Intertek PLC (LON:ITRK) shares fell today despite the bluerchip inspection, product testing and certification group saying it is on track to deliver 2017 targets and delivering solid revenue growth in the first four months of the year, as tough conditions continue for its Resources business.
In a trading update for the period to April 30, the FTSE 100-listed firm said: "In the first four months of the year, the Group has delivered revenue of £883.5m, up 14.2% year on year at actual rates and up 1.8% year on year at constant rates, driven by solid organic growth of 0.9% and a good performance of the acquisitions we made in attractive growth and margin sectors.”
READ: Intertek raises full year dividend as it sounds confident outlook on revenue
It added: “We are on track to deliver our 2017 targets of solid organic revenue growth at constant rates, with moderate margin expansion and strong cash conversion.”
Intertek also said: “The Products and Trade related divisions, which represent over 90% of the Group's earnings, delivered broad-based 5.5% organic revenue growth at constant rates while, as expected, trading conditions continued to be challenging in the Resources related division.”
Resources trough not reached
The firm does not believe that it has “reached the trough” in the Resources division.
“We expect the trading conditions to remain challenging and we continue to be focused on cost and capacity management,” it said
Intertek also noted that it “is well positioned to seize the attractive external growth opportunities in a very fragmented industry and we continue to make progress with our M&A strategy.”
“We struggle to justify the valuation on a fundamental basis", say analysts
In early morning trading, however, Intertek shares were 2.7%, or 115p lower at 4,199p.
In a note to clients, analysts at Liberum Capital said: “We continue to view Intertek as high quality and we like the focus on ascertaining and improving service levels for clients.
“However, on the back of Sterling weakness and we believe on expectations of slowing oil headwinds, the shares have rallied strongly since November.“
They added: “We struggle to justify the valuation on a fundamental basis feeling a recovery is already priced in, with a FY2017F PE of 23x and retain our sell recommendation.”
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