Good day, ladies and gentlemen, welcome to Intertek Full Year Results 2025. At this time, all participants are in a listen-only mode. Later, we'll conduct a question and answer session. If you wish to ask a question, we ask that you please use the Raise Hand function at the bottom of your Zoom screen. If you've dialed in, please select star nine to raise your hand and star six to unmute. Instructions will also follow at the time of the Q&A. I would like to remind all participants that this call is being recorded. Questions will follow after the presentation. I will now hand over to André Lacroix, Chief Executive Officer, to start the presentation.
Good morning to you all. Thanks for joining us on our call. I have with me Colm Deasy, our Chief Financial Officer, and Denis Moreau, our Vice President of Investor Relations. 2025 marks the third consecutive year of double-digit EPS growth. I would like to start our presentation today by recognizing all of my colleagues around the world for the strong delivery of our AAA differentiated strategy for growth. Here are the key takeaways from our call today. In 2025, we have converted a 4.3% revenue growth into 10.1% EPS growth with a strong margin progression of 90 basis points. Cash conversion was excellent at 110%, providing us with the funds to invest GBP 300 million in growth and return GBP 602 million to our shareholders.
Following the launch of our AAA strategy three- years ago, our earnings per share have grown two times faster than revenue. Our margin progression of 240 basis points was ahead of target, and we have delivered a cumulative operating cash flow of GBP 2.3 billion. Importantly, we've increased dividend per share by 17% per year on average in the last three- years. In 2026, we're expecting a strong performance with mid-single-digit like-for-like revenue growth, further margin progression, strong earnings growth, and a strong cash generation. Let's start with the highlights of our 2025 performance. We have delivered indeed a strong financial performance. Our revenue growth was robust at 4.3% at constant rate and 1.1% at actual rate. Operating margin was excellent at 18.1%, up year-on-year by 90 basis points.
Operating profit growth was strong, up by 9.3% at constant rate and 5% at actual rate. EPS grew at 10.1% at constant rate. ROIC was excellent, 21.3%, and our organic ROIC increased by 70 basis points. As I said earlier, our cash conversion was excellent at 110%. Let's now discuss our like-for-like revenue growth performance. The demand for our IT solution was robust, and our like-for-like revenue growth of 3.9% at constant rate was driven by both volume and price. Our like-for-like growth in consumer product, corporate insurance, health and safety, and industry infrastructure combined, which represent 90% of the group's earnings, was 5.4%. The world of energy performance was driven by two factors.
First, a very demanding base with 8% like-for-like revenue growth in 2024 and 8.7% like-for-like revenue growth in 2023. As well as, we know, a slowdown in transportation technology in the second half of 2025. In the last three- years, as you can see on the side, our group mid-single-digit like-for-like revenue growth was broad-based and in line with our AAA targets. The acquisitions we've made are performing very well. We've made seven acquisitions the last few years to strengthen our IT value proposition in high-growth and high-margin sectors. These investments are value accretive to the group, having delivered in aggregate a margin of 34% in 2025. We are truly excited about the consolidation opportunities in our industry and will continue to target high-quality business service.
Two weeks ago, we acquired Aerial PV, a drone-based inspection business, to strengthen our value proposition in the solar energy. Last week, we acquired QTEST in Colombia to expand our Intertek electrical network in Latin America. In the industry, Intertek is recognized for its science-based customer excellence. With our IT premium offering, delivering a superior customer service. Our high-margin and capital assurance business solution is the fastest-growing business. From a geographic standpoint, we've benefited in the last few years from broad-based revenue growth within each region. There's been a lot of discussion about the economy in China, and let me give you an update on the performance of our China business. We have a very strong business in China, operating a diversified portfolio with scale positions across all of our business lines.
We've delivered a like-for-like revenue growth of 5.4% in 2025, in line with our three-year like-for-like revenue growth of 5.6%. We are extremely pleased with our margin performance of 18.1%, which was up 90 basis points at constant currency. We have benefited from portfolio mix, fixed cost leverage into growth, productivity improvements, our restructuring programs, and of course, our accretive investments. These positive margin drivers were partially offset by the cost of inflation and our investments in growth. A few years ago, we announced a cost reduction program to target productivity opportunities based on operational streamlining and technology upgrade initiatives. Our restructuring program has delivered GBP 13 million savings in 2023, GBP 11 million in 2024, and GBP 6 million in 2025. We expect GBP 8 million benefit in 2026 from the restructuring that we have done in 2025.
In the last few years, we've increased our margin by 80 basis points on average per year, well ahead of our AAA targets. I will now hand over to Colm to discuss our full year results in detail.
Thank you, André. In summary, in 2025, Group delivered a strong financial performance.
Total revenue grew to GBP 3.4 billion, up 4.3% at constant currency and 1.1% at actual rates. Sterling strengthened compared to major currencies, impacting our revenue growth by a negative 320 basis points. Operating profit at constant rates was up 9.3% to GBP 620 million, with operating margin of 18.1%, up year on year by 90 basis points at constant currency and 70 basis points at actual rates. Diluted earnings per share were GBP 253.5 pence, with growth of 10.1% at constant rates and 5.4% at actual rates. Turning to cash flow and net debt.
Group delivered adjusted cash from operations of GBP 762 million, down from our 2024 peak, largely due to EBITDA being impacted by translation and of course lower working capital change than the prior year. Adjusted free cash flow was GBP 352 million, down from our 2024 peak due to a lower cash generated from operations, higher interest in borrowing costs, higher cash tax outflow following our strong EPS progression and higher CapEx investments. Turning to our financial guidance for 2026, we expect net finance costs to be in the range of GBP 71 million-GBP 72 million, excluding FX. We expect our effective tax rate to be between 25.5% and 26.5%.
Our minority interest to be between GBP 21 million and GBP 22 million, and our CapEx investment to be in the range of GBP 150 million-GBP 160 million. Our financial net debt guidance, prior to any material movements in FX or M&A, is GBP 930 million-GBP 980 million. I'll hand back to André then.
Thank you, Colm, I'll summarize now performance by division. All comments will be at constant currency. Our consumer products delivered a stellar performance in 2025 with GBP 983 million in terms of revenue, up year-on-year by 6.2%. Our 6.3% like-for-like revenue growth was driven by high single-digit like-for-like in softline, mid-single-digit like-for-like in hardlines, mid-single-digit like-for-like in electrical, and double-digit like-for-like in GTS. Operating profit was up 11% to GBP 299 million, with a margin of 30.4% up year-on-year by 250 basis points as we continue to benefit from a strong operating leverage and productivity gains. In 2026, we expect the consumer product division to deliver mid-single-digit like-for-like revenue growth.
We grew revenue in our corporate insurance business by 6.8% to GBP 514 million. Our like-for-like revenue growth was driven by high single-digit like-for-like in business insurance and low single-digit like-for-like in assurance. Operating profit was GBP 116 million, up year-on-year by 3%, and our slight margin reduction after a strong 2024 was driven by mix and investment in growth. In 2026, we expect our corporate insurance division to deliver high single-digit like-for-like revenue growth. Health and safety delivered a revenue of GBP 347 million, an increase year-on-year of 5.5%.
Our 2.4% like-for-like revenue growth was driven by double-digit like-for-like in food, low single-digit like-for-like in AgriWorld, and negative low single-digit like-for-like in chemical and pharma after a strong baseline effect in 2023 and 2024 and a temporary project delays by several clients. Operating profit rose 2% to GBP 45 million with a margin of 13%, slightly down year-on-year after a strong 2024 driven by mix. In 2026, we expect our health and safety division to deliver low single-digit like-for-like revenue growth. Revenue in industry infrastructure increased 5.3% to GBP 858 million. Our 4.7% like-for-like revenue growth was driven by a stellar performance from minerals, double-digit like-for-like revenue growth, mid-single-digit like-for-like in industry services, and low single-digit like-for-like in building construction with a strong second half.
Operating profit of GBP 95 million was up 24%, our margin was up 170 basis points as we benefit from operating leverage, productivity gains, and portfolio mix. In 2026, we expect our industry infrastructure business to deliver mid-single-digit like-for-like revenue growth. Revenue in our world of energy business was GBP 729 million, 1.3% lower than 2024. Our like-for-like revenue performance was driven by low single-digit like-for-like in Canada Bread after a strong 2024 and 2023, when we reported high single-digit like-for-like revenue growth. Negative high single-digit like-for-like in TT was due to a temporary reduction of investment by several clients. A negative high single-digit like-for-like in our CE business was due to a baseline effect following a strong double-digit like-for-like performance in 2024.
Operating profit was GBP 63 million, down 15% due to mix and of course a lower revenue in TT and CA. In 2026, we expect our world of energy division to deliver low single-digit like-for-like revenue growth. Three years ago in 2023, we introduced our AAA differentiated strategy for growth to unlock the significant value growth opportunities ahead. Today, I would like to step back and give you a strategic update on where we are and how excited we are about the future. Our AAA strategy is all about being the best every single day for every stakeholder. We want to be the most trusted partner for our clients. We want our employees to be fully engaged. We want to demonstrate sustainable excellence in all of our operations and community.
Of course, we want to deliver durable value creation for our shareholders. Our AAA commitment to all stakeholders, it's simple, demanding, and compelling. Quality growth assured. Our clients invite us into the most critical parts of their value chain because they know that our science, our independence, and our ethics are non-negotiable. Our high-quality portfolio with leading scale position is growing in structurally attractive markets where regulation, complexity, and innovation are rising year after year. We target quality revenue growth, focusing on selling our ATIC solutions in high-growth and high-margin segments. Our quality revenue growth, combined with strong fixed cost control, productivity gains, and disciplined investment in growth, deliver continuous margin progression, resulting in strong earning growth, which we convert into excellent cash generation. That's how the Intertek earnings models compounds value over time. That's how the Intertek earnings models deliver durable quality growth.
Ten years ago, we recognized that ATIC solutions were necessary but not sufficient to give a superior customer service to our clients, given the complexity in their global operations. We invented ATIC, and today we are the premium leader in risk-based quality assurance. Our systemic end-to-end quality assurance, combined with our scientific technical expertise, it is what makes us truly unique and the best in the industry. Our ATIC approach is industry-agnostic. Let me show you some examples on how ATIC works across categories. Here you can see how ATIC works for a T-shirt in the softline industry part of our consumer products division. Here you can see how ATIC works for the development of data center, the high-growth areas for electrical and building construction operations. In the fast-growing energy storage market, ATIC solutions are of course mission-critical for the performance and safety of batteries.
Here you can see from an ATIC standpoint how it works in attractive energy sector, which plays, as you know, a significant role in the energy transition. Our growth model has compounded significant value over time. Our earnings per share have grown at an average of 10% since 2004. Outstanding financial performance starts, of course, with the trust of our clients based on our science-based customer excellence advantage. At the bottom of the slide, you can see a few examples of our Your BMAs campaigns, where our clients acknowledge publicly the trust they have in Intertek. Of course, there are many more examples on our website. We are very excited about the growth opportunities ahead. Every day in every industry, we pursue three types of growth opportunities.
In the outsourced quality assurance market, we are targeting higher ATIC penetration with existing clients as well as the acquisitions of new clients. In in-house quality assurance market, outsourcing remains a significant opportunity. Of course, the most exciting growth areas is the untapped opportunity based on the quality assurance work that our clients don't do today and will do moving forward. Our clients indeed invest more today than 10 years ago in quality assurance. They still do not invest enough given the increased risks in their operations. That's why our role of independent quality assurer is mission-critical for the world to operate safely. Regulation on quality, safety, and sustainability are tightening. Supply chains have become more global and more complex. The energy transition and electrifications are creating new growth opportunities.
For sure, innovation cycles are shortening in all categories. Consumers are demanding more choice and high-quality choices driving SKU proliferation. Finally, digitization and data-driven assurance increase the value of our science-based ATIC intelligence. Over the years, we have built a high-growth quality portfolio to seize these opportunities in every single of our business line. Moving forward at the group level, we continue to expect to deliver mid-single-digit like-for-like revenue growth. Let me explain how we'll do that starting with consumer product. Consumer product, our largest division in revenue and profit, has reported like-for-like revenue growth of 5.2% between 2023 and 2025, ahead of our guidance. As a result, we are upgrading our corporate guidance for consumer product to deliver mid-single-digit like-for-like revenue growth in the medium term.
In the medium term, we continue to expect high single-digit to double-digit like-for-like growth in corporate assurance, mid-single-digit to high single-digit like-for-like growth in health and safety and industry infrastructure, and low single-digit to mid-single-digit like-for-like growth in the world of energy. Margin accretion revenue growth is central to the way we manage performance at Intertek. Between 2015 and 2025, we have step changed our margin performance, having increased our reported margin by 220 basis points. We have benefited from our portfolio mix and strong pricing power. We've delivered consistent revenue growth with good operating leverage. We've reduced our fixed cost, both at the operating and management levels. We have reinvented our processes to increase productivity. Our CapEx and M&A investments were made in high-growth and high-margin sectors.
These positive margin drivers were partially offset by the cost of inflation and the investment that we've made to accelerate growth. The margin accretion potential ahead is significant, and we are on track to deliver our 18.5% plus margin targets. On cash and shareholder returns, we've also made significant progress between 2015 and 2025 with our end-to-end cash performance management. The opportunity ahead is also significant from a cash generations in terms of return for our shareholders. We'll continue to of course, be very disciplined in terms of cash management on daily basis. Being the best every day for our customers is mission-critical to deliver quality growth for our shareholders.
We do regular customer research monitoring our performance versus our peers, and I can proudly say that Intertek is positioned as the absolute premium leader in quality assurance. Being the best for our customers gives us the opportunity to benefit from growing recurring revenues with our existing clients, as well as win with new clients, giving us strong reputation in the industry. To deliver superior return, as we just discussed, we consistently convert our revenue growth into fast earning growth and strong cash generation. On that slide, we provide a benchmark of performance versus our two peers, and I'm pleased to report that Intertek stands out with best-in-class productivity metrics, margin, and returns in the industry. Of course, a key component of our superior returns is our accretive capital allocation. We allocate CapEx and working capital, targeting 4%-5% of our revenue to support growth.
Since 2015, we've invested more than GBP 1.2 billion in CapEx. In terms of shareholder returns, our goal is to grow dividend over time with a payout ratio of around 65%. Selective acquisitions to strengthen our leadership positions are important, and we've invested since 2015, GBP 1.4 billion in M&A. Lastly, our goal is to operate with a leverage target of 1.3-1.8 net debt to EBITDA and return excess capital when it cannot be deployed at attractive returns. Our high-quality cash component earnings model that we've just discussed has played and will continue to play an essential part in unlocking the value ahead and delivering quality growth. We have good visibility on the structural growth drivers to deliver our revenue growth targets.
We are confident that we'll deliver the substantial upside to our medium-term target in terms of margin of 18.5%. We have step-changed the cash generation of the group and our disciplined capital allocation policy is, as we just discussed, accretive. We'll continue to benefit year after year from the compounding effect of mid-single-digit like-for-accreting growth, margin accretion, excellent free cash flow, and disciplined investments. This is how we'll deliver durable quality growth and unlock significant value ahead. Over the years, we've built five enduring competitive advantage, which underpin our confidence moving forward. We operate a high-quality growth portfolio poised for global growth with leading scale position in attractive industries. We are the premier leader in quality assurance with our superior IT offering, giving us the trust of our clients.
Our high-quality cash component earnings model deliver industry-leading productivity and returns, and our high-performance science-based organization continue to attract the best talents in the industry. Finally, we operate with doing business the right way. This is part of our culture, and this is supported by strong controls, strong compliance, and a tight governance. Before taking your question, let's discuss guidance for 2026 and beyond. We're entering 2026 with confidence. In the last three years, as we just discussed, we've accelerated our revenue growth to 6% per year and have grown EPS 2 times faster than revenue at 12%. Operating margin has expanded by 240 basis points. We've increased EPS by 17% a year, and we've delivered GBP 2.3 billion in operating cash flow and GBP 1.1 billion in free cash flow.
We've invested GBP 396 million in CapEx, GBP 211 million in acquisitions, and returned almost GBP 1 billion to our shareholders. Above all, we have delivered an excellent ROIC with a three-year average of 21.4%. Our growth momentum was strong throughout 2025. In 2026, we expect to deliver mid-single-digit like-for-like revenue growth at constant currency with high single-digit like-for-like in corporations, mid-single-digit like-for-like in consumer product, industry, and infrastructure, and low single-digit like-for-like in health and safety and the world of energy. We are targeting further margin progression, which combined with expected revenue growth, will deliver strong earning growth. Cash discipline will remain in place and will deliver a strong free cash flow. We plan to invest around GBP 150 million-GBP 160 million in CapEx.
As you would expect, we continue to focus on delivering a strong ROIC. In terms of currency, the average selling rate in the last six months applied to the full year results of 2025 will be broadly neutral at the revenue and operating level. Beyond 2026, of course, the value growth opportunity is significant. We continue to expect our like-for-like revenue to be at mid-single digit and will benefit from value accretive M&As. Margin accretive revenue growth, as we just discussed, will remain a top priority. We are confident that there is upside to our 18.5%+ margin target. We'll remain very disciplined in terms of cash conversion and cash allocation to seize the organic and inorganic opportunities in the market. Of course, we'll continue to reward our shareholders with a 65% dividend payout ratio.
In summary, the value growth opportunity ahead is significant. Our triple A strategy is about being the best all the time, and our commitment to all of our stakeholders is simple, demanding, and compelling. Quality growth assured. That's what our triple A differential strategy growth is all about. We'll now take any questions that you might have.
We will now start the Q&A. If you have dialed into the call and wish to ask a question, please use the raise hand function at the bottom of your Zoom screen. If you've dialed in, please select star nine to raise your hand and star six to unmute. We'll take our first question from Rory McKenzie with UBS. Please go ahead.
Good morning. It's Rory here from UBS. Firstly, I appreciate it's only, two months, but can you just help us get from the November to December exit rate of 1.9% organic growth to a guidance of mid-single-digit growth for this year overall? I know your outlook comments suggested that some areas are supposed to pick up quite a bit. Could you maybe just give us some more detail on what caused that high single-digit decline in world of energy in the end of last year and what you're seeing so far this year, and also why corporate assurance slowed and why you see a pickup?
Secondly, obviously it was good to see the strong Adjusted EBITA margin progression, but also restructuring charges I think, have increased quite a bit. You know, H2 was the highest run rate we've seen for several years. Can you share more about where those programs are targeted and why you decided to expense them this year? Also just what should we expect in terms of the payback from those charges? Thank you.
Of course. Look, in terms of like-for-like revenue growth, there is no question that in the second half, and particularly in November, December, we faced very demanding base when it comes to the world of energy. As I just explained, the world of energy had a very strong 2023 and 2024. Just to remind everyone about the data, you know, we had 2023 like for like with 8.7% in 2023, with 9.6% in November, December 2023. In 2024, the like for like revenue growth of world of energy was 8%, and it was 10.7% in November, December last year.
If you basically put the November, December like for like revenue growth, which is the first part of your question in context, if you basically take that baseline effect into consideration, recognizing of course, as I said earlier, that we saw a demand reduction in the transportation technology industry, our like for like, you know, revenue growth was 4.7% ex the world of energy in November, December, and was 5.4% in the full year, you know, 2025. From my perspective, yes, you might, you know, call it a slowdown in the months of November, December, but there are good reason for that. The reason why, you know, we are confident about mid-single digits like for like revenue growth is pretty clear from our perspective. Let's go through each division one at a time.
If you look at consumer product, there is no question that it's a stellar performance, in all, you know, segments within consumer product. We have, you know, done super well in electrical for many, many, many years, and we continue to innovate and drive growth in our all electrical operations around the world. There is no question that we've made tremendous progress in soft lines and you can see from the numbers that we are gaining market share. In the industry, we've won lots of new contracts, and hard lines is performing very well. We've got also quite a lot of new contracts, and DTS is in a good place. From a, you know, pure, you know, consumer product standpoint, there is no question that, you know, we are very, very comfortable with our guidance for the year.
Looking at corporate assurance, corporate assurance essentially always has a bit of a slowdown in November, December because this is the period already where we are at, you know, peak capacity, and it's very difficult to basically go beyond the auditors' capacity that we have. Having said that, the backlog is strong and we are, you know, very comfortable with the guidance we are giving. As I said earlier in the call, we are investing in expanding our auditors' capacity to deliver the orders we have in the backlog. Within, you know, health and safety, there is no question that, you know, food continues to, you know, be outperforming everyone in the industry. We are very proud of the double-digit revenue growth, and we don't expect, you know, food to basically, you know, slow down.
There is no question that there was a bit of slowdown in chemical and pharma in 2025 for all the reasons we talked about, but we expect that to basically, you know, bottom out in the first half and start growing in the second half. We are obviously, you know, seeing an increased order momentum from all of our clients given the temporary cuts they've done in 2025. When it comes to industry and infrastructure, we are obviously, you know, comfortable with the guidance that we've just, you know, talked about with a stronger H2 than H1, if I were to say it differently. If I look at industry infrastructure, look, minerals is, you know, going from strengths to strengths. You will have seen a double-digit, you know, revenue growth performance well ahead of anybody in the industry.
This is because we are winning new contracts. Lots of our sourcing, you know, opportunities are coming our way given our science-based, you know, customer excellence advantage. Here we're gonna have another very, you know, good year. Moody continues to, you know, to thrive. You know, pleasingly, as expected, we've seen a rebound in terms of demand with building and construction that has a stronger H2 than H1. Here the backlog is very good indeed. As far as the world of energy is concerned, I'm not concerned about, you know, Canada Bread, nor am I concerned about CA. Transportation technology, which is the automotive industry, will take time to recover, but we expect the demand to start improving in the second half.
When you go division by division, you can see why we're guiding the way we are guiding and mid-single digit, you know, like for like is really what we believe we will deliver in 2026 after having delivered that for 3 consecutive years in the last, you know, three- years. When it comes to restructuring, very, very important questions. As you know, 2025 was the fourth year of our restructuring program. We have another year to go. Our view is that, you know, we give, you know, the operations maximum times to fix some of the issues, but at one point of time, we need to make decisions for underperforming units. We have taken some decisions. We've obviously taken some cost reduction in TT and CMP given the trajectory that we have seen.
We've continued to streamline our overheads. We continue to streamline the, you know, operational, you know, management within our units. We're using essentially a number of layers. Then there were a few sites that, common I felt, you know, we had to basically, you know, get out of because after having tried for two and a half years, the results were not competing, and they were starting to destroy value. That's basically, you know, what I could say to these two questions. Thank you, Rory.
Thanks, André.
Our next question comes from Suhasini Varanasi with Goldman Sachs. Please ask your question and go ahead.
Hi, good morning. Thank you for taking my question. Just a couple from me, please. As a reminder, the restructuring charges that you took below the line, I think I missed it, but could you help us understand the quantum of the benefit you expect to SG&A in 2026? Just to help us understand the exit rate versus the early trends, is it possible you can give us some color on early trading in January, February this year? Thank you.
The benefit in 2026 from the restructuring we did in 2025 is GBP 8 million. In terms of trading, I typically don't comment on short-term trading, as I just said to Rory, I'm not worried about the like for like momentum, you know, for the group in 2026. You know, we are in a good place.
Thank you.
Our next question comes from Annelies Vermeulen with Morgan Stanley. Please ask your question and go ahead.
Hi, good morning. I have two questions, please. Firstly, on transportation technologies, you talked about customers' temporary reduction of investments, but we've also seen some of the OEMs make quite big decisions around moving away from EVs, for example. When you think about that business, do you think that there'll be any need for restructuring as you try and position it to match where the growth actually is in the market? What gives you confidence on that recovery in the second half based on what you can see today? Secondly, just on capital allocation, no new share buyback today despite the still quite low leverage. Can we infer from that you expect to continue to do more deals in 2026?
How does the pipeline look in terms of what you're looking for specifically? Thank you.
All right. Of course. Let me just, you know, double-click on TT because that's, you know, the first question you're asking. Essentially, if you look at, you know, the global automotive industry, if you look at, you know, the European brands, including here, JLR, the American brands and the Chinese and Japanese brands, the Chinese market and the U.S. market have always been the biggest but also the most lucrative markets for Western OEMs. Essentially, the reason why we've seen a very quick wave of restructuring across all OEMs in Europe and in U.K. here, but also in the U.S., is essentially for two reasons, right? The Western OEMs have basically lost massive market share in China because the Chinese OEMs have an advantage in terms of electric vehicles.
The electric vehicle segment and hybrid segment continue to grow globally. The issue is that, you know, the OEMs are losing market share in China. For the European OEMs, the tariff obviously have increased the cost of doing business in North America, which is the, you know, second most lucrative markets for all, you know, OEMs here in Europe and the U.K. That's why you've seen these, you know, massive, you know, cost-cutting in terms of R&D projects and, and people and dividend in the short term because these OEMs had to basically, you know, deal with, you know, short-term, you know, cash pressure.
When you step back, and if you look at, you know, where our footprint is for Intertek in terms of transportation technology, we are very strong in the U.S., we are strong in China, and we've got a, I would say, a decent operations in Europe. Looking at the investment moving forward, I don't think that, you know, OEMs will stop investing on EV and hybrids for all markets outside of the U.S. because the demand continues to be very, very robust, and all the Western OEMs need to dial up their EV and hybrid capabilities to compete against, you know, Chinese OEMs. The U.S., of course, we have never expected a huge, you know, growth for electric vehicles and this is a market where the traditional combustion engine will continue to play a big role.
I mean, the good news for us is that in the U.S., that's exactly what we do in the automotive industry. You know, we are, you know, quite well positioned. My view is that, you know, OEMs cannot stop investing in R&D to improve their market share and we believe that, you know, they will resume investments, you know, step by step. We are optimistic for the second half of 2026. As far as the capital allocation question, we did our share buyback last year because our net debt to EBITDA, you know, leverage was way below our, you know, target range. Now we're at 1.3 at the bottom of our, you know, target. We basically believe that, you know, the opportunities to create additional value for shareholders through M&A is increasing.
We've seen the demand, you know, increase in terms of good businesses being for sale. We've done quite a few acquisitions, as you know, in 2025 and, you know, these last few weeks. We believe that being at, you know, 1.3 net debt to EBITDA. We are in a good place to putting, if you want, our cash to work and deliver superior returns, provided of course, the opportunities are very significant. If, you know, at the end of 2026 we are in situations where our leverage is below our target, and the, below the threshold, minimum threshold in our target, obviously we'll reconsider with the board.
We've always said that, you know, if the group is below the minimum threshold of 1.3, we'll obviously return excess cash that can be deployed for strong returns. Again, as I said, you know, in the presentation, you have seen the return that we've delivered in the last three- years. The acquisition that we made, it's really accretive to the group. If we find the right opportunities, we will seize these. We'll remain very, very disciplined, and we'll take a view at the end of the year with the board if there is excess cash that we need to return cash to shareholders. All right?
Very clear. Thank you, André.
Our next question comes from Virginia Montorsi with Bank of America. Please go ahead.
Good morning. Thank you for taking my question.
Welcome
Two quick ones. One is on the margins, particularly in corporate assurance and health and safety. You've mentioned in the press release some portfolio mix effect. Could you help us understand how to think about these two divisions margin-wise, for 2026? The second one, when we think about CapEx, it's increased slightly year-on-year, and your guidance for next year is slightly higher. What are your priorities CapEx-wise for this year? Thank you.
All right, look, I think if you look at the mix effect within, you know, corporate assurance, it's essentially that we have, you know, two big businesses, Business Assurance and Assurance, and the latter program growth was a bit lower on Assurance than on corporate assurance, on Business Assurance, and this is what the mix effect, you know, was all about. As I said, there was more than mix. We are investing in technology and auditors', you know, capability. In terms of health and safety, there is no question that the mix effect was driven by chemical and pharma, which was, you know, down year-on-year, and it's a, you know, really high-margin business for us. We do not guide in terms of margin by division for the year.
We give you a guidance for the overall group. We expect obviously to deliver margin equity program growth in, you know, most of our businesses there are opportunities in 2026 for both corporate assurance, sorry, and health and safety, you know, to do, you know, to do better.
Thank you. Can I ask on CapEx?
Yeah. I mean, the CapEx question is pretty, you know, simple to, you know, to think about it, right? We are in a unique, you know, position when it comes to seeing growth opportunities in each of our business lines. You know, we have obviously opened new sites in Pacific, in Latin America, and also in Europe. We have expanded certain of our, you know, sites in terms of building additional, you know, capacity. We, of course, have invested in technology. We are, you know, using technology to innovate and augment our TQA, you know, value proposition. You know, lastly, maintenance continue to be important and we continue also to make some investment as you would expect in the group in terms of, you know, overall IT strategy.
That's basically, you know, what we are doing. It's pretty broad-based. There is no single business line at Intertek that doesn't have opportunities to grow, with, you know, good CapEx investments. That's what, you know, we are doing. You can see with all the announcements that we are making, you know, around the world, the type of investments, you know, we've done in 2025.
Perfect. Thank you very much.
Our next question comes from James Rowland-Clark with Barclays. Please unmute your line by pressing star six and ask your question.
Hi. Good morning. Thanks for taking my questions. You talked about.
Welcome
The healthy M&A pipeline. You talked about the healthy M&A pipeline earlier. Just can you just elaborate on how deep this pipeline is that you know, you decided that that is the priority of capital allocation right now? How far out do you think this takes the business in terms of the sort of run rate of bolt-on deals for the foreseeable future? My second question is on margins. It's another very strong year within the corporate consumer products division in terms of margin progress. You've spoken earlier about growing a little faster in assurance, adding auditors, and also you're guiding higher on growth in consumer products.
Do we assume that the opportunity for margin growth is still there in those two divisions, or are you adding lots of capacity to drive the growth that will maybe delay the sort of operating leverage coming through in those two divisions in 2026? My final question is on free cash flow. It looks like working capital was the reason that free cash flow was down 15% year-on-year. Are you now happy with the working capital sort of base to run off for 2026, i.e. payables and receivables days are in a normalized position now for 2026? Thank you.
Thank you. Well, thank you very much. I'll take these questions, starting with the third one. Look, I mean, you're right. I mean, you know, we've made so much progress on cash over the last 10 years that we are now in a territory of incremental gains. You know, we are truly, you know, continuous improvement driven organization and, you know, we'll continue to look at opportunities for, you know, better, you know, cash generation moving forward. There is no question that we can do much better than what we've done over the years, but we are talking about incremental gains. I would never say, you know, that our working capital is the best you can get. I would say it's a very, very good working capital, but we're gonna go for incremental gains, you know, step by step.
You're absolutely right, the free cash flow was impacted largely by the lower change of working capital between 2024 and 2025 compared to what happened between 2023 and 2024. We had a stellar, you know, cash performance in 2024, as you know. In terms of margin, as I said, you know, to the previous question, you know, we do not guide in terms of margin. The way we operate internally is margin equity program growth is, you know, central to how we deliver, you know, value for stakeholders, right? Look, there are opportunities even within consumer products, even with, you know, corporate insurance to invest and continue to improve margin. That's the way, you know, we are running the company.
That's the way, you know, people are incentivized 'cause essentially, you know, to basically improve your margin, you've got quite a lot of levers you can pull if you are an operation. It starts with, you know, the quality of your portfolio strategy. Are you targeting the high growth, high margin, you know, segments in the industry so that, you know, the IP that our engineers and scientists have to offer to the market are basically priced at a higher, you know, price points and are targeted to high growth areas. The second thing is, of course, you know, you've got to stay, you know, very, very disciplined in terms of pricing. We are the premier leader, as I was explaining, you know, during the presentation.
Wouldn't have the, you know, productivity metrics that we have in terms of revenue per headcount, operating profit per headcount, and free cash flow per headcount if we didn't have a very disciplined, you know, volume price, you know, mix management. In addition to that, you know, the fixed cost leverage continues to be playing a big role when you want to drive margin accretions. Despite the fact that, you know, you are investing in new opportunities, you should basically always target some productivity improvements. Net-net, you know, we expect our teams to, you know, drive margin equity program growth, you know, year in, year out.
We do not always get there for reasons that, you know, we've just talked about. That's the way we are running the company. That's the way the incentive schemes is based. This is why we are obviously in the situation where we are in terms of margin performance. In terms of M&A, look, we are very disciplined in terms of M&A. We don't have any goals. You know, we don't state we're gonna do X number of M&As. We want to be ultra careful on how we select these businesses. We only target high quality, you know, businesses, and we believe the environment is obviously more positive for M&A in 2026 than it was in 2025 and certainly in 2024.
Therefore, you know, we want to keep, you know, some firepower given the fact that we had a good place with our net debt-to-EBITDA at 1.3 level to seize the opportunities coming our way. Having said that, we have built lots of, you know, bilateral relationships around the world. That's our preferred, you know, way of operating. That's how we did, for instance, you know, Envirolab. That's how we did QTEST. That's how we did Suplilab. That's how we did Aerial PV. And building this relationship takes time and you need to make sure that the owner is ready to monetize her or his asset base at the right time.
We of course participate in, you know, processes which tend to be, you know, very competitive and, you know, there are situations where we win. You know, we don't have any quantified goal. It's got to make sense, you know, acquisition by acquisition. The positive news is that we've got a very good integration approach. We've seen the return we've delivered from acquisitions. We are very clear about where we want to invest. We target, you know, high growth, high margin sectors that will augment the IP of Intertek. You know, we believe that 2026 will be a good year. I can assure you, we're not gonna rush to make acquisition just because, you know, we want to say we've done M&As. We do M&As if it makes sense all the way.
Thank you.
Our next question comes from Karen So with J.P. Morgan. Please go ahead.
Hi. I have two questions, please. The first one is with the U.S. IEEPA tariff ruling last week and the introduction of the Section 122 blanket tariffs on U.S. trading partners, do you see any impact of this to your consumer testing business, maybe in terms of delayed decision-making or pull forward of SKU testing to take advantage of the lower tariff rates on certain products in Asia? My second question is on your initial thoughts on AI implementation in the business, please. How you're thinking about rolling out AI across the business to deliver efficiencies and are there particular areas or business lines where you expect to see the most benefit in terms of the cost base? Thank you.
All right. I think on tariff, there is no question that the news is better news for China and India than it was a few weeks ago. As you know, we are in the swim of the supply chains of our clients. We're working very closely with them. We've launched SupplyTek in 2025 to basically help our clients figure out what they could do to reengineer their supply chain based on the change potentially of economics, creating new routes, replacing routes. I would say the overriding position within our clients is wait and see. They've made no big decision because the agenda has been moving around.
Having said that, there is no question that we are having lots, lots of meetings with our consulting teams, helping clients to figure out would these tariff situations settle at what is expected to settle at, what we mean in terms of economics and, potentially, you know, new routes. The overriding, you know, situation is let's not rush and take our time. You can understand why because these, you know, supply chain changes are very, very costly, very risky, very, very timely, and people only want to change their, you know, supply chain if it really makes sense, not for tomorrow, but for many, many years, you know, to come. As far as.
Of course, we continue to, you know, to monitor that, the net news of the new decision is that it's incrementally better for the economics in China and India. In terms of AI, look, we are called Intertek, we use technology to augment everything we do for our clients internally. Of course, you know, we are investing on AI. If you were to be here in the office with us here, next to our conference room, we have a lab, AI lab that is made of, you know, engineers that are providing support to our teams around the world to make sure that, you know, we develop the right AI solutions for our business. How do we think about AI at Intertek?
First of all, we believe there is a significant opportunity to help our clients manage the risk associated to the investment they are making in AI. If you basically take the technology company aside and, you know, largely some other industries like more medical devices or defense, AI is pretty new for most, you know, corporations. I'm not talking about using large language models, which are third-party large language models. Everybody understand that. Developing your own AI, you know, algorithms and using agents to basically either improve your customer service, drive more sales or of course, work on productivity.
That's why we've launched AI Square, which is, you know, an independent end-to-end AI assurance program to help our customers, you know, operate, you know, smarter and safer and with the right trusted AI, you know, algorithm. This is the external opportunity if you want, and this is of course, you know, very good news for us. Here I would say, you know, we are at cutting edge of what's happening in industry. I think we are the only company, you know, to do that, competing with, you know, lots of very big companies like consulting firms and Big Four because, you know, we do have the expertise.
In terms of, using AI, on how we do business, there is no question that, you know, we are looking at AI to augment, you know, the way we deliver total quality assurance for our clients, right? I'll give you a few examples in a second. There is no question that, you know, we are looking at AI on how to improve our productivity, and I'll give you know, some examples on how we are seeing some benefits from a productivity standpoint.
Finally, you know, we are looking at AI to basically get, you know, faster to the right insights and, and, you know, decision-making by, you know, doing data science at scale in all parts of the organization to basically see the opportunities or the issues faster and, and therefore, you know, make better decisions. As you know, we've built an incredible database of financial, non-financial indicators that we call Five-by-Five. This gives us a, a real depth and breadth of reach in, in the operations, and this is where AI investments that we are making are making a big difference for us to basically look at, you know, some of the big trends and, and deviations, and you understand a lot of this.
When it comes to, using AI on how to augment the total quality assurance value proposition of our clients, there is no question that, in all of our large scale data-based platforms, the SaaS platform we've launched over the years, we have a very good positions to differentiate ourselves. We are already using, you know, AI to, for instance, you know, provide better targeted, you know, people assurance, you know, training with our Alchemy, you know, solutions.
We are using AI to help our clients, you know, use platforms like SourceClear and InterLink and RiskAware, which are SaaS-based platforms where essentially it's all about, you know, intelligent document processing, getting, you know, the right risk-based quality assurance analysis on the trends and therefore, as a client, you know, making some pretty big decision in terms of where you want your testing investment or assurance investments, you know, to be. When it comes to the internal use, you know, we have invested over the years.
We use Harvey, for instance, which is a pretty good platform to review clients' contracts, to basically look at large documents when we do, you know, DD inside, you know, the data room for M&A. Going into, you know, the operational opportunities, anywhere where, you know, we have, you know, pretty well, you know, codified, digitized, you know, process, AI can help us obviously make, you know, much, much, much faster, you know, decisions and gain some productivity. The areas that we're looking at, for instance, is, you know, in terms of marketing, how do you basically qualify the right leads much faster? Another area which is an obvious opportunity for us is, you know, the quality reviews, our test report, but also our audit, you know, reports.
Very, very important area of opportunity where we're investing a lot is resource management. If you think about scheduling auditors for BA, or if you look at, you know, scheduling of inspectors for Caleb Brett or Moody. There is no question that when it comes to global market access, we use AI to accelerate the speed at which we provide, you know, the right testing protocols to our clients when they want to go to market in other, you know, industries or in other markets, you know, geography story. You know, the real, you know, opportunity is data science, right? How do you basically take, you know, the work we do for clients in geochemistry and minerals?
We do a lot of work for them, and most of our clients do not basically use most of the data. Well, with the intelligence we have on geochemistry, we can help our clients go beyond the test report. We are very, very, very excited. Obviously early days, but I would say that, you know, we are at the cutting edge of AI in the industry at Intertek.
Thank you.
As a reminder, if you would like to ask a question, please use the raise hand function at the bottom of your Zoom screen. We'll take our next question from Karl Green with RBC. Please unmute your line by pressing star six and ask your question. Karl, please go ahead and ask your question.
Thank you very much. Yes, good morning. Just a couple of follow-up questions around the restructuring costs in the year. I just wanted to clarify, did I hear correctly that the SG&A benefits expected for 2026 would be GBP 8 million? If so, that ratio between the GBP 37 million of charges and the SG&A savings of almost five to one suggests that there's possibly savings in other cost buckets beyond SG&A. Is that correct?
The GBP 8 million is the total saving we expect on our cost base in 2026.
That's the total cost base. Okay, thank you. Then just for this year, this fiscal year, fiscal 2026, how should we be thinking about likely P&L charges for restructuring costs? Obviously, it's been a consistent feature for the last few years as you've gone through this program. What ballpark number would you point people towards this year?
Look, we do not, you know, guide regarding restructuring costs. This is a process that, you know, Colm and I go case by case. We only do that when we believe it's the best way, you know, moving forward. I wouldn't want to give you any numbers because frankly speaking, you know, we're gonna take every opportunity, you know, at its face value and we'll do it very, very rigorously. We've got some clear, you know, rules on how we book these. As you can imagine, we always announce our results fully audited, so that's been through the minute review of our auditors. This is our, you know, final year of the five-year program we announced a few years ago.
We'll continue to be very, very rigorous, so I won't want to give you any number at this stage.
Okay, thanks.
We'll take our last question from Ben Wild with Deutsche Bank. Please go ahead.
André, thanks for taking my question. Just one remaining from me. I think if I look back at the November trading update and compare with where you ended the year on net financial debt, you ended GBP 20 million above the guide that you gave in November. Just to understand, is there a one-off effect that reverses next year on the free cash flow or is there anything else that resulted in the difference between?
No.
The end of November guide and the result?
It's a fair question. When we give the net debt guidance, we never include the M&As. As you know, between the November statement and year-end, we did an additional acquisition, so that's the only difference. There is nothing more to that.
Okay, thank you.
There are no further questions on the webinar. I'll now hand back over to management for closing remarks.
Well, thank you very much for your time today. I know it's a busy day. Of course, we are available would you have any follow-up questions. Thank you very much and have a good day.
Thank you for joining today's call. We're no longer live. Have a nice day.