Intertek Group PLC (LSE:ITRK) shares dropped 7% in early trading after its half-year results disappointed against expectations, with one analyst describing the outcome as “a little light” versus consensus.
The testing and assurance group reported revenue of £1.67 billion for the first half, up 4.5% at constant currency but flat at actual rates.
Adjusted operating profit grew 9.7% at constant currency to £276 million, while adjusted earnings per share rose 12.6%. Margin improvements were driven by portfolio mix, pricing, cost control and productivity gains, with adjusted margins up 80 basis points to 16.5%.
All core divisions posted like-for-like revenue growth, led by Corporate Assurance and Consumer Products, which grew 8.2% and 7.9% respectively.
Cash generation remained strong, with adjusted operating cash flow at £266 million and cash conversion of 118%. The company increased its interim dividend by 6.3% to 57.3p per share and continued its £350 million share buyback, with £187 million already completed.
Despite a robust operational performance and continued investment in growth areas such as AI and industry innovations, market reaction was muted.
The guidance for the full year remains for mid-single digit revenue growth and further margin progress, with management confident in meeting medium-term targets.
The shares fell 390p to 4,550p. "We struggle to see where the valuation upside for Intertek emerges in the medium-term," said Shore Capital in a note.
Its discounted cash flow analysis suggests a fair value around 4,500p 'range'.