Earnings Call: Q3 2020

Oct 22, 2020

Hello, and welcome to the Bureau Veritas Q3 2020 Revenue Call. My name is Dan, and I will be your coordinator for today's event. Please note this conference is being recorded and for the duration of the call, your lines will be on listen only. However, there will be an opportunity to ask questions at the end. I will now hand you over to the CEO of Bureau Veritas, Didier Michel Daniel, to begin today's conference. Thank you. Thank you, Dan. Good morning, good afternoon and good evening to everyone. Thank you for joining Bureau of Ital's 3rd quarter 2020 revenue on the webcast and on the call. Francois Chabot, our group CFO is here with me to present our results along with Laurent and Florent. I confirm that we are all at a safe distance away from one another to ensure social distancing. As a roadmap to our existing strategic plan has now run its course, I will take the opportunity today to share with you the driving principles for our new strategic plan. The next stage of our development will be funded on the continuity of our ongoing successful strategy that has delivered the resilience we see today and the considerable opportunities driven by sustainability. Since the start of the pandemic, the all of Bror Veritas has been placed on a crisis management footing. During the Q3, health and safety and ensuring service to our clients has continued to be at the heart of our operations. We continue to take all possible measures to ensure the health and safety of all our employees. This is paramount. We continue to ensure business continuity with and for our clients by accompanying them in managing their risks and to restart their operations, both in the field and remotely using more digital solutions and tools. All our teams remain highly mobilized and proactive. I would like to take this opportunity to thank them for their professionalism, which is vital for us to return to growth in these uncertain times. Our performance in the Q3 illustrates once again the dedication of our teams. So first, a few highlights on our Q3 performance. Revenue totaled €1,150,000,000 down organically by 4.4%, but showing a significant sequential improvement after the 16% decline in the 2nd quarter. For the full year 2020, based on how we see our businesses moving currently and assuming we are not moving back to general lockdown measures in our main countries, we now expect a slow and gradual recovery as the most likely scenario for BV. Looking now at our portfolio during Q3. We posted a resilient revenue performance, thanks to our diversified portfolio. Nearly half of the group's revenue was again on a growth path in the 3rd quarter. The 3 businesses, Marine and Offshore, Building and Infrastructure and Certification were up 1.9% on average. This demonstrates the robustness of our portfolio and the quality of our mix. It's very balanced, and we have been able to absorb the shocks. We are steadily recovering as you can see on the right hand side of the slide. This recovery is not just a consequence of short term catch up. We expect and are indeed already seeing an increased demand for sustainability services and the opportunities triggered by the green deals and infrastructure spending in many geographies. These form the basis of medium term growth drivers across all of our business activities. I will come back to this in a minute. First, I would like to share with you our strategy and assessment for 3 of BV's key businesses. Starting with Buildings and Infrastructure. 5 years ago, this business was largely European, mainly geared towards construction in France. We have now repositioned the business both geographically and operationally, thereby making it more resilient and less exposed to potential local trends. We now have a solid footprint in both China and in the U. S. As you can see in the chart with a much improved geographical balance. Operationally, our strategy to reposition the portfolio towards OpEx related services means that these now represent more than 60% of our B and I revenues. These services have much more visibility, driven by regulation that ensures a regular flow of recurring client business with clear visibility. OpEx related revenues now total more than 75% of Building and Infrastructure French Business. For CapEx now. For CapEx, we have worked on diversifying, improving visibility and making our exposure more resilient and more resilient and focused. We now have 3 growth engines providing greater resilience to the group. The quality of our CapEx exposure is much better today, more balanced geographically and by asset type. The business expects to continue to benefit from the huge Chinese infrastructure drive, our U. S.-based platform for data center commissioning services and also the European Green Deal. Over the next few years, we expect to benefit from the numerous investment programs. In the medium term, we expect these infrastructure projects to be transformed into OpEx opportunities. Looking now at our Certification Assurance business. This business has strong growth features as we have rolled out over the last few years a suite of services focused on long term secure growth plans. These were largely hidden behind the rush for recent certification changes that are now at the forefront of our activity. Brand protection and supply chain monitoring that are paramount for our clients sustainability and CSR related services, which account for 37% of divisional revenues and will continue to grow at an above average pace. Short term wise, this business has strong tailwinds, benefited from 1, the restart your business with BV and safeguard missions and 2, audit catch up following postponement in H1. Moving to our Consumer Products business. Since the introduction of trade tariff, the group has been impacted from its historic positioning on the U. S.-China retail channel. In 2019, we took the decision to restructure this business to give it new momentum. This has resulted in a rationalization of our laboratories in China. We have also optimized our cost base. These efforts will bring us back to a margin above 20% already in the second half of twenty twenty. The diversification strategy is well underway. We are developing our geographical footprint with particular focus on Asia and also Latin America and Africa. This reflects also the trends in the soft clients industry to stores elsewhere from China. We will, of course, continue to develop our presence in the Chinese domestic market. Diversification will also take place for the development of certain markets within the smart world, E and E, E, IoT and cyber. These markets are supported by powerful underlying trends. We are working to develop the mix of our customer base to expand the e commerce branch, mega vendors and the middle market. The opportunities are therefore numerous. I mentioned sustainability earlier. I would like to come back to this as sustainability is at the heart of our business. As a business to business to society services company, Bureau Verinta's mission is to establish a relationship of trust between businesses, public authorities and consumers. As a world leader in audit and certification services, we believe that we are the best positioned to support our 400,000 clients to be more efficient, more methodical and more credible in their journey towards more responsible business and sustainable world. So what do I mean by this? Sustainability is embedded into our strategy, our whole organization and across all our businesses. When we talk about sustainability or ESG commitments, the same key headline subjects are at the forefront of any strategy: safety, the environment, social responsibility and product or service quality. With our expertise, we serve our clients to meet these challenges all along the chain from resources and production to consumption during the construction and refurbishment phase of buildings and infrastructures or in the field of transport and of course CSR strategy with regards to employees and all stakeholders. To this end, we will demonstrate through a green line of services and solution, we can empower organizations, private and public, to implement measure and achieve their ambitions towards sustainability. What does it mean in terms of services delivered to our clients? We propose tailor made expertise reaching across responsible use of natural resources, renewables and alternative energies and carbon footprint verification, traceability of the supply chain, sustainable construction, new mobility, ethical business practices and CSR strategy management. In all these fields, we support our clients with their compliance with regulations, managing risks and to improve performance. In doing so, we contribute to proving the impact our clients' ESG actions by making them traceable, visible and reliable. By bringing transparency, we provide the tools to protect their brand and their reputation. These services already exist for the most part and will be further developed as part of our strategic plan as we gain traction with our clients. This is fast moving and presents numerous growth opportunities. We see a wide range of opportunities related to a more sustainable world. I would like to focus on 3. First, energy transition and the shift towards renewable and alternative energies. We can fully support energy players in energy transition when they need to design, build and then operate their assets. Secondly, supply chain management. This is an increasing need for better supply chain risk management, our undisputed global footprint and network of experts is key to address that. Lastly, the European Green Deal. As a leader in building and infrastructure as well as in industry, we are well positioned to capture part of the investment programs in Europe, aiming at supporting the green economy. This includes green deal in France and in other European countries. Here, we are talking about green building, sustainable mobility and clean energy. Bureau Veritas will play an increasing role as an impartial and independent third party in the chain of actions towards making our economy more transparent and more responsible for our planet and its inhabitants. Let me now hand over to Francois for the financial and the business reviews for Q3. Francois? Thank you, Didier. Good morning, good afternoon, everybody. So starting with the revenue bridge on Page 16. The organic decline amounted to 4.4%, as mentioned by Didier, representing a marked improvement on the previous quarter, which was down minus 15.6 percent, as you may remember. External growth contributed minus 0.3% on a net scope basis. This reflects essentially the divestments during the quarter of a non core business unit in the U. S, which was margin dilutive to the group. ForEx had a strong 4.9% negative impact, mainly due to the depreciation of some emerging countries' currencies against the euro. Turning now to the organic revenue growth by business in the Q3. I would say to summarize, organically, 3 out of our 6 businesses grew at 1.9% on average. Certification, first, rebounded by plus 7%. Marine and Offshore confirmed its resilience despite the change in market at +1.9 percent and Building and Infrastructure returned to growth at plus 0 6%, thanks to the strong growth in China and the delivery on its OpEx related business in Europe. The other three businesses continued to suffer, mainly from the impact of the pandemic. Agro Food and Commodities and Industry declined by 7.5% and 8.2%, respectively. And finally, Consumer Products was down 11%. I would highlight, however, that it has improved materially from H1, as you may remember, benefiting from our actions towards diversification and our efforts to restructure the business. Turning to the revenue growth for the 1st 9 months of 2020. We delivered €3,350,000,000 in the 1st 9 months with an overall decline of 10.6%. Organic decline reached 7.4% despite the sequential improvement I commented a minute ago. External growth contributed minus 0.4 percent on a net scope basis. As far as ForEx is concerned, the year to date impact was negative by 2.8%. Let me now share with you the highlights of the Q3 for each of our 6 businesses. Starting first on Marine and Offshore. The business delivered a solid 1.9% organic growth in the 3rd quarter, benefiting notably from mid single digit growth in the new construction segment and a good level of in service activity as we continue to deliver essential services to clients around the world. When it comes to the other book, it stood at GBP 14,400,000 gross tonnes at the end of the quarter, up plus 1.5 percent compared to the end of 2019. So the book remains very well diversified in a market down high single high double digit. We continue to benefit from a strong positioning on the most dynamic market segments, such as LNG vessels and the most technologically advanced ships. So the group continues to pursue its strategy to develop innovative services for alternative fuels, including fuel cells and hydrogen. For Agri Food and Commodities, the business improved from Q2 with a decline of organic growth revenue limited to 7.5% in Q3. Within Agri Food and Commodities, it is worth noting that the Agri Food delivered good growth. The business is supported by strong secular growth drivers around increased food profitability and increased outsourcing. In Asia, where the group has leading position, we delivered double digit organic growth in Q3. For metal and minerals, our product mix geared towards gold and our increased exposure to outsourcing contracts give us pretty good visibility and growth prospects. In Oil and Petroleum, although the environment is tough, we have identified several opportunities to grow our non trade related business. Moving to Industry now. Revenue declined by 8.2% organically in the Q3 of 2020. Obviously, oil and gas CapEx activity tracked down the divisional performance as many projects were frozen. That said, they now only account for 3% of group revenue, thanks to the rebalancing of the portfolio. But on the other hand, the Power and Energy segment, now accounting for 16% of divisional revenue, continued to be a key contributor to growth. It grew high double digit organically, illustrating the good execution of our diversification strategy. In the medium run, we see growth opportunities related to renewables and alternative energies. Obviously, the European Green Deal would accelerate previously identified trends towards energy transition and targets of carbon neutrality. For Building and Infrastructure, revenue improved organically to 0.6% in the 3rd quarter from minus 10% in Q2, confirming the recovery of the activity. The group is proving to be resilient, thanks to its 3 growth platforms across different geographies: Europe, Asia Pacific and North America. Our performance was strong for OpEx activities, which again represents close to 60% of divisional revenue, up low double digit organically as it benefited from a catch up of regulatory driven businesses not delivered during the first half. By region, we delivered robust growth in Europe, notably in Spain and in France, and strong growth in China, while our business in North America has yet to return to normal. For Consumer Products, organic growth declined by 11% in the Q3 of 2020, being an improvement compared to the Q2 performance, which was down 22 point 8%. This reflects less disruption from lockdown measures across the group operations. However, low activity levels remain with American and European clients, where many new product launches are currently on hold. Testing activities continue to be under pressure, while the inspection and other services reached near stability during the quarter. As mentioned by Didier at the beginning, the group continues to pursue its strategy towards new geographies and new markets on this segment. Starting with Certification, it's been the best performer within the portfolio, up 7% in the Q3. It benefited from the restart your business with BV Offering, helping, as you know, our clients to restart their operations and second, from a catch up of postponed audit from Q2. By scheme, food, transport and supply chain and sustainability services performed the most. Now during the Q3, the group demonstrated strong agility with a risk scheduling of nearly 40,000 man days that had been initially planned in H1. It may not be meaningful to you, but it truly illustrates the huge challenge that our teams across the world had to face and their excellent execution. We also continue to perform some audits remotely, which amounts to approximately 12% of the program. I will now hand back to Didier for the outlook. Didier? Thank you, Francois. Regarding the 2020 outlook, when we spoke in July, we shared with you our scenarios and assumptions for the full year 2020. Notwithstanding the fact that the crisis is still with us in a number of geographies such as India, the U. S. And also in Europe, Based on the information available today and assuming that we are not moving back to generalized lockdown measures in our main countries, we can now retain the scenario slow and gradual recovery. I shared with you Bureau Veritas wide ranging strengths to support and accompany our clients in achieving their sustainability ambitions. With the work we have done over the past 5 years at Bureau Veritas, we are well positioned to thrive in the world's new reality. The need to create an environment of trust. This will be built on transparency where confidence will only be restored through the support and endorsement by impartial and independent third party experts. The pandemic has accelerated the awareness of economic players regarding the way they operate, work and perform. It has highlighted their weaknesses and reinforced the need to understand and manage the risk in their supply chain. It has brought to ahead the challenges of risk participation, agility, flexibility and responsiveness to challenge. It has become central for the management teams of most of our clients. Through the initiatives and the digital that we have with them, we have seen a strong evolution over the past month and believe that we will be a key link in helping them to solve many of their issues. Digital. Digital will be a key pillar of the new entity. We will pursue to digitalize our services and constantly innovate. Thank you for listening. Francois and I are now pleased to answer questions you may have. The first question will come from Edward Stanley calling from Morgan Stanley. I've got 3, please. I'll take them 1 by 1. Very interested in the certification division, which has obviously been a fantastic recovery from last quarter and specifically restart with BV. I think in Q2, you were downplaying this as relatively modest impact, and it's obviously had a better impact than possibly was the case back then. So I'm just interested in how one off in nature the pipeline of work is to restart with BV or whether you've got some remaining work for the rest of the year, which means that this won't be a completely Q3 event? Okay. On certification, today, I can be very transparent with you. We recorded a little bit more than €25,000,000 orders, which is very good news. It represents certification business with more than 2,000 clients. Some of them are brand new, which is again another good news because we've started to work with clients who are not used to work with. I'm thinking, for instance, about the hotel chains, which are still very demanding because of the today situation. So of course, it had an impact on Q3. It will continue in Q4 and probably beyond because with these new clients, we are developing new business on top of this certification business. Last but not least, the situation with the epidemic is not over yet, meaning that we are still contacted by clients. I'm thinking, for instance, about skin stations today, who would like us to help them to put protocols in place, sanitary protocols in place, develop referential and of course give the what we call the safeguard certification. Okay. So there is clearly some business in Q3. There will be some business in Q4. And we can foresee probably some business and some certification in the future as well. Perfect. Thank you. And the second question on oil and gas, while the oil prices obviously led to some freezing of projects. But as you have progressed through the quarter and maybe into October, is there any evidence that as the oil prices stabilized around the $45 level that any of these projects are beginning to unfreeze and ramp up or is that too early to stay at this point? Honestly, between you and I, oil and gas is not my obsession today. It's very slow. I even don't understand why you are asking the question. 3% of our business. It's not announced CapEx. So I understand why you would have asked this 10 years ago, but now honestly, it's not my concern every day when I'm working here. The pipeline on gas is very good, so which is good news. We still have some maintenance CapEx. Some other CapEx will develop. But again, I'm focusing on what the opportunities are for BV more than on what was too cyclical and that is still for me a business which is too cyclical. Fair enough. And the final one, you talk a lot about the interesting stuff gearing up in green buildings, supply chain transparency, energy transition. So we're getting 2020 for a minute. I'm interested now that the dust is settling. What do you think the business can realistically deliver over the coming 2 or 3 years in growth post COVID? And where will you be putting your incremental euro or CapEx to work to achieve that growth over the medium term? So it's a very good question that one. I prefer that one to the oil CapEx honestly, because there are a lot more opportunities in this domain than in the oil CapEx. So on this one, as you know, first, I'm going to start with the green deal. As you know, there are 1,000,000,000 of euros which are invested in Europe and in France on what we call sustainable development. So it's going to bring some business to grow beta. As you said, and you are right, on building on infrastructure, but it will be much more than that. We know, for instance, that the company like Total and we are working with them on new projects are going to develop Queen Farm Offshore. We won some big contracts already. When we about the big contract, it's €3,000,000 So it's quite big. And we know that a lot of companies, the UK is a good example. The Prime Minister of the U. K. Said that he wanted to be a renewable energy nation. So we can see a lot of opportunities in wind farm development and solar development in some other countries. After I was talking about the Green Deer, but I could talk also about the rehabilitation, the refurbishment of the buildings. As you know, there will be huge investments on refurbishment of the building to make them more greener. And in fact, in this case, it means that there will be new regulation. And again, as we are the leader in building and infrastructure, we will be fully involved in these refurbishments or new buildings. I could give you a good another good example. Each time now I meet a client, he's asking me, how could you help us, Didier, on the CSR business or the ESG business? The ESG, I mean, I'm talking about the certification. Why is it? Today, they are working with external consultants, defined KPIs and we are talking here about self declaration. Consumers, boards are asking now for more transparency, okay? So they want to be sure that what they declare is right. And we have, of course, a very important role to work with various companies and you will see very soon that we have already signed some important contract to help them to prove to the consumers to the final consumers who is very implied today and very involved and to their board that what they declare is right. So clearly, for term and midterm, this is an opportunity of growth. I have absolutely no doubt about it. It's the reason why we decided to give you more perspective with a green line showing that we are capable at BV and we are probably the leader we are the leader in building and infrastructure. We are the leader in energy. We are the leader in certification and assurance. So it gives us a very good position to be ready to deliver the services along this green line. Thank you. My pleasure. The next question will come from George Gregory calling from Exane. George, when you are ready, please go ahead with your question. Good evening, Didier Francois. Thank you for the thanks for the slides on your sustainability services, very interesting. I had just one question with regards to the benefit of the catch up in some of your divisions. I think you highlighted certification B and I and perhaps some extent Marine offshore. How should we think about that effect going into the Q4, please? So, Francois? Yes. Well, thanks for your question. And you're right, the 2 main divisions where we have a catch up certification on the one hand where it's very visible and B and I. Those 2 for a good chunk of their activity are related to businesses requiring a yearly inspection. So what hasn't been done in Q2 is moved to Q3 and Q4. So basically, to answer your question very rapidly, it will continue in Q4, no doubt. The I would say, there is a risk of execution if we want to be cautious, which is which has one to see with our own capacity to deliver. I have mentioned the 40,000 additional audit days that had to be scheduled over the summer. So we'll have the same type of operational issues to deal with. That's at least we know what to do. On the other side, it's a cutoff issue. On those two businesses, regulators are somewhat lenient and low in some of the schemes that the deadline of the 31st of December is pushed by 1 month or 2. There is no general rule. It's country by country and scheme by scheme. But for operational management, obviously, the main point is to keep their clients happy and deliver the service, whether it is Q4 or January, it doesn't make a big change. As you know, we report on the calendar year. So we may see a little bit of production moving from December to January. It's too early to say on that stage. But I would say on those two businesses, we expect the trend to trend in terms of catch up. That's great. Thank you. Thank you, Joe. The next question will come from Andy Grodler of Credit Suisse. Andy, when you are ready, please go ahead with your question. Hi, good evening, everybody, and thanks for taking my questions. 3, if I may. Firstly, you talked about your ESG services and products in terms of helping your clients to be transparent. We've heard quite a lot about this from various companies. Can you try and help us quantify how big that market is now and how much you think that could grow in the coming years? And also where you see competition sort of above and beyond just the traditional testing plans will be great. Thank you. Secondly, on remote inspection, which seems to have been a real trend in recent months. How do you see that developing? And what impact could that have both on costs? Clearly, that will be helpful, but also on pricing. And then thirdly, on oil and gas, if I dare, just as you go through the energy transition, the trade and the CapEx and the OpEx are all going to come under relative pressure, one would assume. To what extent can you repurpose the individuals and the assets that are involved in that into other industries and other services? And to what extent could they be stranded if they're no longer needed? Thank you very much. Thank you very much, Andy, for your question. I'm going to start by the last one. In fact, when you think about the fact that we are working on energy, some of these individual, as you said, can be could be clearly re affected. But the good news is, on this part of the business, we are now very resilient, because we are talking mostly about OpEx. CapEx is extremely low. As I said, it's mostly maintenance CapEx, meaning that these guys, we need them. This part of the business for me now is more resilient and will be as it is. So meaning that other part, and I am happy because you understand very well the opportunity that we have with renewables, we will have to develop, of course, expand. This is something we do already. I talked about a big contract that we won in the Netherlands, another one in France. These are big contracts. We can we have the accreditation. We can and we will and we are already training the experts who will work on it. So you have this type of very resilient part. I'm talking about purely about OpEx. I'm not talking about trade. Trade is another question. It's a good question on the trade path. On the trade path, it's a different story because today, the trade is highly affected just because as you know the volume of oil, the demand is lower than what it was. So of course, there is more stock and the trade is of course not as high as it was. After it will stabilize at a certain level. That's okay. On the second question that you asked, which is the remote inspection, it's clearly for me an opportunity to improve productivity. We sell service. And in fact, when you look at it, we sell a certificate, which is proven against the regulation or an internal referential that things are done, are compliant, okay? So it's not about pricing in this case. It's about giving a certificate to the client, proving that the client is compliant. So for me, it's an opportunity of productivity improvement. On the ESG services, it's a little bit too early. You will have more details before the end of the year. I cannot say more than that, except that we are launching a product, but it's too early to talk about it, but you can be sure you will get a lot of details about it. And just on that Andy, may I finish, please? I'm sorry, sorry. It's where you are right, Andy, it's a great opportunity. There is no doubt about it. Each time now I'm visiting a client, I'm talking mostly about CEOs of big companies. They are asking me about how Didier could you help us? How could you help me to prove to my customers to prove to my stakeholders, to the Board that what I am declaring today is true, is right. And of course, because we can deliver service 80,000 people everywhere in the world on their supply chain And you will see we are working now. It's a little bit too early with a very big client and we are talking here about 100 suppliers. Our job will be to go and check that the KPIs they put in place are achieved according to what they want to declare. So it's a market. We are going to dig to inspect. This is our business and deliver a certificate, not just approving, but giving a clear view to the board, a clear view to the consumers about what was done according to the commitment taken by the management, by the CEO in this case. So it's clearly a huge opportunity. Fantastic. Sorry for interrupting. It's just on that, who else do you compete with apart from kind of the bigger traditional testing players? Are there other competitors, be auditors and so forth that are also moving into that space? And how do you see that? Not really because in fact, when you think about it, Andy, you have today what we call notation agency, rating agency. What do they do with these guys? I can tell you because we are very well rated at BB. They are asking us to self rated us, meaning we self declare what we do regarding CO2 emission, regarding diversity, regarding safety and so on. It's not acceptable anymore. Consumers want more than that. Board wants more than that. They want to be sure that what is self declared is just checked. And today, we have some financial firms, which are proposing to help regarding KPIs, but it's not enough. If I commit on planting 1,000, 2,000, 10,000 trees, I want to be sure today as a Board member that it's done. And we will go where wherever we have to go in Africa, in Brazil, wherever to check that it's done. I take this simple example, of course, on the supply chain, it's much more complicated than that, which is good news for us, but it gives you a good illustration of what we can deliver as a service to our clients. Okay. Excellent. Thank you very much. A pleasure, Andy. The next question will come from Sylvia Barker of JPMorgan. Sylvia, when you are ready, your line is now open. Please go ahead. Hi, evening. Thanks for taking the questions. I've got 3, please. First of all, just going back to the certification question that Ed asked, just to understand the restart of your business with BV, you mentioned €25,000,000 of orders. Just to understand what was the actual revenue in the quarter, if you can talk about that? I guess €25,000,000 is obviously 30% or so of that business. So presume that that's not the actual revenue. Then secondly, just the profitability on, 1, the restart your business with BV type activities with hotels? And then maybe if you can mention the same on the supply chain audit as well. Just interesting whether those activities are kind of more or less profitable than the overall division. And then finally, just a quick one, if you can give us any guidance on full year FX just as an impact on revenue? Thank you. I think, Francois, these questions are for you. On the profitability side, when we talk about Certification, you can be sure we are the same level as in terms of margin as the one we enjoy in Certification. So Francois? Yes. So just to take your question, in certification. So Francois? Yes. So just to take your question in the order, when it comes to restart your business, we've mentioned indeed EUR 20 5,000,000. It's kind of a it's a moving number because the clients keep on registering on this one. And obviously, the sad news we have across Europe are kind of shooting this because there is more and more concern. So when it comes to the impact, the impact is on Q3 and Q4 and is spread, let's say, mainly in certification. We have a little bit as well in B and I. So but I would say Q3, Q4 at the moment in terms of impact. When it comes to the margin, I think Didier mentioned it's standard margin compared to what we've used to deliver in Certification, so roughly 18%. And coming to the full year FX, well, pretty hard to give a guidance, obviously. We've gone through a tough summer with the U. S. Dollar going pretty low, currently kind of back at 1.18. So I would say, at the moment, replicating Q3 is somewhat what we see. Obviously, don't take it as a very solid guidance or this is just what we see from our share. Currently, it's all dollar driven in terms of FX, knowing that on emerging countries, we are more in under the constant pressure of the weakness in Latin America. So no change on that front. I mean, the news of the quarter was the U. S. Dollar. Most probably, the election may bring as well some new elements, the U. S. Elections. So pretty hard to predict there. But if you want to build up your model, replicating the Q3 impact is currently the, I would say, I will not call it a safer way, but this is our vision. Thank you, Silvia. And sorry, so the Q3, if we exclude the restart your business impact in Certification in Q3, would the division still have been up organically or? That would be up organically. Yes. Okay. All right. Thank you. Thank you. The next question will come from Paul Sullivan of Barclays. Paul, when you are ready, your line is now open. Please go ahead. Yes. Hi. Good evening, everybody. Believe it or not, 3 for me. Firstly, just on I know it's I know you don't like talking about margins, but the sharp improvement relative to your own expectations in Q3, does that change the 50 to 60 basis point drop through guidance you gave at the interim results? And how should we think about that as given the pace of recovery that you're seeing at the moment? Secondly, outside or other than certification and building and infrastructure, do you think the rates of improvement is sustainable? Do you think we'll see another step up in those other activities like consumer going from Q3 to Q4? And how do we think about additional tightening of restrictions going through the Q4? How are you thinking about that? And then finally, on Marine, how concerned are you that the sort of latest cycle businesses like Marine perhaps start to turn down as we go through next year? Thank you. Okay. Thank you, Paul. So on the Marine business, we are very proud because as Francois said before, our backlog of business, I'm talking about new equipment, is in fact above last year and above the BIN of the year. Why is it? It's because as we decided some years ago to be the experts on the LNG, we won some very big contracts, okay? And because we won these big contracts, we feel today that we might finish this year, which is a challenging year for Marine, probably at €6,000,000 gross tons, which means very close to last year, with highly technical ships, meaning clearly more revenue and of course, in this case, more margin. So and I can be very transparent with you. Today, new equipment, first time ever, our market share is close to 25%. So it's a great achievement. I'm very happy with the management and the Marine team, because I know already that I'm going to restart next year with a good backlog even if, as you know, the market is extremely difficult. The good news is that on the LNG market, which is the biggest one today, we are doing extremely well. Regarding margin and the other point was about top line. I'll let Francois answering these questions. Yes, Paul. So on the first one, when it comes to the performance of Q3 and the impact on the overview for the year end, First of all, just if I may come back to your wording of the question, we haven't been surprised by the performance. As you know, in H1, we've given you 3 scenarios, I mean, considering all the options that we could face, external options that we had to consider. And as you know, summer has gone through without major lockdowns or external events that have been strongly impacting our operations. So I would say the fact that we today confirmed that the scenario 1 is the one we favor at that time of the year is for us the translation that our vision in July was the right one, meaning this scenario 1 is what happens when there is no major lockdown coming. Does that change currently or drop through expectations? No. I mean, let's be clear. The short term uncertainty around us, whether it is in Europe or even currently still in India, makes us careful in our short term provision. Again, I think we try with Laurent, as we always do, to be transparent with you all guys. The fact that we now narrow to one scenario gives you, I believe, already a strong base for thinking. When it comes now to the rate of improvement in Q4, well, at the end of the day, we'll have a bit of a catch up that I've mentioned. We do not give more guidance than we have done already, which is in scenario 1. We expect some limited improvement at CPA that you mentioned. But I would say, keep scenario 1 in mind. I would be happy to report by the end of February your final numbers. And keep one thing in mind as well is that on the short run, the scenario 1 is a scenario we today favor in absence of any lockdown I mean, real lockdowns in any of our large countries, obviously. And you've heard the news, like me, on Ireland and Wales. Fortunately, we are not exposed in terms of business in those geographies. But frankly, today, nobody knows what's going to come. So our guidance today or vision in terms of scenario is the number one without lockdown in material countries for buretors. I hope it answers your question. Yes, that's great. Thank you very much. Thank you, Paul. Thank you very much. The next question will come from Rory McKenzie of UBS. Rory, when you are ready, please go ahead. Good evening. It's Rory here. Just one last one for me, please. On the consumer products repositioning or diversification, it sounds like you're now willing to take some kind of firmer actions there. To be clear, are you talking about closing or disposing of more labs? Should we expect elevated CapEx as you try to open more aggressively in new areas? And what kind of targets are you setting yourself? How quickly do you think you can shift your mix to the areas that you've talked about? Well, thank you for the question, Francois. Yes, I would take the first part of what we have done, and Didier may elaborate then on what remains to be done. But as I think I've said a couple of times, we had a plan set up already in October last year prior to know anything about COVID obviously and to resize our network of laboratories, especially in China. And I think together with Didier in February when we got the news about the COVID and together with the Consumer Product team, we took the decision to deliver in 6 months what we thought would be carried over 16 to 18 months period. So the good news in a sense is that it's been all executed by the end of June. So whether it is laboratory closing, rationalization, downsizing of teams here and there, writing up of assets, this is, let's say, 90% behind us. So the repositioning of our capacities in China is done. The cleaning of what has to be cleaned is done. Now we are moving towards what Didier mentioned, which is repositioning geographically and in term of business. Do you want to give further details on how we progress? Yes. That was a good question from Raul. Clearly, there will be some CapEx. For instance, maybe I'm sorry if I probably I said it before, but at the meeting when we could still travel with a very important and big client for BV last year in New York City. And he wanted us to accompany him in Ethiopia. So we are building a lab in Ethiopia now. We can see clearly that the shift from China to South Asia is already bearing some fruits and our labs are more or less probably more today than less busy. And we will continue to look at why not potential small lab acquisitions or CapEx clearly because we feel that we need to continue to develop our business with CPS. There is another good opportunity for us, which is clearly the wireless, the AMC business. 5 gs, for instance, we built a chamber in Korea. So and we are now ready to test 5 gs connectivity in Korea, which was the case already in Taiwan and in China. And we will continue in that direction. We can clearly see today that there is a business which is still growing, which is a wireless IoT business, And we want to continue to accelerate and accelerate our position there. And still a business on what we call softlines, But of course, it has to be relocated in some other countries as a supply chain, notably from our American clients, is relocating today in some other countries. So we are following our clients clearly and we will continue to do so. The next question will come from Suhasini Varanasi of Goldman Sachs. Suhasini, when you are ready, please go ahead with your question. Hi, good evening. Thank you very much for taking my questions. Just a couple from you, please. I appreciate the detail on ESG. It's very helpful. You made an interesting comment about how very few probably very few of your customers are getting audits done in by independent third parties and many are doing self reporting. Do you you are doing the audits on or what percentage of your customer base are doing self reporting? Therefore, we can get a sense of the opportunity here. And the second question, just on the improvement through the quarter, minus 4.4% in Q3 versus a minus 8.8% in June. Can you maybe give us a sense of how the exit rate in September was, please? Maybe low single digit, almost flattish growth? Appreciate that. Thank you. Thank you very much for your question. You understand the business so well. Francois, on the second question? On the second question, the for the quarter, well, we usually avoid it, especially in a very volatile situation to disclose a month to month growth. But what I can say to help you is that the September month in terms of organic growth was higher than the average of the quarter. Okay. On your first question, by the way, you did a very good job on your note trying to estimate what the market is or will be. Of course, we are today clearly assisting the situation. And again, as I said, we are solicited by clients to deliver the service. We will discuss it before the end of the year, because we are going to be more precise with the new product. It's a little bit too early, so you will get even more details about it. What we can estimate today is probably 50% of our portfolio clearly related to ESG Services. So and again, self audit is not going to be sufficient. Self declaration is not going to be enough, boards are more demanding. When you think that now CEOs have a part of their bonuses or anti IPs on ESG, you can imagine that boards are going to be extremely demanding and shareholders, of course, to get the right inspection, the right documents, the right audit. I mean, this is now becoming extremely important. And it's true for not just CO2 emission. It's true about also recyclability of the products. It's true about even social responsibility. And on top, you have more and more regulations. And these regulations, I'm absolutely convinced, will be reinforced. And today, we see already Europe working on these new regulations, which will be implemented along the way for senior, if I can say something like that. I don't like this word, but probably encouraging the CEOs and the various management teams to be audited and to be inspected. This is absolutely clear. Appreciate the response. Thank you so much. And the last question from our call today comes from Rajesh Kumar of HSBC. Rajesh, when you are ready, please go ahead with your question. Good evening. Thanks for taking the questions. The first one is, you indicated drop through margins. You've already given some idea in the scenario. When you look at 2021, what do you feel about the cost base? Is it in the right shape? Or do you see more automation opportunities? Should we look at the drop through during the decline as a guide for how it might be in a recovery? Or could you get a bit more better due to automation? And the second one is on working capital. Could you give us some color on where do you see the working capital going in the medium term? Thank you for your question, Rafael. And so Francois, take both questions, please. Thank you, Rajesh. So on start with the second one. On working capital, so you saw that the 1st semester was very strong. We have we've kind of accelerated on this metric, pretty harsh. First of all so coming back to the summer, we don't report on those metrics. But just to give you a hint, the level of cash collection has remained pretty homogeneous compared to what we've seen in the first half. So no particular concern on that matter. You may have seen that our net debt has continued to go down, making us one of the rare company, I believe, mostly to exit this crisis with a net debt lower than it was at the beginning. So this being said, on the long run, we confirm our vision on working capital, which is a steady, sustainable decrease to try and land by 2021 at a working capital to revenue of around 8%. So no deviation on the targets. If we can do better, we will, as you know. But at the moment, that's the target we keep in mind throughout this crisis. That's the horizon. When it comes to the drop through margins in 2021, well, honestly, it's a bit early. We may give you more insight most probably in February. I think the message is that the teams are focused on closing the year. It's been a tough one. It's not over. And we will do what was best, first to deliver a strong H2, as Didier mentioned, not forgetting that the drivers which are behind this business are more medium terms as well. And so on drops to a margin, let's close the year and then I will come back to you in February with more on news. Okay. Thank you very much. I think we are done for today. So I wish you all good evening and thank you for your attention on your questions. Bye bye. Thank you all for joining tonight's conference. You may now disconnect your lines.