Is Intertek Group plc (ITRK) the Ultimate Retirement Share?

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LONDON — The last five years have been tough for those in retirement. Portfolio valuations have been hammered and annuity rates have plunged. There’s no sign of things improving anytime soon, either, as the eurozone and the UK economy look set to muddle through at best for some years to come.

A great way of protecting yourself from the downturn, however, is by building your retirement fund with shares of large, well-run companies that should grow their earnings steadily over the coming decades. Over time, such investments ought to result in rising dividends and inflation-beating capital growth.

In this series, I’m tracking down the UK large-caps that have the potential to beat the FTSE 100 over the long term and support a lower-risk income-generating retirement fund (you can see the companies I’ve covered so far on this page).

Today, I’m going to take a look at Intertek Group plc (LON:ITRK), a company involved in industrial testing and certification on a global scale. Although it may not be a company that has crossed your investing radar before, Intertek has delivered impressive results to investors over the last ten years, and may deserve a closer look.

Intertek vs. FTSE 100
Let’s start with a look at how Intertek has performed against the FTSE 100 over the last 10 years:

Total Returns 2008 2009 2010 2011 2012 10 yr trailing avg
Intertek (18.9%) 62.9% 43.6% 16.3% 54.1% 26.1%
FTSE 100 (28.3%) 27.3% 12.6% (2.2%) 10% 9.6%

Source: Morningstar; Total return includes both changes to the share price and reinvested dividends. These two ingredients combined are what make it possible for equity portfolios to regularly outperform cash and bonds over the long term.

Intertek’s performance against the FTSE 100 has been deeply impressive over the last ten years. In each of the last five years individually, it has delivered total returns above those of the index, and Intertek’s 10-year average total return of 26.1% is 2.7 times that of the FTSE 100.

If we exclude dividends and look at its share price alone, Intertek has also outperformed. The firm’s share price has risen by 890% over the last ten years, compared to a 77% gain for the FTSE 100.

What’s the score?
To help me pinpoint suitable investments, I like to score companies on key financial metrics that highlight the characteristics I look for in a retirement share. Let’s see how Intertek shapes up:

Item Value
Year founded 1987*
Market cap £5.4bn
Net debt £618.5m
Dividend Yield 1.1%
5 year average financials
Operating margin 14.5%
Interest cover 12.2x
EPS growth 16%
Dividend growth 17.9%
Dividend cover 3.3x

*Intertek’s various components date back as long ago as 1880 but were only organised as a single business unit from 1987.

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