Just wanted to to welcome you all here in Changzhou. I know for many of you, it's a long trip, but as well, you know what? We're often in the broad spectrum of theHS Group. Those far reaching regions compared to Europe are usually the more interesting one because they're in a more dynamic market and it's a more fast growing market. And I think during the the next 2 days between China and Taiwan, you're going to see a little bit what we do in the regions and some of the newer activities that we are on taking these regions.
Before all, I just would like to thank the local team here. I think Juliana She's not in the room on Angela. I think they spend a lot of weeks on the months to reorganize these events. So, I know it's a lot of work to be done. I just wanted to thank, the robot team as well as, thanks to Camilla, Camile, sorry, for all the work she's done.
She's Geneva. I think a lot of you has exchange email. We first want to do the coordination from Europe or from Asia to to be in Changzhou. So thank you for that as well. So the the format of today's, session is basically a presentation from my side and Dominica, our new CFO, this is 1st Investors Day with the bachelor's group.
So So if your presentation is about 1 a half hours, then after that, you will have a local presentation from the local management, the regional management, how may I check that's given due for the local management. Just to show you how long since how long we've been in China, Stephen already mentioned a bit yesterday, we've been in China for the last 29 years, completely the 140 years of the history of the Turkish group is quite short, but still you tell you look at in terms of growth Tomo Expansions. It is now China 1 of our largest and in fact, it's our largest affiliate worldwide, the in term of growth new as well as in term of headcount. I think we are up to 16,000, colleagues here in China. So on broad spectrum of what we do, you'll see during the to lab 2.
And then, from, the presentation, we'll move to, 2 very specific presentations, one from a a month for EHS. Just to give you an idea how we migrate from an affiliate that started in the international trade which is focused purely on consumer when we started in, in China and slowly migrating toward portfolio that is nowadays 60% or close to 60% is to a domestic business. Not that we have walked away from the consumer goods, I would say we have expanded the rest of our portfolio. During the 29 years, we've been here, we have grown with the local market. We're expanding to local market.
I think the air fell on the HS is a good example of how we can expand into this local market. Because the market's opening up the regulatory regulators in China. He's starting to open the market. They have a schedule. They we are well positioned into this, upgrade versions, you'll be able to capture some of those, opening up the market and benefit on that.
So AFL and EHS will show you a little bit how this expression has been made and how they are really focusing the local market versus the international market. That will finish the afternoon on a visit to one of our customers. It's Metule Toretto, is actually a Swiss company with not a Chinese company, but it's a Swiss company that has, an operation in Changzhou. I think the the party secretary yesterday already mentioned this quality of international companies settled here. So this is one of them.
They do position in Streamman, to interesting part of this visit is that they use in the manufacturing, a lot of the, what we call, the world class manufacturing concept. Which is something that the address group has implemented for the last couple of years, I would say, a year or so. And it's interesting to see how this is applying to the manufacturing locations, and you'll see a lot of the similarity, what we call the world class services is a structured way to look at manufacturing into the services. And this is something that we've been implementing our labs, and I will make a few mention on the on my presentations. To to finish the day, you will have to pack your bags, the rush to the airport and take the flight to, to the next location, which is, which is that way.
The then we're late evening arrival for the next morning or early start, unfortunately, but you will have a look on how the difference is between what we do in our in China and the portfolio that we have in our in typing would be interesting. Also, the cultural aspect of the 2, 2, 2 places. Changzhou and Taipei just to see as well. I think it would be for those of you who have has never been to China or to Taipei would be an interest our aspect to serve differences in culture. On that, we start that to be at, in 3 minutes.
So, maybe just to to to to carry on because we stepped away pretty in 3 minutes. So, just to say that, in China, we started 29 years ago. The main business was consumer good. In fact, the hamburger and myself was part of the the first, Opera users, I would say, of Asia, China has actually started a consumer good, activities here. I think I was based in, in Shanghai for quite some years and then we expanded this portfolio.
And it's interesting really to see, the extension of, of the country itself. And you'll see that if you've never been to to Shanghai, these are first time you'll see if you can move backward 15, 20 years ago. What you see as a put on airport where we landed is in fact was rice fields. There was actually nothing there. And less than 15, 20 years, you've seen an amount of building enough about the infrastructure, the Chinese government has built.
And Changzhou is a little bit the same. They are betting more and more sophisticated. They are taking more and more infrastructures terms of supporting the economy, in terms of, communication port or on the transportation hub and so on. So this is why we're here. And again, this afternoon, we'll see some of those facilities.
2 more minutes Toby. So maybe just to stay on the personal level, for those who doesn't know, I was born in Hong Kong, but, actually, my parents are from my nearby here, Sean, and Ming Bo. So this is why, to some extent, it's very interesting for me to be back here. Because, what change do is not exactly home for me, but it's not that far from our home from home. And a lot of the people in Shanghai is actually coming from the surrounding on Shai because Shai is an immigration, a town, I would say, we can count on a lot of the people.
So someone sent out a party secretary yesterday was asking me which are related to my parents coming from to figure out whether they're coming from distribution or not, which I have no idea. So, difficult to say. But on that, let's wait one for one more minute, then we can start the webcast. Correct? I'm running out of ideas, though.
Okay. Maybe maybe I'll, talk a little bit. Has do you know if the webcast
has started?
So the webcast has started, could I, can I just say to people who are on the webcast that, you are unable to ask questions over the phone? So if you wish to ask a question, could you please log on to the conference call and submit it by text? And with that, Franky, if you'd like to start presentation. Yes.
Thank you. Just to finish on my background 25 years in the Azure's group. I think, Steven yesterday was 20 and, to be said was, was a short time frame in terms of the SS Group horizon. Yes, 25 years and I have a few colleagues in the rooms. He's longer than me.
27 to 32 is from correct. So, I think this also shows the dedication of the people in the HS Group in terms of, the long term evolution or long term vision of the group that we really means to develop the businesses for the long term. So let me start the the the the presentations with, a slide that you most of you are knows very well is what we call the business print these are really part of the culture of the desk group, HS group, integrity, respect, leadership, quality and professionalism. This is exactly what is behind everything that do in the field in the office and in the laboratories. Haven't safety and sustainability is something that will develop a little bit more during my presentations today.
Because I don't think we talk enough, especially in health and safety is something that we do a lot in the group, but we don't talk enough, and I just want to take this opportunity this time, due to mentioning being more about this aspect. In terms of the ops council, there's, couple of changes, I already mentioned Dominique has joined us as a new CFO since February. That you see that the crystal handler is the CIO. In fact, Crystal was already part of the HS Group, but the CIO position was not part of ops canceled. And he has now moved to the ops council as a full full member of the the management team there.
There's one less region our colleagues, Pauline, earn, has decided to retire. So in fact, the Western European region has been split in in basically 2, a big pit and a small pit. And we have a big piece called now Africa, Western Europe, and the some of the smaller countries has been moved to the Central Europe area as well. You see my face on the North American CO positions. In fact, that he's already someone there.
He's not an OC member, so I don't actually run this, this region myself. Whoever colleagues down and running, I'm just taking the the roles of, at interim until this, this person is up to a certain level before we decide whether he would join the officer or not. To be mentioned, you've seen the press release. So, would not extend too much on that. You can ask questions later on to, doing these sessions.
I think the key aspect is we need for the second half of twenty nineteen. We have now a low single digit growth as a guidance, that as well as that we have, also changed our our view on the annualized saving for the optimization plan from, what we said, the 75,000,000 to 90,000,000 which we're quite comfortable on that because of the latest information we have from this, this plant implementation and so on, we're comfortable with this 90 meter. But I think, build this trading update, it is important also to look at the term of a midterm and long term, drivers of the tick sectors. They remain just, quite strong that this is how the presentation is gonna be showing this and, what they get, the, the, the key drivers are there. So from the trading update to the 2020 plan guidance, The only thing that has changed here is the first, first boxes.
What you say is the solid organic growth for mid single digit is mathematical. If, to the 19, we're not able to achieve, a higher growth, then I would say we decided to change these guidance as well. Because in the in terms of the average combined weight across the whole plan of 16 to 20, it was a little bit of stretch to target the mid single digit So we have now revised that to a solid organic growth for the period of 16 to 2020. But what is important for me is the rest days are more so that the 17% margins. This is something that we believe in with the management.
We have all the means to achieve it, and this is something that I would say I'm quite comfortable to say that we will get it there by the end of nextyear. So if I look at, drivers of the market, you'll see here a lot of what we do is driven by regulations. On the market size here is about 230,000,000,000. You can talk about the 350,000,000,000 what do you put in there? So I've seen the different, different size of the market, 350,000,000,000 dollars, $230,000,000,000.
We usually use the $230,000,000,000 in the interest group. Of which 55% is in source, whether it is done by the industry themselves, what it is done by the government, a lot of institution. And in China, for example, there's, tens of 1000 of, local institutions that does account activities, the government related. So the, the actual, the testing of the inspection is not accessible to the market. But you look at China as well, these markets are opening up.
So we we'll see this migration of this 55% toward the 45%. So the 45% is what is accessible to what we call the tip sector. This 45% will be above 100,000,000,000 and you look at on the on the chart on your, right hand side is the digits group is a market leader with about 6.7 percent market share, although the 100,000,000,000. The top 20 of our peers occupied 40% market share, then you have a long trail of a lot of companies whether it is regional players, national players, vertical player. So it's a long trail of the the of them.
So it is actually a very fragmented market. The with a fragmented market like this, there's a lot of conversations to be done in the over time. I would say consolidation, not necessarily between the last peers, but certainly in terms of vertical, in terms of, regional approach, there will be certainly some, consolidation. We've seen that in the past, but I think this will carry on, in the future. The drivers.
As I just mentioned, a lot of what we do is link to regulations. So you look at this chart, about 60% of what we do in the testing inspection verification. Is directly linked to a certain regulations, after global level, national level, or regional level per industry is linked to regulations. The other 40 ish percent that not necessarily linked directly to the regulations, but they're indirectly linked to regulations. A lot of our cost would be asking us to do quality control because you think at least somewhere down the road, they would have to comply to certain regressions in their countries or in terms of, trade.
So somewhere somehow, you can say that most of what we do with very few exceptions is really linked to one of the others to regulations. But regulation is not only things that drive, our industry. You also look at global GDP. The volume of goods is being produced. It's all something that, the inference, the way we're looking at the market extensions.
You also look in the outsourcing. I mentioned earlier, with this outsourcing from the industry to the private sector, whether it is outsourcing from the government to the private sector, then, the regulation of, of, some countries, inspection, testing requirement. So these are additional drivers. Supply Chain Complexity is also 1. China is a good example.
Where from a more neutral kind of, supply chain from Europe that with the emergence of China, if, several years back, see much more complex supply chain in terms of our logistics and so on, where China has become a quite important supply chain for the for the, manufacturing base for the global supply chain. So this is also the complexity, the extent of supply chain inference the tick sectors activity as well. So there's 2 little orange bar there, which is sustainability and data. These are the new emerging trends. Sustainability is something that we've seen since the past 5, 6 years, but you're seeing a much more strong push into this now.
A lot of places that we go to talks about ESG, environmental, social governance. So this is something that, in terms of market vision, I think, a lot of the industry started technologies of data, and I will develop a little bit more during the presentation. Data? Same thing. We talk about digital, when you talk about digitalizations, what is on the background is also data.
So there's a lot of, new requirement for data. These are not new drivers on that. And these also create additional drivers for the tick sectors. And this is why this part of a 1000000000, 230,000,000,000 will keep expanding. Good thing about all those regulations is they don't they're not shorter.
A regulation is put in here to last. Some of the regulation in which we're still working on dates 20, 30, 40 years. So what this critical is enforcement. Once you have the regulation, you need to enforce. Well, often, the new regulation has less enforcement, but a more mature regulation will have a really strong enforcement.
And this is where, what is really driving the market for us. Capital allocations, is a really simple chart to margin growth. The evolution for us in a simplistic way is we move towards the right hand side, upper corner there, where we're looking at the Azure as a group, so we look at the more high value added services to our customers. Think you have a presentation with, with the, or the owner of main point here, Steve, Steve, and see how main point is typically some of those migration we're trying to look up in terms of, more complex, services, more digitalized and of higher value to our customers where that we need to, to pay a higher price for the better return for the better value added that they get from, from this kind of activity. This is what's, the where the addressable wants to be in.
I also mentioned, PSC, which will run a corporation services is an active, is a disposal that we made early this year. It doesn't really exactly fit into the lower end of the the spectrum of the chart. It's more mindful intensive, but this is also to show that not only we look at the different value, but we also need to look at the strategic importance and the long term evolution. PSE is a typical one of those acquisitions or disposal where in the long term, we see the market is changing. The way they're doing business is service is changing.
Your capital needed is, is going to be more intensified in terms of CapEx. So this is why at this stage, we have decided to dispose of that. So not only these are the basic parameters we're looking at, but the strategic importance of an acquisition is our disposal is key as well. So I think Dominique would talk a little bit more about the exact parameters of those 2 acquisitions to you, the whole disposal, to give you a better look within the 2 of them. It am an artificial accelerations of M And A.
What you see on the CD certification business enhancement is mainly due to, to main point, because it's a large, a large acquisition compared to most of the bolt on we have done for the past several years. And accelerations, we've done 12 acquisitions compared to a year to date compared to 9 for the full year of last year. We do focus on growth areas, even in our industrial, the growth areas we're testing because there's a lot of growth in the testing areas. So in it's really focused on that as well. AFL, CD, as I mentioned, we have a full pipeline.
There's more to come, certainly. Some of those targets by looking up, a larger size, not necessarily the merger with my 2 or 3 largest peer. We're not talking about that. But more focused on the mid sized players, but larger than what we used to do in terms of a bolt on acquisition. And the last bullet point there is, all those acquisition this will be easily positive by 2020.
This is a very busy slide, but, so I'm not going to extend too much on it, but I should just take a couple of example. Is a a slide that I wanted to put in here to show you how some of the bolt on acquisitions that we made in the past has created a impact to the SRS Group. If I take SRS Blue sign, is a small acquisitions that we purchased, almost, 10 years back based in Switzerland. They specialize in the chemical Consulting. From then on, we expanded this chemical consulting across the globe in Europe and in U.
S. And Asia. And we use this technical consulting as a backup to the testing. So we're bundling our services to sell the consultancy as well as the testing in terms of a chemical residue and chemical treatment for the textile industry. In fact, Blue sign today is the only would say only standard that has been approved by the 0 discharge coalitions, which is the consortium of textile manufacturers in terms of discharge of chemicals into the the water stream.
Their standard is the only one that's gonna prove out the gold standard by the 0 discharge correlations in terms of AQ variance. This is a good example of how we're taking a consultancy business is quite small in Switzerland. We have implemented that globally, and we have used this as a key driver for some of the chemical test thing that we're doing the group. The other one I would take is, SGS, bulk premier, next generation sequencing, NGS. There's something that's needed.
2 days, we're doing a lot of this gene sequencing, the DNA to a normal PCR methodology. NGS is a next generation. So it's not a targeted methodology. It's a scanning methodology under the 4 foot authenticity. It is needed for the future.
So what we did is we purchased a rather small company in Portugal and we talked to know how we expanded that into France, Germany, are now in China. In fact, I don't think we used it in Changzhou. We're studying in Shanghai where we're using this technology to complement a lot of the food testing, specifically that authenticity has become a critical aspect of the food safety on this demandable consumer. So this is a good example of, 2 good examples of how we take a small acquisitions because both, both of them are rather small, where rather small, blue side is not anymore small. And we just took it, helped the group to grow as well as growing these activities ourselves.
So it's a really good complement between the group and those small acquisitions, and this is why the bolt on works very well for the, for the HS Group, and we have the footprint to expand those, bolt on acquisitions. An update on the digital evolutions. This is quite interesting. I made a lot of comment about digital. I would say is a learning curve for the Edgeoscope as well.
4, 5 years back when I started, And I said to myself, digital disruptions, digital drive, we need to find something. We need to find new services. We need to to take a opportunity of the market. But over time, we started realizing with my teams that there's not that many new digital, pure digital services out there. Where you can just go and make the new solutions to the customers because time to market is longer.
You need to explain to the what is all about. Technology changes so fast that the customer is hesitant. When you look up the totally new solution, totally new technology, And following a new solution is the testing inspection that leaves your market where you just come up with a total new solution is sometimes difficult. So what is more interesting for the Jewish group is the evolution of our existing services where you're starting to digitalize the existing services. The single inspection that we do, how do you look at the internal disiritizations to offer better value to our customers, or to offer better productivities all the better executions in terms of digitalizing that.
This is what we have been focusing on more in the past 2 years, where we're looking at What do we need to do to evolve our existing portfolio in the more digital age in terms of customer centricity? On the back end of pocketivities. And I will give you a couple of examples on that. So this is where we're looking at. If you look at the chart, I just put a few things that, we've been doing, you look at DG Compliance.
Now we are about, 5,000,000 documents index, that we're scanning, 30,000 or 10,000, sorry, web page on the daily basis. This is a regulatory, compliance approach to our customers. A typical, manufacturer of chocolate, for example, that sales chocolate in 100 countries would need at least 6000 standard minimums to to monitor, to be able to comply to the local regulations. And this is the digital structure they have on that. If I go that to more specific chosen Net is a better example where we're actually digitizing the flow of what we were used to do.
Chosen Net is a equivalent of what you call the TIL. You know what? This is the paper structures where a transporter that goes into Europe has to clear all the customer of each of the countries if you, for example, you take, a track that goes into Turkey and get out of Spain, this track, this Transporter would have to clear every single customer across Europe, to make sure that they have their compliance. So you have to, a lot of paperwork. What we did with TransNet is a service that we had in the past, but we actually digitalize it.
So we made 20 plus agreement with all the customers in Europe. And now our systems have been connected to the systems. Where the transporter, the track will register them itself with our system at the entry of the the point in Turkey. And all the custom clearance is done by our system. So we're basically helping him to clear all the customs.
We can settle the tax well, on his behalf and we get the tax back from him. The we're only intervening again in Spain when he has gone through his journey and all the in between step has been cleared by our system. When in little interventions, we've done 600,000 transaction in 2019, the with the macro and IQI acquisition, we're going to do a caregiver origins as well, our custom configurations combine with that. So this is a typical example where from a normal HS inspection where we used to do inspection at the at the some of those to checkpoint. What digital is in that.
We are connecting this with the custom, and now we are dematerializing the whole paper flow. And this is something that's very interesting for for our customers because they don't need to work around this safe paperwork. Everything's been not deal with the system average, clear by the system. Another example, this is more linked to the digital age giving us new opportunities. We're still testing inspection certifications.
So we're still doing the product testing. We're still doing a audit and verification and we're still doing a system and certifications. With, you know, cyber security field. So you see that there's more and more regressions. I'll give you an idea.
I was told that by 2025, There will be 2500 connected devices. It's gonna be connected to any kind of, network per second. You can think about the 2500 per second. You make the math on a yearly basis. There's a lot of devices being connected.
So when you connect the device to a a network, one of the key issues is Office Security. And this is where there's some more and more countries putting regulation in place. To control these aspects, to protect their network, to protect the infrastructures, to avoid hackers, and the cybersecurity issues. The European Union has, put the interactions, the cyber safety act, by 2021, there should be a certain requirement for some of those products to be tested, 3 level, the low risk, medium risk, high risk, low risk could be self declared by the manufacturers. High risk has to be tested.
And the medium risk, there would be part of that would be have to be tested by the 3rd party. While the other ones would be self declaration. The US is, having a requirement. The Chinese government, which we're here is also looking on new requirement, of, service security and IoT devices. So this is, really a a set of, regressions.
It can drive the market. It's going to drive additional activities for the sales group. I mentioned earlier, Dassault Group is not looking at becoming our IT company. We're more focusing on the hardware, a design because the hardware design has an incidence on the cyber secret of the product. So I'm more looking at the, our core skill, which is testing inspection, certification.
In product. I'm not looking at the software side of the the process. They own the company for that. So in terms of, locations, you've you know, that already, last year, I mentioned that we have the location in a in a Madrid, and we have now created the location in Grats. And there will be 2 additional locations that will be opened up in 2020, one in, in Asia.
We have not decided where. Because there's quite sensitivity in terms of where you put a cyber security lab and they're all within North America. So this will just be complement our network in terms of growth in terms of potential of, of capturing on those regulations. The third example is, again, internal optimizations. We looked we talk a lot about, robotic optimizations.
So not going to expend too much on this slide. You probably see I'm not sure if you're going to see some of those in Changzhou. I think, the the robotization is more, in Shanghai, unfortunately. But it goes back to what I've seen, I'll show you that in some of the previous investors' day where we have created those internal processes, this box that we were helping to optimize the flow, but now we have connected those flow into robotic arms that allow us to actually process and the work on the sample itself is not just, optimizing the flow is we're working on the process itself. The number of saving in terms of headcount looks small 50 FTCF, 15 FTs there.
But you look at the fragmentation of the Sures portfolio and you just choose to add, start to add, all the project we do, one after the other one, Jack Jeweler headcount saving is not small and we have a lot of those going on within the group. So you could, figure out that you start to accumulate all those small saving would be an interesting evolution. And these also, of course, of having safety is better for employees in term optimization. The efficiency as well. I just need, sorry about that, the screen has 3 3 still.
So operation integrity, world class manufacturer. So I think it's good to, to talk about that. As I mentioned, in terms of having safety, operational integrity, we don't talk enough about it, world class manufacturing, world class services, and extension of, the automation where we we I was just talking now. Let me start with, world class manufacturing or world class services, what we call it in SGS. We started this project a little bit over a year ago.
So it's been deployed across the 20 largest lab of this group. And you talk about the last line there, 20 to a 200, the CASM event. It doesn't sound a lot, and it is not a lot. We should be in the thousands. But we started this journey, a CASM event is typically a small improvement steps that we do in the labs in a very focused manner And the saving could be a few $1000 to $50,000.
Nothing in the medias. We need 1000 to 50, $60,000. But the idea is to have 1000 of those small effects. And the return is typically less than 12 months. The concept of the world class services is to have a lot of small steps undertaken by the laboratories themselves are not the global corporate schemes where the lab technician, the lab match, understand which part of the process they have to improve, and you start to accumulate a lot of those small CASM events with the return this less than 12 months to start to communicate to saving.
And this has been done by manufacturing sectors, and we're doing that now in the insurance group in terms of services and in terms of, laboratory testing our own sectors. We'd expand that into the inspection path. Very interesting, process. Again, the 200, the project we started do have the 12 month return, and this is going to be expanded across the whole network as we become more and more. Madrinda.
The good thing about that is the saving is sustainable over time, and you will have to impact the efficiency on the cost structure of the group. One of the key pillar of, world class services is actually health and safety, what we call enhanced operation integrity. You look at this chart. We don't talk a lot about it. We have a global team on that.
We have regional team. We have global team. What we want to make sure is that all our employees goes from safe and sound in the evening. There's no reasons they should be in the house way when they're working for their chess group. So this is one of the key pillar of what we do as a company.
In fact, this was also required by a lot of our customers because they have criterias that says that you have to have a system in place to ensure the safety of your colleagues, especially when they go into, sites like, oil and gas, like industrial, there has a lot of danger, and we need to do risk assessment to make sure that our employees is safe and sound when they come out of the work at the end of the day. So you look at the the numbers, we actually reduced our accident rate by two and a half times the last 5 years. This is a, a effort that we have put in the group and showed that, this is This is pushed out, and we actually have almost the best in the in the sectors in terms of, our health and safety criteria. So a lot of audit per year, a lot of risk assessment per year, but this is part of the what you need to do as a as a company to ensure that, we are up to the best in class as well as the 4 hour employees that they can work in the sound and safe environment.
This is just a chop to show you, the progression of the, the, the, the KPIs. These are specific KPIs that the industry used, the, what we call the, last time in season rate and the total recordable incident rate. And these are typical criteria that the industry uses to ensure that you are within a certain so certain, index. And again, if you are too high, some customers would not use you as a service provider because you have to be lower certain level in order to beat for those projects. That to do a way to finish the presentation is, what is the important for that shared scope is, society, what we call value to society.
This is a job that they most ready to beat the supply chain is whatever the exchange code procures, we are very strict with our own supply chain about in our procurement. In terms of their supply chain, in terms of human right, in terms of, procurement policy. We want to make sure that we don't procure good services for the HS Group with the suppliers that doesn't fulfill our own vision of sustainability. This is important. Direct operations is what we do as a good company.
We are very strict on that and we'll see in the next slide, some of the KPIs. We want to be the most sustainable company in the tech sectors and in the business, services sectors as well. So we put a lot of emphasis by winning strict car policy human capital policy, building policy. So we restrict on that. We are a capital neutral company for the past several years.
So this is something that is important community as well. So what we do, Keith, to comment in which we operate. So really important for the coach of the group. That services, services is what we offer to our customers, that we as a group believe that a lot of what we do is helping our customers to be more sustainable. Focusing on their sustainability, ensuring that our services create a sustainable value to their customers as well.
So the services we're offering to them is we have them to be more sustainable. Under stakeholders, they're involved in that. It's for their own employees. Our customers, the investors, and the general committee, which we serve. You look at our value to society to some of the criteria we have, we've been at the 6 consecutive years now for the down johns which we index.
The 40 four good index is the 3rd year that were included on that. Eco Vadis is an important index, standard in France, where more and more customers asking you to offer the Eco Vadis certification and for the last 4 years been, goal rated. So something that's where we're, like, proud of. And the new the new award, I would say we've got, a friend that was told that, PwC has given us the best integrated report, annual report award for the first time. So I'm quite proud of that.
But what is more important for us to continue this journey in terms of sustainability and capabilities and important aspect. We do a lot to ensure that we don't have a major carbon footprint to, to the society. And this is what we do on the other criteria, but not go further. Again, a busy slide, but I just wanted to put in place, when we talk about sustainability as to the drivers for the future. So to illustrate, we already offer a lot of services to our to our customer installed system with the whether it is, what the management with what is GHG, GHG, greenhouse, gas, emissions, verifications with awful lot of services already.
But you look at the evolution of this, the market, even in the most traditional fuel like minerals, there's more and more demand for sustainability services. And here is an an idea what is out there and what is coming next to to the market, responsible sourcing Circular Economy. The mining sector is not only about anymore the miners and the traders pushing for our services. Was seeing now that emergence of the end user, the automotive sectors, the consumer sectors asking for more responsible mining that forces us to start to look asking us to start to look at what services we can offer to them. To help them to ensure that their supply chain is more sustainable and you look at all those products, one of the raw materials is is the raw, the raw materials, the mining, the cobalt, the, the copper, and all those things that are using their own productions.
So this is something thing because we're seeing an increasing demand. And is with, a new opportunities where we can create a new service portal for you to ensure that we can help some of the end users in terms of, sustainability in their own supply chain. My last slide is about, just to conclude on that is about the megatrend, that we talk a lot about that. And I try to reformulate what I call the megatrend for the tick sector. I mentioned 6 of them is more connectivity, health, health, and wellness, mobility, cyber security, systematic and climate administration.
These are really key themes that we see on emergence of regulations measures of, of need for my customers, our services to be demanded by customers. And we we were looking at these, 6 sectors, plus orders to see how we're going to re strategize ourselves, how groups are able to capitalize on these emergence of, of them. If I just take connectivity as an example, connectivity is not just about 5 gs and how you connect with the mobile phone. You'll talk a lot about, the connectivity connectivity itself. We talk about interoperability, how does 2 product community with each other?
This is why one of our partners, Adient, that you were going to see tomorrow in Taiwan, we can talk about how interoperability works. Really how does two product to talk to each other and how does the flow goes up? Then you talk about data privacy and data security, which goes back to cybersecurity as well. So these are really key themes in the future that we need to address in terms of new service, golf, the welfare. Helping wellness.
Absolutely. We're doing that, but, there's more and more demand. The wellness side is an interesting evolutions, in terms of, cosmetic, personal care, product, and so on. It's just a new version of the, your portfolio. And I just already mentioned about climate and nutrition is already something we do.
But the demand in terms of testing and, in terms of, new requirements increasing on that. On that, I think, I will pass the floor to a Dominique that will be more focusing on the financial objective and financial framework of the insurance group.
Thank you, Frankie. Good morning. It's a pleasure for me to talk to you this morning. As Frank, you mentioned, I joined the company, back in February, so middle of February is almost 9 months. In the role.
And before I start my presentation, I have a question for you. Was the most often question. People asked me when I was announced or in the 1st couple of weeks or months after I joined STS. Any idea? The question which a lot of people had What are the reasons that you joined SGS?
And for me, it comes back to a couple of key criterias. 1st of all, I love business services. And the tick industry is an important part of the business service sector and has on top very interesting structure growth fiber. Secondly, I used to work for global leaders and we've no doubt we are truly global and we are a leader in the industry, but then of course, very important is strategy and people. And when I had my first interview with Frankie, I was very impressed by his vision for the business for SGS also for the market, and by his strategy, and what he would like to accomplish with his team, needless to say, of course, his method experience in the in the company.
Subsequently, I had a meeting with the chief HR of South Jose Maria. It's also also here. It was a great meeting We talked a lot about operations. I really enjoyed this meeting. So after this after I met this 2 key guys, I felt, hey, there, there is a good chemistry.
I also felt that I can bring something to the table that I can bring something to the company for my experience. And finally, I had a couple of meetings with several board members, and I felt strong support towards the management and towards the strategy, which is ups would be key. So finally, I was very happy when they offered me when they offered me the job. Now let's talk about more the financials. I would briefly go through the financial highlights, but then spend much more time on what kind of initiatives we're doing?
Are we accelerating in order to drive the performance of our company? I will talk a bit about capital allocation about the way how we achieve the 17% plus next year and then conclude. So what are the key elements of our company in general? We have a strong track record of solid organic revenue growth and a very resilient profitability. Our cash flow generation is very strong, outlined by, yeah, if you look to last 5 years on average, around 80%, cash conversion ratio, and very strong free capital generation.
Our returns are very strong, several times more than 3 times based average cost of capital, and the company did a fantastic job over the recent years to reduce the networking capital. These are very strong fundamentals in general. If you compare to peers and here we have taken numbers from analyst reports and aligned the KPI. So our numbers to to the measures because sometimes the measures are a little bit different so that we really compare apples to apples. But in summary, we can see We have, net CapEx and percentage of revenue, of course, depends a little bit on the end businesses.
It's in channel where we similar with the peers. We have clearly best in class return on invested capital as well as net blocking capital. And finally, a leading cash flow conversion. With this in mind, I think we have very strong fundament but there are opportunities that we continue, yeah, to accelerate our profit growth and our cash flow growth. And here, I want to spend a bit more time on it.
I will not touch on all the points, and and then maybe my part is obviously a bit more financially related but it will cover a couple of key items. On the one hand, active portfolio management, a EV age driven performance management, what we what we currently roll out, the structural cost optimization program, which we announced, with the half year numbers, then obviously efficiency gains, I give the example more related to finance, Frankie, pointed out several other initiatives if we think about, the initiative to work digitization, but also world class services, all these things will provide efficiency gains in the years to come. I mentioned before, working capital was very well managed, but I do believe on the AR side, there are still some opportunities to continue to improve. Procurement spent not a lot of time on it, I think great job was done so far, but also here, we have a couple of more things which we can can check. So let's start with our portfolio and I have to explain this slide a bit more.
So what you basically see here it's a mapping of our activities based on web market growth and on the relative market share. So the qualitative market share basically means if we are the leader, we are on the right side of this slide with the activity because we have the relative market share above 1. Right? If we are follower, if we're not the leader, we are more on the left side because there's somebody that's bigger than us. So relative market share is below 1.
Then we mapped what is the market growth potential? It's more more, let's say, over several years. You have businesses who have, let's say, a mid term growth, more low single digit, up to mid single digit and you have businesses that grow mid single digit, high single digit or even double digit. Obviously, our intention in terms of portfolio management is to move more to the businesses with high growth and preferably we have a strong relative market share because we know if we have a strong relative market share, the ability that we get that we achieve great returns is just higher. You have the color codes indicated for all these activities how much value they create from value destroying to, to to areas where we have a positive EVA.
So we create value to what I call wood value creation, they are mean that we clearly have a ROIC, which is, yeah, doubling, at least doubling, the double of the of the weighted average cost of capital. Then of course, we have a lot of businesses where the ROIC is several times higher than the than the weighted average cost of capital. If you look to the box and and the and the and the percentage indicate how much of our group revenue are roughly in this boxes, right? So if you look to the box right down, So market growth lower single digit to mid single digit, but we are the clear leader. This is a great position which we have.
In this in this part, you find primarily our trade activities, then in agri and in oil gas chemicals, and energy minerals, but also our certification activities, and they have great returns. Because one reason is obviously that we are the clear leader that we have a very strong relative market share. So these businesses are very important because we can grow them organically. There's not a need of acquisition. We, we have limited need for additional CapEx and we generate a ton of cash.
And with this cash generation, that allows us on the one hand to pay a very strong dividend, but more importantly, to allocate more capital to areas where we see more of potential in terms of growth, especially to the bucket, left up. So basically areas where we have higher growth, market growth opportunities, so above 5% up to double digit. And there is our relative market share not above 1. In some cases, it will stay below 1 because maybe the market leader is much, much bigger, but to improve the relative market share will also help. So there will be more capital allocation in areas like within CIS, E and E, in food, in life, because these are very interesting parts, higher growth, great returns at the same time.
Then we have the area, the segment left down. So basically market growth lower single digit up to mid single digit, we are not the market leader. Some of them, we are very close. Yeah? Some businesses our relative market share is maybe 0.9, right?
So the leader is is 10% bigger than us. It's not it's not massive. So some of them have a similar, have a similar criteria like the right part, but we are not the market leader. And and also here, strong returns, if you think about our soft line business, very high returns, now soft line growth rate is more, yeah, below 5%, but it's a great business and, and of course, we we we aim to to strengthen continue to strengthen this business. But there are also businesses, as you can see, who destroy value, and there we have to do something about it.
It is obviously, a rather small part. If we look to the to the overall to the overall, pies, but there are areas where we continue to actively pursue, a disposal or looking for partners for which this business adds more value than for us. And this is mainly related to various field activities. Frankly mentioned already at the disposal of PSC, acquisition of main point, and I think, these two examples actually illustrate quite well what I said before, what I said on the slide before, we disposed PSE, I think it was a great, journey for PC WIFEN SGS. The business was acquired back in 2014.
And very good growth over the time, but the characteristics of this business, we are changing going forward. So it's a noncore activity for us. So we disposed this business for a, yeah, valuation of around 10.5 times EBITDA. At the same time, we acquired main points. I don't want to go to to the details.
You know this transaction in detail, and then we have also Steven there who's running this business and still, holds 40% of this company and he will surely explain you much more about the potentials, which we have, but we are all very excited about this business and how it fits well in our CBE business in general, and the fact that it should create after the year 1 already a positive EVA. Now if you look to our business units in terms of capital intensity in terms of returns and M and A appetite. I illustrate here the 9 different units Please consider if I talk about CapEx intensity or net bargain capital intensity, we always compare relatively to the group. Right? If we say higher, it does not mean it has high, high working capital needs.
It's higher means it's higher than the group error bridge, right, So the average is basically our CapEx intensity, which is in the higher 4% area, and for working capital below, yeah, more in the 1.5% area. So you see indications by business, whether they hire lower or on average in terms of intensity. More importantly, if you look to all these units, they all have a strong return profile. Are they clearly outgrowing their cost of capital in some, but in some of these businesses, if you go to subunits, or sub activities, it is not good enough. And we have to improve it or some of them, as I mentioned before, need to consider some disposals.
But obviously the return profile depends also, on on on on on on the margin profile and the intensity And not surprisingly, you have businesses like CIS with a very hybrid time profile given the margins which we're achieving in this business. Whereas our key focus when it comes to M And A, I mentioned already definitely high in food and life, also within CIS and E and E and in cosmetics, and EHS, channel high, you have seen a lot of bolt on acquisitions, especially in this part, the last one and a half years, and then for a lot of the other ones in selective areas, it is lower in oil gas, chemicals, and minerals, because we have very strong market share, and we believe we can do this, to the main part organically. Now obviously when you talk about acquisition, it often comes back about pricing and and what kind of price we are willing to pay It's very clear for us. If we say we want to accelerate M and A, it still means we do this in a disciplined way. And I want to provide a little bit of a framework of what I mean with this.
It is important the price of the value you pay depends on much depends much on how important is this business? You how strategically is it important? What does it change for us as a company? And depending on the importance we would like to give these businesses a different time frame until we expect from them to earn the cost of capital. As simple as this.
So you see on the upper part, indicators where we expect the EVA to be quickly positive. So let's say within a year or a bit more, but you see in the lower part, indicators where we would like to give this business more time, given the importance, given the synergy potential given the impact it has on a certain business unit. And I believe with this framework, we combine on the one hand to not miss out interesting strategic opportunities, but at the same time, not committing a price, which we may be later request. Coming to EWA driven performance management. We are in the process of integrating the EWA from framework for strategic decision making and with this to drive performance.
And if we look to it, and think about EVA, it comes simply back about achieving awareness of people in the whole organization, whether they create value, and if they create value, how much value to create. Right? Today, they are, of course, partly paid on blocking capital, which is very good. They get their P and L, they have their numbers, and they see how much profit they generate, including overhead costs and all these things. What is their margin?
But it doesn't necessarily mean whether they create or destroy value or if they create value, how much value they create. And this is a bit of a change in mindset that people understand we have costs, which are not allocated like the Geneva, corporate headquarter costs like the global business unit structure, we have to allocate taxes. And of course, most importantly, consider that the invested capital needs and minimum, minimum interest. And by doing so and by creating awareness, it will help to try performance because I'm sure if people say I destroy value, they will do something about it because they recognize that they have a problem. And from my point of view, if you recognize you have a problem, half of the problem is solved because you recognize it.
You can do something about it. And I do believe this will change the performance. What we did as a first step, we assessed all individual businesses on a certain level and, kind of analyze them and realize that roughly 150 plus of these individual businesses are today very destroying. A lot of them only for small amounts, but it doesn't matter. They should they should create value, so we need to do something.
About it. These 150 plus businesses, contribute roughly 8% to group revenues. Now in Q4, so the current running quarter, we are in the process of establishing a recovery plan. It's a standard recovery plan, which will be applied by each individual owner who's accounted for this individual business, and he will come up with his action plan. You see it on the right side of the slide, what what is due to expect to be covered in order to drive the performance.
And this plan will be followed up on a quarterly basis to see whether we are on track or not on track on what we're doing about it. So it's it's really about to improve the performance and maybe in some cases also think about the disposal or a merger with other units. The structural cost optimization program. We announced it with the half year numbers that we spent 1,000,000 and we are looking for savings 1,000,000 plus fully annualized. Today we update you, that we expect with the same spending, so 75,000,000 spending savings of at least 90,000,000 analyzed Some of them will kick in towards the end of the year, but the vast majority will be fully realized in 2020, which is a strong margin uplift.
Now what is important in that respect is the reason why we can be more precise is that, the actions which we decided were implemented very well We had 9 70 actions. There was a strong support from the complete leadership team, to work on these actions to come up with this action and implement them, and and we are very satisfied with the process, with with the process so far so that we are very comfortable to achieve this million sustained savings, structurally, who should stay with us. You see on the pie how the savings are split. So there is a bit of more, saving, especially in Europe, Africa, Middle East, compared relatively to revenues, but in general, all regions working on the plan, all functions and all business units. It's very important that done across the board because a lot of it is about duplication.
On the right side, on the bottom, you see, in which areas the savings will occur. I would like to show you one that is a bit more tangible one example of a country, how does it look like for a country and have chosen Germany. Germany is an important business for us, the saving target for Germany is 8,000,000 plus, and we're looking for the impact if this plan is completely executed and rolled out, it will lead on the like for like basis to 4% less headcount. And in that respect, I would like to outline the target of this program is primarily overhead costs and indirect costs. So less so people working in a lab Some of them, yes, because in some cases, they consolidate lapse, in some cases, they contain sub subunits.
But the main focus is the overhead and the indirect costs. So overall, that reduction out of this program around 4%, the reduction of the overhead people in Germany around 16%. Then we had 2 units where we had opportunities to consolidate something within the country and industrial and oil gas chemicals. And each of them, their headcount reduction, 12 and respectively, 6%. If we look, if we look in which areas we have this duplication, a lot of the savings are coming from duplication, which we assessed and analyzed in detail.
They are duplication in different areas between business and functions within a country between business and business within a country. So sometimes both several business units have the same have the same, additional task, which can be consolidated by working more closer together. Then between global functions, local functions, between the global business and the local business. And finally, in some countries, we had opportunities to also consolidate some of the business and some of the locations. So besides the saving benefit, I do believe that with this program, we simplify the structure, we're becoming a bit more agile and it should help in terms of decision making and execution.
How does the saving occur in Germany? 65% of the, of the, actions are implemented. So it's a bit more than group average. Remaining will be done the rest of the year. Just to point out, for Germany, but also for the group, the data, 65% or 47% on the group was end of September.
So this was what's happening in 2 and a half months. So obviously, having now 1st week of November is already much more accelerated. So it's end of September data just to to to point this out here. The saving will occur in direct and overhead is the main part now in Germany also direct to a certain extent given lab consolidation and sub unit consolidation. And you see in which units the main driver for Germany overhead, followed by industrial and oil gas chemicals.
Now let me talk about one example for efficiency gains. I think the last years, HTS did a good job to move key processes, key finance processes into shared services, and onboarded it in shared services, and it was done with a very low level of noise, which is actually very good. However, if you do this with a lift and shift approach, which is often very often used because it's it's just faster and simpler. It leads to a certain moment that we have complexity. Complexity in a way, if you lift and shift, decentralized businesses where every business, every country has a different process.
You end up in a shared service center, with a a gravity of processes, and you never achieved the efficiency gains. So for us, it is key for the remainder of this year and next year to basically standardize and harmonize all these processes. It's the 3 key areas, the P2P, the R2 Arm, and the O2C. We are now in the process to harmonize and like the P2P process, and then we follow with the other ones, the timing also depends on onboarding of new, countries. And with this in mind, we will move from a situation today in shared services, which I would say it's more managing complexity to situation in 1 year from now, very managing standardized processes.
And that should help going forward to have continuous efficiency gains out of shared services, which we need. I mentioned before that doggett Capital Management, clearly leading in the industry very good job done over the last year to bring it down, but I do believe we can still do on the AR side particularly a little bit better. And I would like to outline this in, in a certain detail. If we think about the process order to cash or better to say when the order is finished, to the time we get the money. You can split this process in three parts, the time to bill, the payment term, so the time how long the client is time to pay the bill, and then they'll overdue.
And if we look to it, and start with time to build, which has no impact on DSO. But it has an impact on, yeah, when we get the money from the from the client back, we have this duration today that billing is primarily done in each and every laboratory in each and every and this is, of course, not very, not very efficient. And we had 2 pilots. 1 is already done. One is ongoing.
The one was in Poland, where we basically centralize this work on a national level. And we were able to reduce the headcount who was involved in billing by 40%. By just replacing it centrally. So it's a cost saving. We do we do the same economy in South Africa, a little bit bigger country, and it looks more or less that we achieve the same potential.
Now this is a cost saving benefit, which would be rather on the efficiency gains. But interesting here is if we centralize billing, we clearly see we build faster and we have less mistakes. So this is the key area we're focusing on. We have 2 pilots, and we're working out after this pilot on a rollout plan, going forward. The payment term and channel will I think they are very well negotiated, but, you know, we can always improve a little bit.
I think the EVH weapon culture they'll also help in some areas. They maybe should be tighter on top of when it comes to milestone payments, but in general, very well done. And then when we come to overdue, there's quite some potential because as the same for the billing, if this is done out of every lap, the overdue management is very difficult. This process was already moved to to shared services, which is which is good, but now we have to start to, to basically drive more productivity. So we're currently rolling out advanced collection This will help as a system that we collect, faster and more efficient, revolving out a new policy for collection So I do believe the overdue can come down over time.
DSOs for the company are currently 47 days taking these actions into account, I feel comfortable that we can reduce this in the midterm by around 4 days. Coming to capital allocation, you see the CapEx in order, yeah, to maintain the business, but also grow the business. You have seen the, the capital percentage of revenues went down in the last years. Now fourteen-fifteen was partly also a bit higher given investments in in more natural resources segment where it's less, necessary today and the 4.3% in the last 12 months, they look a bit bit low. I mentioned already to the 1st half year numbers we will have.
Clearly more kept this in the second half. So for the full year, it's definitely in the range, 4.5% to 5% what we usually, guiding. M and A activity, frankly, saw the acquisition, which we did. And so far, so last 12 months were 8 for a contribution 147,000,000. We're accelerating.
So the for the full year, we definitely should have more acquisition done than last year, and the total consideration for the full year should be also higher than what we had in 2000 in 2016. If we look to the dividend, and and shareholder, return policy. We have a high payoff ratio, you you notice, that's a key feature of our company. And if I look to the dividend yield, in the individual years, the yield was ranging depending year by year between 3.2%, 4.9% average around, 3.7%. Looking to the source and use of funding, not surprisingly.
Cash flow from operations is the main driver of, of the source of funding, then obviously, depending on the year, sometimes we have proceeds from from corporate bonds, which is the main financing instrument to be used. And in terms of spending, we have, besides, a big part in the dividend, we have, of course, the CapEx and, to a certain extent, acquisition going forward we definitely expect more from the acquisition side in that respect, but at the same time maintaining a strong dividend policy, which is mentioned here. So basically sustained enhanced growth by organic CapEx We we want to accelerate M and A and dividend policy is the same in line with earnings growth to reward performance. We are committed to our current balance sheet and looking to our bond balance sheet allows us enough capacity to make decent M and A transactions and in general, we prioritize investments over distribution. However, following a very stringent approach when it comes to return invested capital EBA, and not jeopardizing our dividend capacity.
How we achieve 2020, the 17 percent plus. The main driver is obviously the cost optimization program. We said this morning that we're aiming for at least 90,000,000. And as I mentioned before, the majority of it will realize in 2020. So there is a margin uplift from this program of 100 basis points plus.
At the same time, we're still benefiting only for a half year because the first half year is already is already, this year and from the mix change of, the fact that we, sold PTO, which had a margin below group average and acquired smaller business, but it has, of course, some impact, main point with a higher margin. So there's still some benefit into next year because the business was deconsolidated, July 1st. And then I do believe that the focus on the EVH driven performance and performance management in general should have also some uplift, to the margin so that we feel very comfortable to basically achieve this target of a margin in 2020. Of 17% plus. With this, I would like to come to conclusion and kind of summarize yeah, what can investors expect to invest in SGS?
It's definitely exposure to the global leader in the tech industry, with a very broad and balanced portfolio, a proven track record of sustainable solid organic growth, best in class ROIC with very strong cash conversion, a very shareholder friendly dividend policy, with a high payout ratio, a strong unleverage balance sheet with the capacity to basically leverage a little bit more, in order to basically drive or add businesses with higher growth potential, with higher value add, and in general, as I outlined before, opportunities to accelerate profit and cash flow growth, given the underlying growth we see Given the structural growth, we we we we see in the in the in the near term and the measures which we are taking, which are just outlined. With this, I would like to conclude my remarks, and I would like to ask Frank and Toby to join for the Q And A.
You very much, Dominic. So we've got plenty of time for Q And A. You'll be pleased to know. I would like to reiterate to those people on the the call and the webcast. If you would like to ask a question, please submit it by text.
So if we start with some questions in the room,
Hi. Good morning. Sohazni from Goldman Sachs. Just a couple from me, please. When you think about the change in the growth outlook for this year and for the next year, what has exactly changed?
Which divisions have seen the most deterioration in the last 3 months since you reiterated at the first half results. And secondly, as you do this restructuring program, it looks like that have been some disruption to operations, especially as you consolidate labs, reduce headcount. Can you talk about talk about what impact it had on your growth so far? And is it going to be done by the end of the year? Thank you.
If I take the second one as a plus question, so if we If you look to this conversation program where we because of this conversation program, close also some of the businesses, the the impact on revenue is rather is rather limited. It's between, 10,000,151,000,000 annualized. So this is rather limited. And otherwise, if you looked at the whole program, it's really it's really about much more the overhead costs the indirect cost, the not client facing function is not about salespeople. And if we consolidate laps, usually As I mentioned, you assume a bit of client attrition, which is considered a 1000000 to 1000000, but it's rather limited.
And the first question was?
The first question was which, businesses have slowed since the first half? To get to the lower growth in the second
So basically, if we if we look if we look to the, to the to the main drivers, and the Industrial business had quite strong, strong growth in the in the first half of the year. Their their growth is decelerating. To be fair to say. It's also, the business where we actively came to some contracts who were loss making or value destroying So it's partly related related to it. So I do believe that for the whole year, the growth rate for the whole year is maybe impacted by a half percent from, basically stopping values for contracts and this half percent is more geared to the second half of the year.
So this is the main, the main point.
Would you like to add anything to that or should we
No, no, I think I think that the the two businesses that we flagged already in the first half that, that was going to be slow in the second half, specifically, our transportations that, that I mentioned that for the, at the beginning of the year, that for next, 12 to 18 months that we'll have, a situation where some of the existing contract was closing while the orders are not starting. Suddenly this is also a part of the the gap that we're seeing here on this continued deteriorated rate. For example, if you look at, a Transplantations, one of the contract we have in Africa that was supposed to be start in the second half of the year are just not restarting because, not not not much because of the virtual group itself is more because of the government's issue that they're not willing to restart for political reasons that we cannot infringe, so we try to do our best. We said they will just carry on till end of this year and beyond next year as well.
Okay. Next. Sorry. Please start on that, Simon. Workaway across.
Tom.
Okay. So if we look to the EVA process, of course, it is too short than the culture change. However, the fundamental mandate is already very strong with you. If you look to SGS, people all the key people, all the leaders in the company, they were already paid, not only on on on on on their profit, they were also paid on blocking So they had a working capital thinking already in their mindset, which is which is big advantage. Of course, now we're adding also cost of capital for for the for the real invested capital, and this is definitely a cultural change because, because people before we are thinking in their profitability in their margin.
But what what we're seeing also with the discussions and when we when we when we start to talk about these things that people start to think differently, and ask the question, okay, why are we doing this in this or that way? So I do believe that the the organization is it's ready for this change, and I also know that longer time ago, there was a similar concept applied. So there was also once a time, where where something similar like EVA was applied. To, it was already one one there?
I think, I think it's a bit of a cultural change as well as refocus on DVA. If you recall, several years back, we have a problem called, was implemented by our former chairman, Sergio. That the certiva concept was not that far off, for me, it was just more complex in terms of a lot of moving parts. So we kind of, give up this concept where we focus on a, on a pure P and L aspect and networking capital and so on. I think with, with the new discussions with our rival Dominic, we have kind of refocused organization to what is CVA, which is a simpler matters to concept to understand for the network, or we just be focusing on that as well.
Now to to add on, from a timing point of view, I I do I I there there will be some positive impact in 2020, but I do believe it's like you're also structured. It's more for the midterm. Yeah. We we're starting now with the business who are very destroying, but obviously it's not only to say what this voice value creates, but it's also the ones who create value is this good enough? What can we do to improve it?
So I do believe, it is, it is also for for the midterm and and especially when it comes, towards, M and A, but also important CapEx projects where it is a 2, supporting to, to make a decision making, whether you invest or not invest, this is not for the short term. It's more, it's more for the midterm. Regarding the bad debt, the 2 bigger bad debts within GIS, they are not yet collected. The team is very actively logging in, but they're not yet collected.
Thank you. Yeah, as as we just said on the EV, I think, like, well, services, the ben most of the benefit will be met beyond the 2020 calendar. Yes, please. Let's move over here. Thank you.
It's Alex Mees from JP Morgan. Just Firstly, on the value destroying businesses, Dominic, you've identified, presumably they haven't always been value destroying, or maybe they have been under the new framework, but If they have become so, what has changed to cause them to be value destroying? Is it competitive pressure? Is it the cycle? Is it changing market dynamics?
Is it possible to generalize And then secondly, I wonder if, you're able to put any numbers around the larger M and A targets you say that you're looking for, largest, obviously, a relative term. So is it possible to put any metrics about the upper limit of the size of businesses that you you would like to acquire if you can.
There are some businesses who who are, let's say, values drawing only only the short term, for for various reasons. It could be you depend on a on a on a on a big client and, and and and he's aggressive to cut the price down. So in business with the lower value add activity or if you're in areas where you have businesses, which, where the value add like a cost plus model It's not very great. You have other players maybe for my other industry than our sector who would just do this more efficient with a different margin profile. There are also some who destroy value for several years, but I think this is kind of the awareness of changing from a mindset.
This is the margin to a mindset to a mindset. This is the real, the real, value value creation or value displacement. So there are various reasons. Certainly, the majority of the things are more in field activities, right? So more labor intensive parts where you have, sometimes pressure in terms of wage inflation, but the inability to to pass on the price.
But if you if you understand, it destroy values, you may be better in the in negotiating the price increase.
Can I just add on this that, out of 150 unit that Dominique talked about? Some of them are structurally made for the purpose of feeding work in other and other labs in our strategic evolution. So Not all of them are destroying value because they are badly run and perform. Some of them, for example, some of the unit that we have in our in the U. S, actually, because of the nature of the consumer goods activities that we have in China, this lap are developed to be a figure's lap where they will have a proper lower price, a smaller volumes, but they fit the bigger volumes into another laps.
In terms of performances, you'll probably see them being, in terms of
most probably combined. Yeah.
But they are strategically feeding a purpose elsewhere. Those ones need to be combined for the time being, the least that we put in there are not yet combined, I would say. If I answered your second question, in terms of acquisitions, in terms of size and shape, we don't have a set set target. But I would say that we are also actively looking at the acquisition in the 2, 3, 400,000,000 dollars, $400,000,000, $400,000,000 in total revenue. Those size.
So, I would say we're more looking at the, the 3 to 500,000,000 size than something much more substantial. But again, only if the value is right, the strategy is right, the way we go for it, the core of the strategy is still on the bolt on acquisitions.
Thank you. Yes. Let's keep moving across the room.
Hello. Good morning. Philip Cottrack from CQS. I also have a few follow-up questions on these value destroying businesses. So how much time do you give them to recover and, also have you put in place some special incentives for the local business leaders to recover?
And, finally, are these recovery programs more geared towards cost cutting, or are you also ready to invest money in order to drive innovation and drive sales. And finally, do you also have already a new disposal target in mind or or not yet?
So if we if you look to this businesses, so basically, in Q4, so the current quarter is about to, to provide back the action plans, and the recovery plans. The recovery plans as a standard template is basically a plan until the end of, next year, follow-up on a quarterly basis. All these plans, basically, we are coming back last weekend, but as you can imagine, with this event this week, I didn't look to them yet, and frankly as well, not, but for sure, we, we review and the leadership team will review this in weeks to come, and then, and then we have to see what are the different reasons, like frankly, we're saying, just maybe one or the other, which is very destroying, but it has a bigger purpose. So we have to think about this differently than than an individual individual business. And then we review this plan and see, are are they feasible?
Are they feasible or not? Now, in terms of, I think it's too easy to say just cut costs, right? Because they will be for sure, or they are for sure. I mean, this is 100 things here. A lot of them, they are just small.
And they are, they are, let's call it, sub scale, right? And and even if you cut cost, it doesn't change, it doesn't change it. I think we have, we have with the structural cost optimization program an important initiative who will help a lot of them because they will, they will, of course, benefit if we have, if we have less overhead costs in a certain country, if we have less overhead costs in in in in general, there will be some of them on the list. They were only short term on the list because they had also kind of timing of bad debt in this last 12 months is to recover the bed that they're okay again. But there will be, from my point of view, quite a lot we are really about, a very good plan to accelerate revenue growth, yeah, if possible, and, and and and thinking about pricing versus versus wage inflation, but this is about in Q4, we have to review and assess this in detail, in in that respect, but it's solely not just a function of, of cost cutting because by the end of the day, if you if you want to have sustainable strong EVA, you need, you need, a focus also on the top line for the right price.
In terms of your second question, we have disposals, in the pipeline, mostly the answer, yes. We're still actively looking at our portfolio. I think the larger one was done with, PSC at the beginning of this year, but we're also having some smaller asset that we're looking at, disposing off, it will be coming in the next, next few months as we found the right partners and so on.
I think given the, the effort that we've had from someone actually sending a question, from Europe, then we'd probably answer it. So Rajesh Kumar would like to know how much of the gross cost savings will be reinvested for future growth? The first question. And then the second one is what is the average margin of the 8% of revenues that are not EVA accretive? And then there's a final one.
Do divisional and branch managers have different EVA thresholds.
So if you if you look to the, the the first question, the vast majority of this are structural savings. So the tension is not to reinvest this into growth. It's about to make a structural saving which should give us a sustainable margin uplift. The second question regarding, the average profitability if you if you look through this 8%, there are quite some business that are profitable, but they have a negative EVA because you allocate in our thinking also the cost of Geneva. You also allocate the cost of the global business unit and you have the cost of capital, right?
So underlying locally, some of them are acquired a lot, are profitable, but there are also some are loss making. So the average margin is is is flattish to tiny negative.
And clearly, we use a different cost of capital depending on the region.
And the cost of capital, obviously, it's it's it really depends on the region. Yeah.
And are there different EVA thresholds given to different businesses?
No. I mean, I mean, EVA is basically a concept where you allocate related overhead costs, taxes, and the cost of capital. The only difference is that, of course, in a country like like Brazil, you have much higher cost of capital than in Switzerland.
Thank you. I'd like to remind anyone else on the call or the webcast, if you'd like to submit questions, we'll, of course, ask that right answer them out. So yes, should we go to Ed, please?
I take the last one. Yep. So, yeah, yes, you know what? We we see the indeed, the the the multiples for the acquisition has come down from the last, last, of month, I would say partly because, some of the large asset that was the target of the the piece was, was purchased, in the previous 2 years, that we're seeing much less of those popular asset on the on the the market. So when you look at, the way we're looking at it as well, not only that we're looking at a specific asset in some newer field, that is not targeted by our peers or other peers as well as we're taking that in a much, forward looking way in the sense that we're pushing those, those company ourselves rather than waiting for them to be on the market.
I think as Steven could mention that from my point earlier that we have to approach them much earlier talking to them and try to to convince them of the strategic evolution. So there's also a different ways that we have approached the the the market or to say whether the the multiple change, what I mean, we, I believe, what a good window of opportunities to keep pushing ahead with acquisition, with the the right value, that we believe is the fair to pay. We see less of the headwinds that we had in the past, past couple of years, I would say.
Regarding the CapEx, what what I said was, basically, if you look to the fur in the first half with rather low low CapEx compared to to prior year the historic trend, and this is partly a timing issue. So in the second half, we have, a higher CapEx, and this is, primarily related to the fact that we had several, great wins in our Minerals business for on-site on-site laboratories, where the CapEx spending is happening in the second half. But also, in in, within CIS and E and E, we investing into into into wireless 5 g where some CapEx will occur because these are definitely, create growth opportunities going forward, also what Frankly talked about it in his speech about about connectivity. So we're actively investing in this and and and and see and have no doubt that it is that it had a great, great return, in, in that respect. The second question was related to, the revenue growth, now obviously it is it is with the structure optimization program, the 70% plus is more geared towards towards the cost saving.
This is this is without doubt and and the revenue growth by the end of the day will have a certain impact, on on how much it is above 17, right? If you have a bit more revenue growth, you have a bit more leverage. This is this underlying leverage around it but, we want to be sure, that that, the structure optimization program, and this is not just done because of the 70% is just done because we think it's the right way to do for the mid and long term of the company. Will be an important lever to get there.
Morning. It's George Gregory from Exane BNP Paribas. Just following up on some of the prior questions around, the margins, please. Firstly, for this, for this current year, Could you just indicate what you expect the impact to be from the disposal of of PSC on the margin, and any other relevant building blocks. I think Tom earlier asked about the collections are you making any implicit assumption on what happens on collections this year?
And then perhaps looking to next year, clearly, good upside potential from the cost savings the annualization of PSC, some impact of main point, the contract exits what are the offsets to that, or potential offsets to that improvement in margin, please?
So if we if we look to it, if we start with the with the with the bad debt recovery, we we said in in the first half, that the kind of timing of bad debt collection was was a negative of around 20, 25 basis points. The biggest part, or or let's call it, not the biggest, but an important part was this collection within GIS, but there were also other areas, where where we have delay in collections. While in these other areas, we clearly see we get this collected. In in the GRS business, we are still very active. It's not there, right?
So this will maybe, partly realize would be a timing issue. If it happens in Q1, we do everything that happens this year, but if it's gonna happen to Q1, right? It's not that this money is lost. On the on the on the equity. If I take, on the one hand, PSC, and on the other hand, main main point, the impact in the second half year just from the change for the second half is around 30 basis points for the second half.
So that means annualized to simplify, let's call it 15. Since next year, it's full year they are this year was a half year there is still 15 for next year, right? So the other 15 basis points, in, in that respect, And then, you know, we we're aiming for 70% plus. So we we we we we, obviously, we we we don't know yet what the revenue growth will be next year. We have to see, but these are the kind of building blocks.
Thank you, Rory. That's
if if we start with with with the saving, I mean, First of all, this program is global because all all units, all functions, but relatively speaking, you have the highest saving potential in Europe. And in in in in Africa, I think in Europe, it's also a partly function of of labor law regulations, right? That it needs a special program that we really change things it is less less of an impact in in in in in in the Asian in the Asian markets, but also they they will contribute because duplication, are also there, but the bigger part is definitely, Europe in general and and and Africa to certain Latin America. What what's the additional part before? Okay.
A few months into the plan, where are the additional savings coming from?
Oh, the additional savings. The additional savings. So basically, if, if we look to it, several hours were coming up with additional additional potential. So but but a lot was from your workers' value.
Okay. And then, all right, from consumer to
consumer, yeah.
Yeah. This is the perfect place to talk about, the trade dispute and, so they they there's an impact. There's no no question about that. We've seen it, specifically in Hong Kong. The China operational consumer goods has been sending back in terms of a volume between, the US, the China trade.
The good news is we managed to compensate that with the some of the domestic market activity even in the consumer good. So in the in the Chinese market, you have the GB standard, which is, also a testing requirement. So we are actively expanding to this. And you also see an on migration of some of the work that we used to do in China into, some of the other location like Vietnam, Indonesia, and so on. And even Turkey, we have a quite strong growth.
You see that our consumer goods, result are not that bad. We also gained, additional volumes that we'd save from, some of our European based customers. So these, the, the overall structures that we put in place that allow us to, to be quite stable in the customer good actually, we're actually growing in a good pace. The conversations, the, the shape in the way, investment, obviously, we are migrating together with our, our customers. If they are moving to, to a location like Vietnam, we are certainly putting, I think Vietnam this day for us is double digit growth.
We're certainly putting more resources, some of the CapEx there. Some of the equipment is moved from, for more locations, we can't. So it's just, just following up our customers. For next year, if I understand the last part of your questions, still talking to our customers. I think, there's still a lot of uncertainty on the, on the market with our customers to see, what this trade dispute is gonna end.
Now this seems that the Chinese government and the US government wants to, to make some kind of, for step 1st phase deals. So we're monitoring that, but still a lot of uncertainty, but it doesn't really change much of our strategies we put in place, we need to focus on better servicing our customers, migrating our portfolio to, to, to, to the European customers, to the Asian customers, to our Chinese customers. I'm following up the, the new, supply chain migrations to China and elsewhere. This is Vietnamo Innovation with Zhen.
To come back to the cost savings, roughly 1st shift of 1 double. The command to the cost savings, the 90,000,000, if I understood well, it's 100% retention rate. And then you have the portfolio management. So we're looking at 150 bps for margin. So if you don't have any headwinds next year, any improvements, in the business, in the annual business, you're aiming at what above 17%, if I'm right.
If you can maybe precise, this one, on the disposals, you were aiming at divesting 350,000,000 last year. You got this PSC now how should we understand this 8% value destroying activities? How much more you could divest if you could put a number maybe on this, on these disposals? From total sales. And the last one, frankly, I think you are talking about being the number one in sustainability.
Are you planning to put some incentive for management to get to those targets.
Yes. We're we're already number 1 in term of, in terms of services. So, yes, these, not not to scare my at the back there, with the discussion about, evolution of our incentive schemes and the certainty art, I would say at the country level already, a lot of the business manager and managing directors have part of this, system release, specifically OI operational integrity's criteria into their incentive plan. So, in this day, discussion of human resources to migrate and move part of this into the, the senior management's incentive plan because at the end of the day, as we evolve as the corporations, Swiss rate is a key aspect of what we do and the house to be reflecting 2 other way we certify for our colleagues as well. So I would say at the lower level for timing, yes, because it's more tangible to, to what they're doing But we're in discussion to move this one step up as well.
Regarding your first question, JP. So I agree with your with the methodology of calculation calculation, just one caveat. When we talk about, the movement from 19 to 20, we also from now or let's call it half year number to to to end of next year, for the for the, let's say, impact business portfolio change main point versus PSC, half of these benefits happens, of course, already this year, and the run rate, the other half, the other half next year, and and, while the vast majority of the 90,000,000 is hitting next year, some of the stuff will hit already this year. But in general, I agree, and it should be clearly above 17, 17%. When it comes to disposals, there was a clear statement last year by Frankie, aiming for 350,000,000.
The biggest part was the disposal of PSC, which had last year revenues of 308. So so the majority of this is done, but obviously, with what we outlined today, there are more opportunities are we working on. We will not give a new revenue target on this one. But we we we continue to look to it but but as they always said, these are smaller things. So there is nothing with the size or magnitude like PSC in the pipeline.
Thank you.
Sorry. I I mean, if if if you think about if you think about about pricing, I mean, there's certain errors where you have, what what type of pricing environment in in in certain in certain parts, but this was before also the case. It's not that it's that it's accelerating. What what it's not that the price environment has now fundamentally changed the last couple of months or quarters, but what is the case? And and maybe you can say this is pricing related.
If we stop certain contracts, yeah, who who'll not have the right probability or or values drawing, it is, of course, a pricing issue. Or is is is one lever in that respect, and and that being said, from the businesses which we which we decided to stop, this the impact would be roughly, a negative impact on the corporate of roughly half percent for this year. And the second question was?
Would gross margin become a KPI?
I mean, currently, we're doing this on, on a LC level, right, on and and I think there are opportunities to look more to cross margins, but we have today not the systems or the group level in place to to to look to read across much, but but it's definitely something which, which is interesting to look at it, especially in a laboratory business to really understand what's the breakeven point, what's the margin on a laboratory level.
Please, sir.
Hi. Florent from LGM Investments. Just discussing a bit, more growth once again. One way of breaking it down is, still, you have a chunk of your business in emerging market outside China and India. And this pocket of geographic areas hasn't grown that much in the past 10 years, especially in our currencies.
And so going forward, maybe you can discuss the breakdown and, you know, what, what does, change there? Another one is, you discussed a lot about the big mega trends driving growth for the tick sector, but also big mega trends impacting and grows for the tick sector. So it seems that trade slowdown is more structural than what we discussed. Now it's been, 5, 6 years that trade globally isn't growing. Same easy pressure on oil and gas and and in the commodities sector.
So maybe we can discuss a model, the negative trends and how structural they are. And another question, a bit different is, between organic and inorganic, growth, my understanding is from an EVA perspective, organic growth generates, higher EVA, So should we also look at, this M and A strategy as a failure on your part to capture more market share organically and generating more more EVA this way.
So start with the last one? Without a doubt, right? Organic growth is always has the best return. There's there's no question, but I would I would not call it as a as a as a failure. Because, there are obviously, always opportunities via an acquisition.
It's just the better way to do it because it it's that actually the benefit of acquisitions, you can do this much faster, in in that respect. So it has obviously over time is to have an impact on the ROIC, right, because if we acquire an asset and even if it's EVA positive in the 1st year, it will it influenced the overall ROIC because our ROIC of around 24% is partly also, that high that that M and A, quote was rather was rather remote, but I think on the other hand, M and A is important in certain areas to, to, to start the business and we see often a lot of synergy potential. I'm sure when you, when you see Steven in his presentation, he will outline the benefits, which, which, which, happening, thanks to the fact that we acquired this business.
If I look at the, the trade business, you're absolutely right. I mean, we would talk about the opportunity of the the new future trends and, if you look at the current businesses, indeed, Comenity specifically or gas, or gas and chemical activities are on the pressure. There's no question about that. The industrial activities linked to oil and gas businesses on the pressure based on natural evolution of the market. I think, the key point for us is always look at, you look at the evolution of the interest group for the past, 2030 years, maybe even longer.
Is always trying to look at, a constant evolution of the portfolio toward what we do traditionally and moving to the new sectors where we can, we can create more value added, trying to, to evolve the portfolio. And this is why the robust, in the past, a lot of focus on government services. Do we move to a lot of trade businesses? We move to a consumer good? And there's a concern evolution.
So some of those sectors part of those sectors, not all the whole or gas chemical industrial sectors would be under pressure, but is the speed at which we can innovate and move to the new sectors compensate for some of those, those, subsegment of the businesses on the project is critical to us and it's just an evolution of the the portfolio. We were very happy about the PTO businesses, bottom operation businesses for more than 10, 15 years. With the services part of it because the market condition is changing, and we are happy to move into something that's new with the consulting activities. But this is, a constant evolution of our portfolio.
The last one was EM growth ex China and India, but we could maybe lead that to the COOs. You can ask the COOs for 2 regions. Are here today.
Well, what was the question about?
The question is, growth outside of China and India in emerging markets has been slow or at least slow in hard currencies?
Yes. It's been slow. I would say if you look at the, I think Malcolm is here, you at the Southeast Asia Pacific, which is still the regions in Asia for us. It has been slow for for several reasons in the past, past a year or so, partly because of a lot of those elections that was going on is typically in our kind of activities when you have a post or pre or post election years. Businesses are sometimes slowing down.
There's certainly look at the prices like turn on into a political stability or in terms of internal administrative, huddles, this is where we'll exhibit the on the performing for the time being tower growth. It's not that a negative growth But I don't see that as a long term trend. If you look at our, our evolution in the South Asia Pacific regions, been pretty strong. I think the more challenging, region would be Africa. We do good businesses some years back in some others because it's highly volatile in terms of, business environment, but this is also, amongst the regions that we have the highest margins.
Is like the only day you pay, we pay for the risk that we're taking some of those regions. So in some years, we're doing good. Some of the years is more challenging. But I think although we are still growing in term of, of, of growth potential, whether you convert that into a Swiss francs currency, I don't know. I mean, I I don't.
I have not met them up.
Yes, Andy. That's there. Thank you.
Hi, Andy Grobler from Credit Suisse. A similar question to the last one in terms of some of the structural headwinds that you're also facing. When you did the EVA analysis and you looked at 90% plus of your business being EVA positive, were the segments of your operations where they were still positive, but the trend was was negative. And if if that's the case, why and and kind of which areas were under most pressure?
I mean, there there are definitely areas where where you have, good EVAs, but but they they may be structurally coming a bit more under and under pressure. If you think about certain certain trade activities, there's more competition. There's a bit more price pressure. It's not something happened the last quarter happened the last, I would say, at least 2 years. So there there are definitely areas where where where it needs from our side, attention and ways of thinking how how we can run this business.
This business is more more efficient. Obviously, having a very strong market share in in in this segment is then, is then helpful. So they are here and there's sometimes headwinds, but this is, I think, normal operational things, which we have to daily, work with it. And then in general, I would say in some in some markets where maybe our value add is more on the lower side on the slide, which you have seen by, by Frankie, and there's maybe a market with rather high wage inflation. It's sometimes the ability to pass this completely on the sometimes top.
But I do believe it analyzes this helping because it it illustrates better. You may have a certain profitability But, but you destroy values, you have to do something about it, or are you, you create not a lot of value.
Thank you. And then one last, I have 2, 2 more in the room.
Hi. This is Ben Izzo from Matthews Asia. And I have a question on digital. And obviously, it's been a very hot topic. Impacting every single industry and every single end market that you've been operating in.
And you collect a lot of data, right, from TIC And can you just help us flesh out a little bit more? How you plan to monetize that data? Because the data is hugely valuable, right? I'm sure internally, you must be thinking of various initiatives to monetize the data that you've collected over the past few decades. And it's a gold mine for you to mind if you can find the right revenue model.
And also speaking of revenue model, I know that maybe today, my impression, which could be wrong is maybe a tiny portion of your revenue is already generated from what people call SARS, right, subscription as a service. So how do you think, you know, we're in your vast portfolio. Do you think will be more amenable for a SaaS model going forward, either through organic growth or through M and As. Thank you.
Sure. You're absolutely right. In fact, We have, vast amounts of data. So let let me step 2 step back to to to to to illustrate that. First, you look at my slide about digital.
There's one box that says that we moved the 2000 servers to the cloud. What happens up to now is that we had the 4000 servers in the address group sitting in the basement of our, each one of the laboratories. So in terms of using a consolidated data lake was bit complicated. So one of the first steps that we did is we to migrate all those, those server into a cloud concept where we can start to really truly utilize the fuller set of data versus just having them sitting, in different servers. The source This is still ongoing.
Should we finish by, sometime next year? So this was the first step. Second second step is, you've seen that, actually, you're already using some of the data for 2 purpose, internal and external. For the all gas chemicals activities, I think I mentioned about 15, 50,000,000 data point per year that we actually already recording from the different, operations that we do in, in the field as well as some external, or gas chemical, data that we're coming is coming from outside the sales group that we are consolidating, and we're working with external partners to, to provision that to our end customers for them to be able to, to take some decision on the trade side. We're doing the same with a smaller company in in Switzerland called Agflow that we have a small participation in where some of the agricultural data has been captured by AFL is already sold to them as, How's the service?
So we're migrating that we're evolving to the this aspect, we recently have, appointed 2 external companies to look up the amount of data that has just got passed to ask the question is, who else would be interested by the kind of data that the, that the tech sector has in terms of, pure data, not just the tick sectors players, their own customers, but outside this field. So this is something that we're also looking at because, we personally don't know who else outside the customers would be interested by the kind of data that we have. So we're also looking at these opportunities now with, external providers to look at use the CBs also using, a lot of their certification information because in the certification informations, you have a lot of discrepancies or no compress. Into the audit. And actually, they're using these informations to enhance their training and their consulting activities for, for, for their customers.
So this is also the use of, information to enhance the value proposition that we offer to our customers. On the internal side, we actually have, project that we're using our pass, unadditional data to optimize the way we are looking at the statistics for the result to, to be able to automate that in terms of, optimizing the productivity of some of our, our, our testing, testing a process. So this is also something we do with our data. In terms of stars, in fact, we have a few pilots going on now. One of them is with, OGC is that we have, a portal, that we actually offering to our customers in terms of, of, SaaS model subscriptions where basically we put some of the specific information account top much about it, but we're putting on some specific information about oil and gas sectors plus some external white paper that we are we're working on with partnership with the university, our research group that we're publishing combined with our own informations to offer that as a SAS portal.
It's a really tiny part of what we do, but this is certainly something that we're looking at in terms of expansion, in terms of understanding, we can expand that. This is why we have those pilots. In terms of, looking at the future.
Okay. And for the final question.
Hi, James Rosenblanc, please. In the press release, it states that organic can get back to mid single digit in the near term. Is that guidance for FY 'twenty? And and how do we get back there? I mean, the the divisions which are currently under more pressure, do they need to reverse for us to get back there?
Thanks.
So it's, so first of all, if we if we it's it's it's geared to It's it's something between 1 or 2 years, right? It's not necessary for the whole year 20. But if we if we look through the underlying business, we definitely, we are very sure about soft business will pick up next year. Like, like, the GIS business, we are sure about the CPE business because the CPE business had this year mid of September transition year, so this business will definitely pick up, there are also other areas where things should improve so that we, in general, feel comfortable in the near term to achieve, mid single digit growth. Also, what frankly outlined investments, which we are doing into, into, areas where we have more growth opportunities and the COF virus we have in our industry.
Okay. Thank you very much. We'll draw this part of the presentation to end, and we'll close the webcast. So thank you for, getting up in the middle of the night and joining the webcast. And I hope you get a couple of hours of sleep before you start work again.
And now we've got coffee, a break for coffee and with, could we be back inside the room for about 10:35, please, for 10:35? Thank you