Trading Update

Nov 24, 2020

Hello, and 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 session. And I will now hand you over to your host, Andre 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 Morrow are both with me on the call. There are essentially 3 key takeaways in our presentation today. First, we saw a strong AT3 bound in the last 4 months. Indeed, in the last 4 months of the semester in the second half of this year, we benefit from a strong rebound of assurance testing inspection and simplification activities as we are supporting our clients to resume their operations within our leading TQA solutions. Despite the nonprecedented global pandemic, the resilience of our financial performance demonstrates the strength of our high quality and high cash generative earnings model. And the 3rd Chetegoay, we are strongly positioned for growth moving forward. COVID-nineteen has made the need for risk based quality assurance, safety and society assurance greater and clearer inside corporations. We've been championing total quality assurance for more than 5 years, and we are strongly positioned moving forward for growth. Right from the start of the pandemic, being agile west 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 5 priorities and we remain 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 expiratory times, and 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 intake. For the 20 fourseven customer service that has delivered to our clients with a very, very strong passion for being the best. 2020 has been a very challenging time for our clients, and I 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 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 ability in most economies, driving strong progress in the Manufacturing sector and the 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 the operation and benefited from strong revenue rebound in Q3. Our employees have gone beyond their normal color of beauty to support our trials with innovative solutions to resume operation safely. And here are a few examples of what we have done. We've ensured supply continuity with our remote video inspection and audit solutions. On May 1, we've launched ProTech, the World First Health safety and welding assurance program for people, workplace and public spaces. And at the end of July, we further strengthened our ATIC Sustainability offering with the launch of Carbon Clear, the world certification program that independently verify the upstream carbon intensity per barrel of oil. These 3 major global innovations are in addition to all the service we've developed rapidly, priority testing service for lifesaving medical equipment like ventilators and to end testing and certification capacity increase for PPA equipment, increased testing capacity and express service for sanitizers and infections, of course, support the pharma industry for vaccine development and cybersecurity only related for home working conditions. You will have seen our trading update this morning in July October period. We have benefits from a rebound in assurance testing inspection and certification activities in all regions. In the last 4 months, we saw a strong improvement of our revenue momentum in our product and trade divisions, which represent 93% of our group earning while trading conditions remain challenging in the resource sector. In the last 4 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 rebounding 80 activities in most of our business soft lines, hard lines, electrical and connected world, business assurance, food and chemical and pharma. The last 12 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 rebalancing activities in July, October period compared to May, June, for Calibrate and Agri World. Looking at our results now in more details. In the last 4 months, the group revenues were 1,000,000 a decrease of 6.2% at constant rate and 9.9% at actual currency. Black for lack of revenue at constant currency was down 6.3% year on year. Black for like or Product division declined by 4%, our trade division declined by 10.1% and our Resolve division delivered a revenue decline of 9.6%. Year to date in the January talk to the period, group revenues were 1000000,272,000,000, minus 7.2% at constant currency a minus 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% the Resource Division delivered a revenue decline of 5.2%. Turning now to margin. We are making progress on margin in the second half based on productivity gain from sequential revenue increase and our disciplined performance management. Our strict controls and pricing 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 Operating discipline on cash is delivering strong free cash flow, strengthening our balance sheet further. We continue to take a disciplined capital allocation approach, investing in a high growth and high margin sectors. We're implementing a progressive dividend policy and in 2020, We have reward our shareholders with a total dividend payment of GBP 150,000,000 for the final payments for 2019 and GBP 55,000,000 for the half year of 2020. Now 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 mid single digit like for like revenue decline at constant rate with mid single digit like for like revenue decline in our prod division, a high single digit like for like revenue decline or trade division and a mid single digit like for like revenue decline or 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 1,000,000 to 1,000,000. Our cash conversion is strong, and we are targeting the year end net debt lower than 2019 of circa 1,000,000 to 1,000,000 before any M and A and any significant movement in currencies. Just now to give you an update on ForEx based on the actual figures for the 1st 10 months of the year and a current spot rate for the remainder of the year, The average selling rate applies to the full year results of 2019 will 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 4 months, a product delivered a like for like revenue decline of 4% at constant rate, which was a strong improvement compared to the like for like with a decline of 12.4% in a major period, resulting in a year to date, like for like with a decline of 6.8 percent. This strong revenue improvement in our product business was driven by rebalancing activities in the during our October period compared to May June in most of our business lines. Surf lines, hard lines, electrical and connected world, business assurance, food and chemical pharma. In the July, October period, our Softline business delivered a mid single digit negative like for like revenue, resulting in double digit negative like for like revenue on a year to date basis. In the last 4 months, our global supply 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 have delaying the launch of new products due to the disruption of their supply chain in the first half of the year. Our hard line business saw improvement 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 Harlan 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 the markets, while closures stores in Western Europe and North America are continued. Our Electric Collectible 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 4 months, our electrical and connected world business saw an increased level of ASP activities driven by increased demand for higher regulatory standards and energy efficiency, the strong growth in testing and simplification of medical device the increased testing requirements for 5G and greater corporate focus on cybersecurity. Our business assurance business delivered a stable like for like revenue performance in the July or October period, resulting in a mid single digit flat negative operating performance on a year to date basis. The easing of lockdown restrictions in the last 4 months has driven a rebound in number of either audits in some of our operations while we continue to benefit from the attractive growth in supply chain assurance to continue focus on ethical supply and the increased need of cooperation for stability assurance and the strong growth we seeing in our people assurance business. Our Building And Construction business delivered a mid single digit like for like revenue decline in 4 months, resulting in a low single digit lack of lower product revenue decline on a year to date basis. We continue to benefit from the growing demand for more environment friendly and a high quality building, as well as a strong investment in NAS Infrastructure Projects, while the temporary reduction of building construction activities we saw in Q2 due to lockdown restriction in some of our North American market continued in July after the period. Our Transportation Technology business delivered a double digit revenue decline in the last 4 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 client in new powertrain to roll CO2, not emissions and increased fuel efficiency. Our food business delivered a good like for like revenue performance in the last 4 months, resulting in a stable like for like revenue performance on a year to date basis, the last 4 months, we'll benefit from the resumption of supply operation for most of the lines 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 4 months, we saw a high single digit like for like revenue decline of chemical and business, resulting in double digit like for like revenue on a year to date basis. In the last 4 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-nineteen the pharma industry continues to reprioritize the investment delaying all the research and development projects. In 2020, We expect to deliver mid single digit decline in like for like revenue at constant currencies in our products division. Moving now to our trade division. In the last 4 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 management period, resulting on a year to date basis with a like for like reduction of 10.2 percent. This strong revenue momentum improvement in the last 4 months was driven by a rebound in ATIC activity, in a July or 2 period compared to May jewel for Calabretes and agri world. Our Calabre business saw improved momentum in a 4 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 4 months, our Cadbury business benefited from an improvement of global mobility and the rebound of the global economy in Q3. As we all know, Cadbury is a global leader in a crude oil and refined product gold trading activities with 7600 employees around the world and 275 operations. Our government and trade services provide a certification service to government in the Middle East and Africa to facilitate the import of goods in their markets based on high quality and safety standards. We saw a double digit negative revenue decline, both in the 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 agri world business provided spectrum activities to make sure that the global food supply chain operates fully and safely. Agree World delivered a robust like for like revenue growth in the last 4 months resulting in a solid like for like revenue growth on a year to date basis. Following a stable performance in H1, we saw increased demand for inspection activities, driven by easing of the lockdown restrictions most of our markets. In 2020, we expect our trade division to deliver a high single digit decline in revenue at constant currency. In last 12 months, our Resource business delivered a like for like per minute decline of 9.6% at constant rate, which was broadly in line with the 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 4 months, we saw a reduction of exploration and production investments by our plan in some of the markets. And consequently, our CapEx inspection business delivered the 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 July October period as well as in H1, the lockdown restrictions and the cost saving initiatives achities of our clients has impacted the demand for inspection services. We delivered a robust revenue growth in our mineral business in the 4 months period to October and on year 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, operational focus will remain unchanged on our 5 priorities. Every time, health and safety comes first. Our COVID-nineteen health and safety policy is very comprehensive and has been updated on a regular basis on our website. Our second priority is secure customer service, We are a passionate organization providing our customers with the best possible service. The lockdown measures that create huge operational challenges for all of our customers Since day 1, we've increased the frequency of communication with our clients to make sure we understand and need quickly. Our 3rd overriding priority is margin discipline. Over the years, we've built a very disciplined approach to margin management. Our strict controls and pricing and costs remain firmly in place We've also taken a number of additional steps to protect our margin. We believe that our plants have been facing temporary disruptions in the operations and all of our margin initiatives. And sure, that we have the ability to service our clients fully when their operations are back to normal. Operation discipline on cash management is robust and we expect OREA and net debt to be lower than 2019. Our fleet 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 ease of 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 a critical area of our clients operation and our assurance solutions provide end to end assessment of their operating processes. Said differently, we provide mission pre call services to our clients to make sure that their supply chain operates fully and safely 20 fourseven. Pre COVID nineteen 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 a high quality safety and semity products and services to their customers. The global crisis we are leading has demonstrated there are major risks in the world that are not properly at that by no mitigated. Moving forward, all stakeholders in society expect government and corporations to build back a better world with a sharp focus on end to end quality assurance. 2020 will indeed be remembered as a year where we all forced to rethink on how we operate and to make the world a state of place. We expect this theme of buildback ever better to guide the actions of governance, companies, institutions, regulators, and consumers in three areas. Management boards and shoulders will want to see their companies operate in the safest supply chain. Consumers, governments and corporations will want to offer better personal safety and the way the world will operate and invest will be at the lower carbon society. 2020 Innovius has made the need for risk based quality assurance clearer for all stakeholders in society, the world needs intertake in a short, medium, and long term, more than ever. We are very excited about the growth opportunity moving forward. We'll 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 to present 81 percent of the group earnings to grow ahead of global GDP, benefiting from brand SKU expansion, fast innovation cycle, increased demand for smart products and increased focus of corporations and 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 an increased focus on traceability and, of course, an increased focus on sustainability. The gross prospect in our Resource division, which represents 7% of the group earning are linked to growth drivers in the energy sector. Investment and exploration and production for essential resources like oil and minerals will grow to meet the demand of the growing population. Our resolve business will also benefit from the portfolio diversification of our clients as they manage their transition from fuel oil and gas to total energy, increasing their focus on lower carbon source of energy. 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 welding, 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 close to the business and what they should outsource to improve the efficiency and the return on capital employed. Intertek has been an industry leader for more than 130 years we are well positioned to see these exciting growth opportunities, capitalizing on our strengths of total quality assurance, superior customer service, our powerful portfolio, our high quality component, 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 in an attractive $250,000,000,000 plus EBIT market with increased need for quality assurance. We've got scale positions in our verticals and provide a superior total quality assurance, customer service, and our innovative culture and operational discipline are making Intertek ever better, ever stronger every single day. In summary, there are 3 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 strength 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 clear inside corporations and governments. Thank you for your attention today and we'll take any questions you might have. And our first question comes in from the line of Edward Stanley calling that I got 3, please. You say on morning. You say on PB testing, which has obviously been a very helpful offsetting factored to some of the more negative movements. Are you seeing the demand for that testing ease as people slow their stockpiling and vaccine get announced or have you won enough long term contracts in DP 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, so relatively surprising to 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 didn't your assurance business didn't sort of collapse to the same degree as theirs did? And therefore, the recovery in Q3 is less pronounced. And finally, I'm interested on carbon clear the world's clearly taking ESG more seriously in I'm sure your clients are committing to net carbon 0. So 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. Okay. Thanks, Ed. Look, on PPE, as you know, PPE is much more than math, right? It's math, gold, gowns, glows. And within the PPE market, you got multiple segments. And we focus if you want on a high quality, high added value testing, which primary, is targeted to the medical operators and the medical world. I'm not saying that we are now doing testing for consumer purchases. So 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 focused simply on quality PPEs. I mean, you've seen all the scandals, where people have been buying the wrong PPEs and destroying everything. So we believe that there is a strong market for your superior quality PPPs. That's what we are focusing on. And of course, this is continuing to grow because the medical world will need to improve the infrastructure to make sure that all medical workers are protected for future pandemics and diseases. So this is a gross market. And although the vaccine has been announced, in the last few days, we are not seeing reduction in demand in PPEs. Assurant is concerned. This is a great question. Look, our assurance business is, quite unique. As you know, we are very, very focused on ISO and non ISO audit solutions and a non ISO is really the high margin bit, which is basically the high quality supply assurance solutions that we offer. And you would have noticed that our business assurance business in the first half was very resilient. So we have not seen the same cyclicality than others because our mix is very different. And we are very, very focused on making sure that the non ISO solutions continue to perform very well. And what we've seen of course in Q3, as I said, in the previous conversation is that the eyes audits have obviously started to rebound. As far as carbon clear and then 0, look, we are very excited about Calvin Clear. I've never seen Ed such a market reaction to 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 5000 investors, a few days ago. And the level of interest for the solution is huge. So this is a really, really good timing for us because as you've seen, all the oil and gas companies are under tremendous pressure to accelerate their sustainability investments efforts They have obviously to continue to manage their typical oil and gas exploration activities while investing in renewables. And the lion's share of the emissions, as you know, is in traditional oil and gas. So that's why Carbon Clear is playing a major role. So now 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, Andre. Hope you're well. Good morning. Good morning. Just another 3 for me. Can you give us any color on the exit rate? I think your guidance implies further improvement in November, December. So any color there would be very helpful. Secondly, likewise on 2nd half margin progression, any color there or your thinking around for your profit expectations. And then finally, it's just over a year since your since the Corporate Sustainability, announcements. If you can provide an update on progress there and and take up? And any color on in terms of the number of certificates issued, for example? Thanks, Paul. Look, 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. And 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, look, 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. And we were expecting the progress from one to H2, but we are really pleased with the progress we are seeing. And then in terms of expectation management, we are broadly comfortable with the consensus EPS after the product adjustment that we've just talked about. So 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. And we are making progress on both going back to the correct question that Ed has raised, it doesn't matter which sector you look at, sustainability is at the forefront of every board or sealed agenda. And 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. So we are we are seeing great demand for operations to scalable solutions as well as corporate certification. Thanks, Paul. Thanks, Andre. The next question comes in from the line of Suhozini Varanna calling from Goldman Sachs. Please go ahead. A couple for me, please. The leverage improvement that you're guiding for about $70,000,000 at the midpoint for FY 2020, can you comment on what is changing 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? And the second one, obviously, the focus on sustainability is very clear in your conversations with customers So should we basically expect a strong acceleration in your Assurance division going into 20212022 on the back of Thank you. Yes. Look, let me just take the second 1. First, look, the assurance has been the fastest growing service of take 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. So absolutely. As far as the net debt, guidance, which is obviously lower than what we talk about at the end of H1. I think there are 2 things, we are pleased with the margin progress we are making. And as I've just said to to Paul, we are comfortable with, the consensus EPS of notwithstanding the Forex. Updated we've given. So there is obviously good news, good progress on margin. And really importantly, we are making great progress again on cash 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. So this is really a tribute to the connectivity we have with our clients, but also discipline we have. So it's both margin and cash. Thank you. Question comes in from the line Hi, good morning. Thanks for taking my questions. Good morning. So 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. So if we assume that the vaccine comes in at some point next year, and the demand for PPE ease is 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, as in all their revenue, which are cyclically down that can, recover and within the top line, bottom 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, you know, any other type of service you're providing. And finally, on the ESG thing, Can you, just remind us how you are placed, work with 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 me just start with supply and outlines. Look, as I said, in the previous Q and 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. And that market will continue to perform very, very strongly given the huge gaps in quality PPs that we've seen, unfortunately, in so many jurisdictions around the world and our whole market in the UK. Is no difference and the EU is also no difference and we are seeing everyday 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. And just to name a few, we are very obviously focused on how e commerce is challenging the quality assurance agenda of clients, either, you know, bringing losses retailers or pure play e commerce, which takes some dedicated focus. So we are very focused on that. Obviously, I talked about sustainability from an operational stable 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 commitment 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. And then the other thing I would say is supply assurance, which is one of the big, I would say, wake up call for lots of board and companies that realized that during the heart of the COVID-nineteen crisis, they didn't have all the information they wanted on the Tier 1 tier 3 suppliers. They realized they didn't have the business continuity plans in place. They realized that they may maybe were dependent on too many, too few suppliers. So the all supply assurance business continues to grow. We have a well leading, digital platform called Inlight. Which is exactly what corporates needs. And 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 CMP business is very small. As you know, we are only in few markets and the country where we have exposure to the R and D development from a vaccine standpoint is the UK and you know exactly what's happening in the UK. And as far as ESG is concerned, look, are uniquely positioned because offering is both looking at the operational sustainable solutions as well as the corporate, you know, certification And our competitors, which could be the big force do not have the operational understanding, 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 operations to stay be. So we are extremely well positioned because we get both the corporate corporations authentication program verification of claims as well as the operational understanding of what's happening in every industry. And as you know, every industry is different. So this is again where the depth and breadth of interconnection verticals makes a huge difference because no matter which industry we know what to offer and I talk about carbon clear for instance in the oil and gas industry. Understood. Thank you. And 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, you know, cash flow, implied cash flow for second half. Or is it lower M and A spend? So look, I think we had given our net debt guidance at the end of H1 with a certain CapEx expectation, which has not changed. We typically do not guide for M and A. How could we? And basically, 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 collections because we are doing a great job at debt, which is obviously receivable and a bit of margin progress. Understood. Thank you. The next question comes in from the line of Sylvia Barker calling from JP Morgan. Silvia. Please go ahead. Thank you. Yes, hi, good morning. Good morning. Just coming back, I've got 3 as well. Firstly, 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. And secondly, 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? And then finally, M and A and capital allocation, clearly very strong cash flow performance. The M and A market seem 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. Yes. Look, I think, in terms of your first question, working days, look, the information is 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. But there is no question that in the July or October period, there was a difference versus last year. So there was, obviously, 1 less working days. And we expect, you know, the November, December period to benefit from 1 more working day. And this is basically, the question that you were asking. As far as your question on on BNC in the U. S. So we have a very well diversified business that is present across all, in a region in the United States and, 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. So although we have not seen the content of the president-elects agenda in terms of investments, we would assume that there will be some positive tailwind there, but at the time. And from an M and A standpoint, look, we remain very active in the market. Obviously, this is not the easiest here for any seller to monetize an asset given the exit point that we all know is going to be unfavourable but nonetheless, we are in contact with all the quality targets that we have. And this is parallel strategy, but as we've always said, we are very selective. We only want to invest in high growth, high margin opportunities with multiple that makes sense. So we can deliver shareholder value. So no change from an M and A standpoint. The next question comes in from the line of Rory Mackenzie calling from UBS Rory, please go ahead. Morning. Yeah, it's Rory here. Just two for me, please. Firstly, softlines and hardlines, you've called out the impact of customer store closures. Are you able to yet identify how many customers have permanently close stores or maybe could permanently reduce product ranges or exit entire categories there. And then secondly, on the more positive side, And you've 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 reengineer 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 years after that? On the, what's happening in the Breeze and Moises 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. So 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, but it's been an ongoing initiative for our clients. Now what COVID nineteen has done, it has accelerated the parent closures of certain companies that didn't have a strong balance sheet. And 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. I mean, this is a real insight that, we see in all of our client conversations and our clients, if you want today, are both managing the short term, which is the COVID-nineteen recovery as well as starting to look at the long term. Having said that, we are seeing good demand for in light. And we believe that's going to continue to impact our business positively in a 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. And do you have any big reference contracts up and running for in light 2.0 yet? Or again, you kind of it's taking time to get to that stage? No, we have, we have extended several of our contracts that were existing within like 2.0, and we've got some new customers, of course, yes. 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 to high the oil and gas, either through resources or bits of trade. When you think about the world going through energy transition over the next 5, 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 or can it be offset by alternative energies? Can you just talk us through how you kind of your expectations for the next few years there, please? Look, I think the, thanks. And the energy transition is very high on the agenda of all of our clients. You would 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 would have to invest infrastructure that is targeted to renewables and low carbon source of energies. And both trends are positive from our standpoint because if you look at the investments in infrastructure, with our multi organization, which has basically market leadership around the world. We are well positioned with our IP to help our clients invest in traditional oil and gas exploration, project as well as in renewables. And 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, in hydrogen is on the horizon And it was very, very exciting because it's going to drive investments in the industry. And as far as the ongoing consumption, I think, the our Cadbury 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. Question comes in from the line of David Wu calling from Bank of America. David, please go ahead. Most of my questions have been answered. So just two brief ones from me. The first one is is post the US elections. Has there perhaps been any noticeable change in customer activity or behavior in recent weeks? So were any of your customers perhaps holding back on this event before taking a strategic decision with Intertek? And then secondly, on China exports, The macro data has rebounded strongly in the last, last several months. Could you perhaps talk a bit about the activity and growth levels for those businesses geared to towards China exports as a whole. Please Look, I think the, on the first question, look, our clients in the United States are very focused on merging the here now, I. E. Rebuilding the supply chain being ready for, obviously, increased retail activities around Thanksgiving and Christmas. And they also, as I said, in the previous questions, looking at some of the systemic issues in terms of supplier assurance. I don't think there is total clarity yet on what the president-elect agenda means in terms of predictions for 2021. And I think companies are getting on with their own agenda, which is, I think, what you would expect them to do. And any announcement from the president-elect, obviously, will be looked at it separately moving forward. As far as China is concerned, you've seen the data, China has done a terrific job at controlling COVID-nineteen. 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. And you've seen the data where the export activities are really rebounding very strongly and the domestic demand is obviously, very strong. So No, China is doing well and we are doing very well in China. No question about it. The next question comes in from the line of Neil Tyler calling from Redburn. Neil, please go ahead. Yes, good morning. Thank you. 2 more from me please, Andre. Firstly, on the, you mentioned that you've ensured that you've been able to maintain the ability service customers when things return to normal. And, but I wonder 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? And 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 that work provides, Can you share have any any changes in the intensity or number of conversations with customers about actually reshaping their supply chains because clearly you provided them with the insight of whether that has now, led to investment on their part to change the supply chains and simultaneously whether that is going to require more investments from Intertek to accompany those moves? Thank you. Look, of use, remain that the disruption in supply chains that COVID 19 has created for clients is temporary. We are not, as you know, exposed to some of the verticals that are more, I would say, structurally potentially impact for a few years. Like the airline industry or hotel industry. So the way we are thinking about our capability we don't want to lose the subject activities of our colleagues around the world. And 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 other vertical. So we have kept the capability that we have to be ready for our clients when they need us and they resume the operation. And so far, it's working very well because all of our customer service data 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-nineteen that they didn't know enough on their supply chain, you know, activities or infrastructure mean, the good news about Inlight, it's a SaaS model, which is very easy to scale up. So in terms of investment, it's about basically getting our clients onto the platform and obviously investing in the activities linked to set up of the platform and meant and providing the data to the platform. But it's a it's a relatively fast and easy to scale up. 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, Okay. And we do have one final question coming through from the line of George Gregory calling from Exane. George, please go ahead. Good morning, Andre. One follow-up in relation to the broader push around environmental disclosures and sustainability disclosures. To what extent are 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, Dror. I mean, our view is that the annual report of the future, if you want, will have the strategy report, would have a financial report audited by 1 of the audits firms and would have a sustainability report, which will be independently very by a company like Intertek. It is very difficult for the regulator to cover all aspects of every single supply chain across every single industry. So, 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 Intertek. I think the sector where we are seeing the highest number of discussions in terms of creating a framework which is obviously, standard and potentially mandatory is obviously the, the financial sector. I mean, you've heard what's happening in the UK. And I think this is probably the sector that will, drive some more of the mandatory disclosures. It's going to take some time, but we've seen it over the years that companies that want to be obviously seen doing the right thing will take the own view and really get going, which is what we are seeing today, but financial sector will be by my, my bet in terms of creating a few maybe mandatory indicators that everyone needs to report against. And it will be country by country, there will be a U. K. Views that will be a U. S. View and China view probably. Thank in the queue. So I shall turn the call back across to yourself Andre for any closing remarks. 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 then if you've got additional questions and If you don't talk, if you're now and the end of the year, we show a very, peaceful and relaxing Christmas, after a year, there's been quite challenging for all of us on the call. So thanks for your support and look forward to catching up. Thanks for joining today's conference. You may now