrix which outlines the matters
reserved for the Board. When necessary, the Board may delegate
very specific matters to ad hoc subcommittees with clearly defined
responsibilities and for a limited period of time. The Terms of
Reference for each Committee and the Board Approval Matrix
are available at intertek.com.
Audit Committee
Nomination Committee
Remuneration Committee
Oversees the Group’s financial reporting, ensuring the
effectiveness and independence of the external and
internal audit functions and reviews the Group’s financial
internal controls.
>
Read more on page 00
Ensures the Board and its Committees have the correct
balance of skills, experience and knowledge and that
adequate and orderly succession plans are in place.
Establishes the Group’s Remuneration Policy and ensures that
it supports the strategy promoting the long-term sustainable
success of the Group and there is a clear link between
performance, remuneration and alignment with culture.
>
Read more on pages 98 to 104
>
Read more on pages 94 to 97
>
Read more on pages 105 to 130
The Board delegates specific responsibilities, subject to certain financial limits, to management. This is governed by the Core Mandatory
Controls, a regularly reviewed and refreshed framework that allows the delivery of the strategic aims and financial performance whilst
allowing risk to be assessed and managed. Biographical details of the Leadership Team can be found on our website.
Leadership Team
Supporting Committees
The Leadership Team operates a number of supporting committees which provide
oversight on key business activities and risks, including the:
• Disclosure Committee
• Ethics & Compliance Committee
• Group Risk Committee
•
Investment Committee
• Sustainability Operating
Committee
Intertek Group plc Annual Report and Accounts 2020
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Financial statementsDirectors’ reportStrategic report Board activities in 2020
The following pages give an insight into how we, as a Board, use our meetings as a mechanism for
discharging our responsibilities, including how the consideration of stakeholders is embedded into our
workings as a Board and the range of matters we considered and discussed throughout the year.
Each Board meeting follows a carefully structured agenda agreed in advance by the Chairman, CEO and
Group Company Secretary; this ensures that proper oversight of key areas of responsibility are scheduled
regularly and that adequate time is available for the Board to fully consider strategic matters. Every
December, the Board reviews, discusses and agrees the Group’s strategic plan and objectives and during the
year, the Board then monitors and reviews the performance of the business to ensure that the strategic
objectives are being met. The topics in the following table are presented to the Board for review against
the 5x5 strategy to ensure that the goals underlying our differentiated strategy for growth have been met
during the year. The 5x5 strategy and goals are outlined in the Strategic report on page 18 and the outcome
of some of the decisions made by the Board during the year in line with the 5x5 strategy are outlined on
page 65.
In addition to regular items, we receive presentations from the Leadership Team and global leaders across
the business on their areas of responsibility and expertise. External speakers also present periodically to
provide an overview on global or regional matters. One meeting a year is conducted overseas however, due
to the pandemic, this year it was held virtually. Due to COVID-19, we moved rapidly to virtual meetings from
March using our Ever Better Tek. The technology has worked extremely well and has enabled the Board and
its Committees to fully participate in all discussions and discharge our responsibilities seamlessly.
Principal risks
Strategic priorities
01
02
03
04
05
06
07
08
09
10
11
Reputation
Customer service
People retention
Health, safety & wellbeing
Industry and competitive landscape
Third-party relations
IT systems and data security
COVID-19
Differentiated
brand proposition
Superior
customer service
Effective
sales strategy
Growth and margin-
accretive portfolio
Operational
excellence
Regulatory and political landscape
Key to stakeholder groups
Business ethics
Financial risk
Customers
Communities
Investors
People
Suppliers
Other
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Intertek Group plc Annual Report and Accounts 2020
Topics
Strategy
Link to risks:
Link to strategic priorities
Link to stakeholders
01 02 03 04 05 06 07 08 09 10 11
2020 Board Strategic Agenda
Group M&A strategy
COVID-19 update
Group strategy update &
strategic plan
External presentations on the
economic outlook
Group IT strategy
Topics for the 2020 strategy
session
2021 annual budget and
five-year plan
Financial management and performance
Link to risks:
01 02 05 06 07 08 09 10 11
CEO report
Finance report
Investor Relations report
Financial forecasts
Approval of full-year results,
Annual Report and Accounts,
half-year results and the AGM
circular and proxy
Dividends
Group Portfolio update
Financial statementsDirectors’ reportStrategic report
Board activities in 2020 Continued
Topics
Link to strategic priorities
Link to stakeholders
Topics
Link to strategic priorities
Link to stakeholders
People and culture strategy
Link to risks:
02 03 04 07 08 10
Culture and people
development
Health & Safety Group update
Group talent planning
Group People Strategy
Executive Committee
succession planning
Sustainability
Group Sustainability Strategy
Corporate governance
Link to risks:
01 02 03 04 05 06 07 08 09 10 11
Reports of the activities of the
Audit, Nomination and
Remuneration Committees
AGM preparation (Chairman’s
script, Questions & Answers,
proxy votes and voting reports)
Chairman’s corporate
governance meetings feedback
Re-election of Directors at the
2020 AGM
Directors’ conflicts of interest
2020 Board, Director and
Committee evaluation process
2019 Internal Board
effectiveness review
Purchase of shares by ESOT
Compliance and risk
Link to risks:
01 02 03 04 05 06 07 08 09 10 11
Quarterly Risk, Control,
Compliance and Quality report
Modern Slavery Statement
Customers
Link to risks:
01 02 03 04 05 06 07 08 09 10 11
Group Innovation Strategy
Other
Link to risks:
01 02 03 04 05 06 07 08 09 10 11
Presentations by regions,
country and business lines
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Financial statementsDirectors’ reportStrategic report
Governance and
Sustainability
Sustainability continues to be hugely important and the Board, as
part of their overall stewardship of the Company, oversees the Group’s
sustainability and corporate responsibility. A formal review and
presentation to the Board on Sustainability is conducted annually by
the Head of Sustainability outlining Intertek’s sustainability strategy,
our progress and our strategic priorities for the following year.
The Board has delegated responsibility to the Sustainability Operating
Committee whose purpose is to advance the Group’s initiatives in
our external sustainability services for clients, but most importantly
in our own internal sustainability activities. The Committee, which
meets monthly, is chaired by the CEO, and is made up of the Head
of Sustainability, VP Group ATIC Innovation, EVP Marketing &
Communications, EVP Human Resources and the Group General
Counsel. To support the efforts of the Committee, formal and informal
committees led by regional management across the Group globally
help to drive our regional strategies for our people, the communities
in which we operate, the environment and our customers, through
the dissemination of our sustainability strategy.
At Intertek, we believe that we are Born to Make the World Ever Better.
For more than 100 years, sustainability services have been core to
our global business. As the industry leader in Sustainability Assurance
solutions, we have continued to launch products despite the uncertain
landscape that COVID-19 has posed to us, as it has sharpened the
world’s focus on other global threats such as climate change, which
still remain ever present. In July 2020, we launched the world’s first
independent carbon intensity certification programme. Our extensive
knowledge of the Oil & Gas sector’s drive toward sustainable energy
leaves us uniquely positioned, through the use of CarbonClear™, to
help producers to achieve the lowest carbon Oil & Gas production in the
world. This is only one of many ways we are paving the way to make
the world ‘Ever Better’.
As a multinational company, we recognise that, although our own
operations may not be as energy intensive or resource depleting as
other industries, we are still exposed to various types and degrees of
risks associated with climate change. We therefore acknowledge that
it is important for us to lead the effort globally to mitigate the adverse
effects of climate change by both reducing our own emissions, as well
as helping those across our value chain. More detailed information
on our goals to address climate-related issues, and our strategy
for achieving these goals, can be found within our Strategic report
(Sustainability section) on pages 26 to 41.
BOARD
GROUP CEO
GROUP
LEADERSHIP TEAM
UPDATES
MONTHLY
UPDATES
ANNUALLY
UPDATES
QUARTERLY
SUSTAINABILIT Y OPER ATING COMMIT TEE
SUSTAINABILIT Y
CHAMPIONS
REGIONAL
SUSTAINABILIT Y
COMMIT TEES
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Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Stakeholder relations
Workforce engagement
For more than 130 years, Intertek has understood its role in society
as companies around the world have depended on us to help ensure
the quality and safety of their products, processes and systems.
We are focused on driving long-term sustainable performance and
recognise the importance of considering Intertek’s responsibilities to
our customers, shareholders, and wider stakeholders. We, as a Board,
are clear on our legal duty to act in good faith, to promote the success
of the Group for the benefit of shareholders and have regard to the
interests of our stakeholders and other factors. These include the likely
consequence of any decisions we make in the long term; the interests
of employees; the need to foster the relationships we have with all
of our stakeholders; the impact of our operations on the community
and the environment; the desire to maintain the highest standards of
business conduct and to act fairly between shareholders.
In line with the Code, this section outlines our engagement with
our employees. After extensive discussions when the Code was
introduced, we decided not to choose one of the methods suggested
in the Code due to the global nature and size of the business together
with the complexity and diverse make-up of the various sectors
and regions in which we operate. Instead, we utilise a multi-faceted
approach to workforce engagement to make certain that what is in
place ensures that we, as a Board, receive 360˚ multi-source feedback
to assist us in evaluating the different views and perspectives from
our employees across the Group. We continue to believe that this is
effective as it enables us the Board to fully understand the views of
the workforce when taking such considerations into account as part of
our decision-making process. This is vital as our people are core to our
business and make it happen 24/7.
The Directors’ duties under section 172 of the Companies Act
2006 help to underpin the good governance which is at the heart of
what we do. Details of how we met our obligations during 2020, by
taking account of shareholder and wider stakeholder interests in our
strategic planning and decision-making processes, are outlined in the
section 172 statement on pages 64 to 70 in the Strategic report.
This statement summarises how we have had regard for the need to
foster the Company’s business relationships with suppliers, customers
and others, and the effect of that regard, including on the principal
decisions taken by us during 2020. Details of the principal decisions
we have taken during 2020 are set out on page 65 and the value
we create for our stakeholders is outlined on pages 67 to 69 in the
Strategic report.
The next section summarises how we have engaged with employees
during 2020 and how we have had regard to their interests and the
result of that engagement. Our approach to investing in our people
to attract, develop, retain and reward our employees is outlined in the
Sustainability section of the Strategic report on pages 30 and 31.
The way in which our people combine passion and innovation with
customer commitment to create a single unbeatable asset sets us
apart and is a vital element of our entrepreneurial, customer-centric
culture. The variable remuneration structure and policy for the
Executive Directors cascades down to the wider workforce and is
communicated throughout the Group ensuring engagement across
Intertek to drive the right behaviours and to deliver the 5x5 strategy.
We are focused on ensuring that our strategy and culture give our
people the right platform to not only grow and develop their careers,
but to support our purpose in making the world a better place by
bringing quality, safety and sustainability to life.
COVID-19, a contagious respiratory and vascular disease, became a
truly visible risk to the world on 22 January 2020 when the lockdown
in Wuhan, China was put in place. On 30 January 2020, the World
Health Organisation (‘WHO’) declared the coronavirus a Public Health
Emergency of International Concern, WHO’s highest level of alarm.
Since that time, we have seen a rapid progression of the virus across
all countries, with a resurgence in certain countries of second and
third waves of the virus changing very quickly the way we live and
how we work. Right from the start of the pandemic, being agile was
paramount for all of us and the business reacted fast and decisively
to an unprecedented situation. The organisation focused on five
critical priorities with the health and safety of our employees as
number one and required optimal engagement with our employees.
With our people continuing to work in our laboratories, and 20% of
our people working remotely, it has never been more important for us
to stay connected every day. Our world-class digital communication
platform made it possible for us to reach out frequently to everyone
in the organisation.
The way our colleagues have come together and brought so clearly
to life our purpose to bring quality, safety and sustainability has been
an inspiration to all during the pandemic. Their commitment to our
customers to go above and beyond and deliver superior customer
service has truly demonstrated the strong customer-centric ethos
at the core of Intertek.
The following pages outline:
details on how we engaged with our workforce;
what we have learned and how we have responded.
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Financial statementsDirectors’ reportStrategic report Workforce engagement Continued
How did we engage?
Our employees have gone above and beyond their
normal call of duty and here are just a few examples
of that:
Our Heroes
•
In March 2020, we launched ‘First-In-Queue
Priority’ for critical care medical devices. Our
medical laboratories across North America made
it their top priority to ensure that these devices
received immediate attention so they could be
tested, certified, and rushed into the hands of
healthcare workers fast. Products covered under
this initiative included ventilators, respirators
and other personal protective equipment, CPAP
machines, telehealth carts and robots, hospital
beds and operating tables, IVD test kits, and
several more that were in surging demand. A
Rapid Response Team was formed to support our
internal teams as they worked with manufacturers,
retailers, and facilities around the world.
• We introduced remote training, witness testing,
and inspections to support manufacturers,
distributors, and retailers.
• Our global team of scientists, regulatory
consultants and auditors have worked with
companies to help clients innovate and
accelerate their progress in finding solutions
in response to COVID-19.
• Across the world, from China, Hong Kong,
India and the Philippines to the UK, Turkey and
Netherlands, colleagues have produced hand
sanitiser to keep customers and colleagues safe.
•
Intertek Indonesia has provided 200,000 face
masks to countries greatly affected by the virus.
• Our Food team in the UK worked seven days a
week to collect, register and process samples for
clients in a safe way – supporting our customers’
tight deadlines.
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Intertek Group plc Annual Report and Accounts 2020
Intertek Peru
Artisanal fishing in Peru is an activity
to which thousands of people are
dedicated and is the only income option
to their families. It also takes place in an
environment where the risk of infection
by COVID-19 is extremely high. However,
Intertek colleagues from the Fisheries
Surveillance and Control Programme have
supported this activity since day zero of
the state of emergency, with courage
and great responsibility to carry out our
commitment to the Government of Peru.
Intertek staff are present 24 hours a day,
supervising the landing activities of the
fishery at 16 docks along the Peruvian
coast and at each control point of 17 fish
processing plants. Despite the very high
risk of infection, Intertek provides them
with the assurance to continue. Our work
ensures the traceability and sustainability
of the main hydro-biological resources,
from landing to marketing, to reach all end
consumers in Peru.
Intertek Bangladesh
A nationwide lockdown gripped Bangladesh
for more than a month due to COVID-19.
Our colleagues responded by offering
helping hands in whatever way they could.
They generated funds, reached out to
communities and distributed essential food
items. To assist overwhelmed hospitals,
Intertek Bangladesh launched a ‘Virtual
Hospital’ initiative, where oxygen cylinders
were delivered to the homes of employees
and their family members who needed
emergency oxygen support, free of cost.
The Virtual Hospital also helped colleagues
to get appointments with doctors and
arrange hospital admissions, which was
appreciated by all colleagues.
Intertek Hardlines China
The Hardlines team in Shenzhen, China are
determined to get to work, even walking
and cycling for close to an hour, so that
they can continue to bring ‘Ever Better’
services to our customers!
Dariusz Lewandowski
Lab Technician, Intertek Lintec
As lockdown commenced due to COVID-19,
UK-based Dariusz volunteered to remain in
Rotterdam to deliver a time-critical service
to one of the biggest shipping companies
in the world. Dariusz ended up remaining
in Rotterdam for over three months,
away from his family and friends, living
and working on his own. His efforts made
sure that we were able to deliver an ‘Ever
Better’ service to our customer.
Financial statementsDirectors’ reportStrategic report Workforce engagement Continued
How did we engage?
Continued
Weekly updates on the status of
the pandemic across the world and
information on our colleagues’ health
and wellbeing using a ‘5-category’
system, with ‘net’ data to reflect the
number of people in each category
excluding those who have now
recovered/returned to work.
Virtual meetings with
colleagues within the business
during 2020, the Chairman and Non-
Executive Directors have virtually met
15 leaders across the Group and had
presentations on their areas of expertise.
The Board was particularly interested
to hear from each of the businesses
on how the impact of COVID-19 had
affected employees and their
health and mental wellbeing across
the different locations.
Around the world in 17 days
thanks to our ‘Ever Better Tek’ the
CEO undertook his global market visits
virtually completing 32 online townhalls,
speaking to more than 3,400 employees
in 23 countries. Feedback from these
virtual meeting visits was given to
the Board in October 2020.
Our engagement
with our people
during 2020
Feedback from colleagues on the
culture operating within the business.
See page 79 for more information.
An internal
stakeholder survey on employee
safety and wellbeing was conducted and
the findings were presented to the Board in
July 2020. The findings outlined what
we do well, what is best-in-class and
our opportunities and challenges
for improvements in Employee
Health, Safety, & Wellbeing.
In action
Boxborough, Massachusetts,
USA
Tour of the Boxborough laboratory
by Michael Parker, Vice President
Electrical, Chem & Pharma USA,
showing the various types of medical
testing undertaken.
St. Rose, Louisiana, USA
Tour of the Caleb Brett laboratory by
Carlos Velasco, Vice President Latin
America and Caribbean and Caleb
Brett Americas, showing some of
the larger testing equipment.
Virtual visits to our laboratories:
the October overseas board trip
was held virtually and the Board
were shown around the
following laboratories:
• Boxborough, Massachusetts, USA
• St. Rose, Louisiana, USA
• The American Center for
Mobility, Ypsilanti, Michigan, USA
• Lima, Peru
Our colleagues
across the world were invited to send
in their short Hero story videos about
how they or their team are
bringing our purpose to life
through their work.
The videos are available to view on our
intranet and on WhatsIn, our internal
communications system.
Lima, Peru
Tour of the Lima laboratory by Carlos
Velasco, Vice President Latin America
and Caribbean and Caleb Brett
Americas, showing the control room
guiding the inspectors in the harbour.
Ypsilanti, Michigan, USA
Tour of the American Center for
Mobility by Gavin Campbell, President
of Transportation Technologies,
and Ralph Buckingham, Director of
Sales – Transportation Technologies,
demonstrating the testing of
automated and connected vehicles.
Intertek Group plc Annual Report and Accounts 2020
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Financial statementsDirectors’ reportStrategic report
Workforce engagement Continued
What did we learn were the issues for employees during 2020?
What did we do?
The engagement with our colleagues
highlighted four main areas of concern in 2020:
How do I continue to
work and how does this
affect my wellbeing?”
Will the pandemic
affect my job
security?”
What does the
pandemic mean
for our business?”
Will I be safe
at work?”
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Intertek Group plc Annual Report and Accounts 2020
Safety at work
To ensure the health & safety of all of our
employees, protocols and measures were reviewed
and updated to ensure the highest standards of
control, hygiene and prevention were in place pre,
during and post-lockdowns. From the beginning
of May 2020, all employees were required to wear
face masks at work and these were provided by the
Company. Scientists and researchers continue to
improve their understanding of this novel virus and
we are reviewing studies as they are published, in
order to evaluate and update our HSE policy against
the latest intelligence and to try to anticipate what
the mid- to longer-term impact on working practices
and societies might be.
Hygiene control and prevention guidance
Hygiene measures were
set out on posters to be
displayed at all Intertek
locations.
Employee wellbeing
Thanks to our ‘Ever Better Tek’, our excellent IT
colleagues supported the transition for those working
in an office to working from home full time to ensure
a seamless transition. The systems had already been
put in place which enabled virtual working.
We were conscious that the daily living routines
for all were disrupted causing additional anxiety,
loneliness, stress and strain. The importance of
still taking time off was recognised and employees
were encouraged to take their holidays. In the UK,
during the week of 18 May, Intertek recognised
National Learning at Work Week and Mental
Health Awareness Week with daily emails sent to
employees with different content and resources
to support employees at this time.
In December 2020, a new Intertek Global Wellbeing
programme – Kindness was introduced to support
the wellbeing of all employees. Kindness is a
personal experience that helps all employees make
sure that they do the simple things that help build
their own personal strength and resilience – to
help re-energise, boost wellbeing and unleash our
potential. Six spaces were developed and each
of these six spaces of Wellbeing are available
to all employees as e-learning modules. The ten
minute modules introduce the theory and science
behind each area of wellbeing, providing tips and
suggestions on how to benefit and improve in that
area, exercises and tools to apply, and information
on where to find out more.
Further, we have renamed Employee Health and
Safety, as – Employee Safety and Wellbeing, so
that we will focus even more on these areas
going forward.
Ongoing communication
There were weekly audio messages from the CEO
to the whole organisation providing information
on what was happening throughout the world
due to the pandemic, updates on the business,
with feedback from clients across all regions
and developments in the business together with
information on the new safe ways of working and
the innovations being brought to the market.
COVID-19
The pandemic has brought much uncertainty into
everyone’s lives but we believe that this has been
a temporary disruption to the supply chain. No
restructurings due to COVID-19 have taken place
to ensure that we have the expertise within the
business to continue to make the world a better and
safer place and to take advantage of the business
opportunities post-COVID-19.
Financial statementsDirectors’ reportStrategic report Investor and shareholder engagement
January
• ODDO BHD Conference, Lyon
• Sydney/Melbourne Roadshow
• Seoul, Singapore, Kuala Lumpur
Roadshows
March
• Full year results 2019
• London, Edinburgh, Montreal, Chicago, Toronto,
New York Annual Results Roadshows
Investor relations programme
Aimed at helping existing and potential investors
understand the Group’s business model, strategy, financial
performance and outlook. The programme is wide-ranging
and includes events and roadshows throughout the
year to update investors and sell-side analysts on the
developments of the Group.
Feedback Forum
The Executive Directors and Investor Relations team
receive regular feedback from sell-side analysts and
investors during the year both directly and through the
Group’s corporate advisers. The Group Company Secretary
also receives feedback on governance matters directly
from investors and shareholder bodies.
The Board is committed to maintaining an
active and open dialogue with investors
and sees this as an important part of the
governance process. At each meeting, the
Board receives a report from the investor
relations department and analysts’ reports
are circulated to the Directors when available.
Feedback from meetings held between
executive management, or the investor
relations department, and institutional
shareholders, is also communicated to
the Board.
May
• Trading Statement
• AGM
•
Jefferies Structural Winners Conference (virtual)
June
• Barclays Testing, Inspection & Certification
(‘TIC’) Conference (Virtual)
August
• Half-year results 2020
• London, Edinburgh, Toronto, New York, US
Mid- Atlantic, Chicago & Midwest – Interim
Results (Virtual Roadshows)
September
• UBS Business Services Conference (Virtual)
• Sydney/Melbourne Roadshow (Virtual)
• Citi Growth Conference (Virtual)
• Bernstein London Strategic Decisions
Conference (Virtual)
October
• Société Générale – Germany Roadshow (Virtual)
• Berenberg London Testing, Inspection & Certification (‘TIC’)
Conference (Virtual)
Jefferies 2020 Industrials Conference, London (Virtual)
•
November
• Goldman Sachs Conference: Carbonomics: The Green Engine of
Economic Recovery (Virtual)
• Trading Statement
• Deutsche Bank Business Services Conference, London (Virtual)
• Stifel Roadshow (Virtual)
• AGM Update Statement (website)
December
• Berenberg European Corporate
Conference, London (Virtual)
• Credit Suisse Business Services
Conference, New York (Virtual)
Board shareholder engagement
Intertek’s largest shareholders, representing circa 65% of
the share register, are invited annually to meet with the
Chairman to share their views and discuss any corporate
governance matters. Following the 57.10% vote in
favour of the Remuneration Policy at the 2020 AGM, the
Remuneration Committee consulted with shareholders
representing circa 66% of the Group’s shareholder base, on
their reasons for voting against. See pages 105 and 106
for further information.
Resources
A wealth of information is available to investors in our
Annual Report and Accounts, Sustainability Report, interim
announcements and trading updates and Regulatory News
Service announcements. These materials are available on
our website and are supplemented by videos, webcasts
and presentations.
Conferences
Executive Directors and the Investor Relations team
attend industry conferences throughout the year,
providing the opportunity to meet a large number of
investors. Due to COVID-19, virtual conferences took place.
Roadshows
Following the full-year and half-year results
announcements, the Executive Directors and Investor
Relations team held meetings with principal shareholders.
Due to COVID-19, all meetings took place online.
Annual General Meeting (‘AGM’)
The Board welcomes the opportunity to meet with both
private and institutional investors at the AGM.
The 2021 AGM is currently scheduled to be held on 26 May
2021 at 9.00 a.m. at Intertek Group plc, 33 Cavendish
Square, London, W1G 0PS, however, we will keep under
review any restrictions that may apply. The AGM provides
the opportunity for all shareholders 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 Board
welcomes the opportunity to meet with both private and
institutional investors at the AGM. The Company proposes
a resolution on each separate issue and does not combine
resolutions inappropriately. The Notice of the AGM is sent
to shareholders by e-communications or by post and is also
available at www.intertek.com.
Due to the unprecedented circumstances presented
by the COVID-19 pandemic and to ensure the safety of
our shareholders, the AGM on 21 May 2020 was held as
a closed meeting, with the necessary quorum present.
Shareholders sent any questions to investor@intertek.com
which were responded to directly. The results of voting at
the AGM were published on the Company’s website.
Intertek Group plc Annual Report and Accounts 2020
89
Financial statementsDirectors’ reportStrategic report Division of Responsibilities
There is a clear division of responsibilities between the running of the Board (a key responsibility of the Chairman) and the day-to-day running of the Company’s business (the responsibility of the CEO).
These responsibilities have been formalised in writing.
The letters of appointment of the Non-Executive Directors, as well as the service agreements for the Executive Directors, are available for inspection at the Company’s registered office and at the
Annual General Meeting (‘AGM’).
Roles and responsibilities
Chairman – Andrew Martin
Key responsibilities
• Leading and governing the Board to ensure its overall
effectiveness in directing the Company.
• Assessing and monitoring the culture within the Company and
ensuring that it aligns to the Company’s purpose and values.
• Ensuring that Directors receive accurate, timely and clear
information to enable them to discharge their duties to promote
the long-term sustainable success of the Company.
• Ensuring effective two-way communication between the Board,
shareholders and key stakeholders.
• Communicating to all Directors the views, issues and concerns of
major shareholders.
• Promoting a culture of openness and debate and facilitating
constructive Board relations and the effective contribution of the
Non-Executive Directors.
Senior Independent Non-Executive Director –
Graham Allan
Key responsibilities
• Providing a sounding board for the Chairman.
• Being available as an intermediary between the other Directors
and shareholders if necessary.
• Leading the annual performance review of the Chairman.
• Being available to meet with shareholders and other stakeholders
should they have any concerns that have not been resolved
through the normal channels.
90
Intertek Group plc Annual Report and Accounts 2020
Chief Executive Officer – André Lacroix
Key responsibilities
Independent Non-Executive Directors
Key responsibilities
• Proposing and agreeing the Group Strategy with the Board.
• Leading the day-to-day operations of the Group in line with the
agreed strategy and commercial objectives.
• To constructively debate and add value with respect to
the proposals on strategy and risk management and offer
specialist advice.
• Promoting and conducting the affairs of the Company with the
• Reviewing and monitoring the performance of management in
highest standards of ethics, integrity, sustainability and corporate
governance.
• Managing the Leadership Team.
meeting agreed goals and performance objectives.
• Reviewing the appointment and removal of Executive Directors.
• Allocating sufficient time to the Company to discharge
his/her responsibilities.
Group Company Secretary – Fiona Evans
Key responsibilities
Chief Financial Officer – Ross McCluskey
Key responsibilities
• Supporting the Chairman in delivering Board and governance
procedures.
• Advising the Board on governance.
• Ensuring good information flows within the Board and its
Committees.
• Managing the financial delivery and performance of the Group.
• Analysing the Company’s financial strengths and weaknesses and
proposing corrective actions.
• Managing the finance and accounting departments.
• Ensuring that the Company’s financial reports are accurate and
• Facilitating induction and assisting with professional development
completed in a timely manner.
as required.
• Overseeing the capital structure of the Company, and determining
• Developing and overseeing the systems that ensure that the
the best mix of debt, equity and internal financing.
Company complies with all applicable codes, in addition to its legal
and statutory requirements.
• Facilitating access to independent professional advice at the
Group’s expense.
Financial statementsDirectors’ reportStrategic report Division of Responsibilities Continued
Independence
On appointment as Chairman of the Company on 1 January 2021, the
Board assessed and agreed that Andrew Martin was independent in
accordance with Provisions 9 and 10 of the Code. The Board continues
to review the independence of the Non-Executive Directors, other than
the Chairman, and considers that all of them continue to demonstrate
independence in both character and judgement, are free from any
conflicting interests and have independent oversight of governance
and compliance. The Chairman is committed to ensuring the Board
comprises a majority of independent Non-Executive Directors, who
objectively challenge management and monitor performance for
the benefit of all stakeholders balanced against the need to ensure
continuity on the Board. The Board determined that Lynda Clarizio and
Tamara Ingram were independent in accordance with the Code upon
their appointment to the Board.
The Board recognises the recommended terms within the Code for
Non-Executive Directors and the Chairman to ensure the progressive
refreshing of the Board meets the evolving needs of the Company.
More information on the succession plans of the Board, to ensure the
appropriate combination of executive and independent Non-Executive
Directors on the Board, is outlined in the Nomination Committee report
on page 95.
Time commitment of Directors
The Board recognises the importance of all Non-Executive Directors
having the necessary time to commit to the business of Intertek and,
upon appointment, their letters of appointment stipulate the expected
time commitment whilst acknowledging that this may vary depending
upon the demands of the business and other events. One such
event has taken place this year with the emergence of the COVID-19
pandemic with the Board meeting more frequently during 2020,
increasing dialogue about the impact on the business, employees,
customers and other stakeholders, together with, agreeing mitigating
actions to ensure the long-term success of the Company. All Directors
made themselves freely available as required, even at short notice,
in order to meet the needs of the business.
Procedures have been put in place and the Directors seek approval
from the Board before accepting any additional external appointments.
When assessing additional directorships, the Board considers the
number and nature of external directorships already held by the
individual and the expected time commitment for those roles. During
2020, the Board gave approval to Graham Allan, Louise Makin and
Lena Wilson for new appointments. Approval was granted as it was
determined that the additional time commitment, taking into account
their current overall responsibilities, would not have an effect on their
commitment to Intertek as a Non-Executive Director. Graham Allan, as
the Senior Independent Non-Executive Director, led the succession
planning for the Chairman and has clearly demonstrated that he
has sufficient time to devote to his present role at Intertek. Prior to
joining the Board, Tamara Ingram and Lynda Clarizio disclosed their
current commitments and the time commitment involved. The Board
was satisfied that Tamara and Lynda could provide sufficient time
to discharge their duties as Directors of Intertek (see biographies on
pages 74 to 76). As demonstrated, in the Board meeting attendance
table, all Directors who were eligible to attend scheduled meetings
attended every such meeting and every unscheduled meeting of
which there were three.
In addition to the scheduled Board meetings, there was frequent ad
hoc contact between Directors to discuss the Group’s affairs and the
development of its business. When required, the Board also met at
short notice on a quorate basis. During 2020, three additional Board
meetings were held to deal with the evolving COVID-19 pandemic.
The Chairman and the Non-Executive Directors meet regularly without
the Executive Directors or management being present. The Chairman
also maintains regular contact with the Senior Independent Non-
Executive Director.
Where Directors have concerns about the operation of the Board
or the management of the Company that cannot be resolved,
the minutes will reflect this. No such concerns were raised during
the year.
Board members and attendance
Board meeting attendance during the year to
31 December 2020
Board members
Sir David Reid
(retired 31 December 2020)
Chairman
André Lacroix
Chief Executive Officer
Ross McCluskey
Chief Financial Officer
Graham Allan
Senior Independent Non-Executive Director
Gurnek Bains
Non-Executive Director
Tamara Ingram
(appointed 18 December 2020)
Non-Executive Director
Dame Louise Makin
Non-Executive Director
Andrew Martin
Non-Executive Director
Gill Rider
Non-Executive Director
Jean-Michel Valette
Non-Executive Director
Lena Wilson
(resigned 31 January 2021)
Non-Executive Director
Scheduled
meetings
eligible to
attend
Meetings
attended
5
5
5
5
5
0
5
5
5
5
5
5
5
5
5
5
0
5
5
5
5
5
100%
Attendance from all Board members
Intertek Group plc Annual Report and Accounts 2020
91
Financial statementsDirectors’ reportStrategic report Division of Responsibilities Continued
Composition, Succession and Evaluation
Directors’ conflicts of interest
The Board operates a policy to identify, authorise and manage any
conflicts of interest to assist Directors in complying with their duty
to avoid actual or potential conflicts. The Directors are advised of the
process upon appointment and receive an annual refresher. 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 Articles.
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. Any conflicts
of interests are reviewed when a new Director is appointed, or if and
when a new potential conflict arises. A formal process is also in place
for managing such conflicts to ensure no conflicted Director is involved
in any decision related to their conflict and, during the year, this process
operated effectively.
Board appointments
The Board is committed to ensuring that it has the right balance of
skills, experience, knowledge and diversity, taking into account the
targets of the Hampton-Alexander and Parker reviews, to lead Intertek
in these complex and fast-moving times and deliver our strategy and
TQA customer promise to Build Back Ever Better post-COVID-19 and
make the world a better and safer place. More information on the
appointment process to ensure that we have the right individuals
who can inspire and provide passionate leadership to deliver our 5x5
strategy is outlined in the Nomination Committee report on pages 95
and 96.
Board skills, experience and knowledge
Induction, training and development
There is a full, formal and extensive induction programme which is
tailored to ensure that Directors joining the Board are provided with
the knowledge and materials to add value from an early stage. This
is managed by the Chairman and the Group Company Secretary.
During the programme, new Directors receive a wealth of background
information on the Company and details of Board procedures, Directors’
responsibilities, various governance-related issues and sustainability
strategy and priorities within the Group. The induction also includes a
series of meetings with other members of the Board, senior members
of management and external advisers and visits to our laboratories
and sites. This process is kept under review, taking into account
Directors’ feedback.
Ongoing and continual development is crucial to our Directors
remaining highly engaged, effective and well informed. All Directors are
kept up to date with information about Intertek’s business and there
is an ongoing programme of information dissemination throughout
the year. 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 the Leadership Team to the Board and meetings
have been held on regional strategy to increase the understanding
of operations, opportunities and risks together with presentations
from external advisers on regional economic trends and the impact
of COVID-19.
Board, Committee and Directors’ evaluation
2020
Internal
evaluation
2022
Internal
evaluation
2021
Externally
facilitated
evaluation
The Company also encourages Directors to attend briefings and
seminars offered by professional and commercial bodies in order to
keep abreast of current legal and regulatory requirements, especially
within their specialist fields such as audit or remuneration.
The effectiveness of the Board, and its Committees, is rigorously
reviewed annually and an independent externally facilitated review is
conducted every three years. The internal questionnaires are reviewed
and updated annually to ensure that the right questions are asked and
take into account changes in guidance and regulations.
The 2020 Board internal evaluation process was led by Sir David Reid,
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 the Board
as a whole, identifying and agreeing areas for improvement – the
strategy and strategic agenda having already been agreed at
the Board.
92
Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Composition, Succession and Evaluation Continued
For each Committee of the Board a similar process was undertaken.
The Committee evaluations looked at ways in which they could
improve their overall effectiveness, their performance and areas of
improvement during the year. The outcome from these evaluations
confirmed that the Committees were performing well and were
appropriately constituted.
In 2019, the findings from the internally facilitated Board evaluation
were very positive and constructive, with the focus during the year
on continuing to improve Board processes to ensure the maximum
use of time on discussion, and focus on a few significant areas such
as culture, customers and our people. We wanted to understand more
about what our employees are thinking and how we can support and
develop them, and this became even more important as the pandemic
spread around the world with employee engagement becoming one
of our top priorities. More information on our workforce engagement
during the year is outlined on pages 85 to 88.
We spent more time as a Board looking at the Intertek culture and held
a Board session on this during the year and as part of that session,
received insights from our employees on what the culture means to
them as seen on page 79.
Our customer centricity is the cornerstone of what we do 24/7 and
the Board visits to two of our major customers in October 2019 were
extremely informative as we continue to support customer innovation
and the drive into the services that our customers need. We held a
session on the innovation strategy for customers during the year and
received updates throughout 2020 on customers from different areas
of the business. During 2020, we have listened to and supported our
customers in resuming their operations and rapidly brought to market
a range of new products to assist in addressing their operational and
supply chain challenges due to COVID-19.
Sustainability will continue to be hugely important as demonstrated
by the launch in September 2019 of Total Sustainability Assurance, an
industry-leading, independent assurance solution enabling businesses
to demonstrate their end-to-end commitment to sustainability. During
2020, we launched CarbonClear™, the world’s first certification
programme that independently verifies the upstream carbon intensity
per barrel of oil or gas equivalent. This programme will enable traders,
refiners, regulators and other stakeholders to confidently rely on
certified and standardised emissions intensities, to further compare
and differentiate the value of production streams, and how the
purchase of commodities from these streams impacts a company’s or
country’s overall progress toward emissions targets across the energy
value chain. During 2020, the Board succeeded in actioning the areas
identified from the 2019 evaluation.
Again following the 2020 Board evaluation, the findings from the
internal evaluation have continued to be positive with strong scores
in the six categories that were evaluated. The findings from the
evaluation recognise the continuing drive to be ‘Ever Better’ and living
the Board promise which defines our work and purpose at Intertek.
We have continued to review the board processes and have identified
areas where more discussion time would be helpful especially in the
areas of strategy, customer insights and risk. This will form part of
the forward Board agenda for 2021 and the ongoing assessment and
monitoring of culture within Intertek will continue to be a focus for
2021. During 2020 and continuing into 2021, as necessitated by the
pandemic, we moved seamlessly to virtual meetings and will continue
to make best use of the extensive tools we have in place to ensure
engagement with our stakeholders, even though it is not possible as
yet to undertake meetings in person.
An externally facilitated evaluation will be held in 2021.
Chairman and Director evaluation
The Non-Executive Directors, led by the Senior Independent Non-
Executive Director, conducted a performance review of Sir David Reid,
who was the Chairman during 2020. They considered his leadership,
performance and overall contribution to be of a high standard during
the year.
Sir David Reid, the previous Chairman, met with each Director to discuss
their individual contributions and performance, together with any
training and development needs. Following these reviews, the Board
remains satisfied that, in line with the Code, 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 any Director is able to devote to the Company.
The Board recommends that shareholders should be supportive of their
election and re-election to the Board at the 2021 AGM.
Group Company Secretary support
The role and responsibilities of the Group Company Secretary is
outlined on page 90.
Intertek Group plc Annual Report and Accounts 2020
93
Financial statementsDirectors’ reportStrategic report Nomination Committee report
I would like to thank Sir David
Reid, Chairman of Intertek until
31 December 2020, for his work
on board succession, and
Graham Allan for leading the
Chairman succession process.”
Andrew Martin
Chair
94
Intertek Group plc Annual Report and Accounts 2020
Dear shareholder
As Chair of the Nomination Committee (‘Committee’), I am pleased
to present the Committee’s report for 2020.
2020 has been a busy year for the Committee, focusing its discussions
on reviewing the current experience and skills on the Board and likely
future needs in order to build up a total skills overview and identify any
gaps; the outcome from the Board evaluation is also used to inform
these discussions.
A priority for us was Executive and Non-Executive succession
planning; with the impending retirement of Sir David Reid, Louise Makin
and Lena Wilson as they approached nine years since their date of
appointment, succession planning was a focal point for the Committee
throughout 2020. I would like to thank Sir David Reid, Chairman of
Intertek until 31 December 2020, for his work on board succession,
and Graham Allan for leading the Chairman succession process.
The impact of the pandemic highlighted more than ever the importance
of the characteristics of our Board to ensure their experience would
provide strength and resilience to lead the Group through any crisis,
whilst maintaining the level of knowledge and skills appropriate
for the industries that Intertek operates within. The Committee
has demonstrated its ability to successfully identify these key
characteristics and in December 2020 and March 2021, respectively,
Tamara Ingram and Lynda Clarizio were appointed to the Board as
Non-Executive Directors. Tamara and Lynda are passionate, committed
and well-rounded businesswomen with track records of outstanding
leadership in their areas of expertise and proven adaptability; they are
both excellent additions to the Board.
When facing the pandemic, the Board and Senior Management team
have demonstrated their versatility, adaptability and reactivity to
quickly evolving challenges, whilst simultaneously navigating the Group
through these unprecedented times with the strategy remaining the
core of decision-making. Our colleagues at Board and management
level have illustrated the defining characteristics we strive for in our
Intertek leaders when carrying out succession planning, which in turn
exemplifies the successful mechanics of the Committee.
Andrew Martin
Chair of the Nomination Committee
Membership of the Committee
During the year, we held five formal meetings. Attendance of members
at formal meetings is shown in the table below. The Group Company
Secretary attends all formal meetings of the Committee and the
Committee invites the CEO and the EVP, Human Resources to attend
meetings when the subject matter deems their presence appropriate.
Committee meeting attendance during the year to
31 December 2020
Committee members
Sir David Reid (Chair)
(retired 31 December 2020)1
Graham Allan
Gurnek Bains
Dame Louise Makin
Lena Wilson
(resigned 31 January 2021)
Scheduled
meetings
Meetings
attended
5
5
5
5
5
5
5
5
5
5
1. Andrew Martin was appointed Chair of the Committee on 1 January 2021.
100%
attendance
Role and key responsibilities of the Committee
• Review the structure, size and composition of the Board and
its Committees.
•
Identify, review and nominate candidates to fill Board vacancies1.
• Evaluate the balance of skills, independence, knowledge, experience
and diversity on the Board and its Committees.
• Review the results of the performance evaluation process that
relates to the composition of the Board and its 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.
Financial statementsDirectors’ reportStrategic report Nomination Committee report Continued
The full Terms of Reference of the Committee, which were updated
in 2019, can be found on our website.
Committee responsibilities and how we met them in
the year
Performance evaluation
As part of the annual Board evaluation, the Committee’s performance
was evaluated by all Committee members 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 Code.
Board and Committee composition
During the year, we continued to monitor the composition of the
Board and its principal Committees and the independence of our Non-
Executive Directors. We undertook our annual review of the Board’s
effectiveness and composition. To ensure that the Board comprises
a wide range of skills, experience and attributes, the Committee
discusses and reviews extensively the experience, skills and behaviours
required of future Directors, including the qualities of the individual
required to ensure the right fit with the culture and style of Intertek.
The review concluded that the current composition of the Board and
each Committee contained a good balance of skills, multi-industry
sector and geographic experience, as well as diversity. The Committee
also unanimously agreed, following the consideration of the
independence of each Non-Executive Director except the Chairman,
that each Non-Executive Director continued to be independent
in accordance with the criteria set out in the Code.
Talent mapping, succession planning and senior
management succession
In the past year, we have particularly focused our discussions on
the different time horizons within our succession planning, including
contingency planning for sudden and unforeseen departures, the
orderly replacement of current Board members and senior executives,
and a longer-term view looking at the relationship between the delivery
of the Group strategy and objectives and the skills needed on the
Board now and in the future.
As part of our succession planning, the Committee initiated a search
for new Non-Executive Directors. In addition to the specific skills,
knowledge and experience deemed necessary, the role specification
contained criteria such as competency and personal qualities that
would be required for the position. The Committee also paid close
attention to ensure that the candidate(s) selected exhibited the right
behaviours to fit the culture, values and ethics of the Group and would
also be able to allocate sufficient time to the Company to discharge
their responsibilities.
The Committee engaged Spencer Stuart, an external search
agency with no other connection to the Company or its individual
Directors, to assist with the selection process. An initial list of
potential candidates was produced and shortlisted. The Committee
members and the Chairman both met separately with the shortlisted
candidates, following which they agreed to recommend to the Board
the appointment of Tamara Ingram as Non-Executive Director,
with effect from 18 December 2020 and subsequently the same
process was followed with Lynda Clarizio who was appointed to
the Board on 1 March 2021. Tamara has had an extensive career in
advertising, marketing and digital communication and brings her deep
understanding of consumer brands and digital strategy to complement
the current skills and experience on the Board. Lynda has over 20 years’
experience in the media industry and her significant experience
in digital measurement and broader technology provides a strong
addition to the current skills on the Intertek Board.
Following Sir David’s ninth consecutive year on the Board on
1 December 2020, the Committee held a number of meetings
throughout the year to support the search and appointment of the
new Chairman. When the Committee dealt with the succession of
the Chair, Graham Allan, in his capacity as Senior Independent Non-
Executive Director, chaired the meetings. Interviews were conducted
with external search consultants, with the interviews resulting in
the engagement of Lygon Group to assist in the search for potential
candidates for Sir David’s successor. Lygon Group have no connection
to Intertek or any individual Directors. Following meetings with each
individual Director, Lygon Group presented a list of potential candidates
for the Committee to consider. Upon consideration of the list of
potential candidates and subsequent interviews, the list was reduced.
In addition, the Committee also considered current acting Directors for
the role.
The Committee held a meeting to discuss and agree the appointment
of a new Chair, which was followed by separate presentations made
by the candidates to the Board, as well as separate meetings with the
CEO. As a result, the Committee made a final recommendation to the
Board that Andrew Martin be appointed as Chairman of the Company.
The Board supported the recommendation and in turn Andrew Martin
was appointed Chairman of the Company with effect from 1 January
2021, following the retirement of Sir David Reid with effect from
31 December 2020. Sir David’s letter of appointment expired on
30 November 2020, and thus the Committee approved a one-month
extension to his term. As a result, Sir David’s tenure exceeded the
recommended nine years under Provisions 10 and 19 of the Code,
however the Committee and the Board deemed this necessary to
ensure a smooth transition in the succession of the Chair and given
that Andrew’s appointment would not come into effect until
1 January 2021.
Subsequently, with effect from 1 January 2021, Andrew stepped down
as Chair of the Audit Committee in line with Provision 24 of the Code;
Jean-Michel Valette was appointed Chair of the Audit Committee with
effect from 1 January 2021 and Gill Rider was also appointed a member
of the Audit Committee on 1 February 2021.
With effect from 31 January 2021, Lena Wilson retired from her role
on the Board after having served for nearly nine years from the date of
her appointment. During this time, Lena has been a diligent and valued
member of the Board, and the Audit and Nomination Committees,
and we thank her for her enthusiasm, dedicated service and valuable
contribution. Louise Makin will be stepping down from the Board
on 30 June 2021 having served for nine years from the date of
her appointment.
During the year, the Board approved the external appointment of
Jonathan Timmis as Group Chief Financial Officer, taking over from
Ross McCluskey. Jonathan will join the Board as an Executive Director
on 1 April 2021.
Jonathan is an Associate member of the Chartered Institute of
Management Accounting. He has had an exceptional career with
some of the top companies in the world. At Reckitt Benckiser, prior
to his current role as CFO Health, he has been the Group Controller,
Regional Finance Director for North America and Regional Finance
Director for Southern Europe. Prior to his time at Reckitt Benckiser,
Jonathan spent several years in senior finance roles with SAB Miller,
including three years as the Finance Director of Royal Grolsch and
also for its UK business. Jonathan’s early career in finance was with
PricewaterhouseCoopers.
Intertek Group plc Annual Report and Accounts 2020
95
Financial statementsDirectors’ reportStrategic report Nomination Committee report Continued
Ross McCluskey, who was appointed as Group Chief Financial Officer
on 22 August 2018, will be appointed into a new operational role in
the business from 1 April 2021. This provides an excellent opportunity
for him to grow his operational experience and continue within
the business.
Board reappointments
Having come to the end of their first term on 30 June 2020 as
Non-Executive Directors on our Board, Gurnek Bains and Jean-Michel
Valette’s appointments were reviewed. Following this review, the
Committee was pleased to recommend to the Board the reappointment
of Gurnek and Jean-Michel for a further three years, until 30 June 2023.
Graham Allan’s first term as Senior Independent Non-Executive
Director came to an end on 30 September 2020, and thus his
appointment was also reviewed. Following this review, the Committee
was pleased to recommend to the Board the reappointment of Graham
for a further three years until 30 September 2023.
Where the reappointment of a member of the Committee is being
discussed, they are precluded from any involvement in the discussions.
In the instance where the reappointment of the Chairman is being
discussed, the Senior Independent Non-Executive Director would chair
the Committee meeting.
Biographies for all of the Directors are available on pages 74 to 76, and
a resolution for each Director will be proposed at the forthcoming AGM
for their election or re-election.
Board evaluation
The process and findings of the evaluation of the Board, Committee
and Directors are outlined on pages 92 and 93. An evaluation can
determine whether there are any gaps in the skills and composition
of the Board. Following the last evaluation, it was concluded that
the Board, each Committee and each Director continue to perform
effectively and contribute to the long-term sustainable success of
Intertek. The outcomes and the actions taken from the evaluations
undertaken in 2019 and 2020 are outlined on pages 92 and 93 and
the feedback from the Board evaluation is taken into account when
determining the key skills required for new Directors on the Board.
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Intertek Group plc Annual Report and Accounts 2020
Chairman and Non-Executive
Director Appointment Process
Skills and Composition Review
The Committee reviews the structure and composition of the
Board, in turn considering the balance of skills, experience,
industry and geographic experience and knowledge, diversity,
independence, cognitive and personal strengths of the current
Board. When considering these factors, the Committee is
mindful of attributes which are favourable to assist in the
delivery of the Group’s strategy.
Creating the Brief
The Committee, following the skills and composition review,
compile a brief for the vacant position which outlines
favourable characteristics and attributes that they desire
the appointed individual to hold. This brief is then shared with
the chosen consultant who will utilise the brief to compile a list
of suitable candidates.
Longlist and Shortlist Review
The appointed consultant presents an initial longlist
of candidates. This list is then shortlisted using the brief
as a guide to determine suitability.
Due Diligence
Once the candidates are shortlisted, extensive due diligence
is undertaken on each individual. Once the due diligence is
completed, the candidates are invited to separate meetings
with the Board and the CEO.
Recommendation
Once a preferred candidate is chosen, the Committee makes
a recommendation to the Board to appoint the individual into
the vacant position.
Diversity
The Board and the Committee are committed to achieving a Board
which embraces diversity in culture, gender, skills, background, regional
and industry experience and other qualities to truly reflect the diverse
nature of our business which operates in more than 100 countries.
All of these factors are considered in determining the composition of
the Board to ensure that we have the best people to lead Intertek,
a leading Quality Assurance provider to industries worldwide.
In identifying suitable candidates to recommend for appointment to
the Board, the Committee considers all candidates on merit, against
objective criteria, and with due regard for the benefits of diversity on
the Board to achieve the most effective Board possible. We expect
to make continued progress as our existing Non-Executive Directors
rotate in the ordinary course of business.
Due to the strategic importance of talent mapping and succession
planning to the long-term sustainable success of the Group, the
Board, as a whole, discusses and supports succession planning in the
Leadership Team and as part of that discussion review the diversity, as
well as talent mapping across the Group in respect to Regional, Country
and functional roles. This has enabled the Board to gather insights on
the key success factors desired for senior roles within the Group and
support in developing a diverse pipeline in order to drive the Group’s
5x5 strategy. The Leadership Team can be found on page 77.
Our policy on Board gender diversity, which is available on our website,
is aligned to the recommendations of both Lord Davies in his report
‘Women on Boards’, and the Hampton-Alexander Review (‘Review’),
which encourages at least 33% representation of women on FTSE 350
boards by the end of 2020 and with the Parker Review ‘Beyond One by
21’, which recommends that FTSE 100 company boards should have at
least one ethnically diverse Director by 2021.
We met and complied with both the targets outlined in the Review and
the Parker Review by the end of 2020. As at 31 December 2020, we
had four female Non-Executive Directors representing 36% female
membership and one ethnically diverse Director on the Board.
The gender balance, ethnicity and geographical heritage of the Board
as at the date of this report is set out in the diagrams overleaf. As
at 31 December 2020, as per the definition in the Code, the senior
management gender balance was nine male and three female and their
direct reports were 89 male and 31 female. Further details regarding
gender balance across the Group is outlined on page 30 within the
Sustainability section in the Strategic report.
Financial statementsDirectors’ reportStrategic report Nomination Committee report Continued
The Committee continues to monitor the overall diversity of Intertek’s leadership at Board and senior management level, to ensure the broadest range of leaders are
considered for new appointments.
Skills and experience on the Board as at the date of publishing this report
Director
Consulting
Risk
Management
Customer
Service/Care
People
Finance
International
Sustainability
Technology
UK Listed
Company
Director
Previous/
Current CEO
UK NED
Experience
Andrew Martin1
André Lacroix
Ross McCluskey
Graham Allan
Gurnek Bains
Lynda Clarizio2
Tamara Ingram³
Dame Louise Makin
Gill Rider
Jean-Michel Valette
1. Appointed Chairman on 1 January 2021.
2. Appointed 1 March 2021.
3. Appointed 18 December 2020.
Board composition and diversity as at the date of publishing this report
Board balance by gender
Board balance by
independence
In the Hampton-Alexander
Review report 2021,
Intertek is:
One of 68
FTSE 100 companies
who have met or exceeded the
Hampton-Alexander target
of 33% Women on Boards
Ranked 37
of FTSE 100 companies
Ranked 14
of 23
in the Support Services sector
across the FTSE 350
Board tenure
Geographical heritage
Board ethnicity
40%
60%
20%
10%
80%
1
1
2
30%
60%
1
6
9
Male
Female
Executive Directors
Independent Non-Executive Directors
0–3 years
3–6 years
6–9 years
Europe
Australasia
North America
South East Asia
White
Asian
Intertek Group plc Annual Report and Accounts 2020
97
Financial statementsDirectors’ reportStrategic report
Audit Committee report
Intertek’s business model
remains resilient, but like other
companies operating during
these unprecedented and
challenging times due to
COVID-19, we continue to
support and closely monitor the
financial results of the Group.”
Jean-Michel Valette
Chair
98
Intertek Group plc Annual Report and Accounts 2020
Dear shareholder
On behalf of the Audit Committee (‘Committee’), I am pleased to
present the Committee’s report for 2020. I was pleased to take up
the role of Chair of the Committee with effect from 1 January 2021
following Andrew Martin’s move to become Chairman of Intertek Group
plc. Andrew was an exemplary Chair of the Committee and on behalf of
the Committee members I thank him for his dedication and leadership.
I look forward to continuing the good work of the Committee during
my tenure as Chair.
During 2020, whilst the Committee’s primary focus centred on the
accuracy of the Group’s financial reporting, we have applied additional
focus to assess the COVID-19 impact on the risk management and
internal control framework, together with the additional work carried
out to support the long-term viability statement. Intertek’s business
model remains resilient, but like other companies operating during
these unprecedented and challenging times due to COVID-19,
we continue to support and closely monitor the financial results of
the Group.
This report aims to outline the activities and the responsibilities of the
Committee, and is intended to provide shareholders with an insight into
key areas considered in scrutinising the conduct of the business, its
management and auditor, to protect the interests of our shareholders,
the livelihoods of our employees, and the confidence of our customers
and suppliers in the long-term financial strength of our Group,
especially during 2020 where we have faced an unprecedented
global pandemic.
The COVID-19 outbreak first impacted the UK in the first quarter
of 2020 and in March 2020 the FCA issued a Statement of Policy
recognising the unprecedented challenges faced by companies and
their auditors in preparing audited financial information as a result of
the pandemic. Following a review of the practical impacts on the audit
process, such as travel and access to key offices, we agreed ways to
ensure that a full audit could be conducted at both the half and full-
year without impacting on our half and year end reporting deadlines.
As Chair of the Committee, I shall, as did my predecessor, make myself
available to shareholders, especially at the AGM, to facilitate the
answering of any questions that they may have around the scope of
the Committee’s responsibilities as a whole, the Committee’s activities
throughout the year, and any other questions that may arise from
this report. However, as with many aspects of our business during
the year, the 2020 AGM was impacted by the COVID-19 outbreak in
the UK, making a physical meeting impossible but arrangements were
put in place to ensure that we were able to respond to any shareholder
enquiries online via our investor email.
We advised the Board that the 2020 Annual Report and Accounts
is fair, balanced and understandable and provides the necessary
information for our shareholders to assess the Group’s position,
performance, business model and strategy. The process of review
is described in greater detail on page 103.
PricewaterhouseCoopers LLP (‘PwC’) completed their fifth full audit
of the Group for the year ended 31 December 2020. During the
year, the Committee reviewed and agreed the independence and
effectiveness of the audit process, in establishing positive relationships
and providing a good level of service to the Group, whilst seeking
continual improvements in the audit of Intertek.
Throughout the year, the Committee also ensured that separate
meetings with the CFO, Group Audit Director and the external auditor
took place without management present in order to provide an open
forum for any issues to be raised.
We carried out an internal evaluation of the Committee 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 Code.
Jean-Michel Valette
Chair of the Audit Committee
Financial statementsDirectors’ reportStrategic report Audit Committee report Continued
Committee composition
The Board is satisfied that the Committee, led by Jean-Michel Valette,
has recent and relevant financial experience and competence relevant
to the sectors in which Intertek operates, meeting the requirements
of the Code. Jean-Michel, Gill and Louise all collectively possess the
qualities which, complemented with Jean-Michel’s relevant Executive
and recent extensive Non-Executive financial experience, including
his current role as Chair of the Audit Committee of the Boston Beer
Company in the US, are indicative of an effective committee. Jean-
Michel has been the Chair of the Audit Committee of the Boston Beer
Company since January 2019, after being a member of that Committee
since 2003. He is also designated a financial expert on the Sleep
Number Corporation board. Their collective experience in the roles
of Chief Executive Officer, as well as other senior global positions,
demonstrates their ability to oversee key risks, not just financial, as
well as maintain the intellectual curiosity and professional challenge
needed to operate effectively as a committee.
During 2020, the Committee comprised Andrew Martin (as Chair, and
with relevant financial experience), Louise Makin, Jean-Michel Valette
and Lena Wilson and during that period the Committee met the
requirements of the Code.
Effective 1 January 2021, Andrew Martin stepped down as Chair of the
Committee and Jean-Michel Valette took up his position. Furthermore,
following the resignation of Lena Wilson as a Director on 31 January
2021, Gill Rider was appointed a member of the Committee with effect
from 1 February 2021.
On appointment, new Committee members receive an appropriate
induction, consisting of meetings with senior management and
the Group’s internal and external auditors, a review of the Terms
of Reference, previous Committee meeting papers, minutes, and
information on the Group’s financial and operational risks. During the
year, there were no changes to the composition of the Committee.
Performance evaluation
The internal evaluation of the performance of the Committee was
conducted during the year and entailed the completion of a detailed
questionnaire by each of the Committee members, review and
discussion of the results of the evaluation and identifying and agreeing
areas for improvement. The Committee reviewed their functionality,
members’ individual strengths and identified any additional training
that may be beneficial. The review concluded that the timing of
meetings and clear annual agenda worked well, the composition of the
Committee was good, there was very thorough reporting by the Chair
and the Committee to the Board and consideration would be given
to how internal and external audit synergies could be maximised. 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 Code.
An overview of the background, knowledge and experience of the
Committee Chair and each of the Committee members can be found on
pages 74 to 76 and in the Notice of the AGM.
During the year, the Committee held four formal meetings. Attendance
of members at meetings is shown in the table below.
Committee meeting attendance during the year to
31 December 2020
Scheduled
meetings
Meetings
attended
4
4
4
4
4
4
4
4
Committee members
Jean-Michel Valette (Chair)
(appointed Chair on 1 January 2021)
Andrew Martin
(Chair to 31 December 2020)
Dame Louise Makin
Lena Wilson
(resigned on 31 January 2021)
100%
Attendance
Intertek Group plc Annual Report and Accounts 2020
99
Financial statementsDirectors’ reportStrategic report Audit Committee report Continued
Committee responsibilities and how we met them in the year
The Committee has specific responsibilities delegated to it by the
Board and the full Terms of Reference of the Committee can be found
at intertek.com. The Group Company Secretary, the audit partner and
members of his team attended all meetings held during the year. At the
invitation of the Committee, the Chairman, CEO, CFO, Deputy Group
Financial Controller and the Group Audit Director attended meetings.
Other members of senior management were invited to attend the
meetings as necessary.
The business of the Committee is linked to the Group’s financial
calendar of events and the timetable for the annual audit. The table
below outlines what the Committee considered during 2020.
February
May
July
December
Management Highlights Memorandum for
the year ended 31 December 2019
Annual appraisal of the external
auditors
Viability Statement
PwC Audit Plan for the year
ended 31 December 2020
Management Highlights
Memorandum for the period
ended 30 June 2020
Going Concern assessment
Accounting update paper for the
year ended 31 December 2020
Group Risk Process and Viability
Statement basis of preparation
for the year ended 31 December
2020
Going Concern assessment
Internal Audit Summary Q4 2019 PwC Interim review findings for
the period ended 30 June 2020
Update on Core Mandatory
Controls and Assurance Map
Letter of Representation to PwC and
Statement of Directors’ Responsibilities for
the year ended 31 December 2019
Internal Audit Q1 2020 update
PwC report to the Committee for the
year ended 31 December 2019 and
independence confirmation
Draft 2019 Full Year Results
COVID-19 response and Internal
Audit Plan for the rest of 2020
Private meeting without
management with the Group
Audit Director
Policy for engagement of External Auditors
and pre-approval of non-audit activities for
the year ended 31 December 2020
Fraud processes
2020 Rolling Committee Agenda
2019 Evaluation of the Committee
Committee Terms of Reference
Private meetings without management
with (i) PwC and then (ii) the CFO
100 Intertek Group plc Annual Report and Accounts 2020
Letter of Representation
and Statement of Directors’
Responsibilities for the period
ended 30 June 2020
Draft 2020 Half Year Results
Non-audit fees update for the
year ended 31 December 2020
PwC pre-year end accounting
and controls update
Internal Audit Q2 2020 update
Internal Audit August to
November 2020 update
Private meetings without
management with (i) PwC and
then (ii) the CFO
Internal Audit Plan for 2021
Update on Internal Audit
effectiveness
Private meeting without
management with the Group
Audit Director
Financial Reporting
A principal responsibility of the Committee is to monitor the integrity
of the financial statements of the Group, having regard to the matters
communicated to us by the external auditor, and to measure the
performance of the Group against the financial goals of our strategy.
This is key for our shareholders and other stakeholders in order for
them to understand the financial strength of the business.
In order to fulfil this responsibility, we reviewed the full-year and
half-year results, as well as any formal announcements relating to
the Group’s financial performance, prior to release. We also reviewed
significant accounting policies and confirmed that it remains
appropriate to report as a going concern.
Going concern
We received a detailed report from management with the approach
taken to the going concern statement and viability statement which
included the projected funding requirements, the facilities available
to the Group, the sensitivity models used (including an illustrative
sensitivity scenario of a reduction of 50% to the base profit forecasts
and the corresponding impact to cash flow forecasts in both 2021 and
2022 due to a greater than expected impact of COVID-19) and the
review of principal risks and uncertainties undertaken.
The Committee reviewed the paper and robustly challenged the
assumptions with management and 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 and meet its liabilities as
they fall due over the period. 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 2022.
As disclosed in note 14 of the financial statements, all the current
borrowing facilities are expected to be available at 31 December
2021, except for US$15m of senior notes that are due to be repaid in
July 2021 and US$140m of senior notes that are due to be repaid in
January 2022, and our models forecast these to be repaid using current
facilities. Following the recommendation of the Committee, the Board
continues to adopt the going concern basis in preparing the Group’s
financial statements (as disclosed in note 1 of the financial statements
on page 141) and has approved the long-term viability statement as
set out on page 57.
Financial statementsDirectors’ reportStrategic report Audit Committee report Continued
External auditor
The appointment, review and relationship with the external audit firm
and the annual review of the effectiveness of the external audit is
a responsibility that is delegated to the Committee.
The views of management and the Directors on PwC’s service, level of
challenge, and application of professional judgement are obtained via a
questionnaire, and subsequent follow up as necessary. The feedback is
then presented to the Committee.
The key findings and recommendations from both processes, together
with any form of appropriate external valuation such as feedback from
shareholders and the FRC Audit Quality Inspection Report then form
the basis of the assessment of PwC’s effectiveness, together with
the Committee’s experience of dealing with PwC during the year.
The responses to the annual appraisal questionnaire were collated
and incorporated into the planning process for the following areas:
Planning, Fieldwork and Reporting.
Following this review, the Committee considered in detail the feedback
received from a selection of Intertek personnel, including Committee
members, Group functions, regional finance teams and country finance
managers. The feedback was consistent with 2019 and it was noted
that there had been a high level of staff continuity and improvements
had been recognised in the areas of communication and business
knowledge with increased visibility of senior team members. The audit
findings and the areas to improve were discussed at the May 2020
Committee meeting and PwC effectively addressed questions and
challenges provided by Committee members.
The Committee concluded, at the meeting held in May 2020, that PwC
remained independent and that, overall, PwC had completed a robust
and fit-for-purpose audit process across the Group with a satisfactory
level of resources.
The effectiveness of the 2020 audit of the Group will be reviewed by
the Committee in May 2021.
The Committee monitors and reviews the independence and
objectivity of the external auditor and reviews the effectiveness of
the external audit process. The Committee also considers and makes
recommendations to the Board, to be put to shareholders for approval
at the AGM, in relation to the appointment, reappointment and removal
of the Group’s external auditor. It ensures that at least once every
ten years the audit services contract is put out to tender to enable
us to compare the quality and effectiveness of the services provided
by the incumbent auditor with those of other audit firms.
A transparent and independent audit tender process was completed
in 2015 and PwC have been the Group’s auditors, and Ian Chambers
the Audit Partner, since May 2016. In line with current regulation, the
Group is required to put its external audit process out to tender again
in 2025–2026. The Audit Partner is due to rotate in May 2021 and
the transition to the new Audit Partner is currently taking place.
The independence of the external auditor is critical for the integrity of
the audit. The Committee sought confirmation from the auditor that
they are fully independent from the Group’s management, are free
from conflicts of interest and have assessed the nature and level of
non-audit fees paid to PwC and have determined that PwC are
fully independent.
Effectiveness of the external audit process
The Committee conducts an annual review to assess the
independence and objectivity of the external auditor and the
effectiveness of the audit as part of the year end process. This process
is conducted in three parts:
PwC presents to the Committee its approach to safeguarding and
maintaining the quality and independence of their audit of the
Group and their auditors, including addressing any risks they face in
maintaining audit quality across their network. This is an extensive
report covering all aspects of the audit from the scope of work,
reporting the outcomes of findings, the key audit matters, fraud and
investigations, intercompany transactions, treasury, key risks, going
concern and IT environment. Each aspect is rigorously reviewed and
debated with the auditors. The Committee was satisfied that the
audit was extensive, sufficiently challenging and robust.
Audit and non-audit fees
The Group has set out a policy on the provision of non-audit work
by the external auditor consistent with the 2019 Ethical Standard
issued by the FRC and it 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, subject to the audit cap, be permitted to undertake, including
reviewing interim financial information, verification of interim profits,
extended audit or assurance work in an entity relevant to the Group,
assurance work on agreed procedures or governance, reporting
on government grants, reporting on covenant or loan agreements
that require independent verification, generic subscription services
providing factual updates in changes of law or accounting standards
and any services subject to an application to the competent authority.
In the event that an engagement for non-audit services arises, the
policy is designed to ensure that the external auditor is only appointed
where it is considered to be the most suitable supplier of the service
and the necessary prior approvals have been given in accordance with
the policy.
The Committee annually reviews and re-approves the framework
of permitted non-audit services as set out in the policy, taking into
account any changes in legislation and best practice. PwC also provides
an update on the spend for non-audit services twice a year. For 2020,
the Committee pre-approved a total non-audit spend of £250,000.
As per the policy, all non-audit services have to be approved by the
CFO, and in the event that the pre-approved limit is exceeded, the
Committee Chair and the CFO have to approve an increase to the pre-
approved limit. In 2020, this process operated effectively.
Intertek Group plc Annual Report and Accounts 2020
101
Financial statementsDirectors’ reportStrategic report Audit Committee report Continued
A summary of the fees paid for non-audit services is set out below.
The majority of the non-audit fees related to a review by PwC of the
Interim Results announcement, which is deemed a non-audit service.
This was considered appropriate as PwC also audit the full-year results.
Internal audit
The Group has an Internal Audit function, whose activities are
overseen by the Committee, which provides assurance over compliance
with the Group’s framework of financial CMCs.
Further information is contained in note 4 to the financial statements
on page 147.
Audit fee breakdown for services provided by PwC in 2020
Total non-audit fees
– audit-related services
– tax services
– other non-audit services
Audit fee
% of audit fee
2020
£m
0.2
0.2
–
–
4.8
4%
2019
£m
0.1
0.1
–
–
4.6
2%
The Statutory Audit Services for Large Companies Market
Investigation (Mandatory Use of Competitive Tender
Processes and Audit Committee Responsibilities) Order
2014 (‘CMA Order’) – Statement of compliance
The Group confirms that it complied with the provisions of the CMA
Order for the financial year under review.
The Committee monitors and reviews the effectiveness and resources
of the Internal Audit function. To this end, the Committee approves
the Internal Audit programme and charter for the year. The Committee
reviews the internal audit reports and monitors management’s
responsiveness to the findings and recommendations of the Group
Audit Director, as well as approving the appointment and removal of
the Group Audit Director as appropriate. The Committee noted that
COVID-19 had impacted on the ability of the Internal Audit team to
undertake the full programme of audits planned for the year and the
need to conduct computer-based audits rather than site visits where
necessary. When reviewing the summary findings, management
responses, progress against audit recommended improvement plans
and average compliance scores, the Committee were satisfied that
the Internal Audit function continued to work effectively and focus
its activities in the areas with most need.
Independent review of effectiveness
An independent review of effectiveness, which is carried out every
three years, was undertaken by Grant Thornton in 2019. Their
approach considered four key areas: Performance, Planning, People
and Positioning. The review concluded that Internal Audit is a valued
function of the business and that their role in defining expectations
and improving compliance with the financial CMCs is widely
acknowledged. They further concluded that the function exhibits
a number of areas of good practice, in particular in the continuous
improvement agenda of the team, as well as their innovative processes
and reporting. The report also highlighted that the remit of the
Internal Audit role could evolve and expand in the future. The next
independent review of effectiveness will be in 2022.
In 2020, the Committee:
Oversaw the independence of Internal Audit by maintaining a direct
independent reporting line between the Group Audit Director and
the Committee Chair, and by meeting with the Group Audit Director
without the presence of management.
Approved the audit plan aimed to ensure that all significant
businesses have received multiple audits but this was subsequently
reviewed to take account of the impact of COVID-19 on the ability to
undertake internal audits. The Committee gave due consideration to
local Government COVID-19 regulations in each country and reviewed
the audit plan accordingly reflecting that many auditors were
required to work from home, no foreign travel would be possible
although domestic travel may be permitted, in country audits in
countries where auditors were based would continue, some audits
would have to be postponed and remote auditing would take longer
as the auditors would be more stringent on ensuring that proper
evidence was produced.
Reviewed reports on internal audit activities including overall
progress in delivering the plan and summaries of each audit
performed, with commentary on compliance with the controls
framework, areas of good practice and areas for improvements.
The Committee has noted a steady improvement in audit scores
over the period since the introduction of the Core Mandatory
Controls framework.
Monitored management progress on addressing audit actions.
Reviewed the annual assessment on the effectiveness of the Group
Internal Audit function which included feedback from key business
stakeholders. An action plan for areas of improvement was approved.
An independent review of effectiveness, which is carried out every
three years, will be undertaken in 2022.
102 Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Audit Committee report Continued
Fair, balanced and understandable assessment
The Code depicts that through its financial reporting, the Board
should provide a fair, balanced and understandable assessment
of the Group’s position and prospects. We, at the Board’s request,
reviewed the 2020 Annual Report and Accounts to determine whether,
taken as a whole, the report meets the standard prescribed, whilst
simultaneously providing shareholders with the necessary information
to facilitate their assessment of the Group’s position, performance,
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;
•
revisions as a result of regulatory requirements monitored on
a regular basis;
• pre year end discussions held with the external auditor in advance
of the year end reporting process;
• 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 advisers 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 financial statements by the
Committee; and
• final sign-off by the Board.
Internal control and risk management systems
A key focus for the Committee is to keep under review the adequacy
and effectiveness of the internal financial controls and the internal
control and risk management and assurance systems.
We annually review and approve the statements to be included in
the Annual Report and Accounts to ensure they remain relevant to
the Group’s strategy and operations as well as complying with any
regulatory requirements.
‘Doing Business the Right Way’ is at the heart of what we do and
is a key enabler of our 5x5 strategy for growth. The Intertek Core
Mandatory Controls (‘CMCs’) are an integral part of ‘Doing Business
the Right Way’, and provide the mechanism by which we define,
monitor and achieve consistently high standards in our control
environment throughout the whole organisation. At the end of the
year, the Committee undertook a review of the CMCs and Assurance
Map to ensure that they continued to be fit for purpose. Where non-
compliances with the current CMCs were identified in the 2020 internal
audit review process, remediation plans have been put in place. For
2021, this process was reviewed and there were additional controls
introduced to address the areas for improvement identified in 2020,
changes to existing controls in order to improve their precision, clarity
and specificity with further clarity achieved by consolidating Local IT
and General IT into a single integrated OneIT control set.
In order to provide assurance that the Intertek controls and policy
framework is being adhered to, a self-assessment exercise is
undertaken across the Group’s global operations. This exercise is
reviewed and refreshed each year to align to the updated control
framework and to support the continued development of the Group’s
control environment. An online questionnaire requesting confirmation
of adherence to controls: financial, operational, HR and IT is sent to all
Intertek operations. Where corrective actions are needed, the country
is required to provide an outline and a confirmed timeline. The results
are used as an input for the Internal Audit and Compliance Audit
assurance work for 2021.
Self-assessment responses are consolidated for review at a
regional level, with further review and sign-off of the consolidated
self-assessments in the regional risk committees, before a final
consolidated CEO and CFO review. 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’s operational and financial structure, and in order to enhance
the alignment of the self-assessment to the assurance process.
A detailed verification programme also provides assurance to the
Committee and the Board 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 giving
instructions and guidance on all aspects of accounting and reporting
that apply to the Group. More information on the risk governance
and management system and processes is outlined on page 80. 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
2020, and up to the date on which these financial statements were
approved. No significant failings or weaknesses were identified.
Whistleblowing and fraud
We reviewed the adequacy and security of the Group’s arrangements
for its employees and contractors to raise concerns, in confidence,
about possible wrongdoing in financial reporting or other matters
ensuring that these arrangements allow proportionate and
independent investigation of such matters and appropriate follow-
up action. We are advised of any significant notifications from
the whistleblowing hotline.
In addition, we review the Group’s systems and procedures for
detecting fraud, the prevention of bribery and receive regular
reports on non-compliance and keep under review the adequacy
and effectiveness of the compliance function.
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. The Committee’s views,
comments and their insights are used to inform the processes and
approach taken by management in all areas of significant risk, thus
facilitating a Group-wide consistent and prudent approach.
In accordance with the Code, 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.
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During the year, the Committee reviewed and considered the following estimates and areas of judgement to be exercised in the application of the accounting policies:
Area of Judgement
Committee comment
Claims
Taxation
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, 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 Committee,
following assurance from management and review of the report presented by the external auditor, considered and agreed that the claims provision, and associated disclosures,
were appropriate given the size and status of claims reported.
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, including provisions related to transfer pricing risk, 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 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 the activities pursued as part of the restructuring ensuring that the appropriate level of provision
is put in place, that these activities are aligned with the Group’s strategy for growth and their classification as a separately disclosed item is appropriate.
Accounting for acquisitions
The Committee was advised of the approach taken to acquisitions which had their fair values finalised in the year including any associated contingent consideration. Any
provisional amounts are subsequently finalised within the 12-month measurement period, as permitted by IFRS 3. Details of acquisitions in 2019 are set out in note 10 on
page 157.
The Committee, following assurance from management and review of the position by the external auditor, was satisfied that the treatment was appropriate.
Impairment
On acquisitions, the Group is required to make judgements to estimate the fair value of assets and liabilities acquired; in particular, the amounts attributed to separate intangible
assets such as titles, brands, acquired customer lists and associated customer relationships. These judgements impact the amount of goodwill recognised on acquisitions.
Annually, an impairment assessment is performed and the impairment model used has been updated to reflect the impact of COVID-19.
The Committee noted the update as at the year end and, taking into account the extra work undertaken due to the current economic environment, and after seeking confirmation
from the external auditor, agreed the disclosure in the Annual Report and Accounts.
Pensions
The Group operates a number of post-employment plans. In most locations, these are defined contribution arrangements. However, there are significant defined benefit schemes
in the United Kingdom and Switzerland.
Having considered advice from external actuaries and assumptions used by companies with comparator plans, the Committee agreed that the assumptions used to calculate the
income statement and balance sheet assets and liabilities for post-employment plans were appropriate (see note 16).
Following reviews and discussions throughout the year of all the relevant papers presented and after considered discussion with management and the external auditor, the Committee had an understanding of the business
rationale for transactions and how they were being recorded and disclosed in the financial statements, and therefore agreed that the estimates and areas of judgement exercised by management were appropriate.
104 Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Remuneration Committee report
COVID-19 has impacted
so much and so many; a
challenging year. The Board is
confident our Remuneration
Policy and rewards appropriately
reflect Intertek’s resilient
performance and our
shareholders’ experience
and views.”
Gill Rider
Chair
Dear shareholder
I am delighted to present our Remuneration Committee report for the
year ended 31 December 2020.
Business context
In an extremely challenging macroeconomic environment, the
Group has demonstrated the strength of our high quality and highly
cash-generative earnings model and the effectiveness of our 5x5
differentiated strategy for growth. Despite an unprecedented global
pandemic, we have delivered resilient 2020 performance:
for shareholder approval at the 2020 AGM. Whilst the changes to the
performance metrics received strong support from shareholders,
we were disappointed that only c.57.1% of shareholders supported the
Remuneration Policy resolution at the 2020 AGM.
The Board is committed to maintaining ongoing, open dialogue with
our shareholders, and, following the AGM, we engaged with a number
of our largest shareholders to fully understand their concerns. During
consultation, we learnt that there were three principal factors that
led to the 2020 AGM result:
• Resilient FY financial performance, ahead of earnings and
• a desire to see a glide path reducing the CEO pension allowance;
cash expectations
• H2 2020 adjusted operating profit of £259.5m with record adjusted
operating margin of 18.4%, up 60bps YoY at constant rates
•
request for a higher level of shareholding requirement for the
CEO; and
• a desire for greater clarity on post-cessation of employment
• Statutory operating profit of £378.2m, down 20.7% YoY at
shareholding requirements.
constant rates
• Excellent cash conversion of c.150% drives a record adjusted free
cash flow of £435.6m, up 10.2% YoY
• Strong balance sheet with financial net debt of £419.9m, down
£209.5m YoY; financial net debt to EBITDA of 0.7x
• Highly cash-generative and carbon-light earnings model delivers
strong adjusted ROIC of 21.6%, down 190bps YoY at constant rates
• Sustainable returns to shareholders with FY 2020 dividend of
105.8p, in-line with 2019.
2020 AGM voting
As many shareholders will recall, in 2019, in line with the ordinary cycle,
the Remuneration Committee (‘Committee’) presented our previous
Directors’ Remuneration Policy for shareholder approval at the AGM.
The 2019 Policy received overwhelming shareholder support, with
almost 98% votes in favour.
Whilst the Remuneration Policy received strong support at the
AGM, the Committee received feedback from some of our largest
shareholders in respect of the performance metrics used for the
long-term incentive plan. Reflecting on the feedback, and following
extensive consultation, we proposed changes to the long-term
incentive performance criteria to ensure they supported the Group’s
5x5 differentiated strategy for growth (metrics updated to EPS; ROIC;
Free Cash Flow). As such, a new Remuneration Policy was presented
Based on the feedback received, and the performance of the Group
and the executives (as detailed above), the Committee is proposing
the following:
• Executive pensions – Reflecting on the expectations of some
of our shareholders, we have agreed with the CEO to reduce
his pension from 30% of base salary to 5% of base salary over
five years, which is the level of the majority of the UK workforce
(reducing at the rate of 5% p.a.).
• Executive shareholding requirements – In order to promote
long-term shareholdings and provide alignment with long-term
shareholder interests, we are significantly enhancing the CEO and
CFO’s shareholding requirements:
– the CEO’s shareholding requirement will be increased to 500%
of base salary (from 200%); and
– the CFO’s shareholding requirement will be increased to 300%
of base salary (from 200%).
• Post-cessation of employment executive shareholding
requirements – In addition to the above, and in line with best
practice, we are updating our post-cessation of employment
shareholding requirement such that executives will be required
to hold the lower of their actual shareholding and in-employment
shareholding requirement for two years post-cessation
of employment.
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Considering that we were making changes to the CEO remuneration,
we took the opportunity to do a thorough benchmark of our CEO’s
remuneration given that we had not done such a review for six years.
During these six years, we have seen the Company transform itself
both financially, but also in terms of the culture and capability that the
CEO and his team have been able to create. Notable highlights include:
– Group Revenue increasing by CAGR 4.6% (£2,093m (FY’14)
to £2,742m (FY’20)).
– Adjusted diluted EPS increasing by CAGR 4.4% (132.1p (FY’14)
to 170.9p (FY’20)).
– The Group’s market capitalisation having grown from £3,702m
(December 2014) to £9,110m (December 2020) and an increase
in the dividend by CAGR 13.6% to 105.8p.
– The Company has been within the FTSE 50 for over two years.
As a consequence of this review, we feel it is appropriate for us to also
propose an adjustment to the CEO’s long-term incentive opportunity
as below.
• Long-term incentive opportunity for the CEO – Reflecting
the growth in the size and complexity of the Group and the
performance of the CEO since appointment, the Committee is
proposing to increase the long-term incentive opportunity for the
CEO by 50% of base salary to 300% of base salary. Following the
increase, the total remuneration opportunity for the CEO will be
positioned competitively against other FTSE 100 peers.
The Committee recognises the need to exercise caution in the
current market. The Committee therefore carefully considered
whether it would be appropriate to proceed with the increase
for the FY’21 performance year. In light of the performance of
the business (as detailed above) and the Group’s share price
performance, broadly flat year-on-year in a very challenging
macroeconomic environment, the Committee agreed it would be
appropriate to implement the increase this year, subject to the
shareholder vote on the Remuneration Policy.
On behalf of the Remuneration Committee, I would like to thank
shareholders who engaged extensively with us over the course of the
year. The time they committed to conversations with us brought real
insight and was highly valuable to the Committee in the development
of our approach to executive remuneration going forward.
Pay for performance
Intertek’s firm belief is that incentive awards for executives should
be tied to the performance of the Group, and therefore the shareholder
experience. Incentive awards are therefore based purely on financial
performance.
As set out earlier in the Annual Report, in a tough economic
environment, Intertek has had a resilient full year performance with
(8.2%) decline in revenue ((6.7%) at constant currency) and (18.4%)
decline in adjusted operating profit ((17.0%) at constant currency),
an adjusted operating margin of 15.6% (down 190bps at constant
currency), a proposed full year dividend of 62% and ROIC of 21.6%.
Based on our predetermined performance matrix, the Committee
approved a 0% payout of annual incentive.
The three-year performance of the Group has delivered adjusted
diluted EPS CAGR growth of (1.6%) at 2017 constant currency and
total shareholder return of 24.8%, just below the upper quartile of the
FTSE 31–130. This has resulted in a payout under the 2018 long-term
incentive award of 41.5%.
When determining incentive outcomes, the Committee exercised
independent judgement, taking into account a number of internal
and external considerations to determine whether the results felt
appropriate, including:
• overall share price performance in the year and the exceptional
share price performance since the outbreak of COVID-19, reflecting
the resilient performance of the Group;
• the positive actions taken by the Board to provide maximum
support to our clients, employees and communities in these
uncertain times; and
• the overall stakeholder experience over the year.
It was the view of the Committee that the incentive outcomes
appropriately reflected performance in the period and the wider
shareholder experience, and the Remuneration Policy operated as
intended and therefore no discretion was applied.
COVID-19 was an unprecedented global pandemic impacting the
world economy and all its stakeholders. Given this backdrop, the CEO
recommended to the Committee a 0% salary increase for himself this
year. This recommendation was approved whilst the UK workforce has
been granted a yearly salary increase as every year.
Board changes
As announced on 5 October 2020, Jonathan Timmis will be appointed
as CFO with effect from 1 April 2021. In terms of remuneration,
Jonathan has been appointed on a remuneration package reflecting
the calibre of the individual and taking into account his remuneration
arrangements at his previous employer, as follows:
• base salary: £525,000;
• pension: 5% of salary (in line with the wider workforce);
• annual bonus opportunity: 200% of salary (in line with his
predecessor); and
•
LTIP opportunity: 200% of salary (in line with his predecessor).
Jonathan will forfeit a number of awards on leaving his current
employer, including performance share awards, share option awards
and one-off restricted stock awards as he was a high performer,
granted in May 2018 through to May 2020. In determining the
appropriate buy-out award, the Committee took into account the
time horizons of awards forfeited, the nature of the awards and
the performance conditions attached to those awards. Reflecting
these factors, the Committee agreed to buy-out the awards in the
form of restricted shares linked to Intertek share price performance,
with elongated time horizons relative to the awards being forfeited.
A buy-out award of 39,000 shares will therefore be awarded to
Jonathan on appointment, with the shares vesting in equal tranches
on the first, second and third anniversary of grant. The Committee
was comfortable that the awards were a fair reflection of the awards
being forfeited by Jonathan.
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Wider workforce
Finally, I would also like to recognise the efforts made throughout
the Group in 2020, as we responded to COVID-19 with organisational
focus on employee wellbeing, safety and engagement. In an extremely
challenging macroeconomic environment, the Group has demonstrated
its strength and resilience, and I am very proud of the energy, agility
and innovation of our colleagues around the world that has enabled
us to navigate a difficult 2020.
The Board is confident that remuneration at Intertek is aligned to
our shareholder interests and carefully designed to support the
sustainable delivery of Intertek’s TQA customer promise and the
clear and powerful differentiated 5x5 growth strategy. I look forward
to your support on the Remuneration Policy and Report at our
forthcoming AGM.
Yours sincerely,
Gill Rider
Chair of the Remuneration Committee
Each year the Committee approves the overall reward strategy
for the Group and sets the individual remuneration of the Executive
Directors and certain senior management. 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 benchmark
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.
DIRECTORS’ REMUNERATION
POLICY REVIEW REPORT
The section below sets out the Remuneration Policy for Executive
and Non-Executive Directors, is subject to a binding vote of the
shareholders and will, if approved, be effective from the date of
the 2021 AGM.
In determining the Remuneration Policy, the Committee followed a
robust process which included discussions on the content of the Policy
at two Remuneration Committee meetings. The Committee considered
input from management, although conflicts of interest were managed
with decisions being taken by the members of the Remuneration
Committee, and our independent advisers as well as in the context
of best practice and guidance from our major shareholders and the
proxy advisory bodies.
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 aligned to the Company’s strategy and is in the best interests of
the Company and its stakeholders. It is directed to deliver continued
sustainable profitable growth.
Our remuneration strategy is to:
• align and recognise the individual’s contribution to help us succeed
in achieving our 5x5 differentiated strategy for sustainable growth;
• 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.
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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.
The Committee normally reviews salaries annually, taking
account of factors including, but not limited to, the scale of
responsibilities, the individual’s experience and performance.
There is no prescribed maximum salary or
annual increase.
Individual performance is taken into account
when salary levels are reviewed.
BENEFITS
To provide competitive
benefits to ensure the
wellbeing of employees.
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 their dependants) and other benefits typically
provided to senior executives.
Executive Directors can participate in any all-employee share
plans operated by the Company on the same basis
as all other employees.
In awarding any salary increases, 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,
development in role, change in
responsibility and/or variance to market
levels of remuneration.
The total value of these benefits
(excluding the all-employee plans) will not
normally exceed 12% of salary.
n/a
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.
PENSION
To provide competitive
retirement benefits.
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.
For new Executive Directors pension
provisions will be in line with those of
the wider UK workforce (currently 5%
of salary).
n/a
For current Executive Directors – reducing
from 30% of salary by 5% each year for
five years until it is in line with the wider
UK workforce (currently 5% of salary).
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Element of pay
Purpose and link to strategy
Operation
Maximum opportunity
Performance measures
ANNUAL INCENTIVE
PLAN (‘AIP’)
To drive the short-term
strategy and recognise annual
performance against targets
which are based on business
objectives.
Awards are based on Group annual performance targets, with
performance targets normally set annually by the Board.
Incentive outturns are normally assessed by the Committee
at the year end, taking into account performance against the
targets and the underlying performance of the business.
The payout at below threshold performance is 0% of maximum,
with 25% of the maximum bonus normally payable for threshold
performance. Payouts between threshold and maximum (100%)
are determined on an annual basis. Details of the payout schedule
will be disclosed in the relevant Directors’ Remuneration report.
Normally, 50% of any incentive is paid in cash and 50% deferred
into shares which will vest after a period of three years subject
to continued employment.
Malus and clawback provisions apply.
The maximum opportunity in respect of
a financial year is 200% of salary for each
Executive Director.
The annual incentive will be measured
against a range of key Group financial
measures.
The Committee has the ability to adjust
the performance measures if not
appropriate in the context of overall
performance.
The current intention is that none of the
incentive will be subject to non-financial
measures or personal performance
measures.
The Committee can adjust upwards the
incentive outturn (up to the maximum set
out above) to recognise very exceptional
circumstances or to recognise
circumstances that have occurred which
were beyond the direct responsibility of
the executive and the executive has
managed and mitigated the impact of
any loss.
The Committee, however, retains the
discretion to introduce such measures in
the future, up to a maximum of 20% of the
incentive.
Were the Committee 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 incentive payout if threshold
targets are not met.
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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.
Annual grant of conditional shares which vest after three years,
subject to Company performance and continued employment.
Up to 300% of salary in respect of any
financial year.
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.
Awards may be made in other forms (e.g. nil-cost options)
if considered appropriate.
The shares will also normally be subject to a two-year holding
period after vesting.
Performance targets are normally set annually for each three-
year performance cycle by the Board.
Vesting is normally assessed by the Committee after the end of
the performance period, taking into account performance against
the targets and the underlying performance of the business.
The Committee has the ability to adjust incentive payments if it
believes that out-turns are not appropriate in the context of
overall performance.
Malus and clawback provisions apply.
LTIP awards are subject to an appropriate
balance of earnings, cash and capital
efficiency based performance measures.
The Committee retains the discretion to
introduce another performance metric, with
a maximum weighting of up to one-third of
the incentive. Were the Committee to
introduce such measures, it would normally
consult with the Company’s largest
institutional shareholders.
For 2021, the LTIP award will be based on
earnings per share, return on invested
capital and free cash flow from operations.
Each measure will have an equal weighting.
25% of an award will vest for achieving
threshold performance, increasing pro-rata
to full vesting for the achievement of
stretch performance targets.
SHARE OWNERSHIP
GUIDELINES
To increase alignment
between executives and
shareholders.
Executive Directors are expected to retain any vested shares
(net of tax) under the Group’s share plans until the guideline
is met.
500% of salary for the CEO.
300% of salary for the CFO.
n/a
The guideline should normally be met within five years of the
guideline being set.
Further details of the share ownership guidelines and the
post-cessation shareholding guidelines are set out in the
Directors’ Remuneration report.
Holding and vesting periods for all share awards will be adhered
to post-employment.
Executive Directors required to hold shares
as per share ownership guidelines for two
years post-employment.
n/a
POST-CESSATION
OF EMPLOYMENT
SHAREHOLDING
To ensure alignment of
sustainable performance
between executives and
shareholders.
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Element of pay
Purpose and link to strategy
Operation
Maximum opportunity
Performance measures
NON-EXECUTIVE
DIRECTORS’ FEES
To attract and retain high-
calibre Non-Executive
Directors through the
provision of market-
competitive fees.
A proportion of the fees (at least 50%) are paid in cash, with the
remainder used to purchase shares.
Fees are primarily determined based on the responsibility and
time committed to the Group’s affairs and appropriate market
comparisons.
The Chairman receives an all-inclusive fee. Non-Executive
Directors receive a base fee and further fees for additional Board
responsibilities. Additional fees may be paid in the exceptional
event that Non-Executive Directors are required to commit
substantial additional time above that normally expected for
the role.
With the exception of benefits-in-kind arising from the
performance of duties (and any tax due on those benefits which
is reimbursed by the Company), no other benefits are provided.
n/a
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
As set out in the statement from the Committee Chair, there are four
key changes to the Remuneration Policy:
•
reduction in pensions for the Executive Directors to align with the
wider workforce;
• updates to the share ownership guidelines;
• updates to the post-cessation of employment shareholding
guidelines; and
• an increase in the maximum award under the LTIP.
Selection of performance metrics
The annual incentive plan 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.
The 2021 LTIP award is based on earnings per share growth, return on
invested capital and free cash flow from operations. The performance
metrics align with Intertek’s earnings model, which supports delivery of
the Company’s differentiated strategy, which aims to move the centre
of gravity of the Company towards high-growth, high-margin areas
in our industry. Earnings per share ensures that there is a clear focus
on margin-accretive revenue growth; free cash flow from operations
ensures focus on strong cash management; and return on invested
capital ensures a focus on disciplined capital management.
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. When setting
the targets for the annual incentive and the LTIP, the Committee takes
into account a range of factors, including the business plan, prior-year
performance, market conditions and consensus forecasts.
Terms of incentive awards
Deferred awards and LTIP awards may include the right to receive (in
cash or shares) the value of the dividends that would have been paid
on the shares that vest up to the time of vesting (or for LTIP awards, up
to the end of the relevant holding period). The Committee’s intention is
that such dividends would normally be settled in shares.
The Committee will operate the annual incentive plan and LTIP
according to the respective rules of the plans. The Committee will
retain flexibility in a number of areas regarding the operation and
administration of these plans, including (but not limited to) the
following:
• how to deal with a change of control or restructuring of the Group,
or a demerger or similar event (including how to assess performance
conditions and whether to time pro-rate awards); and
• how and whether any award may be adjusted in certain
circumstances (including in the event of a variation of share capital,
demerger, special dividend, or similar event).
The Committee also retains the discretion within the Policy to adjust
targets and/or set different measures and weightings if it considers
it is required so that the targets or conditions achieve their original
purpose. Revised targets/measures will be, in the opinion of the
Committee, no less difficult to satisfy than the original conditions.
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The Committee may accelerate the vesting and/or the release of awards
if an Executive Director moves jurisdictions following grant and there
would be greater tax or regulatory burdens on the award in the
new jurisdiction.
Remuneration scenarios for Executive Directors
The chart on the next page illustrates how the Executive Directors’
remuneration packages vary at different levels of performance under
the Policy which applied in 2020 for both the Chief Executive Officer
(‘CEO’) and Chief Financial Officer (‘CFO’).
Approach to recruitment and promotions
The remuneration package for a new Executive Director – base
salary, benefits, pension, annual incentive 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
incentive and long-term incentive awards, or any combination thereof)
which may be awarded to a new Executive Director at or shortly
following recruitment shall be limited to 500% 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 buy-outs 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 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.
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
Detailed terms
Notice Period
12 months
Common law
and contractual
principles
Remuneration
entitlements
Common law and contractual principles apply
An incentive may be payable (pro-rata where
relevant) and outstanding Share Awards may
vest (see below)
Change of control No Executive Director’s contract contains
provisions or additional payments in respect
of change of control. The treatment of annual
incentive awards and outstanding Share Awards
will be treated in line with the relevant plan rules
There is no automatic entitlement to an annual incentive award in
the year of cessation of employment. The Committee may determine
however, that for certain leavers an annual incentive award 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, and under the 2021 LTIP,
is that any outstanding awards lapse on cessation of employment.
However, in certain prescribed circumstances, such as death, ill-
health, injury, disability or other circumstances at the discretion
of the Committee, ‘good leaver’ status may be applied.
112 Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Remuneration Committee report Continued
For good leavers, Deferred Share Awards will vest in full on the
original vesting date (as permitted under the plan rules), unless the
Remuneration Committee determines that awards should vest at
an earlier date. LTIP awards will normally vest on the original vesting
date (they will normally, where appropriate, be subject to any holding
period), and 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 (for example, death). 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.
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.
The Committee reserves the right to make any other payments
(including appropriate legal fees) in connection with an Executive
Director’s cessation of office or employment where the payments are
made in good faith on discharge of an existing legal obligation (or by
way of damages for breach of their obligation) or by way of settlement
of any claim arising in contravention with the cessation of an Executive
Director’s office or employment.
Value of remuneration packages at different levels of performance
£’000
8,000
7,500
7,000
6,500
6,000
5,500
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
£7,802
57%
£6,319
47%
31%
25%
£3,849
39%
26%
£1,379
100%
36%
22%
18%
LTIP award
Annual incentive
Basic salary, benefits and pension
£2,475
39%
39%
22%
£2,970
49%
33%
18%
£1,506
32%
32%
36%
£537
100%
Minimum
On-target
Maximum
Maximum 2
Minimum
On-target
Maximum
Maximum 2
A Lacroix, Chief Executive Officer
R McCluskey, Chief Financial Officer
Points relating to the above table:
1. Salary levels are based on those applying on 1 April 2021.
2. The value of taxable benefits is based on the cost of supplying those benefits (as disclosed) for the year ended 31 December 2020.
3. The value of pension receivable by the CEO and CFO in 2021 is taken to be 25% of salary and 5% of salary, respectively.
4. The on-target level of annual incentive is taken to be 50% of the maximum 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 first three scenarios. Share price growth of 50% has been assumed on the LTIP in the Maximum 2 scenario.
Intertek Group plc Annual Report and Accounts 2020
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Financial statementsDirectors’ reportStrategic report Remuneration Committee report Continued
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.
Consideration of employment conditions elsewhere within
the Group
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.
Andrew Martin
Graham Allan
Gurnek Bains
Lynda Clarizio
Tamara Ingram
Dame Louise Makin
Gill Rider
Jean-Michel Valette
Date of Appointment
Appointed Chair: 1 January 2021
Appointed to the Board: 26 May 2016
Reappointed: 26 May 2019
1 October 2017
Reappointed: 1 October 2020
1 July 2017
Reappointed: 1 July 2020
1 March 2021
18 December 2020
1 July 2012
Reappointed: 1 July 2018
1 July 2015
Reappointed: 1 July 2018
1 July 2017
Reappointed: 1 July 2020
Notice Period / Unexpired Term as at
31 December 2020
One month/15 months
One month/33 months
One month/30 months
One month/36 months from 1 March 2021
One month/35 months
One month/6 months
One month/6 months
One month/30 months
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, annual incentive 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 Committee values the opportunity to engage in meaningful
dialogue with its investors. Prior to the 2021 AGM, the Committee
consulted with key institutional investors on the proposed
Remuneration policy and the changes that were being made.
The proposed policy reflects the discussions with investors
during the consultation process.
Legacy arrangements
The approved Directors’ Remuneration Policy provides authority to
the Company to honour any commitments entered into with current
or former Directors such as the vesting of outstanding share awards
(including exercising any discretions available to it in connection with
such commitments) 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.
114 Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Remuneration Committee report Continued
ANNUAL REPORT ON REMUNERATION
Committee membership and meeting attendance
The membership of the Committee throughout the year and at the
year end was Gill Rider (Committee Chair), Graham Allan, Gurnek Bains
and Andrew Martin. Meeting attendance during 2020 is shown below.
Committee responsibilities and how we met
them in the year
We have specific responsibilities reserved to us by the Board and the
full Terms of Reference of the Committee, which were updated in
2019 and are reviewed annually, can be found on our website at
www.intertek.com.
Committee members
Gill Rider (Chair)
Graham Allan
Gurnek Bains
Andrew Martin (stepped down with effect
from 1 Jan 2021)
Scheduled
meetings
Meetings
attended
6
6
6
6
6
51
6
6
1. Graham Allan was unable to attend one meeting as it was held at very short notice and he had
a prior engagement.
The above members were members throughout 2020 and at all times
when Directors’ remuneration for the year was considered. During
2020, the composition of the Committee was compliant with the
Code. All members are independent Non-Executive Directors. Prior to
joining Intertek in July 2015, Gill had been Chair of the Remuneration
Committee at Charles Taylor Plc since January 2002. This enabled the
Nomination Committee to recommend her appointment as Chair of the
Committee which was then approved by the Board.
Since the year end, Andrew Martin has stepped down from the
Committee (upon taking up his position as Intertek Chairman)
with effect from 1 January 2021.
On appointment, new Committee members receive an appropriate
induction consisting of meetings with senior personnel, advisers
and as appropriate, meetings with shareholders and other relevant
stakeholders. They also review the Terms of Reference, previous
Committee meeting papers and minutes. The Committee invites the
Chairman, CEO and the EVP, Human Resources to attend meetings
when it deems appropriate, 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 decisions made by
the Committee. The Group Company Secretary acts as Secretary
to the Committee.
Matters delegated to the Committee
Determine the Company’s policy on remuneration for the
Executive Directors and senior executive management.
Determines the remuneration for the above and the
Chair, 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.
Responsible for establishing the selection criteria,
selecting, appointing and setting the terms of reference
for any remuneration consultants who advise the
Committee.
Keeps the Remuneration Policy under review in light
of regulatory and best practice developments and
shareholder expectations and ensure that the policy
is voted on at least every third year. Due regard is given
to the interests of shareholders and the requirements
of the Listing Rules and associated guidance.
Code
provision
33, 36–40
33
33
33
35
36–40
Ensures each year that the Annual Director’s Report
on Remuneration is put to shareholders for approval at
the AGM and includes a description of the work of
the Committee.
41
Executive Director remuneration
We are responsible for determining the Company’s policy on the
remuneration of the Chairman, the Executive Directors and senior
executive management. We also determine their remuneration
packages, including any compensation on termination of office and
review to ensure their alignment with our culture and with those
of the workforce as a whole.
In the year we addressed this by reviewing and agreeing the
remuneration of the Executive Directors as well as the Leadership
Team. We received advice from Deloitte LLP (‘Deloitte’) to inform
our discussions.
Wider workforce remuneration and engagement
We also review the remuneration and related policies of the wider
workforce to ensure that incentives and rewards align to our purpose,
values and culture. This is used to inform decisions when setting the
policy for Executive Director remuneration and for when we consult
with, or provide advice to, the CEO on major policy issues affecting
the remuneration of other executives. The incentive structure that
we have in place cascades right down through the wider workforce
and ensures alignment with the 5x5 strategy. We ensure that we
have effective engagement with the wider workforce on the Group’s
remuneration and related policies through several processes and
communication forums including town halls, the Intranet, emails
and leadership briefings.
During the year, we reviewed the salary levels for senior management
and the determination of the annual incentive payments for 2019. We
considered a report on the general market trends that could impact
the Group. In addition, due to the pandemic a voluntary salary deferral
scheme for management was put in place, running from March to
October 2020. This involved a 50% deferral for our Board Members
and Executive Vice Presidents, 30% for our Senior Vice Presidents
and 20% for management, with approximately 1,200 individuals
supporting the business in this way.
Intertek Group plc Annual Report and Accounts 2020
115
Financial statementsDirectors’ reportStrategic report Remuneration Committee report Continued
Remuneration Policy and report
It is important that we keep the Remuneration Policy under review in
light of regulatory and best practice developments, Listing Rules and
Governance Code changes as well as shareholder expectations.
Committee review
We undertake an annual review of how effectively we are working
as a Committee and take steps to develop any areas identified
for improvement.
At the Company’s Annual General Meeting (‘AGM’) on 21 May 2020,
the Remuneration Policy was passed with a vote of c.57.1%. Following
the 2020 AGM, extensive engagement took place with shareholders
and information on the results of that engagement and the proposals
being made are outlined in the Chair’s letter on pages 105 to 107. The
Remuneration Committee would like to thank shareholders that took
part in the engagement process and values the feedback and insights
it has gained.
In addition, we undertook a review of the Directors’ Remuneration
report to ensure compliance with Remuneration Reporting
Regulations. We discussed the 2020 proxy voting agencies reports
and their recommendations issued prior to the 2020 AGM.
Incentives
A key task for us each year is to review the outcomes for the incentive
schemes and agree on payment levels taking into account actual
performance and any extraordinary events which may have impacted
on performance. We will consider if there is a need to apply malus or
clawback and, should there be, we would agree the quantum.
We undertook, with external advice, a thorough review of the 2020
annual incentive targets, performance measures and the TSR and EPS
results to determine the percentage of incentive awards that would
vest in 2020.
We also agreed the performance conditions that should apply to the
LTIP awards granted in the year to vest based on the performance
to the end of 2022. We reviewed the quantum of awards given and
were satisfied that they reflected the Remuneration Policy and
were appropriate.
We also reviewed how we work as a Committee, members’ individual
strengths and also any additional training that may be beneficial.
We received updates on market trends in remuneration from Deloitte
and regular updates on corporate governance and policy changes.
Advisers
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.
We review the appointment of the remuneration consultant and
consider if they remain independent and applicable for the needs
of the Committee. In the event that we decide that they are
no longer appropriate, we would arrange a review and any
subsequent appointment.
In 2020, the Committee received advice from Deloitte, who they
appointed in 2015 for their particular expertise both at a local and
global level, due to the worldwide operations of the Group and,
following review, the Committee remains satisfied that their advice is
objective and independent and has sufficient breadth of knowledge to
support our deliberations across the diverse Group as a whole. 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 £162,693 exclusive of VAT.
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 addition to the services provided to the Committee, Deloitte
provided unrelated tax services to the Group during the year. Deloitte
do not have any connection with any Directors of the Company.
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. No Executive Director currently has an
external appointment.
Statement of shareholder voting
At the 2020 AGM, a resolution was proposed to shareholders to
approve the Remuneration Policy. This resolution received the
following votes from shareholders:
In favour
Against
Total
Withheld
Votes
79,910,934
60,031,344
139,942,278
3,063,796
%
57.10
42.901
86.712
1. A summary of the reasons for the votes against and the actions taken in response are
outlined in the Chair’s letter.
2. Percentage of total issued share capital voted.
At the 2020 AGM, a resolution was proposed to shareholders to
approve the Directors’ Remuneration report for the year ended
31 December 2019. This resolution received the following votes
from shareholders:
In favour
Against
Total
Withheld
Votes
139,816,488
3,158,747
142,975,235
34,041
%
97.79
2.211
88.592
1. A summary of the reasons for the votes against and the actions taken in response are
outlined in the Chair’s letter.
2. Percentage of total issued share capital voted.
116 Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Remuneration Committee report Continued
Directors’ Remuneration Policy – implementation in 2021
There were no deviations from the procedure for the implementation of the policy during 2020.
Elements
Implementation in 2021
Base salary
COVID-19 was an unprecedented global pandemic impacting the world economy and all its stakeholders. Given this
backdrop, the CEO recommended to the Committee a 0% salary increase for himself this year. This recommendation
was approved, whilst the UK workforce has been granted a yearly salary increase as every year.
Base salary for 2021:
• André Lacroix: £988,153
•
Jonathan Timmis: £525,000 (to be appointed as CFO with effect from 1 April 2021).
Benefits
Includes, for example, 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 and other benefits typically provided to senior executives.
Executive Directors can participate in any all-employee share plans operated by the Company on the same basis as all
other employees.
Total value of benefits (excluding all-employee plans) will not exceed 12% of salary.
Pension
• 30% reducing by 5% each year for five years until it is in line with the wider UK workforce (currently 5% of salary)
Annual incentive
Plan (‘AIP’)
for the CEO. 5% of base salary for the CFO.
• Maximum opportunity for the CEO and CFO: 200% of base salary.
• 50% of any incentive is paid in cash and 50% is deferred into shares vesting after three years.
• Malus and clawback provisions apply.
• Performance metrics – 80% will be based on a matrix based on revenue and adjusted operating profit growth, and
20% will be based on ROIC. Targets are not disclosed prospectively due to commercial sensitivity, however, detailed
disclosure of the performance targets and actual outturns will be provided in the following year.
• Annual incentive will continue to be subject to a quality of earnings review at the end of the year to ensure that
payouts 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.
Intertek Group plc Annual Report and Accounts 2020
117
Financial statementsDirectors’ reportStrategic report Remuneration Committee report Continued
Elements
Implementation in 2021
Long Term
Incentive Plan
(‘LTIP’)
• Maximum opportunity for the CEO and CFO: 300% and 200% of base salary, respectively.
• Two-year holding period after vesting.
• Malus and clawback provisions apply.
• Performance metrics for awards being granted in 2021:
Measures
Definition
Threshold
(25%)
Maximum
(100%)
Commentary
Earnings
Per Share
(‘EPS’)
(1/3)
Annualised fully diluted, adjusted
EPS growth.
Measured on a constant currency
basis.
Per the definition used for the
Group’s KPIs on page 24.
Adjusted
Free Cash
Flow
(1/3)
Free cash flow generated from
operations less net capital
expenditure, net interest paid
and income tax paid. Adjusted for
separately disclosed items.
Measured on a constant currency
basis.
Per the definition used on page 53.
4% p.a.
10% p.a.
Compound annual growth rate targets.
£977m
£1,057m Cumulative targets measured over three years.
Targets set taking into account stretch within
business plan and expected capital expenditure
over the coming three years.
Return on
Invested
Capital
(‘ROIC’)
(1/3)
Adjusted operating profits less
adjusted tax divided by invested
capital (net assets excluding tax
balances, net financial debt and net
pension liabilities).
20%
24%
Measured on a constant currency
basis.
Per the definition used for the
Group’s KPIs on page 24.
Cumulative adjusted operating profits divided by
cumulative invested capital in each of the three
performance years.
Target set taking into account stretch within
business plan, current ROIC performance, and
reflective of the Group’s strategy of making
small bolt-on acquisitions which complement the
Group’s business.
The treatment of significant acquisitions would
be determined at the time of the transaction.
Share ownership
guidelines
Shareholding guidelines are 500% of salary for the CEO and 300% of salary for the CFO.
118 Intertek Group plc Annual Report and Accounts 2020
Non-Executive Directors’ fees
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.
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
From
1 January
2021
£’000
From
1 January
2020
£’000
350
62
12
20
15
–
10
10
5
320
62
12
20
15
–
10
10
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 £35,000 (2020: £30,000) of the fees paid to the Chairman are
used each year to purchase shares in the Company.
Financial statementsDirectors’ reportStrategic report Remuneration Committee report Continued
Remuneration in context
The following section sets out how the Remuneration Committee has addressed the factors in Provision 40, when determining Executive remuneration as set out in the 2018 UK Corporate Governance Code.
Code requirement
Intertek approach
Clarity
Remuneration arrangements should
be transparent and promote effective
engagement with shareholders and the
workforce
Simplicity
Remuneration structures should avoid
complexity and their rationale and operation
should be easy to understand
Risk
Remuneration structures should ensure
reputational and other risks from excessive
rewards, and behavioural risks that can
arise from target based incentive plans,
are identified and mitigated
Predictability
The range of possible values of rewards to
individual Directors and any other limits or
discretions should be identified and explained
at the time of approving the policy
Proportionality
The link between individual awards, the
delivery of strategy and the long-term
performance of the Company should be
clear and outcomes should not reward
poor performance
Variable remuneration arrangements, which are cascaded throughout the workforce, are based on clearly defined financial performance metrics which are aligned with
the Group’s 5x5 differentiated strategy for sustainable long-term growth.
Remuneration arrangements are simple, comprising the following key elements:
• Fixed element: comprises base salary, benefits and pension, which are aligned to that offered to the majority of the workforce.
• Short-term incentive: annual bonus which incentivises the delivery of financial performance metrics. Half of the bonus is paid in cash with the balance deferred into
shares vesting after a period of three years.
• Long-term incentive: LTIP which incentivises financial performance over a three-year period, promoting long-term sustainable value creation for shareholders.
Awards are subject to a two-year holding period post-vesting.
Performance targets are calibrated to be aligned with the Group’s business plan which is set in line with the Group’s risk framework.
The Remuneration Committee retains the flexibility to review formulaic outcomes to ensure that they are appropriate in the context of overall performance of the
Group, including risk.
The remuneration scenario charts, set out on page 113, provide estimates on the potential future reward opportunity in a range of scenarios, including below threshold,
target and maximum performance (including share price appreciation).
Variable remuneration is directly aligned to the Group’s strategic priorities (through the selection of key financial performance metrics), with payments calibrated to
ensure that payments are only made where strong performance is delivered.
As noted above, the Remuneration Committee retains the flexibility to review formulaic outcomes to ensure that they are appropriate in the context of the overall
performance of the Group.
Intertek Group plc Annual Report and Accounts 2020
119
Financial statementsDirectors’ reportStrategic report Remuneration Committee report Continued
Code requirement
Intertek approach
Alignment with culture
Incentive schemes should drive behaviours
consistent with the Company’s purpose, values
and strategy
As set out on page 107, the Remuneration Policy at Intertek has been set to be appropriate for the nature, size and complexity of the Group, encourages our employees
in the development of their careers and is aligned to the Company’s strategy and is in the best interests of the Company and its stakeholders.
It is directed to deliver continued sustainable profitable growth.
Our remuneration strategy is to:
• align and recognise the individual’s contribution to help us succeed in achieving our 5x5 differentiated strategy for sustainable growth;
• 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 through well designed and appropriately calibrated incentive schemes.
The following sections on pages 120 to 128 have been audited.
Directors’ remuneration earned in 2020 (audited)
The table below and on the following page summarises Directors’ remuneration received for 2020 and the prior year for comparison. Taken in the context of internal and external comparators, the Committee considered
the Executives’ remuneration to be appropriate.
Executive Directors
André Lacroix
Ross McCluskey
Base salary
or fees1
£’000
Benefits2
£’000
BIK arising
from
performance
of duties
£’000
974
964
477
475
94
141
28
28
3
14
1
2
2020
2019
2020
2019
Annual
incentive3
£’000
Long-term
incentives
£’000
–
1,2154
1,014
2,5645
–
497
584
625
Pension6
£’000
Total
£’000
Total fixed
£’000
292
289
24
24
2,578
4,986
588
1,088
1,363
1,408
530
529
Total
variable
£’000
1,215
3,578
58
559
1. The Directors agreed to a 50% salary deferral for six months from 1 April 2020 and there was a six month delay in the implementation of the 2020 annual salary increase.
2. 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 (£24,473).
3. This relates to the payment of the annual incentive and Deferred Share Award for the financial year end. Further details of this payment are set out on the following pages.
4. This relates to the 2018 LTIP award which is still due to vest at the time of writing. The value shown is based on the share price of £59.07, which was the average mid-market share price in the fourth quarter of 2020. Further details on performance are set out on page 123. Of the total amount,
19.36% (£197,022 and £9,379 for André and Ross, respectively) reflects the share price appreciation in the period. There was no discretion exercised in respect of the awards.
5. This figure has been updated to show the actual value of the vested LTIP share awards based on the share price of £46.62, the share price at vesting in March 2020, as the 2019 Report included figures based on the share price for the final quarter of 2019 (£54.09).
6. Neither of the Executive Directors had a prospective entitlement to a defined benefit pension.
120 Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Remuneration Committee report Continued
Non-Executive Directors
Sir David Reid (retired 31 Dec 2020)
2020
Graham Allan
Gurnek Bains
Tamara Ingram
Dame Louise Makin
Andrew Martin
Gill Rider
Jean-Michel Valette
Lena Wilson
2019
2020
2019
2020
2019
20204
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Base salary
or fees1
£’000
320
320
89
89
77
77
2
n/a
77
77
92
92
77
77
72
72
77
77
Benefits2
£’000
BIK arising from
performance
of duties3
£’000
25
25
–
–
–
–
–
3
9
–
–
–
–
–
n/a
n/a
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1
2
5
1
4
Total
348
354
89
89
77
77
2
n/a
77
77
92
92
77
78
74
77
78
81
1. 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 were used to purchase shares in the Company.
2. 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.
3. Certain expenses relating to ensuring that the Directors were in a position in order to undertake the performance of their duties (not included in the Benefits column above) such as travel to and from Company meetings, related accommodation and completion of UK tax returns for overseas Directors
have 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.
4. The 2020 fees for Tamara Ingram relate to the period from 18 December 2020, the date she was appointed to the Board.
Intertek Group plc Annual Report and Accounts 2020
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Financial statementsDirectors’ reportStrategic report Remuneration Committee report Continued
Annual incentive (audited)
The annual incentive for 2020 was based solely on financial measures:
• 80% based on a matrix based on revenue and adjusted operating profit growth; and
• 20% based on return on invested capital (‘ROIC’).
Overview of the matrix (80% of the award)
Revenue performance (£m)
Maximum
Target
Threshold
Below threshold
Adjusted operating profit performance (£m)
Below threshold
Threshold
Target
Maximum
0%
0%
0%
0%
40%
30%
25%
0%
65%
50%
35%
0%
100%
75%
60%
0%
Straight-line payouts occur between each of the points above threshold noted above.
The Company’s performance resulted in a Group annual incentive payout of 0.0% of maximum opportunity. Performance of individual components is shown below.
2020 Company performance against annual incentive targets (at 2019 constant currency)
Financial measures
Total external revenue1
Adjusted operating profit1
Revenue/profit matrix
Return on invested capital1
Total
%
Weighting
80%
20%
100%
2020
Threshold
£2,998m
£527m
2020
Target2
£3,059m
£543m
2020
Maximum
£3,120m
£559m
2020
Actual
£2,790m
£435m
23.6%
23.8%
24.0%
21.8%
Achieved3
Weighted
achievement
0.0%
0.0%
0.0%
0.0%
0.0%
1. Calculated using constant 2019 exchange rates. Adjusted results exclude the impact of Separately Disclosed Items.
2. Target is equivalent to 50% payout.
3. Percentage achieved against maximum targets.
122 Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Remuneration Committee report Continued
For 2020, the annual incentive outturn in cash and shares is as follows:
André Lacroix
Ross McCluskey
1. These awards vest three years after the date of grant, subject to continued employment or good leaver status.
Vesting of LTIP Share Awards (audited)
The LTIP Share Awards granted in 2018 are subject to performance for the three-year period ended 31 December 2020.
The performance conditions attached to this award and actual performance against these conditions are as follows:
Payable in
cash
£’000
Deferred
Share
Award1
£’000
0
0
0
0
Metric
Performance condition
Earnings Per Share (50%)
Annualised fully diluted, adjusted EPS growth, calculated on the basis of foreign exchange rates adopted
at the start of the performance targets
Threshold
target
4%
Stretch target
Actual performance
Vesting
level
10%
(1.6%)
0.00%
Total Shareholder Return (50%) Relative TSR performance against the FTSE 31 to 130 (excluding banks and investment trusts)
Median
Upper quartile
Total vesting
1. TSR performance calculation was calculated by Deloitte; Intertek was ranked 27th of the 88 members of the comparator group of companies.
The LTIP Share Awards granted in 2018 to the Executive Directors were as follows:
Between median
and upper quartile1
83.00%
41.50%
Executive Director
André Lacroix
Ross McCluskey
Total
Number of
shares at grant
Number of shares
based on accrued
dividends
Total number
of shares
Number of
shares to lapse
Number of
shares to vest
47,037
2,244
49,281
2,522
117
2,639
49,5592
2,3612
51,920
(28,993)
(1,382)
(30,375)
20,566
979
21,545
Value of
vested shares
£’0001
1,215
58
1,273
1. The value shown is based on the share price of £59.07 which is based on the average mid-market share price in the fourth quarter of 2020.
2. Due to vest in March 2021.
The Committee considered the LTIP outturns in the context of the underlying financial performance of the Group and determined it was appropriate not to exercise its discretion, as the business performance merited the
award.
Intertek Group plc Annual Report and Accounts 2020
123
Financial statementsDirectors’ reportStrategic report Remuneration Committee report Continued
LTIP Share Awards granted during the year (audited)
The following LTIP Share Awards were granted to the Executive Directors on 29 May 2020:
Executive Director
André Lacroix
Ross McCluskey
Type of award
Basis of award
granted
Award
price
£
Number of
shares over
which award
was granted
LTIP Share Award
250% of salary
£53.94
44,900
LTIP Share Award
200% of salary
£53.94
17,612
% of face
value that
would vest
at threshold
performance
Vesting determined by
performance over
25%
25%
Three years to
31 December 2022
Face value
of award
£’000
2,422
950
The LTIP Share Awards granted in 2020 are conditional share awards subject to performance for the three-year period ending 31 December 2022. Shares are granted at the average of the mid-market quotation price for
the five days up to and including the day immediately before grant.
The performance conditions attached to this award and the targets are as follows:
Metric
Performance condition
Earnings Per Share (33.3%)
Annualised fully diluted, adjusted EPS growth, calculated on a constant currency basis and per the EPS definition used for the Group KPIs in the
2019 Annual Report and Accounts.
Return on Invested Capital (33.3%)
Cumulative adjusted operating profits less adjusted tax, divided by cumulative invested capital (being net assets excluding tax balances, net
financial debt and net pension liabilities) in each of the three years, measured on a constant currency basis.
Threshold
target Maximum target
4%
20%
10%
24%
Adjusted Free Cash Flow (33.3%)
Free cash flow generated from operations less net capital expenditure, net interest paid and income tax paid adjusted for separately disclosed
items and is measured on a constant currency basis. Cumulative targets measured over three years.
£1.126m
£1.206m
Deferred Share Awards granted during the year (audited)
The following Deferred Share Awards were granted to the Executive Directors on 13 March 2020:
Executive Director
Type of award
Basis of award granted
André Lacroix
Deferred Share Award
Deferral of 2019 bonus
Ross McCluskey
Deferred Share Award
Deferral of 2019 bonus
Award
price
£
Number of
shares over
which award
was granted
Face value
of award
£’000
Vesting date subject to
continued employment or
good leaver status
£48.126
10,532
506,863
13 March 2023
£48.126
5,163
248,475
13 March 2023
The Deferred Share Awards granted in 2020 are conditional share awards subject to continued employment, with a three-year vesting period. Shares are granted at the average of the mid-market quotation price for the
five days up to and including the day immediately before grant.
124 Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Remuneration Committee report Continued
Share Plan Awards (audited)
The table below shows the Directors’ interests in the Intertek Share Plans, all of which are restricted stock units (‘RSUs’):
Type of Award
LTIP Share3,4
Dividend
Deferred Share3
Dividend
LTIP Share4,5
Dividend
Deferred Share5
Dividend
LTIP Share4,6
Dividend
Deferred Share6
Dividend
LTIP Share7,8
Dividend
Deferred Share8
Dividend
André Lacroix
2017
2018
2019
2020
Total
31 December
2019
Number of
shares
Granted
in 2020
Number of
shares
Award
price1
£
Dividend
accrued in
20202
Vested in
2020
Number of
shares
Lapsed in
2020
Number of
shares
31 December
2020
Number of
shares
Date of
vesting
58,636
2,879
16,474
807
47,037
1,632
18,815
652
50,117
963
15,135
290
–
–
–
–
–
–
–
–
–
–
–
–
38.92
–
38.92
–
49.49
–
49.49
–
47.378
–
47.378
–
–
–
–
–
44,900
53.94
–
–
10,532
48.126
–
–
–
–
–
–
–
890
–
355
–
950
–
286
–
250
–
199
(52,420)
(6,216)
– Mar 2020
(2,574)
(305)
–
(16,474)
(807)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– Mar 2020
–
47,037 Mar 2021
2,522
18,815 Mar 2021
1,007
50,117 Mar 2022
1,913
15,135 Mar 2022
576
44,900 May 2023
250
10,532 Mar 2023
199
213,437
55,432
2,930
(72,275)
(6,521) 193,003
Intertek Group plc Annual Report and Accounts 2020
125
Financial statementsDirectors’ reportStrategic report Remuneration Committee report Continued
Type of Award
LTIP Share3,4
Dividend
Deferred Share3
Dividend
LTIP Share4,5
Dividend
Deferred Share5
Dividend
LTIP Share4,6
Dividend
Deferred Share6
Dividend
LTIP Share7,8
Dividend
Deferred Share8
Dividend
Ross McCluskey
2017
2018
2019
2020
Total
31 December
2019
Number of
shares
Granted in
2020
Number of
shares
Award
price1
£
Dividend
accrued in
20202
Vested in
2020
Number of
shares
Lapsed in
2020
Number of
shares
31 December
2020
Number of
shares
Date of
vesting
2,826
135
715
34
2,244
75
2,244
75
20,051
385
3,890
74
–
–
–
–
–
–
–
–
–
–
–
–
38.92
–
38.92
–
49.49
–
49.49
–
47.378
–
–
–
–
–
42
–
42
–
–
379
47.378
–
–
73
–
98
–
97
(2,526)
(121)
(715)
(34)
–
–
–
–
–
–
–
–
–
–
–
–
(300)
(14)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– Mar 2020
–
– Mar 2020
–
2,244 Mar 2021
117
2,244 Mar 2021
117
20,051 Mar 2022
764
3,890 Mar 2022
147
17,612 May 2023
98
5,163 Mar 2023
97
–
–
–
–
17,612
53.94
–
–
5,163
48.126
–
–
32,748
22,775
731
(3,396)
(314)
52,544
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. 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.
3. Awards vested on 20 March 2020, on which date the closing market price of shares was £44.39, having been granted on 20 March 2017, on which date the closing market price was £39.17.
4. 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).
5. Awards will vest on 21 March 2021, subject to continued employment or good leaver status, having been granted on 21 March 2018, on which date the closing market price was £49.55. Awards were made at a share price of £49.49 being the share price obtained by averaging the closing share prices
for the five dealing days before the date of grant.
6. Awards will vest on 21 March 2022, subject to continued employment or good leaver status, having been granted on 21 March 2019, on which date the closing market price was £47.378. Awards were made on a share price of £49.49, being the share price obtained by averaging the closing share
prices for the five dealing days before the date of grant.
7. One-third of the LTIP Share Awards are subject to EPS, one-third on Return on Invested Capital and one-third on Adjusted Free Cash Flow as detailed further on page 124 of this report. Awards will vest on 29 May 2023, subject to continued employment or good leaver status, having been granted
on 29 May 2020, on which date the closing market price was £55.06. Awards were made at a share price of £53.94 being the share price obtained by averaging the closing share prices for the five dealing days before the date of grant. The LTIP shares will be subject to an additional two-year holding
period post-vesting.
8. Awards will vest on 13 March 2023, subject to continued employment or good leaver status, having been granted on 13 March 2020 on which date the closing market price was £45.36. Awards were made at a share price of £48.126, being the share price obtained by averaging the closing share
prices for the five dealing days before the date of grant.
126 Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Remuneration Committee report Continued
Malus and clawback (audited)
Malus and clawback will operate, in respect of the 2011 Long Term Incentive Plan and the 2021 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 propriety; 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 Committee has the discretion to reduce annual incentive 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 Committee also
retains the discretion to reduce or reclaim payments if the performance achievements are subsequently found to have been significantly misstated.
Directors’ interests in ordinary shares (audited)
The interests of the Directors in the shares of the Company as at the year end, or date of ceasing to be a Director, are set out below. Save as stated in this report, during the course of the year, no Director or 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. None of the Non-Executive Directors have share options or share awards.
André Lacroix5
Ross McCluskey6
Sir David Reid
Graham Allan
Gurnek Bains
Tamara Ingram7
Dame Louise Makin
Andrew Martin
Gill Rider
Jean-Michel Valette
Lena Wilson
Beneficially
owned at
31 December
2019
Beneficially
owned at
31 December
20201
Outstanding
LTIP Share
Awards2
Outstanding
Deferred
Shares3
Shareholding as
a % of salary4
Shareholding
Guideline met
394,230
432,535
146,739
3,513
6,595
233
235
0
5,312
6,942
355
357
0
1,068
1,179
363
632
10,237
1,063
474
754
10,370
1,182
40,886
–
–
–
–
–
–
–
–
–
46,264
11,658
–
–
–
–
–
–
–
–
–
2,472
62
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Yes
No
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
1. No changes in the above Directors’ interests have taken place between 31 December 2020 and 2 March 2021.
5. Appointed 16 May 2015 with the guideline to hold 200% of base salary in shares by 16 May 2020, which has been exceeded.
2. Subject to performance conditions.
3. Subject to continued employment or good leaver status.
6.
Joined Intertek in August 2016 with the guideline to hold 35% of base salary in shares by August 2021. This was increased on his appointment
to Chief Financial Officer on 22 August 2018 to 200% to be achieved by August 2023.
4. Calculated as the number of shares beneficially owned at 31 December 2020 based on a share price of £56.48 as at 31 December 2020,
7. Appointed 18 December 2020.
being the last trading day, and applied to the annual salary for 2020.
Post employment share ownership requirements
In line with best practice on the post-cessation of employment shareholding guidelines, Executive Directors are required to retain shares equivalent to the lower of their actual shareholding and in-employment
shareholding requirement for two years after ceasing employment with Intertek. Further consideration will be given over the course of the year on how these will be enforced in practice including utilising the
Company nominee.
Intertek Group plc Annual Report and Accounts 2020
127
Financial statementsDirectors’ reportStrategic report Remuneration Committee report Continued
Payments to past Directors (audited)
Edward Leigh received 17,004 shares on 20 March 2020 which vested
at a share price of £46.623. These are a tranche of awards vesting
under the good leaver status granted to Edward on leaving the
Company and he has a further two tranches yet to vest. The shares
were granted in March 2017 on which date the closing market price
was £39.17 per share. The proceeds include a sum of £130,981.81
which has resulted from the increase in the value of shares from the
grant price of £38.92 to the vesting price of £46.623. These vested in
line with the LTIP awards vesting for other Executives in respect of the
performance period ending on 31 December 2019 (89.4%) of maximum.
Payments for loss of office (audited)
Sir David Reid received no payment on ceasing to be the Chairman
of the Company and no payments were made to any Director of the
Company for loss of office.
Percentage change in remuneration levels
The table below shows the average movement in salary and annual
incentive for UK employees between the 2019 and 2020 financial
year ends. The UK total employee population has been chosen as a
comparator, as the parent company (Intertek Group plc) does not
have any employees apart from the Directors.
Salary
%
Incentive
%
Benefits
%
CEO (André Lacroix1)
CFO (Ross McCluskey)
Average based on Intertek’s UK
employees2
Chairman (to 31 Dec 2020)
(Sir David Reid)
Graham Allan
Gurnek Bains
1.0
0.5
3.2
0
0
0
Tamara Ingram (from 18 Dec 2020)
n/a
Dame Louise Makin
Andrew Martin
Gill Rider
0
0
0
128 Intertek Group plc Annual Report and Accounts 2020
(24.2)
(12.4)
12.2
(2.5)
(9.9)
16.45
n/a
n/a
n/a
n/a
n/a
n/a
n/a
131
(100)
n/a
(59.3)
n/a
(63.5)
Lena Wilson
Jean-Michel Valette
Salary
%
Incentive
%
Benefits
%
0
0
n/a
n/a
(77.2)
(48.9)
1. The percentage change for incentive and benefits for André Lacroix are based on actual
amounts earned in 2019 and 2020.
2. The Intertek UK employee group has been selected as the most appropriate comparator group,
due to the diverse nature of the Group’s global employee population.
CEO pay ratio
The following table sets out the CEO’s pay ratio, comparing the
CEO’s total remuneration against that of all of its UK employees. The
table below shows the required information for 2019 and 2020. The
reduction in the 2020 CEO’s pay ratios compared with 2019 is largely
due to two factors: 0% of annual incentive was earned in 2020 and the
LTIP vesting percentage reduced to 41.5%.
Method
Option B
Option B
25th
percentile
pay ratio
Median pay
ratio
75th
percentile
pay ratio
99:1
205:1
75:1
152:1
53:1
107:1
2020 CEO
2019 CEO1
1. These ratios have been updated to reflect actual LTI vesting value in the single pay figure.
The regulations also require the total pay and benefits and the salary
component of total pay to be set out as follows:
(25.1)
CEO remuneration
UK employee 25th percentile
UK employee median
UK employee 75th percentile
Base salary
£
Total pay
and benefits
£
973,621 2,577,847
24,708
26,155
31,967
34,252
41,094
48,988
In terms of reporting options, the Company chose option B, using the
most recent gender pay gap information to determine the relevant
employees at the 25th, 50th and 75th percentile to compare to CEO
pay, as that data was already available and is used for other reporting
purposes. It refers to gender pay data as of 1 April 2020 and uses the
single total figure methodology for the identified individuals. The pay
and benefits for the employees at the quartiles are their total actual
annual pay and benefits as of 31 December 2020.
With regards to representativeness of the ratios, Intertek is a very
diverse employer and has employees in many UK locations. Our
employees have many different qualifications and are working in and
serving almost all major industries. As a consequence, it is unlikely
that there is any one single individual whose pay and benefits is
representative of Intertek UK as a whole. Intertek have therefore also
looked at the total pay of the individuals immediately above and below
the 25th, 50th and 75th percentile. Looking at the spread of resulting
ratios, it was decided that the ‘best equivalent’ would be the arithmetic
mean of the total pay of three individuals around each reporting point:
• For the three employees around the 25th percentile: Ratios ranged
from 97.0:1 to 100.0:1, with an arithmetic mean of 98.6:1.
• For the three employees around the 50th percentile: Ratios ranged
from 74.9:1 to 76.0:1, with an arithmetic mean of 75.3:1.
• For the three employees around the 75th percentile: Ratios ranged
from 48.6:1 to 55.2:1, with an arithmetic mean of 52.8:1.
When calculating total pay and rewards, no pay components were
omitted. The Company used the calculation methodology as set out
in the relevant regulations (The Companies (Miscellaneous Reporting)
Regulations 2018). For part-time employees, their relevant pay and
benefit components have been adjusted to the equivalent full-time
figure for the relevant business. Full-time equivalent hours can vary
across locations and legal entities.
The pay ratio reflects how remuneration arrangements differ as
responsibility increases for more senior roles in the organisation,
including reflecting that an increased proportion is based on
performance-related variable pay and short term based incentives for
more senior executives. The Committee is therefore comfortable that
the pay ratio reflects the pay and progression policies at Intertek.
Financial statementsDirectors’ reportStrategic report Remuneration Committee report Continued
Relative importance of the spend on pay
The table below shows the movement in spend on staff costs between the 2019 and 2020 financial years,
compared to dividends.
2020
£m
2019
£m
%
change
£
400
300
Staff costs1
Dividends
1,220.4
1,314.5
(7.2%)
200
170.4
163.2
4.4%
1. Staff costs are shown at actual rates. At constant currency, staff costs decreased by 5.7%, reflecting a 1.5% foreign exchange impact.
Performance graph
Consistent with prior years, the graph alongside shows the TSR in respect of the Company over the last
ten financial years, compared with the TSR for the full FTSE 100 Index. The FTSE 100 is selected as the
comparator group as it is a good representation of peer group companies and Intertek is a constituent of the
FTSE 100. 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.
100
0
2010
Intertek Group
FTSE 100
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
CEO total remuneration
The total remuneration figures for the CEO during each of the past ten 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 incentive 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 incentive payout and LTIP award vesting level as a percentage of the maximum opportunity are also shown for each of these years.
Total remuneration £’000
Annual incentive (%)
LTIP award vesting (%)
2011
4,554
92.3
100.0
2012
5,298
83.1
100.0
2013
3,195
34.6
81.8
2014
2,011
38.4
25.2
W Hauser
2015
A Lacroix
2015
876
90.6
–
1,824
96.6
–
2016
2017
5,4521
11,4171
70.2
–
100.0
90.87
2018
6,223
75.5
98.32
2019
4,986
52.3
89.40
2020
2,578
0.0
41.50
1. As reported in previous years, at the time of joining, the Company had bought out André’s existing share awards with his previous employer in two tranches of 91,575 and 91,574 shares vesting in 2016 and 2017, each at an award price of £28. The tranche that vested in 2017 vested at a share price
of £42.95, which represents an increase in our Company share price over the two years of over 53%. These awards were one-off awards and not part of his ongoing remuneration.
Intertek Group plc Annual Report and Accounts 2020
129
Financial statementsDirectors’ reportStrategic report Remuneration Committee report Continued
The graph below shows the total remuneration of the Intertek CEO over the ten-year period from 2011 to 2020.
Mirror awards5
LTIP (share price increase)4
LTIP (award share price)3
Annual incentive
Pension
Benefits6
Salary
£’000
12,000
10,000
8,000
6,000
4,000
2,000
0
2011
2012
2013
2014
2015 (WH)1
2015 (AL)2
2016
2017
2018
2019
2020
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, which in 2020 was £556,518.
5. Mirror Awards – as reported in previous years, at the time of joining, the Company had bought out André’s existing share awards with his previous employer in two tranches of 91,575 and 91,574 shares vesting in 2016 and 2017 each at an award price of £28.
The tranche that vested in 2017 vested at a share price of £42.95 which represents an increase in our Company share price over the two years of over 53%. These awards were one-off awards and are not part of his ongoing remuneration.
6. Benefits – years 2018, 2019 and 2020 also include benefits in kind (‘BIK’) arising from performance of duties and will continue to include any BIK values in future years.
Approval of the Directors’ Remuneration report
The Directors’ Remuneration report, including both the Directors’ Remuneration Policy review report and the Annual report on remuneration, was approved by the Board on 1 March 2021.
Gill Rider
Chair of the Remuneration Committee
130 Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report 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.
Annual Report and Accounts and compliance with Listing
Rule (‘LR’) 9.8.4 R
The Board has prepared a Strategic report (pages 2 to 71) which
provides an overview of the development and performance of the
Company’s business during the year ended 31 December 2020 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.
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 next table.
Topic
Location and page
1. Amount of interest capitalised
Not applicable
2. Any information required by LR 9.2.18 R
(Publication of unaudited financial
information)
Not applicable
3. Details of long-term incentive schemes Directors’ Remuneration
report (pages 115 to 130)
4. Waiver of emoluments by a Director
Not applicable
5. Waiver of future emoluments by a
Director
Not applicable
6. Non pre-emptive issues of equity for
cash
Not applicable
7. Information required by (6) above for any
unlisted major subsidiary undertaking of
the Company
Not applicable
8. Company participation in a placing by a
listed subsidiary
Not applicable
9. Any contracts of significance
10. Any contracts for the provision of
services by a controlling shareholder
11. Shareholder waivers of dividends
12. Shareholder waivers of future
dividends
13. Agreements with controlling
shareholders
Other statutory
information (page 132)
Not applicable
Other statutory
information (page 132)
Other statutory
information (page 132)
Not applicable
Directors
The names of the members of the Board, as at the date of this report,
and their biographical details are set out on pages 74 to 76. During the
year, Tamara Ingram was appointed as a Non-Executive Director with
effect from 18 December 2020 and Sir David Reid stepped down as
Chairman effective 31 December 2020. In 2021, Andrew Martin was
appointed as Chairman on 1 January 2021, Lena Wilson stepped down
from the Board on 31 January 2021 and Lynda Clarizio was appointed
as a Non-Executive Director of the Board on 1 March 2021.
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 2020, 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.
Intertek Group plc Annual Report and Accounts 2020
131
Financial statementsDirectors’ reportStrategic report Other statutory information Continued
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 and the FCA under Article 19 of the Market Abuse
Regulation, are disclosed in the Remuneration report on pages 114,
125 to 127.
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 71.6p per ordinary
share (2019: 71.6p) making a full-year dividend of 105.8p per ordinary
share (2019: 105.8p) which will, if approved at the AGM, be paid on
18 June 2021 to shareholders on the register at the close of business
on 28 May 2021.
Share capital
The issued share capital of the Company and the 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, receive the Company’s Annual Report and Accounts, attend
and speak at general meetings of the Company, appoint proxies
and exercise voting rights. A waiver of dividend exists in respect of
313,270 shares held by the Intertek Group Employee Share Ownership
Trust (‘Trust’) as at 31 December 2020. 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.
Allotment of shares
At the AGM held in 2020, 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 held in 2020, 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.
It is the Board’s intention, in line with guidance issued by the Pre-
Emption Group, to also propose the renewal of the additional special
resolution to allow the Company to allot equity securities up to a
further 5% of the Company’s issued share capital. This is applicable
when the Board determines a transaction to be an acquisition or other
capital investment, as defined by the Pre-Emption Group’s Statement
of Principles and is announced contemporaneously with the allotment,
or has taken place in the preceding six-month period and is disclosed
in the announcement of the allotment.
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 ten-year period under
the relevant share plan rules. The Company currently holds no shares
in treasury.
Significant agreements
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 2020 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. The Company is not aware of any other
agreements with change of control provisions that are considered
to be significant in terms of their potential impact to the business.
There are no significant agreements or contracts in place with any
group company and a director of the Company or a major shareholder.
Material interests in shares
Up to 1 March 2021, 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 (‘DTR 5’). The Company is not aware of any
changes in the interest disclosed under DTR 5 since the year end.
132 Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Other statutory information Continued
At date of notification
Shareholder
BlackRock Inc.
Fiera Capital Corporation
Mawer Investment Management Ltd
Marathon Asset Management LLP
MFS Investment Management
Fundsmith LLP
Direct
voting rights
Indirect
voting rights
Percentage of
voting rights
attached to shares
Voting rights
through financial
instruments
Percentage of voting
rights through
financial instruments
Total
voting rights
Percentage of
total voting rights
–
–
8,110,417
–
–
10,473,019
9,553,525
–
8,037,714
8,004,731
7,917,434
–
6.49%
5.92%
5.03%
4.98%
4.96%
4.90%
1,392,394
0.85
11,865,413
–
–
–
–
–
–
–
–
–
–
9,553,525
8,110,417
8,037,714
8,004,731
7,917,434
7.35%
5.92%
5.03%
4.98%
4.96%
4.90%
These holdings are published on a Regulatory Information Service and on the Company’s website.
Employment
Information about the Group’s employees, employment of disabled
persons policies and employment practices is contained within our
Sustainability section in the Strategic report on pages 30 and 31.
Information on the employee share schemes is in the Directors’
Remuneration report and in note 14 to the financial statements.
The steps by the Company taken to inform, engage and consult
with employees is outlined in pages 85 to 88 and in the Section 172
statement on page 67.
Streamlined Energy and Carbon Reporting (‘SECR’) and
Greenhouse Gas emissions (‘GHG’)
Information about the Group’s GHGs and compliance with the SECR
regulations is given in our Sustainability section in the Strategic report
on pages 35 to 38.
Political donations
At the AGM in 2020, shareholders passed an ordinary resolution,
on a precautionary basis, to authorise the Company to make donations
to EU political organisations and to incur EU political expenditure
(as such items are defined in the Act) not exceeding £90,000.
During the year the Group did not make any such political donations
(2019: £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 section
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 related undertakings is available on pages 176 to 183.
Auditor
The auditor, PricewaterhouseCoopers LLP, have expressed their
willingness to continue in office. Upon the recommendation of
the Audit Committee, a resolution to re-appoint them as auditor and to
determine their remuneration will be proposed at the
forthcoming AGM.
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 2021, 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.
Intertek Group plc Annual Report and Accounts 2020
133
Financial statementsDirectors’ reportStrategic report André Lacroix
Chief Executive Officer
1 March 2021
Registered Office
33 Cavendish Square
London
W1G 0PS
Registered Number: 04267576
Statement of Directors’ responsibilities
in respect of the Annual Report and Financial Statements
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulation.
Company law requires the Directors to prepare financial statements
for each financial year. Under that law, the Directors have prepared the
Group financial statements in accordance with international accounting
standards in conformity with the requirements of the Companies
Act 2006. Additionally, the Financial Conduct Authority’s Disclosure
Guidance and Transparency Rules require the Directors to prepare
the Group financial statements in accordance with international
financial reporting standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union. The Directors have
prepared the Company financial statements in accordance with United
Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards, comprising FRS 101 ‘Reduced Disclosure
Framework’, and applicable law).
Under company law, 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 Company and of the profit or
loss of the Group for that period. In preparing the financial statements,
the Directors are required to:
• select suitable accounting policies and then apply them
consistently;
• state whether international accounting standards in conformity
with the requirements of the Companies Act 2006 and
international financial reporting standards adopted pursuant
to Regulation (EC) No 1606/2002 as it applies in the European
Union have been followed for the Group financial statements and
United Kingdom Accounting Standards, comprising FRS 101 have
been followed for the Company financial statements, subject to
any material departures disclosed and explained in the financial
statements;
• make judgements and accounting estimates that are reasonable
and prudent; and
• prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the Group and Company will
continue in business.
The Directors are also responsible for safeguarding the assets of the
Group and Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Group’s and Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Group and Company and enable them to
ensure that the financial statements and the Directors’ Remuneration
Report comply with the Companies Act 2006 and, as regards the
Group financial statements, Article 4 of the IAS Regulation.
The Directors are responsible for the maintenance and integrity of the
Company’s website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Directors’ confirmations
The Directors consider that the 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 and
Company’s position and performance, business model and strategy.
Each of the Directors, whose names and functions are listed in the
Directors’ report confirm that, to the best of their knowledge:
• the Group financial statements, which have been prepared in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and
international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union,
give a true and fair view of the assets, liabilities, financial position
and profit of the Group;
• the Company financial statements, which have been prepared in
accordance with United Kingdom Accounting Standards, comprising
FRS 101, give a true and fair view of the assets, liabilities, financial
position and profit of the Company; and
• the Strategic report and Directors’ report include a fair review of the
development and performance of the business and the position of
the Group and Company, together with a description of the principal
risks and uncertainties that it faces.
134 Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Consolidated income statement
For the year ended 31 December
Revenue
Operating costs
Group operating profit/(loss)
Finance income
Finance expense
Net financing costs
Profit/(loss) before income tax
Income tax (expense)/credit
Profit/(loss) for the year
Attributable to:
Equity holders of the Company
Non-controlling interest
Profit/(loss) for the year
Earnings per share**
Basic
Diluted
*
See note 3.
** Earnings per share on the adjusted results is disclosed in note 7.
Adjusted
results
£m
2,741.7
(2,314.0)
Separately
Disclosed
Items*
£m
Total
2020
£m
–
(49.5)
2,741.7
(2,363.5)
Adjusted
results
£m
2,987.0
(2,462.8)
Separately
Disclosed
Items*
£m
Total
2019
£m
–
2,987.0
(38.4)
(2,501.2)
427.7
(49.5)
378.2
524.2
(38.4)
485.8
1.1
(36.0)
(34.9)
392.8
(100.2)
292.6
–
0.6
0.6
(48.9)
18.9
(30.0)
1.1
(35.4)
(34.3)
343.9
(81.3)
262.6
277.3
15.3
(30.0)
–
247.3
15.3
292.6
(30.0)
262.6
1.2
(40.6)
(39.4)
484.8
(118.8)
366.0
345.5
20.5
366.0
–
(1.3)
(1.3)
(39.7)
7.3
(32.4)
(32.4)
–
(32.4)
153.6p
152.4p
1.2
(41.9)
(40.7)
445.1
(111.5)
333.6
313.1
20.5
333.6
194.5p
192.6p
Notes
2
2
14
14
6
2
20
7
7
Intertek Group plc Annual Report and Accounts 2020
135
Financial statementsDirectors’ reportStrategic report Consolidated statement of comprehensive income
For the year ended 31 December
Profit for the year
Other comprehensive income
Remeasurements on defined benefit pension schemes
Tax on comprehensive income items
Items that will never be reclassified to profit or loss
Foreign exchange translation differences of foreign operations
Net exchange gain/(loss) on hedges of net investments in foreign operations
Gain on fair value of cash flow hedges
Items that are or may be reclassified subsequently to profit or loss
Total other comprehensive (expense)/income for the year
Total comprehensive income for the year
Total comprehensive income for the year attributable to:
Equity holders of the Company
Non-controlling interest
Total comprehensive income for the year
Notes
2
16
6
14
20
2020
£m
262.6
0.8
(3.1)
(2.3)
(53.9)
3.7
0.3
(49.9)
(52.2)
2019
£m
333.6
(3.2)
0.2
(3.0)
(72.4)
31.2
0.7
(40.5)
(43.5)
210.4
290.1
195.4
15.0
210.4
271.8
18.3
290.1
136 Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Consolidated statement of financial position
As at 31 December
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
Lease liabilities
Trade and other payables*
Provisions*
Total current liabilities
Interest-bearing loans and borrowings
Lease liabilities
Deferred tax liabilities
Net pension liabilities
Other payables*
Provisions*
Total non-current liabilities
Total liabilities
Net assets
Notes
2020
£m
2019
£m
8
9
9
6
11
14
14
14
12
13
14
14
6
16
12
13
585.8
835.9
279.7
–
48.6
644.2
859.8
302.4
–
51.9
1,750.0
1,858.3
15.5
621.2
203.9
24.5
865.1
19.2
685.0
227.4
28.5
960.1
2,615.1
2,818.4
(31.0)
(53.8)
(61.4)
(576.2)
(28.8)
(238.9)
(57.2)
(61.7)
(518.0)
(24.2)
(751.2)
(900.0)
(592.8)
(162.8)
(59.7)
(12.1)
(26.1)
(7.4)
(617.9)
(184.3)
(68.2)
(13.4)
(29.2)
(20.1)
(860.9)
(933.1)
(1,612.1)
(1,833.1)
1,003.0
985.3
As at 31 December
Equity
Share capital
Share premium
Other reserves
Retained earnings
Notes
15
Total equity attributable to equity holders of the Company
Non-controlling interest
20
Total equity
2020
£m
2019
£m
1.6
257.8
(80.8)
796.4
975.0
28.0
1.6
257.8
(31.2)
727.7
955.9
29.4
1,003.0
985.3
* Working capital of negative £4.0m (2019: positive £100.7m) comprises the asterisked items in the above statement of financial position less
refundable deposits aged over 12 months of £2.2m (2019: £12.0m).
The financial statements on pages 135 to 183 were approved by the Board on 1 March 2021 and were
signed on its behalf by:
André Lacroix
Chief Executive Officer
Ross McCluskey
Chief Financial Officer
Intertek Group plc Annual Report and Accounts 2020
137
Financial statementsDirectors’ reportStrategic report Consolidated statement of changes in equity
For the year ended 31 December
Attributable to equity holders of the Company
Other reserves
Share
capital
£m
Share
premium
£m
Translation
reserve
£m
Other
£m
Retained
earnings
£m
Notes
Total before
non-
controlling
interest
£m
Non-
controlling
interest
£m
At 1 January 2019
Total comprehensive income/(expense) for the year
Profit
Other comprehensive income/(expense)
Total comprehensive income/(expense) 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
1.6
257.8
1.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(39.0)
(39.0)
–
–
–
–
–
–
–
5.4
–
0.7
0.7
–
–
–
–
–
–
–
15
20
15
17
17
6
At 31 December 2019
1.6
257.8
(37.3)
6.1
727.7
955.9
*
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.
138 Intertek Group plc Annual Report and Accounts 2020
588.3
854.8
34.3
313.1
(3.0)
310.1
313.1
(41.3)
271.8
(163.2)
(163.2)
4.1
(23.1)
(11.6)
21.9
1.2
4.1
(23.1)
(11.6)
21.9
1.2
(170.7)
(170.7)
20.5
(2.2)
18.3
(19.1)
(4.1)
–
–
–
–
(23.2)
29.4
Total
equity
£m
889.1
333.6
(43.5)
290.1
(182.3)
–
(23.1)
(11.6)
21.9
1.2
(193.9)
985.3
Financial statementsDirectors’ reportStrategic report Consolidated statement of changes in equity Continued
For the year ended 31 December
Attributable to equity holders of the Company
Other reserves
Share
capital
£m
Share
premium
£m
Translation
reserve
£m
Other
£m
Retained
earnings
£m
Notes
Total before
non-
controlling
interest
£m
Non-
controlling
interest
£m
At 1 January 2020
Total comprehensive (expense)/income for the year
Profit
Other comprehensive (expense)/income
Total comprehensive (expense)/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
IFRS 16 effects of deferred tax
Total contributions by and distributions to the owners of the Company
1.6
257.8
(37.3)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(49.9)
(49.9)
–
–
–
–
–
–
–
–
6.1
–
0.3
0.3
–
–
–
–
–
–
–
–
15
20
15
17
17
6
727.7
955.9
29.4
247.3
(2.3)
247.3
(51.9)
245.0
195.4
(170.4)
(2.2)
(12.2)
(8.5)
17.7
–
(0.7)
(170.4)
(2.2)
(12.2)
(8.5)
17.7
–
(0.7)
15.3
(0.3)
15.0
(18.6)
2.2
–
–
–
–
–
Total
equity
£m
985.3
262.6
(52.2)
210.4
(189.0)
–
(12.2)
(8.5)
17.7
–
(0.7)
(176.3)
(176.3)
(16.4)
(192.7)
At 31 December 2020
1.6
257.8
(87.2)
6.4
796.4
975.0
28.0
1,003.0
*
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 2020
139
Financial statementsDirectors’ reportStrategic report Notes
2020
£m
2019
£m
For the year ended 31 December
Cash flows from financing activities
Purchase of own shares
Tax paid on share awards vested
Drawdown of borrowings
Repayment of borrowings
Repayment of lease liabilities*
Purchase of non-controlling interest
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
15
20
14
14
14
14
2020
£m
2019
£m
(12.2)
(8.5)
279.9
(507.1)
(72.0)
–
(18.6)
(170.4)
(23.1)
(11.6)
110.0
(221.3)
(69.7)
(5.2)
(19.1)
(163.2)
(508.9)
(403.2)
(21.7)
213.0
(7.9)
183.4
31.1
203.2
(21.3)
213.0
The notes on pages 141 to 183 are an integral part of these consolidated financial statements.
Cash outflow relating to Separately Disclosed Items was £19.9m for year ended 31 December 2020
(2019: £15.3m).
Free cash flow of £415.7m (2019: £380.0m) comprises the asterisked items in the above consolidated
statement of cash flows.
Consolidated statement of cash flows
For the year ended 31 December
Cash flows from operating activities
Profit for the year
Adjustments for:
Depreciation charge
Amortisation of software
Amortisation of acquisition intangibles
Equity-settled transactions
Net financing costs
Income tax expense
Profit on disposal of subsidiary/associate
(Profit) 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
Sale of associate
Acquisition of property, plant, equipment and software*
2
8
9
9
17
14
6
16
14
10
262.6
333.6
156.6
156.2
17.4
28.1
17.7
34.3
81.3
–
(0.9)
597.1
3.5
52.9
36.8
(3.1)
(2.0)
685.2
(34.8)
(91.6)
558.8
7.6
1.1
–
(0.5)
–
(79.8)
15.3
29.1
21.9
40.7
111.5
(1.8)
(0.9)
705.6
(1.5)
(25.6)
40.7
(1.9)
(2.0)
715.3
(40.7)
(111.8)
562.8
2.5
1.2
(16.9)
(0.6)
2.1
(116.8)
Net cash flows used in investing activities
(71.6)
(128.5)
140 Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report 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 in England & Wales and domiciled in the UK.
The Group financial statements as at and for the year ended 31 December 2020 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 accounting standards in conformity with the requirements of the Companies Act
2006 and International Financial Reporting Standards (‘IFRSs’) adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union. The Company financial statements present information
about the Company as a separate entity and not about its Group. The Company has elected to prepare its
Company financial statements in accordance with UK GAAP, comprising FRS 101 and applicable law; these
are presented on pages 184 to 188.
Significant new accounting policies
During the year no new accounting standards were adopted by the Group.
Changes in accounting policies
The accounting policies set out in these financial statements have been applied consistently to all years
presented. There are no new accounting standards that are effective for annual periods beginning on or
after 1 January 2020 that have a material effect on the consolidated financial statements of the Group.
There are no accounting standards that are issued but not yet effective that are expected to have a
material effect on the consolidated financial statements of the Group.
The Interest Rate Benchmark Reform, which does not impact on the Group’s hedging instruments,
is assessed further in note 14.
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.
Going concern
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. 2020 was an
unprecedented year and the financial impact was managed with a resilient revenue performance, robust
margin and strong cash generation.
The Board has reviewed the Group’s financial forecasts up to 31 December 2022 to assess both liquidity
requirements and debt covenants. The Group’s financial forecasts, which have been updated for the
expected continued impact of COVID-19, show a recovery in 2021 with:
• all of our Products business lines other than Transportation Technologies delivering YoY revenue growth;
• Trade division revenues being broadly flat with 2020; and
•
revenue in our Resources divisions forecast to be below 2020.
In addition, the Group’s financial forecasts for 2021 and 2022, and the related liquidity position and forecast
compliance with debt covenants, have been sensitised for a severe decline in economic conditions (including
an illustrative sensitivity scenario of a reduction of 50% to the base profit forecasts and the corresponding
impact to cash flow forecasts in each of these years due to a greater than expected impact of COVID-19).
The Board remains satisfied with the Group’s funding and liquidity position with the Group forecast to
remain within its committed facilities and compliant with debt covenants even following the 50% stress
testing sensitivity. The sensitivity modelling excludes additional mitigating actions (e.g. dividend cash
payments, non-essential overheads and non-committed capital expenditure) that are within management
control and could be initiated if deemed required.
The undrawn headroom on the Group’s committed borrowing facilities at 31 December 2020 was £494.0m
(2019: £326.2m). As disclosed in Note 14 of the financial statements, all the current borrowing facilities
are expected to be available at 31 December 2022, except for US$15m of senior notes that are due to
be repaid in July 2021 and US$140m of senior notes that are due to be repaid in January 2022, and our
models forecast these to be repaid using current facilities. Full details of the Group’s borrowing facilities
and maturity profile are outlined in note 14.
On the basis of its forecasts to 31 December 2022, both base case and stressed, and available facilities, the
Board has concluded that there are no material uncertainties over going concern, including no anticipated
breach of covenants, and therefore the going concern basis of preparation continues to be appropriate.
Consideration of climate change
In preparing the financial statements we have considered the impact of climate change, particularly in the
context of the disclosures included in the Strategic Report this year. There has not been a material impact
on the financial reporting judgements and estimates arising from our considerations, consistent with our
assessment that climate change is not expected to have a meaningful impact on the viability of the Group
in the medium term. Specifically, we note the following:
• The Group has bought carbon credits in the year to offset our measured Scope 1, 2 and 3 GHG emissions,
making 2020 our first carbon neutral year. The cost of purchasing these credits was less than £1m.
• The Group continues to invest in on-site renewable energy generation at our locations. Spend in 2020
was not material.
• We have specifically considered the impact of climate change on the carrying value of fixed assets (see
note 8) and in our goodwill impairment assessment (see note 9).
Government grants
Government grants are recognised in the income statement so as to match them with the related expenses
that they are intended to compensate. Where grants are received in advance of the related expenses, they
are initially recognised in the balance sheet and released to match the related expenditure. Non-monetary
grants are recognised at fair value. The related cash flow is classified in accordance with the nature of
the activity.
Intertek Group plc Annual Report and Accounts 2020
141
Financial statementsDirectors’ reportStrategic report Notes to the financial statements Continued
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.
142 Intertek Group plc Annual Report and Accounts 2020
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 2020
31 Dec 2019
1.35
1.10
8.81
10.47
1.78
1.31
1.17
9.17
10.18
1.87
2020
1.28
1.13
8.88
9.96
1.87
2019
1.28
1.14
8.82
10.00
1.84
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. Details of amounts
both recognised and unrecognised are disclosed in note 6.
IFRIC 23 Uncertainty Over Income Tax Treatments interpretation addresses the determination of taxable
profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty
over income tax treatments under IAS 12. It clarifies that an entity must consider the probability that the
tax authorities will accept the treatment in its income tax filings, assuming that they have full knowledge
of all relevant information when making their examination. In such a case, the income taxes shall be
determined in line with the income tax filings. The main areas of judgement in the Group tax calculation are
reassessment of the uncertain tax positions and the probability of the tax treatments in its tax filings being
retained. The most significant individual uncertain tax position relates to EU State Aid investigations and
contingent liability disclosures have been included in note 22.
Basis of consolidation
Judgement is applied when determining if the Group ‘controls’ a subsidiary. In assessing control, the Group
considers whether it has the power to direct the relevant activities, whether it has exposure to variable
returns from the investee and whether it has power over the investee to affect the amount of investor
returns. Our original assessments are subsequently revisited on a rolling basis – see ‘Basis of consolidation’
policy opposite. The Group acquisitions are disclosed in note 10, and the Group’s principal subsidiaries are
disclosed in note 23.
Financial statementsDirectors’ reportStrategic report Notes to the financial statements Continued
1 Significant accounting policies Continued
Intangible assets
When the Group makes an acquisition, management determines initially whether any intangible assets
(e.g. customer relationships, trade names and technology) should be recognised separately from goodwill,
and the provisional amounts at which to recognise those assets. Certain assumptions are used in
determining the provisional values for such intangible assets, including, but not limited to, future growth
rates and customer attrition rates. During the first 12 months of ownership, intangible assets are reviewed
to determine whether any additional information exists that supports amendments to that original
assessment, including new intangible assets. Management has performed this subsequent review
for the 2019 acquisition of Check Safety First Limited, during the current year – see note 10.
Restructuring
In making a provision and classifying costs as restructuring as part of our 5x5 differentiated strategy
for growth, management has used its judgement to assess the specific circumstances of each local and
regional restructuring proposal as to whether it meets the Group definition of this SDI, including an estimate
of future costs and the timing of completion – see note 3.
Claims
In making provision for claims, management has used its judgement to assess 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.
Leases
On transition to IFRS 16 at 1 January 2019, the Group elected to adopt two exemptions proposed by
the standard. The Group did not recognise right-of-use assets and lease liabilities for short-term leases
(less than 12 months duration) and low-value assets (usually less than £4,000).
Normally the lease term is based upon the start and end date stated within the lease contract. Some lease
contracts may also contain an extension option or a break option. Judgement is applied to assess whether
to include these options in calculating term of a lease.
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.
Impairment of goodwill
Following recognition of goodwill as a result of acquisitions, the Group determines, as a minimum on
an annual basis and including current year acquisitions, whether goodwill is impaired, which requires an
estimation of the future cash flows of the cash generating units to which the goodwill is allocated, as well
as assumptions on growth rates and discount rates – see note 9. The outbreak of COVID-19 has increased
the level of estimation uncertainty in relation to assumptions used in impairment assessments (e.g. cash
flow projections, long-term growth, discount rate). However, no risk has been identified of a goodwill
impairment in the next 12 months, as detailed in the sensitivity analysis in note 9.
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. Following the outbreak of COVID-19 we have
reassessed our assumptions including both discount and mortality rates. Further details and sensitivity
analysis are included in 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, the length of time that the debts have remained unpaid and forward-looking
judgemental factors, such as specific customer knowledge and country-specific risk factors. Following the
outbreak of COVID-19 we have reassessed our expected loss provisions including assessing the country-
specific risk factors. Further details and sensitivity analysis are included in note 11.
Contingent consideration
When the Group acquires businesses, the total consideration may consist of an amount paid on completion
plus further amounts payable on agreed post-completion dates. These further amounts are contingent on
the acquired business meeting agreed performance targets. At the date of acquisition and at subsequent
reporting periods, 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. The outbreak of COVID-19 has increased
the level of estimation uncertainty in relation to profit and cash forecasts used in estimating the amount
of contingent consideration that is likely to be due. Further details and sensitivity analysis are included in
note 10.
Other accounting policies
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
Intertek Group plc Annual Report and Accounts 2020
143
Financial statementsDirectors’ reportStrategic report Notes to the financial statements Continued
2 Operating segments and presentation of results
Accounting policy
Revenue
Revenue represents the total amount receivable for services rendered when there is transfer of control to
the customer, 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 or test/inspection certificate
is issued. Short-term projects are considered to be those of less than two months’ duration.
On long-term projects revenue is recognised using the five steps for revenue recognition. The majority of
contracts are for less than one year. 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 contract assets, if billing has yet to be completed. Performance obligations vary across business lines
and regions, and on a contract-by-contract basis. There may be more than one performance obligation per
contract, for example Alchemy Training Solutions contracts have multiple elements which are split between
recognising revenue at a point in time for services such as software licences and over time for other services
delivered under the same contract.
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. The operating segment revenue disclosures provided under IFRS 8 are
consistent with the disaggregated revenue disclosure and recognition and measurement requirements
of IFRS 15.
A reconciliation to operating profit by division and Group profit for the year is included overleaf.
Tax provisions are recognised for uncertain tax positions where a risk of an additional tax liability has
been identified and it is probable that the Group will be required to settle that tax liability. Measurement
is dependent on management’s expectation of the outcome of decisions by tax authorities in the various
tax jurisdictions in which the Group operates. This is assessed on a case-by-case basis using in-house tax
experts, professional firms and previous experience.
The principal activities of the divisions, and the customers they serve, are as follows:
Long-term projects consist of two main types:
• time incurred is billed at agreed rates on a periodic basis, such as monthly; or
• 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 contract liabilities where services have not yet been rendered.
The Group does not expect to have any contracts where the period between the transfer of promised
goods or services to the customer and payment by the customer exceeds one year. As a consequence,
the Group does not adjust any of the transaction prices for the time value of money.
The Group has applied practical expedients in i) recognising assets from the costs incurred to obtain or
fulfil a contract; and ii) in disclosing unsatisfied performance obligations in contracts as contracts have an
expected duration of less than a year. The economic factors affecting revenue for both short- and long-term
contracts are consistent within each.
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.
These operating segments are aggregated into three divisions, which are the Group’s reportable segments,
based on similar nature of products and services and mid- to long-term structural growth drivers. When
aggregating operating segments into the three divisions we have applied judgement over the similarities
of the services provided, the customer base and the mid- to long-term structural growth drivers.
Products – Our Products division consists 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
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, people assurance, process performance analysis, facility plant and equipment verification and
third-party certification.
Trade – Our Trade division consists of three global business lines with similar global and regional trade-flow
structural growth drivers with demand driven by population and GDP growth, the development of regional
trade, increased traceability and growth in port and transport infrastructure.
The division provides differing services which reflect the breadth of our ATIC offering, but the services
provided are similar in nature and include analytical assessment, inspection and technical services that are
delivered to the customers through issuing certificates or reports. The three business lines all assist our
Trade-related customers in protecting the value and quality of their products during their custody-transfer,
storage and transportation, globally. Our Trade-related customers are all dependent on, and intrinsically
linked to, global shipping and trade flows.
Our Caleb Brett business provides cargo inspection, analytical assessment, calibration and related research
and technical services to the world’s petroleum and biofuels industries.
144 Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Notes to the financial statements Continued
2 Operating segments and presentation of results Continued
Our Government & Trade Services 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 AgriWorld business provides analytical and testing services to global agricultural trading companies
and growers.
Resources – Our Resources division consists of two business lines demonstrating similar mid- to long-
term structural growth drivers closely linked to our end-customer capital investment. Demand is driven by
long-term energy demand, supply chain risk management, sustainability of energy supply, infrastructure
investments, growth in alternative energy and focus on health and safety.
The division offers similar services across our range of Total Quality Assurance solutions to the oil, gas,
nuclear, power and minerals industries. Our Resources customers typically extract natural resources from
the ground and our services enable our customers to optimise the use of their assets and to minimise risk
in their supply chains. Delivery of our services is through issuing certificates or reports.
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 from exploration and resource development,
through to production, shipping and commercial settlement.
The results of these divisions for the year ended 31 December 2020 are shown below:
Year ended 31 December 2020
Products
Trade
Resources
Total
Group operating profit
Net financing costs
Profit before income tax
Income tax expense
Profit for the year
Revenue
from
contracts
with
customers
£m
1,681.6
592.6
467.5
Depreciation
and software
amortisation
£m
Adjusted
operating
profit
£m
Separately
Disclosed
Items
£m
Operating
profit
£m
(108.1)
(45.1)
(20.8)
351.6
47.1
29.0
2,741.7
(174.0)
427.7
427.7
(34.9)
392.8
(100.2)
292.6
(32.1)
(5.0)
(12.4)
(49.5)
(49.5)
0.6
(48.9)
18.9
(30.0)
319.5
42.1
16.6
378.2
378.2
(34.3)
343.9
(81.3)
262.6
Year ended 31 December 2019
Products
Trade
Resources
Total
Group operating profit
Net financing costs
Profit before income tax
Income tax expense
Profit for the year
Revenue
from
contracts
with
customers
£m
1,796.7
679.4
510.9
2,987.0
Depreciation
and software
amortisation
£m
Adjusted
operating
profit
£m
Separately
Disclosed
Items
£m
Operating
profit
£m
(105.2)
(44.6)
(21.7)
(171.5)
405.4
86.6
32.2
524.2
524.2
(39.4)
484.8
(118.8)
366.0
(23.9)
(4.6)
(9.9)
(38.4)
(38.4)
(1.3)
(39.7)
7.3
(32.4)
381.5
82.0
22.3
485.8
485.8
(40.7)
445.1
(111.5)
333.6
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 recognising 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
2020
£m
870.8
517.9
161.6
2019
£m
969.9
553.3
188.9
1,191.4
1,274.9
2020
£m
962.2
77.2
191.2
470.8
2019
£m
1,016.7
75.8
197.1
516.8
2,741.7
2,987.0
1,701.4
1,806.4
Major customers
No revenue from any individual customer exceeded 10% of total Group revenue in 2019 or 2020.
Intertek Group plc Annual Report and Accounts 2020
145
Financial statementsDirectors’ reportStrategic report Notes to the financial statements Continued
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 non-current 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 market
or fair value gains or losses on financial assets or liabilities, including contingent consideration.
Adjusted operating profit, which is a non-GAAP measure, 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 as part of our 5x5
differentiated strategy for growth are excluded from adjusted operating profit where they represent
fundamental changes in individual operations around the Group and where they reflect the refinement of
our operational structure identified as part of the Group’s strategy that are not expected to recur in those
operations. The impairment of goodwill and other assets that by their nature or size are not expected to
recur; 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 to provide
useful information regarding the underlying performance of the Group’s operations.
Separately Disclosed Items
The Separately Disclosed Items are described in the table below:
Operating (costs)/income:
Amortisation of acquisition intangibles
Acquisition costs
Restructuring costs
Gain on disposal of business
Material claims and settlements
Guaranteed minimum pension equalisation
Total operating costs
Net financing income/(costs)
Total before income tax
Income tax credit on Separately Disclosed Items
Total
(a)
(b)
(c)
(d)
(e)
(f)
(g)
2020
£m
(28.1)
(2.4)
(19.0)
–
–
–
(49.5)
0.6
(48.9)
18.9
(30.0)
2019
£m
(29.1)
(1.6)
(13.3)
1.8
4.6
(0.8)
(38.4)
(1.3)
(39.7)
7.3
(32.4)
(a) Of the amortisation of acquisition intangibles in the current year, £8.6m (2019: £8.7m) relates to the customer relationships, trade names,
technology and non-compete covenants acquired with the purchase of Alchemy Investment Holdings, Inc (‘Alchemy’) in 2018.
(b) Acquisition costs comprise £2.0m (2019: £1.2m) for transaction costs in respect of successful, active and aborted acquisitions in the current
year, and £0.4m in respect of prior-years’ acquisitions (2019: £0.4m).
(c) During the year, the Group has implemented the final year of various fundamental restructuring activities, consistent with the Group’s 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) £nil of small non-core businesses were disposed of in 2020 (2019: £1.8m).
(e) The 2019 material claims and settlements relate to a commercial claim that is separately disclosable due to its size.
(f) £nil has been recorded as past service cost under the defined benefit scheme – see note 16.
(g) Net financing income of £0.6m (2019: £1.3m cost) relates to the change in fair value of contingent consideration and the unwinding of discount
on put options related to acquisitions.
146 Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Notes to the financial statements Continued
4 Expenses and auditor’s remuneration
An analysis of operating costs by nature is outlined below:
5 Employees
Total employee costs are shown below:
Employee costs
Depreciation and software amortisation (notes 8 and 9)
Other expenses
Total
Certain expenses are outlined below, including fees paid to the auditors of the Group:
2020
£m
2019
£m
Employee costs
1,220.4
174.0
969.1
1,314.5
171.5
1,015.2
2,363.5
2,501.2
Wages and salaries
Equity-settled transactions
Social security costs
Pension costs (note 16)
Total employee costs
2020
£m
2019
£m
1,031.0
1,121.1
17.7
118.9
52.8
21.9
123.9
47.6
1,220.4
1,314.5
2020
£m
2019
£m
Details of pension arrangements and equity-settled transactions are set out in notes 16 and 17
respectively.
Included in profit for the year are the following expenses:
Property rentals
Lease and hire charges – fixtures, fittings and equipment
Government grants related to employee costs
Profit on disposal of property, fixtures, fittings, equipment and software
Average number of employees by division
9.0
11.3
(22.5)
(0.2)
13.7
8.7
(4.8)
(0.9)
Products
Trade
Resources
Central
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
Total
2020
£m
2019
£m
Total average number for the year ended 31 December
Total actual number at 31 December
0.8
4.0
4.8
0.2
5.0
0.8
3.8
4.6
0.1
4.7
The total remuneration of the Directors is shown below:
Directors’ emoluments
Directors’ remuneration
Amounts charged under the long-term incentive scheme
Total Directors’ emoluments
2020
23,849
10,466
8,395
1,915
2019
24,320
10,740
7,998
1,910
44,625
44,968
43,769
45,653
2020
£m
2019
£m
2.8
1.3
4.1
4.4
3.0
7.4
Intertek Group plc Annual Report and Accounts 2020
147
Financial statementsDirectors’ reportStrategic report Notes to the financial statements Continued
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.
Tax provisions are recognised for uncertain tax positions where a risk of an additional tax liability has
been identified and it is probable that the Group will be required to settle that tax liability. Measurement
is dependent on management’s expectation of the outcome of decisions by tax authorities in the various
tax jurisdictions in which the Group operates. This is assessed on a case-by-case basis using in-house tax
experts, professional firms and previous experience.
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:
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 statutory tax charge, including the impact of SDIs, of £81.3m (2019: £111.5m), equates to an effective
rate of 23.6% (2019: 25.1%) and the cash tax on adjusted results is 23.3% (2019: 23.1%).
The income tax expense for the adjusted profit before tax for the 12 months ended 31 December 2020 is
£100.2m (2019: £118.8m). The Group’s adjusted consolidated effective tax rate for the 12 months ended
31 December 2020 is 25.5% (2019: 24.5%).
Differences between the consolidated effective tax rate of 23.6% and notional statutory UK rate of
19.0% include, but are not limited to: the mix of profits; the effect of tax rates in foreign jurisdictions; non-
deductible expenses; the effect of movement in unrecognised deferred tax asset; 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. These tax incentives mainly relate to China’s High and New Technology Enterprise and
Technology Advanced Service Enterprise incentives. Without these incentives the adjusted effective
tax rate would be 28.0% (2019: 27.1%).
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:
•
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.
148 Intertek Group plc Annual Report and Accounts 2020
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
2020
£m
94.8
(3.7)
91.1
(2.4)
(7.4)
(9.8)
81.3
100.2
(18.9)
81.3
2019
£m
101.1
(0.1)
101.0
11.8
(1.3)
10.5
111.5
118.8
(7.3)
111.5
Financial statementsDirectors’ reportStrategic report Notes to the financial statements Continued
6 Taxation Continued
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 before taxation
Notional tax charge at UK standard rate 19.0% (2019: 19.0%)
Differences in overseas tax rates
Withholding tax on intercompany dividends
Non-deductible expenses
Tax exempt income
Change in tax rate impact
Movement in unrecognised deferred tax
Adjustments in respect of prior years1
Other2
Total tax in income statement
2020
£m
343.9
65.3
5.4
10.7
12.1
(5.7)
(0.5)
4.9
(11.1)
0.2
81.3
2019
£m
445.1
84.6
13.2
9.4
23.6
(13.8)
(0.4)
2.7
(1.4)
(6.4)
111.5
1. Adjustments in respect of prior years include £8.2m credit relating to deferred tax on intangible assets and £6.4m following the refinement of the final FY18 and FY19 USA base erosion and anti-abuse tax charge. The remaining £3.5m charge relates to various territories, which mainly relate to
derecognition of brought forward tax losses.
2. The Other category contains R&D tax credits and super deductions of £3.2m (2019: £3.1m) and a net provision charge of £2.5m (2019: £6.0m) following the review of uncertain tax provisions across multiple territories. The remaining £0.9m charge is other local taxes.
The UK government announced in March 2020 the UK corporation tax rate would remain at 19% from 1 April 2020 onwards, and this was substantively enacted in March 2020.
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:
Foreign exchange translation differences of foreign operations
Net exchange gain/(loss) on hedges of net investments in foreign operations
Gain on fair value of cash flow hedges
Remeasurements on defined benefit pension schemes
Tax on other items that will never be reclassified to profit or loss
Total other comprehensive (expense)/income for the year
Before tax
2020
£m
Tax charge
2020
£m
Net of tax
2020
£m
Before tax
2019
£m
Tax charge
2019
£m
Net of tax
2019
£m
(53.9)
(2.8)
(56.7)
3.7
0.3
0.8
–
(49.1)
–
–
0.3
(0.6)
(3.1)
3.7
0.3
1.1
(0.6)
(52.2)
(72.4)
31.2
0.7
(3.2)
–
(43.7)
(0.6)
–
–
0.7
0.1
0.2
(73.0)
31.2
0.7
(2.5)
0.1
(43.5)
Intertek Group plc Annual Report and Accounts 2020
149
Financial statementsDirectors’ reportStrategic report Notes to the financial statements Continued
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:
Before tax
2020
£m
Tax charge
2020
£m
Net of tax
2020
£m
Before tax
2019
£m
Tax charge
2019
£m
Net of tax
2019
£m
Equity-settled
transactions
17.7
–
17.7
21.9
1.2
23.1
Deferred tax
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Assets
2020
£m
Assets
2019
£m
Liabilities
2020
£m
Liabilities
2019
£m
0.4
7.1
1.8
8.3
52.0
9.0
78.6
0.5
9.8
2.2
8.6
41.3
14.8
77.2
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
(72.5)
(87.5)
(3.9)
–
–
(13.3)
–
(5.9)
–
–
(0.1)
–
Net
2020
£m
(72.1)
3.2
1.8
8.3
38.7
9.0
Net
2019
£m
(87.0)
3.9
2.2
8.6
41.2
14.8
(89.7)
(93.5)
(11.1)
(16.3)
48.6
(59.7)
(11.1)
51.9
(68.2)
(16.3)
*
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 £30.0m, but the net liability of £11.1m is the same in both
cases.
150 Intertek Group plc Annual Report and Accounts 2020
Movements in deferred tax temporary differences during the year
The movement in the year in deferred tax assets and liabilities is shown below:
1 January
2020
£m
Exchange
adjustments
£m
Acquisitions
£m
Recognised
in income
statement
£m
Recognised
in equity
and OCI
£m
31 December
2020
£m
Intangible assets
Property, fixtures, fittings
and equipment
Pensions
Equity-settled transactions
Provisions and other
temporary differences
Tax value of losses
Total
(87.0)
3.9
2.2
8.6
41.2
14.8
(16.3)
1.8
(0.3)
–
–
(2.1)
(0.3)
(0.9)
(1.1)
14.7
(0.5)
(72.1)
–
–
–
–
–
(1.1)
(0.4)
(0.2)
0.5
0.7
(5.5)
9.8
–
(0.2)
(0.8)
(1.1)
–
(2.6)
3.2
1.8
8.3
38.7
9.0
(11.1)
1 January
2019
£m
Exchange
adjustments
£m
Acquisitions
£m
Recognised
in income
statement
£m
Recognised
in equity
and OCI
£m
31 December
2019
£m
Intangible assets
Property, fixtures, fittings
and equipment
Pensions
Equity-settled transactions
Provisions and other
temporary differences
Tax value of losses
Total
(90.6)
4.3
2.6
8.2
42.2
10.9
(22.4)
3.2
(1.0)
–
–
(0.4)
(1.4)
0.4
0.6
–
–
–
–
9.9
10.5
(0.2)
1.1
(0.6)
–
(7.4)
(3.4)
(10.5)
–
(87.0)
(0.5)
0.2
0.4
6.8
(1.2)
5.7
3.9
2.2
8.6
41.2
14.8
(16.3)
Financial statementsDirectors’ reportStrategic report 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:
Intangibles
Pensions
Provisions and other temporary differences
Tax losses
Foreign tax credits1
Total
2020
£m
2019
£m
28.7
1.5
0.2
150.7
12.0
193.1
29.2
–
2.0
113.7
12.4
157.3
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.
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:
1. The total unrecognised foreign tax credits is £3.2m, the grossed-up equivalent amount of which is £12.0m as stated above.
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 £276.4m (2019: £250.8m) 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.
Profit 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 per share
Potentially dilutive share awards
Diluted earnings per share
Adjusted basic earnings per share
Potentially dilutive share awards
Adjusted diluted earnings per share
2020
£m
247.3
30.0
277.3
161.0
1.3
162.3
153.6p
(1.2)p
2019
£m
313.1
32.4
345.5
161.0
1.6
162.6
194.5p
(1.9)p
152.4p
192.6p
172.2p
(1.3)p
214.6p
(2.1)p
170.9p
212.5p
Intertek Group plc Annual Report and Accounts 2020
151
Financial statementsDirectors’ reportStrategic report Property, plant and equipment
The property, plant and equipment employed by the business is analysed below:
Cost
At 1 January 2019
IFRS 16 asset recognised on 1 January 2019
Exchange adjustments
Additions
Disposals
Businesses acquired (note 10)
At 31 December 2019
Depreciation
At 1 January 2019
IFRS 16 asset recognised on 1 January 2019
Exchange adjustments
Charge for the year
Disposals
At 31 December 2019
Net book value at 31 December 2019
Fixtures,
fittings,
plant and
equipment
£m
Land and
buildings
£m
Total
£m
104.0
437.0
(16.6)
47.0
(27.2)
0.4
1,177.9
1,281.9
37.4
(57.6)
96.4
(34.6)
0.2
474.4
(74.2)
143.4
(61.8)
0.6
544.6
1,219.7
1,764.3
36.9
221.4
(8.8)
59.1
(24.9)
283.7
260.9
803.8
8.9
(40.4)
97.1
(33.0)
836.4
383.3
840.7
230.3
(49.2)
156.2
(57.9)
1,120.1
644.2
Notes to the financial statements Continued
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
All leases where the Group is the lessee (with the exception of short-term and low-value leases) are
recognised in the statement of financial position. A lease liability is recognised based on the present value
of the future lease payments, and a corresponding right-of-use asset is recognised. The right-of-use
asset is depreciated over the shorter of the lease term or the useful life of the asset. Lease payments
are apportioned between finance charges and a reduction of the lease liability.
Low-value items, usually below £4,000, and short-term leases with a term of 12 months or less are
not required to be recognised on the balance sheet and payments made in relation to these leases are
recognised on a straight-line basis in the income statement. The Group leases various properties, principally
offices and testing laboratories, which have varying terms and renewal rights that are typical to the territory
in which they are located. Non-property includes all other leases, such as cars and printers. Normally the
lease term is the contractual start to end date, except when a break or extension option are reasonably
certain to be taken, which are considered on a lease-by-lease basis.
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. Freehold land is not depreciated.
The estimated useful lives are as follows:
Freehold buildings
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.
152 Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Notes to the financial statements Continued
8 Property, plant and equipment Continued
The net book value of land and buildings comprised:
Cost
At 1 January 2020
Exchange adjustments
Additions
Disposals
Businesses acquired (note 10)
At 31 December 2020
Depreciation
At 1 January 2020
Exchange adjustments
Charge for the year
Disposals
At 31 December 2020
Net book value at 31 December 2020
Fixtures,
fittings,
plant and
equipment
£m
Land and
buildings
£m
Total
£m
Freehold
Leasehold*
Total
2020
£m
62.0
182.2
244.2
2019
£m
58.7
202.2
260.9
*
IFRS 16 Leases was adopted on 1 January 2019 and all the Group leases were recognised on balance sheet.
Contracts for capital expenditure which are not provided in the financial statements amounted to £12.0m
(2019: £4.0m).
We have specifically reviewed our portfolio of freehold properties (total 2020 net book value of £62.0m) to
consider whether there are indications of material impairment arising from the potential physical risks arising
from climate change. We have not impaired any assets this year as a result of this exercise.
544.6
1,219.7
1,764.3
3.1
47.2
(81.3)
–
(10.2)
64.6
(97.9)
–
(7.1)
111.8
(179.2)
–
513.6
1,176.2
1,689.8
283.7
836.4
1,120.1
(2.9)
61.4
(72.8)
269.4
244.2
(3.8)
95.2
(93.2)
(6.7)
156.6
(166.0)
834.6
1,104.0
341.6
585.8
Fixtures, fittings, plant and equipment include assets in the course of construction of £23.0m at
31 December 2020 (2019: £40.6m), mainly comprising laboratories under construction. These assets will
not be depreciated until they are available for use.
Intertek Group plc Annual Report and Accounts 2020
153
Financial statementsDirectors’ reportStrategic report Notes to the financial statements Continued
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 First-Time Adoption of International
Financial Reporting Standards 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.
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.
154 Intertek Group plc Annual Report and Accounts 2020
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
Technology and know-how
Trade names
Licences
Covenants not to compete
Up to 7 years
Up to 20 years
Up to 15 years
Up to 18 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 within operating costs. 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.
Financial statementsDirectors’ reportStrategic report Notes to the financial statements Continued
9 Goodwill and other intangible assets Continued
Intangibles
The intangibles employed by the business are analysed below:
Other intangible assets
Goodwill
£m
Customer
relationships
£m
Licences
£m
Other
acquisition
intangibles
£m
Computer
software
£m
Total other
intangible
assets
£m
Cost
At 1 January 2019
Exchange adjustments
Additions
Transfers
Reclassifications
Disposal
Businesses acquired
(note 10)
1,418.0
(38.5)
–
(7.2)
–
(0.2)
19.3
452.6
(11.0)
0.2
(2.4)
–
–
–
11.5
(0.3)
79.3
(2.4)
–
–
–
–
–
–
–
–
–
–
At 31 December 2019
1,391.4
439.4
11.2
76.9
Amortisation
At 1 January 2019
Exchange adjustments
Transfers
Reclassifications
Charge for the year
Disposal
543.1
(11.5)
–
–
–
–
271.9
(6.6)
–
9.3
21.4
–
At 31 December 2019
531.6
296.0
Net book value at
31 December 2019
859.8
143.4
9.6
(0.4)
–
–
0.5
–
9.7
1.5
25.9
(0.5)
–
(9.3)
7.2
–
23.3
205.6
(6.8)
28.8
–
–
(1.8)
0.4
226.2
112.1
(3.4)
–
–
15.3
(1.7)
749.0
(20.5)
29.0
(2.4)
–
(1.8)
0.4
753.7
419.5
(10.9)
–
–
44.4
(1.7)
122.3
451.3
53.6
103.9
302.4
Other intangible assets
Goodwill
£m
Customer
relationships
£m
Licences
£m
Other
acquisition
intangibles
£m
Computer
software
£m
Total other
intangible
assets
£m
1,391.4
(24.3)
0.4
(4.4)
–
(3.0)
–
439.4
(7.5)
–
1.9
–
–
–
11.2
(0.2)
–
1.1
–
–
–
76.9
(2.2)
–
2.5
–
–
–
226.2
(4.4)
25.5
–
–
(20.0)
753.7
(14.3)
25.5
5.5
–
(20.0)
–
–
Cost
At 1 January 2020
Exchange adjustments
Additions
Transfers
Reclassifications
Disposal
Businesses acquired
(note 10)
At 31 December 2020
1,360.1
433.8
12.1
77.2
227.3
750.4
Amortisation
At 1 January 2020
Exchange adjustments
Transfers
Reclassifications
Charge for the year
Disposal
531.6
(7.4)
–
–
–
–
296.0
(4.1)
–
–
19.8
–
9.7
(0.1)
–
–
0.8
–
23.3
(0.7)
–
–
7.5
–
122.3
(1.2)
–
–
17.4
(20.0)
451.3
(6.1)
–
–
45.5
(20.0)
At 31 December 2020
524.2
311.7
10.4
30.1
118.5
470.7
Net book value at
31 December 2020
835.9
122.1
1.7
47.1
108.8
279.7
Other intangible assets
Computer software additions of £25.5m (2019: £28.8m) relates to separately acquired computer software
of £13.7m (2019: £14.8m) and internally developed intangible assets of £11.8m (2019: £14.0m).
The Other acquisition intangibles net book value of £47.1m (2019: £53.6m) consist of guaranteed income,
order backlog, covenants not to compete and know-how. The average remaining amortisation period for
customer relationships is nine years (2019: eight years).
Computer software net book value of £108.8m at 31 December 2020 (2019: £103.9m) includes software
in construction of £58.2m (2019: £50.4m). Research and development expenditure of £28.0m (2019:
£34.7m) was recognised as an expense in the year.
Intertek Group plc Annual Report and Accounts 2020
155
Financial statementsDirectors’ reportStrategic report Notes to the financial statements Continued
9 Goodwill and other intangible assets Continued
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
2020
£m
–
–
–
–
2019
£m
19.3
–
–
19.3
The total carrying amount of goodwill by CGU is as follows, which is also used for the assessment of the
Group’s impairment review.
Industry Services
Business Assurance
Food & AgriWorld
Caleb Brett
Government & Trade Services
Minerals
Softlines
Hardlines
Electrical & Wireless
Transportation Technologies
Building & Construction
Chemicals & Pharma/Health, Environmental & Regulatory
Net book value at 31 December*
2020
pre-tax
discount
rate
12.3%
8.6%
8.6%
8.7%
8.6%
10.4%
8.5%
8.4%
8.6%
8.6%
8.7%
7.7%
2020
£m
14.5
274.4
17.1
55.2
0.8
38.7
6.2
8.1
86.1
42.9
212.0
79.9
835.9
2019
£m
14.7
289.0
16.6
56.1
0.8
37.0
6.2
8.9
88.0
43.6
218.9
80.0
859.8
*
All goodwill is recorded in local currency. Additions during the year are converted at the exchange rate on the date of the transaction and the
goodwill at the end of the year is stated at closing exchange rates.
Impairment review
In order to determine whether impairments are required, the Group estimates the recoverable amount
of each CGU. The calculation is based on projecting future cash flows over a five-year period and using a
terminal value to incorporate expectations of growth thereafter. The long-term growth rate is used in the
perpetuity calculations. A discount factor is applied to obtain a value in use which is the recoverable amount.
Goodwill arising in year from acquisitions is assessed for impairment separately from the above CGUs
and on an acquisition-by-acquisition basis. No impairments were required on goodwill arising in 2020
(2019: No impairments).
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 1.8% to 2.6% (2019: 1.8%
to 2.6%). The discount rate for each CGU is based on the Group’s weighted average cost of capital adjusted
for the risks specific to the CGU. Pre-tax discount rates ranged from 7.7% to 12.3% (2019: 8.0% to 9.3%).
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. 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.
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 2021 to 2024 from the 2020 budgeted revenues,
with margins increasing with base assumptions.
(ii) Assuming zero growth in operating profit margins in 2020 to 2024 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.
In preparing our forecasts, including the rate of revenue and profit growth, we have also considered the
potential impact of climate change, and to reflect a severe impact of climate change transition risk through
the modelling across all CGUs, we have modelled an additional sensitivity of discounted cash flows with
a limited 25-year life, excluding any terminal value. In this scenario, which we also consider to be a low
probability, there is no impairment.
156 Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Key assumptions
The key assumptions in deriving the contingent consideration to be recognised include the weighted
probability of making a payout and the discount rate used to bring the cash flow back to present values.
The discount rates used for the calculation are aligned with the discount rates used for impairment
purposes as set out in note 9.
Sensitivity analysis
It is estimated that an increase of 1% in the discount rate used to calculate the contingent consideration
would have decreased the financial liability by £0.1m, and a 1% decrease in the discount rate would
have increased the financial liability by £0.1m. It has also been estimated that an increase of 10% in the
probability used to calculate the contingent consideration would have increased the financial liability
by £2.9m, whilst a decrease of 10% in the probability used would have decreased the financial liability
by £2.0m.
Notes to the financial statements Continued
10 Acquisitions
Acquisitions in 2020
No acquisitions were made during the year.
Consideration paid
There were no acquisitions in the year hence total consideration was £nil (2019: £18.0m). In 2019 there
was additional consideration payable of £3.0m.
Acquisitions in 2019
On 13 December 2019, the Group acquired 100% of Check Safety First Limited (‘CSF’), a market-leading
global health, safety, quality and security risk management business focused on the travel, tourism and
hospitality sectors, for a purchase price of £18.0m, (£17.0m net of cash acquired) generating goodwill
of £12.3m.
On 3 July 2019, the Group acquired the remaining shares in Laboratorios ABC Química, Investigación y
Análisis, S.A. de C.V. (‘ABC’) for cash consideration of £5.2m.
The fair value adjustments 12 months from the date of acquisition were:
2020
2019
Book value
prior to
acquisition
£m
Fair value
adjustments
£m
Fair value to
Group on
acquisition
£m
Book value
prior to
acquisition
£m
Provisional
fair value
adjustments
£m
Provisional
fair value to
Group on
acquisition
£m
0.6
0.9
0.4
1.8
(1.5)
(0.3)
–
1.9
–
11.4
5.5
–
(0.7)
0.6
12.3
5.9
1.8
(2.2)
–
(0.3)
(1.1)
15.1
(1.1)
17.0
0.6
0.9
0.4
1.8
(1.0)
(0.4)
–
2.3
–
18.4
–
–
(0.6)
–
–
17.8
0.6
19.3
0.4
1.8
(1.6)
(0.4)
–
20.1
Check Safety First Limited
Total
Property, plant and
equipment
Goodwill
Other intangible assets
Trade and other receivables
Trade and other payables
Provisions for liabilities and
charges
Deferred tax assets/
(liabilities)
Net assets acquired
The provisional fair values disclosed in 2019 have been updated, principally for the recognition of £5.5m of
specific intangible assets, resulting in a decrease in goodwill of £7.0m. These fair value adjustments were
made in the 12 months following the acquisitions and are now final.
Intertek Group plc Annual Report and Accounts 2020
157
Financial statementsDirectors’ reportStrategic report Notes to the financial statements Continued
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. The Group applies the simplified
approach permitted by IFRS 9, which requires the use of the lifetime expected loss provision for all
receivables, including contract assets. The provision calculations are based on historic credit losses and
forward-looking data, namely specific country-risk classifications with higher default rates applied to older
balances. This approach is followed for all receivables unless there are specific circumstances, such as the
bankruptcy of a customer or emerging market risks, which would render the receivable irrecoverable and
therefore require a specific provision. A provision is made against trade receivables and contract assets until
such time as the Group believes the amount to be irrecoverable, after which the trade receivable or contract
assets balance is written off.
Trade and other receivables
Trade and other receivables are analysed below:
Trade receivables
Contract assets
Other receivables
Prepayments
Total trade and other receivables
2020
£m
428.9
99.8
53.7
38.8
621.2
2019
£m
463.4
121.3
65.9
34.4
685.0
Trade receivables and contract assets are shown net of allowance for impairment losses of £18.9m
(2019: £20.6m) and £5.3m (2019: £5.9m) respectively and are all expected to be recovered within 12
months. The largest individual element within allowance for impairment relates to a counterparty where the
net exposure to the Group is £7.2m (2019: £9.6m). Net impairment on trade receivables and contract assets
charged as part of operating costs was £1.7m (2019: £3.4m) and £1.7m (2019: £3.5m) respectively.
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 and contract assets 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 and contract assets
Allowance for impairment
Trade receivables and contract assets, net of allowance
2020
£m
428.3
51.3
19.0
54.3
552.9
(24.2)
528.7
2019
£m
479.1
55.2
27.8
49.1
611.2
(26.5)
584.7
Included in trade receivables under three months of £360.6m (2019: £383.4m) are trade receivables of
£315.4m (2019: £332.6m) that are not yet due for payment.
The movement in the allowance for impairment in respect of trade receivables and contract assets during
the year was as follows:
Impairment allowance for doubtful trade receivables and contract assets
At 1 January
Exchange differences
Acquisitions
Net impairment loss recognised
Receivables written off
At 31 December
2020
£m
26.5
(1.4)
–
3.3
(4.2)
24.2
2019
£m
25.9
(0.9)
0.1
6.9
(5.5)
26.5
Sensitivity analysis
Trade receivables and contract assets are assessed for impairment using a calculated credit loss assumption.
A 0.25% variance in the assumed credit risk factor would impact impairment by £1.9m. There were no
material individual impairments of trade receivables or contract assets.
158 Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report 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.
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.
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 SDIs as a finance charge.
Provisions
Trade and other payables
Trade and other payables are analysed below:
Trade payables
Other payables
Accruals
Contract liabilities
Total trade and other payables
Current
2020
£m
Current
2019
£m
Non-current
2020
£m
Non-current
2019
£m
142.0
82.9
248.1
103.2
576.2
163.8
39.0
240.6
74.6
518.0
0.8
17.5
5.2
2.6
26.1
0.9
20.1
2.8
5.4
29.2
The Group’s exposure to liquidity risk related to trade payables is disclosed in note 14. £61.0m of contract
liabilities at the end of 2019 was recognised in revenue in 2020.
Other payables include revenue taxes, interest payable and retirement liabilities.
Contract liabilities consist of consideration received in advance of the Group transferring the related good or
service to the client.
In one part of the Group an arrangement is available that allows payment terms to suppliers to be extended
by up to 60 days. At 31 December 2020, this arrangement was applicable to trade payables totalling £2.5m
(2019: £3.7m).
At 1 January 2020
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 2020
Included in:
Current liabilities
Non-current liabilities
At 31 December 2020
Contingent
consideration
£m
Claims
£m
24.3
(0.9)
–
–
0.2
(3.7)
(0.2)
19.7
12.5
7.2
19.7
4.3
(0.1)
6.8
–
–
(4.5)
(3.5)
3.0
3.0
–
3.0
Other
£m
15.7
(0.1)
28.1
–
–
(6.0)
(24.2)
13.5
13.3
0.2
13.5
Total
£m
44.3
(1.1)
34.9
–
0.2
(14.2)
(27.9)
36.2
28.8
7.4
36.2
The maximum contingent consideration, on a discounted basis, that could be paid in relation to acquisitions
is £34.0m. The contingent consideration is a financial liability held at fair value through profit and loss with
the measurement basis disclosed in note 14.
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 £3.0m (2019: £4.3m) represents an estimate of the amounts payable in
connection with identified claims from customers, former employees and other plaintiffs and associated
legal costs. A release of £nil is included in SDIs (2019: £4.6m) – see note 3 for further information.
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 £13.5m (2019: £15.7m) includes restructuring provisions. The timing of the cash
outflow is uncertain, but is likely to be within one year.
Intertek Group plc Annual Report and Accounts 2020
159
Financial statementsDirectors’ reportStrategic report Notes to the financial statements Continued
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; interest income and expense relating to pension assets and liabilities; net foreign exchange gains
or losses on financial assets or liabilities; unrealised market or fair value gains or losses on financial assets
or liabilities, including contingent consideration; 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. As permitted by IAS 7, interest paid is classified within operating
cash flows and interest received is classified within investing cash flows.
Trade and other receivables
Trade and other receivables are recognised initially at fair value and subsequently at amortised cost less
impairment losses (including bad debt provision).
Cash and cash equivalents and net debt
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on
demand and form an integral part of the Group’s cash management are included as a component of cash and
cash equivalents for the purpose of the statement of cash flows. Net financial debt comprises borrowings
less cash and cash equivalents and total net debt is net financial debt plus the IFRS 16 lease liability.
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.
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 SDIs as a finance charge.
Derivative financial instruments
The Group uses derivative financial instruments, including cross currency interest rate swaps and foreign
currency forwards, to hedge economically its exposure to foreign exchange and interest rate risks. 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 remeasurement 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 cross currency interest rate swaps is estimated using the present value of the estimated
future cash flows based on observable yield curves.
The fair value of foreign currency forwards is estimated using present value of future cash flows based on
the forward exchange rates at the balance sheet date.
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 foreign operations
The Group is exposed to foreign exchange risk exposure arising from its net investment in foreign currency
operations and net assets. The Group uses a combination of debt and cross currency interest rate swaps to
hedge foreign exchange risks.
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 value in relation to the hedge instrument that is held within the cumulative foreign currency
translation reserve is recycled through the income statement when the hedged subsidiary is disposed of.
If the instrument is no longer deemed effective, then future movements in fair value are posted to the
income statement.
Cash flow hedges
Cash flow hedges comprise derivative financial instruments designated in a hedging relationship to
manage interest rate risk and foreign exchange risk to which the cash flows of certain assets and liabilities
are exposed. The Group is exposed to the variability in cash flows arising from the foreign exchange risk
exposure in a USD private placement bond. In accordance with the Group’s hedging strategy, the Group has
cross currency interest rates swaps designated as cash flow hedges.
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 value in relation to the hedge instrument that
is held within the cumulative cash flow hedge reserve (disclosed within other reserves) is recycled through
the income statement when the hedged item impacts the income statement. If the instrument is no longer
deemed effective, then future movements in fair value are posted to the income statement.
Interest Rate Benchmark Reform
A number of our existing agreements, such as borrowings and commercial contracts utilise various
benchmark rates such as LIBOR and other interbank offered rates (‘IBORs’). The replacement of these
benchmark interest rates has become a priority for global regulators and is expected to be largely completed
in 2021. Intertek’s hedging relationships will not be affected by the interest rate benchmark reforms, and
the implications on the wider business are been assessed and the Group is preparing to move to the new
benchmark rates in 2021.
Impairment
A financial asset is assessed for impairment at each reporting date by application of an expected loss model
in line with IFRS 9 requirements.
160 Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Notes to the financial statements Continued
14 Borrowings and financial instruments Continued
Net financing costs
Net financing costs are shown below:
The components of net debt are outlined below:
1 January
2020
£m
Cash flow
£m
Non-cash
movements
£m
Exchange
adjustments
£m
31 December
2020
£m
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
Leases – IFRS 16
Facility fees and other*
Total finance expense*
Net financing costs*
*
Includes £0.6m income (2019: £1.3m cost) 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
2020
£m
2019
£m
Cash
213.0
(21.7)
Borrowings:
Revolving credit facility US$800m 2021
Revolving credit facility US$850m 2025
Senior notes US$150m 2020
Senior notes US$15m 2021
Senior notes US$140m 2022
Senior notes US$160m 2023
Senior notes US$125m 2024
Senior notes US$120m 2025
Senior notes US$75m 2026
Other*
Total borrowings
Total net financial debt
Lease liabilities (note 1)
Total net debt
(285.5)
–
(114.7)
(11.5)
(107.0)
(30.6)
(95.6)
(30.6)
(57.4)
(109.5)
(842.4)
(629.4)
(246.0)
(875.4)
285.5
(130.3)
111.4
–
–
(89.8)
–
(59.8)
–
110.2
227.2
205.5
72.0
277.5
*
Includes other uncommitted borrowings of £nil and facility fees of £2.4m (2019: £0.7m).
1.1
1.1
1.2
1.2
(20.6)
(26.4)
(0.2)
(5.6)
(8.3)
(0.7)
(35.4)
(34.3)
2020
£m
203.9
(20.5)
183.4
(0.2)
(2.7)
(9.1)
(3.5)
(41.9)
(40.7)
2019
£m
227.4
(14.4)
213.0
–
–
–
–
–
–
–
–
–
–
2.2
2.2
2.2
(50.9)
(48.7)
(7.9)
183.4
–
(5.2)
3.3
0.4
3.3
1.9
3.0
1.6
1.9
(0.5)
9.7
1.8
0.7
2.5
–
(135.5)
–
(11.1)
(103.7)
(118.5)
(92.6)
(88.8)
(55.5)
2.4
(603.3)
(419.9)
(224.2)
(644.1)
Intertek Group plc Annual Report and Accounts 2020
161
Financial statementsDirectors’ reportStrategic report Notes to the financial statements Continued
14 Borrowings and financial instruments Continued
Borrowings
Borrowings are split into current and non-current as outlined below:
1 January
2019
£m
Cash flow
£m
Non-cash
movements
£m
Exchange
adjustments
£m
31 December
2019
£m
Cash
203.2
31.1
Borrowings:
Revolving credit facility US$800m 2021
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 financial debt
Lease liabilities (note 1)
Total net debt
(384.8)
(15.8)
(118.6)
(11.8)
(110.7)
(31.6)
(98.9)
(31.7)
(59.3)
(118.2)
(981.4)
(778.2)
(269.9)
(1,048.1)
90.0
15.5
–
–
–
–
–
–
–
5.8
111.3
142.4
69.7
212.1
*
Includes other uncommitted borrowings of £110.0m and facility fees of £0.7m in 2019.
–
–
–
–
–
–
–
–
–
–
(0.8)
(0.8)
(0.8)
(52.8)
(53.6)
(21.3)
213.0
9.3
0.3
3.9
0.3
3.7
1.0
3.3
1.1
1.9
3.7
28.5
7.2
7.0
14.2
(285.5)
–
(114.7)
(11.5)
(107.0)
(30.6)
(95.6)
(30.6)
(57.4)
(109.5)
(842.4)
(629.4)
(246.0)
(875.4)
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
Current
2020
£m
Current
2019
£m
Non-current
2020
£m
Non-current
2019
£m
11.1
(0.6)
10.5
114.7
109.8
224.5
594.6
(1.8)
592.8
618.2
(0.3)
617.9
2020
£m
2019
£m
10.5
103.0
434.3
55.5
603.3
224.5
296.9
233.1
87.9
842.4
Description of borrowings
Total undrawn committed borrowing facilities as at 31 December 2020 were £494.0m (2019: £326.2m).
162 Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Notes to the financial statements Continued
14 Borrowings and financial instruments Continued
US$850m revolving credit facility
In January 2020, the US$800m multi-currency revolving credit facility was refinanced with a US$850m
revolving credit facility maturing in 2025 which is the Group’s principal bank facility. 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 2020 were £135.5m (2019: £285.5m
under previous facility).
In January 2021, US$850m of the facility was extended to 2026, the impact of this would be a transfer of
£135.5m from borrowings due to be repaid between two and five years to borrowings due to be repaid in
over five years.
Private placement bonds
In December 2010 the Group issued US$250m of senior notes. These notes were issued in two tranches
with US$100m repaid on 15 December 2017 at a fixed annual interest rate of 3.2% and US$150m repaid
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 repaid 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%.
In December 2020 the Group issued US$200m of senior notes. These notes were issued in two tranches
with US$120m repayable on 2 December 2023 at a fixed annual interest rate of 1.97% and US$80m
repayable on 2 December 2025 at a fixed annual interest rate of 2.08%.
Lease liabilities
Undiscounted lease liabilities are split into current and non-current as outlined below:
Analysis of lease liabilities falling due:
Current:
Repayable in less than 1 year
Non-current:
Repayable in 1–2 years
Repayable in 2–5 years
Repayable in more than 5 years
Total lease liabilities
2020
£m
2019
£m
68.3
49.7
80.6
93.5
69.3
54.7
92.7
95.8
292.1
312.5
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 50.
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
2020
£m
428.9
183.4
612.3
2019
£m
463.4
213.0
676.4
Intertek Group plc Annual Report and Accounts 2020
163
Financial statementsDirectors’ reportStrategic report Notes to the financial statements Continued
14 Borrowings and financial instruments Continued
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
2020
£m
120.4
169.9
138.6
428.9
2019
£m
126.4
188.1
148.9
463.4
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. Counterparty credit risk inherent in all hedge relationships is monitored throughout the
period of the hedge but this risk is not expected to be significant.
The Group, wherever possible, enters into arrangements with counterparties who have a 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.
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
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 2019):
2020
Non-derivative
financial
liabilities
Senior term
loans and
notes
Other loans
Trade payables
(note 12)
Lease liabilities
Contingent
consideration
(note 13)
Derivative
financial
liabilities/
(assets)
Foreign currency
forwards
Outflow
Inflow
Cross currency
interest rate
swaps
Outflow
Inflow
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
605.7
(2.4)
142.8
224.2
654.1
0.1
142.8
292.1
19.7
990.0
20.9
1,110.0
7.8
–
138.2
36.3
12.5
194.8
–
(0.9)
538.8
(539.7)
538.8
(539.7)
–
–
–
–
–
–
(0.9)
(0.9)
(0.9)
19.1
0.1
3.8
32.0
–
55.0
–
–
–
–
–
115.3
–
0.7
49.7
–
165.7
–
–
–
–
–
454.6
–
0.1
80.6
8.4
543.7
57.3
–
–
93.5
–
150.8
–
–
–
–
–
–
–
–
–
–
• avoid excess liquidity which restricts growth and impacts the cost of financing.
Total
989.1
1,109.1
193.9
55.0
165.7
543.7
150.8
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.
164 Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Notes to the financial statements Continued
14 Borrowings and financial instruments Continued
2019
Non-
derivative
financial
liabilities
Senior term
loans and
notes
Other loans
Trade payables
(note 12)
Lease liabilities
Contingent
consideration
(note 13)
Derivative
financial
liabilities/
(assets)
Foreign
currency
forwards
Outflow
Inflow
Cross currency
interest rate
swaps
Outflow
Inflow
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
732.9
109.5
164.7
246.0
798.8
110.3
164.7
312.5
10.6
110.1
160.4
36.1
24.3
26.7
–
1,277.4
1,413.0
317.2
125.1
0.2
3.5
33.2
4.6
166.6
311.3
–
0.7
54.7
14.5
381.2
259.4
–
0.1
92.7
7.6
359.8
92.4
–
–
95.8
–
188.2
–
(0.2)
435.8
(436.0)
435.8
(436.0)
–
–
4.4
–
4.2
81.8
(79.5)
2.1
0.8
(1.5)
(0.9)
81.0
(78.0)
3.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
1,281.6
1,415.1
316.3
169.6
381.2
359.8
188.2
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 achieve this, the Group uses bank debt facilities,
US private placements and cross currency interest rate swaps.
Sensitivity
At 31 December 2020, 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 £10.6m (2019:
£15.0m). 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.
Intertek Group plc Annual Report and Accounts 2020
165
Financial statementsDirectors’ reportStrategic report Hedge of net investment in foreign operations
The Group’s foreign currency denominated loans are designated as a hedge to protect the same amount
of net investment in the Group’s foreign currency operations and net assets, against adverse changes in
exchange rates. The nominal amount of these loans at 31 December 2020 was £605.7m (2019: £561.3m).
93.8m EUR/GBP fixed-to-fixed cross currency swaps which matured in December 2020, including all
coupons, were designated as a hedge to protect the same amount of net investment in the Group’s Euro
operations and net assets, against adverse changes in exchange rates.
Notes to the financial statements Continued
14 Borrowings and financial instruments Continued
The foreign currency profiles of cash, trade receivables and payables subject to translation risk and
transaction risk, at the reporting date, were as follows:
2020
Cash
Trade receivables (note 11)
Trade payables (note 12)
2019
Cash
Trade receivables (note 11)
Trade payables (note 12)
Carrying
amount
£m
183.4
428.9
142.8
Carrying
amount
£m
213.0
463.4
164.7
Sterling
£m
US dollar
£m
Chinese
renminbi
£m
Hong Kong
dollar
£m
Other
currencies
£m
2.6
23.9
13.4
44.1
208.2
56.8
49.1
35.6
14.1
(1.3)
6.9
1.9
88.9
154.3
56.6
Sterling
£m
US dollar
£m
Chinese
renminbi
£m
Hong Kong
dollar
£m
Other
currencies
£m
11.6
35.5
19.7
57.5
161.5
67.9
55.7
48.9
14.3
3.1
13.4
3.5
85.1
204.1
59.3
Recognised assets and liabilities
Changes in the fair value of foreign currency forwards that economically hedge monetary assets and
liabilities in foreign currencies, and for which no hedge accounting is applied, are recognised in the income
statement.
Cash flow hedge
The Group held a US$150m fixed interest rate USD private placement bond which matured in
December 2020.
A proportion of the bond was hedged using 100m USD/GBP fixed-to-fixed cross currency swaps which
matured in December 2020 to eliminate the changes in the cash flows of the repayment of coupon and
principal related to changes in foreign exchange rates.
In 2020, £1.2m of the cash flow hedge reserve was recycled through to the income statement to offset
the impact of the hedged US$100m bond.
166 Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Notes to the financial statements Continued
14 Borrowings and financial instruments Continued
A foreign exchange gain of £3.7m (2019: £31.2m foreign exchange gain) was recognised in the translation reserve in equity on translation of these loans to sterling and the impact of changes in fair value of the cross
currency interest rate swaps. The Group has the following hedging instruments:
2020
Cash flow hedges – foreign exchange and interest rate risk
Cross currency interest rate swaps – discontinued
Hedges of net investment in a foreign operation – foreign exchange risk
Cross currency interest rate swaps – continuing
Cross currency interest rate swaps – discontinued
Foreign currency borrowings – continuing
Foreign currency borrowings – discontinued
2019 – represented
Cash flow hedges – foreign exchange and interest rate risk
Cross currency interest rate swaps – continuing
Hedges of net investment in a foreign operation – foreign exchange risk
Cross currency interest rate swaps – continuing
Foreign currency borrowings – continuing
Foreign currency borrowings – discontinued
Other comprehensive income
Nominal
amounts in
local
currency
Carrying
value
£m
1 January
2020
£m
Fair value
gain/(loss)
deferred to
OCI
£m
FX (gain)/
loss recycled
to the
income
statement
£m
Hedges
closed in
year
31 December
2020
£m
(0.3)
(0.9)
1.2
–
–
–
–
£605.7m
–
–
–
–
605.7
–
605.7
(13.8)
–
(110.7)
(121.8)
(246.6)
(5.2)
–
8.9
–
2.8
–
–
(19.0)
(50.4)
(173.2)
–
–
–
–
19.0
(19.0)
51.4
(51.4)
1.2
–
(242.6)
Other comprehensive income
Nominal
amounts in
local
currency
Carrying
value
£m
1 January
2019
£m
Fair value
gain/(loss)
deferred to
OCI
£m
FX (gain)/
loss recycled
to the
income
statement
£m
Hedges
closed in
year
31 December
2019
£m
US$100m
(9.4)
(1.0)
(2.3)
3.0
EUR 93.8m
£561.3m
–
13.8
561.3
–
565.7
(19.3)
(131.2)
(127.0)
(278.5)
5.5
25.7
–
28.9
–
–
–
3.0
–
–
(5.2)
5.2
–
(0.3)
(13.8)
(110.7)
(121.8)
(246.6)
The Group had entered into US$100m of cross currency interest rate swaps which pay EUR denominated interest and principal; and receive USD denominated interest and principal; which matured in December 2020.
The cross currency interest rate swaps were bifurcated into two relationships: 1) A cash flow hedge of US$100m versus GBP foreign currency and interest rate risks in USD denominated borrowings; and 2) A net
investment hedge of EUR versus GBP foreign currency risk in EUR denominated net assets of the Group.
Intertek Group plc Annual Report and Accounts 2020
167
Financial statementsDirectors’ reportStrategic report Fair values
The table below provides a comparison of book values and corresponding fair values of all the Group’s
financial instruments by class.
Financial assets
Cash and cash equivalents
Trade receivables (note 11)
Foreign currency forwards*
Total financial assets
Financial liabilities
Interest-bearing loans and borrowings
Trade payables (note 12)
Contingent consideration**
Cross currency interest rate swaps*
Book value
2020
£m
Fair value
2020
£m
Book value
2019
£m
Fair value
2019
£m
183.4
428.9
0.9
183.4
428.9
0.9
613.2
613.2
603.3
142.8
19.7
–
621.7
142.8
19.7
–
213.0
463.4
0.2
676.6
842.4
164.7
24.3
4.4
213.0
463.4
0.2
676.6
851.0
164.7
24.3
4.4
Total financial liabilities
765.8
784.2
1,035.8
1,044.4
*
Cross currency interest rate swaps and foreign currency forwards 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.
** Contingent consideration is categorised as Level 3 under which the fair value is measured using unobservable inputs – being the EBITDA
performance of the acquired companies.
Notes to the financial statements Continued
14 Borrowings and financial instruments Continued
The weighted average exchange rates of the swaps are GBP/USD 1.5207 and EUR/GBP 0.7009.
The cross currency interest rate swaps and foreign currency forwards are disclosed within other payables
in the statement of financial position.
The critical terms of the swap contracts and their corresponding hedged items are matched and the Group
expects highly effective hedging relationships. Net ineffectiveness on the cash flow and net investment
hedges recognised in the income statement was nil.
Hedge ineffectiveness may occur due to:
a) the fair value of the hedging instrument on the hedge relationship designation date if the fair value is
not nil;
b) changes in the contractual terms or timing of the payments on the hedged item; and
c) a change in the credit risk of the Group or the counterparty with the hedged instrument.
The hedge ratio for each designation will be established by comparing the quantity of the hedging
instrument and the quantity of the hedged item to determine their relative weighting; for all of the Group’s
existing hedge relationships the hedge ratio has been determined as 1:1.
The carrying values of the hedging instruments; US$635m senior notes and RCF drawings EUR114m,
CHF8.0m and AUD45.0m are included within long-term borrowings within the statement of
financial position.
Fair value gains and losses on the hedging instruments designated in the cash flow and net investment
hedges have been presented as ‘fair value on cash flow hedges’ and ‘net exchange on hedges of net
investments in foreign operations’ respectively within the statement of other comprehensive income.
Foreign exchange loss of £1.2m recycled from the cash flow hedge reserve are presented in interest on
borrowings within finance expenses in the income statement.
Sensitivity
It is estimated that an increase of 10% in the value of sterling against the US dollar and Chinese renminbi
(the main currencies impacting the Group) would have decreased the Group’s profit before tax for 2020
by approximately £17.9m (2019: £24.8m). This analysis assumes all other variables remain constant.
It is estimated that an increase of 10% in the value of sterling against the currencies of the hedging
instruments would have increased OCI by approximately £55.1m (2019: £58.3m) which would be offset
by the retranslation of the Group’s investment in foreign operations in the same currencies. This analysis
assumes all other variables remain constant.
168 Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report 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
2020
number
2020
£m
2019
£m
161,393,127
–
161,393,127
1.6
–
1.6
1.6
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 nil (2019: nil) ordinary shares in respect of all share plans.
Purchase of own shares for trust
During the year ended 31 December 2020, the Company financed the purchase of 225,165 (2019: 459,078)
of its own shares with an aggregate nominal value of £2,252 (2019: £4,591) for 12.2m (2019: £23.1m)
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, 358,718 shares were utilised to satisfy the
vesting of share awards (note 17). At 31 December 2020, the ESOT held 313,270 shares (2019: 446,823
shares) with an aggregate nominal value of £3,133 (2019: £4,468). The associated cash outflow of £12.2m
(2019: £23.1m) has been presented as a financing cash flow.
Dividends
Amounts recognised as distributions to equity holders:
Final dividend for the year ended 31 December 2018
Interim dividend for the year ended 31 December 2019
Final dividend for the year ended 31 December 2019
Interim dividend for the year ended 31 December 2020
Dividends paid
2020
£m
2020
Pence per
share
2019
£m
2019
Pence
per share
–
–
115.3
55.1
–
–
71.6
34.2
108.2
55.0
–
–
67.2
34.2
–
–
170.4
105.8
163.2
101.4
After the reporting date, the Directors proposed a final dividend of 71.6p per share in respect of the year
ended 31 December 2020, which is expected to amount to £115.6m. 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 18 June 2021.
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.
Intertek Group plc Annual Report and Accounts 2020
169
Financial statementsDirectors’ reportStrategic report Notes to the financial statements Continued
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 is 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 and Switzerland. The United Kingdom Scheme is funded, with assets held in separate trustee-
administered funds and the Switzerland Scheme is an insured scheme. The scheme in the United Kingdom
were closed to new entrants in 2002. 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.
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)
2020
£m
(50.6)
(2.2)
(52.8)
2019
£m
(45.2)
(2.4)
(47.6)
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 31 March 2019, and for IAS 19 accounting purposes
has been updated to 31 December 2020. The Switzerland Scheme was valued for IAS 19 purposes as
at 31 December 2020. The average duration of the schemes are 20 years and 15 years for the United
Kingdom and Switzerland schemes, respectively.
Defined benefit schemes
The cost of defined benefit schemes
The amounts recognised in the income statement were as follows:
Current service cost
Curtailment gain
GMP pension equalisation (note 3)
Scheme administration expenses
Net pension interest cost (note 14)
Total (charge)/credit
2020
£m
(1.8)
–
–
(0.4)
(0.2)
(2.4)
2019
£m
(2.0)
5.8
(0.8)
(0.5)
(0.2)
2.3
The current service cost, scheme administration expenses and curtailment gain are included in operating
costs in the income statement and pension interest cost and interest income are included in net
financing costs.
170 Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Notes to the financial statements Continued
16 Employee benefits Continued
Included in other comprehensive income:
Remeasurements arising from:
Demographic assumptions
Financial assumptions
Experience adjustment
Asset valuation
Other
Total
2020
£m
2019
£m
4.1
(14.9)
0.9
10.4
0.3
0.8
(1.5)
(17.6)
2.4
13.3
0.2
(3.2)
Company contributions
The Company assessed the triennial actuarial valuation for the United Kingdom Scheme and its impact on
the scheme funding plan in 2020 and future years. In 2021 the Group expects to make normal contributions
of £2.7m (2020: £0.6m) and has made a special contribution of £2.0m (2020: £2.0m). The next triennial
valuation is due to take place as at 31 March 2022 and will include a review of the Company’s future
contribution requirements.
Pension liability for defined benefit schemes
The amounts recognised in the statement of financial position for defined benefit schemes were as follows:
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
Closure of Hong Kong Scheme*
2020
£m
136.8
2.4
1.3
2.0
0.5
(3.8)
1.1
10.4
(0.4)
0.1
–
2019
£m
144.6
3.3
1.2
2.0
0.5
(5.1)
(0.1)
13.2
(0.5)
0.2
(22.5)
Fair value of scheme assets at 31 December
150.4
136.8
*
The Hong Kong Scheme closed during 2019.
Asset allocation
Investment statements were provided by the Investment Managers which showed that, as at 31 December
2020, the invested assets of the United Kingdom Scheme totalled £131.5m (2019: £120.8m), broken down
as follows.
Fair value of scheme assets
Present value of funded defined benefit obligations
Deficit in schemes
United
Kingdom
Scheme
£m
Switzerland
Scheme
£m
131.5
(140.3)
(8.8)
18.9
(22.2)
(3.3)
Total
£m
150.4
(162.5)
(12.1)
Asset class
Equities
Property
Liability-Driven Investment*
Corporate debt instruments
Cash
Total
United Kingdom Scheme
2020
£m
83.8
10.1
17.7
12.6
7.3
2019
£m
48.0
11.1
14.0
–
47.7
131.5
120.8
*
Investments are included at fair value. The pooled investment vehicles are held under a managed fund policy in the name of the Scheme. Pooled
investment vehicles (including the LDI Fund) which are not traded on active markets, but where the investment manager has provided a monthly
trading price, are valued using the last single price, provided by the investment manager at or before the year end. 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.
Intertek Group plc Annual Report and Accounts 2020
171
Financial statementsDirectors’ reportStrategic report Notes to the financial statements Continued
16 Employee benefits Continued
The United Kingdom Scheme had bank account assets of £0.6m as at 31 December 2020 (2019: £2.0m).
The United Kingdom Scheme invested assets comprise both quoted and unquoted assets. The value of
quoted assets in 2020 was £28.6m (2019: £30.9m), included within equities in the above table, with the
remaining assets being 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
Past service cost
Interest cost
Contributions by scheme participants
Benefits paid
Effect of exchange rate changes on overseas schemes
Remeasurements
Curtailment gain
Closure of Hong Kong Scheme*
2020
£m
150.2
1.8
–
2.6
0.2
(3.8)
1.3
10.2
–
–
2019
£m
157.1
2.0
0.8
3.5
0.2
(5.1)
0.1
16.7
(5.8)
(19.3)
Defined benefit obligations at 31 December
162.5
150.2
*
The Hong Kong Scheme closed during 2019.
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.
The Switzerland Scheme is an insured plan.
172 Intertek Group plc Annual Report and Accounts 2020
United Kingdom Scheme
Switzerland Scheme
2020
%
2019
%
2020
%
2019
%
1.35
1.8
–
1.9
1.6
2.0
2.2
–
2.3
1.8
0.2
n/a
1.0
n/a
n/a
0.1
n/a
1.0
n/a
n/a
Life expectancy assumptions at year end for:
Male aged 40
Male aged 65
Female aged 40
Female aged 65
United Kingdom Scheme
Switzerland Scheme
2020
2019
2020
2019
47.8
21.8
50.1
23.9
49.0
22.2
51.1
24.3
45.6
22.7
48.2
24.5
42.8
19.7
45.4
21.9
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 (and lives to 65) or 65 at 31 December. The mortality tables
adopted in 2020 for the United Kingdom Scheme are S3PA tables, based on the CMI 2019 mortality
projection model with a 1.00% long term annual rate for future improvements. In 2019 the S3PA tables
were used, based on the CMI 2018 mortality projection model with a 1.25% long-term annual rate for
future improvement. For the Switzerland Scheme, the mortality table adopted in both 2020 and 2019 is the
BVG2015, 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 pension assets and liabilities as at
31 December 2020 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
Increase/
(decrease)
in deficit
£m
Liabilities
£m
140.3
134.2
146.8
143.8
137.2
–
(6.1)
6.5
3.5
(3.1)
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 £6.9m and decreases by
£6.5m, respectively.
Financial statementsDirectors’ reportStrategic report Notes to the financial statements Continued
16 Employee benefits Continued
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 has made an additional contribution of £2.0m
in 2020 to reduce the deficit disclosed by the 2019 valuation.
Funding risks
The main risks for the schemes are:
Investment return risk:
If the assets underperform the returns assumed in setting the funding targets
then additional contributions may be required at subsequent valuations.
Investment matching risk:
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.
Longevity risk:
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.
Guaranteed Minimum Pension Liability
On 26 October 2018, the High Court of Justice of England and Wales issued a judgement in a claim
between Lloyds Banking Group Pension Trustees Limited (the claimant) and Lloyds Bank plc (defendant)
that UK pension schemes should equalise pension benefits for men and women for the calculation of their
guaranteed minimum pension liability. This court ruling impacts the majority of companies with a UK defined
benefit plan, including the Intertek Pension Scheme. A formal calculation of the impact was undertaken
during 2019 as part of the scheme’s three-yearly valuation process, £0.8m was been recorded as past
service cost under the defined benefit scheme. In 2020 nil was recorded as a part service cost under the
defined benefit scheme.
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 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 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 TSR performance conditions being achieved.
Share plans
2011 Long Term Incentive Plan
The Deferred Bonus Plan 2005 was replaced in 2011 with the Intertek 2011 Long Term Incentive Plan
(‘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.
The weighted average remaining contractual life of share options outstanding at the end of the period
is one year.
Outstanding awards
At beginning of year
Granted*
Vested**
Forfeited
At end of year
2020
2019
Deferred
Share
Awards
812,317
278,996
LTIP Share
Awards
Total
awards
927,395
315,054
1,739,712
594,050
Deferred
Share
Awards
895,582
303,942
LTIP Share
Awards
Total
awards
962,657
369,529
1,858,239
673,471
(244,837)
(258,438)
(503,275)
(318,629)
(344,123)
(662,752)
(61,544)
(94,074)
(155,618)
(68,578)
(60,668)
(129,246)
784,932
889,937
1,674,869
812,317
927,395
1,739,712
*
Includes 12,570 Deferred Share Awards (2019: 13,796) and 12,239 LTIP Share Awards (2019: 18,006) granted in respect of dividend accruals.
** Of the 503,275 awards vested in 2020, nil were satisfied by the issue of shares and 331,380 by the transfer of shares from the ESOT (see note
15). The balance of 171,895 awards represented a tax liability of £8.0m (2019: £11.6m) which was settled in cash on behalf of employees by the
Group, of which £7.1m was settled by the Company.
Intertek Group plc Annual Report and Accounts 2020
173
Financial statementsDirectors’ reportStrategic report Equity-settled transactions
During the year ended 31 December 2020, the Group recognised an expense of £17.7m (2019: £21.9m).
The fair values and the assumptions used in their calculations are set out below:
Notes to the financial statements Continued
17 Share schemes Continued
Deferred Share Plan
Awards may be granted under the Deferred Share Plan (‘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. 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.
Outstanding awards
At beginning of year
Granted*
Vested**
Forfeited
At end of year
2020
2019
Deferred
Share
Awards
68,560
21,762
(36,574)
(7,867)
Total
awards
68,560
21,762
(36,574)
(7,867)
Deferred
Share
Awards
120,014
24,806
(54,661)
(21,599)
Total
awards
120,014
24,806
(54,661)
(21,599)
45,881
45,881
68,560
68,560
*
Includes 1,062 Deferred Share Awards (2019: 2,048) granted in respect of dividend accruals.
Fair value at measurement date (pence)
Share price (pence)
Expected volatility
Risk-free interest rate
Time to maturity (years)
Fair value at measurement date (pence)
Share price (pence)
Expected volatility
Risk-free interest rate
2020 Awards
Deferred
Share
Awards
5,429
5,429
n/a
n/a
1–3
Share
Awards
LTIP Share
Awards
4,814
4,814
n/a
n/a
3
4,793
4,793
24.0%
0.02%
3
2019 Awards
Share
Awards
4,523
4,523
–
–
3
LTIP Share
Awards EPS
element
LTIP Share
Awards TSR
element
4,508
4,508
–
–
3
2,122
4,508
21.3%
0.8%
3
Deferred
Share
Awards
4,590
4,590
–
–
1–3
** Of the 36,574 awards vested in 2020, 27,338 were satisfied by the transfer of shares from the ESOT (see note 15). The balance of 9,236 awards
represented a tax liability of £0.5m which was settled in cash on behalf of employees by the Group, of which £0.4m was settled by the Company.
Time to maturity (years)
The expected volatility is based on the historical volatility, adjusted for any expected changes to future
volatility due to publicly available information.
The weighted-average exercise prices of all share awards in the year are £nil (2019: £nil).
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. From 2020 the LTIP Share Awards are granted under performance-related non-market
conditions only.
174 Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Notes to the financial statements Continued
18 Subsequent events
In January 2021, US$850m of the facility was extended to 2026, the impact of this would be a transfer
of £135.5m from borrowings due to be repaid between two and five years to borrowings due to be repaid
in over five years.
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.
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.
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. Financial net debt has
decreased from £629.4m at 31 December 2019 to £419.9m at 31 December 2020, primarily reflecting the
continued strong underlying cash generation of the Group in 2020. The Group has a strong balance sheet
with financial net debt to EBITDA of 0.7x.
During 2020, the Group has continued the working capital focus and through disciplined performance
management, working capital has reduced by £104.7m to negative £4.0m. Working capital is defined on
page 137.
The Group uses key performance indicators, including return on invested capital (‘ROIC’) and adjusted diluted
earnings per share to monitor the capital position of the Group to ensure it is being utilised effectively. The
rate of ROIC, defined as adjusted operating profit less adjusted taxes divided by invested capital, measures
how effectively the Group generates profit from its invested capital. This is a key measure to assess the
efficiency of investment decisions and is also an important criterion in the decision-making process. ROIC in
2020 was 21.6% (2019: 23.7%). Adjusted diluted earnings per share is a key measure of value creation for
the Board and for shareholders and in 2020 was 170.9p (2019: 212.5p).
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. Our dividend
policy aims to deliver sustainable dividend growth over time, based on a target dividend payout ratio of
circa 50%. Reflecting the Group’s strong cash generation in 2020 and reduced leverage, the recommended
final dividend is 71.6p bringing the full-year dividend to 105.8p, which is in-line with 2019, and the dividend
payout ratio to 62%.
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
2020
£m
29.4
(0.3)
15.3
2.2
(18.6)
28.0
2019
£m
34.3
(2.2)
20.5
(4.1)
(19.1)
29.4
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
2020
£m
11.6
0.8
10.4
22.8
2019
£m
11.4
0.9
9.7
22.0
More detailed information concerning Directors’ remuneration, shareholdings, pension entitlements 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.
Intertek Group plc Annual Report and Accounts 2020
175
Financial statementsDirectors’ reportStrategic report Notes to the financial statements Continued
22 Contingent liabilities
Guarantees, letters of credit and performance bonds
2020
£m
26.0
2019
£m
26.7
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. These claims are not currently expected
to result in meaningful costs and liabilities to the Group. 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 with complex tax laws and regulations. At any point in
time it is normal for there to be a number of open years 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. 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 Group continues to monitor developments in relation to EU State Aid investigations. On
25 April 2019, the EU Commission’s final decision regarding its investigation into the UK’s Controlled Foreign
Company regime was published. It concludes that the legislation up until December 2018 does partially
represent State Aid. The Group considers that the potential amount of additional tax payable remains
between £nil and £16.3m (excluding interest and penalties) depending on the basis of calculation and the
outcome of HMRC’s appeal to the EU Commission. Based on current advice, the Group does not consider any
provision is required in relation to this investigation. This judgement is based on current interpretation of
legislation, management experience and professional advice.
176 Intertek Group plc Annual Report and Accounts 2020
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 2020. 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.
Company name
Intertek Finance plc
Intertek Holdings Limited (i)
Intertek Technical Services, Inc. (ii)
Intertek Testing Services Holdings Limited (i)
Intertek Testing Services Hong Kong Limited (iii)
Intertek Testing Services Limited Shanghai (iv)
Intertek Testing Services NA, Inc. (v)
Intertek Testing Services Shenzhen Limited (vi)
Intertek USA, Inc. (vii)
Intertek USD Finance Limited
Labtest Hong Kong Limited (viii)
RCG-Moody International Limited
Testing Holdings USA, Inc. (ix)
(i) Directly owned by Intertek Group plc.
Country of Incorporation and principal
place of operation
England
England
USA
England
Hong Kong
China
USA
China
USA
England
Hong Kong
England
USA
Activity
Finance
Holding
Trading
Holding
Trading
Trading
Trading
Trading
Trading
Finance
Trading
Holding
Holding
(ii) Ownership held in ordinary and preference shares; Registered office address is: 25025 I-45 North, Suite #111, The Woodlands, TX 77380, United
States.
(iii) Registered office address is: 2/F Garment Centre, 576 Castle Peak Road, Kowloon, Hong Kong.
(iv) Equity shareholding 85%, company controlled by the Group based on management’s assessment; Registered office address is: 2nd Floor (West
Zone), No 707 ZhangYang Road, Pilot Free Trade Zone, Shanghai, China.
(v) Registered office address is: 3933 US Route 11, Cortland, NY 13045, United States.
(vi) Registered office address is: West side of 1/F and 3,4,5/F of Bldg. 1, 1-5/F of Bldg. 3, Yuanzheng Science and Technology Industrial Park, No. 4012,
Bantian Street, Longgang District, Shenzhen, Guangdong, China.
(vii) Registered office address is: CT Corporation System, 5615 Corporate Blvd., Suite 400B, Baton Rouge, LA 70808, United States.
(viii) Registered office address is: 2/F, Garment Centre, 576 Castle Peak Road, Kowloon, Hong Kong.
(ix) Registered office address is: Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801, 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 principal subsidiaries listed above have not been duplicated in the list below.
Where no address is listed, the address of the registered office is Academy Place, 1–9 Brook Street,
Brentwood, Essex, CM14 5NQ, United Kingdom. Unless otherwise stated, the share capital for all related
undertakings included in this note comprises ordinary or common stock shares which are indirectly held
by Intertek Group plc as at 31 December 2020. No subsidiary undertakings have been excluded from
the consolidation.
Financial statementsDirectors’ reportStrategic report Notes to the financial statements Continued
23 Principal Group companies continued
Fully owned subsidiaries
0949491 B.C. Limited
1620-400 Burrard Street, Vancouver, BC V6C 3A6, Canada
4th Strand, LLC (i)
3000 Northwoods Parkway, Suite 330, Norcross, GA 30071, United States
Acucert Labs, LLP
82/2, Shreyas, 25th Road, Sion West, Mumbai, 400022, India
Acumen Security, LLC
2400 Research Blvd, Suite 395, Rockville, MD 20850, United States
Adelaide Inspection Services Pty Limited
Level 3, 235 St Georges Terrace, Perth, WA 6000, Australia
Admon Labs Servicios Corporativos y Administrativos, S.A. de C.V.
Boulevard Adolfo Lopez Mateos #2259, Atlamaya, Alvaro Obregon, Ciudad de Mexico, C.P. 01760, Mexico
Ageus Solutions Inc.
505 March Road, Suite 100, Kanata, ON K2K 2V6, Canada
Alchemy Investment Holdings, Inc.
1209 Orange Street, Wilmington, New Castle, DE, 19801, United States
Alchemy Systems L.P.
5301 Riata Park Court, Building F, Austin, TX, 78727, United States
Alchemy Systems Training, Inc.
8015 Shoal Creek Blvd, Suite 100, Austin, TX, 78757, United States
Alchemy Systems Training Limited
Alchemy Training Technologies, Inc.
1 Germain Street, Suite 1500, Saint John, NB E2L 4V1, Canada
Aldo Abela Surveys Limited
98 Triq Patri Magri, Marsa, MRS 2200, Malta
Alta Analytical Laboratory, Inc. (i)
200 Westlake Park Blvd., Westlake Building 4, Suite 400, Houston, TX 77079, United States
Amtac Certification Services Limited (ii)
CVR Global LLP, Town Wall House, Balkerne Hill, Colchester, Essex, CO3 3AD, United Kingdom
Angus Management, LLC
1209 Orange Street, Wilmington, New Castle, DE 19801, United States
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
Bigart Ecosystems, LLC
3011 American Way, Missoula County, Missoula MT 59808, United States
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 U.S. Inc.
100 Davidson Avenue, Suite #102, Somerset, NJ 08873, United States
Capcis Limited (ii)
CVR Global LLP, Town Wall House, Balkerne Hill, Colchester, Essex, CO3 3AD, United Kingdom
Catalyst Awareness, Inc.
43 Carolinian Lane, Cambridge, ON N1S 5B5, Canada
Center for the Evaluation of Clean Energy Technology, Inc.
3933 US Route 11, Cortland, NY 13045, United States
Charon Insurance Limited (ii)
Thomas Miller (Bermuda) Ltd, Canon’s Court, 22 Victoria Street, Hamilton, HM12, Bermuda
Check Safety First Limited
Checkpoint Solutions Ltd
Cristal Iberica Consulting S.A.
Carrer Jaume Vidal Alcover, 9, Palma, Mallorca, 07010, Spain
Cristal International Care Limited (ii)
CVR Global LLP, Town Wall, House, Balkerne Hill, Colchester, Essex, CO3 3AD, United Kingdom
Cristal International Limited (viii) (ii)
CVR Global LLP, Town Wall, House, Balkerne Hill, Colchester, Essex, CO3 3AD, United Kingdom
Cristal Middle East SAE
22 El-Imam Ali, Almazah, Heliopolis, Cairo Governorate, Egypt
Cristal North Africa CNA
Immeuble, SOGIT Faisant angle de la rue, lac victoria, et rue du des lacs de mazurie, les berges du lac, 1053 Tunis Le bureau,
B5 situé, au 2ème étage, Tunis, Tunisia
Cristal World Wide Limited (ii)
Ecristal Europe Limited (ii)
CVR Global LLP, Town Wall, House, Balkerne Hill, Colchester, Essex, CO3 3AD, United Kingdom
Ecristal Limited (i)
Electrical Mechanical Instrument Services (UK) Limited (ii)
Unit 19 & 20 Wellheads Industrial Centre, Dyce, Aberdeen, AB21 7GA, United Kingdom
Electronic Warfare Associates-Canada, Ltd
1223 Michael Street North, Suite 200, Ottawa, ON K1J 7T2, Canada
Entela-Taiwan, Inc
4700 Broadmoor Avenue SE, Suite 200, Kentwood, MI 49512, United States
Esperanza Guernsey Holdings Limited
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
Four Front Research (India) Pvt Limited (ii)
Plot# 847, 5th Floor, Near Electricity Substation, Ayyappa Society Road, Madhapur, Hyderabad, Telangana, 500081, India
Frameworks Inc.
1595 Sixteenth Avenue, Suite 301, Richmond Hill, ON L4B 3N9, Canada
Gamatek, S.A. de C.V.
Alanis Valdez #2308, Industrial, Monterrey, Nuevo Leon, Mexico
GCA Calidad y Analisis de Mexico, S.A. de C.V.
Jacarandas #19, San Clemente, Alvaro Obregon, Ciudad de Mexico, C.P. 01740, Mexico
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. (ix)
112 East Service Road, Morgan City, LA 70381, United States
H.P. White Laboratory Inc.
3114 Scarboro Road, Street, MD 21154, United States
Intertek Group plc Annual Report and Accounts 2020
177
Financial statementsDirectors’ reportStrategic report Notes to the financial statements Continued
23 Principal Group companies Continued
Hawks Acquisition Holding, Inc.
Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington, New Castle, DE 19808, United States
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
Inspection Services (US), LLC
Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801, United States
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, Phoenix, Mauritius
Intertek (Schweiz) AG
TechCenter, Kaegenstrasse 18, 4153 Reinach, Switzerland
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 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. (xiv)
Cerrito 507, 4th Floor, Of. 46 and 47, Montevideo, 11000, Uruguay
Intertek Caleb Brett Chile S.A.
Avenida Las Condes N° 11287 Torre A, oficina 301 A Las Condes, Santiago, Chile
Intertek Caleb Brett El Salvador S.A. de C.V.
Recinto Industrial de RASA zona industrial de Acajutla, Sonsonate, El Salvador
178 Intertek Group plc Annual Report and Accounts 2020
Intertek Caleb Brett Germany GmbH
Georgswerder Bogen 3, D-21109 Hamburg, Germany
Intertek Caleb Brett Panama, Inc.
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
Avenida Las Condes N° 11287 Torre A, oficina 301 A Las Condes, 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 Sandefjord, Norway
Intertek Certification France SAS
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 Colombia S.A.
Calle 127A No. 53A-45, Oficina 1103, Bogotá, Colombia
Intertek Commodities Mozambique Lda (xvi)
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 127A No. 53A-45, Oficina 1103, Bogotá, Colombia
Intertek Consulting & Training Egypt (ii)
46 B Street #7, Maadi, Cairo, Egypt
Intertek Consumer Goods GmbH
Würzburger Strasse 152, 90766 Fürth, 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
Stangenstrasse 1, 70771 Leinfelden-Echterdingen, Germany
Financial statementsDirectors’ reportStrategic report Notes to the financial statements Continued
23 Principal Group companies Continued
Intertek DIC A/S
Buen 12, 2, 6000 Kolding, Denmark
Intertek do Brasil Inspecoes Ltda
Av Eng. Augusto Barata s/n, Alamoa, Santos, SP, CEP11095-650, 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, Pilot 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 No. 2 Ltd (x)
Intertek Finland OY
Teknoublevardi 3-5, FI-01530 Vantaa, Finland
Intertek Fisheries Certification Limited (ii)
CVR Global LLP, Town Wall House, Balkerne Hill, Colchester, Essex, CO3 3AD, United Kingdom
Intertek Food Services GmbH
Olof-Palme-Strasse 8, 28719 Bremen, Germany
Intertek France SAS
ZAC Ecopark 2, 27400, Heudebouville, 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 South Africa Pty Ltd
Level 3, 235 St Georges Terrace, Perth, WA 6000, Australia
Intertek Ghana Limited
1st Floor Gian, Towers Office, Number 2 Community, Gian Towers Tema, Accra, Accra Metropolitan, P.O. BOX GP 199, Ghana
Intertek Global (Iraq) Limited
Intertek Global International LLC
Building 242, Office No.3, C-Ring Road, Doha, PO Box 47146, Qatar
Intertek Global Limited
1st Floor, Liberation House, Castle Street, St Helier, JE1 1GL, Jersey
Intertek Health Sciences Inc. (v)
2233 Argentia Road, Suite # 201, Mississauga, ON L5N 2X7, Canada
Intertek Holding Deutschland GmbH
Stangenstrasse 1, 70771 Leinfelden-Echterdingen, Germany
Intertek Holdings France SAS
ZAC Ecopark 2, 27400 Heudebouville, France
Intertek Holdings Italia SRL (xvi)
Via Guido Miglioli 2/A, Cernusco sul Naviglio, 20063, Milano, Italy
Intertek Holdings Nederland B.V.
Leerlooierstraat 135, 3194AB Hoogvliet, Rotterdam, The Netherlands
Intertek Holdings Norge AS
Oljevegen 2, Tananger, 4056, Norway
Intertek Ibérica Spain, S.L.
Alameda 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 Holdings (Pty) Ltd
53 Phillip Engelbrecht Drive, Woodhill Office Park Building 2, 1st Floor Unit 8B Meyersdal, Gauteng, 1448, 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 de Argentina S.A.
Cerrito 1136, 2nd floor CF, Ciudad Autonoma de Buenos Aires, C1010AAX, Argentina
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 61, 1st Floor, Sector 5, Bucharest, Romania
Intertek Industry WLL
Office # 24, Building 400, Road 3207, Mahooz, Block 332, Manama, Bahrain
Intertek Inspection (Malaysia) Sdn. Bhd. (xi)
D-28-3, Level 28, Menara Suezcap 1, No. 2 Jalan Kerinchi, Gerbang Kerinchi Lestari, 59200 Kuala Lumpur, Malaysia
Intertek Inspection Services Ltd
2561 Avenue Georges V, Montreal-Est, QC H1L 6S4, Canada
Intertek Inspection Services Scandinavia AS
Leif Weldings vei 8, 3208 Sandefjord, Norway
Intertek Inspection Services UK Limited
Intertek International France SAS
67 Boulevard Bessières, 75017, Paris, France
Intertek International Gabon SARL
Quartier Montagne Sainte – Immeuble Dumez, 2éme étage, Libreville, B.P: 13312, Gabon
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, Suite 200, The Woodlands, TX 77386, United States
Intertek International Kazakhstan, LLC
Building 2A, Abay street, Atyrau City, 060002, Kazakhstan
Intertek International Limited
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, The Netherlands
Intertek Group plc Annual Report and Accounts 2020
179
Financial statementsDirectors’ reportStrategic report Notes to the financial statements Continued
23 Principal Group companies Continued
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, 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
Cevizli Mah. Tansel Cad. No: 12-18, Maltepe, 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 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 Notified Body AB
Torshamnsgatan 43, Box 1103, Kista, S-164 22, Sweden
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 (i)
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, Rotterdam, The Netherlands
Intertek Nominees Limited
Intertek OCA France SARL
Route Industrielle – Centre Routier, 76600, Gonfreville L’Orcher, France
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, Plot No.1-5/11-A, Sector-5, Korangi Industrial Area, Karachi, Pakistan
Intertek Poland sp.z.o.o.
Cyprysowa 23 B, 02-265, Warsaw, Poland
Intertek Polychemlab B.V.
Koolwaterstofstraat 1, 6161 RA, Geleen, The Netherlands
Intertek Portugal, Unipessoal Lda (xvi)
Rua Antero de Quental, 221-Sala 102, 4455-586, Perafita-Matosinhos, Portugal
Intertek Quality Services Ltd (i)
Intertek Resource Solutions (Trinidad) Limited (i)
#91-92 Union Road, Marabella, Trinidad, Trinidad and Tobago
180 Intertek Group plc Annual Report and Accounts 2020
Intertek Resource Solutions, Inc.
24900 Pitkin Road, Suite 200, The Woodlands, TX 77386, United States
Intertek Rus JSC
Electrozavodskaya street, 27, building 2, 125047, Moscow, Russian Federation
Intertek S.R.O
Sokolovská 131/86, Karlín, Praha 8, 186 00, Czech Republic
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, Alnarp, SE-230 53, 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 Statius N.V.
Man ‘O’ War #B3, Oranjestad, St. Eustatius, Netherlands Antilles
Intertek Surveying Services (USA), LLC (xv)
3033 Chimney Rock Road, Suite 625, Houston TX 77056, United States
Intertek Surveying Services UK Limited
Averon House 3 Dail Nan Rocas, Teaninich Industrial Estate, Alness, IV17 0PH, United Kingdom
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 Technical Testing and Analysis Private Limited Company (i)
Bole Sub City Woreda 04, House Number 064/A/, Abune Yosef, Addis Ababa, 4260, Ethiopia
Intertek Testing & Certification Limited
Intertek Testing and Inspection Services UK Limited
Intertek Testing Management Ltd
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
5th Floor Charter House, 13 Brand Road Glenwood, Kwa-Zulu Natal, 4001, South Africa
Intertek Testing Services (Fiji) Pte Limited
c/o 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
Financial statementsDirectors’ reportStrategic report Notes to the financial statements Continued
23 Principal Group companies Continued
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.
3 Irving Road #05-01 to 05, Tai Seng Centre, 369522, 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 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, DE 19901, United States
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
2/F, 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 Testing Services Zhejiang Ltd
Room 262, Building B, No 126 Shuanglian Road, Haining Economic Development Zone, Haining, Jiaxing, Zhejiang, China
Intertek Timor, S.A.
Hotel Timor, Colmera, Vera Cruz, Dili, Timor-Leste
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 (xvii)
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, Côte d’Ivoire
Intertek West Lab AS
Oljevegen 2, 4056 Tananger, Norway
IntertekGenalysis SI Limited
c/o Baoro & Associates, Top Floor, Y. Sato Building, Point Cruz, Honiara, Solomon Islands
ITS (PNG) Limited
Section 27 Allotment 27, Voco Point, Lae, Morobe Province, Papua New Guinea
ITS (Subic Bay), Inc.
Area 8 – 10, Lots 11/12 Boton Wharf, Argonaut Highway, Subic Bay, Freeport Zone, Olongapo City, Philippines
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
3771 North Fraser Way, Suite 17, Burnaby BC V5J 5G5, Canada
ITS Testing Services (UK) Limited
ITS Testing Services Co. LLC
Ras Tanura KSA, PO Box 216, 31941, Saudi Arabia
KJ Tech Services GmbH (xii)
Kirschberg 20, 64347, Griesheim, Germany
Laboratorio Fermi S.A. de C.V.
Jacarandes #15, San Clemente, Alvaro Obregon, Ciudad de Mexico, C.P. 01740, Mexico
Laboratorios ABC Química, Investigación y Análisis, S.A. de C.V. (xiii)
Jacarandas #19, San Clemente, Alvaro Obregón, Ciudad de Mexico, C.P. 01740, Mexico
Laboratory Services International Rotterdam B.V.
Pittsburghstraat 9, 3047 BL, Rotterdam, The Netherlands
Labtest International Inc.
2107 Swift Drive, No 200, Oak Brook, Illinois, 60523, United States
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)
Materials Testing & Inspection Services Limited (ii)
CVR Global LLP, Town Wall House, Balkerne Hill, Colchester, Essex, CO3 3AD, United Kingdom
Materials Testing Lab, Inc.
145 Sherwood Avenue, Farmingdale NY 11735, United States
McPhar Geoservices (Philippines) Inc. (i)
Building 7 & 8 Philcrest 1 Compound, Km23 West Service Road, Bo. Cupang, Muntinlupa City, Philippines
Intertek Group plc Annual Report and Accounts 2020
181
Financial statementsDirectors’ reportStrategic report Notes to the financial statements Continued
23 Principal Group companies Continued
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 (Shanghai) Consulting Co., Ltd
RM602, No.4 Building, 123 Juli Road, Zhangjiang High-Tech Park, Pudong, Shanghai, China, 201203
Moody Algerie SARL
Cité SERBAT, Bat. B2/C2, N°03, Garidi 1, 16051, Kouba, Wilaya d’Alger, Algeria
Moody Energy Technical Service Co Ltd
Room A201, B-2 East 3rd, Ring Road North Road, Chaoyang District, Beijing, 100027, China
Moody International (Holdings) Limited (vii)
Moody International (India) Private Limited
E-20, Block B1, Mohan Co-operative Industrial Area, Mathura Road, New Delhi, 110044, India
Moody International (Russia) Limited
Moody International Certification India Limited
E-20, Block B1, Mohan Co-operative Industrial Area, Mathura Road, New Delhi, 110044, India
Moody International Holdings LLC (xv)
24900 Pitkin Road, Ste. 200, The Woodlands TX 77386, United States
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 (xv)
145 Sherwood Avenue, Farmingdale NY 11735, United States
MT Operating of New York, LLC (xv)
145 Sherwood Avenue, Farmingdale NY 11735, United States
N T A Monitor Limited
NDT Services Limited
Northern Territory Environmental Laboratories Pty Ltd (i)
Level 3, 235 St Georges Terrace, Perth WA 6000, Australia
NTA Academy Limited (ii)
CVR Global LLP, Town Wall House, Balkerne Hill, Colchester, Essex, CO3 3AD, United Kingdom
NTA Monitor (M) Sdn Bhd
No. 18-B, Jalan Kancil off Jalan Pudu, 55100 Kuala Lumpur, Wilayah Persekutuan, Malaysia
Paulsen & Bayes-Davy Ltd
2/F, 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
Profesionales Contables en Asesoría Empresarial y de Ingenieria S.A.S.
Calle 120, No. 45A – 32, Bogota, Colombia
Professional Service Industries (Canada) Inc. (i)
200 Bay Street, Suite 3800, Royal Bank Plaza, South Tower, Toronto ON M5J 2J7, Canada
182 Intertek Group plc Annual Report and Accounts 2020
Professional Service Industries Holding, Inc.
Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801, United States
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, DE 19808, United States
PT. Moody Technical Services
Graha STR 3rd floor, Suite#302, Jl. Ampera Raya No. 11, Jakarta, 12550, Indonesia
PT. RCG Moody (i)
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
Schindler & Associates (L.C.) (i) (xv)
24900 Pitkin Road, Suite 200, The Woodlands TX 77386, United States
Shanghai Orient Intertek Testing Services Company Limited
Room 301,401, No 1,4,5, Lane 2028, Changzhong Road, Jin’an district, Shanghai, 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
Tourcheck Limited (ii)
CVR Global LLP, Town Wall, House, Balkerne Hill, Colchester, Essex, CO3 3AD, United Kingdom
Tradegood Singapore Pte. Ltd (i)
3 Irving Road #05-01 to 05, Tai Seng Centre, 369522, Singapore
Tradegood.com International Limited
2/F, Garment Centre, 576 Castle Peak Road, Kowloon, Hong Kong
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)
3 Irving Road #05-01 to 05, Tai Seng Centre, 369522, Singapore
Youngever Holdings Ltd
Ritter House, Wickhams Cay II, Road Town, Tortola, VG 1110, British Virgin Islands
Related undertakings where the effective interest is less than 100%
Caleb Brett Abu Dhabi LLC (49.0%) (xix)
CB UAE (Private) Ltd, c/o Al Nahiya Group, PO Box 3728, Abu Dhabi, United Arab Emirates
Euro Mechanical Instrument Services LLC (49.0%)
PO Box 46153, Abu Dhabi, United Arab Emirates
International Inspection Services LLC (70.0%) (xix)
PO Box 193, Al Hamriyah, Muscat, PC 131, Oman
Intertek (Qeshm Island) Limited (51.0%)
Unit 107, Goldis Building, Valiasr Boulevard, Qeshm Island, Islamic Republic of Iran
Financial statementsDirectors’ reportStrategic report Notes to the financial statements Continued
23 Principal Group companies Continued
Intertek Angola LDA (99.0%)
282 Rua Amilcar Cabral no.147 2nd floor, Apartment Z, Luanda, Angola
Intertek Caleb Brett Tzn Limited (87.4%)
Plot number 5, Minizani str.-Opposite Roman Catholic Church, Kilwa Road, Kurasini Temeke, Dar Es Salaam, 15109,
United Republic of Tanzania
Intertek ETL SEMKO KOREA Limited (90.0%)
5F, Intertek building, Gongdan-ro, 160beon-gil 3, Gunpo-si, Gyeonggi-do, 15845, Republic of Korea
Intertek GM Testing Service Zhuhai Co., Ltd (70.0%)
55 Guangdong-Macau TCM Park Commercial Service Center, 2522 Huan Dao Bei Road, Hengqin New Area, Zhuhai,
Guangdong, China
Intertek Industry Services (PTY) LTD (69.9%)
3 EL Wak Street, Vereeniging, 1930, Gauteng, South Africa
Intertek Industry Services Colombia Limited (99.0%)
Calle 127A No. 53A-45, Oficina 1103, Bogotá, Colombia
Intertek Kimsco Co., Ltd (50.0%)
9F, Hansan Building, 115, Seosomun-ro, Jung-gu, Seoul, 04515, Republic of Korea
Intertek Lanka (Private) Limited (70.0%)
Intertek House, No: 282, Kaduwela Road, Battaramulla, Sri Lanka
Intertek Libya Technical Services and Consultations Company Spa (65.0%)
P.O Box 3788, Hay Alandalus, Gargaresh, Tripoli, Libya
Intertek Life Bridge (Shanghai) Testing Services Co., Ltd (80.0%)
Room 401, Building #5-6, Lane 1218, WanRong Road, JinAn District, Shanghai, Shandong, China
Intertek Ltd (99.9%)
Borco Administration Bldg, West Sunrise Highway, Freeport, Grand Bahama, The Bahamas
Intertek – QNP LLP (xvii) (51.0%)
Building 2A, Abay street, Atyrau City, 060002, Kazakhstan
Intertek Robotic Laboratories Pty Limited (50.0%)
Level 3, 235 St Georges Terrace, Perth WA 6000, Australia
Intertek South Africa Holdings (Pty) Ltd (75.0%)
5th Floor, Charter House, 13 Brand Road, Glenwood, Kwazulu-Natal, South Africa
Intertek Test Hizmetleri Anonim Sirketi (85.0%)
Merkez Mahallesi, Sanayi Cad. No.23, Altindag Plaza, Yenibosna-34197, Istanbul, Turkey
Intertek Testing Services (South Africa) (Proprietary) Limited (49.5%)
5th Floor, Charter House, 13 Brand Road, Glenwood, Durban, South Africa
Intertek Testing Services Korea Limited (50.0%)
1st Fl., Aju Digital Tower, 284-56, Seongsu-dong 2-ga, Seongdong-gu, Seoul 133-120, Republic of Korea
Intertek Testing Services Nigeria Limited (60.0%)
No. 2 Bombay Crescent, Apapa, Lagos, Nigeria
Intertek Testing Services Sichuan Co., Ltd (90.0%)
No 1, Jiuxiang Blvd, Pharmacy Industry Park, Luzhou National High Technology District, Sichuan, China
Intertek Testing Services Wuxi Ltd (70.0%)
No. 8 Fubei Road, Xishan Economic Development Zone, Wuxi, Jiangsu, 214101, China
ITS Caleb Brett Deniz Survey A S (xviii) (50.0%)
Ulus Mah. Oz Topuz cad. no.32, Besiktas, Istanbul, 34340, Turkey
ITS Testing Services (M) Sdn Bhd (74.0%)
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 Holdings (M) Sdn Bhd (49.0%)
Unit 30-01 Level 30, Tower A, Vertical Business Suite, Avenue 3, Bangsar South, No. 8, Jalan Kerinchi, 59200 Kuala Lumpur, Malaysia
Moody International Angola Ltda (i) (xvi) (78.6%)
Rua de Macau, Edifico ex Edil Apto 1, Res de Chao Esq. C.P 215, Cabinda, Angola
Moody International Bangladesh Limited (99.9%)
House 6, Road 17/A, Block E, Ground Floor, Banani, Dhaka, 1213, Bangladesh
Moody International Holdings Chile Ltda (99.0%)
Avenida Las Condes N° 11287 Torre A, oficina 301 A Las Condes, Santiago, Chile
Moody International Lanka (Private) Ltd (99.9%)
no.5, St Albans Place, Colombo-4, Sri Lanka
Moody International Philippines, Inc. (i) (92.5%)
Intertek Building, 2310 Chino Roces Avenue Extension, Metro Manila, Makati City, 1231, Philippines
PT Citrabuana Indoloka (xviii) (50.0%)
Jl. Raya Bogor KM 28, RT/RW. 04/07, Kel. Pekayon, Kec. Pasar Rebo, Jakarta Timur, 13710, Indonesia
PT. Intertek Utama Services (xviii) (49.0%)
Jl. Raya Bogor KM. 28, RT/RW. 04/07, Kel. Pekayon, Kec. Pasar Rebo, Jakarta Timur, 13710, Indonesia
Qatar Calibration Services LLC (49.0%)
Petrotec, PO Box 16069, 8th Floor, Toyota Tower, Doha, Qatar
RCG Moody International de Venezuela S.A. (i) (99.0%)
Res Morgana, p_4, #04, Av.Andres Bello, Fco de Miranda, Los Polos Grandes, Caracas, Venezuela
Shanghai Moody Management & Technical Services Co. Ltd (i) (90.0%)
Room 225, No. 14 at Lane No. 1700 Luo Shan Road, Shanghai, China
Société Tunisienne Intertek Caleb Brett SARL (51.0%)
67 rue Ech-Chem, Tunis, 1002, Tunisia
The Wine Warehouse (Chepstow) Management Company Limited (75.0%)
The Wine Warehouse, The Back, Chepstow, Monmouthshire, NP16 5HH
Associates
Intertek Geronimo JV Limited (i) (48.9%)
1, North Industrial Area, Klan Street, Accra, Ghana
Lynx Diagnostics Inc. (xviii) (50.0%)
#220, 8 Perron Street, St Albert AB T8N 1E4, Canada
Moody International Certification Ltd (40.0%)
53, Nautic, Triq l-Ortolan, San Gwann, SGN 1943, Malta
Moody International Morocco (30.0%)
28, Rue de Provins, 2 eme etage, Casablanca, Morocco
Moody International SA (35.0%)
4 Rue Des Brasseurs, Zone 3 Abidjan, Côte d’Ivoire
(i)
Dormant.
(xi) Ownership held in ordinary and redeemable preference shares.
(ii)
In Liquidation/Strike off requested.
(xii) Ownership held in No.1, No.2.1 and No.2.2 shares.
(iii) Ownership held in class A and B shares
(xiii) Ownership held in class I Series B shares and class II Series B
(iv) Ownership held in class A and E shares.
(v) Ownership held in class A, B, C, D and E shares.
(vi) Ownership held in class A, B, C, D, E and F shares.
(vii) Ownership held in class ordinary and ordinary-A shares.
(viii) Ownership held in class ordinary, ordinary-A, ordinary-B and
deferred shares.
(ix) Ownership held in ordinary and preference shares.
(x) Ownership held in ordinary and redeemable shares.
shares.
(xiv) Ownership held in ordinary bearer shares.
(xv) Ownership held in membership units.
(xvi) Ownership held in quota capital shares.
(xvii) Ownership held in charter capital.
(xviii) Intertek shares joint control over the company under a
shareholders’ agreement.
(xix) The Group obtains 99% of the economic benefit of the company.
Intertek Group plc Annual Report and Accounts 2020
183
Financial statementsDirectors’ reportStrategic report Intertek Group plc – Company balance sheet
As at 31 December
Fixed assets
Investments in subsidiary undertakings
Current assets
Debtors due within one year
Debtors due after more than one year
Cash at bank and in hand
Creditors due within one year
Other creditors
Net current assets
Total assets less current liabilities
Net assets
Capital and reserves
Called up share capital
Share premium
Retained earnings
Shareholders’ funds
The profit for the financial year was £222.4m (2019: £197.2m).
The financial statements on pages 184 to 188 were approved by the Board on 1 March 2021 and were signed on its behalf by:
André Lacroix
Chief Executive Officer
Company number: 04267576
Ross McCluskey
Chief Financial Officer
184 Intertek Group plc Annual Report and Accounts 2020
Notes
2020
£m
2019
£m
(E)
342.2
339.6
(F)
(F)
(G)
(H)
(H)
(H)
420.5
–
420.5
0.9
421.4
(6.6)
(6.6)
414.8
757.0
694.2
121.3
815.5
0.1
815.6
(448.2)
(448.2)
367.4
707.0
757.0
707.0
1.6
257.8
497.6
757.0
1.6
257.8
447.6
707.0
Financial statementsDirectors’ reportStrategic report Intertek Group plc – Company statement of changes in equity
At 1 January 2019
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 2019
At 1 January 2020
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 2020
Share
capital
£m
Share
premium
£m
Retained
earnings
£m
Total
equity
£m
Notes
1.6
257.8
425.3
684.7
(B)
(D)
(E)
(B)
(D)
(E)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
197.2
197.2
197.2
197.2
(163.2)
(163.2)
(23.1)
(10.5)
21.9
(23.1)
(10.5)
21.9
(174.9)
(174.9)
1.6
257.8
447.6
707.0
1.6
257.8
447.6
707.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
222.4
222.4
222.4
222.4
(170.4)
(12.2)
(7.5)
17.7
(170.4)
(12.2)
(7.5)
17.7
(172.4)
(172.4)
1.6
257.8
497.6
757.0
Intertek Group plc Annual Report and Accounts 2020
185
Financial statementsDirectors’ reportStrategic report 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 have been prepared in accordance with Financial Reporting Standard 101
Reduced Disclosure Framework (‘FRS 101’).
These financial statements have been prepared on a historical cost basis. The Company continues to adopt
the going concern basis of accounting in preparing these financial statements.
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 Payment 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.
186 Intertek Group plc Annual Report and Accounts 2020
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.
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.
Significant new accounting policies and standards
No significant new accounting policies or standards were adopted in the year ending 2020.
Financial statementsDirectors’ reportStrategic report Notes to the Company financial statements Continued
(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 (2019: nil).
Details of the remuneration of the Directors are set out in the Remuneration report.
(C) Use of judgements and estimates
In the application of the Company’s accounting policies, the Directors are required to make judgements,
estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent
from other sources.
The estimates and associated assumptions are based on historical experience and other factors that are
considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised, if the revision affects only that
period, or in the period of the revision and future periods if the revision affects both current and
future periods.
The assumptions which have a significant risk of causing a material adjustment to the carrying amount
of assets and liabilities are outlined below. There are no critical estimates which have a significant risk of
causing a material adjustment to the carrying amount of assets and liabilities.
Judgements
Recoverability of receivables
Amounts owed by Group undertakings are recognised initially at the value of the invoice or loan raised 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. The Company applies the
simplified approach permitted by IFRS 9, which requires the use of the lifetime expected loss provision for
all receivables. The provision calculations are based on a review of all receivables to see if there are specific
circumstances which would render the receivable irrecoverable and therefore require a specific provision.
Investments impairment review
Interests in subsidiaries, associates and jointly controlled entities are initially measured at cost and
subsequently measured at cost less any accumulated impairment losses. Estimates are used in determining
the level of investment that will not, in the opinion of the Directors be recoverable.
(D) Dividends
The aggregate amount of dividends comprises:
Final dividend paid in respect of prior year but not recognised as a liability in
that year
Interim dividends paid in respect of the current year
Aggregate amount of dividends paid in the financial year
2020
£m
2019
£m
115.3
55.1
170.4
108.2
55.0
163.2
The aggregate amount of dividends proposed and recognised as liabilities as at 31 December 2020 is
£nil (2019: £nil). The aggregate amount of dividends proposed and not recognised as liabilities as at
31 December 2020 is £115.6m (2019: £115.7m).
(E) 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
2020
£m
339.6
17.7
(15.1)
342.2
2019
£m
334.4
21.9
(16.7)
339.6
The Company has made Share Awards to the employees of its directly and indirectly owned subsidiaries,
and as such, the Company recognises an increase in the cost of investment in subsidiaries of £17.7m
(2019: £21.9m). 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 2020: 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 (2019: £nil).
Intertek Group plc Annual Report and Accounts 2020
187
Financial statementsDirectors’ reportStrategic report (I) Related party transactions
Details of related party transactions are set out in note 21 of the Group financial statements.
(J) 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 £4.0m at 31 December 2020
(2019: £2.8m).
From time to time, in the normal course of business, the Company may give guarantees in respect of certain
liabilities of subsidiary undertakings.
(K) 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.
Notes to the Company financial statements Continued
(F) Debtors
Amounts owed by Group undertakings – due within one year
Amounts owed by Group undertakings – due in more than one year
Total debtors
2020
£m
420.5
–
420.5
2019
£m
694.2
121.3
815.5
The amounts owed by Group undertakings are unsecured, have no fixed date of repayment and are
repayable on demand. A mixture of the amounts due are interest bearing and interest free.
Amounts owed by Group undertakings are recognised initially at the value of the invoice or loan raised 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. The Company applies the
simplified approach permitted by IFRS 9, which requires the use of the lifetime expected loss provision for
all receivables, including contract assets. The provision calculations are based on a review of all receivables
to see if there are specific circumstances, such as the bankruptcy of a customer or emerging market risks,
which would render the receivable irrecoverable and therefore require a specific provision.
(G) Creditors due within one year
Amounts owed to Group undertakings
2020
£m
6.6
2019
£m
448.2
The amounts owed to Group undertakings are unsecured, have no fixed date of repayment and are
repayable on demand. A mixture of the amounts due are interest bearing and interest free.
(H) 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 £170.4m
(2019: £163.2m), was £222.4m (2019: £197.2m) which was mainly in respect of dividend income in relation
to 2020.
The Company has sufficient distributable reserves to pay the 2020 final dividend and the anticipated 2021
interim dividend. When required, the Company can receive additional dividends from its subsidiaries to
further increase distributable reserves.
The Group settled in cash the tax element of the Share Awards vested in 2020 amounting to £8.5m
(2019: £11.6m) of which the Company settled £7.5m (2019: £10.5m).
During the year ended 31 December 2020, the Company purchased, through its Employee Benefit Trust,
225,165 (2019: 459,078) of its own shares with an aggregate nominal value of £2,252 (2019: £4,591)
for £12.2m (2019: £23.1m) which was charged to profit and loss in equity.
188 Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report Independent Auditors’ Report
to the members of Intertek Group plc
Report on the audit of the financial statements
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 2020 and of the group’s profit and the group’s cash flows for the year then ended;
• the group financial statements have been properly prepared in accordance with international accounting
standards in conformity with the requirements of the Companies Act 2006;
• the company financial statements have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101
“Reduced Disclosure Framework”, and applicable law); and
• the financial statements have been prepared in accordance with the requirements of the Companies
Act 2006.
We have audited the financial statements, included within the Annual Report, which comprise: the
consolidated statement of financial position and company balance sheet as at 31 December 2020; the
consolidated income statement and consolidated statement of comprehensive income, the consolidated
statement of cash flows, and the consolidated statement of changes in equity and company statement
of changes in equity for the year then ended; and the notes to the financial statements, which include
a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Separate opinion in relation to international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union
As explained in note 1 to the group financial statements, the group, in addition to applying international
accounting standards in conformity with the requirements of the Companies Act 2006, has also applied
international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies
in the European Union.
In our opinion, the group financial statements have been properly prepared in accordance with international
financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and
applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities
for the audit of the financial statements section of our report. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the group in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable
to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with
these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical
Standard were not provided to the group.
Other than those disclosed in the Directors’ Report, we have provided no non-audit services to the group in
the period under audit.
Our audit approach
Overview
Audit scope
• We performed full scope audit procedures over 59 legal entities and performed specific audit
procedures on a further 6 entities, covering 29 territories in total.
• Taken together, the entities over which audit work was performed accounted for 81% of the group’s
revenue and 90% of the group’s statutory profit before tax.
• Due to the current restrictions on travel and social distancing measures, enacted in response to the global
COVID-19 pandemic, the group engagement team used video conferencing to oversee the component
auditor work and conducted remote discussions and review activities to understand and supervise the
work of the local teams.
Key audit matters
• Completeness and valuation of customer claims (group)
• Carrying value of goodwill and intangible assets (group)
• Valuation of defined benefit pension scheme liabilities (group)
• Valuation of current tax balances in relation to transfer pricing risk (group)
•
Impact of COVID-19 (group and parent)
Materiality
• Overall group materiality: £19,700,000 (2019: £22,000,000) based on 5% of the weighted average
profit before tax of 2018–2020.
• Overall company materiality: £7,600,000 (2019: £11,500,000) based on 1% of total assets.
• Performance materiality: £14,775,000 (group) and £5,700,000 (company).
Intertek Group plc Annual Report and Accounts 2020
189
Financial statementsDirectors’ reportStrategic report Independent Auditors’ Report Continued
to the members of Intertek Group plc
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in
the financial statements.
Capability of the audit in detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined in the Auditors’ responsibilities for the audit of the
financial statements section, to detect material misstatements in respect of irregularities, including fraud.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance
in the audit of the financial statements of the current period and include the most significant assessed risks
of material misstatement (whether or not due to fraud) identified by the auditors, including those which
had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing
the efforts of the engagement team. These matters, and any comments we make on the results of our
procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and
in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Based on our understanding of the group and industry, we identified that the principal risks of non-
compliance with laws and regulations related to fraud, anti-bribery and corruption laws and indirect and
direct tax laws, and we considered the extent to which non-compliance might have a material effect on
the financial statements. We also considered those laws and regulations that have a direct impact on the
preparation of the financial statements such as the Companies Act 2006. We evaluated management’s
incentives and opportunities for fraudulent manipulation of the financial statements (including the risk
of override of controls), and determined that the principal risks were related to posting inappropriate or
fictitious journal entries to manipulate the financial performance or financial position of the group and
management bias in accounting estimates to achieve management incentive schemes and targets. The
group engagement team shared this risk assessment with the component auditors so that they could
include appropriate audit procedures in response to such risks in their work. Audit procedures performed
by the group engagement team and/or component auditors included:
• Enquiry of management, those charged with governance and the group’s legal counsel around actual
and potential fraud and non-compliance with laws and regulations.
• Auditing the risk of management override of controls, including through testing journal entries
and other adjustments for appropriateness, testing accounting estimates (because of the risk of
management bias), and evaluating the business rationale of significant transactions outside the
normal course of business.
• Enquiry of group’s staff in tax and compliance functions to identify any instances of non-compliance
with laws and regulations.
• Obtaining and understanding the results of whistleblowing procedures and assessing any
related investigations.
• Enquiry of the group’s Head of Internal Audit and reviewing internal audit reports.
• Reviewing financial statement disclosures and testing to supporting documentation to assess
compliance with applicable laws and regulations.
There are inherent limitations in the audit procedures described above. We are less likely to become aware
of instances of non-compliance with laws and regulations that are not closely related to events and
transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement
due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate
concealment by, for example, forgery or intentional misrepresentations, or through collusion.
190 Intertek Group plc Annual Report and Accounts 2020
This is not a complete list of all risks identified by our audit.
The Impact of COVID-19 is a new key audit matter this year. Otherwise, the key audit matters below are
consistent with last year.
Key audit matter
How our audit addressed the key
audit matter
Completeness and valuation of customer
claims (group)
Refer to the Audit Committee report on page 98
and to note 13 in the financial statements.
We met with the group’s legal counsel to discuss
certain open or threatened claims to understand the
likelihood of an adverse judgement and the potential
magnitude of the claim.
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 either
recognise a liability or disclose a contingent
liability in the financial statements. As the
potential cost is often unknown, management
must exercise judgement as to whether a liability
should be recognised or a specific disclosure
is required.
We have evaluated management’s process for
identifying claims and have inspected the details
of legal costs incurred during the year.
Where relevant we obtained confirmations from
the group’s external legal counsels of the existence
and details of key open claims. We obtained and
read the relevant sections of the group’s insurance
documents and checked 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 provision was
not appropriate.
Financial statementsDirectors’ reportStrategic report Independent Auditors’ Report Continued
to the members of Intertek Group plc
Key audit matter
How our audit addressed the key
audit matter
Key audit matter
How our audit addressed the key
audit matter
Carrying value of goodwill and intangible
assets (group)
Refer to the Audit Committee report on page 98
and to note 9 in the financial statements.
The group had £835.9 million of goodwill and a
further £279.7 million of other intangible assets
recognised on the balance sheet at 31 December
2020. The carrying values of goodwill and
intangible assets are dependent 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 may 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, and a significant amount of value is
based on the value to perpetuity of the CGUs,
future cash flows must be estimated, which can
be highly judgemental and could significantly
impact the carrying value of the assets.
We evaluated management’s cash flow forecasts
and understood the process by which they were
determined and approved. This included confirming
that the forecasts were consistent with the
latest Board approved budgets and checking
the methodology and mathematical accuracy of
the underlying calculations, with no exceptions
identified.
We evaluated the inputs included in the value in use
calculations and challenged the key assumptions,
particularly for the higher risk CGUs, Business
Assurance and Caleb Brett, by obtaining evidence
including in respect of:
• the growth rates used in the cash flow forecasts
by comparing them with historical results,
external forecasts and our understanding of the
business;
• using our in-house valuation expertise to
evaluate 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 performed sensitivity analyses around these
assumptions. We also challenged the extent to
which climate change considerations had been
reflected, as appropriate, in management’s
impairment assessment process.
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 it 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 defined benefit pension
scheme liabilities (group)
Refer to the Audit Committee report on page 98
and to note 16 in the financial statements.
We utilised our in-house actuarial experts
to evaluate whether the assumptions and
methodology used in calculating the pension
liabilities were reasonable, by:
The group had net and gross pension liabilities
of £12.1 million and £162.5 million respectively
recognised on the balance sheet at 31 December
2020.
The valuation of pension liabilities involves the
exercise of judgement and technical expertise in
choosing appropriate actuarial assumptions such
as the discount rate, inflation level, mortality
rates and salary increases. Management
engaged external actuarial experts to assist
them in selecting appropriate assumptions and
to calculate the liabilities.
The methodologies and assumptions utilised are
judgemental and could significantly impact the
magnitude of the liabilities recognised.
• Assessing whether salary increases and
mortality rate assumptions were reasonable
based on the consideration of the specifics of
each plan, pension plans of similar maturity to the
group’s and industry benchmarks;
• Evaluating the consistency of the discount and
inflation rate assumptions with our internally
developed benchmarks based on national
data; and
• Reviewing the methodology and calculations
prepared by external actuaries to assess their
appropriateness and the consistency of the
assumptions used.
Based on our procedures, we concluded that the key
assumptions utilised lay within acceptable ranges
and that the methodology was appropriate. We
assessed the related disclosures included in the
group financial statements and consider them
to be appropriate.
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to the members of Intertek Group plc
Key audit matter
How our audit addressed the key
audit matter
Key audit matter
How our audit addressed the key
audit matter
Valuation of current tax balances in relation
to transfer pricing risk (group)
Refer to the Audit Committee report on page
98 and to notes 1, 6 and 22 in the financial
statements.
We involved our in-house tax specialists in our
testing of the appropriateness of the techniques,
estimates and judgements taken over current tax
balances in relation to the transfer pricing risk. In so
doing, we evaluated:
Provisions in relation to potential tax exposures
are subject to judgement and involve estimation
techniques that could influence the current
tax positions. The group operates in a large
number of jurisdictions, which increases the risk
of non-compliance in relation to transfer pricing
considerations relating to intercompany financing,
management recharges and trading transactions.
The individually largest uncertain tax position
within the group is in relation to EU State Aid where
no liability has been recognised; the group considers
that the possible amount of additional tax payable
remains between £nil and £16.3m (excluding
interest and penalties) as set out in note 22.
• 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
• Management’s methodology, calculations and
assumptions utilised in provisions recorded, or
rationale for not recording a provision.
Specifically in relation to EU State Aid we considered
the developments in the year and the evidence
provided to support the assessment that no current
tax liability is recognised. The procedures above did
not identify any material issues with regards to the
valuation of current tax balances.
We assessed the related State Aid disclosures
included in the group financial statements and
consider them to be appropriate.
Impact of COVID-19 (group and parent)
Refer to the Audit Committee report on page 98
and to notes 1 and 11 in the financial statements
The COVID-19 pandemic has had an adverse impact
on the trading performance of the group during the
year. Whilst the group has a broad customer base
across its multiple business lines and in its different
geographic regions, there is inherent uncertainty in
determining the impact of the pandemic on certain
aspects of the financial statements.
The key potential impacts of COVID-19 on
the group and parent company financial
statements are:
• The carrying value of goodwill and other
intangible assets, as the budgets and models
supporting the goodwill and indefinite-lived
intangible impairment assessments have
been updated to reflect management’s best
estimate of the impact of COVID-19.
• These models and related assumptions also
underpin management’s going concern and
viability assessments. Management has
modelled severe but plausible downside
scenarios to its base case trading forecast.
The recoverability of receivable balances involves an
increased level of judgement as a consequence of
the COVID-19 pandemic and its impact on the wider
economic environment. The gross trade receivables
and contract assets balance was £552.9 million,
with an associated allowance for impairment of
£24.2 million, resulting in a net trade receivables and
contract assets balance of £528.7 million.
The pandemic has resulted in the year end financial
close process, as well as the external audit, having
to take place largely remotely in a number of
locations this year.
We validated that the cash flow forecast models
used across the goodwill impairment, going concern
and viability assessments were consistent. Our
procedures in respect of the goodwill and indefinite-
lived intangible asset impairment assessments are
covered in the related key audit matter above.
With respect to management’s going concern
assessment, our procedures are covered in the
‘conclusions relating to going concern’ section below.
We have instructed our component teams to
assess the recoverability of receivable balances,
in particular for aged balances. We have assessed
the reasonableness of the group’s expected
credit losses on receivable balances in accordance
with IFRS 9. There were no material individual
impairments of trade receivables or contract assets.
We also instructed our component teams
to understand if there were any changes to
management’s planned operation of controls or
monitoring activities. Based on our work, we did not
identify any evidence of material deterioration in the
control environment. We increased the frequency
and extent of our oversight over component
audit teams, using video conferencing and remote
working paper reviews, to satisfy ourselves as to
the appropriateness of audit work performed at
financially significant and material components.
We considered the appropriateness of management
disclosures in the financial statements in respect
of the impact of the current environment and
the increased uncertainty on certain accounting
estimates and consider these to be appropriate.
In those locations where we have undertaken much
of our year end work remotely, we did not encounter
any significant difficulties in performing our audit
testing or in obtaining the required evidence to
support our audit conclusions.
192 Intertek Group plc Annual Report and Accounts 2020
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to the members of Intertek Group plc
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 structure of the group and the company, the
accounting processes and controls, and the industry in which they operate.
The group is split into three reporting segments: Products, Trade and Resources and the operations are
spread across over 100 countries and approximately 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.
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 in aggregate
on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole
as follows:
When determining our scope, the key financial measure used was profit before tax. Due to the
disaggregation of the group’s results across the various entities, we identified only three individually
financially significant legal entities, two within China and one within the United States. As a result, we
instructed our component teams to perform audits of the complete financial information of these entities.
We considered the countries in which PwC are appointed statutory auditor. Of these, 22 countries (including
China) 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 intermediate holding companies, and those entities with highly immaterial revenue. This left 49
legal entities (including the two financially significant legal entities in China) for which we instructed our
local teams to perform audits of the complete financial information for the purpose of the group audit.
In addition, we performed full scope audit procedures over two head office legal entities.
In certain territories, notably the US, Canada and Brazil, there is no statutory audit requirement and so we
considered whether procedures needed to be performed to supplement our coverage. We selected seven of
the largest entities in the United States and Canada for full scope audits (including the financially significant
component in the United States), representing those with the largest contribution to group profit, and a
further legal entity in each of the United States and Brazil, over which we performed specified procedures
over the complete financial information.
We instructed a local audit firm to perform an audit of the complete financial information for one legal entity
in Bangladesh for the purpose of the group audit.
We identified a further four legal entities in Japan, Peru and Saudi Arabia over which we instructed specific
audit procedures to be performed over revenue and receivables to supplement coverage over these key
financial statement line items.
In total we performed procedures relating to 65 legal entities in 29 countries, which together accounted for
81% of the group’s revenue and 90% of the group’s profit before tax.
This, together with additional procedures performed at the group level (including audit procedures over tax,
legal claims, defined benefit pension schemes, impairment assessments and consolidation adjustments),
gave us the evidence we needed for our opinion on the financial statements as a whole.
Financial statements –
group
Financial statements –
company
Overall materiality
£19,700,000
(2019: £22,000,000).
£7,600,000
(2019: £11,500,000).
How we determined it
5% of the weighted average profit
before tax of 2018–2020.
1% of total assets.
Rationale for benchmark
applied
We considered that the most
appropriate benchmark on which
to calculate materiality was the
group’s profit before tax. Given the
volatility in profitability in 2020 as
a result of COVID-19, we based our
materiality on a weighted average
for three years of the group’s
profit before tax.
These are a single set of
company accounts for an entity
which has no external revenue
and takes advantage of the
exemption offered under S408
of CA 2006 not to present
its income statement in its
financial statements, which are
presented alongside the group
financial statements within the
Annual Report. As a result, the
determination of materiality was
based on the total assets of this
non-trading holding company
within the group.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall
group materiality. The range of materiality allocated across components was between £1.2 million and
£6.9 million. Certain components were audited to a local statutory audit materiality that was also less than
our overall group materiality.
Intertek Group plc Annual Report and Accounts 2020
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to the members of Intertek Group plc
We use performance materiality to reduce to an appropriately low level the probability that the aggregate
of uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance
materiality in determining the scope of our audit and the nature and extent of our testing of account
balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance
materiality was 75% of overall materiality, amounting to £14,775,000 for the group financial statements
and £5,700,000 for the company financial statements.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial
statements and our auditors’ report thereon. The directors are responsible for the other information. Our
opinion on the financial statements does not cover the other information and, accordingly, we do not
express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of
assurance thereon.
In determining the performance materiality, we considered a number of factors – the history of
misstatements, risk assessment and aggregation risk and the effectiveness of controls – and concluded that
an amount in the middle of our normal range was appropriate.
We agreed with the Audit Committee that we would report to them misstatements identified during
our audit above £900,000 (group audit) (2019: £1,100,000) and £900,000 (company audit) (2019:
£1,100,000) as well as misstatements below those amounts that, in our view, warranted reporting for
qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the group’s and the company’s ability to continue to adopt
the going concern basis of accounting included:
• An assessment of management’s base case and downside scenarios, challenging the key assumptions
• Considering the group’s available financing, including related covenants, and maturity profile to assess
liquidity through the assessment period
• Testing the mathematical integrity of the forecasts and the models and reconciled these to Board
approved budgets
• Performing our own independent sensitivity analysis to assess appropriate downside scenarios
• Assessing the reasonableness of management’s planned or potential mitigating actions.
Based on the work we have performed, we have not identified any material uncertainties relating to events
or conditions that, individually or collectively, may cast significant doubt on the group’s and the company’s
ability to continue as a going concern for a period of at least twelve months from when the financial
statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of
accounting in the preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as
to the group’s and the company’s ability to continue as a going concern.
In relation to the company’s reporting on how they have applied the UK Corporate Governance Code, we have
nothing material to add or draw attention to in relation to the directors’ statement in the financial statements
about whether the directors considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in
the relevant sections of this report.
194 Intertek Group plc Annual Report and Accounts 2020
In connection with our audit of the financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If
we identify an apparent material inconsistency or material misstatement, we are required to perform
procedures to conclude whether there is a material misstatement of the financial statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude that there is
a material misstatement of this other information, we are required to report that fact. We have nothing to
report based on these responsibilities.
With respect to the Strategic report and Directors’ Report, we also considered whether the disclosures
required by the UK Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report
certain opinions and matters as described below.
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the
Strategic report and Directors’ Report for the year ended 31 December 2020 is consistent with the
financial statements and has been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the group and company and their environment obtained
in the course of the audit, we did not identify any material misstatements in the Strategic report and
Directors’ Report.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared
in accordance with the Companies Act 2006.
Financial statementsDirectors’ reportStrategic report Independent Auditors’ Report Continued
to the members of Intertek Group plc
Corporate governance statement
The Listing Rules require us to review the directors’ statements in relation to going concern, longer-term
viability and that part of the corporate governance statement relating to the company’s compliance with
the provisions of the UK Corporate Governance Code specified for our review. Our additional responsibilities
with respect to the corporate governance statement as other information are described in the Reporting on
other information section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of
the corporate governance statement is materially consistent with the financial statements and our knowledge
obtained during the audit, and we have nothing material to add or draw attention to in relation to:
• The directors’ confirmation that they have carried out a robust assessment of the emerging and
We have nothing to report in respect of our responsibility to report when the directors’ statement relating
to the company’s compliance with the Code does not properly disclose a departure from a relevant provision
of the Code specified under the Listing Rules for review by the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities, the directors are responsible for
the preparation of the financial statements in accordance with the applicable framework and for being
satisfied that they give a true and fair view. The directors are also responsible for such internal control as
they determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
principal risks;
• The disclosures in the Annual Report that describe those principal risks, what procedures are in place to
identify emerging risks and an explanation of how these are being managed or mitigated;
• The directors’ statement in the financial statements about whether they considered it appropriate to
adopt the going concern basis of accounting in preparing them, and their identification of any material
uncertainties relating to the group’s and company’s ability to continue to do so over a period of at least
twelve months from the date of approval of the financial statements;
• The directors’ explanation as to their assessment of the group’s and company’s prospects, the period
this assessment covers and why the period is appropriate; and
• The directors’ statement as to whether 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 of its assessment,
including any related disclosures drawing attention to any necessary qualifications or assumptions.
Our review of the directors’ statement regarding the longer-term viability of the group was substantially
less in scope than an audit and only consisted of making inquiries and considering the directors’ process
supporting their statement; checking that the statement is in alignment with the relevant provisions of the
UK Corporate Governance Code; and considering whether the statement is consistent with the financial
statements and our knowledge and understanding of the group and company and their environment
obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each of the
following elements of the corporate governance statement is materially consistent with the financial
statements and our knowledge obtained during the audit:
• The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and
understandable, and provides the information necessary for the members to assess the group’s and
company’s position, performance, business model and strategy;
• The section of the Annual Report that describes the review of effectiveness of risk management and
internal control systems; and
• The section of the Annual Report describing the work of the Audit Committee.
In preparing the financial statements, the directors are responsible for assessing the group’s and the
company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless the directors either intend to liquidate the group or
the company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
Our audit testing might include testing complete populations of certain transactions and balances, possibly
using data auditing techniques. However, it typically involves selecting a limited number of items for testing,
rather than testing complete populations. We will often seek to target particular items for testing based on
their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion
about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
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.
Intertek Group plc Annual Report and Accounts 2020
195
Financial statementsDirectors’ reportStrategic report Independent Auditors’ Report Continued
to the members of Intertek Group plc
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not obtained all the information and explanations we require for our audit; or
• 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
• certain disclosures of directors’ remuneration specified by law are not made; 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.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the members on 25 May
2016 to audit the financial statements for the year ended 31 December 2016 and subsequent financial
periods. The period of total uninterrupted engagement is five years, covering the years ended 31 December
2016 to 31 December 2020.
Ian Chambers (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
1 March 2021
196 Intertek Group plc Annual Report and Accounts 2020
Financial statementsDirectors’ reportStrategic report 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 telephone number or the address on this page.
Investor relations
E: investor@intertek.com
T: +44 (0) 20 7396 3400
Electronic shareholder communications
Shareholders can elect to receive communications by email each time the Company distributes documents,
instead of receiving paper copies. This can be done by registering at www.shareview.co.uk. In the event that
you change your mind or require a paper version of any document in the future, please contact the Registrar.
Access to Shareview allows shareholders to view details about their holdings, submit a proxy vote for
shareholder meetings and notify a change of address. In addition to this, shareholders have the opportunity
to complete dividend mandates online which facilitates the payment of dividends directly into a nominated
bank account.
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 at www.intertek.com.
Financial calendar
Financial year end
Results announced
Annual General Meeting
Ex-dividend date for final dividend
Record date for final dividend
Final dividend payable
Interim results announced
Ex-dividend date for interim dividend
Record date for interim dividend
Interim dividend payable
31 December 2020
2 March 2021
26 May 2021
27 May 2021
28 May 2021
18 June 2021
30 July 2021
16 September 2021
17 September 2021
7 October 2021
Registrars
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
T: 0371 384 2653 (UK)*
T: +44 121 415 0804 (outside UK)
*
Lines are open 8.30 a.m. to 5.30 p.m. Monday to Friday,
excluding bank holidays in England and Wales.
Auditors
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 7742 4000
Goldman Sachs International
Plumtree Court
25 Shoe Lane
London EC4A 4AU
T: +44 (0) 20 7774 1000
Registered office
Intertek Group plc
33 Cavendish Square
London W1G 0PS
T: +44 (0) 20 7396 3400
www.intertek.com
Registered number: 04267576
ISIN: GB0031638363
LEI: 2138003GAT25WW1RN369
London Stock Exchange Support Services
FTSE 100
Symbol: ITRK
This report has been printed on material which is certified
by the Forest Stewardship Council. The paper is made at a
mill with ISO 14001 Environmental Management System
accreditation. Printed using vegetable oil based inks, printer
is also certified to ISO 14001 Environmental management
system and FSC certified.
Intertek Group plc Annual Report and Accounts 2020
197
Financial statementsDirectors’ reportStrategic report INTERTEK GROUP PLC
33 Cavendish Square,
London, W1G 0PS
United Kingdom
Tel +44 20 7396 3400
info@intertek.com
intertek.com