Hello, and welcome to the Intertek 2022 full year results conference 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. I have with me Jonathan Timmis, our CFO, and Denis Moreau, our VP of Investor Relations. I'd like to start our call today recognizing all of my colleagues at Intertek for having delivered a robust performance in 2022. 2022 marks another year of consistent delivery with revenue and EPS in line with expectations, which demonstrates the high quality of our growth earnings model. There is no question that 2022 was more challenging than expected. The global economy was impacted by the compounding effect of three consecutive shocks in the last three years. The global pandemic, a major disruption of the world supply chains, and the return of inflation. There are five takeaways in our presentation today. First, we saw a higher demand for ATIC solutions with mid-single-digit like-for-like revenue growth at constant rate.
Our full margin was robust at 16.3% with a strong H2. We delivered double-digit EPS growth at actual rate. Our cash flow from operation was strong and grew by GBP 26 million. Finally, we delivered an excellent ROIC of 18% with year-on-year progress at constant rate. Let's start with our performance highlights. We delivered indeed a robust performance with group revenues up 8% at constant rate and nearly 15% at actual rates. Like-for-like revenue growth of 4.9% at constant rate. Operating profit up 4% at constant rate and nearly 10% at actual rates. Robust operating margin of 16.3%. EPS growth of 4.6% at constant rate and 10.6% at actual rates.
Progress on ROIC at constant rate and unchanged full year dividend at GBP 105.8. Let's now discuss our like-for-like revenue performance. Globally, we saw an acceleration of our momentum in trade and resource outside of China. Our like-for-like revenue growth was 6.5%. Our products division delivered a good like-for-like revenue growth of 3.9%, notwithstanding the impact of COVID-19 in Q2 and Q4 in China, the supply chain disruptions in the automotive industry, and the slowdown in new product development in softline and hardline in Q4. Our trade division delivered a like-for-like revenue growth of 5.6% as we benefited from the increased demand for energy and agri-products. Our resource division reported like-for-like revenue growth of 7.9%, driven by higher CapEx investments from our energy clients and by the higher demand in minerals.
Before we discuss margin and cash, a few remarks on our November-December like-for-like performance, which was slightly below our expectations. We knew that the November-December like-for-like revenue growth would be impacted by one less working day and the expected slowdown in softlines and hardlines, but our performance in the last two months of the year was impacted by a high number of COVID cases in China. Adjusted for the GBP 5 million revenue loss in China due to COVID, our like-for-like revenue growth in November-December was mid-single digit. Indeed, after the relaxation of the COVID-19 restrictions, the level of COVID-related sickness in our China business was high in November and December. It was back to normal in the first week of January. You will have noted that we have shown as a reference November-December like-for-like for 2021, which was demanding in terms of comparable for products and trade.
We have delivered a robust margin of 16.3%, which was down as expected year-on-year by 70 basis points at constant rates due to the COVID-19 in China in Q2 and Q4, higher than expected inflations in many other markets, and the fact that margins benefited from higher than usual government subsidies in 2021. We are pleased with the strong margin progression we saw in trade and resources. margin accretive revenue growth is central to the way we deliver value at Intertek in each part of our portfolio. Moving forward, we are targeting margin progression. We pursue a portfolio strategy that focuses on quality growth initiatives based on the right volume, price, and mix benefits.
Our superiority customer service gives us a strong pricing power. Following the good pricing performance we saw through 2022, we have taken additional pricing that will be beneficial in 2023. Assurance, which now represents 20% of our revenues, is growth in margin accretive with excellent growth opportunities. We pursue a disciplined capital allocation approach. Our performance management discipline is based on well-embedded continuous improvement processes. As part of this, we are announcing today a cost restructuring program that targets productivity opportunities based on operational streamlining and technology upgrade initiatives to deliver GBP 6 million-GBP 7 million cost reduction in 2023, with an annual saving of GBP 15 million when the program is complete. We've continued to make progress on cash management in 2022.
Our cash from operation of GBP 722 million was up year-on-year by GBP 26 million, which enable us to invest in growth while still operating with a very strong balance sheet. We pursue a disciplined approach to investment in growth. Our M&A strategy targets investments in attractive growth and margin sectors to augment our organic growth. The three recent acquisition we made, SAI, JLA, and CEA are performing well and added GBP 152 million of margin accretive revenue in 2022. Our pipeline of potential acquisition is healthy. Investments in innovation are essential to deliver a superior ATIC customer service. Our teams are focused on scaling up our winning innovations while working on the next generation of industry-leading solutions. We have operationalized this investment successfully over the years, as evidenced by our excellent ROIC. Sustainability is an exciting growth drivers, which we'll discuss later.
Internally, we are focused on sustainability excellence in every operation. We are targeting net zero emissions by 2050. Sustainability is much more than net zero. We also focus on customer satisfaction, diversity, inclusion, health and safety, compliance, and engagement. I'll now hand over to Jonathan to discuss our full year results in detail.
Thank you, André. All the comments I will make will be on the adjusted results. In summary, in 2022, the group delivered a robust financial performance. Total revenue growth was 8.2% at constant currency and 14.6% at actual rates, as beneficial movements in FX rates impacted our revenues by 640 basis points, driven by the weakening of sterling. Like-for-like revenue grew at 4.9% at constant rates. Operating profit at constant rates was up 3.8% to GBP 520 million, delivering a margin of 16.3% down year-on-year by 70 basis points. Diluted earnings per share were GBP 211.1 pence, growth of 4.6% at constant rates and 10.6% at actual rates. Turning to cash flow.
Adjusted cash flow from operations was GBP 722 million, up GBP 26 million year-on-year. Adjusted free cash flow was GBP 386 million, down year-on-year by GBP 16 million. We invested GBP 117 million in CapEx, GBP 18 million above prior year, and finance costs were GBP 10 million higher. We finished 2022 with financial net debt of GBP 738 million in line with prior year, which represents a financial net debt to adjusted EBITDA ratio of 1.1x . Now turning to our financial guidance for 2023. We expect net finance costs to be in the range of GBP 40 million-GBP 45 million. We expect our effective tax rate to be between 26.5% and 27.5%.
Our minority interest to be between GBP 21.5 million-GBP 22.5 million, and CapEx investment to be in the range of GBP 115 million-GBP 125 million. Net debt guidance for M&A is GBP 630 million-GBP 680 million. I will now hand back to André .
Thank you, Jonathan. Let's discuss the performance of our business lines starting with products. All comments I will make in the section are at constant currency. Our product division delivered a good performance of percent notwithstanding the impact of COVID-19 in Q2 and Q4 in China, the supply chain disruptions in the automotive industry, and the slowdown in new product development in softlines and hardlines in Q4. Outside of China, our like-for-like revenue growth was 5.5%. Our like-for-like performance was driven by double-digit like-for-like in Business Assurance, mid-single-digit like-for-like in softlines, Building and Construction. Low single-digit like-for-like in hardlines, technical, and Chemicals & Pharmaceuticals, and high single-digit negative like-for-like in Transportation Technologies.
Operating profit of GBP 427 million was stable year-on-year, and as a result of 21.1% decline, 180 basis points year-on-year, reflecting the COVID-19 disruption in China and the inflationary pressure in North America, Europe, and Australia. In 2023, we expect our product divisions to deliver good like-for-like revenue growth. Our trade divisions delivered like-for-like revenue growth of 5.6%, as we benefit from the increased demand for inspection and testing in energy and agri products. The performance of our GTS business reflected the decision to terminate two unprofitable contracts. Outside of China, our like operating profit was up 14% to GBP 58 million, resulting in an operating margin of 9.1%, 70 basis points higher. We expect our trade divisions to deliver good like-for-like revenue growth.
Our resource division delivered like-for-like revenue growth of 8%, driven by increased CapEx investments by oil and gas, traditional oil and gas and renewables, as well as by high demand in minerals. Outside of China, our like-for-like renewables about 61% higher than one from using 150%. Let's now discuss the growth opportunities ahead. We have made a lot of progress on both points. Within our three divisions, product has been the fastest growing business with a CAGR of 9%, and today represents nearly 2/3 of our revenue and 82% of our profit. Within our ATIC solutions , assurance has been the fastest growing business at 17% compound, representing 20% of our revenue. Our portfolio is extremely well positioned for growth, let me explain you why. COVID has been much more than a tragedy for the world.
In the post-COVID world, stakeholders' expectations in quality, safety, and sustainability are higher, making the case for risk-based quality assurance stronger. The demand for ATIC solutions will grow faster post-COVID. Our industry is highly attractive, of course, with strong structural organic growth drivers that will deliver GDP plus like-for-like revenue in real terms. Based on our customer research, these attractive structural growth drivers will be augmented by an increase in new clients, high investment in safer supply, high investment in innovation, the step change in sustainability, and high growth in the world of energy. We are seeing significant growth in a number of companies globally, given the low barriers to entry for any brand with e-commerce capabilities. The lack of quality assurance expertise of these young companies is excellent news for our Global Market Access solutions. Our decentralized customer-first organization has a strong track record of winning new clients.
COVID-19 is proving a catalyst for many corporations to improve the resilience of their supply chains. We are seeing a change of focus within our clients with better data on what is happening in all parts of the supply chain, tighter risk management with razor-sharp business continuity planning, a more diversified portfolio strategy with tier one, tier two, tier three suppliers. A more diversified portfolio strategy also regarding factories and of course, investment in processes, technology, training, and independent assurance. Our superior assurance offering means we are well-positioned to help our clients reduce the intrinsic risks in their operations. Our clients have also realized that they need to invest more in product and service innovation to meet the changing needs of their customers. A recent survey by Gartner showed that 60% of R&D leaders expect to increase their R&D investments in 2023.
These investment innovations mean a higher number of SKUs and a higher number of test-based SKUs, which will be beneficial for our products division. The other major area of investment inside corporations is, of course, sustainability. We are seeing positive momentum with new and emerging regulation. That means that companies will have to reinvent the way they manage their sustainability agenda with a great emphasis on independently verified non-financial disclosures. This is excellent news for our industry-leading Total Sustainability Assurance solutions. The growth opportunities in the world of energy are truly exciting. In 2022, we have all witnessed the concerns reflecting energy security, and everyone agrees that global energy production capacity is an issue that needs to be addressed quickly to meet the growing demand for energy.
Given the underinvestment in traditional oil and gas exploration and production in the last decade, and the lack of scale for renewables, investment for production in traditional oil and gas and renewables will increase. This is excellent news for Caleb Brett and industry services businesses. Moving forward, we'll continue to deliver sustainable growth and value for all of our stakeholders. Our science-based custom excellence USP provides our clients with the ATIC advantage they need to strengthen their business. We operate a high margin, capital light, carbon light, and highly cash generative earnings model. Intertek's approach to value creation is based on the compounding effect year after year of margin accretive revenue growth, strong cash generation, and disciplined investment in growth. That approach has delivered 8% annual TSR since 2012. Our earnings model has strong intrinsic defensive characteristic. The ATIC solutions we offer are revenues.
Enjoy strong and lasting relationship with our clients. Our business model is based on a number of quality, safety, and sustainability clients make on existing SKU as well as a number of new brands and SKUs that are being launched in the market. Our trade business grows in line with GDP cycle. Is well-positioned for growth given the lack of investment in traditional oil and gas in the last few years and the need to scale up renewables. We are truly excited at Intertek about the growth opportunities ahead. Our Good to Great journey, which has delivered significant value between 2014 and 2022, continues capitalizing on our USP, the Intertek science-based customer excellence TQA advantage. On May 3rd and 4th, we will host the Capital Markets Day in London, which will give the opportunity to the entire leadership team to present our Intertek 30 growth strategy.
True to our purpose of bringing quality, safety, and sustainability to life, our science-based customer excellence TQA advantage helps our clients to make the world ever better. Our unique approach is based on three components. First, it's about our science-based technical expertise. Our industry-leading processes build the world's best intellectual property to deliver superior TQA solutions. Second is our commitment to science-based continuous improvement. We always go back to the data to ensure the solutions we offer to our clients are based on the best possible research, knowledge, and insight. Third is, of course, our science-based innovation. We continuously apply superior data-driven insights when creating new solutions for our clients. Let me give you a few examples to illustrate what I mean. Our medical device experts support the development of artificial sights to the blind.
Intertek Caleb Brett is supporting the development of synthetic fuels for the airline industry. Our AgriWorld business has developed innovative DNA testing tools to assist the coffee industry. Before taking your questions, I'd like to share our 2023 guidance. We're entering 2023 with confidence given the reopening of China, the increased demand for ATEX solutions, the strength of our portfolio, our strong pricing power, our productivity and cost initiatives, as well as our cash discipline. We expect the group will deliver mid-single digit like-for-like revenue growth at constant currency, driven by good like for like in product and trade and a robust like for like in resources. We are targeting margin progression both in H1 and H2. Our cash discipline will remain in place to leave a strong free cash flow.
We invest in growth with CapEx between GBP 115 million and GBP 125 million, and we expect our financial net debt to be in the range of GBP 680 million-GBP 680 million. A quick update on currency for your models. The average staying rate since the beginning of the year applies to the full year results of 2022 will be broadly neutral at the revenue and earnings level. In summary, we are a purpose-led company offering ATEX solutions that are mission-critical for the world. The growth in our end market is accelerating. We operate a strong portfolio with leading market positions, a high-performance earnings model that has a strong track record. We are a high-quality growth business creating sustainable value for all. 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 will now take our first question from Rory McKenzie at UBS. Your line is open. Please go ahead.
Morning. Two from me, please.
Morning.
Firstly, can you quantify the impact on margins from the disruption in China? You obviously disclosed it was a 160 basis points drag on revenue. If we were to assume a, you know, 50% incremental margin on that lost work, that would account for all the decline in group margins, I guess. Can you help us understand margins outside of China? Secondly, can I ask why have you decided to go ahead with a restructuring program now? You've talked in the past how it was important to keep capabilities intact, and you've been doing restructuring over the past year. It's interesting what's changed and maybe you can talk more about where you're trying to direct this current restructuring effort. Thank you.
Thanks. Look, on China, we've been obviously quite transparent in terms of the impact that China had in Q2 and Q4. Of course, we have not quoted any number, but you can make an assumptions between the like for like growth differential at the group level and the like for like growth without China. There is no question that the disruption we had in China was significant in revenue and margin. As you know, we don't disclose our margin for China. You know, when you lose, you know, GBP 1 million in China, you've got, of course, a negative flow through because you cannot basically get rid of your fixed costs, right? You've got to be ready for your customers. It has been, you know, significant indeed.
I'm not gonna say much more than that because then I'll get into selective disclosures. You know, this is, you know, something that has been very, very tough for our China team and for all of us as the numbers, obviously, that you've talked about describe. As far as the restructure is concerned, I think it's a very important question. Look, as you know, the way we run the company, right, is really about continuous improvement. Kaizen, call it ever better. There is nothing at Intertek that we believe cannot be improved. This is the spirit that we operate in.
Essentially, we believe that we have an opportunity to streamline some of our operations, and what I mean by operations is essentially site consolidations, you know, non, you know, customer facings, you know, overheads that are supporting the business around the world, as well as technology as we, you know, upgrade our digital footprint around the world. That's, you know, the approach we are taking. Obviously, we did a bit of a portfolio restructuring when I arrived in 2015, and we believe we have the opportunity to, you know, improve the margin by being simply more efficient.
Understood. Thank you very much.
Thank you. We'll now take our next question from Will Kirkness at Goldman Sachs. Your line is open. Please go ahead.
Hey. It's Will Kirkness from SocGen.
Morning.
Morning. I have two questions if that's okay. Firstly, just wonder if you could talk about the pricing element on group organic revenue growth, either sort of how you ended the year or maybe how you see it for 2023. Secondly, just looking at Building and Construction within products, it looks like it slowed towards the end of the year. I just wonder why that was and maybe why the outlook isn't better. I think I understand this is mostly a U.S. business, where I would have thought there's sort of quite good support in that space. Thanks very much.
Look, in terms of pricing, as you know, we take a very considered approach to pricing. It has been our strategy over the years to, you know, pass 60% of the wage increases through inflation and cover the rest, you know, through productivity initiatives. Of course, last year was, you know, a different year for all of us around the world. Our organic, you know, revenue performance was 1/3 pricing, 2/3 volume, which we should believe is the right mix. And as far as BNC is concerned, look, I wouldn't worry too much about BNC.
Yes, you know, there was a bit of a, you know, poor weather in some of the regions in North America in November, December, but the business is in good shape. Given the investments that the government is doing in the U.S. in green infrastructure, I think we continue to expect some really exciting times for our business. I wouldn't read too much into that.
Okay, thanks.
Thank you. We'll take our next question from Suhasini Varanasi at Goldman Sachs. Your line is open. Please go ahead.
Hi. Thank you for taking my question. Good morning, André.
Morning.
Morning. Just a couple from me, please, both around the margins and the SDIs. You've indicated that you booked the cost in 2022, and it's going to get implemented over the course of 2023. Do you see the full impact of the GBP 15 million by 2024? I just wanted to clarify that, please. Sorry if I missed that. The second one is on the margin progression that you're forecasting for 2023. Can you please talk about the moving parts? I think on the positives, you basically have the cost-saving program. You probably have China reopening, potentially, obviously. Maybe on the flip side, you have maybe some of the mix effects with resources growing a bit stronger, maybe some inflation, et cetera.
Just if you could talk us through the moving parts and how you see margin progression getting affected by these factors. Thank you.
Okay. Thanks, and hope I heard your question well. The line is a bit difficult. In terms of the restructuring program we've announced, we basically are targeting a full year annualized benefit of GBP 15 million. As you know, when you make a decision to do certain restructuring activities, you obviously need to, you know, to book this in your P&L, which is what we did at the end of 2022 when we made the decision. There is a time to implement that. The benefit in 2023 will be GBP 6 million-GBP 7 million. You're absolutely right. There will be additional benefit in 2024.
Look, in terms of the various, you know, moving parts on margin, what I would say beyond the obvious fact that, you know, if China was obviously dilutive to the group in 2022 with the reopening of China, there is a benefit, you know, in 2023 that we should expect. That's obviously obvious for all of us. I think the fundamental point about the way we manage the company is that margin accretive revenue growth is basically, you know, the way we run every single operation around the world. We are of the opinion that when you are a high-quality growth business model, and you've got some strong, you know, pricing power to make sure that you've got margin accretive revenue growth discipline in every single operations is super important.
It starts at every single site, as we talked in the past. Look, of course we have, you know, span of performance, not every business unit at Intertek is delivering margin accretive revenue growth every single month. We understand that when you run a group like ours, but that's the approach we take.
To your question about the moving parts, in addition to the, you know, positive effect, this year that we expect from the rebound in China, you know, we'll continue to motivate, energize, and manage the portfolio to target margin accretive revenue growth in every single business with the right strategic focus in terms of which segments we invest in, the right operational discipline in making sure that we deliver superior quality for our customers to justify our pricing power. The very, very important pricing disciplines to make sure that, you know, we don't undermine the future earnings models for the company because that's what happens when you start, you know, reducing price. You know, it goes without saying that with a very strong discipline in terms of fixed and variable cost management.
As you know, we run the company with a very, you know, comprehensive, you know, performance management approach with our 5x5 metrics, financial, non-financial in every single site. As I've said, you know, many times on this call, the good news at Intertek is that, you know, data, you know, is what we are all about, and there is nowhere to hide. We know exactly where the opportunities are. Having said that, we are not perfect, and there is more fuel in the tank.
No, sorry. I meant that, when you think about the cost-saving program, which probably adds about 20 BPS to your margins in 2023, and you have China reopening, which is a tailwind to your margins-
Okay.
that's the upside. Your margins can actually go up maybe 40, 50 basis points on a year-over-year basis. Are there offsetting factors that can take the margins down? For example, do you have wage inflation? Do you have negative mix effects? Do you plan incremental headcount investments that can potentially limit the margin expansion for 2023? That's where I was going. Thank you.
I mean, of course, we always, you know, invest in growth and this is part of, you know, the portfolio, you know, approach we take. Of course, if, you know, you look at our guidance, you know, resource is a low margin, you know, business. We expect resources, you know, to grow, you know, faster than the rest of the group, and there will be, of course, some mix effects from that. Net-net, we believe that the margin is in a good place for 2023. Okay?
Thank you.
Thank you. We'll take our next question from Sylvia Barker at J.P. Morgan. Your line is open. Please go ahead. Sylvia, your line is open. Do you want to unmute?
Morning, everyone.
Morning.
May I ask one quick follow-up on restructuring, please? Just could you clarify where are the site consolidations kind of happening? Is it impacting any particular region or business line?
Specifically. Secondly, on Business Assurance, it seems like both ISO and the more bespoke sustainability type checks have been growing well. Could you maybe give us a bit of an idea of the trends within Business Assurance and then maybe some of the margin differentials there? Finally, you make a comment in the statement that you medium term expect margin progress for the business going forward. I guess, it's a difficult one because it's such a portfolio business. Could you maybe talk about why you think that overall for the group you can see margin progression over the medium term? Thank you.
Sure. Thanks, Sylvia. On the sites, you know, You know, the program we've announced this morning is covering around 24 sites and offices. You know, about half of these will be in North America, just to give you a sense. As far as, you know, Business Assurance is concerned, look, we are tremendously, you know, pleased with the performance, double digit, you know, revenue growth. We believe that, you know, we continue to take advantage of essentially, you know, 3 type of growth. The standard, if you want ISO certification, that obviously is very important because companies need to have the independence on their, you know, standards.
The, you know, non-ISO audit, which is essentially, you know, what I call, supply chain, you know, resilience, and this is all about, you know, independently auditing the risks in your operations. As you know, we are, you know, very strong in CSR, for instance. Then, you know, finally, you know, sustainability, where, you know, there is no question that companies understand that they need to identify their sustainability risk, both from an operational standpoint, but also from a corporate standpoint. They are getting better organized. They are trying to, you know, manage this complexity of multiple requests from different, you know, proxy rating agencies in terms of disclosures, and it's creating a lot of additional work for them.
They're all, of course, you know, looking at net zero and understanding, you know, what it takes to achieve net zero, Scope one, two, and three, direct three and indirect three, and then financially. Finally, sorry, you know, all the disclosures that are gonna be, you know, independently verified. We've talked about on this call the importance of CSRD in Europe, and as you know, Europe is ahead of the rest of the world. What is gonna happen for all companies in Europe is gonna be significant in terms of, you know, the need for independently, you know, audited non-financial accounts. That's really important for our Business Assurance business.
This is why we're doing, you know, so well and that will continue, of course. As far as, you know, margin, I mean, the reason why, you know, we believe that in the short, medium, and long term, the group, you know, will be margin accretive over growth is essentially based on, you know, the way we run the company, as I just explained to, you know, to the previous, you know, colleague on the call. Maybe if I were to go back in time, if you look at the progress we've made between, you know, 2014 and 2019, where we've delivered margin accretive revenue growth every single year, it is a testament on how we run the company.
It doesn't need to be, you know, 100 basis points every single year, but every five or 10 basis points, you know, compounds. This is the beauty of our earnings models, right? We are very, very confident because it starts with a portfolio strategy that is truly accretive. We focus on the high growth, high margin, you know, sectors. You know, product, which is the high margin, you know, side of our business, has got some very strong structural growth moving forward. That will obviously help us. No question about it. Thank you.
Thank you.
Thank you. Once again, if you would like to ask a question, please press star one on your telephone keypad. Thank you. We'll move on to our next question from Arthur Truslove at Citi. Your line is open. Please go ahead.
Good morning. Thanks very much. Arthur Truslove from Citi.
Morning.
Just firstly, on the product side, you obviously guided to good growth for 2023. Obviously at the 10 months, you talked about challenges in the softlines and hardlines side of things, which I guess was due to the sort of destocking cycle. Just wondering what you're seeing now in the softlines and hardlines side of things. If you could give us a bit of detail as to what you expect to be better than good and what you expect to be weaker than good from the perspective of that division. Secondly, could you give us an idea, you know, what sort of wage growth are you actually seeing?
I guess thirdly, to what extent do you see the trade division as having fully recovered now from a volume perspective, and I'm talking particularly on the oil side. Thank you.
Thanks. In terms of products outlook for 2023, as you know, when we say good, there is a range, and unfortunately we do not give, you know, guidance per business lines. I'll give you know, the way we think about softlines and hardlines. There is no question, and it's public information for everyone, that Western retailers, you know, U.K., European and U.S. retailers had
Overstocked their businesses as they went into the fall and winter season. They were worried about, you know, a change of, you know, consumer demand and eventually, you know, higher competition from low price brands, given some of the pricing they took. They went into, if you want, the season that's for us, you know, start in November, December, very, you know, carefully. Now, in our business, softlines, you know, we basically produce, you know, for the winter, till the end of March. I don't expect any change in softline hardlines in the first quarter. Have certainly you've seen some errors here in London, you know. Not change in the first quarter, but it will.
It is, you know, the wage growth at the group level because we do it. And we typically ensure that over time we maintain the power of Actually, you know, we do that maximum. As far as the trade division is concerned, you know, the fourth quarter was that the supply and demand, you know, all-time high compared to what we saw in 2019. It was not the case in the first, second and the third quarter. There is a obviously, beyond, you know, the peak that we achieved in 2019, our view is that, you know, demand for oil and gas will continue to grow for many years to come.
As you know, we have our own economic model in terms of supply and demand in all aspects of energy. While renewables is super important, still less than 10% of Oil and gas production for quite a long time. Delighted to be at the GBP 100 million plus, but there is more to go.
Thank you. Yes. Sure. Thank you, Peter. We'll now take our next question from Karl Green at RBC. Your line is open. Please go ahead.
Yeah. Thank you very much. Apologies, I think I missed a couple of minutes there. The sound quality deteriorated significantly. Apologies if I'm asking questions that have been asked already. I've got three questions. Possibly the final one for Jonathan because it's quite technical, but the first two, André. Just in terms of the essentially flat dividend announced or proposed year-on-year, just in terms of what that is or isn't signaling around capital allocation, should investors be inferring that you've got some meaningful activity brewing in the M&A pipeline or any other comments about capital allocation in light of that flat dividend? The second question, if my maths are correct, it looks like the trade business did slow quite significantly in November, December.
I appreciate it had a tough comp from the prior year compared to the other divisions, but just any incremental color you can add there. That final question for Jonathan, just in terms of the restructuring charges, it looks like over half the restructuring charges are technology related asset write-downs. Just specifically, you know, what exactly, what systems were they that are getting written down? And is it fair to assume that you're gonna get an immediate depreciation and amortization benefit from those write-downs? And if so, what sort of magnitude? I mean, given the residual life left on those assets. I hope you've heard all of that. Thanks.
Yeah. Karl, thank you. Sorry for the issue in terms of communication. Let me maybe fresh trade with the last question that maybe, you know, you guys couldn't really basically. In terms of oil and gas which is where we are in 2019 there is still
André, I'm sorry to interrupt, but I don't know if other people are having the same issue, but I your line is completely gone. It seems to be the same on the webcast as well as the phone. I think the operator needs to address the sound issue. The answers are inaudible.
Can you hear me now or not?
Only just, André.
All right. Sorry for that.
Fraser, can you hear us now?
Now, yes, but it was really deteriorating earlier. We could hardly hear anything at all. Do you mind just speak once again, please?
Okay. Karl, can you hear me now?
Yes, that's better. Thank you.
Can promise you we've been
Operator, that's gone again.
We still can't. Yes, we still can't hear him again. It's gone. We are still connected, Karl. Just give me one moment, please.
Thank you.
Thank you. Please do stay, Karl. They're dialing back in. Thank you.
Operator, can you hear us now?
Yes, we can. Karl, can you hear them now?
Yes. Yeah, let's try again.
Karl, can you hear me now?
That's much better. Thanks, yeah.
Okay. Can I ask you, did you hear the answer to my previous question on the trade division performance, when I talked about the oil and gas supply and demand, or do we need to start from there?
If you could start from there, I only got a couple of words. Yes, thank you.
Okay, good. Basically what I was saying is that, you know, supply and demand in the oil and gas trading business is slightly above 100 million barrels a day, which is the peak that we saw in 2019. It was not the case in Q1, Q2, Q3. Therefore, you know, the growth is gonna be, you know, really, really positive for us in trade, in particular with Caleb Brett. What I was also, you know, saying is that we have our own, you know, supply and demand economic model that looks at, you know, the long range, you know, aspects of the world of energy. While, you know, renewables is very important and investments, are gonna be very, very meaningful, it's still less than 10% of the global energy supply.
Our view is that, you know, investments in traditional oil and gas production and explorations will continue. And of course, you know, Caleb Brett will benefit from this continuous, you know, growth in traditional oil and gas, you know, production and supply. As far as question about trade in November and December, look, it was a very strong, you know, close for us, but we had a baseline effect as you can see on the slide, because November, December is when we started seeing a rebound in oil and gas, you know, last year. As far as, you know, your question on dividend, a few years ago will continue to the.
I'm sorry. We lost it again. You may continue now. We can hear you. Go ahead.
Yeah, Karl, did you hear the dividend question? Did you give me an answer?
That where it cut out. I got all of the oil and gas on trade. That was great. It cut out when you started talking about dividends.
Okay. Dividend, let me just start again. As you would recall, we changed our dividend payout policy a few years ago, and we moved to a 50% payout, which is our policy. As the EPS improves over time, obviously the absolute payment of dividends subject to the board, obviously final decisions will follow this policy. This is, you know, where we are, and we believe that 50% payout is a good approach given the investments opportunity we have organically and inorganically, and that's the flexibility that we'll have to retain to invest in growth. Okay. Did you hear that?
I did. Thank you.
Sorry.
Yeah. Karl, on the restructuring question. As we said, the restructuring covers sites and offices, head count and some upgrading and harmonization of technology. The overall cost is GBP 27.4 million. As you said, a component to that relates to asset write-offs across the three areas. There is a relatively small impact from that going forward, but that's been built into the guidance and the numbers that we've already given.
Okay. Thank you.
Okay. Apologies on our behalf for the communication issues here. Hopefully you got all the answers you wanted to your questions. If you have any more questions, Denny is available. Thanks again for your time today. Apologies for the technical hiccup.
Thank you. Ladies and gentlemen, this concludes today's call. Thank you for your participation. Stay safe. You may now disconnect.