Hello, and welcome to the Intertek 2019 half year results call. My name is Rosie, and I'll be your coordinator for today's conference. For the duration of the call, you will be on listen only. However, at the end of the presentation, you'll have the opportunity to ask questions. If you need assistance, then please press star zero and you will be connected to an operator. I will now hand you over to André Lacroix, CEO of Intertek, to begin today's conference. Thank you.
Good morning to you all, and thanks for joining us on the call following the release of our H1 results a few moments ago. I'm with Ross McCluskey, our CFO, and Denis Moreau from our Investor Relations team. This morning we've announced a strong set of results with broad-based revenue growth and margin accretion, strong cash generation, and continuous progress on dividends. We are extremely pleased with the consistent performance delivery of the group year after year, and we are on track to deliver our full year 2019 targets. As you know, I spent quite a bit of my time visiting our operations, traveling around the world, and of course, meeting with our clients. In addition to the strong financial performance of the group, I'm really energized by the progress our teams are making, offering our differentiated Total Quality Assurance value propositions to our clients.
Our customers are more focused today than they have been on mitigating the increased operational risks in their operations. There is no question that our risk-based quality assurance approach is addressing their needs to improve the quality, safety, and sustainability of their operations. Today, we'll start with our performance highlights in the first half of 2019. Ross will then take you through the detailed financial results. I'll discuss the progress we are making with our clients, and finally, we'll talk about the outlook for 2019 by divisions. Before we start, I'd just like to give an update on the approach Intertek is taking in relation to the changes in accounting standards. For reporting consistency purposes, the numbers we'll discuss in our presentation today are based on IAS 17. The IFRS 16 figures are detailed in our press release of this morning.
We'll continue to guide on the IAS 17 until the end of 2019. When we start 2020, you will have a full year of numbers under both standards, and it's only then we'll start guiding on the IFRS 16. Let's start with our H1 performance highlights. In the first half, we continued to make progress on revenue margin and cash. The group generated revenues of GBP 1,443,000,000, up year-over-year by 4.9% at constant currency and 7% at actual currency. Our revenue performance at constant currency was driven by good organic growth of 3% in line with expectations and by the contribution of recent acquisitions. The group delivered an operating profit of GBP 243.6 million, up 6.8% at constant currency and 7.9% at actual currency. We have delivered an operating margin of 16.9%, up 30 basis points at constant currency and 10 basis points at actual rates.
Our EPS for H1 was GBP 0.978, up 6% at constant currency and 7.2% at actual currency. Continue to make significant progress on cash with a 12% increase year-on-year on operating cash flow underpinned by our disciplined approach to working capital, which was down year-on-year by 12%. In line with our dividend policy that targets a payout ratio of circa 50%, we have announced an interim dividend of GBP 0.342, up 7.2% compared to last year. We are pleased with the consistent performance delivery of the group underpinned by our strong earnings model and our disciplined performance approach on daily basis. In the first half in the last five years, we have grown our revenue on CAGR by 7% per year, operating profit by 10%, operating cash flow by 9%, and our dividend by 16%.
Last but not least, we have improved the margin of the group, which is now 200 basis points higher than it was five years ago. We have reported broad-based organic growth in margin accretion. Each of our divisions made progress on both organic revenue growth and margin. Our product rated businesses delivered a robust rating performance with a revenue growth of 4.9% at constant currency driven by good organic revenue of 2.1% and by the benefit of acquisitions made recently. Product operating profit increased by 6% at constant currency and the margin was up by 20 basis points. We benefited from an acceleration of growth momentum in our trade related businesses as we delivered a revenue increase of 5.8% at constant currency driven by robust organic growth of 5.1% and the benefit of acquisitions. Operating profit in trade was up 6.8% at constant currency and our margin improved by 10 basis point.
We saw improved revenue momentum in our resource rated businesses delivering a good organic revenue growth of 3.5% at constant currency. Operating profit was up 16.9% at constant currency and our margin expanded by 70 basis points. Our M&A strategy is focused on the acquisitions of leading and innovative solutions that we can scale through the Intertek network. The acquisitions that we've made since January 2018 in attractive growth and margin sectors, as you know we are very selective where we invest, are performing well and have added 1.9% to our revenue in the first half. I'm particularly pleased with the progress Alchemy is making offering our leading people assurance services to our clients in North America. As always, we continue to actively pursue expansion opportunities in attractive growth and margin areas with value enhancing acquisitions. Margin is an important priority for the group.
We have delivered an operating margin improvement of 30 basis points at constant currency, benefiting from an operating leverage linked to growth, productivity gains, and from our margin accretive portfolio strategy. We are pleased with the continuous progress we are making on margin with five consecutive years of margin accretion in H1 at constant currency as you can see on the slide. Our daily focus on cash management is also a very important priority for the group. We continue to reduce working capital with delivered operating cash flow increase of 12% with a strong cash flow conversion of 126%. I'll hand over to Ross, who will take us through our financial results in detail.
Thank you, André, good morning, everyone. I will now take you through our results in detail. In summary, in the first half, we delivered robust revenue profit and EPS growth at constant currency. Margin improved year-over-year at both actual and constant currency, and our cash flow performance was strong. The half year 2019 results are the first reported under the new lease accounting standards of IFRS 16, as you know. For comparability purposes, we've also presented results on an IAS 17 basis. The comments that I will make on the year-over-year developments will be in a consistent IAS 17 basis. Total revenue growth was 4.9% at constant currency and 7% at actual rates, as FX translation increased our revenues by 210 basis points, driven by the depreciation of sterling.
Organic revenue growth at constant currency was up 3%. Operating profit at constant rates was up 6.8% to GBP 243.6 million. Our margin was up 30 basis points. The FX effect for the half year resulted in operating profit up 7.9% at actual rates. The overall fully diluted EPS grew to GBP 0.978, being up 7.2% at actual rates and 6.0% at constant rates. I'll now take you through the high-level margin performance by division. The group recorded a 10 basis points improvement in operating margin in the first half at actual rates, increasing to 16.9% on an IAS 17 basis. Margin improved by 30 basis points at constant rates, driven by margin accretion in each of the divisions. This was partly offset by FX, which had a negative 20 basis points impact on the group margin. Now turning to group cash flow and net debt.
Our disciplined focus on cash management continued throughout the period. Cash flow from operations was £229 million, up 12% year-on-year, with working capital down 12% year-on-year and further reducing as a percentage of revenue. We invested GBP 45.7 million in CapEx, in line with 2018, to expand our market coverage and develop innovative ATIC solutions. Free cash flow in the period was GBP 104.6 million. Net debts stood at £826 million on an IAS 17 basis and GBP 182 million on an IFRS 16 basis. Turning to our financial guidance for FY 2019, as André said, for comparability purposes, our guidance remains an IAS 17 basis. Expected net finance costs will be around GBP 31 million-GBP 33 million.
The effective tax rate is still expected to be in the 24.5%-25.5% range. Minority interest will be circa GBP 21 million-GBP 23 million. We're expecting full year CapEx to be GBP 130 million-GBP 140 million. We continue to expect the net debt to close the year at between GBP 670 million and GBP 700 million. Of course, this net debt guidance is stated on an IAS 17 basis before any further M&A and before any future material movements in FX. I would now like to hand you back to André.
Thanks, Ross. In the last eight to 10 minutes we've covered our financial performance. What I would like to do now is to give you an update on the progress we are making with our clients. As you know, at Intertek, we put customer first. We work with more than 300,000 corporations around the world, and we enjoy deep and trusted relationships with each of them. These long-lasting relationships are based on our superior customer service. We provide independent quality assurance services that are mission critical for our clients. We have a strong technical expertise in all sectors we operate in, and when combined with our passionate and entrepreneurial culture, that enables us to support the growth agenda of our clients in an ever-changing and more complex operating environment.
At Intertek, we truly value the long-lasting relationship with our clients, and each of us is deeply committed to the delivery of our Total Quality Assurance customer promise. We see very attractive growth opportunities in the quality assurance market. The market is worth circa $250 billion, yet only 20% of this market is outsourced. We see, of course, strong growth opportunity with existing and new customers. We see also attractive growth opportunities to get access to quality assurance work that corporations currently do in-house, i.e., outsourcing. The opportunities goes beyond outsourcing and existing clients. It's all about the untapped potential in our exciting industry. The global operations of our corporations around the world are increasingly more complex, which drives more demand for end-to-end quality assurance services as corporations increase their focus on systemic operational risks.
The untapped potential is really exciting as this is all about what companies do not do today in terms of quality assurance and are starting to do today or tomorrow to improve the quality, safety, and sustainability of their operations. We are seizing these exciting growth opportunities with our differentiated Total Quality Assurance value proposition. Globally, across all of our businesses, we support the existing and emerging quality assurance needs of our customers in each area of their operations, R&D, raw material sourcing, component suppliers, manufacturing, transportation, distribution and channel management, and of course, consumer management. True to our customer-first approach, innovation is truly important to help our clients mitigate the increased quality, safety, and sustainability risks in their operations. I'd like to share some of the innovation that we've launched recently.
As you know, we do NPS as a feedback with our clients, and we do about 7,000 monthly surveys. That gives you tremendous customer insight when it comes to innovation. Let's start with some of the most recent innovations in our product divisions. We have developed a virtual audit solution through which our TQA experts are able to audit remotely. This allows us to deliver our audits faster and with a wider audience of subject matter experts. STEM toys are increasingly being marketed to young children. These are toys that have inbuilt science, technology, engineering, and mathematics functionality. There is an increased demand from schools for toys for learning that are both genuinely STEM and are safe. We've developed a unique STEM toy mark to verify that our customers' toys meet stringent quality and safety standards. Let's now discuss a few innovations in our trade-related businesses.
Turnaround time is a key factor for all trading customers. It's critical for our clients with offshore operations to have their samples tested in a fast, efficient, and flexible way. Our Caleb Brett business has developed a very unique service proposition called On-site Lab Quality Testing Laboratories, and we've partnered with the clients in installing these labs on their ships. Another innovation to reduce turnaround time for our clients in our AgriWorld business, we have recently launched a rapid protein analysis leveraging leading technology for soya exports. A few innovation examples in our resource sector. Our offshore drilling, exploration, and production customers face the challenge of maintaining aging or increasingly complex new equipment in an even more stringent regulatory environment.
We've developed Debu 3D, a new inspection methodology that combines 3D laser scanning and precise metrology data with advanced non-destructive testing that gives an accurate representation of current conditions and mechanical integrity of critical assets. This allows our customers to take a smarter approach to maintenance, reducing expensive operational downtime. An important safety innovation for oil and gas clients. As you know, helicopter journeys can present risks when staff work on offshore rigs. Our experts have developed a helicopter underwater escape simulation program, which is essentially a training program. Let's now discuss the outlook for the group in 2019. We are on track to deliver our full year 2019 targets. We expect to deliver good organic revenue growth at constant currency with good organic revenue growth in each of our three divisions, product, trade, and resources. From a profitability standpoint, we expect to deliver moderate margin progression.
We'll continue to invest in growth with full-year CapEx being circa GBP 130 million-GBP 140 million. A quick update on currency for your models. Based on the actual figures of the first six months of the year and the last three months average rate for the remainder of the year, the average sterling rate applied to the full-year results of 2018 would provide a 150 basis points uplift at the revenue level and 100 basis points at the operating profit level. Let's now discuss our divisions, starting with products. All the numbers I will discuss in this section are at constant rate. In the first half, our product business delivered consistent margin accretive revenue growth. We delivered 4.9% revenue growth driven by good organic revenue growth of 2.1% and by the benefit of acquisitions made recently.
We delivered a robust operating profit of £185 million, up 6%, enabling us to deliver a margin of 21.3%, 20 basis points ahead of last year, driven by the benefits of operating leverage, cost discipline, and our pricing power. Softlines business delivered solid organic revenue growth, benefiting from supply chain expansion of our clients in new markets, the rapid expansion in the footwear sector, and the increased demand for chemical testing. I'm pleased with the commercial progress we are making with our Softlines clients. Our full-year guidance of solid organic growth for Softlines remains unchanged. Our Hardlines business reported solid organic revenue growth driven by innovation from our customers leveraging wireless technology, increased demand for chemical testing, and our innovative inspection technology, i2Q. We are making good progress on business development activities with our clients and our full-year guidance of good organic revenue growth for Hardlines remains unchanged.
We've delivered robust organic revenue growth in Electrical & Connected World as we continue to benefit from electrical appliances innovations that provide better efficiency and connectivity and of course increased demand for IoT, including cybersecurity assurance services. Our full-year guidance of robust organic growth for Electrical & Connected World remains unchanged. Our Business Assurance delivered good organic revenue growth. We are competing versus a high base last year, as you know, when we benefited from the increased ISO audit demand for our clients to meet the Q3 2018 deadline for standards upgrade. Our full-year guidance of robust organic growth for Business Assurance remains unchanged. We are seeing a strong demand for non-ISO assurance solutions as we benefit from increased focus of corporations on risk management and obviously supply chain processes, increased consumer and government focus on ethical and sustainable suppliers.
In our Building and Construction business, we are also competing against a high base in 2018 and have delivered a solid organic revenue growth as expected. You'll recall that the inspection activities of large new projects in the U.S. in 2017 were soft following the presidential election, that in 2018, we benefited from a fast ramp-up of several new projects that were delayed in 2017. We are seeing good traction with our business development activities, our full-year guidance of good organic growth for B&C remains unchanged. In our Transportation Technologies business, we've delivered robust organic revenue growth driven by continued investment of our clients in new models and new fuel-efficient engines and increased scrutiny on emissions. Our full-year guidance of robust organic growth for Transportation business in 2019 remains also unchanged.
We generated good organic revenue growth in our Food business, driven by continuous innovation and increased focus on the safety of supply chain. We expect our Food business to deliver good organic growth in 2019. We saw, as expected, organic revenue below last year in our chemical and pharma business in the first half, as we benefited last year from robust growth ahead of the June 1st switch deadlines, which created, obviously, a very strong business for us. We are maintaining a full year guidance of solid organic growth for our C&P business. Our partner activities is strong for the second half. Overall, for the full year, we expect our product-related business to deliver good organic revenue growth. Our trade business benefits from acceleration in revenue momentum and delivered a robust performance with a revenue growth of 5.8% and an organic growth of 5.1%.
We delivered an operating profit of GBP 44 million, up year-on-year by 6.8%, and an operating margin of 13.3%, up year-on-year by 10 basis points. Our Caleb Brett business reported good revenue performance. We continue to benefit from the global and regional trade and structural growth drivers in all regions. Our full year guidance of good organic revenue growth for Caleb Brett is unchanged. Our Government and Trade Services businesses delivered double-digit organic revenue growth, driven by volume growth from existing contracts, as well as from new contracts around the world. We continue to expect our GTS business to deliver strong organic growth for the full year. Our AgriWorld business reported good organic revenue growth. We expect this trend to continue for the full year. For the full year, we expect our trade-related businesses to deliver good organic revenue growth.
Our revenue momentum has improved in our resources-related businesses, and we've delivered a good organic growth of 3.5%. We've delivered a strong operating profit of GBP 14.5 million, up by 16.9% year-on-year, with a margin of 6%, up 70 basis points year-on-year at constant rate. Our CapEx inspection business reported good organic revenue growth as we start to benefit from the increased investment of our clients in exploration productions around the world, and we expect our CapEx inspection business to deliver good organic growth in 2019. The demand for OpEx maintenance services remains stable in a competitive environment, and we expect that trend to continue for the remainder of the year.
We continue to see an improved level of demand for testing activities in the mineral business as we deliver the robust organic growth performance in the first half and our full year guidance of a good organic growth for minerals in 2019 remains unchanged. For the full year, we expect our resources businesses to deliver a good organic revenue growth performance. Before we take any questions you might have, a few concluding remarks from my side. We operate a high-quality earnings model at Intertek. Our approach to value creation from mid to long term is based on global GDP plus organic growth in real terms, plus margin accretion, plus strong cash conversion, and plus disciplined capital allocation in organic, inorganic investment, targeting the attractive growth and margin sectors in our industry.
Compounding effect of virtuous economics of our earnings model year after year will continue to deliver shareholder value creation. Our future growth outlook is global GDP plus organic growth in real terms. We expect our product division, that represents 76% of the group's earnings, to grow ahead of global GDP, benefiting from brand and SKU expansion, regulatory development, as well as an increased focus of corporations on safety, quality, and sustainability. We expect our trade division, that represents 18% of the group earnings, to grow at a rate broadly similar to GDP through the cycle. Our trade business will benefit from the development of regional and global trade routes, as well as from increased focus on traceability. The growth prospect of our resource division, which represents 6% of the group earnings, are linked to the global growth drivers in the energy sector.
Investment in exploration and production of potential resources like oil and minerals will grow to meet the demand of the growing populations around the world. We also expect structural growth in the renewable sector from an energy standpoint. Intertek is going from strength to strength. We have scale positions in attractive end markets in 100 plus countries. We offer our clients a superior customer service with our unique total quality assurance value proposition. We operate a high-quality component earnings models. Our ever better operational discipline is making us ever stronger every single day. Thank you for your time, and we'll answer now any questions that you might have.
If you would like to ask a question, please press star one on your telephone keypad. If you change your mind and wish to withdraw your question, please press star two. You will be advised when to ask your question. The first question comes from the line of Ed Stanley from Morgan Stanley. Please go ahead.
Morning, y'all. Thank you for taking the questions. Two, please. In the products division, when we think about the 20 basis points of constant currency margin expansion, can you give us a bit more detail about where that underlying organic margin improvement's coming from, given there are clearly some weaker segments within the mix year-on-year in products? Secondly, it feels like you're now comfortably past the trough in resources. Where do you think you can get the underlying margin in that division back up to relative to the previous peak margin in resources? Thank you.
Yeah. Good morning, Ed. Thanks for your questions. Look, I think we are tremendously proud of where the product business is. If you look at what we've done over the last five years, and I would say even beyond that, when it was a different disclosure format, this is obviously the core of the group, and we have obviously the highest margin in this division. As you know, we do not disclose individual numbers by business lines for essentially commercial reasons, because we are competing against several companies in the industry, as you know. I can tell you that the organic growth in the product division is broad-based. There was only one division that was low last year, which is CMP.
From a margin standpoint, we are also making progress in most of the divisions. As you know, my approach to organic revenue growth is all about good organic revenue growth. We focus our operations on volume price mix, and we say no to a client that just wants a price reduction because we believe that we are a superior quality operator in the industry with our customer service approach. We are the market leader in most of the business line, our product business of Trade and Resources is the way we operate our portfolio, and having a strong pricing power is very important. When you think of operating leverage, don't only think about revenue growth, think about pricing power, mix, innovation, and that's how we get, obviously, the margin that you spoke. Look, I'm tremendously pleased indeed to see some light in the resource sector.
We had been expecting that moment, and it is now here for us to seize. There is no question that this business has been under a lot of pressure for many years. It's been one of the longest, oil prices in terms of price, and the oil and gas companies have been under a lot of pressure, as you know. The good news is our clients have rebuilt their balance sheets. They have realized that they need to invest in exploration productions. Look, if you look at the peak to trough, I mean, from 2013 to 2018 on a full year basis, our resource division lost about 27%-28% revenue and 60% profit. Our margin at the peak was around 10.5%. We have a lot of room for improvement here. We're going to take it a step at a time.
I really believe that with all the work that we have done in terms of volume pricing, quality of earnings, productivity through the downturn, we should be able to show some steady progress in terms of margin. The opportunity is absolutely significant, as you just spotted.
Thank you.
The next question comes from the line of Alexander Mees from JPMorgan. Please go ahead.
Good morning. Thanks so much for taking my questions. A couple, please. Just firstly, within the products division, I noticed that the outlook for food, I think was previously described as robust, is now good. I just wonder if there's been any change in the market dynamics and if you can give any color there. Secondly, on the working capital improvement, I just wonder if you could explain what measures you've actually taken to improve the working capital, and should we consider this improvement sustainable, and can you go further? Thank you.
Thanks, Alex. Look, on food, as you know, food for us is a relatively small business around the world. It's essentially a regional business in several markets. We've seen in a couple of markets, one of our competitors, and I'm not going to say who it is, starting to redraw prices because they're facing some challenges. We decided to move away from these contracts because, as I just said to Ed, we believe in volume price mix and pricing power. I'm not too worried about it. It's just commercial, I would say, in the management of these few markets where one competitor is more aggressive than usual. Working capital, we still have a lot of opportunities, and I think Ross will answer your question directly.
Yeah, Alex. On working capital, we've basically brought the same disciplined approach to margin discipline that we have into working capital. We continue to make progress both on the receivable side and the payable side. In terms of further opportunity, absolutely. We still see a span of performance across the group. As we said at the year-end for 2018, we continue to see opportunities to take this down more.
Thanks very much.
The next question comes from the line of Rory McKenzie from UBS. Please go ahead.
Morning, all. Two from me, please. Firstly, hate to focus on the really short term, but the implied organic growth seemed to slow in May, June compared to the first four months, especially in products. Can you just help us estimate how much of that was maybe due to the fewer working days year-over-year? Secondly, on the kind of margins in product side, can you talk about Alchemy a year on from when you first bought it? What are your thoughts about the margin investment you want to make in growth there? If it will be dilutive for this year overall, and the thoughts the year after and the year after that will be very helpful. Thank you.
Yeah. Look, I think, the point about May, June is essentially a working day. As a matter of fact, if you do the math and you normalize the implied organic growth from product in May and June with additional working days, you will see that you are slightly ahead of your run rate in January to April. There is nothing new. I explained the baseline effect in our May trading statement in greater detail, and this is working there, and I'm not concerned about it. Look, Alchemy, thanks for asking. It's going to be very soon the 12-month anniversary of our acquisition. This is something that is really going to make a huge difference to our clients around the world. There is no question that corporations have invested a lot in testing, inspection, certification, which is all definition of the industry.
We believe that the industry is moving to ATIC, where you have to add assurance because testing, inspection, certification is just a physical quality control. Today to get quality assurance end to end, this is necessary and not sufficient, and you need to add assurance. Assurance has always been for us, not just our operating procedures and management system. I was always of the view that one day we'll go into skills and behaviors. If you think about people in a driven industry, it doesn't matter if it's high street restaurants or hotels factories. After having streamlined processes, sharpened your investments in terms of equipment, done all the work on formulations and quality control, people assurance is really the next frontier for corporations.
I'm saying it because we have been presenting our people assurance solutions to a lot of clients, and I've done lots of clients meeting myself in North America, but also around the world. When I explain what we can do for them, either for factory owners or for multi-site owners, their eyes are just wide open. "Wow, we didn't know that technology could enable that to do that." This is very energizing. We are making a lot of progress on the commercial agenda. Today, we are essentially focused on setting up in North America with clients that are based in North America, but also have operations around the world. We are going to be very careful about what we disclose, because obviously there is some competitive sensitivity.
I think we are taking a step ahead of many companies in the world of quality assurance with our approach with Alchemy. I can tell you that, if you look at all SaaS models, when you scale it up, the margin is just fantastic. From our perspective, we are on track both commercially and on track in terms of margin. As far as investments and developments. Look, innovation is part of the group strategy, and we continue to invest in innovations. Of course, there are innovation opportunities in Alchemy. I host the full day of innovation workshop with our teams in Austin, which is just a fabulous team, and the opportunity is very significant. We will share some of these as we go. I'm so pleased we have Alchemy now part of the Intertek family.
Great. Thank you.
The next question comes from the line of George Gregory from Exane. Please go ahead.
Good morning. I have three questions, please. Firstly, just in terms of the Hardlines's performance, I wondered if you could elaborate on the solid growth in the first half and the expected improvement to good for the full year, please. Secondly, I noted you look to have accelerated some of your restructuring activities with the SDIs up a bit. I just wondered if you could give us some more color as to where that work is taking place. Finally, just on guidance. Your tax rate guidance is unchanged, despite you being, I think, at 24.5% the first half. I just wondered if there's any particular reason to expect that to increase in the second half. Similarly, on the interest guidance, the first half run rate looks a bit higher than the full-year expectation.
Does currency have any upward impact on that interest, or are there any offsetting factors on an IAS 17 basis, please? Thanks.
Thanks, George. I'll do the first two, Ross will do the last two questions on tax and net finance cost. Look, Hardlines is pretty straightforward. As you recall, the bankruptcy of Toys Us really materialized at the end of the first half last year. Basically, it's simply a baseline effect, as I explained in the main trading statement. As you know, Toys Us is an important player in the global toy industry, or was, I should say, an important player in the industry. As far as SDI, look, you might recall when we announced our strategy in 2016, we said that we would take our time to do deep forensics on certain parts of our portfolio, because we want to take the time to make the right decision. Taking a restructuring charge is really the last resort.
There are many things that you can do to improve performance of certain business lines. We are going at our own pace. I wouldn't see the year-on-year increase in the first half as a signal of acceleration. It's just the way the math and the review has played out. We are being very selective. Where is it happening? It's happening in businesses around the world. We typically don't go in too many details because it will be really true details. We are very selective, and it is really only the last resort when we believe that we have explored all options. We decide, okay, we need to take some costs out here because that's the only way to improve the performance of this business. I'll hand over to Ross for tax and net finance cost.
Hi, George. For tax, as you saw, the range is 24.5%-25.5%. As you know, when we do the half-year results, we use our estimate for the full-year tax rate for the group, which is 24.5%, so within the range. Clearly, as we go into the second half, the final number will be a function of the overall mix of the business and the geographies that contribute, hence the reason we've continued to guide to a range of 24.5%-25.5%. On interest, again, the range we've reiterated from the full results at this point of March of GBP 31-GBP 33.
That guidance is maintained on the basis of no further material movements in FX, given obviously the U.S. dollar dominated debt that we've got and is very much based upon the view of the group's cash generation over the course of the second half.
Thank you.
The next question comes from the line of Rajesh Kumar from HSBC. Please go ahead.
Hi. Good morning, gents. Following up on the working capital comments earlier, what are your medium-term aspirations for working capital? What is the level you think Intertek can achieve in, say, 18-24 months' time? The second question is, looking at the overall tariff debate, I appreciate it's quite difficult to quantify what the impact could be. How are your discussions with suppliers, customers shaping up in terms of preparation for various scenarios of outcome? Have you seen any adverse effect or benefit from the inventory buildup we are seeing in the U.S. in response to the tariff? Finally, on the pricing dynamics with your customers, can you give us some color on what sort of pricing discussion you're seeing in the product and the resource segment, please?
Thanks. Look, on working capital, as you know, we do not give any quantitative targets at Intertek for medium to long term. Our view is that there is more fuel in the tank or there is more juice in the lemon. The answer is ever better, and we're going to continue to make some improvement, and every bit for me makes a huge difference because it's about the consistency of performance delivery. We've made tremendous progress, but there is more progress to be made, as Ross said, in terms of spot performance. As you know, global trade, frankly speaking, the situation has not changed since our recent May trading statement. You know that the discussions are going on between the U.S. and China. A few important points.
I think we have not seen any impact of the trade discussions on the sustained good performance of our business in China across all business lines. We are really pleased with our Chinese performance. I just came back from a trip. I was two weeks in Asia trying to talk to clients and talk to our colleagues and what's happening. Because nothing has changed, there is no need for companies to make any decision. As I explained in our previous discussions, it is a very complex decision for a given brand to move factory from China to another country. Obviously, they've done it in the past, and we've followed the activities of relocating supply. It's costly and not risk-free because they've got to rethink all production standards, training of the factories. They've got to rethink their tier 1, tier 2, tier 3 supply base.
They've got to rethink logistics. As you can imagine, this is not a light decision to take. What I can say is that obviously companies are evaluating the options as you would expect them to do. That's really the main point. No change in our business momentum in our Chinese business. Companies are looking at what could happen and what could be the best solutions for them. The only thing I would say is that we should not underestimate the high quality of manufacturing in China. China is just not a low-cost manufacturing hub or house for the world. It's much more than that, right? There is a lot of investment in leading technology and the quality of processes, the discipline of the workforce. All of that contributes to the output of what companies get out of China. Look, I think we are monitoring it.
I'm very close to it. I've got, as I said in a previous call, a task force that basically is staying close to the ear of our clients, because frankly speaking, following the supply chain of our clients wherever they want to go in the world is something that we do every single day at Intertek. And if our clients want to move from A to B, we'll be very happy to help. And I just want to make sure we provide that customer service. In terms of pricing, look, as I said earlier, we are a premium operator. We believe in superior customer service. We invest in innovations that add value. We track our customer service. And I wouldn't say that there is any change of dynamic in terms of pricing in the market. You've got clients that want to negotiate, as you always have.
That has always been part of the day-to-day commercial activities. There is nothing that's telling me pricing trends are changing one way or the other. We continue to focus on our own pricing power strategy, and that's the way we run the business.
Understood. Thanks.
The next question comes from the line of Tom Sykes from Deutsche Bank. Please go ahead.
Yeah. Morning, everybody. Just on a rather boring question on the depreciation, because I think your EBITDA number or margin on a pre-IFRS 16 basis is up by quite a bit more than the 10 basis points. Therefore, and I think that might be the first time in quite a few years, is there anything particular about increased depreciation levels for this year that we should think about depressing the EBITDA a little? You suggest the underlying profitability is perhaps a little stronger. Just on the CapEx guidance, should we really expect you coming into the GBP 130, GBP 140? What areas is the CapEx actually going into? Is that a very conservative estimate?
Finally on the Chems and Pharma and Building and Construction. Has there been any sort of, or is there a basis points drag on the margin that you'd pick out from Chems and Pharma that might reverse in H2? What's the forward like on the Building and Construction business, given that you have tougher comps up until Q4, I think. Thank you.
Thanks, Tom. I'll take two, three, four, and then Ross will do one. Look, in terms of CapEx, typically, we tend to spend less in H1 than H2. That's the nature of CapEx approval inside any global company. You approve your CapEx at the beginning of the year, and it takes a bit of time. The guidance is, I would say, not too conservative. We might not spend it all, but we want to be fair and deliver when we give you some numbers for your model. I think where we are investing, it's very simple. It's maintenance CapEx, as you would imagine. We invest obviously in IT to continue to develop our IT functionality. We invest in lab extension in terms of capacity, lab equipment, but also one of the big area of focus is innovation. We try to bring new equipment.
Let me talk about this for quite a while, or we try to basically invest in the development of new solutions. This is basically what we do. I think the allocation is the same, that the types of discipline is the same approach that we take to M&A. We only invest in areas where we believe that we'll get the right returns. Look, as far as CMP is concerned, as I said earlier, we don't talk about margins by business line inside the three divisions. Look this is, again, for us, it's a relatively regional business. We are not a global player in CMP. I think what happened is essentially the June 1st deadline for which last year, which obviously had a great revenue momentum. Of course, when you are negative in terms of growth it has an impact on your operating leverage.
I'll leave it to that. As far as B&C, that's true that we had a good momentum last year. Equally the large investment projects, we're really concentrated in Q1, Q2, and Q3, the comms should be slightly easier in Q4. I will hand over to Ross.
Thank you.
Sure. Tom, as you say, if you look at the cash flow, you can see the combination depreciation, amortization was GBP 51 million in the first half of this year. That simply reflects the CapEx spend over the last few years because we've been spending broadly between GBP 100 million and GBP 113 million in the last three years. It's simply a timing impact of that.
Okay. That times two in H2 as the underlying depreciation number replicated again in H2 is about fair then. Oh, sorry. Yeah.
Okay, Tom. Thank you very much.
Okay, thank you.
We have no further questions coming through. I'll now hand the call back to André for any concluding remarks. Oh, apologies. We have actually just had another question. Are you happy to take that?
Of course.
This question comes from the line of David Roux from Bank of America. Please go ahead.
Hi. Good morning, guys. Just three questions from my side. I think firstly, going back to your comments around more competitive price behavior and food. I was just wondering whether you've seen more aggressive price behavior from your competitors in any of your other segments. My second question relates to the sort of hypothetical shift in manufacturing bases. I'd be interested to know if your labs in Southeast Asia are running at full utilization, or if there was a shift of the manufacturing base to Southeast Asia, would you need to roll out further capacity in labs? Lastly, just going back to restructuring of the business. I just want to know whether you've seen a net increase or decrease in employee headcount since year-end 2018. Thank you.
On the price, as I said, the price comment I made is really targeted to two markets inside of food business. As I said to the previous question from our colleague from HSBC, we are not seeing any change in terms of price activities globally from our major competitors. As far as the capacity utilization point, it is a good question, of course. It is not an easy one to answer precisely, because every situation is different. Broadly speaking, for us there is quite a lot of headroom in terms of capacity utilization because it is a function of the number of shifts that you run. You can run one and a half, one point two, one point three. Typically, we do not have operations running at three shifts a day. Capacity is also a function of storage and obviously logistics because we get samples in.
When we look at our capacity, we take these two factors into consideration. To give you an example, we were one of the first mover into Vietnam many years ago, and last year we basically expanded our lab in Vietnam because of these two considerations. Look, we have capacity in our labs, and if we need to increase it, we will do that. It's not that complicated, because at the end of the day our IP is with our processes combined with our people and equipment, and we can move that relatively easily, which we do all the time. Of course, in terms of headcount, we'll report it at the full year, but we continue obviously to invest in growth. We are a growing business, so we are a people business, so our headcount continues to progress, of course.
Thank you. That was very useful.
Thank you.
We have no further questions, so I'll hand back to André now. Thank you.
I know it's a busy morning for everyone today, so thank you very much for being on the Intertek call this morning. Obviously, Denis is going to be available for any question you might have after this call, and have a good day.
Thank you for joining today's conference.