Intertek : Annual Financial Report

RNS Number : 8827G

Intertek Group PLC

20 March 2020

INTERTEK GROUP PLC

(the 'Company')

20 March 2020

ANNUAL REPORT AND ACCOUNTS 2019 AND NOTICE OF 2020 ANNUAL GENERAL MEETING

In accordance with Listing Rule 9.6.1R and Disclosure Guidance and Transparency Rule ('DTR') 4.1.3R, the Company announces that the following documents have been posted to shareholders and submitted to the UK Listing Authority via the National Storage Mechanism:

• Intertek Group plc 2019 Annual Report and Accounts;
• Notice of 2020 Annual General Meeting; and
• Proxy Form for the 2020 Annual General Meeting.

The above mentioned documents (except for the Proxy Form) are available on our website atwww.intertek.comand will shortly be available for inspection at www.morningstar.co.uk/uk/nsm. The 2020 Annual General Meeting is due to be held on Thursday,21 May 2020 at 9.00 a.m. in the Marlborough Theatre, No.11 Cavendish Square, London W1G 0AN.

In compliance with DTR 6.3.5R, the information contained in the Appendix below is extracted from the 2019 Annual Report and Accounts and should be read in conjunction with the Company's 2019 Full Year Results Announcement for the year ended 31 December 2019 issued on 3 March 2020. Both documents are available atwww.intertek.comand together constitute the material required by DTR 6.3.5R to be communicated to the media in unedited full text through a Regulatory Information Service. This material is not a substitute for reading the 2019 Annual Report and Accounts in full. Page numbers and cross references in the extracted information refer to page numbers and cross references in the 2019 Annual Report and Accounts.

Appendix

1. PRINCIPAL RISKS AND UNCERTAINTIES

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.

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 76 to 80.

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 pages 51 to 55, 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.

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. We added Brexit as a risk last year and have retained it because of the continuing political uncertainty. Although we are keeping Brexit developments under review, we do not at this stage perceive any material risk to the Company's viability arising from Brexit.

We have added two risks this year. The first is third-party relationships, which relates to how we manage the way in which we work with third parties (including landlords, suppliers, sub-contractors or agents) optimally from a financial, commercial, risk, governance, security or sustainability perspective. We have added this risk to reflect our increased focus on sustainability, including in our supply chains.

The second is Coronavirus (Covid-19), which relates to the outbreak of coronavirus which started inWuhan in December 2019 and has been declared a Public Health Emergency of International Concern by the World Health Organisation. It is too early to assess what impact the developing situation in China and other countries will have on our clients' resumption of production activities. We are working closely with our clients to mitigate the risks caused by the virus and maximise business continuity in our and their operations.

Operational

PRINCIPAL RISK	POSSIBLE	MITIGATION	2019 UPDATE
	IMPACT
Reputation	• Failure to meet	• Quality Management	This risk remains stable
Reputation is key to	financial	Systems; adherence to	compared with 2018.
the Group	performance	these is regularly audited	The Group continues to
maintaining and	expectations.	and reviewed by external
invest in staff
growing its business.	• Exposure to	parties, including
development, quality
Reputation risk can	material legal	accreditation bodies.
systems and standard
occur in a number of	claims, associated	• Risk Management
processes to prevent
ways: directly as the	costs and wasted	Framework and
operational failures.
result of the actions	management time.	associated controls and
of the Group or a	• Destruction of	assurance processes,
Group company	shareholder value.	including contractual
itself; indirectly due	• Loss of existing or	review and liability caps
to the actions of an	new business.	where appropriate.

Page 1 of 7

employee or	• Loss of key staff.	• Code of Ethics which is
employees; or		communicated to all staff,
through the actions		who undergo regular
of other parties,		training.
such as joint venture		• Zero-tolerance approach
partners, suppliers,		with regard to any
customers or other		inappropriate behaviour
industry participants.		by any individual
		employed by the Group,
		or acting on the Group's
		behalf.
		• Whistle-blowing
		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.
Customer	• May lead to	• Net Promoter Score	This risk remains stable
Service	customer	('NPS') customer	compared with 2018.
A failure to focus on	dissatisfaction and	satisfaction, customer
customer needs, to	customer loss.	sales trends and
provide customer	• Gradual erosion of	turnaround time tracking.
innovation or to	market share and	• Global and Local Key
deliver our services	reputation if	Account Management
in accordance with	competitors are	('GKAM'/'LKAM') initiatives
our customers'	perceived to have	in place.
expectations and our	better, more	• Customer feedback
customer promise.	responsive or more	meetings.
	consistent service	• Customer
	offerings.	claims/complaints
		reporting.
People Retention	• Poor management	• HR strategy policies and	This risk remains stable
The Group operates	succession.	systems.	compared with 2018.
in specialised sectors	• Lack of continuity.	• Development and
and	• Failure to optimise	reward programme to
needs to attract and	growth.	retain and motivate
retain employees	• Impact on quality,	employees.
with relevant	reputation and	• Succession planning to
experience and	customer	ensure effective
knowledge in order	confidence.	continuation of leadership
to take advantage of	• Loss of talent to	and expertise.
all growth	competitors and lost
opportunities.	market share.
Operational	• Individual or	• Quality management	This risk remains stable
Health,	multiple injuries to	and associated controls,	compared with 2018.
Safety and	employees	including safety training,
Security	and others.	appropriate PPE (Personal
Any health and	• Litigation or	Protective Equipment),
safety incident	legal/regulatory	Health & Safety policies
arising from our	enforcement action	(including due diligence
activities. This could	(including	on sub-contractors),
result in injury to	prosecution) leading	meetings and
Intertek's	to reputational	communication.
employees, sub-	damage.	• Avoiding fatalities,
contractors,	• Loss of	accidents and hazardous
customers and/or	accreditation.	situations is paramount. It
any other	• Erosion of	is expected that Intertek
stakeholders	customer	employees will operate to
affected.	confidence.	the highest standards of
		health and safety at all
		times and there are
		controls in place to
		reduce incidents.
Industry and	• Failure to	• GKAM and LKAM	This risk remains stable
Competitive	maximise revenue	initiatives in place.	compared with 2018.The
Landscape	opportunities.	• Diversification of	Group's results have been
A failure to identify,	• Failure to take	customer base.	impacted by the lower
manage and take	advantage of new	• Focus on new services	levels of capital
advantage of	opportunities.	and acquisitions.	expenditure in the
emerging and future	• Lack of ability to	• Tracking new laws and	energy sector, driven by
risks. Examples	respond flexibly.	regulations.	lower oil prices, but more
include the	• Erosion of market	• Regular strategic and	than offset by the diverse
opportunities	share.	business line reviews.	nature of the Group and
provided by new	• Impact on share	• Development of ATIC-	its ability to grow
markets and	price.	selling initiatives.	revenue and manage the
customers, a failure	• Failure to respond	• NPS customer research	cost base.
to innovate in terms	to macroeconomic	to understand customer
of service offering	factors.	satisfaction.
and delivery, the	• Sanctions and
challenge of radically	fines for non-
new and different	compliance with
business models,	new laws, etc.
and the failure to
foresee the impact
of, or adequately
respond to and
comply with,
changing or new

Page 2 of 7

laws and regulations.
Macroeconomic
factors such as a
global/market
downturn and
contraction/changing
requirements in
certain sectors.
Third-party	• Poor quality work.	• Third-party appointment	This has been added as a
Relationships	• Ethical issues.	and due diligence	new risk for 2019 to
A failure to optimally	• Lack of control	processes.	capture risks relating to
manage the way in	over services being	• Standard third-party	Intertek's relationships
which we work with	provided via third	contracts.	with all third parties.
third parties	parties.	• Third-party lease	The mitigating controls in
(including	• Failing to agree	reviews.
place should address the
landlords, suppliers,	optional terms,	• Vendor/supplier financial
risks faced and we
subcontractors or	including pricing	diligence.	continue to monitor these
agents) from a	with suppliers.	• Supplier Code of
relationships on an
financial,	• Contracting with	Conduct.
ongoing basis.
commercial, risk,	suppliers whose	• Annual reviews of
governance, security	sustainability,	quality and pricing.
or sustainability	ethical, cyber or	• Training on Code of
perspective.	other standards	Ethics for key third
Poorly established	cause a risk to	parties.
and	Intertek, its	• Supply chain risk review
maintained	reputation or its	as part of compliance with
relationships could	operations.	Modern Slavery Act.
increase the
chances of poor
quality work, ethical
issues and
a lack of control over
the
services Intertek is
providing via third
parties.
UK Withdrawal	• Reduced work	• Monitoring of	This risk remains the
from the EU	volumes or delays in	legal/regulatory/political	same as in 2018, and
(Brexit)	anticipated	developments affecting	uncertainty remains.
Flow of goods and	customer orders.	Group	Brexit has a direct impact
services: increased	• Longer-term	companies and our ability
on our UK Notified Bodies
friction at customs	changes in global	to operate.
and we have taken steps
points could disrupt	supply chains could	• Engagement with
to relocate these
our customers' 'just	lead to a need to	customers to monitor
businesses to address
in time' supply	refocus our service	developments, views and
that risk.
chains in the short-	offering or delivery	feedback.
We continue to monitor
term or lead to	locations to align	• Monitoring of media and
changes in global	optimally with	public statements by	developments.
supply chains in the	customer	customers/regulatory
mid- to longer-term.	requirements and to	bodies/
People: restrictions	remain competitive.	other stakeholders.
• A failure to attract	• Liaising with UK
on the free
and retain talent	Government departments
movement of people
could lead to a	to gather intelligence and
between the UK and
failure to optimise	explore opportunities to
EU could make it
growth.	support.
more difficult to
• A failure to	• Brexit planning to
attract and retain
identify, understand	mitigate impacts on
talent in those
and align our	Notified Bodies, people
markets.
service offering and	and customer service
Regulatory
delivery with	delivery.
environment: de-	additional or	• Access to market sector
harmonisation	diverging regulatory	analysis from advisers.
relating to product	barriers could lead	• Prioritised investment in
or manufacturing	to a loss of revenue/	growth/strategic areas.
standards could	profitability/market
increase the	share.
regulatory burden on
our customers and
have an impact their
investment
decisions.
IT Systems and	• Loss of revenue	• Information systems	We believe this risk has
Data Security	due to down time.	policy and governance	increased in 2019 as
Systems integrity:	• Potential loss of	structure.	cyber-attacks are
major IT systems	sensitive data with	• Regular system	becoming increasingly
integrity issue, or	associated legal	maintenance.	sophisticated.
data security breach,	implications,	• Backup systems in	In 2019, we implemented
either due to internal	including regulatory	place.
mandatory IT awareness
or external factors	sanctions and	• Disaster recovery plans
training for all
such as deliberate	potential fines.	that are constantly tested
employees. A key focus
interference or	• Potential costs of	and
of our mitigation
power	IT systems'	improved to minimise the
activities was on identity
shortages/cuts etc.	replacement	impact if a failure does
and access management
	and repair.	occur.
Systems	to ensure end-user
• Loss of customer	• Global Information
functionality: a	security and data
confidence.	Security policies in place
failure to define the	management.
• Damage to	(IT, Data Protection, Cyber
right IT strategies,	reputation.	Security).
maintain existing IT
• Loss of	• Adherence to IT finance
systems or
revenue/profitability	systems controls (part of
implement new IT
if we fail to adopt an	Core Mandatory Controls
systems with the
IT investment	('CMCs')).
required
strategy which	• Adherence to IT general
functionality and
supports the	controls.
which are fit for
Group's growth,	• Internal and external

Page 3 of 7

purpose, in each	innovation and	audit testing.
case to support the	customer offering.	• Processes to ensure
Group's growth,		compliance with GDPR.
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.

Coronavirus	• There is a health	• We are closely	This has been added as a
(COVID-19)The risk	and safety risk to	monitoring our people's	new risk for 2019 to
caused by the	our people who	health, safety and security	capture the risks of this
outbreak of	come into contact	and relevant	developing situation in
coronavirus, which	with confirmed	regulatory requirements.	China and other
started in Wuhan in	cases.	• We have implemented	countries.
December 2019 and	• In affected areas,	extensive hygiene control	We are working closely
has been declared a	there is a risk that	and prevention measures	with our clients to
Public Health	the ability of our	for our	prioritise the health and
Emergency of	people to work as	office and field-based	safety of our and their
International	normal is impacted	people.	people and to maximise
Concern by the	by mandatory	• We have made changes	business continuity.
World Health	health and safety	to operational procedures
Organisation. The	restrictions,	to redirect work to
virus is a potential	including quarantine	Intertek
risk to: (1) the health	and travel	facilities in unaffected
and safety of our	restrictions in	locations.
people; (2) the	certain cases.	• We are engaging closely
ability of our and	• There is a risk that	with our customers to
our customers'	the ability of our	support their needs.
businesses to	people to perform	• We have put in place
operate normally;	field-based work	temporary travel
and (3) global	(audits and	restrictions into and out of
supply chains and	inspections) is	China and Hong Kong.
the flow of goods	further affected by	• We have working groups
and services.	control and	at the Group, regional and
	prevention	local levels to monitor the
	measures that we	situation and put
	and our clients	appropriate mitigation
	are taking.	action and continuity
	• In affected areas,	plans in place.
	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 disrupt the
	China
	and/or 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 2020
	performance will be
	affected by the
	temporary
	disruption to the
	supply chains of our
	clients and any
	impact it may have
	on global trade
	activities.

Legal and Regulatory

Regulatory and	• Loss of revenue,	• Monitoring of regulatory	This risk remains stable
Political	profitability and/or	environment and political	compared with 2018.
Landscape	market share.	developments.
A failure to identify	• Increase to costs	• Analysis of impact of
and respond	of operations,	regulatory and political
appropriately to a	reduction in	changes on operational
change in law and/or	profitability.	SOPs
regulation, or to a	• Reduction in the	and Group policies.
political decision,	attractiveness of	• Membership of relevant

Page 4 of 7

event or condition	investment in	associations, e.g. IFIA with
which could impact	specific	related advocacy and
demand for the	business, sectors or	liaison activities.
Group's services or	markets and/or
the Group's ability to	adverse change the
grow, innovate	competitive
and/or provide a	landscape.
competitive
customer offering in
any existing or new
industry sector or
market.
Business Ethics	• Litigation,	• Annual Code of Ethics	This risk remains stable
Non-compliance with	including significant	training and sign-off	compared with 2018.
Intertek's Code of	fines and debarment	requirement.	Ongoing annual
Ethics ('Code')	from certain	• Whistleblowing
confirmations ensure that
and/or related laws	territories/activities.	programme, monitored by
staff verify compliance
such as anti-bribery,	• Reputational	the Group Risk	with the Code of Ethics.
anti-money	damage.	Committee, where
Local compliance officers
laundering, and fair	• Loss of	staff are encouraged to
competition	accreditation.	report, without risk, any	perform due diligence on
legislation. Non-	• Erosion of	fraudulent or other	sub-contractors to check
compliance could be	customer	activity likely to adversely	that they have signed the
either accidental or	confidence.	affect the reputation of	Group's Code.
deliberate, and	• Impact on share	the Group.	During 2019, 168 (2018:
committed either by	price.	• Enhanced processes for	158) non-compliance
our people or sub-		engagement with	issues were reported
contractors who		suppliers and third	through the
must also abide by		parties.	whistleblowing hotline
the Code.		• Zero-tolerance approach	and other routes. All were
		with regard to any	investigated, with 40
		inappropriate behaviour	(2018: 45) substantiated
		by any individual	and corrective action
		employed by the Group,	taken.
		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.

Financial

Financial Risk	• Financial losses	• The Group has financial,	This risk remains stable
Risk of theft, fraud	with a direct impact	management and systems	compared with 2018.
or financial	on the bottom line.	controls in place to ensure	Review and update of
misstatement by	• Large-scale losses	that the Group's assets	core mandatory controls
employees. On	can affect financial	are protected from major
for year-end compliance
acquisitions or	results.	financial risks.
certification.
investments, the	• Potential legal	• Adherence to Authorities
financial risk or	proceedings leading	Grid (which sets approval
exposure arising	to costs and	limits for financial
from due diligence,	management time.	transactions).
integration or	• Corresponding loss	• Legal, financial and
performance	of value and	other due diligence on
delivery failures.	reputation could	M&A and other
	result in funding	investments.
	being withdrawn or	• A detailed system of
	provided at higher	financial reporting is in
	interest rates.	place to ensure that
	• Possible adverse	monthly financial results
	publicity.	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.

2. 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 note 21.

Transactions with key management personnel

Key management personnel compensation, including the Group's Directors, is shown in the table below:

Page 5 of 7

	2019	2018
	£m	£m
Short-term benefits	11.4	10.6
Post-employment benefits	0.9	0.8
Equity-settled transactions	9.7	8.5
Total	22.0	19.8

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.

3. STATEMENT OF DIRECTORS' RESPONSIBILITIES

Statement of Directors' Responsibilities in respect of the Annual Report and the 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 Financial Reporting Standards ('IFRSs') as adopted by the European Union and 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, the 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 and Company for that period. In preparing the financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;
• state whether applicable IFRSs as adopted by theEuropean 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 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 theUnited Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility Statement of the Directors in respect of the Annual Financial Report

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 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 Company financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 'Reduced Disclosure Framework', and applicable law), give a true and fair view of the assets, liabilities, financial position and profit of the Company;
• the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and
• the Directors' report includes 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.

The Directors' report comprising pages 58 to 103 and the Group Strategic report comprising pages 1 to 57 have been approved by the Board and signed on its behalf by the Chief Executive Officer.

The Company's 2019 Annual Report and Accounts will be delivered to the Registrar of Companies in due course and copies of all of these documents may also be obtained from:

Fiona Evans

Group Company Secretary

33 Cavendish Square

London

W1G 0PS

Registered Number: 4267576
Telephone:	[phone]

Contacts

For further information, please contact:

Denis Moreau, Investor Relations	[e-mail]
Telephone:	[phone]
Jonathon Brill, FTI Consulting	[e-mail]
Telephone:	[phone]

Intertek is a leading Total Quality Assurance provider to industries worldwide.

Page 6 of 7

Our network of more than 1,000 laboratories and offices and 46,000 people in more than 100 countries, delivers innovative and bespoke Assurance, Testing, Inspection and Certification solutions for our customers' operations and supply chains.

Intertek Total Quality Assurance expertise, delivered consistently, with precision, pace and passion, enabling our customers to power ahead safely.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please [e-mail] visit www.rns.com.

END

ACSUKUBRRUUOAAR

Page 7 of 7