Hello, welcome to the Intertek November 2022 Trading Update Call. My name is Laura, and I will be your coordinator for today's event. Please note this call is being recorded, and for the duration of the call, your lines will be on listen- only. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero and you will be connected to an operator. I will now hand you over to your host, André Lacroix, to begin today's conference. Thank you.
Good morning to you all, thanks for joining us on our call this morning. I am with me, Jonathan Timmis , our CFO, and Denis Moreau , our VP of Investor Relations. There are essentially three main points on our call today. In the last four months, we've delivered a robust trading performance at constant currency with a broad-based good like-for-like revenue growth in products and a like-for-like revenue growth acceleration in our trade and resource businesses. For the full year, we are confident that the group will deliver robust like-for-like revenue growth with good earnings growth at constant currency and at actual rate, strong earnings growth and a strong free cash flow. Looking beyond 2022, we'll continue to deliver sustainable growth and value for all stakeholders, seizing the exciting organic and inorganic ATIC opportunities ahead. I'll start our call today answering the most frequently asked questions regarding Intertek.
The first question we get these days is, how is inflation affecting your performance, and how strong is your pricing power to offset inflation? You will recall that we didn't cut costs in 2020. We wanted to keep our ATIC capability intact for our clients and help them resolve the COVID-19 disruptions they were facing in their supply chains. Based on the growth acceleration we saw in the second half of 2021 and in 2022, we are of course investing in OPEX capability. Given the higher than expected inflation in several markets like North America, U.K., Europe and Australia, this is impacting the margin in the current year. Our superiority customer service gives us a strong pricing power. Notwithstanding the good pricing performance we saw this year, we have taken additional pricing in H2 in these markets, which will be beneficial in 2023.
The second question we get these days is, how resilient is your business model in an economic recession? As you know, we are very fortunate at Intertek. We operate a high-quality growth business with excellent fundamentals and intrinsic defensive characteristics. The ATIC Solution we offer are mission critical for our clients to make sure they can continue to operate safely. Our revenue streams are highly diversified, and we offer a broad range of ATIC Solution in 17 industries across more than 100 countries. Importantly, we have built over the years strong and excellent lasting relationship with our clients, benefiting from very high retention rates. I'd like to take a step back and compare Intertek today versus Intertek in 2009.
In 2009, the company delivered a resilient performance with 3.5% like-for-like revenue growth, 16.9% margin, and a 26.5% ROIC. Since then, of course, our portfolio has evolved and became stronger, given the compounding effect of the organic growth we've delivered across our business lines and the investment we've made. Specifically, our high margin product business was 63% of the group revenues in 2021. That compares to 55% in 2010. This position as well to benefit from the high ATIC investment of our clients moving forward in innovation, assurance, and sustainability. Our trade business was 21% of the group revenue in 2021, compared to 32% in 2010.
Our resource business is now 16% of the group revenue, compared to 13% in 2010, and our strong ATIC portfolio in the world of energy will enable us to benefit from the increased CapEx investment of our clients in the oil and gas and renewable sectors. The third question we get is, how are our few Chinese operations performing? We have excellent businesses in China with leading scale positions. The lockdown restrictions had, of course, a significant impact in our China business between March and June, with Shanghai being the most impacted. It has been operating as normal from July onwards, and as expected, our business has rebound quickly, delivering a good like-for-like revenue growth at constant currency in the July-October period.
However, we expect the revenue momentum in our Softlines and Hardlines business to slow in Q4, as some of our North American and European retailers have postponed the launch of new products, as currently they focus on reducing their inventory levels. The fourth question we get is, what is Intertek's M&A strategy and how is our pipeline looking? Our M&A strategy targets investments in attractive growth and margin sectors to augment our organic performance. Since 2014, we have invested circa GBP 1 billion and have acquired businesses that brought new solutions that we have scaled up through our global network or that have expanded our geographic coverage. We've integrated and operationalized investment successfully as evidenced by our excellent ROIC. The recently acquired businesses, SAI Global, JLA Brasil, and Clean Energy, have delivered GBP 120 million of revenue in the first 10 months of 2022.
Over the years, we've built a superior operating platform to deliver attractive returns from acquisitions, and the M&A is critical to our value creation approach moving forward. Our pipeline is very healthy. What is the outlook for operating margin and is there any risk of deterioration, is the other question we get these days. Given the impact of China in H1, the expected divisional mix and the impact of inflation, OpEx capability investments we are making in North America, U.K., Europe and Australia on margin at constant currency in 2022 will be below 2021. As you know, in 2021, we benefited from GBP 10.5 million of additional government subsidies, which means that our margin in 2022 will be slightly below 2021, adjusted for those subsidies.
Margin equity revenue growth is the way we run Intertek, and it's central to the way we deliver value in each part of our portfolio. We are confident we'll deliver progress on margin moving forward. Let's now discuss our trading performance. The group has delivered a robust like-for-like trading performance in the period at constant currency. Our product business delivered a good like-for-like revenue growth, which was slightly below our expectations recently. We saw a slowdown in new product development from our softline and hardline clients as they focus on short-term reduction of higher than expected inventory before year-end. We have not seen our automotive clients increase their R&D investment in H2, given the challenges they face in their supply chain. In the last four months, our product like-for-like revenue growth was 4%, driven by double digits like-for-like revenue growth in business assurance.
High single-digit like-for-like revenue growth in Building & Construction and food. Mid-single digit like-for-like revenue growth in Softlines. Low single-digit like-for-like revenue growth in Hardlines, Electrical, and Chemicals & Pharmaceuticals. Double-digit negative like-for-like revenue within Transportation Technologies. In our trade divisions, the increased demand for energy and agri product has enabled us to deliver a robust like-for-like revenue growth of 7.1%. In the resource sector, we've delivered a strong trading performance with a 9.7% like-for-like revenue growth. The momentum acceleration in H2 was driven by increased CapEx investments from our clients in traditional oil and gas and renewable sectors, as well as new contract wins. Turning now to the performance of the group on the year-to-date basis. We've delivered a revenue growth of 9% at constant currency and 15.5% at actual rate.
Like-for-like growth was robust and broad-based at 5.2% at constant currency, benefiting from both volume and pricing. As I've already mentioned, we have taken additional pricing in H2 to address the higher than expected inflation in North America, U.K., Europe and Australia, that will be beneficial to the group in 2023. The SAI, JLA and CA acquisitions we recently made to scale up our portfolio in attractive growth and margin sectors are performing well and have delivered 3.8% revenue growth for the group. We continue, of course, to make progress on cost and productivity. Our day-to-day cash performance disciplines continue to drive a strong free cash flow. As you would expect, we continue to invest in growth, in OpEx capability, innovation and capacity expansion. Let's now discuss the financial guidance for 2022.
We expect to deliver robust like-for-like revenue growth at the group level at constant currency, with good like-for-like revenue growth in products and robust like-for-like revenue growth in trade and resources. Given the impact of China in H1, the expected divisional mix and the impact of inflation on the OpEx capability investments we are making in North America, U.K., Europe and Australia, our margin at constant currency would be below 2021 and slightly below our 2021 underlying margin if we exclude the GBP 10.5 million additional government subsidies we received last year. We expect the net finance cost to be in the range of GBP 34 million to GBP 36 million. Our guidance regarding tax is unchanged between 26.5% and 27%. Our minority interest guidance is between GBP 19 million and GBP 20 million.
Our CapEx investment guidance is in the range of GBP 120 million to GBP 125 million. A brief update on currency. The average selling rate since the beginning of the year applied to the full year results of 2021 would provide an uplift of 600-650 basis points at the revenue at earnings levels. Our financial net debt, excluding future change in ForEx rates or M&A, is between GBP 750 million and GBP 800 million. Overall, in 2022, we expect the group to deliver good earnings growth at constant currency and a strong earnings growth and free cash flow at actual rates. Looking beyond 2022, we are well-positioned to continue to deliver sustainable growth and value for all stakeholders.
Our approach to value creation is based on the combining effect year after year of margin accretive revenue growth, strong cash generation and disciplined investment in growth. That approach has delivered 13% annual TSR in the last decade. We are a high-quality growth business, delivering value for all stakeholders with excellent fundamentals in customer service, ethic, structural demand, margin management, capital allocation discipline, and operating culture. Let me explain you what I mean. We provide a superior customer service with our Ethics solutions and science-based customer excellence is our competitive advantage. We measure our customer service with circa 6,000 interviews a month, and work continuously at becoming ever better with both process improvements and industry-leading innovations. That's why we operate with a very high customer retention.
From an ATIC structural demand standpoint, stakeholders expectations in the post COVID-19 world in terms of quality, safety and sustainability are higher, making the case for our risk-based quality assurance solutions stronger. That's why we expect the high demand for ATIC Solutions to drive a higher organic growth post COVID-19. Margin accretive revenue growth is central to the way we deliver value. It starts with our creative portfolio approach, targeting organic and inorganic investments in attractive growth and margin sectors. We've established over the years a continuous improvement performance approach at every layer in the organization to control cost and drive productivity improvements. That's why we expect margin progress moving forward. Strong focus on cash management has stepped up, as you know, our free cash flow performance over the years, enabling us to invest 4%-5% of our revenues in CapEx.
Reward our shareholders with a progressive dividend policy targeting 50% payout, operate with a strong balance sheet, giving us the firepower to invest in M&A. That's what we mean with disciplined capital allocation. At Intertek, we are a purpose-led company. We are all passionate about making the world a better place, bringing quality, safety, and sustainability. We are a growth-oriented company, attracting, developing, and retaining the best talent in the industry. We operate a high energy, people-centric and innovative culture, focusing on delivering the value that is sustainable for all doing business the right way. In summary, in the last four months, we've delivered a robust trading performance at constant currency with a broad-based good like-for-like revenue growth in products and a like-for-like revenue growth acceleration in trade and resources.
For the full year, we are confident that the group will deliver robust like-for-like revenue growth with good earnings growth at constant currency and at actual rate, strong earnings growth and a strong free cash flow. Looking beyond 2022 will deliver sustainable growth and value for all stakeholders, leveraging our excellent fundamentals and seizing the exciting ethical growth opportunities I just talked about. Thank you for your attention. We'll now take any questions you might have.
Thank you. Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star one on your telephone keypad. We'll now take our first question from Suhasini Varanasi of Goldman Sachs. Your line is open. Please go ahead.
Hi. Good morning. Couple for me, please. Can you give us some color on how the headcount investments are going, please? How many have you hired, and has it been completed, or is there more hiring needed? Secondly, when we talk about inflation on cost, thank you for the color there, but is it possible for you to give us some color on has it stabilized sequentially, or is the inflation still picking wages? If not do you need to basically be a little more aggressive on pricing, and therefore, margin implications going into next year? Thank you.
Okay. Thanks for your questions. I mean, let me start with the second one. Look, what we described in terms of inflation, when we announced our H1 results is basically what we see today. We've not seen any change. That's why w e took additional pricing in these markets in H2, which will obviously benefit 2023. That's the situation we're seeing today. Of course, I'm watching the news like you every single day, and we'll see how inflations unfold in the next few months, but no change from our perspective.
As far as investment in capability, it's essentially investments in our productive heads, essentially colleagues in the labs, in the inspection teams, in the audit teams that basically need to be ready for additional growth in the sectors where we're seeing growth way above 2019. Equally, we are very focused on productivity improvement, so it's not a simple adding a headcount because we've got double-digit growth in Business Assurance, for instance, is making sure if you take Business Assurance, making sure that we look at our audit utilizations by program, by country based on the order book we have.
That's what we do, and this is something we've always done because we are a growth company, and you always have in this business to invest in capability if you want to deliver growth, because we are a people business. What's different this time around is, of course, the higher than expected inflation in this market. That's why we are talking about it.
Just to be clear, it's all done, the headcount investments, that you planned?
Sorry, I, the connection is very poor. I couldn't hear the last part of your question.
I just want to confirm that all the headcount investments have now been completed to the most extent. Thank you.
I mean, look, the investment in capability is something we do all the time. If you look at our headcounts over the years, it has basically grown in line with our revenue. We have basically invested in this market based on the growth that we're seeing for the next, you know, 6 to 12 months. We'll continue to invest if there is a need to do so. I mean, that's the heart of our value proposition, right? We are people-based, you know, service organization, right?
Thank you. We'll now take our next question from Sylvia Barker at JP Morgan. Your line is open. Please go ahead.
Thank you. Morning, everyone. Two quick questions, please. Firstly, can we please just confirm the pricing impact in the four months or where it's running now for the second half? I think you said around 1.5%, 1.6% in the first half. Secondly, on the progression of growth during the quarter, it sounds like Q3 was okay, but maybe some of the weakness, especially on the product side, was more pronounced in October. Can you maybe just comment around the growth rates in the group and also products? Finally, on the resources contract wins, can you discuss the kinds of customers and how's pricing on these contracts? Thank you.
As far as pricing is concerned, is what we said in H 1, is still we see it's about 1/3 , 2/3 in terms of the benefit that we get in our revenue mix. T his is for us, the right balance and the right approach. As far as your question on growth, No question that we have a high base to comp against in product. As you remember, we had a really robust July-October period, and it's no surprise to anyone that the automotive industry is facing significant supply issues, which is impacting obviously, their cash flow to start with, as well as their profitability.
Basically, we've seen our automotive clients, put a bit of a break if you want. We have to use an automotive metaphor on their R&D investments. We've not seen the increase we expected. I don't think this is gonna be like this forever because we all know that the automotive industry needs to invest in green powertrains. As far as the other area in our product portfolio where we've seen a bit of softness recently is Hardlines, Softlines. I've tried to explain it. What's happening is very simple. As you know, retailers, basically order collections for a certain period during the year. At the moment, they're very focused on Thanksgiving in the U.S. and Christmas shopping around the world.
They've seen inventory build up, basically they are very, very mindful that they need to deliver a strong cash flow for their shoulders at the end of the year. They're basically putting a bit of a slowdown in terms of new product development to clear the inventory. My sense it's what they're doing now because they've got this this challenge. If you look at our Softlines and Hardlines like-for-like performance in the period year-to-date, it's a very commendable, you know, performance and I'm really pleased with the work that our teams are doing around the world. Yes, there are these two obviously dynamics I just disclosed or described, but I'm not worried about products.
I mean product is the star of Intertek in terms of margin and this is obviously, the lion's share of earnings. We are really pleased with the direction of travel. I would just like to talk about assurance. If you look at the performance that our Business Assurance unit is delivering organically and at the same time we are integrating SAI is just a really stellar performance and clearly outperforming what I'm seeing in the industry. The other thing that I would say is sustainability, continues to be center stage in discussions or with our clients.
Y ou heard about CSRD, which is obviously taking a really, really good direction of travel for us, enabling companies like us to be the approved auditor for non-financial data, which is gonna be mandatory across all European countries very soon. This is a significant opportunity, we know that the U.K. is gonna follow suit. We know that the U.S. is gonna follow suit and even some small countries like Singapore are making some really, really strong progress on their regulatory drivers. Look, innovation sustainability and assurance in making supply chain resilience continue to be significant drivers for our business. As far as your question on energy.
Look, we are very, very focused with our Moody organization, which is the market leader in terms of engineering-based inspections for any energy asset that is being produced by our clients. Our clients are essentially the world of energy companies. We provide the quality assurance at the point of production for these energy assets. The investments, as you know, are increasing. There's been underinvestment in traditional oil and gas, which is now being obviously a focus for all the oil and gas companies. Of course, everybody understands the importance of scaling up renewables. These new contracts are linked to new investments that the energy companies are making or new big projects.
We should not underestimate the impact that the new legislations under the Biden administration is gonna have on the big project, you know, market in the United States. Obviously we operate there with multiple business lines with our PSI business. You've seen the numbers. We are extremely well positioned because we are nationwide and we are in the infrastructure inspection business and material testing and of course with our Moody business we can provide the quality assurance on the energy assets and, you know, there is a huge investment in the United States. It's very exciting.
Thank you.
Thank you. We'll now take our next question from Arthur Truslove at Citi. Your line is open. Please go ahead.
Hi there.
Arthur, your line is open. Please go ahead.
Can you hear me okay?
Of course.
Hi there, Arthur Truslove from Citi. Firstly on pricing, I just wanted to confirm, is it typically annual contracts that you sign from a pricing perspective, or are they slightly shorter term? You know, is there any reason why you shouldn't see pricing go up, you know, similarly to inflation for next year? Secondly, are you able to give us some idea as to how competitive you are in things like 5G and anything beyond that in terms of testing on that kind of thing? I'll leave it there. Thank you.
Okay, thanks. Thanks. There is a bit of echo. On pricing, your question about contract is very important. We operate several types of contracts, right? We've got long-term contracts 3 - 5 years contracts with some of our global customers. Where we do have indexes, closes in these to adjust pricing. We have obviously shorter contracts. If you look at the assurance work, for instance, we do typically the audit is for 3 years. Again, here we've got indexes, you know, in the agreement. We've got obviously contracts that are on 1-year basis or project basis, right?
When I give obviously, a direction of pricing, it's obviously trying to give you the data for the group aggregating all these various contracts, right? That's how we operate. In terms of pricing, our view is that, you know, we really believe in long-lasting relationship with our clients. We try in high inflation environment, to basically focus on 60% of the pricing managed to productivity and 50% of the inflation to productivity and 50% through pricing. As far as the connected devices and 5G, look, we are really well- positioned, 'cause essentially, the big opportunity in 5G is how 5G is gonna power all smart devices.
With our global electrical footprint, we are one outside United States and two in the United States. We've got the infrastructure, the connections across all industries. What's really exciting about 5G is, of course, we all think as users about our tablets and our smartphones. Of course, this is a big opportunity. 5G in terms of manufacturing equipment, in terms of network inside companies is going to be very, very significant, right? There are lots of views out there that says once you've got 5G in your producing units, you might not need Wi-Fi from BT, for instance.
Look, we are really well positioned and it's all about smart devices, which goes from smartphones, tablets to obviously, intelligent fridges, intelligent cars, obviously in very, very strong robotics in the production units and, and warehousing. Really exciting for us here.
Thank you. We'll now move on to our next question from Kate Carpenter at Bank of America. Your line is open. Please go ahead.
Hi. Thanks for taking my question. Two for me. Your CapEx guidance, it looks like it's been lowered quite a bit, particularly when you factor in for FX dynamics. Could you just clarify what the reason is behind this? Then could you also remind us which divisions and geographies the CapEx is being allocated to, as well as the split between maintenance growth and technology investments and how that CapEx costs are being impacted by inflation? Then my second question on Softlines and Hardlines, could you just clarify how much the organic growth during the July to October period was supported by a backlog of samples from the lockdowns in China? Thanks.
Look, on the last question, Hardlines, Softlines. Look, the Softlines and Hardlines industry are very fast-moving industries. There was of course a bit of catch-up in the months of July, August, but it goes really fast. I would say it's minimal. As far as CapEx is concerned, look, when we give CapEx guidance is really an envelope, right? If we don't need to spend it, we don't spend it. We are very disciplined. Look, the reason why we've lowered the guidance a bit is because some projects are being moved into the new year.
I mean, the components and semiconductors supply chains, issue that you hear is also impacting the equipment that we buy around the world. There is nothing much to read into that. You know, we really want to continue to invest in growth. Our CapEx is essentially targeting, as you would expect maintenance CapEx, when we need to do the right things to keep our units operating. We invest, of course, in technology, as you can imagine, both to support our day-to-day business, but also to support the innovation activities we have throughout the world. You know, we invest in new equipment and capacity expansion.
Frankly speaking, the investments are targeted to the business lines that got the biggest growth opportunities and the highest returns for us. It's really broad-based.
Okay. Thank you.
Thank you. Once again, ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. We'll now move on to our next question from Paul Sullivan at Barclays. Your line is open. Please go ahead.
Morning, André. A few from me . Firstly, just on the margin shortfall, how much of it is mix versus an absolute shortfall of product? Secondly, on transport and the deterioration we're seeing in Softlines and Hardlines, it sounds like we should view that as somewhat transitory or do you think it is a consideration that we need to factor into our thinking when it comes to sort of growth and margin expectations into next year or certainly the first half of next year? Then optically or from a headline basis, your organic growth is coming under both SGS and BVI.
I know the portfolios clearly aren't exactly the same, how do you judge sort of market share and how important is it to you? Thank you.
Thanks, Paul. Look, I wouldn't talk about the margin shortfall. What we're trying to basically explain is the constituencies of our margin and the reason for the margin being lower in 2022 than 2021 is because of the GBP 10.5 million additional subsidy we got, which is a significant amount of money. As you know, in terms of BIPS, it's quite important. You know, we are saying we're gonna be slightly below the underlying margin. The reasons I've tried to explain them, right? There is of course a divisional mix with Trade and Resources growing faster than Product. Mechanically, you've got a divisional mix. We cannot obviously forget the impact of China.
China is very important for us and very important for our product, hence your question about product, of course. The margin for the full- year within product is gonna be impacted by the China lockdown effect in H1. Then I talked about the investment we are making in operational capability. As you know, inflation is higher than expected in several markets. When we hire productive capability to cope with the growth, we have to pay a slightly higher level of wages, and it's impacting, obviously, our margin. That's basically where we are. I'm not concerned at all about the margin performance of the group.
As you know, we've always delivered a very stellar performance in terms of margin equity, revenue growth, and free cash flow. This is obviously the algorithm that we use to deliver value for our shareholders. This is continuing. Y ou will see that there is plenty opportunities moving forward to continue to progress on margin. As far as your point about what's happening in Transportation Technologies and Softlines, look, as you know, companies are very financially astute and very focused on profit and cash. I understand why the automotive industry has to put the brakes on the short-term R&D investments because what they're facing is very significant. Is it changing the structural growth drivers in Transportation Technologies? Of course not.
We are, as you know, investing in new powertrains, being hybrid or electrical. I'm not worried about Transportation Technologies. I'm not worried about Softlines and Hardlines either. They just have a bit more inventory than they thought in their balances, and they need to deal with it. O ur clients are very, very, very active in terms of developing new collections moving forward. Of course, they talk a lot about sustainability and how they basically get all their, you know, vendors to operate with the right sustainable KPI. There is a lot of opportunities there. I'm not worried at all.
Therefore, I'm not worried at all for our product business moving forward. As far as your question about portfolio differences and nuances between us and our peers, of course, we've talked about it in the past. At the global level, it makes sense to compare these companies. At the local level, we do not always compete versus our two peers globally. There are businesses where we do, but we have lots of local and regional and other global competitors. Your point about market share is important, Paul, this is the way we run the company. I mean, we basically measure our performance at the local level in terms of relative performance. How are you doing versus your competitors?
The approach we take is we want to be the best partner for local customers. It's always easy, as you know, to grow volume by reducing price. We are very disciplined in terms of pricing power. We never do that. I can tell you that based on the discussions I'm having with my teams, I couldn't worry about businesses where we're losing market share. As a matter of fact, we are gaining market share. If you do a careful, which I'm sure you will side-by-side table looking at our July/August performance compared to what's been disclosed by others, you will see that in the areas where we compete, we are outperforming.
I mean, look at our Business Assurance performance, for instance, and food performance. This is essential, Paul to track your relative performance versus your competition, but at the local level, whoever your competitor is.
That's very helpful, André. Can I just follow up , are you seeing peers or some of your competitors being more aggressive on price t rying to buy market share?
I try to be very disciplined. I never comment on the activities and the performance of my peers. Look, the industry is an excellent industry in terms of price discipline. Are some of the players in the broader industry perspective commercial at times? Of course, you would expect so. I'm not gonna say much more than that.
Okay, that's great. Can I just also be greedy and just ask you what your thoughts are on share buybacks?
I've tried to explain what our disciplined capital allocation policy is all about, and to my knowledge, I've not talked about it, so here's the answer for you, Paul.
All right. Thanks, André. Cheers.
Thank you. We'll now take our next question from Neil Tyler at Redburn. Your line is open. Please go ahead.
T hanks. Good morning. Morning, André. I'd like to start off with a question about your sustainability insurance, Total Sustainability Assurance. You split that into three categories. Of those, can you help us understand from a revenue perspective, which is the largest currently, perhaps rank them in terms of relative growth rates currently, and then in which you see as the greater opportunity? Over the longer term, related to that, I suppose, in your E&P operations and resources, can you give us a rough idea of how relevant, the activity, the work you're doing on renewables is currently relative to traditional oil and gas? Finally, a short one on the operations in government and trade, the contract termination.
Has that now largely annualized, and any other business, you know, I mean, there's a few instances in your prepared remarks where you talk about exiting contracts deliberately. Is, you know, is there any meaningful business that still needs to be either improved from a profitability perspective or exited? Thank you.
Thanks. Let me just start with your last questions. Look, we're now there comping with the data at which, you know, these contracts were stopped, so we're still a few months away, but in 2023, it should be dealt with. As far as renewables are concerned, as you know, renewables are the future. That's why we've invested in the solar energy assurance business with CA. It's only 7% -8 % of the global energy supply. The opportunity we have, as I was talking about, is both to take advantage of the expected increased investments in traditional oil and gas and renewables. As far as renewables is concerned, where do we play?
We essentially are involved in all the major sectors. There is no question that CA gives us a huge advantage in the solar energy world, both in terms of doing the quality assurance in the factories being in China or in Eastern, Southeast Asia, but also helping our clients with solar project assurance management. What people don't know is that the solar panel industry is not very regulated, and companies are basically making significant investments and not knowing exactly where to buy, what to buy, and how to think about safety. As you know, the battery technology is still relatively new technology, and the risks in terms of safety are not insignificant.
There have been some reports recently in the U.S. of major corporations having issues. That's a big move we have made, and we are really pleased. The growth opportunities are very significant. As I said, both quality assurance in the factory and project, assurance management in the customer's operations. As far as wind is concerned, this is obviously another nascent, growing market. W e are really well- positioned with our Moody inspection, you know, expertise, and we take part in many projects around the world. We are quite well-positioned. It's a very small market in hydrogen. I talked about it last time around.
Happy to spend time if you want outside of this call to explain to you what we do on hydrogen. We are really the pioneer here and the conversations we are having with some of the oil and gas companies are really, really energizing because everybody knows that it's gonna be the big solutions in the medium to long term. One area that we should not underestimate is energy storage. As you know, when we move to a more diversified source of energy, grid management is gonna work, provided there is a good mixed management, but also there is a strong energy storage. There is no question here that battery remains a big opportunity.
We are of course, involved a little bit in hydro energy and which is quite small, and nuclear. We are really broad-based. As you would also expect, we are pioneering carbon capture, which is storing the CO2 on the ground. We've got really exciting projects at the moment in the United States where we are helping the energy companies that want to invest in carbon storage to make sure they've got the reservoirs to store the CO2, that they're gonna do the job. It's one thing to say you capture the CO2 from the atmosphere, you put it on the ground, but is it gonna stay in the right place?
We are really, really involved broad-based there. As far as the growth are significant. Opportunities are significant. As far as sustainability is concerned, that's a very valid question. If you go back to what we say when we talk about the purpose of Intertek, we always say we are providing quality, safety, and Sustainability solutions to our clients, right? We've always have been involved on Operational Sustainable Solutions management. What it is helping a given industry to basically address their operational risk in that industry. This is where the core of our Intertek Sustainable Solutions are today. This is industry agnostic, industry specific.
That's why there are a lot of solutions that we offer through our Business Assurance, you know, teams like energy management, as well as lifecycle audit and process management, you can imagine. We've got lots of industry- specific solutions like chemical management in a Softlines business, CO2 and emission management in automotive industry and of course, energy efficiencies in the entire Electrical world. In terms of food, you can imagine we're also involved there. The opportunity here remains significant because for companies to really make a, an impact on their sustainability scorecard, it's got to start at the heart of their operations in their value chain. There are lots of operational risk inside corporations that are not being addressed.
I mean, we just launched, for instance, a SaaS platform called ToxClear, which enables our brand in Softlines, for instance, to track the rea compositions of chemicals being used in the factories to produce the garments for them, which they didn't have before, because our supply chain in Softlines is quite decentralized. This is one example. I've talked about Textile Exchange in the past, where some companies have committed to disclosing the amount of recycled fibers in the supply chain, organic cotton origin. You can imagine, because consumers are very demanding, traceability is driving the agenda here. We've not talked about carbon labeling, but carbon labeling is also gonna be, again, changing moving forward.
They are all, if you want, the Operational Sustainable Solutions. In addition to that, you've got two additional activities which are investment activities. One is the Corporate Sustainability Solutions, helping corporations, making sure they've got the right processes and procedures in place. This is what we do with our TSA programs inside large companies. The other opportunity is the independent verification of non-financial disclosure, which is what I was talking about earlier today in the previous questions on CSRD, where the EU is the front runner here by putting regulation, which can make it mandatory for companies to disclose their non-financial information over the next few years, independently audited. This is a big opportunity. Companies are doing a good job at improving their disclosures in terms of sustainable performance.
Until companies have got independently verified, you know, claims in their report, they're not gonna have the respect and the credibility from all stakeholders. The world is gonna be obviously expecting company to have financial audits for the financial metrics and independent audits for the non-financial metrics. That's where, you know, the opportunity is. It plays really, really well in what we do with Business Assurance, because essentially, it's an audit of operating procedures, management performance, and claims, and we do that all the time. The other important area in that space is, of course, how companies are dealing with net zero. Lots of debate inside the companies between Scope 1, 2, and 3, and direct and indirect.
Here, you know, we see a lot of work through our Business Assurance business, but also our assurance business in the U.S., which is the leading authority in terms of, you know, carbon footprint, scoping and monitoring. The opportunities is very significant. To make it simple, the heart of Intertek today is our Operational Sustainable Solution, which is growing double-digit and gonna continue to do so. We have these two other segments I just talked about.
Thanks very much, André. Just to follow up on the last point you made on the independent verification work. Is the competitors against which you're, I suppose, bidding, for want of a better term, in those sorts of work, the same competitors, you know, that you see elsewhere in your business? Or is it a different competitive set?
No, it's a great question. As you probably remember from our last call, you know, within our industry, I'm chairing the sustainability, you know, working group, and I just had a meeting yesterday with our teams. Of course, our competitors in terms of auditing the non-financial, you know, data is broader because the Big Four want to obviously play in that space. We have been lobbying the EU successfully, and our advocacy campaigns has created a breakthrough, where now the EU has agreed to not let the Big Four be the sole auditors of non-financial reports in corporate EU. It's a major breakthrough for us because it was not a given. It's gonna open the market, you know, for our Business Assurance business.
Yes, the company set is broader. Because we do so much in the supply chain, we have a huge advantage in doing so.
Great. Thank you very much.
Thank you. Ladies and gentlemen, once again, if you would like to ask a question, please press star one on your telephone keypad. We'll now move on to our next question from Annelies Vermeulen at Morgan Stanley. Your line is open. Please go ahead.
Hi. Good morning, André. Thank you for the update. I just have a couple of questions left. Firstly, just again coming back to this, the timing of the recovery in Softlines in particular. You know, you've said that you expect it to be a bit slower in Q4 with that overstocking of inventory and so on. How much visibility do you have going into next year? Do you think this is a theme that will unwind mostly in Q1, or will it be something that may continue through 2023 in terms of those inventory levels of your customers? Secondly, could you give an update on the situation on the ground in China? You mentioned that it's been basically normal since July.
I read this morning actually that cases are up at sort of record levels again. How concerned are you that, you know, you get a situation where you return to what you had in the first half in terms of lockdowns? That's all. Thank you.
Okay. Great. Look, I don't want to be dogmatic here, but I've not talked about the timing of recovery, right? Just for everybody's on the call, our Softlines business in the July-October period delivered mid-single digit like-for-like revenue growth. We, we are not talking about recovery. We are talking a bit of a softness in Q4. And as I explained companies have to deal with their short-term inventory issues, and I'm not worried about the growth opportunities of Softlines moving forward. This is a great industry and we all know what the drivers are. As far as, you know, China is concerned, we are monitoring the situation, as you can imagine.
As a matter of fact, I'm monitoring it on daily basis. Every morning I get an update about where we are in terms of cases in China by region, what it does on our operations. I can say that, you know, yes, we were impacted massively in Shanghai for the reason that we all know. The lockdowns we've seen in the second half and the lockdowns we are seeing at the moment are not impacting our operation, but we are monitoring it.
Okay. Thank you.
You're welcome.
Thank you. We'll now take our last question from Karl Green at RBC. Your line is open. Please go ahead.
Thank you very much. Just one remaining question from me. Just on the M&A contribution, you've cited GBP 120 million of revenues in the year. If I just do some quick back of the envelope maths and back out the first time contribution from CEA, it suggests that the SAI Global business delivered about GBP 115 million of revenues in the first 10 months. Grossing that up and not allowing necessarily for any seasonality, it suggests that revenues there are tracking somewhere in the region of about GBP 138 million. Just again, working through the maths and working through the Australian dollar exchange rate, it looks like SAI Global isn't necessarily delivering much, if any, organic growth.
Could you perhaps clarify just what is happening to SAI Global in terms of the organic growth picture, and also possibly, any margin commentary would be helpful too. Thank you.
Thanks, Karl, and good to have you on the call. SAI for us is on track. You know, the first year is about the integration in terms of, you know, processes and people and policies and of course, and of course, you know, the synergies in terms of getting our teams, you know, ready to sell the Intertek Solutions to the SAI clients and doing the reverse within the Intertek clients. Last but not least, the cost. Based on our business plan, you know, we are on track. As you know, SAI is not part of organic growth definition for 2022, you know, so far.
It will be, you know, moving forward. I will not, you know, comment on that because we don't disclose it. You know, it's a great business. The integration is doing very, very well and we're very pleased.
Okay.
In terms of margin, the margin is in line with what we expect, and as you know, it's accretive to the group.
Thanks.
Thank you. There are no further questions at this time. I will now hand it back to André Lacroix for any additional or closing remarks. Thank you.
Thanks for your time and your questions. We appreciate, you taking the time to raise all the topics that you wanted to raise this morning. If you have any more questions, feel free. We're here to help. Have a good day. Thank you.