Hello and welcome to Bureau Veritas H1 2022 Results. My name is Suzanne, and I will be your coordinator for today's event. Please note this call is being recorded and for the duration of the call, your lines will be on listen only. However, you'll have the opportunity to ask questions. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero and you will be connected to an operator. I will now hand over to your host, Didier Michaud-Daniel, CEO of Bureau Veritas, to begin today's conference. Thank you.
Thank you for the introduction. Good morning, good afternoon, and good evening to everyone. Thank you for joining Bureau Veritas H1 2022 results on the webcast and on the call. François Chabas, our Group CFO, is here with me to present our results, along with Laurent and Colin. In the first half of the year, the environment remained volatile, with the consequences of the war in Ukraine and a new wave of lockdowns in China. We continue to take measures to ensure the health and safety of all our employees. Employee safety is paramount for the management team. I would like to take the opportunity to thank all our teams who remain highly mobilized and ensure efficient solutions and support for all our clients. Let's move now to the results. We have delivered a very solid set of results for the first half.
The strong growth in revenue illustrates our excellent operational performance across the whole of the group's portfolio. Revenue totaled EUR 2.7 billion, up 11.4% year-on-year and 6.5% organically. This has been achieved despite the impact of the lockdowns in China and the war in Ukraine. Adjusted operating profit increased by 8.7% year-on-year to EUR 411 million with a margin of 15.3%. Our adjusted net profit is up 15.8%. Free cash flow totaled EUR 130 million. This was held back by the increase in working capital in China, where the lockdowns resulted in delays in invoice settlement. The group's leverage ratio was further reduced to 1.1 times from 1.3.
In H1 2022, we delivered very steady revenue growth across the board, illustrating our portfolio diversity and our numerous growth opportunities, notably in sustainability. In the pie charts you see that first, a fifth of the portfolio, Industry, delivered double-digit organic revenue growth at 10.8% in H1, including 9.8% growth in Q2. It clearly benefited from both strong business activity for the Power & Utilities segment and for oil and gas markets, which were supported by the rise in oil prices. Second, a further fifth of the portfolio, Agri-Food & Commodities, delivered high single-digit organic revenue growth, up 8.6%. The growth was led by continuing brilliant market conditions in metals and minerals and improving trends in the oil and petrochemical segment. Third, more than half of the portfolio grew at 4.3% organically on average.
Here we are talking about Marine & Offshore, Buildings & Infrastructure, Certification, and Consumer Products. Our diversified portfolio drove the delivery of 5.2% organic revenue growth in the second quarter. This despite the lockdown measures in China. Let's have a look now at what happened in China. China represents 15% of total group revenue at the end of H1 2022. The lockdowns impacted revenue, margins, and cash in the second quarter. We have been able to manage the situation and continued to support our clients. First, in consumer product activities, which makes up half of the group's Chinese revenue, our teams were highly proactive and executed our contingency plan effectively. We were able to limit the impact in Q2 by diverting samples from one location to another across the country or out of China to the group's South Asia testing capabilities, Vietnam, Bangladesh, India.
Bureau Veritas' continuous efforts to diversify geographical footprint outside of China over the last years bore its fruits. All of the group's labs have reopened and were fully back to normal by end of June 2022. One point on the Buildings and Infrastructure, which represents 30% of China revenue. I'm talking about the Chinese Buildings and Infrastructure main fee revenue. Construction sites were completely stopped for as much as eight weeks in areas where lockdowns have been imposed, such as Shanghai and Shenzhen. Once the mobility restrictions were removed, the group had to operate on a stop-and-go basis. Sites are required to shut down as soon as there is any suspicion of a COVID case. Since mid-June, the construction sites have gradually restarted, and the group expects to recover from Q3 2022 onwards.
We have seen over recent quarters how the group geographical and business diversification has enabled us to post overall growth. Our strategy to grow the portfolio with bolt-on acquisitions to deliver consistent performance has continued. The acquisition of PreScience that we announced in January 2022 to reinforce our B&I platform in the U.S., aims to increase our footprint in the infrastructure sector. PreScience is one of California's leading players in project management and construction services for government transportation infrastructure projects. It has an expertise on highways, bridges, and rail, and realized $25 million of revenue. Similarly to B&I, our diversification strategy in consumer goods continues with two acquisitions to expand our offering and footprint. ATL, scientific sourcing services for the North American consumer healthcare and cosmetics markets with EUR 31 million revenue and 500 employees. It expands our footprint in North America.
AMSfashion, expert in sustainability, conformity, and quality services for the fashion industry, including organic, vegan content verification and durability testing. With EUR 3 million revenue and 50 people, it strengthen our presence in Spain and Portugal, supporting the continuing growth in nearshoring from Southern Europe and Africa. In the current inflationary environment, as a service company, the pressure for us concerns mainly wage inflation. We need to remain competitive with our compensation plan to retain our workforce, so we have to address wage inflation. The group has good traction in pricing, even if there are variations across sectors and geographies. Price discipline execution is key in this environment. It is more favorable in the mass market and on highly regulated activities than it is for multiyear on large contracts, where there is delay between price negotiation and the impact on our P&L.
Our world-leading position in sustainability services is spread group-wide. The BV Green Line continues to be a strong growth driver across the entire group and the momentum builds across all sectors. The examples are diverse and wide, ranging, covering all types of sector and services, as illustrated by the many logos on this chart. We bring our expertise in the sustainability field to more than 200,000 clients. In the resources and production sector, it goes from nuclear facility shop inspection to offshore wind project certification in North Sea. In the consumption and traceability area, we perform supply chain audits for large e-commerce company. We also support the pioneer in salmon fishing in Norway in their responsible salmon aquaculture. In buildings and infrastructure, we provide urban NO2 quality monitoring for the environment agency in the U.K.
In new mobility now, we have signed a long-term contract with a battery producer for electric vehicles to perform the sustainability assessment of its supply chain and ensure full traceability along the value chain. This project will be conducted in collaboration with our partner, OPTEL, to track and trace the products along the entire chain for the use of digital tools. As regards social ethics and governance, it ranges from CSR audit for a large furniture company to non-financial verification report for a leading express delivery company. BV Green Line services and solutions are now well on the way to representing above 55% of our sales at the end of H1 2022. Buildings & Infrastructure remains the biggest contributor driven by green building and energy efficiency programs. The sales pipeline related to EU Green Deal and the current government's recovery action plan is now increasing.
Resources on production represent a quarter of the BV Green Line, where renewable energy makes up the largest part. Social ethics and governance amounts to 16% and is a key driver for sustainability assurance. Bureau Veritas' unique worldwide position in sustainability services ensures that we benefit from the tremendous growth opportunity. Before handing over to François for the financial and business reviews, let me say a word on our CSR commitment. Our commitment is to act responsibly in order to shape a better world. This commitment was again recognized by non-financial rating agency during the first half of 2022. This is a great achievement for the constant efforts regarding sustainability. Bureau Veritas entered in the Vérité40 i ndex produced by Axylia with an A rating. We have also been awarded gold class in the latest global sustainability assessment by S&P.
I would like to highlight the five key CSR KPIs. For better workplace, health and safety is an absolute. Diversity is key. This starts at the top, and today we have four female members of our executive committee out of 13. The proportion of women in leadership positions has increased to 29.2% in H1 2022, up 3 points year-over-year towards our 35% target by 2025. As far as environment is concerned, we are committed to reducing our CO2 emissions. Regarding better business practices, ethics is an absolute. Now, I would like to hand over to François for the financial and business reviews. François?
Thank you, Didier. Hello everybody. A quick sum up on our half year results. As Didier said, we have continued to grow and deliver in the context of a volatile environment, from an economic and geopolitical standpoint. Organic revenue is 6.5% higher than in H1 2021, with a steady organic growth throughout the semester, despite the lockdown measures, which negatively impacted the activity in China in the second quarter. Our margin achieved a record 15.3% despite those external events. Our 15% EPS growth is led by solid operating and financial performance. In short, the momentum continues. Moving to the revenue bridge first on page 16, we delivered EUR 2.7 billion in half year 2022, with an overall increase of 11.4%.
Broad-based organic growth reached 6.5, including a solid 5.2 growth in the second quarter. It benefited from a strong commercial momentum. Forex had a positive impact of 5 or 4.5%, of which 5.6 in the second quarter. This was mainly due to the depreciation of the euro against the US dollar and the renminbi in particular. How did each of the businesses perform in H1? As you see on the page, Marine & Offshore confirms its steady growth up 6%. Certification was at 4.1%, benefiting from strong demand for sustainability-driven solutions. Consumer Products was at 4.1%. I would highlight here that we have maintained 4% in the division in Q2, despite the lockdown in China, showing the benefit of our diversification strategy.
Buildings & Infrastructure delivered 3.8% with our Americas platform compensating for the difficulties in China. When it comes to the top performing businesses, Industry is at 10.8%, benefiting from both strong business activity in Power & Utilities, including renewables and from oil & gas markets. The second one being Agri-Food & Commodities, which grew at 8.6%, led by favorable market condition in metals & minerals, an improving trend in the oil & petrochemical segment. Moving to the margin bridge, we delivered a healthy 15.3% margin in the first half, despite the impact from the Chinese lockdown on the operations. Organically, we limited the drop to 44 basis points, thanks to the good execution of our contingency plans, while scope added 2 basis points and FX 4.
Within the portfolio, the revenue improvement and operating leverage drove organic margin higher in Marine & Offshore and in Agri-Food & Commodities. Industry margin remained stable due to mobilization costs for a large contract recently won. As you can see, the strong resiliency of our Consumer Products margin, north of 22%, demonstrate the strong operating synergies between our Chinese and South Asian platform, as Didier mentioned previously. B&I dropped to 13.4%, largely due to the lockdown across many cities in China, with the suspension of construction sites and the stop and go operation for the foreseeable future. Our Certification business finally maintained a record high margin above 19%, thanks to enhanced operational efficiency. Moving now to other financial metrics in the first half, EPS, cash, and the balance sheet.
Starting with EPS, we delivered an adjusted EPS of EUR 54.55, up 15.2% year-on-year. This reflects strong operating performance, organic and FX led, but also lower financial charges and minority interest. Moving to the cash flow statement on slide 22. Free cash is down, but remains solid at EUR 130 million. In more detail, the main drivers are first, the fact that with the second quarter top line growth of 11% in aggregate, it is not surprising to see a working capital requirement outflow of EUR 177 million. This said, we had a temporary impact from the invoice settlement delays triggered by the Chinese lockdowns, that we expect to recover in Q3. We remain very disciplined when it comes to investments.
CapEx stood at 1.9% of revenue, compared to 2.2% in the first half of 2021, and we now expect this to be in the range of 2%-2.5% for the full year 2022. We closed the first semester with a strong financial structure. The adjusted net debt stood at EUR 1.09 billion, up 3.6% from December 2021. Our profile reflects first, the solid free cash flow generation of EUR 130 million. A disciplined M&A strategy with EUR 46.9 million spend, net of divestment. Lease payments related to IFRS implementation of EUR 61 million. A limited dividend outflow of EUR 9.8 million in H1, and a share buyback program of EUR 50.8 million in the semester.
Our leverage ratio was further reduced, as it is indicated on the chart on the right, to 1.10x from 1.30x at the end of June 2021. To sum up, this solid financial performance has been delivered thanks to a lot of hard work from all the teams of BV around the world in a still complex environment, to say the least. Moving to the business review, let me share with you the highlights of the first half for each of our six businesses. First, Marine & Offshore. The business delivered a very solid 6% organic revenue growth in the semester, and 5.2% in the quarter. It was equally led by both in-service and new construction activities.
It is worth noting that we grew high single digits for services as a result of strong commercial development for non-classification services and increased demand for our services in the offshore and gas markets. As regards new construction activity, our new orders totaled 4.8 million gross tons in H1. The order book at 18 million gross tons end of June is up 10.4% compared to the end of previous year, 2021. It also remained very well diversified. Moving to Agri-Food & Commodities. The business remained strong in the second quarter and recorded an organic growth of 8.6% in H1. Within this, division, it is worth noting that our metal and mineral business achieved double digit organic performance overall.
It benefited from a strong exploration market across the group's key hubs and all the major commodities with gold, copper, and iron ore leading the way. The oil and petrochemical segment continued to improve, thanks to increased activity with higher fuel consumption. We continue our diversification into non-trade related activities and value-added segments such as biofuels, liquefied natural gas, oil condition monitoring. Our Agri-Food business delivered positive organic revenue growth. Growth was primarily fueled by agricultural products and food testing in the U.S., in spite of the impact of the changes in trading routes triggered by the war in Ukraine. Lastly, the governmental services achieved double-digit organic growth led by the strong development of verification of conformity contracts in several African countries. Moving to Industry now. Revenue increased by 10.8% organically in the first half across the board.
The strategy of diversification towards OPEX and Power & Utilities markets continued to bear fruit. Power & Utilities remain a key growth driver of the portfolio, with double-digit organic performance achieved in the first semester. Growth came mainly from Latin America and Europe in particular. In renewables, opportunities remained significant, backed by a strong sales pipeline. In oil and gas, the performance improved. We benefited from the restart of many projects in the Middle East and in the U.S. Notably. As of today, the share of oil and gas CapEx in the group revenue has reduced to 2%. For Buildings & Infrastructure, I will not detail again the impact of lockdown in China, but overall revenue growth achieved 3.8% in the first half. The group is well positioned, thanks to its three growth platform across different geographies, Europe, Asia Pacific, and North America.
Americas were the best performing region, supported by numerous growth drivers in the U.S. Construction-related activities grew faster than building and service activities, benefiting from strong dynamics for new projects in the Americas and Middle East. Moving now to Certification. Overall, the business achieved a solid organic growth against changing comparables, supported by strong sales development and robust price increases. During the first semester, Bureau Veritas sustainability services grew above 16%, driven notably by a strong demand for greenhouse gas emission verification solutions. The activity continued to benefit from the overall rising client demand for more brand protection, traceability, and social responsibility commitments all along the supply chain.
Finally, Consumer Products, as mentioned, delivered healthy revenue growth of 4.3% organically, including a 4% increase in the second quarter. This was driven by our South Asian platform, which offset the disruption caused by the lockdown in China. It demonstrated the strong resilient energy of the group to operate in a complicated environment. We achieved a strong organic growth performance in other countries and regions, especially South Asia and South America. I hand back now to Didier for the outlook for the rest of the year.
Thank you, François. The outlook now for the rest of the year. Based on the current environment and assuming there are no new severe lockdowns in our main countries of operation, we still expect to achieve mid-single-digit organic revenue growth, improve the adjusted operating margin, and generate sustained strong cash flow with a cash conversion above 90%. We live in a volatile and uncertain world. In this environment, we deliver strong operating and financial performance in H1 thanks to our agile and resilient business model. The growth platform is in place. We are uniquely positioned to benefit from the key imperatives of sustainability and energy transition. With the 2025 strategy, we will capitalize on our strengths and continue our successful journey of creating value for BV and its stakeholders. Thank you very much for your attention.
François and I are now ready to answer your questions on the call or on the webcast.
As a reminder, if you'd like to ask a question on today's call, please press star one on your telephone keypad. To withdraw your question, please press star two. The first question comes from the line of Paul Sullivan from Barclays. Please go ahead.
Yeah, good afternoon, everybody. Three from me. Firstly, can you quantify the organic drag from China in the second quarter and how much of that comes back versus lost? It feels like organic in June was high single digit. Is that about right and also a sensible indicator for Q3? Secondly, Europe continues to be kind of weak spot and slowed further in the second quarter. What was the drag from Russia, Ukraine in the region, and given recessionary concerns, should we expect growth to slow further from here? Finally, sort of bigger picture, how should we think about sustainability of growth as commodity prices roll over given the direct and indirect impact we're seeing across the group? Thank you.
Okay. Thank you, Paul, for your questions. The first one on the organic growth from China, we had, as you could see on our results, a very limited impact for CPS overall. In fact, this is due to our contingency plan, as I said, and I take this opportunity of thanking our team in China, who did a superb job, who was extremely well mobilized and very proactive to adapt to the new constraints by moving some samples from labs to labs in China, but also by moving samples to our labs in Vietnam, in Bangladesh or in India. By doing so, in fact, we did very well with CPS, and as you could see, we delivered quite a good organic growth in these difficult circumstances.
The second impact, which was a little bit more material, was on B&I. In fact, our B&I business declined by approximately 30% in Q2 because the construction sites were fully stopped. We can see and we expect a gradual recovery of our B&I business in China. There is still some stop and go situation because as you may know, they are testing the people systematically, and when they find a case, of course, they stop the site. It's the reason I think that it's gonna be a gradual recovery. Overall, when you look at the impact on our organic growth, it was very at the company level, I would say very insignificant. On Europe, we disclosed it.
Ukraine and Russia represent approximately 1% of our revenue, so it's a very low part of our revenue. It's difficult to say that because of course we are not, we just sympathize with the people and what is happening there. In fact, today, for Bureau Veritas, we can see more opportunities than issues because of the war. I'm gonna give you two simple ones because they are easy to understand. The first one is the fact that there would be much more imports from countries like the Middle East countries or even the U.S. of gas and of course for Bureau Veritas an opportunity because we have a leadership position, as you know, in LNG ship construction.
The second obvious impact, of course, the one on the price of the oil barrel, and in this case, there will be of course more CapEx. We don't want to be what we were in the past, too much exposed to oil and gas CapEx, but we can see already some opportunities, and we kept our expertise thanks to the fact that we decided to accelerate our OpEx positioning. We can now for sure transfer some of our people from the OpEx to the CapEx, as needed. We will be very selective regarding the project.
And, and then.
Yes, Paul.
I was gonna say, any color on June and indications for Q3?
For Q3, it's a little bit too early to talk about it. Again, you can see our guidance or I could see that in some notes, probably yours, that I'm maybe a little bit conservative. Knowing the conditions and knowing the fact that we don't know exactly what's gonna happen with China, will it be another lockdown? What's gonna be the impact on the consumer? You know, on consumer and the fact also that the inflation is getting higher. Of course I'm still present for Q3 and Q4. So I cannot give you more details than that. On the sustainability part, but this market, whatever happens, and we can see it, is just growing fast.
Again, it's important because I'm visiting, as you know, Paul, a lot of clients who it's not just about ESG assurance, we are doing very well in this sector, but it's also about renewables. The projects of wind farm, solar farms or hydrogen, it's the opposite, they are accelerating. The projects regarding nuclear industry are accelerating, and we are very well placed on these projects. The building which are built today or the infrastructure are greener. And we are of course can sell our expertise. And you could see through the last acquisition we made in Spain, there is more and more demand in organic product testing, in vegan product testing. So on top the ESG assurance of course, which is a new market, ramping up rapidly.
On the sustainability, I do not see any slowdown. In fact, it's the opposite. I foresee acceleration in the demand.
Okay, that's great. Thank you very much.
Thank you, Paul.
The next question comes from Simon Lechipre from Stifel. Please go ahead.
Yes, good afternoon. Three questions please. First of all, on the margin outlook, so you left your guidance unchanged, which basically implies something like 50 bp s improvement in H2. Could you maybe comment on the different drivers behind this? Secondly, on the economic environment, let's say broadly, as part of your discussion with client, do you see let's say some specific area with, let's say more cautiousness or any change in behavior from client due to the economic uncertainties? Lastly on Marine & Offshore, you had quite a nice margin performance in the first half. Is there any sort of one-off you need? If you could just maybe give us a bit of details on the dynamics, so we can let's say better assess the margin outlook for the division. Thank you.
Okay. I missed a little bit your second question. If you can repeat it, please.
Yeah, just on the economic environment, if you noticed any, let's say, change in behavior from client or any, let's say, cautiousness?
Okay.
Due to the economic uncertainty.
Okay. I'm gonna start with Marine & Offshore, move to economic environment, and François will cover the margin question. On the Marine & Offshore, there was no one-off. In fact, I'm sure that you may remember that last year we had very good sales. Probably top level, if I remember well, the last time we achieved the level of sale we achieved last year was in 2013, so a long time ago. In fact, we booked a lot of LNG ships, container ships. These ships have started to be built. There was a little bit of, in fact, and you can see it, a slowdown in Q2 for a simple reason, because the shipyard in China were closed.
We are very optimistic regarding Marine & Offshore because we can see a continuing trend in wins regarding your LNG ships and container ships. At the end, I can be very transparent with you, at the end of the first semester, we already recorded 4.8 million gross tons. Last year more than 8 million gross tons, which is again, if you think about the history of Bureau Veritas, since I took over in 2012, probably a record at the end of the first semester. It's good news. Our backlog has never been at that level because if I'm right, you correct me, around 17-18 million gross tons, so it's very high level of backlog, I'm talking about new equipment.
The second point here, which is important, is, as you know, the IMO now is, of course, driving the ship owners to start thinking about scrapping old ships because they are not compliant, of course, anymore. They decided to reduce the speed of their ships to optimize the consumption. There is a limit you can imagine, it's easy to understand. We can see now more and more ships which are gonna be scrapped, which means that we will have more new construction in the future. On top, the marine division has started to sell sustainability solutions, social audits or, we talk about scrubbers in the past, this type of sustainability solutions.
You know that we are a classification society which is capable to certify dual-fuel and gas. We're also working with some ship owners on biofuel or even hydrogen. Clearly this activity is doing well, and I can foresee a good future this year and the years to come for the marine division. On the other hand, Offshore has stabilized at a low level. It's not decreasing anymore. If you combine both, of course we are growing at a good margin. On the economic environment, we all read the newspaper, we all see what the inflation impact is already for people. Honestly, when I visit clients, I cannot say today that they are putting pressure on us because of the economic environment.
What I can foresee is probably an impact on one of our business, which could be B&I residential. I think that thanks to the good job we did in the past by focusing our efforts on infrastructure, on energy instead of residential. In France, for instance, if you think about the B&I business, it is just 5%. 5% of the B&I business now is residential. It's nothing compared to what it was. The rest is mostly OPEX, and the OPEX is not going to be impacted, so it's good news. For the rest, we are still again pushed by, of course, markets which are resuming. I'm thinking about the oil and gas markets, but also by what we discussed before, sustainability. On the margin side, François?
Yes, Simon, I would be very happy to answer your question, but the line here was not very great at the beginning. Would you mind repeating your question? I would be delighted to answer it.
Yeah, sure. Just on the margin outlook, you left your guidance unchanged, so it implies something like 50 bps improvement.
Okay, yeah.
In the second half. Just keen to have the drivers for such an improvement in it.
You have two ways to look at it, the complex way or the simple way. Let me start with the simple way, and then I go into the more complex. The simple way to look at it is to achieve our guidance, you know, by and large we need to deliver 17.2% in H2, which is exactly what we've delivered in H2 2019. That's the simple way to answer. The more complex way is to try and explain where we see those improvement compared to H1. Without going too much into detail, you have two elements here. A first element, which is a recovery in the B&I segment, for obvious reason.
As Didier mentioned, our outlook is based on progressive reopening of our B&I activities in China over Q3 and continuing activity into Q4. That's an obvious upside we expect in terms of margin in H2 compared to H1. The second element, which is, I would say, sequential, is the improvement in the Agri-Food & Commodities segment. You may remember that, for now almost two, three years, we have commented around the oil and petroleum segment of this Agri-Food & Commodities division, which represents 30% of the division, as being a complicated segment with price pressure and reduction of volumes, 2020, 2021. This has stopped at the end of last year. I think we mentioned it in our yearly publication in February.
The last quarter, half year was better. It seems to be confirmed in the first semester. We expect this to continue with good activity in terms of oil and petroleum tests. We're talking here about the testing of products, not the exploration part. We expect this to continue for H2, and these are laboratory-based businesses where the top line is here. You know as well as me, it is driving the operating profit. These are the two, I would say, sequential changes. Then in a more global manner, we have a seasonality in our margin at Bureau Veritas, where typically businesses like Certification and CPS have a larger, bigger margin in H2 than in H1. Certification for, it's a question of seasonality of audits.
We have peak season in October, November, December. In CPS because Chinese New Year is in H1. You know, all this together. Again, two options, the complex one that I have gone through or the easy one, 72, 17.2, which is a copy-paste of 2019.
Thank you very much.
Thank you for your questions.
The next question comes from Kate Carpenter from Bank of America. Please go ahead.
Hi, everyone. Thanks for taking my questions. Just a quick one on China. Just to clarify, did you make any headcount reductions in the country during the lockdowns in order to manage margins, particularly in the Consumer Products division? Looking forward, how are you thinking about hiring and headcount, just given, you know, in light of current macro conditions, particularly in the more cyclical divisions? Final question is just how much pricing or how much did pricing contribute to organic growth during the quarter? You mentioned, you know, a potential lag effect from your larger contracts, just if you could elaborate a bit more on that. Thank you.
Okay. First question is a very simple answer. In China, we did not reduce any headcount, and I think we were right to do it because again, we are back to a full speed type of activity, in particular with CPS. We decided to keep all our headcount in China. On the hiring side, again, when you think about the model of Bureau Veritas today, we are a lot less cyclical than what we was in the past. Today, our tech business represent probably something like 60% of our revenue, probably even more. Meaning that we haVe no intention today in hiring more people in what you could call cyclical activities, except for those that we know that the market will continue to boom.
I'm thinking, for instance, about the wind farm and solar farms, which are gonna, in fact, accelerate in the past. I say that because you could consider CapEx as cyclical. For the rest, we manage the situation very well. We know now how to work where we're subcontracting compared to what it was in the past. Whatever the resiliency of Bureau Veritas compared to what it was, no comparison. On the pricing side, it's difficult to answer your question for, let's say, H1 for the first semester. What we believe with François is that at the end of the year, the adjustment for the full year will be 1.5%, approximately around 1.5%.
Thank you.
Thank you, Kate.
The next question comes from Neil Tyler from Redburn. Please go ahead.
Good afternoon. Thank you. Three from me as well, please. Firstly, your statement mentions that oil and gas CapEx, or rather renewables CapEx is now larger than the 2% component derived from oil and gas. The question related to that is when you think about the sort of follow through OpEx related business that stems from those customers for whom you've provided CapEx services, how do you think the sort of ratio of OpEx value relative to, you know, to CapEx in the renewables segment might match up? That's the first question. Second question a little bit more specifically, you mentioned the recovery in B&I in China, but presumably so much of that inspection work is just postponed.
Will there be some catch up as well as sort of recovery to normalize levels over the remainder of the year? Actually a bit of a backlog effect. Finally, your statement talks in Consumer Products services of some government subsidies. I wondered whether if you could just clarify whether this was at all meaningful in terms of its contribution to margin, whether you expect to or whether you're obliged to repay any of those amounts. Thank you.
Thank you, Neil. I'm gonna ask François to cover your second and third question. I will take your first one. François.
Yes, Neil. On the second one, the recovery of B&I in China, I think what we aim here to say is the recovery of the activity, the level of activity we had prior to the lockdown. I think our view here is, as Didier mentioned, we are cautious. We are still in many areas in stop and go situation. You know, you only need two guys to get COVID tested positive and then the whole thing is stopped for a week. What we are, you know, thinking of so far is, in your world, you would create postponement. What has not been delivered in the previous eight weeks is getting delivered, but not a V-shaped recovery as we may have gone through back in 2020.
We are cautious. We more expect that the activity will resume than any strong catch up effect. It's too early to say at that stage, I believe. On the governmental subsidies, it's very easy. We're talking here about an incentive fund created in Hong Kong for some companies there. It is not material in terms of margin impact for the group, and it is not even material for our Consumer Product division. It is not refundable, and it's a one-off as was done, by the way, in 2020 in that part of the world.
I see. Thanks.
Neil, regarding your first question, so I have probably three comments. The first one, of course, we want to continue to capture any potential CapEx opportunity in oil and gas, of course, because we have the expertise. The second comment, which is very interesting, we continue to increase our OpEx presence with the oil and gas companies. In fact, I can see a trend today, which is very obvious, for some of our clients are moving to Bureau Veritas instead of local small companies. It's probably coming from the fact that there is inflation now, and they prefer being with a company of the size of Bureau Veritas to be sure that we will continue to deliver the service through this new normal. Of course, your question regarding renewable is very good.
Today, there is no real OPEX business because we are at the beginning of it. What I can see is the number of projects. It's absolutely incredible. It's everywhere in the world. It can be in Europe. It is clearly in Asia and accelerating in Asia. It is, and you know, we decided to buy Bradley in North America, so now we have a good view on this business. It is in North America and even in Latin America. You have a lot of projects, and we want to be a leader in this activity. What we did in terms of growth is just impressive. What I can see in terms of pipeline of opportunity is just incredible. The OPEX will follow. It will be a different type of OPEX. I am very transparent with you.
We are working on finding solutions. It will be different solutions because we are talking here about wind farms, so meaning that in this case, we will have probably to remotely control or remotely, let's say, support the control. This is something we are working on. Again, the CapEx market is so big today that we are focusing on getting as much as we can in terms of projects.
Understand. Thank you. That's helpful.
My pleasure, Neil.
The next question comes from Karl Green from RBC. Please go ahead.
Yeah. Thank you very much. Just a couple of questions. Didier, first question for you. If we think about that implied second half margin recovery for the group, to get to the full year guidance, within that, there's clearly an assumption that the Buildings & Infrastructure margin gets back closer to the longer run average. Just thinking about, you know, the situation in China moving from lockdowns to a sort of broader economic and specifically construction slowdown, given the residential property bubble is deflating quite heavily there. You know, could you just talk a little bit more about your exposure to sort of broader municipal and infrastructure related projects which might feel a knock on effect from that residential construction slowdown, and how that might affect your ability to drive that H2 margin performance?
My second question, François, is much, much simpler. It's just whether it would be a reasonable assumption to double the first half non-controlling interest charge, the minority interest line for the second half, please. Thank you.
On your first question, as you know, Karl, we decided when we decided to be an actor in the B&I business in China, at that time I knew the market in China very well. I decided not to be in residential. By the way, it was a good decision. Today we are in a leading position on infrastructure on energy. I do not foresee any slowdown in energy. In fact, it's gonna be the opposite. The energy might be a little bit different, and we're already working on the certification on wind farm field, of course, as you can imagine, or solar field. Even on hydrogen because the Chinese people are really working on hydrogen solutions. I can still foresee good opportunities. On top of it, I know the backlog today.
The backlog is at the level it is. It has not changed, and we will have to go to the end of the contract that we have in our backlog. We know we have 86 sites where we are working, big one. Just to give you an idea, 82 were closed during eight weeks. Now they are restarting progressively. It's the reason why I'm confident that we will improve our margin in the second part of the year. Clearly, there is no doubt about it. Regarding the second question, François?
Yes. Carl, here as well, there are two ways to answer it. For this time I would choose the long one if you don't mind. Those minority interests are a consequence of the bolt-on strategy when it comes to M&A. As you know, we favor a very much bolt-on view with strong engagement of the minority shareholders, which in 95% of the cases are the previous owner manager. This is a way we do M&A, which we believe is bringing to the company, I think, the best value in terms of return and for the shareholders. We don't intend to change this approach, because that's proven efficient.
I think we've mentioned Didier or myself the fact that in this complex H1 situation the driver behind the still growth of our B&I segment despite the Chinese difficulties has been North America, which is a perfect example of the successful bolt-on strategy with committed managers. Those are the guys getting these minority interests. To answer your question in short, we will not change gear, and you can count that H2 will be kind of the same as H1, around south of EUR 10 million. You had the long version for this time.
That's really helpful. Thanks for that, Didier. Thank you.
Thank you, Karl. Thank you. Well done, François, with your long version.
The next question comes from Arthur Truslove from Citi. Please go ahead.
Hi, everyone. Yeah, just a couple from me if you don't mind. I think in your opening remarks, Didier, you mentioned that there had been a big ramp up cost in Industry or something, and that had held back the margin. I was just wondering whether you could elaborate as to roughly how much that was and how much it impacted the margin in the division in the first half. The second question I had was around the Consumer Products division. Clearly, you did very well to keep it going as you did, given the headwinds in China. I just wondered, you know, are you expecting a reasonable acceleration in the second half? Is sort of mid to high single digits a reasonable assumption there, or are there reasons why that might not be the case? Thank you.
Thank you, Arthur. I'm going to take your second question, and François will cover the first one. No, I do not see any real acceleration in H2 for CPS. I expect the same type and probably the same level of organic growth for the second part of the year. As François explained to you before, clearly an improvement in the margin because of the seasonality. In terms of organic growth, again, and as you said, we manage the situation very well because we manage it proactively so we could foresee things coming, and we decided, thanks to our diversification, geographical diversification, to move the samples around. It's the reason why we achieved. We were quite at the level we were expecting in fact.
We expect the same for the second part of the year. There is no real catch-up. On the first question, François, you would cover it?
Yes, Arthur. Your point is on the margin of Industry and the ramp-up cost. I think here we are victim of our success, meaning this division is growing the fastest with stable margin. You are right, we had even internally intention to be able to raise the margin. Our own target were not as high in terms of growth. We have been a bit surprised by the speed of growth there. That's why, you know, we grow almost 11% on Industry and Energy, and the margin is the same in each one as it was last year. No. On the face of it, no operating leverage, I would say, as you would put it. I will give you a practical example on the why.
We are here expanding very fast in what we call OPEX industry services. We survey sites, network of electrical networks, pipelines. When you win one of those contracts, we're talking about 250 personnel to find, recruit, train, equip, put on the job. There is an amount of mobilization costs which is not insignificant. We have as per our own procedures, a very strict accounting view to it, meaning that we take in the P&L the costs when they arrive. Meaning we are not, you know, storing somewhere in the balance sheet mobilization costs that we then further down the road, erode the margin. We take them straight.
That's why I would say if in industry the growth stays above the 10% mark, the margin will not move. Margin in terms of percentage. Of course, in terms of millions of euros that will follow down, but not without improvement. Again, here it all depends how fast we grow there. You will understand for sure we are not putting the brake on growth just for the sake of the percentage of margin, provided that we deliver more operating profits at the end of the day, and that we do not drop the margin, which is important to us indeed.
Yeah, knowing that after this mobilization cost, François, we will of course improve the margin along the way.
Exactly.
Okay.
Yes. Just quickly following up on that. Sorry. Just on that's kind of what I would have thought. Is there any idea of how much those mobilization costs cost you in that first half? As in, you know, what would the margin have been had, you know, had maybe you grown at 6% or 7% or something like that?
We do not report on it, Arthur.
Thank you.
Okay, thank you, Arthur.
Last question comes from Sylvia Barker from JP Morgan. Please go ahead. Sylvia Barker, please go ahead.
Sylvia?
Hello. Good afternoon and hi, everyone. First question, please. Could I go back to CPS and just check, I guess, what would the margin have been or what would your profit have been excluding China? Because, you have offset the revenue declines very well, but presumably that came at some extra cost. Just thinking about how much of that might come back in the second half. Secondly, on the renewables business, how is that accounted for? Does the cost of the equipment go through the top line at, you know, at the pass-through kind of low margin or do you have any CapEx element related to it? Finally on recertification, you flagged previously that there was a confluence of recertification last year with a deadline at the end of Q3.
Should we expect a bit more of a slowdown in the certification business in Q3? And could that have an impact on the margin as well? That's just on the ISO side. Thank you.
Okay, Sylvia. François is gonna take the your first question. I'm gonna cover the renewable first. There is no CapEx element, zero. It's very simple answer. There is no CapEx. In fact, this is clearly our expertise in terms of inspection and procurement. What we did, in fact, and we still do in CapEx, oh, it's very easy for us to go and move on these projects because we have the expertise. There is zero CapEx. On the recertification side, it's very important for you to understand that now we could call it assurance, some of our colleagues call it assurance, by the way. We are not obsessed by the ISO certification anymore.
We're obsessed by developing, pushing, increasing our ESG certification, our ESG assurance, systematic commitment from clients, supply chain traceability. When you look at the organic growth of this activity now, in fact on the sustainability part, we are moving at double-digit. Clearly, and this is a footprint. Meaning that it's not because there is recertification one year and not the other one, that we will slow down. Again, we are pushing very hard for new schemes, in particular, these schemes of ESG certification, these schemes of traceability, and we can see already a strong demand coming from our clients. In certification, if you think about it, compared to what it was some years ago when it was more or less exclusively ISO, there is just no comparison.
The first point, François?
Yes. On the CPS margin, I think we have the first comparison we should all make is the margin that we've achieved this year, which is a 22.3%, and the margin we had achieved end of H1 2020 when the operation had to face a similar type of lockdown. I think it answers already a good chunk of the question. Now, if nothing really had happened at all, sorry to say, but frankly, the margin would have been perhaps a bit better. But the best way, the most important information we have today is, even with lockdown in China, we managed to keep the business above 22.5%. If it had not happened, it would have been higher for sure perhaps. How much, we haven't completed it.
I would dare to say this is not really the point to be the management team here. The point, that's what we try and reflect is we build a company that is very much resilient. Of course, you know, if there was no China, no Ukraine, no Russia, no Fed hikes in interest rate, I'm sure we'd do great. I'm not sure the investors are really interested to know what happens if everything good happens. I think you guys are interested by what happens when things happen.
Absolutely. Okay. Thank you very much.
Thank you, Sylvia. Thank you very much.
I will now hand back to your host to conclude today's conference. Thank you.
Okay. Thank you very much again for your attention, and for those who are going to be on vacation, good vacations. I wish you good morning, good afternoon, good evening. Bye.
Thank you for joining today's call. You may now disconnect.