Shares in quality solutions provider Intertek (LSE: ITRK) plummeted as much as 8% in early trading this morning after the Group cut full-year guidance.
Intertek reported 2.5% revenue growth at constant currency in Q3, but exchange rates resulted in 5.1% decline for the quarter. Within this, organic revenue growth ceased as the group exited certain low-value Industry contracts accounting for a fall to -0.7% fall and incurring a £15m restructuring charge.
The Consumer Goods and Commercial & Electrical divisions, which accounted for 50% of operating profit in 2013, delivered positive performances driven by textiles growth in newer sourcing countries India, Vietnam and Turkey. Transport continued its rapid growth, while electrical business also progressed well over the period. Developing demand for the groups Chemical & Pharma division in Asia and the Middle East was offset by weaker demand for services in Europe.
Delays in oil and gas capital expenditure, as a result of a plunging oil price, negatively impacted the Industry & Assurance division. Operational expenditure related services continued to grow, although this represents a smaller section of the Group’s oil and gas services.
The Commodities division continued to struggle in the weak mineral market, but the oil and gas cargo business delivered good growth across many of its operations.
Acquisitions picked up the slack and returned the Group to positive revenue growth. Intertek purchased two agricultural analysis businesses in the quarter, QPS Bioserve and ScanBi Diagnostics, for £3m bringing total spend on acquisitions to £43m for the year so far.
Intertek revised full-year guidance, predicting organic revenue growth rate for the full-year to be similar to the -0.7% experienced in Q3.
Wolfhart Hauser, CEO, said:
“Looking to 2015, we expect Group revenue growth to strengthen, led by our product-related businesses, but remain cautious about our oil and gas capex end-markets.”
Intertek is selling off due to the short-termism that plagues our markets. Even if it struggles temporarily while oil prices are low its core business will likely remain strong and yet many people will panic sell.
