Hello, welcome to the Intertek May 2019 trading update conference call. My name is Rosie, and I'll be your coordinator for today's conference. For the duration of the call, you'll be on listen only. However, at the end of the presentation, you'll have the opportunity to ask questions. If you need assistance at any time, please press star zero on your telephone keypad, and you'll be connected to an operator. I will now hand you over to André Lacroix to begin today's conference. Thank you.
Good morning to you all, thanks for joining us on the call following the release of our trading statement a few minutes ago. I have with me Ralph, our CFO, and Denis from investor relations team. Today, I'd like to give you an update on the group trading performance in the first four months of the year, importantly, discuss the outlook for the rest of 2019. There are essentially three main messages in the call today. First, we had a good start to the year in line with expectations, we are on track to deliver our full-year revenue margin and cash target. Second, we delivered a broad-based organic growth across our three divisions as we saw organic growth in Product, Trade, and Resources. You all know this is the first time that we are seeing this positive trend for many years.
Third, our acquisition in attractive growth and margin sectors are performing very well, adding 200 basis points to our revenue growth. Let me start with the highlights of the first four months of trading in 2019. The group revenues were GBP 924.3 million, an increase of 5.3% at constant currency and 7.3% at actual rates. Our group organic revenue growth at 3.3% at constant currency was in line with our expectations, the acquisitions that we made since January 2018 delivered 2% revenue growth. Our disciplined approach to cost and margin management remains firmly in place in each part of our group around the world. We continue to be very focused on cash conversion and disciplined capital allocation. All the comments I will make are at constant currency. Before sharing the trends we see in our Product, Trade, and Resources division, let me cover guidance and currency.
As I said a few minutes ago, the group is on track to deliver its 2019 target of good organic revenue growth at constant currency with moderate margin expansion and strong cash conversion. We expect good organic revenue growth at constant rates in each of our three divisions, Product, Trade, and Resources. From a profitability standpoint, we expect to deliver moderate margin expansion, leveraging our portfolio strengths, our pricing power, and our systemic approach to performance management. We continue to expect to deliver strong cash conversion. We are investing in growth and expect our full-year CapEx investment to be circa GBP 130 million-GBP 140 million. We continue to expect to close the year with a net debt of circa GBP 670 million-GBP 700 million. This is of course pre the impact of IFRS 16, before any additional M&A activities and based on no further material movement in Forex.
In terms of Forex, we are maintaining the full-year guidance on currency we communicated a few weeks ago in March. Based on the year-to-date performance and the average Forex rate in the last three months applied for the remainder of the year, Forex will be broadly neutral for the full-year outlook, both in revenue and earnings level. Let's now move to the divisional reviews. I would like to give you an update on each of the divisions in the first four months of the year, starting with products which perform well in line with expectations. Our product-related business delivered a robust trading performance with a revenue growth of 5.5%, driven by an organic revenue growth of 2.6% and by the benefit of the acquisitions made recently. We are competing against a high base last year when we delivered a 6.6% organic revenue growth in the January-April period.
Indeed, in 2018, we benefited from two positive regulatory changes in Business Assurance and chemical pharma, as well as from the delay of large U.S. building construction infrastructure projects from 2017 into 2018. Moreover, our business with Toys"R"Us was still in base during that period. Our softline business delivered solid organic revenue growth, benefiting from supply chain expansion of our clients in new markets, the rapid expansion of the footwear sector, and the increased demand for chemical testing, which is a very profitable segment. I'm pleased with the commercial progress we are making in our softline divisions based on the AP discussions we are having with existing and new clients. Our full-year guidance of solid organic growth for softlines remains unchanged.
Our hardline business reported solid organic revenue growth driven by innovation from our clients, leveraging technology to make toys smarter, increased demand for chemical testing also, and innovative inspection technology. We are making good progress on business development activities with our clients. Our full-year guidance for hardline of good organic growth remains unchanged. We delivered robust organic revenue growth in electrical and connected world. We are benefiting from electrical appliances innovations to provide better efficiency and connectivity in people's home, offices, and operations around the world. Increased demand for IoT assurance services, including, of course, cybersecurity and data safety. Our full-year guidance of robust organic growth for electrical and connected world remain unchanged. Our Business Assurance business delivered good organic revenue growth.
We are competing versus a high base last year when we benefited from the increased demand from our clients for ISO audits to meet the Q3 2018 deadlines of standards upgrade. Our full-year guidance of robust organic growth for Business Assurance remains unchanged. We are seeing a strong demand for our non-ISO assurance solutions as we are benefiting from the increased focus of corporations on supply chain and risk management. Importantly, increased consumer media and government focus on ethical and sustainable supply. In our building construction business, we are competing against a high base in 2018. We have delivered a solid organic growth as expected. You might recall that the inspection activities of large U.S. new project in 2017 were soft following the presidential election, and that in 2018 we benefited from the fast ramp-up of several projects that had been delayed.
We are seeing good traction with our business development activities and our full year guidance of good organic growth for business building construction remains unchanged. In our transportation technology business, we delivered robust organic revenue growth driven by continued investment of our clients in new models and new fuel-efficient engines, hybrid and battery technology being really fast-growing these days. Importantly, we are benefiting from increased scrutiny on emissions. As you know, car manufacturers now need to test and prove their claims on the road. Our full year guidance of robust organic growth for transportation business in 2019 is unchanged. We generated robust organic revenue growth in our food business, driven by continued food innovation, increased focus on safety of the supply chains, and the growth in food service assurance businesses. Our full year guidance of robust organic growth for food business remains also unchanged.
We saw an organic growth revenue below last year in our chemical and pharma business, as in the first half of 2018, we benefited from a robust growth ahead of our expectations as our clients increased their ATIC activities to meet the July 1st REACH deadline. We are maintaining our full year guidance of solid organic growth for our chemical and pharma business. Our partner activities with our clients is strong, reflecting the growth of SKUs, the expansion of supply base in emerging markets, and increased concern from consumers and regulators on product safety and traceability. For the full year, we expect our product-related businesses, which represent circa 77% of our earnings, to deliver good organic revenue growth.
We are pleased to see an acceleration of our growth rate in our trade business as we've delivered a revenue growth of 6.5%, one of the highest growth numbers we have seen for many years, driven by robust organic growth of 5.3% and the benefits of acquisition. Our Caleb Brett business reported good revenue performance. We continue to benefit from the global and regional trade growth drivers in each part of our business. Our full year guidance of good organic revenue growth for Caleb Brett remains unchanged. Our Government and Trade Services business delivered double-digit organic revenue growth, driven by volume growth with existing contracts and benefiting from the win of several new contracts across many regions. We expect our GTS business to deliver strong organic growth for the full year. Our ID World business reported good organic revenue growth, and we expect this trend to continue for the full year.
The net for the full year, we expect our trade-related businesses, which represent circa 17% of our earnings, to deliver good organic revenue growth. Turning to our resource division, our resource-related business delivered a good trading performance ahead of expectations with an organic revenue growth of 2.9%. We are pleased to see, as expected, an acceleration of the growth momentum in our resource business following the stabilization of revenue we saw in 2018. Our CapEx inspection business reported good organic revenue growth as we start to benefit from the increased investment of our clients in exploration and production infrastructure around the world. We expect our CapEx inspection business to deliver good organic growth in 2019. The demand for OpEx maintenance service remains stable in a competitive environment. We expect this 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 in our various regions. We've delivered a good organic growth performance. Our full year of good organic growth guidance for minerals remains unchanged. Net for the full year. Based on the improvement we are seeing in our CapEx inspection businesses, we expect our resource business to deliver a good organic revenue performance. A few words on M&A. The acquisition made since January 2018 in attractive growth and margin sectors are performing well. In March 2018, we acquired AAS, a leading provider of quality and quantity cargo inspection services in the growing region of the Med. In April 2018, we acquired Proasem, a leading provider laboratory testing and inspection services, consolidating our leadership position in the fast-growing market, Colombia.
In June 2018, we acquired NTA Monitor, a leading network security assurance service provider based in the U.K. and Malaysia, providing end-to-end cybersecurity services to corporations and governments. In August 2018, we acquired Alchemy, a leading provider of SaaS-based people assurance solutions in the food and retail sectors based in North America. In addition, in March 2018, we entered an exclusive agreement with CAPA to run the Automotive Parts Certification program. As always, we'll continue to actively pursue expansion opportunities in attractive growth and margin areas with value-enhancing acquisition. In conclusion, I wanted to share three main messages with you today. First, that we had a good start to the year in line with expectations, and we are on track to deliver our full year revenue, margin, and cash target.
Second, that we delivered a broad-based organic growth across three divisions, product, trade, and resources, which is good news for the group. Third, that our acquisition in attractive growth and margin sectors are performing well and added 200 basis points to our revenue growth. Intertek is going from strength to strength, making progress step by step on our good to great journey with our 5x5 differentiated strategy for growth. We provide a superior customer service with our unique Total Quality Assurance value proposition that is helping our clients mitigate quality and safety risk in the increasingly complex operating environments. We are well positioned to deliver GDP plus organic revenue growth in real terms based on the attractive structural growth drivers we see. Our product divisions, which represent 77% of our group earnings, will continue to benefit from GDP-agnostic growth drivers.
Our trade division, which represents 17% of the group earnings, will continue to benefit from global and regional trade growth. Our resource sectors, which represent 6% of the group earnings, will benefit from the global growth drivers in the total energy sector. Moving forward, we'll seize these attractive organic and inorganic growth opportunities to deliver sustainable growth for all stakeholders. Thank you very much for your time. We'll be happy to answer any question you might have.
If you would like to ask your 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 Edward Stanley from Morgan Stanley. Please go ahead.
Morning, André. I've got a couple, please. On the chemical part of products, can you give a bit more information on how big, I guess, in basis points that impact was to the products division, that comp effect on REACH, and whether that will, I guess, annualize from June and go back to normal? Secondly, on softlines, you say you're doing very well in footwear and chemical testing. I just wonder which other segments are slightly offsetting that growth to come out as solid. Thirdly, on the CapEx point, you give your guidance and I just wonder, given quite a few changes in the mix of growth in the business, what you're thinking in terms of CapEx allocation and which focus areas you have for this year in CapEx.
Okay. Let me just take each question at a time. First, chemical and pharma is obviously an important business for us. As you know, we do not disclose the relative size of the business line inside of products. Based on previous disclosures, you can get a sense. We operate chemical and pharma operations in Europe, in the U.S. We also have a very strong assurance business in the U.S. called Chemtox, which is a leading assurance provider in regulatory and health and safety. REACH was a major change for importers of chemical materials. This deadline of May 31st last year was a bit of a rush for lots of corporations. We saw, as you would recall, a very good performance of our business in the first half of last year. That's why, this year, the business is slightly below last year.
We believe that this is a base effect, and based on the run rate that we have, the pattern of activities that we see, the orders, discussion we have with our clients, the base will get easier in the second half. As far as softline is concerned, the reason why I'm singling out chemical, because this is an important growing demand for our clients. This is very profitable, and we are quite strong around the world, given our strength in softlines and hardlines. It doesn't mean that physical testing is not growing. I was just trying to say this is one of the fastest-growing with footwear. Physical testing continues to grow, and as you know, when I say solid, there is a bit of a range, so don't read the wrong insight there.
As far as CapEx is concerned, look, we are very focused in looking at attractive growth and margin sectors. You've seen, we're investing a lot in technology with our SaaS approach. Alchemy is an acquisition we made, but we're also doing a lot of organic development with our own assurance solution that are SaaS delivered. Inlight, for instance, is an area of investments. We are doing the same in terms of global market access. We continue to invest in transportation technology. The demand for hybrid and electrical vehicles is really strong. You see the data for the automotive sectors. OEMs have got to accelerate their R&D investment, and this is a big area for us. The other area where we are investing quite a bit is, as you would expect, the connected world, helping our clients to manage the complexity.
These are some of the areas, but we're also investing in Caleb Brett and GTS behind some of the growth opportunities. It's really focused and really in line with our strategy to really allocate our capital to the good growth, good margin sectors.
Thank you.
You're welcome.
The next question comes from the line of Paul Sullivan from Barclays. Please go ahead.
Yeah. Good morning, André.
Hey, Paul.
Two quick ones from me. Firstly, would you like to comment on the obvious U.S.-China trade escalations? With some surveys pointing to up to 40% of U.S. manufacturers looking to shift production out of China, do you think that will trigger a restructuring of your network as you shift your resources around? When it comes to sort of organic growth confidence for the full year, how confident are you that you'll see an acceleration in organic growth from the 3.3% from here? Thank you.
Thanks, Paul. Let me start with the second question. We are maintaining our guidance for the full year in terms of organic growth, and if we were not confident, we wouldn't do that. As you know, we had a very high base of 6.6% in our products in the first four months of the year, 4% for the group. That's basically a baseline effect, which is driven by four business lines that I explained, and they are really time-bound, and we are confident in our full-year guidance. As far as the U.S. and China trade discussions, we've talked about this topic in these calls in the past. Let me just reframe for everyone some of the key numbers here. The total value of the imports subject to tariffs today account for 0.5% of the global GDP.
That's one thing that we all need to have in mind. The second thing, I would say, is that China accounts for 17% of the U.S. trade, and the U.S. accounts for 16% of the China trade, which means that, as we all expect, China and the U.S. have got multiple trading partners. Then an interesting stat, that the sum of the value of the Chinese imports into the U.S. and the U.S. imports into China is 1.4% of global trade. I just wanted to frame that so that we all have the numbers in mind of what these discussions are covering in terms of basically size of global GDP. What is it that we are seeing, Paul?
As I said in a previous call, I've got a task force that I lead personally with all my key regional and business line leaders to basically make sure that if our clients want to change a production location from China to Bangladesh, to Cambodia, to Thailand, to India, we are there to help them. There are interesting dynamics here. First of all, as you know, it's not a new thing that corporations are putting on the table trying to look at how they can optimize the manufacturing footprint. We've seen corporations over the last 10 years doing so, moving low added value activities from China to other parts of the world. We have basically helped them to move their supply chain. That's what we do. Anticipating where the supply chain of our clients is going is really part of our role.
When we do that, there is obviously some interesting work for us because we can help with assurance. To your point, because we have a global network, we are obviously well-positioned to do so. That would be the first thing that I would say. The second thing I would say is, there is no question that changing production locations for any brand that manufactures in China is not an easy decision. It's, as a matter of fact, quite a high-risk decision because you have a production system that works in China. You've got your tier 1, tier 2, tier 3 suppliers. You've got the logistics. It's quite complex. I'm not saying that there will not be some additional change, but so far, we've not seen a rush of corporations say, "You know what? This is going too far.
We're going to move. When you ask people, are they thinking about it? Are they monitoring what's happening? Of course. We are doing that with them. The final thing I would say, Paul, and I just came back from China, and I was visiting some of the production locations around the country. One should not forget that the manufacturing level of excellence in China is very high. This is something that brands have to take into consideration because the quality output, the discipline of operational delivery in the China factories in many categories is really high. What am I saying? Look, we are all monitoring the situations. This is not a new trend. We've done that before. If our clients want to move, we are ready. So far it's been pretty, I would say, quiet in terms of companies making the decision.
That's the update I was going to give you and your colleagues because I realize this is an important question for everyone.
Thank you. That's very clear. Thank you very much.
The next question comes from the line of Will Kirkness from Jefferies. Please go ahead.
Morning. Thanks. I've got a couple of questions, please.
Morning, Will.
Just wondered, in your trade business, whether you saw any benefit from IMO 2020, to that good organic growth in Caleb Brett. Secondly, if you could just talk about the OpEx business in Resources being stable. Is that trend consistent in both the volume and the pricing metrics? Thanks.
On the second question. Yes. On the first question, look, IMO is an interesting opportunity. It's relatively small, I would say, in the scheme of things. Caleb Brett, as you know, is the global leader in terms of quality and quantity inspection and testing around the world. It's going to start, but it's not really the driver of the performance on the global scale. It's positive, but it's not game changing for us.
Okay. Thank you.
The next question comes from the line of Alex Smith from JPMorgan. Please go ahead.
Morning, André. Two as well, please.
Morning.
Firstly on Alchemy, I wonder if you can just comment how it's been performing over the first four months of the year. If you could comment on preparations to expand that business outside North America, that would be interesting. Secondly, with regard to M&A, it's been a little while since you last did a deal. I wonder if you'd comment on the availability of appropriate acquisitions and the sort of price expectations you're coming up against. Thank you.
Let me start with second question. On M&A, as you know, we are really disciplined. If we have not announced a deal, it doesn't mean that we've not looked at transactions. We do that all the time. I've got a great team led by Julia here in London, we are obviously in contact with lots of companies around the world. This is basically what's happening with our pipeline. We have not basically seen a transaction that we would like to make happen. The deal flow, to put it like this, continues to be very attractive. As far as Alchemy is concerned, look, I spend quite a lot of time with clients, as you all know, in all my discussions with retailers and food companies, because today, Alchemy is essentially in the food sectors and the multi-site sectors. People say, "You know what?
People assurance is the next frontier." Corporations have spent a lot of times over the last two or three decades to look at processes, to look at engineering, to look at factories, to look at CapEx. They've done a lot of work in terms of testing, inspection, certifications. We've seen a growth in system assurance. Where corporations really lack focus is, do they really understand the effectiveness of their colleagues around the world? Doesn't matter if it's the frontline employees of a factory in Michigan or if it's the staff of Burger King restaurants at the Toronto airport.
Corporations are really struggling to understand how disciplined, focused, motivated, engaged the frontline employees are, how these employees, where they see a high turnover, are basically delivering or not delivering their brand standards, therefore creating quality issues that make the headlines and create obviously a lot of problems, reputation, and shareholder value for corporations. There is no question that we are onto something big with our Inlight. Every client I talk to, doesn't matter if it's in North America, in Asia or in Europe, see it. We had a conference in the food sector a few months ago, some of the European retailers said, "Wow, we didn't know that that would exist." You heard me talk about it in the past.
If I had Alchemy when I was running Burger King International, my life would have been very different and certainly my results would have been much better. Look, the market is there. As far as the progress we are making, look, it's a step-by-step journey. We are basically scaling up the business based on our North America platform. It doesn't mean that we don't reach out to clients out of North America because a lot of our North American clients have got global operations. That's part of the expansion. I want us to stay focused on food and multi-site for now because I think that's why we bought the business. That's where we have the winning solutions, that's where we have the contacts, and that's where we have the delivery platform to do so. There is no question over time, we'll be able to extend that.
Look, there is no question that we are onto something very significant here. From my perspective, in the world of Total Quality Assurance, which is, as you know, a risk-based assurance to help clients mitigate the product quality, safety, and sustainability, in addition to assurance of processes, people assurance is the next frontier for corporations. I'm very excited.
Excellent. Thank you, André.
The next question comes from the line of Emeric Pellerin from Kepler Cheuvreux. Please go ahead.
Yes. Good morning. Thank you very much.
Morning, Emeric.
The question is a follow-up actually on Alchemy progress. Could you quantify the contribution of Alchemy to the M&A contribution, so to the 2% in Q1, and the contribution of the other business you've acquired also? Just to understand the size of the contribution and the progress, obviously, that you had in terms of growth rate at Alchemy. That's the first question. Secondly, looking at the oil CapEx inflection on the resource side that you mentioned and the uplift of guidance for organic growth this year, what do you actually see in terms of outlook for Q4 in particular? As we move into 2020, how big is the upswing that we could anticipate as an exit rate for that segment? Is also in terms of the margin traction, how significant could it be to the outlook for margin at Intertek? Thank you.
Thanks, Emeric. Look, in terms of acquisition, when we make an acquisition, we typically do a pretty specific disclosure on the size of the business and the type of revenue. That, if you want, is public information. We do not obviously report the revenue performance of individual business lines, nor individual acquisitions. It will be a lot of details. What I can say is that we are very pleased with Alchemy. We are on track. As you know, we've given five-year guidance when we made the acquisition in the summer of last year. We are really pleased on where we are, and that's the only thing I would say. As far as resources is concerned, it's a very good question, Emeric. Thanks for asking that. There is no question that our resource business has been through an unprecedented downturn.
If you really think about it, the last time we saw growth with our Moody inspection business was 2013. It's been one, two, three, four, five years of consecutive revenue decline and margin decline. If you really think about the peak to trough, and 2018 being our trough year, I mean, we basically have seen almost a third of revenue reduction through these five years of unprecedented downturn, and the profitability has been slightly more than half. We are really excited about the fact that there is light at the end of the tunnel, and I would say there is sunshine because we are seeing growth in the industry. What we are seeing is several things. The oil and gas clients of ours are basically expecting to invest around 5%-6% more in CapEx this year. That's, if you want, what the consensus is.
It doesn't mean that's the growth we're going to see, because we are, if you want, highly technology investment linked in terms of inspections, because we tend to inspect the really complex infrastructure equipment they put in their businesses. We tend to be in the latter phase of the infrastructure project. We are seeing some growth, as I talked in the call today, and that's really good news. My sense is the oil and gas companies have a much better financial performance behind them now after an unprecedented downturn. They realize that they need to invest in growth. They need to build capacity because demand for energy is growing. What's interesting moving forward is it's not going to be just your traditional oil and gas investment in terms of infrastructure inspection opportunity for us. It's also going to be renewable chemical power plants.
Because the oil and gas clients, and we see that with our ATIC discussions, are really saying, "You know what? We are not oil and gas companies. We are energy company." The way I see the industry is moving to what I call total energy, where in our ATIC discussions with all the oil and gas companies, they say, "Look, we need some help in our typical oil and gas infrastructure investments, but what is your capability in renewable? What is your capability in chemical plants? What is your capability in supply, in sustainability? Importantly, what is your capability in AI and making sure that you help us connect the dots?" Because they want to have an end-to-end approach. Look, it's been a tough five years for the oil and gas industry.
I think we are seeing some better days step by step, and I think the opportunity for us in terms of revenue and margin is significant because in my experience, when you've been through a downturn like we've been, you should be more proactive on the upturn. What it means is that you should not need the same amount of revenue to deliver the same amount of profit. That's what I would say to your question. Thanks, Emeric.
Thank you.
The next question comes from the line of Rajesh Kumar from HSBC. Please go ahead.
Hi. Good morning. Just reflecting on your earlier commentary on the U.S.-China trade, are you suggesting that your customers have actually not started shifting manufacturing base on the ground or having discussions with you where to move? Or is it just too early in the process for them to know?
Exactly right. Thanks for the question. What I was saying is that, look, our clients have been moving production from China to other parts of their supply chain around the world, and we've been supporting them and obviously providing assurance services to help them and supporting them at the other end. At the moment, what we see with our clients is they are looking at the situations because making a decision to change the supply base from China to another country is a very important decision. There is CapEx, there is quality, there is system issues, and they are basically monitoring the situations. That's what we are seeing. I'm not saying it's not going to happen. I'm saying I'm not seeing it happen for now.
If the process starts, say, in the next couple of years, how well prepared do you think you are in terms of availability of labor, capacity, subcontractors?
I mean, look, anticipating where our clients take their supply chain is a very important focus area for us strategically. Operationally, we've done that for decades, and we do that every single day, because it's not only about China. There are a lot of companies changing supply chain from time to time. We have, obviously, the surveillance and monitoring in place, as I talked about. I've got a task force that I personally lead to make sure that we provide our clients with the ultimate support they need. We'll be very happy to help our clients because frankly speaking, it's an opportunity for us, because we are very good at it and we can use this opportunity to obviously offer a global market assurance solution, risk assessments. I mean, this is positive for Intertek. We are there to help our clients if they want to do so.
Just in terms of the margin differential, not the exact numbers, but in terms of order of magnitude, suppose it starts moving to Southeast Asia from China. Do you see a potential margin accretion opportunity or a dilution risk?
Look, we operate with more than 300,000 clients around the world. How could you expect me to make a statement on potential margin opportunity if you got a few hundred clients moving supply base from one place to the other? Look, our business is very diversified, and we are very focused on margin accretive opportunities, assurance solutions that are margin accretive. I'm not worried at all.
Okay. Thank you.
The next question comes from the line of George Gregory from Exane. Please go ahead.
Good morning.
Morning, George.
Good morning, André. Just a couple from me, please. Firstly, on hard lines, I noted in this statement that you delivered solid growth across your main markets. Does that reference anything in your smaller markets or does that growth rate apply to hard lines in total? Secondly, just on Alchemy, are your full year expectations for the impact of Alchemy on the group margin unchanged, please? Has anything changed there? Thanks.
Thanks, George. Yeah, on the second question, we are not changing our assumptions or guidance on the impact of Alchemy on the group margin. As far as hard line is concerned, look, our hard line business is highly concentrated in a few markets. That's why these markets represent 90% of our business. That's why I scripted it like this, but it's across the board.
Okay, thank you.
You're welcome.
The next question comes from the line of Tom Sykes from Deutsche Bank. Please go ahead. Hello, Tom, your line is now open. Please go ahead with your question.
Morning, everybody. Sorry, just following up on.
Morning, Tom.
On the products business. Have you seen any actual increase in frequency in tests at all from U.S. brands who are a little bit worried that people may try to reduce quality as tariffs have come through? Also, just the run rate of the products business as you sort of, events of months 3 and 4 in the 4-month period, was that at all a little bit faster? Presumably there was a bit of sort of negative catch up with early pull through of product at the beginning of the year. Also, just your experience when you have moved business abroad, sorry, out of China, say, to Southeast Asia. Have you seen an increase in frequency of tests when that initially happens, please?
Thanks, Tom. Look, we're going to take them one at a time. We've not seen any change of, if you want, testing protocol for brands that are manufacturing in China. As you know, brands take their quality and safety standards very seriously. No change there. Look, on run rate, I would like to be helpful. We are disclosing the first 4 months of the year. All the guidance we give is based on all the analysis you can imagine. I cannot go into monthly data. Sorry for that. I'm sure you appreciate why. As far as when a brand moves manufacturing from one location, let's just say Dalian, to, let's say Vietnam, they would not change their testing protocol because they have a certain level of quality and safety and systemic standards, and they want to have the same.
There is no difference in terms of the amount of work we will do in Dalian versus the amount of work we will do in Ho Chi Minh. What is interesting when we do support our clients to transfer their business from there to there, is they will need some support in terms of rethinking tier 1, tier 2 supply base, rethinking their operating systems, obviously looking at global market access, because sometimes there are different regulations depending on the country where they operate, and looking at also at their distribution systems and their inspection. It does represent a revenue opportunity with what we call assurance solutions, and that is what I was trying to explain. Net, it is positive for us.
Okay, thank you. Would you be able to say where the relative growth of your assurance business in entirety was organically versus the 3% that you have as a group, please?
Sorry. I get your question.
Yeah. Well, no, it is just that obviously you have a percentage of revenue from assurance, so I am just wondering where the growth rate of your assurance-based type business lines is relative to formal product testing or inspection.
Our assurance service is one of the fastest growing service line that we have. We've disclosed our Assurance, Testing, Inspection, and Certification revenue over the last few years, and it continues to do so. Assurance for us is based off industry agnostic solutions, which is what we call DA. Inside DA, you got ISO and non-ISO solutions. Obviously the ISO has got the base effect I talked about. Non-ISO,
Yeah
We see a lot of interest in many areas of the supply chain. Obviously, CSR continues to be a huge growth area, as you can imagine. End-to-end risk assessment with our Inlight SaaS-based solutions continues to be a huge area. Obviously, people assurance is a growth area. Sustainability is a growth area. Global market access is a growth area. To me, the big insight that is underpinning, if you want, our Total Quality Assurance value proposition and ATIC strategy is very simple, is that corporations today do more TIC activities than they've ever done. They need to do more. In terms of assurance, this is an area where corporations are realizing that they need to have end-to-end audits of their processes, skills, and behaviors to complement their TIC activities. What's really attractive for us is the on-top potential.
What is it that corporations today should be doing and not doing? Another good example is cybersecurity. The number of cybersecurity issues around the world, our connected world business in terms of assurance is doing extremely well. Here are a few examples. I hope it's helpful.
Okay. Many thanks, André.
Thank you, Tom.
As a reminder, if you would like to ask a question, please press star one on your telephone keypads now. Thank you. We have no further questions coming through. I will hand the call back to André for any concluding remarks.
Thank you very much to everyone for being on the call. Obviously, we are available if you have any questions. Denis is going to be there for all of you if you have any follow-up questions. Just want to remind everyone, our half year results will be announced on the 1st of August, and we'll have a call as we always do. Thank you very much, and have a good day.
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