Hello, and welcome to Intertek Half Year Results Conference Call. My name is Amelia, and I'll be your coordinator for today's conference. For the duration of the call, you'll be on listen only. However, you'll have the opportunity to ask questions at the end of the conference. If at any point you require assistance, please press star zero on your telephone keypad, and you'll be connected to an operator. I will now hand over to your host, André Lacroix, to begin today's conference. Thank you.
Good morning to you all, and thanks for joining us following the release of our six-month results this morning. We are pleased with the performance of our H1 results, and we will give you a full briefing on how we see the trends in H1 and importantly, moving forward for H2. We continue to make progress on revenue margin and cash, and we are on track to deliver our 2018 full year targets. I'll start with performance highlights of the first six months of the year, then Ed will take you through the detailed financial results, and I'll come back to give you more insight on strategy and performance moving forward. Let's start with our performance for the first six months of the year. We continue to make progress on revenue margin and cash.
The group generated revenues of GBP 1,348,000,000, up 3.9% at constant currency, down year-on-year by 1.8% at actual currency. Our revenue performance at constant currency was driven by good organic growth of 3.4%, in line with expectations, and by the contribution of recently made acquisitions. The group delivered an operating profit of GBP 226,000,000, up 6.4% at constant currency and up 0.8% at actual currency. We delivered a strong operating margin of 16.8%, up 40 basis points at constant currency and 50 basis points at actual rates. Our adjusted EPS was GBP 0.912, up 6.8% at constant currency and 0.9% at actual currency. We've continued to make progress with a disciplined approach to working capital management, and our working capital was down year-on-year by 6.5%. In line with our new dividend policy that targets a payout ratio of circa 50%, we've announced an interim dividend of GBP 0.319, up 35.7% compared to last year.
Sequentially, we saw an acceleration of organic revenue momentum with 3.4% growth at constant currency, which compares to 2.5% in the second half of 2017 and +1.7% in first six months of 2017. We benefit from broad-based organic revenue growth in our product and trade divisions, growing respectively at 5.7% and 0.7% at constant currency. We saw a marked improvement of our performance in the resource business with organic revenue almost flat at constant currency. As you know, margin management is an important priority for us, and I'm pleased with continuous progress we are making on margin. We delivered an operating margin improvement of 40 basis points at constant currency, benefiting from operating leverage linked to revenue growth, productivity improvement, and from our portfolio strategy. I will now hand over to Ed, who will take you through our financial results in detail.
Thank you, André, and good morning, everyone. I'll now take you through some of the detail underlying our results. In summary for the first half, we delivered good revenue, profit, and EPS growth at constant currency. Margin improved year-on-year at both actual and constant currency, and our cash flow performance was strong. Total revenue growth was 3.9% at constant currency and down 1.8% at actual rates, with FX translation reducing our revenue by 570 basis points, driven by the appreciation of Sterling. Organic revenue at constant rates was up 3.4%. Operating profit at constant rates was up 6.4% to GBP 225.8 million, and margin was up 40 basis points. The FX effect for the half year resulted in operating profit up 0.8% at actual rates.
Net finance costs are GBP 12.2 million, with 10.3% lower than last year through a combination of lower debt and with a stronger Pound reducing our USD interest costs. Overall, fully diluted EPS grew to GBP 0.912, being up 0.9% at actual rates and up 6.8% at constant rates. I'll now take you through the high-level margin performance by division. The group recorded a 50 basis points improvement in operating margin in the first half, increasing to 16.8%. Margin improved by 40 basis points at constant rates, driven by strong margin accretion in products, which was partially offset by the margin performance in trade and resources. The margin also benefited from the stronger portfolio mix, which contributed 20 basis points. We had a further 10 basis points accretive impact from acquisitions completed in the past 18 months.
The group realized a gain from the implementation of a pensionable salary freeze for the U.K. scheme, which was partially offset by other specific costs, resulting in a net gain of 10 basis points. Finally, as expected, FX had a positive 10 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, with working capital down 6.5% year-on-year and reducing as a percentage of revenue year-on-year. Cash flow from operations was GBP 204 million, down GBP 22 million due to two factors. Firstly, a negative FX translation impact on EBITDA of circa GBP 13 million. Secondly, the base effect of our low working capital exit point in December 2017. We invested GBP 46 million in CapEx, up from GBP 34 million in 2017, to expand our market coverage and develop innovative ATIC solutions.
Free cash flow in the period was GBP 91 million. The overall performance in cash flow resulted in a reduction in net debt to GBP 568 million, down GBP 128 million, or 18% versus June last year. Now turning to our financial guidance for full year 2018. The expected net finance costs will be around GBP 28 million-GBP 30 million, with the increase versus previous guidance reflecting the acquisition of Alchemy. The effective tax rate is expected to be in the 25.3%-25.8% range, and minority interests will be circa GBP 20 million. For the models, I've set out the number of shares for the EPS calculation. We are expecting the full-year CapEx to be GBP 130 million-GBP 140 million.
Based on our acquisitions in the first half, the acquisition of Alchemy and the FX effect on our U.S. debt, we have updated the net debt guidance to close the year at between 800 and 850 million GBP. This guidance is stated before any further M&A completions and any material movements in FX. With that, I will hand you back to André.
Thank you, Ed. I would like to start the second part of the presentation today with a brief update on strategy. We provide independent quality assurance services that are mission-critical for our clients. That is exactly what Intertek stands for in the market. We offer ATIC solutions to customers operating in three sectors of the economy, product, trade, and resources. Importantly, we operate a capital-light business model, which combined with entrepreneurial culture, enables us to react quickly to new growth opportunities by following the supply chain of our customers in new geographies. As you know, our approach to value creation for the mid to long term is based on what we call the Intertek Virtuous Economics, global GDP plus organic growth, plus margin accretion, plus strong cash conversion, and importantly, plus disciplined capital allocation.
The compounding effect of our Virtuous Economic earnings model year after year will continue to create shareholder value creation. The growth opportunities in our market are very attractive. The total quality assurance market is worth circa $250 billion. We see strong growth opportunities with existing and new customers, but we also see attractive growth opportunities to get access to the quality assurance work that corporations currently do in-house. Moving forward, our future growth outlook is global GDP plus organic revenue growth in real terms. We expect our product division, which represents 76% of the group's earnings, to grow ahead of global GDP. We expect our trade division, that represent 18% of the group earnings, to grow at a rate broadly similar to GDP through the cycle.
The growth prospect of our resource division, which represents 6% of the group's earnings, are linked to the global growth drivers in the energy sector. The main objective of our 5x5 strategy is to move the center of gravity of the group towards the high growth and high margin sectors in the industry. We are very focused on seizing the exciting growth opportunities in high growth, high margin with our differentiated TQA value proposition, ATIC. Globally, we support the existing and emerging quality assurance needs of our clients through each area of their operations, R&D, raw material sourcing, component suppliers, manufacturers, manufacturing, transportation, distribution, and consumer management.
We spend a lot of time with our clients, each time I meet one of our clients talking about our ATIC opportunities, our clients are really excited about the broad-based approach we take to help them in their day-to-day quality assurance work. Importantly, we focus on innovations to accelerate growth and improve our margin. Our customer-facing innovations are either based on digital solutions or on leading-edge technology. I'll cover later that we get access to industry-leading solutions with our M&A activities that enable us to bring unique IPs and scale these up into the world of Intertek. I'd like to share with you now some of the recent innovations that we've launched based on the innovation work we do in our businesses, which is always starting from customer insights with our 6,000 monthly Net Promoter Score survey.
To help our customers better leverage their customer feedback, we have launched Voice of the Customer. This is a service that uses big data analysis techniques to quickly identify quality issues and deliver actionable product quality improvement for our customers. Another very strong area of growth is sustainability, we've developed a comprehensive suite of services across all areas of the supply chain of our customers, our sustainability approach is industry agnostic. We've continued to expand our Inlight solutions that offer the trusted software-as-a-service platform. Through this unique platform, customers are able to gain great visibility of their supply chain and build resilience in their global operation to reduce risks. You might have noticed that we've rebranded our cargo air business Caleb Brett, to strengthen our service differentiation, leveraging more than 130 years of heritage in the industry where we have pioneered marine surveillance.
Another exciting example of innovations in the trade business is what we've done with ExxonMobil in Mexico, where we've created a mobile laboratory to ensure quality across a fast-growing network and improve the capability and the skills of their staff. Another example of a mobile solution is the unique crop quality toolkit that our experts have developed for small farmers in sub-Saharan Africa, making it easier for all of our clients to get to the highest level of quality. Another very interesting project is what we're doing with Greenlink to minimize the impact on the marine environment. Our experts are providing vital support for the project, ensuring regulatory compliance. In the oil industry, we've developed the only database of near-infrared spectrum analysis of crude oil in the world.
You might remember that in 2017, we launched PipeAware, an industry-leading software solution that allows pipeline asset owners to accept real-time information on their asset inspections through the manufacturing stages. Now, PipeAware 2 has extended its functionality and helps customers track all aspects during the construction phase, too. Let's go back to business and talk about the outlook for the group in 2018. In 2018, we expect to deliver good organic revenue growth at constant currency. We expect our good organic revenue growth to be driven by robust organic growth in our product-related businesses, solid organic growth in our trade-related businesses, stable organic revenue in our resources businesses. From a profitability standpoint, we expect to deliver a moderate margin progression.
We continue to invest in growth with full-year CapEx investments of circa GBP 130 million-GBP 140 million. We are maintaining the full-year guidance we gave you on currency in March. Based on the last three months rate, the average sterling rate applied to the full year results of 2017 would provide a reduction of 400 basis points at the revenue level and 350 basis points at the operating profit level. Let's now discuss the performance and the outlook for each of our divisions. I'm really pleased with the continuous progress we are making in our product businesses, and we delivered an excellent performance in H1. 5.7% organic revenue growth after three years of robust organic growth. All that driven by broad-based revenue growth across business lines and geographies.
We delivered a very strong operating profit of GBP 172 million, up 10.3%. That enabled us to deliver a margin of 21.3%, which is up 70 basis points versus last year. A tremendous performance as we benefit from operating leverage, cost discipline, and pricing power. Let's talk about each of our important business lines in our product business. Our Softlines business delivered solid organic revenue growth as expected, benefiting from supply chain expansion of our clients in new markets, rapid expansion in the footwear sector, and increased demand for chemical testing. Our Hardlines business had a very good first half. We benefit from innovation from our customers leveraging wireless technology and increased demand for chemical testing. I'm really proud about the performance of our Electrical & Network Assurance, where we delivered robust organic revenue growth.
We are benefiting worldwide from electrical appliance innovations that provide better efficiency and connectivity to consumers. Importantly, we are benefiting from increased demand for IoT assurance services, of course, including Cybersecurity. Our Business Assurance continues to go from strength to strength and delivered a strong organic revenue growth driven by ISO standards upgrade, increased focus of corporation on supply chain and risk management. Importantly, increased consumer and government focus on ethical and sustainable supply. Our Building & Construction business, largely focused in the U.S., had a very strong performance. We delivered a robust organic revenue growth in the first six months of the year. We are seeing a growing demand for greener and higher-quality commercial buildings and increased investment in large infrastructure projects in the U.S.
Our Transportation Technologies delivered double-digit revenue growth, driven by the continuous investment of our clients in new models and new fuel-efficient engines. Importantly, the increased scrutiny on emissions. We generated robust organic revenue growth in our food business. The food business is a very exciting sector where we see continuous growth driven by food innovations and increased focus on the safety of the supply chain from both the regulator and consumers. We saw robust organic revenue growth in our Chemical and Pharma business. As expected, we are seeing a growth of activities around the world. Year again, an increased concern from the regulator and the consumer on product safety and traceability. For the full year of 2018, we expect our product-related businesses to deliver robust organic revenue growth. Our trade business delivered a solid performance in line with expectations, an organic revenue growth of 0.7%.
Operating profit was GBP 42 million, slightly down year-on-year. Operating margin of 13.4% was also slightly down year-on-year, driven essentially by country mix. Our Caleb Brett business reported stable revenue performance as expected. We continue to benefit from the global and regional trade structural drivers in all regions except in North America, where we have seen an industry destocking of crude and refined products. Our Government and Trade Services businesses delivered robust organic revenue growth driven by volume growth of existing contracts as well as the win of several new contracts. Our AgriWorld business was in line with expectations, reporting a revenue performance slightly below last year as we saw a low level of export activities due to a baseline effect in some of the largest markets that benefited from strong trading activities in 2016 and 2017.
For the full year, we continue to expect our trade-related businesses to deliver solid organic revenue growth. I'm really pleased with the performance of our resource business that delivered an improved trading performance following several years of revenue decline. Our revenue was broadly in line with last year, slightly down 0.7% versus last year. Operating margin was 5.5%, slightly down versus last year due to contract mix. The revenue from CapEx inspections was lower than last year. Importantly, we benefit from several level of CapEx inspection activities, i.e., the volume that we are seeing from our clients has stabilized, while we continue to see price pressure in the market, again as expected. Good news on the OpEx maintenance service where our revenue is now stable.
We continue to see an improved level of demand for testing activities in the mineral business that deliver a robust organic growth performance, the best performance for many years. For the full year, we expect our resource businesses to deliver a stable organic revenue performance in 2018. Our M&A strategy is focused on the acquisitions of leading and innovative solutions that are scalable across Intertek. In the last 18 months, we've made several acquisition and attractive growth in margin sectors, as Ed has explained, these acquisitions have contributed to the progress we are making on margin. Last week, we announced that we've entered into an agreement to acquire Alchemy, a leading software and solution provider, which will expand our global assurance offering into People Assurance services.
In case some of you couldn't join our webcast last Friday, I just like to recap the key features of the acquisition. Alchemy focus on frontline staff in industries with high turnover, where traditional classroom training is too costly and not efficient. Today, their integrated solutions impact more than 3 million frontline workers at 50,000 locations worldwide. The demand is growing for solutions that identify, monitor, and efficiently close skills gaps among frontline employees. Alchemy gives us further exposure to the highly attractive food industry, where demand for quality assurance is stronger than ever, driven by increased regulations and increased consumer expectations. Frankly, where operational and compliance consistency are an ongoing challenge for companies. Alchemy is a high-quality business with scalable solutions that can be rolled out across many different industries and geographies inside Intertek.
That will accelerate the growth momentum of our capital light and high margin assurance business. The transaction is value accretive for our shareholders. On both a Billing and IFRS revenue basis, we expect strong growth with a 5-year CAGR of 20%. Alchemy operates a high margin business model and has got strong cash conversion, above 100%. Billing EPS will be accretive in year 1, and we expect Alchemy's return on invested capital to exceed the group wide rate in year 5. A few concluding remarks before our Q&A session. In H1, we have continued to make progress on revenue, margin, cash, and returns with our increased dividend of 35.7% compared to last year. We offer our clients a differentiated value proposition that provides a superior service. We are uniquely positioned to deliver GDP plus organic revenue growth in real terms.
We will continue to pursue disciplined approach to margin and cash management. M&A will continue to focus on attractive growth and margin prospects. In summary, we are on track on our good to great journey, making good progress both on performance and strategy. We will now answer any questions you might have.
If you would like to ask a question, please press star 1 on your telephone keypad. If you change your mind and you wish to withdraw your question, please press star 2. You will be advised when to ask your question. We have some questions coming through now. The first one comes from the line of Rory McKenzie from UBS. Please go ahead.
Good morning all. Thanks for taking my questions. Just 2 quick ones first. Can you just clarify the working day impacts towards the end of H1 so we understand the growth trends and whether that was different across the divisions? Secondly, can you discuss the margin drivers in Trade a bit more? Still a negative incremental margin in H1. What should we expect there H2 and the longer term, please?
Okay. Thanks. I'm glad you're asking the questions on working days because I can imagine what you're thinking. Look, May and June had one working day less than last year, which basically reduced our organic growth rate, as you would expect in the trading days sensitive businesses. If you look at sequentially, right, our product and resource business were impacted by one less trading day, but our trade was better than January, April. Overall, this is as we expected. We are not worried about two months. We look at the trends on a much longer term basis. This is bang in line with what we were expecting in our own forecast. As far as the trading performance in our trade business, let me just frame it a little bit.
You might remember that we had a very good performance in the first half of last year where we grew organic growth by 4.5%. Our margin was 14%. That was a really strong performance. We basically saw a continuous strong performance in GTS this year. We saw a lower momentum in the U.S. that has obviously impacted the Caleb Brett business. The U.S. is one of our strongest markets where we've got really good margin. Our Agri business, after three years of consecutive high single digits revenue growth, was basically competing against a very tough base. We saw crops being weaker in three markets that are a lot for us. Basically, you have a high base to compare you against in terms of both revenue growth and margin, and you have a very strong margin in the first half last year.
If you look at the margin of 13.4% in H1, that is bang in line with H2 last year. We are not seeing any deterioration sequentially.
Okay, great. That's very helpful. Thank you.
You are welcome.
I wanted to just, if I can, one more, sorry, dig into that ongoing productivity improvement.
Yeah.
You mentioned you have these monthly performance reviews, your top businesses, country benchmarking. I'm sure they're all much improved compared to when you first started.
Yeah.
Could you give a sense of the range or the spectrum still in there? We're trying to get a sense of how much further there's upside to come out of all these businesses, and maybe which ones are still underperforming, do you think?
Look, I think what's happening when you manage a business that is multi-site, multi-country, the best get better, the weaker gets slightly better, but the benchmark moves up. This is, if you want, the spirit of performance management. We believe we can always do better. Frankly speaking, the new staff are defining new best-in-class benchmarks because innovations in terms of processes and productivity, and equipment help us also to make progress. While I wouldn't expect the type of year-on-year increase we did in 2017 moving forward, I remain of the view that we still have some opportunities to improve margin. You saw it in the first half, the team did a very good job in that view, and there is more to come. I wouldn't say that we are running out of steam. There is still juice in the lemon.
Okay. Maybe it's time to install Alchemy. Thank you very much.
The next question comes through the line, Vatsal Gamit from HSBC. Please go ahead.
Hi. Thanks for taking the question. If I may, given the noise around trade wars, have you spoken with your customers, suppliers, what might be the potential sensitivity? Have you run any scenario analysis around that? If you could share some thoughts on that subject, it will be quite helpful. Second one on the incremental growth commentary you made about Q4. One trading day in two months is quite a meaningful impact. If I look at the four-month statement, you were running at an organic growth of 4%. One trading day in two months is about 2%+ impact, if not more. Are you suggesting that the underlying growth actually improved in the last two months?
Okay. Let me just take the last question first because it is relatively easy from a numbers standpoint. We reported a 4% organic growth at the end of April for the first four months, and there was no trading day impact, which in my view, is a good representation of the underlying trend of the business. We reported 3.4% organic growth for the first six months, and the reason why we moved from 4% to 3.4% is because we had one less trading day in May and June, which basically took 2% of your base in that period and reduced mathematically your organic growth from 4% to 3.4%. That said, just for clarity, there is also one less trading day in H1 compared to last year. I am not worried about it. We should not read the trends on two months basis.
In my view, 3.4% organic growth is sequential improvement on the previous two semesters, and we will continue to focus on driving organic growth moving forward. Having said that, by always being very careful that we do that without reducing prices, i.e., leveraging our pricing power. I am not worried about organic growth. We are in a good position. I think your first question was about the global trade measures?
Yeah. Trade wars, basically.
Great. Okay.
Yeah.
Yeah. Thank you for asking that question. Of course, we are monitoring the situations very carefully. Our view is that changes in tariff around the world will not change the structural growth drivers that basically enable us to grow businesses around the world. The demand for products today is truly global, and we know that global trade is around 60% of GDP. Would there be tariff changes between countries? It will not change the global demand for products. It's a market force-driven supply model around the world, and what will happen, if that would be material, you might see some structural change in the supply chains. I would say that we are very well positioned with our global network to be very flexible and very entrepreneurial, and for the supply chain of our clients, wherever they want to go, if they believe it's economic for them.
We've done that in the past, and we'll continue to do that. I think we are obviously mindful of the news flow, and we continue to monitor it. Just to give you a sense of the quantum based on our analysis, the measure announced today by the various players represent around 0.2% of the global GDP. We are really in a situation where we need to continue to monitor it. I'm not worried about structurally moving forward. Frankly speaking, what has been announced today is not of great meaning for the world.
Okay. Understood. Thank you. Thank you very much.
We have the next question coming through the line of Lukas Serhany from Deutsche Bank. Please go ahead.
Yeah. Morning, everybody. It's actually Tom Sykes at Deutsche Bank. Thank you.
Thanks, Tom.
Just on the cash conversion in H2, could you maybe just go through where you're actually spending the increases in CapEx? Whether we should think about a slightly higher level of CapEx than on an ongoing basis, that you're only giving a view for one year, but how thinking about that, and when, if at all, will we actually see it through the depreciation line? Because obviously that's come down as a % of sales again, please.
Thanks, Tom, for asking the question. Important question. As you know, we've always guided for CapEx being circa 5% of our revenue. You're absolutely right. In the last years, we have not spent the 5%. The reason why we have not spent the 5% is because our colleagues were not needing the investment. I think, as you've heard us talk about the strategy over the last few years, we are increasing our focus on innovation. We believe that our value proposition is clear in the eyes of our customers, and we believe that there is a lot of innovation that can be done and involving technology.
If you look at a good example that I talked about today, our Inlight risk management solution, which is basically a technology-enabled platform that we build for our customers and that is truly scalable, is an important investment because it helps our clients to basically monitor, track, and quantify their risk and take a risk-based approach. If you look at what we are doing in oil and gas, PipeAware is a great example of where our team are investing in technology to develop solutions that are software based to enable their clients. I talked about another interesting innovation last time around InterpreX, which is an algorithm-based simulation software. You're absolutely right. We are investing not only in replacement CapEx, but also in innovations, and it's important moving forward. We will guide accordingly year by year.
Okay. It looks like you're probably going to spend about double what in the second half that which you spent in the first half. Where exactly is the step up in CapEx and investment actually going into in the second half of the year, please?
We always have a bit of a backloaded CapEx investment. That's the way.
Yeah
You start the year with a budget that is approved in January, February, people start planning for it. In the second half, we will invest in products. I talked about Assurance. There is another very interesting investment for us, which is i2Q, which is again, a software-enabled platform for inspection that we are now scaling up across the world. We are doing a lot of work with our teams on data intelligence. It would be going into product, trade and resources, supporting organic growth as well as CapEx investment to replace CapEx where it needs to be replaced. Let's not forget IT, which is a continuous investment. We invest in obviously back office, frontline, but also security.
Okay. Thank you. Just a final question on that for me. Does it include any capitalized staff costs, personnel costs in there? Thinking maybe in the software side, but will there be other parts there's any capitalized staff costs, please?
Not of any significance, no. We have a little around software-
Software, yeah
staff building software. It's just huge, but it's not material.
Okay. Thanks very much. Thank you.
Thanks, Tom.
Here we have the next question coming through the line of Steve Woolf from Numis Securities. Please go ahead.
Hi, guys. Does any of that CapEx end up going into Alchemy at all? Also just to follow up on that, I think last week you sort of mentioned that you would give a little bit more guidance on sort of forecasting on Alchemy going forward. I guess, you mentioned on billings basis of the accretion then working through that back on a revenues basis. I guess obviously the contribution to this year is rather minimal given the timing of closure. Then the contribution on a 12-month basis on a revenue basis, I guess again, the contribution on that side too, given the scale of the underlying business is still relatively small to down to a couple of percent on an EBITDA basis. Just your thoughts on that level of calculation, please.
First, the CapEx we talked about today does not include any additional investment in Alchemy. We still don't own the business, as you know, and then obviously we'll do that when we acquire the business fully. As far as the guidance is concerned, if you've not spent time with Ed and Denny, we're very happy to do that, to take you through step by step to try to give an explanation of the accounting implications in the first years of the acquisitions. We are only guiding this time around for 2018, and as you know, for 2018, Alchemy is going to be EBITDA for the group. There will be a bit of additional finance costs, which Ed has reflected in his guidance, and you've seen the debt impact. We'll start guiding for 2019 when we announce our results in March, as we always do.
Sure. Okay. Thanks, guys.
Thank you.
We have the next question coming through the line of Aymeric Poulain from Kepler Cheuvreux. Please go ahead.
Thank you. A follow-up on this Alchemy acquisition. Is that right, that it would be mostly impacting the product division? Or will it be allocated to the whole of the division? Bearing in mind that, I think last week you mentioned also some potential internal synergies, such as saving on your training needs at Intertek. On that, do you have a number in terms of the potential cost synergies that you could expect next year from Alchemy? Bearing in mind you said it also can be deployed quite fast. That's the first line of question. The second question is on your resource guidance for stabilization of the organic growth. Could you remind us of the current split of CapEx, OpEx, oil pipeline, OpEx inspection, and minerals, to get a sense of the moving parts? I think you mentioned strong minerals continuing into the second half.
Just to get a sense of when we should expect CapEx to improve more significantly, please. Thank you.
Okay. Great, thanks. As far as Alchemy is concerned, it is a People Assurance solution that is industry agnostic, and we will obviously report the Alchemy performance inside the product divisions. Why? Because this is where we have Business Assurance, which is industry agnostic, and People Assurance will basically add People Assurance to systems assurance into our BA business. That's basically where it will be reported moving forward. As far as the internal synergies, you're right that there are some interesting internal synergies in terms of applying Alchemy to our own internal training. As I mentioned in the call last week, there will not be too much cost synergy because we are just starting with our own development for a digital-based group-wide training platform. We've not really invested too much money.
I think what it will do, it will accelerate the development process, and will certainly make it much more cost efficient for us to do that. Very exciting. As far as resource is concerned, the large majority of our revenues is CapEx inspections, and then after that it's minerals and OpEx. We don't disclose the percentages. Getting CapEx inspections to grow again is very important for resources because it's a large majority. As I said, we are seeing a stable level of volume, which is good. Pricing continue to be a negative driver as expected, because we are basically exiting a cycle where our clients had to repair the balance sheet and margins and had to basically negotiate lower prices. We believe that the right sequence is volume should start growing again, and after that you can get some pricing.
We are pleased to see sequential improvement in the resource business.
Thank you.
You're welcome.
As we are waiting for more questions, please be reminded, if you want to ask a question, it's star one on the keypads now.
Okay, it looks like we don't have any more questions. Thanks for being on the call this morning. I know it's a busy day. Obviously Denis and Ed will be available for any more questions that you have. Feel free to give us a call. Thanks everyone, and have a good day.
Thank you for joining today's call. You may now disconnect your handsets.