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Strong pound takes toll on testing group Intertek
Quality and testing group Intertek says rising pound turned profit gain to a decline
Testing company Intertek has become the latest major British business to reveal the extent to which the strong pound is holding back its progress, with revenue and profits both declining.
The FTSE 100 group, which tests the quality and safety levels of products ranging from jeans to oil, said first half revenue fell 5.6pc to £1.02bn and operating profit was 3.8pc lower at £152.3m.
However, measured at constant currency levels, Intertek said these figures would have risen by by 2.9pc and 5.1pc respectively. Over the past year sterling has strengthened by about 10pc against the US dollar and euro.
The company has more than 1,000 laboratories in 100 countries testing products to see if they meet regulatory standards and Wolfhart Hauser, Intertek chief executive, said this global spread meant the company, which reports in sterling, suffered because of currency translations.
“The real hit that we had to take is the currency ... because we are trading in more than 80 different currencies and the pound nearly strengthened to all of them,” he said in a Reuters interview.
Looking to the future the company is reducing its minerals business to reflect the end of the commodities boom but is also positioning itself to capitalise on populations’ increasing wealth in developing markets, with richer consumers demanding higher standards.
“Our product divisions are strongly leveraged to increasing middle-class demand for quality in emerging markets, expanding regulation and product variety,” he said.
Scandals over the quality of food can boost demand for services offered by companies operating in Intertek’s field. Last month McDonald’s was forced to withdraw some of the products on its menu in China after a Shanghai television station alleged that one of the fast-food giant’s suppliers was providing it with meat which had passed its sell-by date. McDonald’s, which Intertek lists as a client, said on Monday it would return to a full menu in some Chinese this week.
Analysts at Shore Capital said the results were below their forecasts and were also unsure whether Intertek would achieve the growth it hoped in the second half.