Hello, welcome to the Intertek November 2020 trading update. My name is Courtney, and I'll be your coordinator for today's event. Please note that this conference is being recorded, and for the duration of the call, your lines will be on listen only. However, you will 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 time, please press star zero and you will be connected to an operator. I will now hand you over to your host, André Lacroix, Chief Executive, to begin today's conference. Thank you.
Good morning to you all, and thanks for joining us on our call. Ross McCluskey and Denis Moreau are both with me on the call. There are essentially three key takeaways in our presentation today. First, we saw a strong ATIC rebound in the last four months. Indeed, in the last four months of the semester, in the second half of this year, we benefit from a strong rebound of assurance testing, inspection, and certification activities as we are supporting our clients to resume their operations within our leading TQA solutions. Despite the unprecedented global pandemic, the resilience of our financial performance demonstrates the strength of a high quality and highly cash generative earnings model. The third key takeaway, we are strongly positioned for growth moving forward. COVID-19 has made the need for risk-based quality assurance, safety and sustainability assurance greater and clearer inside corporations.
We've been championing total quality assurance for more than five years. We are strongly positioned moving forward for growth. Right from the start of the pandemic, being agile was paramount for all of us. We've adapted fast, enabling us to respond decisively to an unprecedented situation. As you know, we've refocused early on the organization on five priorities. We've remained laser-focused throughout the years on health and safety, superior customer service, margin discipline, cash discipline, and purpose-driven engagement. COVID-19 is probably the biggest global crisis of our lifetime. Indeed, we are living in extraordinary times. I'm very proud of the incredible energy, passion, and innovation that our TQA experts have demonstrated in 2020. I would like to thank and recognize all of my colleagues inside Intertek for the 24/7 customer service that they have delivered to our clients with a very strong passion for being the best.
2020 has been a very challenging time for our clients, and they have highly appreciated the help from all of our experts as they resume their operations. As we all know, closing operations on a temporary basis is manageable. However, it is much more difficult to restart a local or a global supply chain safely. In the May-June period, we saw many governments around the world lifting some of their lockdown restrictions. That has increased global mobility in most economies, driving strong progress in the manufacturing sector and a rebound in export activities, resulting in an improved global economy in the third quarter. In most of our markets, our clients were able to resume their operations and benefited from strong revenue rebounds in Q3. Our employees have gone beyond their normal call of duty to support our clients with innovative ATIC solutions to resume operations safely.
Here are a few examples of what we have done. We ensured supply continuity with our remote video inspection and audit solutions. On May 1st, we launched Protek, the world's first health, safety, and wellbeing assurance program for people, workplace, and public spaces. At the end of July, we further strengthened our ethics sustainability offering with the launch of CarbonClear, the world's first certification program that independently verifies the upstream carbon intensity per barrel of oil. These three major global innovations are in addition to all the service we've developed rapidly. Priority testing service for life-saving medical equipment like ventilators, end-to-end testing and certification capacity increase for PPE equipment, increased testing capacity and express service for sanitizers and disinfectants. Of course, support to the pharma industry for vaccine development and cybersecurity audit related for home working conditions. You will have seen our trading update this morning.
In the July-October period, we have benefited from a rebound in Assurance, Testing, Inspection, and Certification activities in all regions. In the last four months, we saw strong improvement of our revenue momentum in our product and trade divisions, which represent 93% of the group earnings, while trading conditions remain challenging in the resource sector. In the last four months, our product business delivered a like-for-like revenue decline of 4% at constant rate, which was a strong improvement compared to the like-for-like revenue decline of 12.4% in the May-June period. This was driven by a rebound in ATIC activities in most of our business lines, Softline, Hardline, Electrical and Connected World, Business Assurance, Food, and Chemical and Pharma.
The last four months saw a like-for-like revenue decline of 10.1% at constant rate in our trade business, which was a strong improvement compared to the like-for-like revenue decline of 18.1% in the May-June period. This was driven by a rebound in ATIC activities in the July-October period compared to May-June for Caleb Brett and AgriWorld. Looking at our results now in more detail. In the last four months, the group revenues were GBP 941 million, a decrease of 6.2% at constant rate and 9.9% at actual currency. Like-for-like revenue at constant currency was down 6.2% year- on- year. Like-for-like, our product divisions declined by 4%, our trade division declined by 10.1%, and our resource divisions delivered a revenue decline of 9.6%.
Year- to- date, in the January to October period, group revenues were GBP 2.472 b illion, amount of 7.2% at constant currency, amount of 8.7% year-on-year at actual currency. Like-for-like, our product division declined by 6.8%, our trade division declined by 10.2%, our resource division delivered a revenue decline of 5.2%. Turning now to margin. We are making progress on margin in H2 based on productivity gains from sequential revenue increase and our disciplined performance management. Our strict controls on pricing and costs remain fully in place throughout the year. As communicated earlier, we have delayed the 2020 salary increase for the organization from April 1st to October 1st. Operating discipline on cash is delivering strong free cash flow, strengthening our robust balance sheet further. We continue to take a disciplined capital allocation approach, investing in high growth and high margin sectors.
We're implementing a progressive dividend policy, and in 2020, we have rewarded our shareholders with a total dividend payment of GBP 150 million for the final payment for 2019 and GBP 55 million for the half year of 2020. Turning to our full year outlook for 2020. We are on track to deliver a resilient full year 2020 performance. At the group level, we expect to deliver a mid-single digit like-for-like revenue decline at constant rate with mid-single digit like-for-like revenue decline in our product division, a high single digit like-for-like revenue decline in our trade division, and a mid-single digit like-for-like revenue decline in our resource division. From a profitability standpoint, despite the H2 sequential margin improvement, we expect a low margin for the year at constant rate.
We're investing in growth with disciplined investments in the high growth, high margin sectors, and we continue to expect our full year CapEx investments to be circa GBP 90 million-GBP 100 million. Our cash conversion is strong, and we are targeting a year-end net debt lower than 2019 of circa GBP 570 million-GBP 590 million before any M&A and any significant movement in currencies. Just like to give you an update on Forex. Based on the actual figures for the first 10 months of the year and the current spot rate for the remainder of the year, the average selling rate applied to the full year results of 2019 would provide circa 150 basis point reduction both at the revenue and operating profit level. Let's now discuss the performance of each division.
In the last four months, our product delivered a like-for-like revenue decline of 4% at constant rate, which was a strong improvement compared to the like-for-like revenue decline of 12.4% in the May-June period, resulting in a year-to-date like-for-like revenue decline of 6.8%. This strong revenue improvement in our product business was driven by a rebound in ATIC activities in the July-October period compared to May-June in most of our business lines: Softlines, Hardlines, Electrical and Connected World, Business Assurance, Food, and Chemicals & Pharmaceuticals . In the July-October period, our softline business delivered a mid-single digit negative like-for-like revenue, resulting in a double-digit negative like-for-like revenue on a year-to-date basis.
In the last four months, our global softline business benefited from continuous growth in e-commerce, increased demand for testing PPE, and the easing of lockdown restrictions in some of our markets, while closures of some stores in Western Europe and North America continued and some retailers are delaying the launch of new products due to the disruption of their supply chain in the first half of the year. Our hardline business saw improved momentum in the July-October period with a low single digit decline in like-for-like revenue, resulting in a high single digit decline in like-for-like revenue on a year-to-date basis. In the last four months, our hardline business benefited from continuous growth in e-commerce, increased consumer demand for home furniture and toys, and the easing of lockdown restrictions in some of our markets, while closures of stores in Western Europe and North America continued.
Our electrical and connected world business delivered a good like-for-like revenue growth in July-October period, resulting in a stable like-for-like revenue performance on a year-to-date basis. In the last four months, our electrical and connected world business saw an increased level of ATIC activities driven by increased demand for higher regulatory standards and energy efficiency, the strong growth in testing and certification of medical device, the increased testing requirements for 5G, and a greater corporate focus on cybersecurity. Our business assurance business delivered a stable like-for-like revenue performance in the July-October period, resulting in a mid-single digit like-for-like negative revenue performance on a year-to-date basis.
The easing of lockdown restrictions in the last four months have driven a rebound in number of ISO audits in some of our operations, while we continue to benefit from the attractive growth in supply chain assurance, the continued focus on ethical supply, the increased needs of corporations for sustainability assurance, and the strong growth we are seeing in our people assurance business. Our Building & Construction business delivered a mid-single digit like-for-like revenue decline in the last four months, resulting in a low single digit like-for-like revenue decline on a year-to-date basis. We continue to benefit from the growing demand for more environmental friendly and high quality building, as well as a strong investment in large infrastructure projects, while the temporary reduction of building construction activities we saw in Q2 due to lockdown restriction in some of our North American markets continued in July-October period.
Our transportation technology business delivered a double-digit like-for-like revenue decline in the last four months period to October, resulting in a double-digit negative like-for-like revenue on a year-to-date basis. The lower demand for testing activities we saw in Western Europe and North America in Q2 continued in the July-October period, which was partially offset by the continued investment of our clients in new powertrains to lower CO2 NOx emissions and increase fuel efficiency. Our food business delivered a good like-for-like revenue performance in the last four months, resulting in a stable like-for-like revenue performance on a year-to-date basis.
In the last four months, we've benefited from the resumption of supply operations for most of our clients in most markets, from the sustained demand for food safety testing activities, and the increased demand for hygiene safety audits in factories, hospitality, and retail operations. In the last four months, we saw a high single-digit like-for-like revenue decline of chemical and pharma business, resulting in double-digit like-for-like revenue on a year-to-date basis. In the last four months, we saw an improved demand for regulatory assurance and chemical testing in some of our operations in North America and Western Europe, while given the importance of COVID-19, the pharma industry continues to reprioritize their investments, delaying other research and development projects. In 2020, we expect to deliver mid-single-digit decline in like-for-like revenue at constant currencies in our Product division. Moving now to our Trade division.
In the last four months, our trade business delivered a like-for-like revenue of 10.1% at constant rate. It was a decline, of course, which was a strong improvement compared to the like-for-like revenue decline of 18.1% in the May-June period, resulting on a year-to-date basis with a like-for-like reduction of 10.2%. This strong revenue momentum improvement in the last four months was driven by a rebound in ATIC activity in the July-October period compared to May-June for Caleb Brett and AgriWorld. Our Caleb Brett business saw improved momentum in the four-month period, July to October, compared to May-June, with a high single-digit decline in like-for-like revenue, resulting in a high single-digit like-for-like revenue decline on a year-to-date basis. In the last four months, our Caleb Brett business benefited from an improvement of global mobility and the rebound of the global economy in Q3.
As we all know, Caleb Brett is the global leader in the crude oil and refined product global trading activities with 7,600 employees around the world and 275 operations. Our Government and Trade Services provide a certification service to governments in the Middle East and Africa to facilitate the import of goods in their market based on high quality and safety standards. We saw a double-digit negative revenue decline, both in the four-month period to October and on a year-to-date basis due to the disruption of manufacturing in China in Q1 and the lockdown restrictions in the Middle East and Africa impacting cross-border trade flows in Q2 and Q3. Our AgriWorld business provide inspection activities to make sure that the global food supply chain operates fully and safely.
AgriWorld delivered a robust like-for-like revenue growth in the last four months, resulting in a solid like-for-like revenue growth on year-to-date basis. Following a stable performance in H1, we saw increased demand for inspection activities driven by easing of lockdown restrictions in most of our markets. In 2020, we expect our trade division to deliver a high single-digit decline in revenue at constant currency. In the last four months, our resource business delivered a like-for-like revenue decline of 9.6% at constant rate, which was broadly in line with a like-for-like revenue decline of 10.7% in the May-June period, resulting in a year-to-date like-for-like revenue decline of 5.2%.
Indeed, in the last four months, we saw a reduction of exploration and production investments by our clients in some of our markets, and consequently, our CapEx inspection business delivered a high single-digit negative like-for-like revenue performance, resulting in a low single-digit like-for-like revenue decline on a year-to-date basis. We saw double-digit revenue decline in OpEx maintenance services in the July-October period, as well as in H1. The lockdown restrictions and the cost-saving initiatives of our clients has impacted the demand for our inspection services. We delivered a robust revenue growth in our mineral business in the four months period to October and on year-to-date basis, as we saw increased demand for testing and inspection activities. In 2020, we expect our resource division to deliver a mid-single digit decline in revenue at constant currency.
Moving forward, during the second wave of COVID-19, our operational focus will remain unchanged on our five priorities. Every time, health and safety come first. Our COVID-19 health and safety policy is very comprehensive and has been updated on a regular basis on our website. Our second priority is superior customer service. We're a passionate organization providing our customers with the best possible service. The lockdown measures have created huge operational challenges for all of our customers. Since day one, we've increased the frequency of communication with our clients to make sure we understand their needs quickly. Our third overriding priority is margin discipline. Over the years, we've built a very disciplined approach to margin management. Our strict controls on pricing and costs remain firmly in place. We've also taken a number of additional steps to protect our margin.
We believe that our clients have been facing temporary disruptions in their operations, all of our margin initiatives ensure that we have the ability to service our clients fully when their operations are back to normal. Our operational discipline on cash management is robust, we expect our year-end net debt to be lower than 2019. Our fifth priority is purpose-led employee engagement. With many of our colleagues working remotely, it has never been more important to stay connected every year. We fulfill a vital role in society to make sure that the supply chain of the world operates safely and fully. Bringing quality and safety and sustainability to life is our purpose. Making sure that all of our engagement activities are purpose-led is central to our day-to-day communication strategy. Our Total Quality Assurance value proposition is more relevant than ever.
We offer testing, inspection, and certification solutions in the critical areas of our clients' operations, and our assurance solutions provide end-to-end assessment of their operating processes. Said differently, we provide mission-critical services to our clients to make sure that their supply chain operates fully and safely 24/7 . Pre-COVID-19, we've been emphasizing the need for our clients to increase their focus on risk management in their supply chain to make sure that they provide the highest quality, safety, and sustainability products and services to their customers. The global crisis we are living has demonstrated there are major risks in the world that are not properly identified nor mitigated.
Moving forward, all stakeholders in society expect governments and corporations to build back a better world with a sharper focus on end-to-end quality assurance. 2020 will indeed be remembered as the year where we're all forced to rethink on how we operate and to make the world a safer place. We expect this theme of build back ever better to guide the actions of governments, companies, institutions, regulators, and consumers in three areas. Management boards and shareholders will want to see their companies operate with a safer supply chain. Consumers, governments, and corporations will want to offer better personal safety. The way the world will operate and invest will build a lower carbon society. 2020, in our view, has made the need for risk-based quality assurance clearer for all stakeholders in society. The world needs Intertek in the short, medium, and long term more than ever.
We are very excited about the growth opportunities moving forward. We benefit from attractive TQA growth drivers and the growth outlook for quality assurance in the medium to long term is GDP plus organic revenue growth in real term. We expect our product division, that represents 81% of the group earnings, to grow ahead of global GDP, benefiting from brand SKU expansion, fast innovation cycles, increased demand for smart products, and increased focus of corporations on safety, quality, and sustainability. We expect our trade division, that represents 12% of the group earnings, to grow at a rate broadly similar to GDP through the cycle, benefiting from the development of regional and global trade and increased focus on traceability and, of course, increased focus on sustainability. The growth prospect in our resource division, which represents 7% of the group earnings, are linked to growth drivers in the energy sector.
Investment in exploration and production for essential resources like oil and minerals will grow to meet the demand of the growing population. Our resource business will also benefit from the portfolio diversification of our clients as they manage their transition from pure oil and gas to total energy, increasing their focus on lower carbon source of energies. We expect our corporate assurance activities, which are industry agnostic, to get even stronger given the increased importance of risk-based quality assurance, the increased regulation, the increased importance of health, safety, and well-being, the growth in people assurance, and the investment in supply intelligence, sustainability, and cybersecurity. Importantly, the case for more outsourcing has never been stronger than today. Companies are reassessing what is core to their business and what they should outsource to improve their efficiency and their return on capital employed.
Intertek has been an industry leader for more than 130 years. We are well-positioned to seize these exciting growth opportunities, capitalizing on our strengths of Total Quality Assurance, superior customer service, our powerful portfolio, our high-quality compound earnings model, our passionate customer-centric organization, and our disciplined performance management. Building on our track record, we are well-positioned to deliver sustained value for all stakeholders moving forward. We operate an attractive GBP 250+ billion ATIC market with increased need for quality assurance. We've got scale positions in our verticals and provide a superior Total Quality Assurance customer service. Our innovative culture and operational discipline are making Intertek ever better, ever stronger every single day. In summary, there are three takeaways from our calls today.
In the second half of the year, we've benefited from a strong rebound of our ATIC activities, supporting our clients to resume their operations with our leading innovations. The resilience of our financial performance demonstrate the strengths of our high quality and highly cash generative earnings model, and we believe we are strongly positioned for growth as COVID-19 has made the need for risk-based quality assurance stronger and clearer inside corporations and governments. Thank you for your attention today, and we'll take any questions you might have.
Thank you. As a reminder that if you would like to ask a question on today's call, please press star one on your telephone keypad. Please ensure your line is unmuted locally, and you will be advised when to ask your question. Our first question comes in from the line of Edward Stanley, calling from Morgan Stanley. Please go ahead.
Hi there. Thank you for taking my questions. I've got three, please. You say on PPE-
Morning.
Morning. You say on PPE testing, which has obviously been a very helpful offsetting factor to some of the more negative movements, are you seeing the demand for that testing ease as people slow their stockpiling and vaccines get announced, or have you won enough long-term contracts in PPE testing that you think that shouldn't roll off next year? The second question, in your assurance business, your peers seem to have shown quite a strong bounce back, it's relatively surprising to see a more stable growth in Q3 in the assurance business. Is there anything holding that segment back in products, or was it a function that your assurance business didn't sort of collapse to the same degree as theirs did, and therefore the recovery in Q3 is less pronounced? Finally, I'm interested on CarbonClear.
The world's clearly taking ESG more seriously, and I'm sure your clients are committing to net carbon zero. We haven't heard a huge amount since the London energy update. Are you seeing an accelerated demand for that product, or is it relatively slow progress with occasional big wins? Thank you.
Thanks, Ed. On PPE, as you know, PPE is much more than mask, right? It's mask, goggles, gowns, gloves. Within the PPE market, you got multiple segments. We focus, if you want, on the high quality, high added value testing, which primarily is targeted to the medical operators and the medical world. I'm not saying that we are not doing testing for consumer purchases. Our view is that this is a growth market moving forward. As I said, everybody has realized that the protection of medical workers and people around the world was not where it should be because of the lack of focus simply on quality PPEs. You've seen all the scandals where people have been buying the wrong PPEs and destroying everything. We believe that there is a strong market for the superior quality PPE. That's what we are focusing on.
Of course, this is continuing to grow because the medical world will need to improve their infrastructure to make sure that all medical workers are protected for future pandemics and diseases. This is a growth market, and although the vaccine has been announced in the last few days, we are not seeing a reduction in demand in PPEs. As far as Assurance is concerned, this is a great question. Look, our Assurance business is quite unique. As you know, we are very focused on ISO and non-ISO audit solutions. A non-ISO is really the high margin bit, which is basically the high-quality supply assurance solution that we offer. You would have noticed that our business Assurance business in the first half was very resilient.
We have not seen the same cyclicality than others, because our mix is very different, and we are very focused on making sure that the non-ISO solutions continue to perform very well. What we've seen, of course, in Q3, as I said in the previous conversation, is that the ISO audits have obviously started to rebound. As far as CarbonClear and net zero, look, we are very excited about CarbonClear. I've never seen, Ed, such a market reaction to an innovation that we've launched over the last few years. The amount of traction that we are getting is just amazing. You might have seen that we were invited as a major speaker at Carbonomics, which was a Goldman Sachs conference with more than 5,000 investors a few days ago. The level of interest for the solution is huge.
This is really good timing for us because as you've seen, all the oil and gas companies are under tremendous pressure to accelerate their sustainability investment efforts. They have obviously to continue to manage their typical oil and gas exploration and activities while investing in renewables. The lion's share of the emissions, as you know, is in traditional oil and gas. That's why CarbonClear is playing a major role. No, we are very pleased with the progress we are seeing.
Excellent. Thank you.
The next question comes in from the line of Paul Sullivan calling from Barclays. Paul, please go ahead.
Good morning, André, hope you're well.
Morning, Paul.
Morning. Just another three from me. Can you give us any color on the exit rates? I think your guidance implies further improvement in November, December. Any color there would be very helpful. Secondly, likewise on second half margin progression. Any color there or your thinking around full year profit expectations. Finally, it's just over a year since the corporate sustainability announcement. I don't know if you can provide an update on progress there and take up and any color in terms of the number of certificates issued, for example. Thank you.
Thanks, Paul. In terms of exit rates, what I can say, obviously, we've announced the July-October period, is that the September-October run rate was better than the July-August. We've tried to provide enough guidance for the full year, I think it's not that complicated to come up with an estimate for the November-December revenue that we expect to see. As far as the H2 margin is concerned, we are pleased with the margin progress we're making in H2. As you know, H2 is always our strongest semester in terms of margin. We were expecting progress from H1 to H2, we are really pleased with the progress we are seeing. In terms of expectation management, we are broadly comfortable with the consensus EPS after the price adjustment that we've just talked about.
Look, this is a good semester for us in terms of margin. As far as sustainability is concerned, while we announced last year our corporate sustainability certification solutions, our strategy is both corporate certification as well as operational sustainable solutions. We are making progress on both. Going back to the question that Ed has raised, it doesn't matter which sector you look at, sustainability is at the forefront of every board or CEO's agenda. The view that we have that ESG is important but not sufficient. Sustainability has to be at the heart of every company's strategy, and we need to go beyond ESG. We are seeing great demand for operation sustainable solutions as well as corporate certification. Thanks, Paul.
Thanks, André.
The next question comes in from the line of Suhasini Varanasi calling from Goldman Sachs. Please go ahead.
Hi. Thank you very much. Good morning, André.
Morning.
Morning. Just a couple from me, please. The leverage improvement that you're guiding for, about GBP 70 million at the midpoint for FY 2020, can you comment on what has changed since the previous guidance? Is it just an improvement in cash generation, or has your margin profile basically improved better than expected in second half? The second one, obviously, the focus on sustainability is very clear in your conversations with customers. Should we basically expect a strong acceleration in your Assurance division going into 2021 and 2022 on the back of this? Thank you.
Let me just take the second one first. Assurance has been the fastest growing service of Intertek for many years, and we continue to expect assurance to be the fastest growing service, given all the opportunities I just talked about, including sustainability. Absolutely. As far as the net debt guidance, which is obviously lower than what we talked about at the end of H1, I think there are two things. We are pleased with the margin progress we are making, and as I've just said to Paul, we are comfortable with the consensus EPS, notwithstanding the Forex update that we've given. There is obviously good news, good progress on margin, really importantly, we are making great progress again on cash flow management.
As you know, it's been very high on our priority list for many, many years, and I'm so pleased and so proud to see the progress our teams are making in a very difficult economic environment. This is really a tribute to connectivity we have with our clients, but also the discipline we have. It's both margin and cash.
Thank you.
The next question comes in from the line of Rajesh Kumar calling from HSBC. Please go ahead.
Hi, good morning. Thanks for taking my question.
Morning.
Morning. The first one is, you pointed out that PPE has been a support to the growth, but obviously there are other businesses which are under pressure. If we assume that the vaccine comes at some point next year and the demand for PPE eases a bit, what are the other things that could grow that can offset some of the weakness in PPE that one might expect in a recovery situation? Are there revenues which are cyclically down that can recover and within the soft line, hard line businesses? The second one is on the vaccine supply chain. Do you have any exposure in that supply chain, in terms of testing or assurance or any other type of service you're providing?
Finally, on the ESG thing, can you just remind us how you are placed versus your competition in terms of winning more contracts or driving further revenue going forward as the focus on ESG increases?
Thanks. Let me just try to answer these three questions. Let's just start with soft lines and hard lines. Look, as I said in the previous Q&A, our focus on PPE is on high quality, high added-value testing and certification, which is largely targeted to the medical world, if you want. That market will continue to perform very, very strongly given the huge gaps in quality PPE that we've seen, unfortunately, in so many jurisdictions around the world, and our home market, the U.K., is no different, and the EU is also no different. We are seeing every day new issues and scandals. One of the other growth opportunities that we are pursuing within our hard line and soft line business, look, there are plenty of innovations that Intertek continues to bring to its clients.
Just to name a few, we are very obviously focused on how e-commerce is challenging the quality assurance agenda of our clients, either brick-and-mortar retailers or pure play e-commerce, which needs some dedicated focus. We are very focused on that. Obviously, I talked about sustainability from an operational sustainable solutions. It's a huge agenda for all of our clients, especially in the apparel sector, and you would have seen some of the leading retailers making some really clear commitments to their sustainability goals because consumers are very focused on that, rightly so. This is a huge area for us both at the corporate and operational certification level.
The other thing I would say is supply assurance, which is one of the big, I would say, wake-up call for a lot of board and companies that realized that during the heart of the COVID-19 crisis, they didn't have all the information they wanted on their Tier 1, Tier 2, Tier 3 suppliers. They realized they didn't have the business continuity plans in place. They realized that they maybe were dependent on too few suppliers. The all supply assurance business continues to grow. We have a world leading digital platform called Inlight, which is exactly what corporates need. Let's not forget all the service innovations that we have around the world. As far as the vaccine supply chain is concerned, look, our C&P business is very small.
As you know, we are only in few markets. The country where we have exposure to the R&D development from a vaccine standpoint is the U.K. You know exactly what's happening in the U.K. As far as ESG is concerned, look, we are uniquely positioned because offering is both looking at the operational sustainable solutions as well as the corporate certification. Our competitors, which could be the Big Four, do not have the operational understanding nor the depth and breadth of solution, which is where sustainability has got to start. If you don't start at the heart of your quality and safety operations, how can you make your operation sustainable? We are extremely well-positioned because we get both the corporate coverage with authentication program, verification of claims, as well as the operational understanding of what's happening in every industry.
As you know, every industry is different. This is again, where the depth and breadth of Intertek verticals makes a huge difference because no matter which industry, we know what to offer. I talk about CarbonClear, for instance, in the oil and gas industry. Thanks.
Understood. No, thank you. Just one follow-up on the net debt guidance you've given. Is there an element of receivables being better than what you were anticipating at H1 which has led you to increase the implied cash flow for second half? Or is it lower M&A spend?
Look, I think we had given a net debt guidance at the end of H1 with a certain CapEx expectation, which has now changed. We typically do not guide for M&A. How could we? Basically, the free cash flow improvement that is basically driving our net debt guidance, which is better than H1, is a function, as I said, of better cash collection, because we are doing a great job at debt, which is obviously receivables and a bit of margin progress.
Understood. Thank you.
The next question comes in from the line of Sylvia Barker calling from JPMorgan. Sylvia, please go ahead.
Thank you. Yes. Hi, good morning.
Morning.
Just coming back, I've got three as well. Coming back to the organic, the guidance implies positive growth in November, December. Could you maybe just touch on the working day impact within the July-October period and the November-December period as well? Just looking at the building and construction business in the U.S., I guess it seems to be relatively normal that that would slow down in the run-up to an election. Could you maybe comment on how big that impact was for your business and any thoughts into next year? Finally, M&A and capital allocation. Clearly very strong cash flow performance. The M&A market seems to have been largely shut in H1. Could you comment on the activity levels there and your thoughts around the capital allocation as well? Thank you.
Yeah. Look, I think, in terms of your first question, working days, look, the information is obviously available to everyone in terms of working days. Obviously very difficult to give precise answers because we do have different calendars around the world. There is no question that in the July-October period, there was a difference versus last year. There was obviously one less working days, and we expect the November-December period to benefit from one more working day. This is basically the question that you were asking. As far as your question on B&C in the U.S., look, we have a very well-diversified business that is present across all regions in the United States. The numbers that I've talked about today were largely influenced by the disruptions in building construction due to lockdown restrictions.
As you know, it's quite complex when you look at the lockdown restrictions state by state. We believe that the investments moving forward to make the infrastructure greener and more sustainable is also going to apply to United States. Although we have not seen the content of the President-elect's agenda in terms of investments, we would assume that there will be some positive tailwind there. It's a step at a time. From an M&A standpoint, look, we remain very active in the market. Obviously, this is not the easiest year for any seller to monetize an asset, given the exit point that we all know is going to be unfavorable. Nonetheless, we are in contact with all the quality targets that we have, and this is part of our strategy. As we've always said, we are very selective.
We only want to invest in high-growth, high-margin opportunities with multiples that make sense, so we can deliver shareholder value. No change from an M&A standpoint.
Thank you.
The next question comes in from the line of Rory McKenzie calling from UBS. Rory, please go ahead.
Morning. It's Rory here. Just two from me, please. Firstly, soft lines and hard lines. You've called out the impact of customer store closures. Are you able to yet identify how many customers have permanently closed stores or maybe could permanently reduce product ranges or exit entire categories there? Secondly, on the more positive side, you talked about that accelerating demand for supply chain assurance post-COVID. As many companies are now getting back towards more business as usual and more long-term planning, are you seeing customers now re-engineer supply chains and install services like Inlight, or do you think this is more a benefit to come for you over maybe more next year and the years after that? Thank you.
What's happening in the bricks and mortars world, look, we do watch from an SKU standpoint, what's happening with every single client. This is not a new trend, right? You will recall that the softline industry went into 2019 with quite a lot of challenges due to increased competition of e-commerce. That has obviously benefited everyone. I would say it's a gradual progress in terms of permanent closures of stores and SKU reductions. It's been going on for several years. We don't know yet when it's going to basically plateau, but we are watching it. It's been an ongoing initiative for our clients. What COVID-19 has done, it has accelerated the permanent closures of certain companies that didn't have a strong balance sheet. You've seen this news, and some of these companies are in Chapter 11.
As far as supply chain assurance, look, I would say that the disruptions inside the supply chains of our clients, which has basically triggered a huge awareness at the senior management level, but also at the board level that the information was not available real time on what was really happening inside the supply chain. This is a real insight that we see in all of our clients' conversations and our clients, if you want, today, are both managing the short term, which is the COVID-19 recovery, as well as starting to look at the long term.
Having said that, we are seeing good demand for Inlight and we believe that's going to continue to impact our business positively in the short and medium and long term. This is not something that you can basically install overnight. It requires some conversations as you would expect, but the demand is very strong.
Cool. Do you have any big reference contracts up and running for Inlight 2.0 yet? Again, it's taking time to get to that stage?
No, we have extended several of our contracts that were existing with Inlight 2.0, and we got some new customers, of course. Yeah.
Okay. Thank you.
The next question comes in from the line of Andy Grobler calling from Credit Suisse. Please go ahead.
Hi, good morning. Just a slightly longer term one, if I may. You still have quite-
Hi, Andy.
a lot of exposure to oil and gas, either through resources or bits of trade. When you think about the world going through energy transition over the next five, 10 years, how do you see that panning out for those parts of the business? Do you see just simple demand for oil and gas or anything related to it coming under a bit of pressure? Can it be offset by alternative energies? Can you just talk us through your expectations for the next few years there, please?
Look. Thanks, Andy. The energy transition is very high on the agenda of all of our clients. You will have seen many disclosures. Some are very different. People are taking obviously a different perspective on how to invest in lower carbon source of energies. Our view is that, if you look at the industry projections, is that the traditional oil and gas markets will continue to grow for several years, with an increased focus on cleaner products, while the oil and gas operators will have to invest in infrastructure that is targeted to renewables and low carbon source of energies.
Both trends are positive from our standpoint, because if you look at the investments in infrastructure with our Intertek Moody organization, which has basically a market leadership around the world, we are well-positioned with our IP to help our clients invest in traditional oil and gas exploration projects as well as in renewables. We are seeing a lot of demand in, obviously, the solar panel energy. We are seeing a lot of demand in the wind farms, obviously, and hydrogen is on the horizon. This is very exciting because it's going to drive investment in the industry. As far as the ongoing consumption, I think our business is very well-positioned to benefit from the continuous growth in oil and gas consumptions with an increased focus on cleaner products, as well as obviously, over time, electrical vehicles and hybrids taking a higher weight in the market.
Okay. Thank you.
The next question comes in from the line of David Woo calling from Bank of America. David, please go ahead.
Good morning, André and Ross.
Morning.
Most of my questions have been answered. Just two brief ones from me. The first one is, post the U.S. elections, has there perhaps been any notable change in customer activity or behavior in recent weeks? Were any of your customers perhaps holding back on this event before taking a strategic decision with Intertek? Secondly, on China exports, the macro data has rebounded strongly in the last several months. Could you perhaps talk a bit about the activity and growth levels for those businesses geared towards China exports as a whole, please?
Look, I think on the first question, our clients in the U.S. are very focused on managing the here and now, i.e., rebuilding their supply chain, being ready for obviously increased retail activities around Thanksgiving and Christmas. They are also, as I said in the previous questions, looking at some of the systemic issues in terms of supply assurance. I don't think there is total clarity yet on what the president-elect agenda means in terms of prediction for 2021. I think companies are getting on with their own agenda, which is, I think, what you would expect them to do. Any announcement from the president-elect obviously will be looked at separately moving forward. As far as China is concerned, look, you've seen the data. China has done a terrific job at controlling COVID-19. It's just incredible the way they've protected the country.
We've talked about the quick resumption of manufacturing outputs in China in the second quarter. You've seen the data where the export activities are really rebounding very strongly and the domestic demand is obviously very strong. No, China is doing well and we are doing very well in China. No question about it.
Thank you.
The next question comes in from the line of Neil Tyler, calling from Redburn. Neil, please go ahead.
Yeah, good morning. Thank you. Two more from me, please, André.
Morning
You mentioned that you've ensured that you've been able to maintain the ability to service customers when things return to normal. The question is, are there any areas where you feel the scale of opportunity may have been more permanently impaired, and therefore where you have begun to redeploy resources to higher growth areas? That's the first question. The second one, relating to some of your previous answers on the supply chain assurance work you're doing. Stemming from the insights that work provides, can you share whether there have been any changes in the intensity or number of conversations with customers about actually reshaping their supply chains? Clearly you've provided them with the insight and whether that has now led to investment on their part to change the supply chains, and simultaneously whether that is going to require more investment from Intertek to accompany those moves. Thank you.
Thanks. Look, our views remain that the disruption in supply chains that COVID-19 has created for our clients is temporary. We are not, as you know, exposed to some of the verticals that are more, I would say, structurally potentially impacted for a few years, like the airline industry or hotel industry. The way we are thinking about our capability, we don't want to lose the subject matter expertise of our colleagues around the world. We have not used, if you want, COVID-19 to do restructuring in certain activities. We do not believe that COVID-19 is changing fundamentally the growth drivers and the outlook in the medium to long term for any of our verticals. We have kept the capability that we have to be ready for our clients when they need us and they resume their operation.
So far it's working very well because all of our customer service data shows that we are making great progress with the attentive approach that we've taken during COVID-19. As far as the supply chain assurance, as I said in the previous question, we are seeing an increased level of interest from our clients because they've realized during COVID-19 that they didn't know enough on their supply chain activities or infrastructure. I mean, the good news about Inlight, it's a SaaS model, which is very easy to scale up. In terms of investment, it's about basically getting our clients onto the platform and obviously investing in the activities linked to the setup of the platform and providing the data to the platform. It's relatively fast and easy to scale up.
That's very clear. Helpful. Thank you.
We've currently no further questions in the queue, so as a final reminder, if you would like to ask a question on today's call, please press star one on your telephone keypad now. Okay, we do have one final question coming through from the line of George Gregory calling from Exane. George, please go ahead.
Good morning, André.
Morning, George.
Morning. One follow-up in relation to the broader push around environmental disclosures and sustainability disclosures. Clearly corporates themselves, stakeholders are pushing towards greater disclosure. To what extent do you think that will be further supported by regulation, and perhaps in which areas do you think that regulation is most likely to come and support your business, please?
Look, it's a great question, George. I mean, our view is that the annual report of the future, if you want, will have a strategy report, will have a financial report audited by one of the audit firms, and will have a sustainability report, which will be independently verified by a company like Intertek. It is very difficult, George, for the regulator to cover all aspects of every single supply chain across every single industry. We believe that companies will be very active in determining what is their sustainability strategy, what are the disclosures they want to make to support their strategy, and what is it they want to verify or let verify independently by a company like Intertek.
I think the sector where we are seeing the highe st number of discussions in terms of creating a framework, which is obviously standard and potentially mandatory, is obviously the financial sector. I mean, you've heard what's happening in the U.K. I think this is probably the sector that will drive some more of the mandatory disclosures. It's going to take some time. We've seen it over the years that companies that want to be obviously seen doing the right thing will take their own view and really get going, which is what we are seeing today. Financial sector will be my bet in terms of creating a few, maybe mandatory indicators that everyone needs to report against. It will be country by country. There will be a U.K. view, there will be a U.S. view and China view, probably.
Thank you.
Thank you. That was the final question in the queue. I shall turn the call back across to yourself, André, for any closing remarks.
Well, thank you very much for being on the call today. I know it's a busy schedule for all of you. Feel free to call Denis if you've got additional questions. If we don't talk between now and the end of the year, I wish you all a very peaceful and relaxing Christmas after a year that's been quite challenging for all of us on the call. Thanks all for your support and look forward to catching up.
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