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Intertek is just the kind of business one would expect to see flourishing in the wake of COVID-19.

One of the lesser-known companies in the FTSE 100, in spite of having a stock market valuation of £9bn, it is the world’s biggest provider of quality assurance.

It employs nearly 44,000 people around the world in more than 1,000 offices and laboratories, providing assurance, testing, inspection and certification services to clients in sectors as wide-ranging as chemicals, food, healthcare, transportation, energy and construction.

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The firm went public in 2002 and joined the top-flight index in 2009

On Friday morning it reported a 23% rise in pre-tax profits, to £186.3m, for the six months to the end of June.

However, despite what appeared to be a confident trading update, the company’s share price plunged by more than 9% at one point – wiping £849m from its stock market value.

So what went wrong?

In a word, it seems that expectations were just a little too high.

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According to Oscar Val Mas, analyst at investment bank JP Morgan Cazenove, underlying earnings came in 7% lower than the market had been expecting and noted that the company had not changed its guidance to investors on profit margins for the year.

Steve Clayton, manager of the HL Select UK Growth Shares fund, which owns shares in Intertek, added: “These interim (results) were always going to be a tough act for Intertek to pull off.

“Demand has been highly volatile and only relatively recently translated into robust growth.

“But expectations for Intertek’s ability to translate any recovery into higher (profit) margins were high.

“So far, the group is lagging a little on the margin front, even though pretty much all parts of the business are now seeing demand bouncing back.

“Full year forecasts are likely to edge down, so no surprise to see the market pushing the stock lower.”

London Stock Exchange
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Expectations were too high and the market pushed stock lower

It is a rare setback for a company which, since going public in 2002 and joining the Footsie in 2009, has been a stock market darling.

It has a strong track record of growing both via takeovers and organically and also of predicting accurately what its customers will be demanding next.

Yet Andre Lacroix, the chief executive, insisted today he was confident demand will keep growing and said the company had “exciting growth opportunities” in the post-COVID-19 environment.

He told analysts today: “The total value of the global product assurance market is $250bn.

“Only $50bn of this is outsourced.

“Given the increased complexity in global corporations, we expect companies to continue to invest in new quality assurance areas to mitigate risk in the supply chain.

“These are what we call untapped quality assurance opportunities. And, indeed, COVID-19 has demonstrated there were major risks in the operations of our clients, which were not all mitigated.

“We expect the increased focus on quality assurance essentially in three areas moving forward – safer supply chain, better personal safety and sustainability.

“And this is why the industry is expected to grow faster post-COVID-19.”

Andre Lacroix
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Intertek boss Andre Lacroix is a former chairman and chief executive of Euro Disney

Mr Lacroix, who joined in May 2015 from Inchcape – coincidentally the company from which Intertek was spun out of 25 years ago – said a recent survey of customers had revealed that 87% of them were planning to invest in the next two years to strengthen their supply chains.

He said that recent shortages in supply around the world – a good example currently being how shortage in chips is hampering car production around the world – had highlighted the need for supply chains to be more resilient.

He went on: “We need to ensure health, safety and well-being for employees and consumers. COVID-19 has raised the bar for health and safety in public and factories and workplaces forever.

“And they all face higher operational complexity, which is driven by the explosion of e-commerce and, of course, the ever-faster innovation cycle.”

One area where investors appear to be concerned, in the immediate term, is inflation.

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As firms put net zero plans in place, Intertek will have a vital role to play, say experts

Intertek employs a lot of specialist and highly-qualified people, such as scientists with PhDs, while it also has a policy of giving employees pay rises every year.

The expectation is that it will be seeing a high level of wage inflation.

Mr Lacroix insisted that this was not the case – pointing out that, when lots of businesses were undergoing large restructurings with a lot of redundancies during the pandemic, Intertek had deliberately not gone down that road.

He went on: “To basically reduce our capability and then start hiring again was going to be very costly and not the right thing from a customer service standpoint.

“So we are not seeing any issues with shortages of labour. We have to hire, we do it all the time, but we don’t have a huge gap in our capability.”

He said the company would be quite capable of returning to its pre-pandemic productivity level without having to take on more employees.

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And there could be another big growth opportunity in coming years, too.

As Mr Clayton put it: “There is a quiet revolution going on in business, as firms start to put net zero plans into place.

“Intertek has a vital role to play here, with its ability to provide quality assurance of supply chains and audits of key environmental performance data.

“In short, there are whole new markets opening up for the business and the shares should increasingly recognise the potential of these opportunities, as well as the issues the existing business faces day to day.”

So, a tough day for Mr Lacroix, a former chairman and chief executive of Euro Disney.

But, once the dust has settled, he has plenty of opportunities to prove to sceptics that his company’s prospects are anything but Mickey Mouse.

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Octopus Energy sparks £10bn demerger of tech arm Kraken

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Octopus Energy sparks £10bn demerger of tech arm Kraken

Octopus Energy Group, Britain’s largest residential gas and electricity supplier, is plotting a £10bn demerger of its technology arm that would reinforce its status as one of the country’s most valuable private companies.

Sky News can exclusively reveal that Octopus Energy is close to hiring investment bankers to help formally separate Kraken Technologies from the rest of the group.

The demerger, which would be expected to take place in the next 12 months, would see Octopus Energy’s existing investors given shares in the newly independent Kraken business.

A minority stake in Kraken of up to 20% is expected to be sold to external shareholders in order to help validate the technology platform’s valuation, according to insiders.

One banking source said that Kraken could be valued at as much as $14bn (£10.25bn) in a forthcoming demerger.

Citi, Goldman Sachs, JP Morgan and Morgan Stanley are among the investment banks invited to pitch for the demerger mandate in recent weeks.

A deal will augment Octopus Energy chief executive Greg Jackson’s paper fortune, and underline his success at building a globally significant British-based company over the last decade.

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Octopus Energy now has 7.5m retail customers in Britain, following its 2022 rescue of the collapsed energy supplier Bulb, and the subsequent acquisition of Shell’s home energy business.

In January, it announced that it had become the country’s biggest supplier – surpassing Centrica-owned British Gas – with a 24% market share.

It also has a further 2.5m customers outside the UK.

Octopus energy wind turbine. Pic suppled by Octopus.
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Kraken is an operating system licensed to other energy providers, water companies and telecoms suppliers. Pic: Octopus

Sources said a £10bn valuation of Kraken would now imply that the whole group, including the retail supply business, was worth in the region of £15bn or more.

That would be double its valuation of just over a year ago, when the company announced that it had secured new backing from funds Galvanize Climate Solutions and Lightrock.

Shortly before that, former US vice president Al Gore’s firm, Generation Investment Management, and the Canada Pension Plan Investment Board increased their stakes in Octopus Energy in a transaction valuing the company at $9bn (£7.2bn).

Kraken is an operating system which is licensed to other energy providers, water companies and telecoms suppliers.

It connects all parts of the energy system, including customer billing and the flexible management of renewable generation and energy devices such as heat pumps and electric vehicle batteries.

The business also unlocks smart grids which enable people to use more renewable energy when there is an abundant supply of it.

In the UK, its platform is licensed to Octopus Energy’s rivals EON and EDF Energy, as well as the water company Severn Trent and broadband provider Cuckoo.

Overseas, Kraken serves Origin Energy in Australia, Japan’s Tokyo Gas and Plentitude in countries including France and Greece.

Its biggest coup came recently, when it struck a deal with National Grid in the US to serve 6.5m customers in New York and Massachusetts.

Sources said other major licensing agreements in the US were expected to be struck in the coming months.

Kraken, which is chaired by Gavin Patterson, the former BT Group chief executive, is now contracted to more than 70m customer accounts globally – putting it easily on track to hit a target of 100m by 2027.

Earlier this year, Mr Jackson said that target now risked being seen as “embarrassingly unambitious”.

Last July, Kraken recruited Amir Orad, a former boss of NICE Actimize, a US-listed provider of enterprise software to global banks and Fortune 500 companies, as its first chief executive.

A demerger of Kraken will trigger speculation about an eventual public market listing of the business.

Its growth in the US, and the relative public market valuations of technology companies in New York and London, may put the UK at a disadvantage when Kraken eventually considers where to list.

One key advantage of demerging Kraken from the rest of Octopus Energy Group would be to remove the perception of a conflict of interest among potential customers of the technology platform.

A source said the unified corporate ownership of both businesses had acted as a deterrent to some energy suppliers.

Kraken has also diversified beyond the energy sector, and earlier this year joined a consortium which was exploring a takeover bid for stricken Thames Water.

This weekend, Octopus Energy declined to comment.

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Ryanair urges EU chief to ‘quit’ over air traffic strike disruption

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Ryanair urges EU chief to 'quit' over air traffic strike disruption

The boss of Ryanair has told Sky News the president of the European Commission should “quit” if she can’t stop disruption caused by repeated French air traffic control strikes.

Michael O’Leary, the group chief executive of Europe’s largest airline by passenger numbers, said in an interview with Business Live that Ursula von der Leyen had failed to get to grips, at an EU level, with interruption to overflights following several recent disputes in France.

The latest action began on Thursday and is due to conclude later today, forcing thousands of flights to be delayed and cancelled through French airspace closures.

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Mr O’Leary told presenter Darren McCaffrey that French domestic flights were given priority during ATC strikes and other nations, including Italy and Greece, had solved the problem through minimum service legislation.

He claimed that the vast majority of flights, cancelled over two days of action that began on Thursday, would have been able to operate under similar rules.

Mr O’Leary said of the EU’s role: “We continue to call on Ursula von der Leyen – why are you not protecting these overflights, why is the single market for air travel being disrupted by a tiny number of French air traffic controllers?

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File photo dated 02/09/22 of a Ryanair Boeing 737-8AS passenger airliner comes in to land at Stansted Airport in Essex. Ryanair has revealed around 63,000 of its passengers saw their flights cancelled during last week's air traffic control failure which caused widespread disruption across the industry and left thousands of passengers stranded overseas. In its August traffic update, the Irish carrier said more than 350 of its flights were cancelled on August 28 and 29 due to the air traffic contr
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Ryanair has cancelled more than 400 flights over two days due to the action in France. File pic: PA

“All we get is a shrug of their shoulders and ‘there’s nothing we can do’. We point out, there is.”

He added: “We are calling on Ursula von der Leyen, who preaches about competitiveness and reforming Europe, if you’re not willing to protect or fix overflights then quit and let somebody more effective do the job.”

The strike is estimated, by the Airlines for Europe lobby group to have led to at least 1,500 cancelled flights, leaving 300,000 travellers unable to make their journeys.

Ryanair chief executive Michael O'Leary speaks to journalists during a press conference at The Alex Hotel in Dublin. Picture date: Thursday October 3, 2024.
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Michael O’Leary believes the EU can take action on competition grounds. Pic: PA

Ryanair itself had axed more than 400 flights so far, Mr O’Leary said. Rival easyJet said on Thursday that it had cancelled 274 services over the two days.

The beginning of July marks the start of the European summer holiday season.

The French civil aviation agency DGAC had already told airlines to cancel 40% of flights covering the three main Paris airports on Friday ahead of the walkout – a dispute over staffing levels and equipment quality.

Mr O’Leary described those safety issues as “nonsense” and said twhile the controllers had a right to strike, they did not have the right to close the sky.

DGAC has warned of delays and further severe disruption heading into the weekend.

Many planes and crews will be out of position.

Mr O’Leary is not alone in expressing his frustration.

The French transport minister Philippe Tabarot has denounced the action and the reasons for it.

“The idea is to disturb as many people as possible,” he said in an interview with CNews.

Passengers are being advised that if your flight is cancelled, the airline must either give you a refund or book you on an alternative flight.

If you have booked a return flight and the outbound leg is cancelled, you can claim the full cost of the return ticket back from your airline.

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CBI kicks off search for successor to ‘saviour’ Soames

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CBI kicks off search for successor to 'saviour' Soames

The CBI has begun a search for a successor to Rupert Soames, its chairman, as it continues its recovery from the crisis which brought it to the brink of collapse in 2023.

Sky News has learnt that the business lobbying group’s nominations committee has engaged headhunters to assist with a hunt for its next corporate figurehead.

Mr Soames, the grandson of Sir Winston Churchill, was recruited by the CBI in late 2023 with the organisation lurching towards insolvency after an exodus of members.

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The group’s handling of a sexual misconduct scandal saw it forced to secure emergency funding from a group of banks, even as it was frozen out of meetings with government ministers.

One prominent CBI member described Mr Soames on Thursday as the group’s “saviour”.

“Without his ability to bring members back, the organisation wouldn’t exist today,” they claimed.

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Rupert Soames
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Rupert Soames. Pic: Reuters

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Mr Soames and Rain Newton-Smith, the CBI chief executive, have partly restored its influence in Whitehall, although many doubt that it will ever be able to credibly reclaim its former status as ‘the voice of British business’.

Its next chair, who is also likely to be drawn from a leading listed company boardroom, will take over from Mr Soames early next year.

Egon Zehnder International is handling the search for the CBI.

“The CBI chair’s term typically runs for two years and Rupert Soames will end his term in early 2026,” a CBI spokesperson said.

“In line with good governance, we have begun the search for a successor to ensure continuity and a smooth transition.”

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