annual review: 2004 · 2015-05-05 · in partnership with caleb brett, our customers achieve...

Annual review: 2004

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .We are committed to driving our businessforward, capitalising on our strengths:> Our extensive global network> Our strong local presence> Our unique range of accreditations,

certifications and approvals> Our teams of highly-skilled individuals> Our cutting-edge solutions> Our passion to exceed our customers’

expectations

Intertek is an international leader in testing,inspection and certification of products andcommodities and the certification of systems.

We deliver our services with skill and integritywhich enables our customers to meet quality,performance, regulatory and safety standardsin respect of the products they sell and theservices they perform.

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2004 Highlights

www.intertek.com

> Another year of very strong growth> Excellent results from every division> £28m spent on seven acquisitions > Successfully managed CEO succession

1. Before goodwill amortisation and exceptional items and including profit from associates

TURNOVER £m CAGR 9.4%

Continuing operations at constantexchange rates

00 01 02 03 04

500

436

411

388

349

TURNOVER

£499.6m+6.0%1 +14.5%2

+11.6%3

OPERATING PROFIT4

£85.2m+11.8%1 +23.5%2

+20.1%3

OPERATING MARGIN4

17.1%up from 15.8%2

OPERATING CASHFLOW AFTER NET CAPEX

£73.9m+31.0%

PROFITBEFORE TAX

£75.8m+7.4%

BASIC EARNINGSPER SHARE

34.1p+8.9%

UNDERLYING EARNINGSPER SHARE5

36.3p+22.2%

DIVIDENDPER SHARE

10.4p+18.2%

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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1. Growth at actual exchange rates2. Growth at constant exchange rates3. Growth at constant exchange rates excluding results of acquisitions and disposals4. Before goodwill amortisation and exceptional items and including profit from associates5. Fully diluted earnings per share before goodwill amortisation and exceptional items

TURNOVER £m CAGR 5.9%

Continuing operations at actualexchange rates

00 01 02 03 04

500

471

461

451

398

Continuing operations at actualexchange rates

00 01 02 03 04

85.2

76.2

76.9

69.8

60.3

OPERATING PROFIT1 £m CAGR 9.0%

Continuing operations at constantexchange rates

00 01 02 03 04

85.2

69.0

66.2

57.5

50.2

OPERATING PROFIT1 £m CAGR 14.1%

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Intertek is built upon a particularly strong ethosof customer service. Our staff pride themselveson their responsiveness to customers’ needs.Responsiveness extends from the speed withwhich services are delivered, to the way in whichservices are developed and designed to meetever-changing customer requirements.

Intertek staff have the technical expertise combinedwith in-depth industry-specific knowledge, toensure that clients receive the most professionaland consistent service. Years of experience, adetailed understanding of standards, inspectionprocedures and test methods, comprehensivetraining programmes and world class laboratoriesmean Intertek offers the expertise that meets andexceeds customers’ needs.

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03

Intertek Group plc Annual review

Interlocking strengths. . . . . . .

The combined strength of all divisionsresults in a service solution that setsthe Intertek Group apart, providing anin-depth response to customers’ needs.

Provides a full range of servicesto retailers and manufacturersof consumer products coveringdesign, quality, safety andcorporate social responsibility,mainly for textiles, footwear,toys and hardlines.

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Agfa • Avecia • ARI • BASF • Bath & Bodyworks • Bechtel • BP • Candela• CAPA • Cargill • Carrier • ChevronTexaco • Chiyoda International •Cisco • Citgo • ConocoPhillips • Dow Chemical • Electrolux • Ericsson• ExxonMobil • Fluor • Gap Inc • GET • Glencore • General Electric •Goodman • Hornbach • IKEA • Imperial Oil • JC Penney • Kraft• Lear/Bing • LG • Linde • Lillian Vernon • Lloyd’s Register • Marks &Spencer • Matsushita • Microsoft • Nike • Nordstrom • Petrobras •Pioneer • QVC • Redcats USA • Sasol • Sharp • Shell • Samsung • SpencerGifts • Sunoco • Tesco • The Home Depot • Total • Unilever • Valero •Vermont Teddy Bear • Vitol • Wal-Mart

Unparalleledexpertise

Clientresponsiveness

www.intertek.com

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Provides testing, inspectionand outsourcing solutionsto the petroleum, chemical,agricultural, pharmaceuticaland other industries.

Provides safety, electro-magneticcompatibility, performance testing,inspection and certificationservices for a wide range ofproducts, primarily electrical,electronic and building productsand heating, ventilation and air-conditioning equipment.

Works with Governments totest and inspect imports tocheck safety and quality, andto verify import duty collection.This division also providescargo scanning systems.

A detailed knowledge of local legislation, cultureand market conditions is an essential componentof an effective global service. It is this localknowledge, on a global basis, which givesIntertek clients the competitive advantage theyneed, to operate in the diverse markets in whichthey both sell and source their products.

Intertek has an extensive network of 13,500employees in 825 offices and laboratories spanning102 countries located across the world. This globalcapability gives clients the confidence that theGroup can deliver the most comprehensive service tothem, wherever it is needed.

Globalnetwork

Localknowledge

A global market leader in testingand inspection services for textiles,footwear, toys, hardlines andother consumer products.

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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .NUMBER OF TESTS

2004

2003

2002

2001

2000’000 0 250 500 750 1,000 1,250 1,500

DIVISIONAL SALES

“Intertek listened toMicrosoft as a customerwhen developing solutionsto meet our needs. Theyexceeded our expectationshelping us succeed in ourbusiness goals – that wasa real difference”Microsoft Corporation

£132mWhat we doActing as a long term partner to a widerange of manufacturers, Labtest providesa full quality assurance service – fromproduct design evaluation to final randominspection. We test and inspect productsagainst safety, regulatory, quality andperformance standards, giving ourcustomers a competitive edge by makingsure that the products they sell are whattheir markets demand. In response to agrowing need, we also provide servicesto certify our customers’ own operatingstandards.

Our customersThrough our uncompromised reputationfor accuracy, integrity and confidentiality,we have earned the confidence of retailers,importers and manufacturers around theworld. Major international companies relyon us to help grow their business bybuilding the trust of their customers.

Our strengthsOur extensive network of laboratoriesand offices means that we can providea local service near manufacturing sitesor customers’ buying offices. Our rangeof accreditations, together with ourinternational reputation, enables thegoods we test and inspect to be sold inall the major markets. Our rapid responseto questions and requests for technicaladvice also gives our customers the abilityto move quickly enough to meetchanging government regulations andindustry standards. We have some ofthe most highly skilled technicians inour industry and a firm commitment toquality and service excellence underpinseverything we do.

Our opportunities and strategiesOur market is growing strongly ascustomers become more quality consciousand retailers seek to raise reputations andstandards. Shorter product lifecycles, newfabrics and a greater number of designsare also driving our market.

The products we test are increasinglysourced from developing countries and weare continuing to expand our network toprovide a service that meets our customers’needs. We are building on strongrelationships with our customers as theymeet the challenges of a global marketplaceand expect to see continuing growth asour business drivers gain momentum.

Corporate social responsibility has gainedan increasing importance across all marketsegments. We help customers implementethical standards by auditing and trainingtheir suppliers on a regular basis andprovide documented evidence ofcompliance to demonstrate theircommitment to social responsibility.

We are also able to monitor supply chainsand advise retailers and manufacturerson necessary upgrades in order to protectand safeguard the supply chain againstacts of terrorism.

Our certification programmes are accreditedby national accreditation bodies, providingour customers with the confidence thattheir business processes are both effectiveand being improved all the time.

32COUNTRIES

79OFFICES

35LABORATORIES

4095EMPLOYEES

www.intertek-labtest.com

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www.intertek.com

Senior Management(From left to right)Albert LoChristina LawRoque CoronaRaymond KongPaul YaoBernard Leroy

A leading international provider ofanalytical laboratory and inspectionservices to industry and commerce,testing products for composition,quality, safety and performance.

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DIVISIONAL SALES

“This is exactly the type ofsupport we envisaged fromthe outsource agreementand I’m pleased to say thatIntertek fully delivered.”Unilever

£177mWhat we doCaleb Brett performs analytical testing,outsourcing, inspection and specialisttechnical services for its clients.

Services offered include laboratoryoutsourcing, quality control, cargoinspection, R&D support, process andcatalysis testing, metallurgy and polymertesting, auditing and consulting.

In partnership with Caleb Brett, ourcustomers achieve reductions in theirinternal costs and enjoy improvementsin quality, delivery and responsiveness.

Our customersOur customers include major companiesin the petroleum, chemical, agriculture,consumer and pharmaceutical industrysectors. World class companies look to usfor innovative business and technicalsolutions.

Our strengthsWe enjoy an international reputation forexpertise, independence and integrity.Our service offerings and capabilities aregrowing at a rapid pace as global industriesincreasingly seek outsourcing solutions.

Dedicated teams of experiencedprofessionals staff the Caleb Brett globalnetwork of analytical testing laboratoriesand offices. The laboratories are equippedwith up-to-date instrumentation andsystems. As a result, we are able to providea wide and growing range of analyticalsolutions to a broad range of globalcustomers.

Our opportunities and strategiesGrowth in laboratory analytical testing andallied technical services continues to berobust as we target conventional anddeveloping market niches.

The industry trend towards laboratoryoutsourcing is growing rapidly as morecustomers search for innovative waysto focus on their core competencies.Outsourcing laboratories to us givesour clients improved service, increasedoperational flexibility and lower totalcosts by utilising the range of servicesthat we provide.

Petroleum, chemical, agriculture,consumer and pharmaceutical: companiesin these sectors rely increasingly on us todeliver across the globe ‘best in class’analytical, outsourcing, technical and inspection solutions.

118COUNTRIES SERVED BY CALEB BRETT

353OFFICES

209LABORATORIES

5870EMPLOYEES

NUMBER OF LABORATORIES

2004

2003

2002

2001

2000160 180 200 220

www.intertek-cb.com

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www.intertek.com

Senior Management(From left to right)Jay GutierrezAndrew SwiftMark LougheadRaymond Pirie

A global leader in the testing, inspectionand certification of products frommanufacturers and retailers focusing ondecreasing product time to market.

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DIVISIONAL SALES

“We were really under thegun with the minimal timewe had. When Intertekresponded instantly witha full range of services –without balking at thetime line – we knew we’dfound our partner”Candela

£122mWhat we doETL SEMKO provides industry specific globalsafety, electro-magnetic compatibility andspecialised telecommunications testingand certification services. These help ourcustomers to fully comply with the widestrange of international standards and end-user requirements. To satisfy a risingdemand for product performanceevaluations, we also provide a full range ofservices including durability, usability andaccelerated stress testing.

Our customersWe work with manufacturers, retailers’industry organisations and governmentbodies around the world, serving a widerange of industries. Our expertise coversdomestic appliances, consumer and homeelectronics, automotive components,heating ventilation and air conditioningequipment, cables and wiring accessories,industrial machinery, medical devices,information technology andtelecommunications, lighting, semi-conductor manufacturing and buildingproducts.

Our strengthsTo provide a local service to globalcompanies, we operate near their mainmanufacturing centres worldwide. We aimto provide our customers with the industry’smost comprehensive range of testing andcertification services. Our experience andknowledge of products, standards, marketsand regulatory regimes together with ourefficient turnaround time, means that wecan help manufacturers achieve thequickest time to market thereby maximisingtheir revenue potential, which makes us anideal partner in any fast moving industry.

Our opportunities and strategiesThe pace of new product developmentcontinues to grow, making fast turnaroundtesting and certification increasinglyimportant. The migration of manufacturingto developing countries in Asia, especiallyChina, is also driving our business. We haveresponded to this change by expandingour facilities in Asia. Our network oflaboratories and offices in Asia means wecan provide our Asian customers with thesame level of service as those in the West,including access to our US and EUcertification services.

Manufacturers exporting to newgeographical markets need to comply withan ever wider range of regulations andstandards, and we continue to expand ourportfolio of approvals to help them do this.Our Global Market Access Programmenow helps manufacturers to gain thecertifications needed to sell in over 55countries around the world.

As retailers continue to develop their “ownbrand” electrical and electronic products,our benchmarking and performance testingexpertise, together with our knowledge ofconsumer behaviour, enable us to offerretailers confidence in their product quality.

Unrivalled flexibility and responsiveness atevery level of our division enables us to addgreater value to our customers.

16COUNTRIES

53OFFICES

50LABORATORIES

2486EMPLOYEES

NUMBER OF ETL LISTED PRODUCTS

2004

2003

2002

2001

2000’000 0 5 10 15 20 25 30 35 40

www.intertek-etlsemko.com

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www.intertek.com

Senior Management(From left to right)Jason QinIan KitchinRob DilworthGregg Tiemann

Working with Governments, StandardsBodies, and Customs Departments tocheck that import duty is properly declaredand paid, and that imports comply withtheir safety and other standards.

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DIVISIONAL SALES

“The work that Intertek hasperformed has been veryprofessional and to a highstandard. Their work hashelped increase import dutyrevenues, reduce smugglingand facilitate trade.”The Government of Nigeria

£68mWhat we doForeign Trade Standards provides arange of services to National StandardsOrganisations, Governments, CustomsDepartments and industrial companies.

National Standards Organisations retainus to ensure that imports comply withrelevant safety, quality and otherstandards. Goods and commodities aretested and/or inspected before shipment.This prevents dumping of unsafe goods,and improves the quality of goodsimported and sold in the country.

Ministries of Finance retain us to increaseimport duty and to work with Customs toimprove efficiency. Imports are inspectedand valued in the country before shipment.Import duties are then accurately assessedand certified, allowing them to becollected by Customs.

Container scanning solutions areimplemented on behalf of Ministries ofTransport and Finance to protect againstsecurity risks associated with internationaltrade. Partnerships with UK Customs andEurotunnel gives customers the widestrange of support on these contracts.

The Intertek ADVANTAS® Advanced TradeAssessment System provides valuationinformation and advice, together with riskmanagement software systems.

Technical inspection services focused onthe oil and gas sectors are provided toensure subcontractors use the rightmaterials, manufacture to correctspecifications and deliver on schedule.

Our customersWe are contracted by Ministries of Financeand Transport, Customs Departments,National Standards Bodies and by majorsuppliers to the oil and gas sector.

Our strengthsWe have a global network, enabling us toinspect, certify and/or value a shipment forexport, rapidly, anywhere in the world. Our office network is supported by theIntertek Group’s worldwide laboratorycoverage. We provide importers andexporters with a range of e-business toolsthat enhance our service. This includesautomated e-mail information systems,online ordering and secure ‘electroniccertificates’ sent by e-mail.

Our opportunities and strategiesThere are good opportunities for growthas we continue to expand our servicesto our existing customers and wincontracts with new customers. Weexpect to increase sales of our IntertekADVANTAS® tools and services, andcontainer scanner solutions.

31COUNTRIES

45OFFICES

1018EMPLOYEES

VALUE OF IMPORTS INSPECTED

US$BILLIONS

2004

2003

2002

2001

20000 5 10 15 20

www.intertek-fts.com

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www.intertek.com

Senior Management(From left to right)Brian KingRob DilworthIan KitchinNigel Harvey


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RAM works with clients to assess andreduce the hazards associated withproducts before the products are produced– incorporating product safety into everyfacet of the business process. RAM drawsupon an impressive array of industryleading intelligence, research, andtechnology, as well as resources within a client’s organisation, to create andimplement essential safety solutionsand processes that protect the brandand contribute to brand value.

It’s a proven approach that impacts thesuccess of a business by delivering adistinct competitive advantage.

RAM Consulting, a specialist division ofLabtest, is committed to advancing thesafety industry through innovation inresearch, evaluation and education.

“RAM has provided us withleading-edge knowledgeand processes to assess thesafety of our products aswe design them, giving usconfidence that we will askthe right questions and findthe right solutions to anyproblem.” Kraft Foods

Senior ManagementGene Rider

www.intertek-ram.com

www.intertek.com

Intertek offers a broad range ofcertification and accreditation marks,accepted in markets around the worldas symbols of quality and integrity.


Chairman’s statement14

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ResultsI am very glad to announce an excellentset of results for the year. It is particularlygratifying to see that these results are thesum of strong performances at each ofour divisions. At actual exchange rates,turnover in 2004 was £499.6m, 6.0%above 2003 and operating profit beforegoodwill amortisation and exceptionaloperating items was £85.2m, 11.8%above 2003.

DividendsThe Board is recommending a finaldividend of 7.0p per share (2003: 5.9p)making a full year dividend of 10.4p pershare (2003: 8.8p) an increase of 18.2%over last year.

Board changesAfter leading the Intertek Group for morethan 20 years, Richard Nelson is retiring asChief Executive Officer in March this year,but we are pleased that he has agreed tobecome Non-Executive Deputy Chairman.Richard has brought his skills and energy tobear in every area of the Group and hispersonal contribution has been absolutelyfundamental to building the Group up toits present size and vigour. We are deeplygrateful to him.

We are very pleased that Wolfhart Hausersucceeds Richard as Chief Executive Officerof the Group in March this year. Wolfharthas been a Non-Executive Director of theGroup since 2002 and before that, wasChief Executive of TÜV Süddeutschland, oneof Germany’s leading testing organisations.In Wolfhart, we have a CEO with detailedknowledge of the industry and Intertekand we are confident that he can bringcontinued success to the company. I am also delighted that Raymond Kongjoined the Board as a Director in May2004. Raymond has been with the IntertekGroup for over 30 years and is Executive

President of China & Asia and ChiefExecutive of Labtest. His record at Labtestspeaks for itself and his appointment willadd another layer of continuity andexpertise to the Board.

Charitable donations The tsunami earthquake on 26 December2004, had a devastating effect on some ofthe countries in Asia in which the Groupoperates. I am relieved that no Intertekemployees were lost in the disaster andthe Intertek businesses were not directlyaffected. In order to support the reliefeffort, in 2005, the Group donatedUSD 250,000 to the Tsunami DisasterAppeal fund.

EmployeesOn behalf of the Board, I would like to takethis opportunity to thank all of the Group’sstaff for their hard work and dedicationduring the year. Intertek employs over13,500 people in 102 countries and it isthe contribution of local employees in theirhome countries that is Intertek’s greatstrength and which has delivered thisexcellent result for the year.

OutlookThe Group will continue to focus onextending the services we offer tocustomers. The key growth drivers remainstrong and we are confident that the manynew opportunities to develop bothorganically and through acquisitions willenable us to continue to perform.

Vanni TrevesChairman

7 March 2005

The Group continues to generate strongorganic growth supplemented bycomplementary acquisitions.

“I am very glad to announcean excellent set of results for the year.”Vanni Treves

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www.intertek.com

GrowthIn 2004, each of our divisions achievedexcellent growth in turnover and operatingprofit at both constant and actual exchangerates. At actual exchange rates, turnover in2004 was £499.6m, 6.0% above 2003 andoperating profit was £85.2m, 11.8% above2003. Approximately 80% of Intertek’sprofits were in US dollars or currencies thatmove in line with the US dollar. The averagevalue of the US dollar compared to sterlingin 2004 has declined by 12% since 2003which reduced the results on translationinto sterling. At constant exchange rates,turnover grew by 14.5% and operatingprofit grew by 23.5%. Despite the currencyeffect, the underlying earnings per shareincreased by 22.2% to 36.3p.

LabtestLabtest continued to perform very strongly.Turnover in 2004 was £132.3m which was11.2% above 2003, at constant exchangerates. Excluding the results of acquisitionsand disposals in 2003 and 2004, atconstant exchange rates, turnover grew13.5%. The most significant growth areasin Labtest continued to be the testing oftextiles, toys and hardlines, particularlyin China and Hong Kong, where the keybusiness drivers remained strong.

Caleb BrettCaleb Brett reported strong growth in 2004with turnover of £177.3m, up 12.3% atconstant exchange rates. Whilst marketconditions improved compared to last yeardue to higher volumes of shipments, themain source of growth continued to beoutsourced testing. This business grew by34%, increasing its contribution todivisional turnover from 25% to 30%.Several new contracts were gained in theyear, including business from Avecia,ChevronTexaco, ExxonMobil, BP and Shell.

ETL SEMKOETL SEMKO reported strong growth in2004 with turnover of £122.4m, up 19.4%at constant exchange rates. Excluding theresults of acquisitions, turnover grew 8.0%at constant exchange rates. The mainacquisition was Entela Inc, an automotivecomponent testing business located inthe US, which ETL SEMKO acquired inMay 2004. Turnover in Asia increased,particularly in China where the demandfor safety testing of home appliancescontinued to grow.

Foreign Trade StandardsIn Foreign Trade Standards, turnover in2004 was £67.6m, up 19.0% over 2003at constant exchange rates. The growthwas principally due to the pre-shipmentinspection contract in Venezuela whichstarted in the second half of 2003, anddue to the other main contractsperforming well.

Acquisitions and disposalsDuring 2004 we made seven acquisitionsand two disposals for a net considerationof £27.6m, of which the following arethe most significant. In April, Caleb Brettacquired the assets of Vestfold TelemarkMetering, a consultancy company offeringmetering services in Norway, for £1.0m. InMay, Avecia outsourced its AnalyticalSciences Group to Caleb Brett in the UK,which involved the acquisition of assets for£4.4m. Also in May , ETL SEMKO boughtEntela Inc., a US automotive componenttesting business for £16.2m. In December,Caleb Brett bought the assets of KelleyCompletion Services, an offshore oil andgas measurement business operating inthe Gulf of Mexico, for £5.3m. Excludingthe results of acquisitions and disposals in2003 and 2004, at constant exchangerates, Group turnover grew 11.6% andoperating profit grew 20.1%.

RetirementAfter more than 20 years leading Intertek, I have decided to retire in March this yearfrom my role as Chief Executive Officer. I will then serve on the Board as Non-Executive Deputy Chairman. I am delightedthat Wolfhart Hauser is becoming ChiefExecutive Officer and am confident thatunder his leadership the Group willcontinue to drive growth and produceexcellent value for its customers andreturns for its shareholders.

Richard NelsonChief Executive Officer

7 March 2005

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Chief Executive Officer’s statement

“The excellent results are due to thestrength of the Intertek managementand employees and their ability toidentify and develop profitableopportunities which benefitour customers.”Richard Nelson


Board of Directors and Executive Management Team16

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Vanni Treves (64)Chairman Appointed to the Board in January 2001*.He became Chairman in April 2001. He isa solicitor, specialising in corporate lawand governance. For 30 years he was aPartner (for 12 of them Senior Partner) ofMacfarlanes, a major law firm in the Cityof London. He has been Chairman ofthree listed companies and Channel FourTelevision. Currently he is Chairman ofEquitable Life Assurance Society, Korn/FerryUK and the London Business School. He isalso a Governor of The College of Law andSadler’s Wells, a Trustee of the J Paul GettyCharitable Trust, Solicitor to The RoyalAcademy and Chair of the NationalCollege for School Leadership.

Wolfhart Hauser (55)Chief Executive OfficerAppointed to the Board as a Non-ExecutiveDirector in November 2002. He becameChief Executive Officer of the Group from1 March 2005. He started his career as ascientist and medical doctor. He thenjoined the service industry establishing andleading a broad range of successful servicebusinesses over the past 24 years. For tenyears he was Chief Executive Officer ofTÜV Product Service growing the testingand certification business to a leadinginternational position. From 1998 to2002 he was Chief Executive Officer andPresident of TÜV Süddeutschland AG, thelargest testing, inspection and certificationcompany in Germany.

Richard Nelson (62)Chief Executive Officer(until 31 March 2005)Appointed to the Board as a Director in1996*. He was Chief Executive Officer of the Group since its acquisition from

Inchcape plc in 1996 and will becomeDeputy Chairman from 8 April 2005. Prior to the acquisition, he was Presidentand Chief Executive Officer of lnchcapeTesting Services Ltd from 1987. Beforethat he was Chief Executive Officer ofTranscontinental Services Ltd which wasbought by lnchcape plc in 1985. He is aChartered Accountant with a Master ofScience degree in Economics.

Bill Spencer (45)Chief Financial OfficerAppointed to the Board as a Director in1996*. He has been Chief Financial Officerof the Group since its acquisition fromInchcape plc in 1996. Prior to theacquisition he was Finance Director oflnchcape Testing Services Ltd after servingas Chief Financial Officer of Caleb Brett forEurope, Middle East and Asia since 1992.Previously he had worked for Olivetti UKLtd, Rexam PLC and Centrica plc in variousfinancial positions. He has a Bachelor ofScience degree in Management Sciencesand is a Fellow of the Chartered Institute ofManagement Accountants and a memberof the Association of Corporate Treasurers.

David Allvey (59)The Senior Independent DirectorAppointed to the Board as a Non-ExecutiveDirector in May 2001*. He started hiscareer in civil engineering and thenqualified as a Chartered Accountant andhas worked in retailing, financial services,cosmetics, paper, pulp and plastics formajor international businesses. He hasbeen Group Finance Director for BATIndustries and Barclays Bank plc and wasChief Operating Officer for Zurich FinancialServices. He is currently a Non-ExecutiveDirector of Britannic Assurance plc, CostainGroup plc, William Hill plc and MyTravel

8 9 3 2 1

1 Vanni Treves †2 Wolfhart Hauser †‡

3 Richard Nelson †‡

4 Bill Spencer †‡

5 David Allvey †6 Ross Sayers †7 Raymond Kong †‡

8 Mark Loughead ‡9 Rob Dilworth ‡

† Board member‡ Executive Management Team

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www.intertek.com

Group Plc. He was a board member of theUK Accounting Standards Board for 10 years until Autumn 2003.

Ross Sayers (63)Non-Executive Director Appointed to the Board as a Non-ExecutiveDirector in April 2002*. He is a FellowChartered Accountant (NZ) and has broadinternational experience in diverseindustries. He is currently Chairman of theMacquarie European Infrastructure FundAdvisory Panel, a Director of Network Railand A-Train AB (Stockholm) and Chairmanof MGN Gas Networks (UK) Ltd. He waspreviously Chairman of Innogy Holdingsplc and Associated British Ports Holdingsplc, Chief Executive Officer and ManagingDirector of China Light and Power Ltd(Hong Kong), Executive Chairman of theState Rail Authority of New South Wales(Australia) and New Zealand RailwaysCorporation, and Managing Director ofNew Zealand Breweries Ltd.

Raymond Kong (57)Executive PresidentAppointed to the Board as a Director inMay 2004. He has been a member ofthe Executive Management Team sinceJanuary 1998. Based in Hong Kong, heis Executive President of China and Asiaand Chief Executive of Labtest. He wasone of the founders of the Labtest divisionand has been with Intertek for over 30years. He was responsible for creatingthe global Labtest network and servicediversification. He also serves on anumber of advisory committees forThe Government of The Hong KongSpecial Administrative Region.

Mark Loughead (45)Executive Vice PresidentAppointed a member of the ExecutiveManagement Team in December 2002.He is Chief Executive of Caleb Brett andis based in Houston, Texas. Previously hewas Vice President of Caleb Brett in theAmericas and prior to that he was VicePresident of Caleb Brett in Europe, MiddleEast and Africa. He joined the Group in1988 as Operations Manager of Caleb Brettin Aberdeen and was promoted to ScottishRegional Manager in 1993. Prior to joiningIntertek, he spent 13 years at Inspectorateincluding six years in the Middle East.

Rob Dilworth (43)Executive Vice PresidentAppointed a member of the ExecutiveManagement Team in January 1999. He isChief Executive of ETL SEMKO and ForeignTrade Standards, and based in the UK. Hejoined the Group in 1978 as a chemist/inspector with Caleb Brett. He wasappointed Director of EnvironmentalTesting Services in the UK in 1988 andfurther promoted to Regional DirectorEnvironmental, Europe, Middle East andAfrica in 1994. After a break of servicefrom September 1997 to September 1998when he worked for BSI, he rejoinedIntertek as Vice President of Foreign TradeStandards Eastern Hemisphere. He has aMasters degree in Business Administration.

* Appointed to the Board of Intertek Testing ServicesLtd which was the previous parent company prior tothe Group reorganisation and appointed to theBoard of Intertek Group plc in April/May 2002

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Compliance and internal control18

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Many of Intertek’s primary businessobjectives relate to compliance: weensure that we conform to local, nationaland international laws, and we requireour employees to show integrity andhonesty in all business dealings. Riskmanagement and internal controls areembedded in the running of eachdivision, assuring the accuracy andvalidity of reports and certificates thatwe provide to customers.

ResponsibilityThe Audit Committee is responsible forensuring that compliance remains centralto our culture. It sets policies andprocedures for identifying and measuringrisk and for preventing breaches ofcompliance rules. Ultimately, it is theDirectors who are responsible forestablishing and maintaining thesystem of internal control and forreviewing its effectiveness.

The Audit Committee comprises threeNon-Executive Directors, DP Allvey(Chairman), RE Sayers and VE Treves.As VP Compliance, I report to the AuditCommittee and administer the policies andprocedures on their behalf. Reporting tome are dedicated Compliance Officersfrom each division who co-ordinate thequality assurance auditors. Also reportingto me are a centrally managed financialaudit team and a claims management team.

Implementation and enforcementAll employees have to sign and comply withthe Group’s Code of Ethics by applying itsprinciples in all their business dealings. Theyknow that the Zero Tolerance Policy willdeal with breaches harshly. An externally

managed telephone hotline is used foranonymous reporting of any matters ofconcern, but it is regular internal auditing,training, development and appraisal of ourpeople that really drives our strong culture.In 2003, we adopted the new InternationalFederation of Inspection Agencies (IFIA)Compliance Code. This document is new inthe industry as it combines businessintegrity, anti-bribery and fair marketingprinciples in one code and requires all IFIAmembers to adopt it and be independentlyaudited to it. The roll out of this code isworld wide with face to face training beinggiven to all staff. 2004 was the first yearthat this code was subjected to externalreview and reporting.

The teams of Compliance Officers andquality assurance auditors regularly carryout ethical audits and checks to make surethat the reported test results are properlyextracted from the raw scientific data andthat testing is performed thoroughly. Thesechecks are applied through all of our sitesat least once a year and more often in thelarger sites.

Internal financial audits include theidentification and investigation of anyunusual or suspect transactions to ensure that local managers comply withthe Group’s ethical standards.

Each geographic region has an internalauditor who reports to the Head of InternalAudit and is independent of the divisions.The main reporting sites are reviewedannually. The other sites are all reviewedregularly on a schedule based onmateriality and risk. The internationalinternal audit department has been

awarded ISO 9001:2000 accreditation;one of the few internal audit teams inthe UK to have achieved this standard.We have a well established risk basedmanagement system. As part of thisprocess, 120 senior managers across alldivisions identify and measure risks withintheir own specialist areas. Panels havebeen set up, first to define the risks andthen to design and implement internalcontrols to mitigate them.

Tight internal controls, comprehensive andregular internal audits and a best practiceculture ensure that our customers receiveaccurate and reliable results from ourtesting, certification and inspections. Intoday’s litigious, fast moving, qualityconscious environment, we provide peaceof mind, with a service that our customershave come to rely upon.

Nigel LucasVice President Compliance

7 March 2005

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“We require our employees toshow integrity and honesty inall business dealings.”Nigel Lucas

Statement of the independent auditorsto the members of Intertek Group plcpersuant to section 251 of the Companies Act 1985

www.intertek.com

We have examined the summary financialstatement, set out on pages 20 to 23 ofthis document.

This statement is made solely to theCompany’s members, as a body, inaccordance with section 251 of theCompanies Act 1985. Our work has beenundertaken so that we might state to theCompany’s members those matters weare required to state to them in such astatement and for no other purpose. Tothe fullest extent permitted by law, we donot accept or assume responsibility toanyone other than the Company and theCompany’s members as a body, for ourwork, for this statement, or for theopinions we have formed.

Respective responsibilitiesof Directors and auditorsThe Directors are responsible for preparingthe Annual Review in accordance withapplicable United Kingdom law. Ourresponsibility is to report to you ouropinion on the consistency of the summaryfinancial statement within the AnnualReview with the full annual financialstatements, Directors’ report and theDirectors’ remuneration report, and itscompliance with the relevant requirementsof section 251 of the Companies Act 1985and the regulations made thereunder. Wealso read the other information containedin the Annual Review and consider theimplications for our report if we becomeaware of any apparent misstatements ormaterial inconsistencies with the summaryfinancial statement.

Basis of opinionWe conducted our work in accordancewith Bulletin 1999/6 ‘The auditor’sstatement on the summary financialstatement’ issued by the Auditing PracticesBoard for use in the United Kingdom. Ourreport on the Group’s full annual financialstatements describes the basis of our auditopinion on those financial statements.

OpinionIn our opinion, the summary financialstatement is consistent with the full annualfinancial statements, the Directors’ reportand the Directors’ remuneration report ofIntertek Group plc for the year ended 31December 2004 and complies with theapplicable requirements of section 251of the Companies Act 1985 and theregulations made thereunder.

KPMG Audit PlcChartered AccountantsRegistered AuditorLondon

7 March 2005

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Summary directors’ report20

21

This report is a summary of the Directors’report which is included in the AnnualReport and Accounts for 2004.

The Group’s principal activities are thetesting, inspection and certification ofproducts and commodities against a widerange of safety, regulatory, quality andperformance standards. A review of theCompany and its subsidiaries’ businessesand likely future developments is given onpages 2 to 12 in the Annual Report andAccounts 2004.

DirectorsThe Directors of the Company who servedduring the year are set out below.

VE Treves ChairmanRC Nelson Chief Executive OfficerW Spencer Chief Financial OfficerDP Allvey Non-Executive DirectorW Hauser Non-Executive Director RE Sayers Non-Executive Director R Kong Executive President

China and Asia

RC Nelson and VE Treves retire by rotationand being eligible, offer themselves for re-election at the forthcoming AnnualGeneral Meeting. R Kong was appointedduring the year and offers himself forelection.

On 1 March 2005, W Hauser wasappointed joint Chief Executive Officer.On 31 March 2005, RC Nelsonwill cease to be Chief Executive Officerand will be an Executive Director until8 April 2005, when he becomes Non-Executive Deputy Chairman.

Summary remuneration reportThis report is a summary of theRemuneration report which is included inthe Annual Report and Accounts for 2004.

Remuneration CommitteeThe Remuneration Committee determines,on behalf of the Board the Company’spolicy on the remuneration of ExecutiveDirectors and senior management.The Committee determines their totalremuneration packages including anycompensation on termination of office.The Committee also provides advice andconsults with the Chief Executive Officeron major policy issues affecting theremuneration of senior executives. Toensure that the Group’s remunerationpractices are market competitive, theRemuneration Committee takes advicefrom various independent sources. TheCommittee met nine times during 2004.The members of the Committee are DPAllvey (Chairman), RE Sayers and VE Treves.

Remuneration policyThe Committee’s policy is to attract,retain, motivate and reward high calibreindividuals to ensure the future success ofthe business and to deliver shareholdervalue. It sets the terms of service contractsand any changes to the terms ofemployment of the Executive Directors.

Directors’ remunerationTotal Directors' remuneration in 2004 (orfrom the date of appointment) comprisedemoluments of £1.5m (2003: £1.0m)and pension contributions of £0.2m(2003: £0.2m).

One Executive Director is a member of theIntertek UK Company Pension Schemewhich is a defined benefit scheme formembers who joined prior to 1 April 2002,and one Executive Director is a member ofthe Hong Kong Retirement Scheme whichis a hybrid scheme combining a definedbenefit plan and a defined contributionplan for members who joined prior to1 December 2001.

Performance GraphTotal Shareholder Return (TSR), comprisingthe changes in value of a share anddividends distributed can be represented bythe value of a notional £100 invested at thebeginning of a period and its change overthat period.

The graph below shows TSR in respect ofthe Group since flotation on 24 May 2002.The TSR for the Group is compared withthe TSR for the FTSE Mid 250 index. TheFTSE Mid 250 index was selected, as it is abroad market index of which the Group isa member. In addition, the Group uses thatgroup of companies, amongst others, forcomparison of pay and benefit levels.

Jun

02

Sep

02

Sep

04

Dec

02

Mar

03

Jun

03

Sep

03

Dec

03

Mar

04

Jun

04

Dec

04

Intertek (rebased) FTSE Mid 250 (rebased)

60

80

100

140

180

160

120

Total Shareholder Return

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Summary group profit and loss accountfor the year ended 31 December 2004

Pre- Pre-exceptional Exceptional exceptional Exceptional

items items Total items items Total2004 2004 2004 2003 2003 2003

£m £m £m £m £m £m

Turnover – continuing operations 499.6 – 499.6 471.1 – 471.1

Operating profit/(loss) before goodwill amortisation 85.2 – 85.2 76.2 (1.1) 75.1Goodwill amortisation (1.5) – (1.5) (1.0) – (1.0)

Total operating profit 83.7 – 83.7 75.2 (1.1) 74.1

Continuing operations 83.7 – 83.7 75.2 (3.7) 71.5Discontinued operations – – – – 2.6 2.6

Non-operating exceptional items – – – – 4.5 4.5

Profit on ordinary activities before interest 83.7 – 83.7 75.2 3.4 78.6Net interest and similar charges (5.2) (2.7) (7.9) (8.0) – (8.0)

Profit on ordinary activities before taxation 78.5 (2.7) 75.8 67.2 3.4 70.6Taxation on profit on ordinary activities (20.8) 0.5 (20.3) (18.7) (0.1) (18.8)

Profit on ordinary activities after taxation 57.7 (2.2) 55.5 48.5 3.3 51.8Attributable to minorities – equity interests (2.8) – (2.8) (3.7) – (3.7)

Profit for the financial year 54.9 (2.2) 52.7 44.8 3.3 48.1Dividends (16.1) – (16.1) (13.6) – (13.6)

Retained profit for the year 38.8 (2.2) 36.6 31.2 3.3 34.5

Earnings/(loss) per share

Basic 35.6p (1.5)p 34.1p 29.1p 2.2p 31.3p

Diluted 35.3p (1.4)p 33.9p 29.0p 2.1p 31.1p


22

23

Summary statement of group cash flowfor the year ended 31 December 2004

2004 2003£m £m

Group operating profit after exceptional items 82.5 72.9Depreciation charge and loss on disposal of fixed assets 18.6 19.1Goodwill amortisation 1.5 1.0Increase in working capital (0.7) (13.0)

Net cash inflow from operating activities 101.9 80.0Dividends from associated undertakings 0.8 0.7Returns on investments and servicing of finance (9.4) (10.1)Taxation (16.0) (13.7)Capital expenditure and financial investment (28.0) (23.6)Acquisitions and disposals (26.3) (1.2)Equity dividends paid (14.4) (12.5)

Cash inflow before financing 8.6 19.6Financing:

Net issue of shares 1.1 (0.1)Decrease in debt (36.3) (6.8)

(Decrease)/increase in cash in the year (26.6) 12.7

2004 2003£m £m

(Decrease)/increase in cash in the year (26.6) 12.7Decrease in debt 36.3 6.8

Decrease in net debt resulting from cash flows 9.7 19.5Acquisitions and disposals (0.3) 0.5Other non-cash movements (2.8) (1.0)Exchange adjustments 13.2 15.7

Decrease in net debt in the year 19.8 34.7Net debt at the start of the year (132.2) (166.9)

Net debt at the end of the year (112.4) (132.2)

Reconciliation of net cash flow to movement in net debtfor the year ended 31 December 2004

Summary group balance sheetat 31 December 2004

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2004 2003£m £m

Fixed assets 127.2 96.8

Current assets 163.8 188.2Creditors due within one year (120.2) (109.6)

Net current assets 43.6 78.6

Total assets less current liabilities 170.8 175.4Creditors due after more than one year (151.4) (197.6)Provisions for liabilities and charges (6.0) (8.6)

Net assets/(liabilities) excluding pension schemes 13.4 (30.8)Pension liabilities (11.3) (5.1)

Net assets/(liabilities) 2.1 (35.9)

Capital and reservesCalled up share capital 1.5 1.5Reserves* (5.1) (44.6)

Shareholders’ deficit (3.6) (43.1)Minority shareholders’ equity interest 5.7 7.2

Capital employed – equity 2.1 (35.9)

* Included in reserves is £229.9m (2003: £244.1m) relating to goodwill written off to reserves in relation to subsidiaries acquired prior to 31 December 1997.

The summary financial statementThe summary financial statement has been produced to allow readers an overview of the financial affairs of Intertek Group plc and itssubsidiaries (the Group), without the need to refer to the full annual accounts together with the Directors’ report and auditor’s report onthose accounts. The independent auditor’s report on the full Financial Statements of the Group for the year end 31 December 2004 wasunqualified and did not contain any statement under section 237(2) of the Companies Act 1985 concerning inadequate accountingrecords and under section 237(3) concerning failure to obtain necessary information and explanations.

The summary financial statement in this Annual Review does not contain sufficient information to allow for a full understanding of theresults of the Group and state of affairs of the Company or of the Group and of their policies and arrangements concerning Directors’remuneration, as would be provided by the full Annual Report and Accounts.

For further information the full Annual accounts and the auditor’s report on those accounts and the Directors’ report should beconsulted. Copies of the Annual Report and Accounts may be obtained, free of charge, from:

Company SecretaryIntertek Group plc25 Savile RowLondon W1S 2ES

This summary financial statement was approved by the Directors on 7 March 2005, and signed on their behalf:

Bill SpencerChief Financial Officer


Corporate and shareholder information24

Financial year end 31 December 2004

Results announced 7 March 2005

Annual General Meeting 6 May 2005

Ex-dividend date for final dividend 1 June 2005

Record date for final dividend 3 June 2005

Final dividend payable 17 June 2005

Interim results announced September 2005

Interim dividend payable November 2005

Shareholder Enquiries andElectronic Communications –www.shareview.co.ukAny shareholders with enquiries relating totheir shareholding should, in the firstinstance, contact Lloyds TSB Registrars (atthe address shown opposite).

Shareholders who would prefer to viewdocumentation electronically can elect toreceive automatic notification by e-maileach time the Company distributesdocuments, instead of receiving a paperversion of such documents, by registeringa request at the Lloyds TSB Registrarswebsite, www.shareview.co.uk.

There is no fee for using this service andyou will automatically receive confirmationthat a request has been registered. Shouldyou wish to change your mind or request a paper version of any document in thefuture, you may do so by contacting theRegistrar by e-mail or by post.

To access www.shareview.co.uk, you willneed to have your shareholder referenceavailable when you first log in, which maybe found on your dividend voucher, sharecertificate or form of proxy.

The facility also allows shareholders to viewtheir holding details, find out how toregister a change of name or what to do if a share certificate is lost, as well asdownload forms in respect of changes of address, dividend mandates and share transfers.

Share dealing serviceA share dealing service for the purchase orsale of shares in Intertek is availablethrough Cazenove & Co, whose details areas follows:

Cazenove & Co (postal service)20 Moorgate, London EC2R 6DATelephone +44 20 7155 5155

ShareGiftThe Orr Mackintosh Foundation operatesa charity share donation scheme forshareholders with small parcels of shareswhose value makes it uneconomic tosell them. Details of the scheme areavailable from:

ShareGift at www.sharegift.org Telephone +44 20 7337 0501.

Share price informationInformation on the Company’s share priceis available from the Investor Relationspages of www.intertek.com, and fromthe UK via the FT Cityline ServiceTelephone 0906 003 2361 (calls are charged at 60p per minute at all times).

www.intertek.com

Contact us for information on the office or laboratory that can best serve your business needs.Information and e-mail available at www.intertek.com

Regional Head Offices

Intertek Group plc Worldwidewww.intertek.com T: +44 20 7396 3400E: [email protected] F: +44 20 7396 3480

RegistrarsLloyds TSB RegistrarsThe Causeway, WorthingWest Sussex BN99 6DAT: 0870 600 3983 (UK only)T: +44 121 415 7059

AuditorsKPMG Audit PlcPO Box 486, 8 Salisbury SquareLondon EC4Y 8BBT: +44 20 7311 1000

Registered OfficeIntertek Group plc25 Savile RowLondon W1S 2EST: +44 20 7396 3400F: +44 20 7396 3480

Company SecretaryFiona Evans

Registered number: 4267576ISIN: GB0031638363

Symbol: ITRK

BrokersCazenove & Co Ltd20 MoorgateLondon EC2R 6DAT: +44 20 7588 2828

Goldman Sachs InternationalPeterborough Court, 133 Fleet StreetLondon EC4A 2BBT: +44 20 7774 1000

Labtest Americas Europe Asiawww.intertek-labtest.com T: +1 973 346 5500 T: +33 2 3209 3636 T: +852 2173 8888E: [email protected] F: +1 973 379 5232 F: +33 2 3209 3637 F: +852 2786 1903

Caleb Brett Americas Europe Asiawww.intertek-cb.com T: +1 713 407 3500 T: +44 1708 680200 T: +65 6222 3889E: [email protected] F: +1 713 407 3529 F: +44 1708 680262 F: +65 6222 2383

ETL SEMKO Americas Europe Asiawww.intertek-etlsemko.com T: +1 800 967 5352 T: +46 8 750 0000 T: +86 21 6495 6565E: [email protected] F: +1 978 264 9403 F: +46 8 750 6030 F: +86 21 6495 6263

Foreign Trade Standards Americas Europe Asiawww.intertek-fts.com T: +1 305 513 3000 T: +44 1277 223400 T: +65 6285 7557E: [email protected] F: +1 305 513 3001 F: +44 1277 220950 F: +65 6382 8662

RAM Consulting Americas Europe Asiawww.intertek-ram.com T: +1 630 623 6060 T: +44 207 665 6678 T: +852 2926 3920E: [email protected] F: +1 630 623 6074 F: +44 207 665 6839 F: +852 2926 3933

Intertek Group plcHead Office25 Savile RowLondonW1S 2ESUnited KingdomT: +44 20 7396 3400F: +44 20 7396 3480E: [email protected]

www.intertek.com

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