Ladies and gentlemen, good morning or good afternoon. Welcome to the SGS 2017 Half Year Results Conference Call and live webcast. I'm Sarah, the conference call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. After the presentation, there will be a Q&A session. You can register for questions at any time by pressing star and one on your telephone. Should you need assistance, please press star and zero to call an operator. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Ms. Carla De Giese, Chief Financial Officer, and Mr. Frankie Ng, Chief Executive Officer at SGS Auditorium in Geneva.
Can you hear me?
Good afternoon, ladies and gentlemen. First, welcome to the presentation of our 2017 half year results. As usual, I will give you a highlight of our performances. Carla will provide you a detailed financial review, and I will come back with more outlook on the business and guidance for 2017. Let me start. Slide moves. Okay. I'm pleased to share with you a set of solid results for the SGS group. In line with our 2020 strategic plan, we have achieved strong growth in our 4 focused business lines, namely Transportation, Agriculture. Food and life, consumer retail, and subdivision in business enhancement. Growth to the focused geographies has also accelerated, particularly in China. On the other hand, market conditions remain difficult in the oil and gas sectors, affecting our insurance activities.
As you can see on the slide, the SGS group revenue grew by 4.9% at constant currency, of which 3.4% is organic. Adjusted operating income margin stands at 14.1%. Profit for the period improved by 5.8% at CHF 293 million, and at the end of June, we generated a solid free cash flow of CHF 210 million. In the first half, we closed 4 acquisitions. One in the consumer retail sectors, expanding our consumer personal healthcare portfolio in the U.S. 2 in the agricultural, food and life sectors, expanding our testing activities Morocco and in Canada. The last 1 is in the industrial sectors, in the valve inspection testing activities, expanding our global expertise to Australia. We have those valve activities already in South Africa, in South America, sorry, in U.K., and in New Zealand. This is an extension of expertise to Australia.
We also made a small loan to a technological firm in Switzerland called Sensima. Sensima is specialized in the development of sensors for remote monitoring of asset infrastructure like bridges. In fact, we are currently using Sensima technology in some of the projects we have in the U.S. and in Europe, the initial response has been quite positive. After the closing of the first semester, we announced two additional acquisitions, one in the consumer retail sectors related to software testing in the U.K., one of the partners that we used to have that we acquired now. The other one in the agricultural, food and life sectors in the grain inspection in the U.S. At the end of June, the SGS group has close to 93,000 employees and over 2,000 operating offices.
You can see the network of our operations is well balanced across the three regions, Americas, Europe, Africa, Middle East and Asia. On that brief highlight, I will hand over the presentation to Carla now, who will give you a more detailed overview of our results.
Thank you, Frankie. A very good afternoon, ladies and gentlemen. It is always a pleasure to present you the financial results the OGC team and the 92,912 colleagues around the world helped to deliver. The first half of 2017 represents one of many firsts. The first time that both minerals and OGC returned to positive growth after seven and four reporting periods, respectively. The first time transportation is claiming the fourth position in the relative ranking of the adjusted operating income, representing now more than 10% of our group profitability. The first time we placed a bond that was sold out in 17 minutes. Finally, it is also the first time since 2012 that the majority of currencies we operate in strengthened versus the Swiss franc, contributing positively to the reported top line growth.
As part of my financial review, I would like to give you some deeper insight into the top and bottom line, the balance sheet, and the cash flow for the first half of 2017, as well as into the impact of the Forex on our financial performance. Looking at the overall P&L, the first and third column reflects the half year performance for 2017 and 2016 at historical rates, while the middle column contains the performance of financial year 2016 at constant currency. Overall, we had a strong first half revenue growth of 4.9%. This is in line with the guidance we presented to you in January of this year. Moreover, we improved the adjusted operating income at constant currency by 4.9%, despite a bad debt provision related to some specific GIS related contracts.
As well as ongoing weakness in the cyclical oil and gas related CapEx-oriented divisions, leading to volume and price pressure. The adjusted operating income margin is in line with last year, and this despite a negative impact of four developments. First, we provided for a couple of specific GIS receivables due to tardiness in collections, in line with group policy, leading to an incremental bad debt expense of approximately CHF 11 million. We are confident that we can recover most of the amounts in question. Second, we were impacted by pricing pressure in both the OGC and industrial businesses. Third, we are still experiencing an impact of two underperforming assets, Accutest and Bateman. Finally, we continued our investments in our growth, transformational, and efficiency projects in line with our strategic plan.
As mentioned before, this project will allow us to grow the top line and improve the bottom line going forward. The net profit for the period amounts to CHF 293 million, an increase by 5.8% on a reported basis compared to last year. During the following slides, I would like to share greater insight into the revenue growth. Our top line growth at constant currency reached 4.9%, of which 3.4% is organic and 1.5% is inorganic. You may remember that in the second half of 2016, three out of the nine divisions reported an organic decline. In the first half of this year, only industrial remained. The orange part of the chart reflects the organic growth, which is driven by the continued strong performance in the non-energy related businesses, which is exceeding 6%.
The dark gray part of the chart reflects the effect of the acquisitions made in 2016 and 2017, as this is on a 12-month rolling basis. The inorganic growth amounts to CHF 45 million and contributes 1.5 percentage points to the growth of the group. We acquired 21 companies, of which four during the first half of 2017. The 21 acquisitions strengthened the portfolio mainly in industrial, agriculture, food and life, and consumer retail services. From a geographical perspective, the majority of the acquisitions were made in our focus markets, Northeast Asia and the Americas. We continue to focus on strategic targets to expand into new markets and to create more diverse service offerings. The group experienced a positive Forex impact of 10 basis points, improving the revenue growth at historical rate up to 5%.
One of the key takeaways as we look at the graph that breaks down the importance of each of our nine businesses from a revenue perspective is that we continue to deliver on our strategy to grow the overall importance of the non-energy related business in our portfolio. Minerals, OGC, and industrial now represent 43% of our total revenue, which is two percentage points lower than a year ago. OGC remains our number one business. Agriculture, food, and life is our number two business, generating a revenue of approximately CHF 478 million and representing 16% of the group's revenue. CRS jumped into the top three from a revenue perspective.
Finally, I believe it is important to highlight that the Minerals business managed to defend its relative importance to our overall business versus a year ago. After four years of decline, the Minerals business has delivered a promising organic growth of 2.2%, and this was fueled by growth across all of the major activities with the exception of the Plant and Operational Services. Similar to the Minerals business, I would like to provide you with insight into the revenue performance by individual business. The orange bar in the graph highlights our organic growth, and the black part indicates the acquisitive growth. Transportation is one of the two businesses that realized double-digit growth, mainly organic. The organic growth amounts to 14.6% and is comparable to last year. The solid performance is driven by double-digit revenue growth across the portfolio, mainly in Europe and the Americas.
The growth in the Regulated Services is driven by the rollout of the driver theory test in France. Moreover, we invested in a number of new projects last year, which became operational and are promising for the period to come. Consumer Retail Services is the second business which delivered double-digit growth of 12% in the first half of this year. Of note, the growth was primarily organic. We achieved a stellar performance in Northeast Asia and want to reemphasize that Electrical and Electronics, including wireless activities, fully recovered. Softlines continued its 2016 expansion through the continued acquisition of medium to large size global brands and retailers, and improved market share in new geographies. The strong performance in Softlines complemented a similar growth in Hardlines, fueled by increasing testing of EE toys. Last but not least, we continued the double-digit growth in Cosmetics, Personal Care, and Households.
Agrium performed strongly with a total growth of 8.2%, fully in line with last year. While the Trade activity had a slow start to the year due to poor crop quality in Europe, Seed and Crop activities benefited from market improvements compared to last year. Food activities delivered double-digit growth, particularly in the Americas and Europe. Similar double-digit growth was achieved in the Life Lab activities. CBE achieved 3.9% growth in the first half of this year, and this was exclusively driven by organic growth in both Management System Certification business and the Training and Performance Assessment business. The latter delivered double-digit growth. Considering the seasonality of the business, we expect a stronger growth in the second half. As I previously mentioned, this is the first half year in which Minerals returned to positive growth.
The Trade Services achieved strong growth, and the team was particularly successful in the on-site lab activities. On the Geochem side, we experienced a nice uptick in sample volumes, particularly in Australia and Africa. One challenging area we need to address relates to the Plant and Operational Services, where we have not realized the growth during the first half of this year. Unlike last year's high single-digit growth, the GIS business achieved a low double-digit growth of 1.8%. GIS achieved solid results in the areas of Product Conformity Assessment and single-window solutions. However, the revenues growth has been impacted by the completion of two major contracts. We are confident that the revenue development in the second half will improve. Environmental Health and Safety, a revenue decline of -1.4%, which is mainly driven by the benefit of a commercial contract that was completed in the first half of last year.
Moreover, we made a decision to restructure the Accutest business and exit high-revenue, low-margin contracts. We achieved strong growth in traditional testing and health and safety services in Europe, Asia, and Australia. In addition to the solid growth in the lab services, we believe that the foundations are in place for our Environmental Health and Safety businesses to continue to grow moving forward. The first half of 2017 represent the first time that OGC has also experienced a positive growth since 2014. The growth is mainly driven by contracts secured in the petrochemical industry, while trade-related activities were declining. After a realignment of our asset utilization and sales strategy, we managed to grow our upstream activities at mid-single digits. Additionally, we achieved strong growth in sample management, oil conditioning monitoring, and stock measurement. We expect a growth in the second half comparable to the one of the first half.
Last but not least, the only business which was in decline in the first half was industrial, the reason is twofold. First, the ongoing depression in oil and gas capital expenditure kept the volume and price under pressure, impacting the industrial services, mainly in mature European and North American markets. Second, there was reduced public investment in infrastructure and construction markets in South America as well as parts of Europe. Unlike the Americas and Europe, the industrial business grew in regions such as Asia and Africa. I will give you more insight as we transition to the group's revenue development by region. You notice on this slide that all three super regions contributed to the growth of the group, with the Asia-Pacific region being the key driver.
The Asia-Pacific region delivered the highest organic growth, significantly above last year. This is driven by a robust growth in Northeast Asia, combined with a low single-digit growth in Southeast Asia-Pacific. China's very strong growth is across the portfolio and particularly driven by the recovery of the electronics and electrics. In addition, Taiwan's double-digit revenue growth was fueled by Consumer Retail Services, Certification and Business Enhancement, and Environmental Health and Safety. After four reporting periods, the Australian business achieved a low single-digit growth, mainly driven by the recovery of the minerals. I mentioned that industrial had a strong performance in the region, particularly in Indonesia, Thailand, Australia, and New Zealand. A good organic growth has been achieved in Europe, Africa, and the Middle East, with a growth of 3.3% fueled by double-digit growth in Africa.
The strong performance in Africa is mainly achieved in Agriculture, Food and Life, Minerals, Transportation, and GIS. Last year, we invested in both the Cameroon scanning project and the Uganda statutory inspection services project. Both projects have evolved positively and generated a revenue and a return in line with the initial business case. The European regions performed well in Consumer Retail Services, Agriculture, Food and Life, Minerals, Certification, Business Enhancement, and Transportation. The Eastern Europe and the Middle East region have decreased slightly, mainly due to the decline in the OGC and industrial business. In addition, the group completed a major GIS contract in Kurdistan in the first quarter. Acquisitions were the main driver behind the Americas' positive growth and related mainly to the acquisitions we made in Industrial Transportation, AFL, and Environmental Health and Safety that have been made last year.
South America performed well in transportation, industrial, and certification and business enhancement. The positive revenue development has been partially offset by a revenue decline in the minerals in Chile and industrial business in Brazil. In North America, we achieved a mid-single digit growth driven by good performance in agriculture, food and life, minerals, and transportation, partially offset by a decline in industrial. On this slide, you see the evolution of the headcount, each of our 92,912 employees around the world contributed to our strong growth. During the first half of 2017, the headcount increased by 5.1% versus a year ago. The inorganic growth represents approximately one-third of the net increase, while the prior year restructuring impacted 577 employees, mainly in OGC, industrial, and minerals. The organic headcount growth mainly relates to agriculture, food and life, Consumer Retail Services, and transportation, which are driving the top line.
The right-hand side of the slide, you see the fluctuation in the average headcount for the three super regions. In two of the three super regions, the increase in the average headcount is slower than the revenue growth. The growth in Asia Pacific is mainly driven by the strong growth in China partially offset by the decreases in countries affected by the slowdown in OGC, minerals, and industrial. The growth in the headcount in Europe, Africa, Middle East is mainly driven by the organic growth in agriculture, food and life, and Environmental Health and Safety, and the staffing of new industrial and mineral projects in Russia. Headcount growth in the Americas outpaced revenue growth as we are staffing a new major industrial project in Peru and supporting the strong growth of agriculture, food, and life in South America.
The Americas region is impacted by the decline of industrial activities in North America and Brazil and the decline of minerals in Chile. I would like now to share some relevant information regarding the adjusted operating income evolution throughout the first half of 2017. You see here the building blocks that contributed to our operating income of CHF 428 million in the first half of 2017. You can see that the uptake of the adjusted operating income is mainly organic, as reflected in the orange box. The relatively low flow through of the incremental revenue can be explained by the four developments I outlined before. First, the bad debt provision of certain GIS receivables. Second, the volume and price pressure, mainly in the industrial business. Third, the fact that we benefited from the completion of a large non-repeating Environmental Health and Safety contract in 2016.
Last but not least, the flow through was impacted by the continued investment we made in our growth transformational and efficiency projects in line with our strategic plan. These are the main reasons why the restructuring savings, as well as the uptake of the margin realized by the majority of the businesses, is neutralized on an adjusted operating income level. The dark gray box reflects the impact of the 2016 and 2017 acquisitions. The flow-through of CHF 3 million corresponds to the CHF 45 million acquisitive growth. The limited flow-through relates to the two underperforming assets, Accutest and Bateman. We still believe that both acquisitions have upside, and particularly Accutest is progressing well.
The light gray box reflects the currency exchange impact and the gap between the positive Forex impact on the top line and the slightly negative impact on the bottom line is driven by the different relative weight of the currencies in the revenue and the adjusted operating income portfolio. Overall, we closed the year with an increase in reported adjusted operating income by 4.3%. Our adjusted operating income portfolio further communicates the increase in importance in our focus business lines. The non-energy related businesses represented 69% of the total SGS income. This is an increase of approximately three percentage points versus the same period a year ago. Consumer retail services remains by far the main contributor of adjusted operating income and increased its relative importance by 2.6 percentage points, thanks to its strong growth and increasing margins.
Agriculture, food and life, the second contributor, increased its relative weight by 1.3 percentage points. Interestingly, transportation overtook Minerals to become the number 4 most important contributor. Industrial, GIS, and environmental health and safety decreased their relative weight as a result of the developments outlined before. Let me now give you some insight into the development of the adjusted operating income margin by individual business. In the middle of the slide, you can see the decrease of environmental health and safety operating margin by 250 basis points versus a year ago. I re-emphasize that this results from last year's positive one-off effect. Related to the completion of a contract which had a significant impact on both the top and the bottom line, as well as the ongoing restructuring of Accutest.
The single reason for this significant margin decrease in GIS by 780 basis points is the bad debt provisioning we talked before. Without this bad debt provision, the margin would have been 19.8%. We are working to recover the bad debt going forward. Industrial suffered the most from a margin perspective, mainly as a result of the decline in top line I explained before. The remaining impact is mainly related to the change in the mix in the portfolio. Considering our concern about market conditions, we remain cautious for the development of the Industrial business during the remainder of the year. Our OGC team was very successful in maintaining the margins. The impact of the weak performance in the trade leading to volume and price pressure has been offset by the improvement in the upstream activities and increasing profitability in measurement and instrumentation, sample management, and stock measurement.
Let's now take a look at Minerals. I would like to recognize the Minerals team as they were successful, not only in growing the top line, but at the same time increasing the margins for the second time in a row, despite the negative impact of the acquisition of Bateman in South Africa. The team remained disciplined in the execution of the restructuring plans and continued to work successfully on improved lab utilization and lab efficiencies. In addition, they were successful in adding a number of profitable contracts to the portfolio, laying a good foundation for future growth and further margin improvement. I would like now to focus on two businesses that are critical in the future development of our portfolio, and these are Agriculture, food and life, and transportation. Both businesses delivered a nice uptake in the margin.
Despite the slow start of the agriculture, food, and life trade activities, they benefited from a good flow-through of the incremental revenue from food and life lab services. In addition, the team focused on lab efficiency, contributing positively to the uptake of the margin. Transportation realized an uptake of 200 basis points as a result of the double-digit growth in all activities, combined with an additional return generated by the new initiatives we invested in North America, Western Europe, and Africa, as well as improved efficiencies. Consumer retail services continue to be the top performer with a healthy 25.1% margin. The CRS business continue to run their operations in a very disciplined manner from a cost perspective in the majority of their portfolio and recovered the performance in the electronics and electric activities, leading to an improvement of the margin by 80 basis points versus a year ago.
I would like to conclude this slide by recognizing the CBE team, who achieved the best margin improvement as a result of the double-digit growth in performance assessment and training. Moreover, the transfer of activities to the shared service centers contributed to the margin improvement, and this demonstrates the potential of leveraging our back offices going forward. I would now like to move to the balance sheet. As you know, our balance sheet continues to remain one of our strengths. SGS remains one of our strengths, and our balance sheet at the end of June shows a net debt of CHF 1,136,000,000. There are a couple of points worthwhile mentioning here. Compared to December 2016, the net debt increased with CHF 400 million, and the increase in loans relates mainly to the issuance of the CHF 375 million bond at the beginning of the year.
The effective interest of our bond portfolio amounts to 1.3%, which proves our investors' trust in our ability to deliver on our commitments. The decrease in accounts receivable is the result of the strong focus we continue to place on net working capital. With 49 days, our DSO has reached a historical low. One of our four financial priorities is to continue to optimize our cash flow. We remain proud of our ability to continually deliver a very solid cash flow, as evidenced again in the first half of this year. The operating cash flow reached CHF 329 million and is the net of the increased profit, partially offset by a negative net working capital movement and an increase in taxes paid. In absolute terms, the controlled uptake of the net working capital amounts to CHF 33 million and is mainly driven by the growth of the business.
These results prove our continued disciplined way of optimizing the operating net working capital. The net operating net working capital as a percentage of annualized sales declined by 1% versus last year and consequently reached a new historical low. In total, we invested a net amount close to CHF 130 million in CapEx and acquisitions. We closed the half year with a free cash flow of CHF 210 million. One of our capital allocation priorities is to invest in organic growth through CapEx in order to lay the foundation for future business growth. We spent CHF 131 million of CapEx, representing 4.3% of sales, which is slightly below last year. Part of the decrease is related to the fact that capital-intensive businesses as Minerals and Industrial slow down in investments, and part can be attributed to the positive impact of our procurement team and their commitment to identifying CapEx efficiencies.
Approximately two-thirds of our CapEx is related to growth investments, while one-third relates to maintenance investments. Our primary CapEx investments were made in our key businesses, AFL, CRS, OGC, and transportation. These four were the most capital-intensive businesses in 2017 and represent approximately 17% of our total CapEx investment in the first half. Agriculture, Food, and Life overtook Consumer Retail Services as the biggest CapEx spender, with a capital intensity of approximately 5%. The CapEx intensity in Consumer Retail Services exceeded that of OGC, mainly as a result of the continued investment in testing capabilities. OGC investments are comparable to last year and were mainly related to lab testing activities, while the limited CapEx in upstream was related to specific new contracts, mainly in the Middle East. Industrial decreased its CapEx investments by 30% and mainly invested in testing lab capabilities in Asia.
From a geographical perspective, the relative weight of Europe, Africa, and the Middle East increased compared to Asia Pacific and Americas. The CapEx investments in Europe are spread across the business portfolio, and the relative importance of the Americas decreased as a result of the continued slowdown in the capital-intensive business as Industrial and OGC. The decrease in relative weight in Asia Pacific results from the large investments in CRS and Industrial in 2016. As you can see from the chart at the right bottom part, the CapEx is slightly below the depreciation due to the reduced level of investment in energy-related business and the CapEx efficiency realized by our procurement teams. Let's now take a look at the impact of the currency fluctuations.
You will remember that SGS is operating in more than 19 currencies, and this slide provides you with the top 10 currencies in 2017, representing approximately 75% of revenue. The top three currencies we operate in are the euro, the dollar, and the Chinese renminbi, representing more than 50% of our revenue. The positive Forex impact on our top line is related to the strengthening of the majority of the top 10 currencies against the Swiss franc. This includes mainly currencies as the dollar, the Brazilian real, the Taiwanese dollar, and the Korean won. The biggest depreciation in the first half of 2017 relates to the pound, which declined by 11% versus the Swiss franc. The Chinese renminbi and euro were also notable declines against the Swiss franc. To conclude my presentation, I would like to remind you of some key financial highlights.
The worldwide SGS team helped us to deliver throughout the first half. A solid top-line growth at constant currency of 4.9%, of which 3.4% organic. An increase in adjusted operating income by 4.9%. We were able to keep the margins flat despite our incremental bad debt provisions. Our profit for the period increased by 5.8% up to CHF 293 million, and we invested CHF 131 million both in CapEx and acquisitions to continue to lay the foundation for future growth. And finally, we generated a solid free cash flow of CHF 210 million. I would like to thank our colleagues around the world for their hard work, and to deliver a solid set of results during the first half. I would now like to pass you back to Frankie, who will give you further insight into the performance of the individual businesses before sharing the outlook for the remainder of the year.
Thank you, Carla. Let me go through quickly the different business lines. I will mainly focus on the second half. Carla gave you quite a lot of details already on the first half result. If I start with agricultural, food, and life, we expect the trading activity in Europe to improve with the next harvest season. This assuming that crops quality and quantity are forecasted as is now. Food services should remain strong with new opportunity in the U.S. related to the Food Safety Modernization Act, as well as with expansion of our footprint in Africa and Asia. Particularly in China, where the gradual opening of the market is giving us new opportunities. Life activities volume should remain steady across the network. Additional investment has been made in virology in Scotland and large molecules in the U.S. for future development.
For minerals, we expect the market stability to continue with ongoing funding for exploration project and also existing project moving to production phase. The strategy we put in place a couple of years ago to focus on site laboratories continues to generate new work, and we are expecting six additional new contract to start in the second half of the year. For the second half, we are also seeing an improved project pipeline for the mine and plant services. Those are complex technical services helping our customers to optimize their operations. These services highlight the technical competencies of SGS beyond our traditional inspection testing activities. For the mineral, we should expect a gradual improvement of margin in the second half. Works. Oil, gas, and chemicals. With the current extension of agreement on production cut, we expect the market to be rather stable.
We are not predicting an increase of our trade activities in the second half. Our plan on terminal operations and non-trade related activities by oil condition monitoring and few retail services will continue to see solid growth in the second half. As Carla already mentioned, for oil and gas, oil, gas, and chemical, we are expecting similar growth in the second semester than in the first. Consumer retail. Strong momentum across the OnTop portfolio. We are expecting this to carry on into the second half. Our wireless activities that slowed down in 2016 has been refocused. We are now producing a strong contribution to both top line and bottom line.
We are now planning to expand further our network in Asia to capture more market share. Also in anticipation of the strong midterm market evolution related to Internet of Things, where you will see a lot of connectivity aspect in it. The setup that we are putting in place is really for the short-term and medium-term activities that we are seeing in the market. Per division business enhancement. Again, the deadline for the transition to the new standard, the ISO 9001:2015 standard, is in the second half of 2018. We are seeing an increase in demand from our customers for training and performing transition audit. We expect this momentum to continue in the second half of 2017. Also in the first half of 2018. For business enhancement, the key contribution is our training services.
This has been strong in the first half, and we expect that to continue in the second half with probably double-digit growth to close the year. We have now expanded our SGS Academy to over 40 countries. This increased geographical presence, combined with the rollout of our digital learning management system, allows us to secure several global contracts with multinational companies as we have the capacity to train the workforce across multiple countries, either in the classroom, through e-learning, or a combination of both. This is where the strength of SGS could come off with the wide footprint that we have in the training academy activities. Industrial. As expected, the market conditions were difficult in this first semester, and we are not expecting any significant improvement during the second half, particularly in the oil and gas sector.
However, we have put a really focused sales approach to selected segments, and we have won several contracts in the testing field in Africa and in Asia, as well as we have won new construction supervision projects in South America. In general, as Carla already mentioned, for industrial, we remain cautious moving into the second half. Our health and safety, EHS. In fact, the market drivers have not changed, and demand for traditional testing, inspection, industrial hygiene, and field audits have been steady. Demand for testing of dioxin, asbestos, persistent organic pollutant, and other hazardous substance has actually increased in the first half and should continue to develop in the second semester. Also, one important point is the current stability of the mineral market should lead to increasing testing volume for our EHS laboratories.
For EHS, we're looking at a stronger second half with a better organic growth and improved margin. Transportation. Another strong semester for transportation in the first half. Moving to the second half, we see increasing competition in France for the driver license program with three additional operators joining the scheme and a softer growth rate with inspection program in the U.S. and Europe as they reach maturity. However, investment we made in the network of laboratories in 2016 are generating increasing volume, and we expect this to continue moving into the second semester. For transportation, we are looking at moderate growth in the second half compared to the first semester. To conclude, government and institutions. In the second semester, we are planning to start three new e-waste monitoring programs in Africa and also the implementation of the third scanner in Cameroon.
Those programs will help to accelerate growth, and we're looking at a stronger second half in both top line and bottom line. This is a quick overview of the eight business lines, and let me go through the overall guidance for 2017. Both the minerals and oil and gas, oil, gas, and chemical market have a more stable environment. The remaining of the business lines should perform well, with the exception of industrial, where the market condition will remain challenging in the second half. On that, we confirm our guidance for 2017. They are solid organic revenue growth, higher adjusted operating income, and robust cash flow generation. And for me to finalize the presentation on the reconfirmation of our Outlook 2020.
Just to remind them, they are mid-single digit organic growth on average over the period, accelerated M&A activities with accretive revenue in the range of CHF 1 billion, adjusted operating income margin of at least 18% at the end of period, strong cash conversions, solid return on invested capital, and solid dividend distribution in line with improvement in net earnings. On that, thank you for your attention, and Carla and I would be happy to take any questions.
For questions, star and one.
Hi there, Edward Lewis from Redburn. Can you remind us of where you are with the four shared service centers? Clearly they're helping the CBE division, but I'm just wondering how much more cost benefit can we expect and when that's likely to come through.
Okay. Are we on?
Yeah, you're on. Yeah.
Yeah. Where do we stand with the shared service center? I think we are progressing well. First of all, the CBE activities or the back-office activities from, let's say, around 16 countries are already part of the shared service center. With respect to the finance organization, we moved part of the financial activities of two countries already in the shared service center in Katowice. As we speak, we are moving a third country in.
Sorry?
Does that give you first a bit of an operational, I would say, background from a financial perspective? The further development of the shared service center will have a net cost impact in 2017 and also 2018, so completely in line what we actually outlined before.
Maybe just to add, we actually have two shared service centers, one in Poland, one in Manila. The third one is being put into operation in China for the Chinese-speaking countries, mainly China, Hong Kong, Taiwan. The fourth one that we discussed in the past that will be in the Americas is not yet operational. We're working on three. Let's start with three first before we start to launch on the fourth one.
Rory McKenzie, UBS. Three questions, please. The first one regarding the CHF 11 million a year provision. Could you detail if it's with one or several clients, and you're confident to recover most of the amount, but when do you expect that to happen? Secondly, regarding the change in the management organization, I notice you've created a SVP position for digital and innovation. Perhaps you could say a word on that, on the opportunities and priorities, and also, why it's happening now and not when you launched the Digi 4.0 initiative. My last question relates to the guidance. We have easier comps in the second half, and you mentioned quite a few times the word improvement. Is it fair to assume an acceleration in the second half compared to what we have seen in the first half?
I'll take the first question, thank you. Referring to your question on the GIS bad debt, first of all, it relates to three contracts. It's not a single contract. We are definitely confident that we will recover a major part of the bad debt. In terms of timing, I would say that a major part will probably come in the second half, and that is spillover effect also into 2018.
I'll take the second one. For the Senior VP of Digital and Innovation. In fact, if you look at in 2015, this position was taken by myself. Back then, it was important for me to drive this change of structure and the culture, if you want to say, in the SGS group, to make sure that it is embedded into organizations. At this point, we come after two and a half years, I felt it was the right time to pass over to a more full-time function, instead of me doing that on a part-time basis. I'm trying to put the focus on these activities. The priorities are quite clear now. We have a roadmap, but there are two key elements.
Everything linked to technology and the innovations is focused on an external aspect, where we're looking at whether it is use of technology to help us to do better asset management, like the smaller investment we made into Sensima. It's all those technology for remote access of information and so on, whether it is on the e-commerce side. We are also looking at, if you recall, we have this company called SILAB, that does those screen of the website for information for the regulatory compliance of food activities, which we're using some kind of artificial intelligence to help us to monitor the change of revision and to formulate response to our customers. This is with the external part, and we're really having a focus on that.
Internally, we're also having this digital team to help us to understand how we can better optimize the use of technology to help us optimize our own operations. This is also under this part of the network. The third part is with innovations, where we're looking at the different new ideas, new venue. The art services that we had in the past, that we discussed in the past already, is part of this innovation process, and we have a few other new ideas coming. Typically, they take a longer time because you have to groom them and put them into the market, the trial and error. If you look at the Transparency-One clips that we saw just at the beginning of the presentation here in Geneva, it is something typical that we started two and a half years ago, but we had to educate the market.
We need to educate the market about the importance of this kind of activities and the solutions and the added value. Now we're seeing an uptick of some major customers, whether it's Mars or some other customers, is really keen on using our solutions now. If I go to the last question, which is about the guidance accelerations. We have a mixed portfolio where we see a lot of positive momentum in some of those businesses, like GIS or EHS, where we're giving more soft internal performance in the first half. Consumer CD and AFL will be in the same level of growth in terms of increasing seasonality, so on, that we're seeing. We still have some concerns about industrial. The OGC is in similar level. All in all, our view is that a similar growth in term of guidance is a fair statement.
There may be some acceleration here and there, so it's not going to be too different from the first half and the second half.
Yes, afternoon. Arthur Truslove from Citi. I've got a few as well, please. First of all, the consumer organic growth was obviously very strong, seems to be a bit better than peers. How much of that number do you think is market share gain, please? Is that market share gain just in E&E or is it elsewhere in consumer, please? Secondly, could you remind us about the French driver training contract, the rough size of it and when it annualizes, please? Thirdly, I think it's CHF 20 million-CHF 25 million or so of provisions movement on the balance sheet. Could you remind us of which divisions had the biggest movements and provisions, presumably cash expenditure during the half, please?
For consumer, I don't have the exact numbers, the split between market share gain and the new portfolio. I would say the market share gain is mainly on the softline industry, where it's a quite competitive sector in terms of development. Growth is always a combination of a more aggressive value proposition to the market, so market share is gaining over there. On the other hand, we have seen a lot of volume increase because of the market itself for E&E, for example, anything linked to our substances into E&E sectors. The market has grown because of additional requirement in that. I would say it's not purely a question of market share gain over other competitors, but more about the evolution of the market as well. I don't have the exact numbers.
I would say the bigger part would be on the market evolutions in terms of market share gain. For the driver's license, I think yearly there's about half million people that we train. With you over that, I don't have the exact numbers in terms of volumes. I will have to find that out for you. I don't have it. Before I say something, I will find it, I'll give it to you before the end of the call.
Can you repeat Ed your question on the provisioning? Are you referring to the bad debt provisioning?
No, I was just referring to the general provisions of the about CHF 20 million, I think CHF 23 million maybe, movement from December to end of June. I'm just wondering which divisions have most of the movement.
Yeah. Honestly, I would have to park that question. Obviously, you have a lot of fluctuations in the provisioning in such a fragmented business. Obviously in the first half, the provisions that I would say decreased are mainly related to the compound debt because of 13-month etc., depending on the cycles in the different regions. The other part I would say is probably related to some investing. I can take it offline. Yeah.
Okay.
Happy to come back on it. Yeah.
Specifically, how much on the restructuring provisions moved?
The restructuring provisions obviously also decreased. Yeah.
Yeah.
That is a couple of million CHF. Yeah.
Okay.
That is definitely, yeah. We are really completely executing the restructuring plan as we proposed it last year. Yeah.
Thanks very much.
Three questions from JP Roland at Vontobel . One, acquisitions, is your pipeline busy, not so busy or very busy? Second question on your debt. If many years ago you had no debt, now you have debt, how comfortable are you with the current level of debt, and what is your target? Third question regards air quality control. One of your competitors seems to be keen in investing massively in air quality testing. Do you plan to do so too? What are you doing exactly in that field, which is a growing field?
For the acquisition, busy, very busy, not busy, I would say very busy. We have not slowed down the way we are looking at acquisitions, so the pipeline is very strong, and we are looking at additional companies in the second half of this year. The number of companies that we close will depend on a lot of factors. Among one of the key ones is the value to us. We are looking at a lot of companies in terms of strategy, certainly on the market, there is also a question of valuation, so we need to be careful. A very clear discipline in term of financial discipline for acquisition. Some of those assets will be too expensive at the current asking price. All those would be interesting, so we are really looking at this.
I would say the pipeline in the second half would be busy.
I think the question related to the increase of the debt. Obviously it increased, but I think we are very comfortable with the level where the net debt is. We would also not avoid increasing the debt if it would relate to interesting, I would say, acquisitions going forward.
The last one for air quality control. I'm not sure what the large investment is, but in fact, it is a service that we already offer in our portfolio when we talk about traditional services. Air, water, and soil are the typical services we offer. I'm not sure about the complexity of the testing that the company is talking about. Generally speaking, air, soil, and water are the three components of the EHS business that we offer in the traditional testing field.
Yeah. Good afternoon. It's Paul Sullivan from Barclays. Just a few from me. Firstly, a lot of your clients are investing hundreds of millions, billions in data services, predictive maintenance. Have you seen any change in the way some of your customers are relating with you, and how they think they will use your services going forward, both positively and negatively? Related to that, from an internal perspective, how far along are you now in terms of the digitalization of some of your manual processes? Your headcount is still sort of trending up along with revenues. When does that start to change, and is there a point when we start to see headcounts starting to fall? That's the first question. Secondly, in industrial, the 7% margin. Are there any parts of industry that are now unprofitable?
If we are in a $45, $50 oil market for two, three, four years, is that level of margin now the new norm?
For that business, should we be braced for further downside pressure?
For the data service, the market is evolving. I would say it has not changed drastically for the time being. It is evolving. As mentioned earlier about these Transparency-One activities, where it took us two years to educate our customers. We're a little bit in the beginning of the process as well. We speak a lot with our customers, trying to educate and evolve together with them. I would say the momentum will be there. Our customers will start to look at asset integrity in the more data point of view, rather than those regular visits. This is why we're investing to these companies, so Sensima and so on.
I would say it's a positive development because our colleagues, instead of being sent to the field to do this physical inspection on a regular basis, we are first sending them to do this physical inspection at a specific time where the data tells us that there's a program that we need to go there. It doesn't substitute completely our services. It's just refining the time at which our services have to go versus a regular visit. We're going to a specific timeline because the sensor or the data is telling us that we should do something. Number one. Number two is we're also training our colleagues now to become more data interpreter. It's great to have data, but you have to interpret those data. Without the technical expertise of the field, those data are just a set of numbers.
The analytic of data needs to be done by expert, and we are really moving part of our colleagues from these field activities, for more data analytic activities. The training will come. As well, I would say whether it is going to be reduced or it's going to be change in our landscape, it's difficult for me to say for the moment. Again, we're training, we're educating our customers. We're working through with them. I would say it's a long-term process, and you are not going to see a massive decrease of FTEs for some of those asset integrity businesses in the next couple of years, I would say. It will come in the longer term, for sure, because the sensor will become more and more performant. For the time being, you're not going to see. The last point is also regulations.
While some of those services can be done, the regulatory environment has to change for this technology to be adopted. There will be a few of those elements to take into considerations. The second question for the dollar on industrial. We do have activity in the industrial that makes good margins. If I take the testing activities of our industrial portfolio, they are making double-digit margins. I would say more close to the mid double digit, the tens than in the low singles like they have in other. The business is really impacted. We have testing, NDT, inspection and so on. You will see more lower margins in the inspection maintenance activities, and much better margins in the testing activities, as well as some of the NDT activities linked to the nuclear power and so on. The portfolio is quite mixed, I would say.
For the time being, we're trying to migrate the mix to the right balance where the margin will pick up in the coming semesters.
One quick follow-up. It's Arthur again, Citi. You've got the capital market day in two or three months. Does the board intend to reconsider the 2020 targets in advance of that, then you'll either reiterate or tweak? Is there no intention to think about it in advance, please?
I just reconfirmed those targets, I'm not going to say I'm going to reconsider. No, not for the time being. Maybe there will be discussion with the board one day, not for the time being.
Great. Thank you very much.
The phone? Any call on the phone? Yes.
The first question from the phone is from Robert Plant from J.P. Morgan. Please go ahead.
There was a drag on the margin from investment. Do you think that level of investment will continue into the second half and into 2018, please?
Yes, definitely it will continue in the second half. Yeah, the impact coming from the investments.
Also into next year?
Yes, part of the program, as I said before, will also impact next year. Will have a negative impact on next year.
Do you think that will be to the same degree as this year?
Yes. That it should be a comparable level.
Okay. Thanks.
The next question from the phone is from Jean-Philippe Bertschy from Vontobel. Please go ahead.
Good afternoon. The first one would be related to M&A. Frankie, you were saying you remain financially very disciplined. If you can remind us the rationale of the buyback as you're buying back your shares, trading at 3 times sales and 20 EBIT, while you can buy some very attractive targets at a margin of close to 30% in H1 at, if you bid that less of 10 times. The second one would be related to restructuring costs. I was a bit surprised not to see any restructuring. You're like having some difficulties in industrial, and you had as well some headwinds in environmental. Do you expect some restructuring costs in H2? Maybe the third one, in terms of e-commerce, if you can quantify in absolute terms the sales and at what margin. Frankie, you're not surprised I'm asking you about clinical research.
There is no comment on the press release. If you can give us an update, please. Thanks.
Okay. I'll start with the last one, clinical research. Actually, it's performing well for the time being. We have refocused this business. If you look at the clinical research now, 50% of what they do is biometrics analysis, which is the statistical analysis of information coming from the life sciences clinical sectors. The other half is on the early phase trial. We have quite significantly reshuffled the portfolio to focus also on the part of the data that we think is interesting for us in these clinical research activities. For the time being, this is the current strategy. The margins are good and the growth is correct. We're going to keep monitoring that. Certainly, if there's evolutions that we need to do to change the direction, we'll look into it. For the time being, it's quite stable.
Again, more focused on data analytics in terms of biometrics analysis than the clinical research itself. If I go back to your restructuring question, the first one is no. We don't are restructuring. We don't expect any restructuring in the coming semester. We have done what we needed to do to reshuffle, realign the organization to the new market conditions. The softness or the fluctuation in some of those business lines, part of the day-to-day operations, that we will handle that. The other two questions, do you want to say the.
The one on buyback, and the other one on e-commerce.
Oh, I'll take the e-commerce one. I'd prefer not to give you a number for e-commerce. What I can say is, we have identified three level of e-commerce strategy. One is basically offline services, basically our existing services moving to online retailer or online portal. The other one is we evolving what we call level 2, evolving our services into a more digital aspect, where we're going to complement our existing services with some digital additions to be done online. We have a couple of those projects that we will discuss during the Investors Day. The third level is more a vision that we have regarding the B2B2C, where we're going to look at targeting the consumer itself. This is more from the longer term in term of a vision and development.
I would say, I can only tell you that in China, the growth of the e-commerce activities that we have there was in the quite strong double digit again this year, and we'll keep developing that, but I would prefer not to give you a number.
Thank you.
It was on the first, on the M&A. I will take the question on the M&A, Jean-Philippe. The fact that we remain disciplined on the M&A side, I think the fact that the inorganic activity slowed down during the first half is not only a result of remaining disciplined. You know that in this area, first of all, you need to find the right targets that are in line with the strategy, et cetera. Then is, of course, the price element. I don't think that there are any major opportunities that we lost because of price in the first half. The pipeline is reasonably okay for the period to come. We will continue to work on new opportunities.
The rationale of buying back shares at this level?
We definitely launched the new share buyback program. You probably also noticed that up to now, we have not been active under the program, Jean-Philippe. It's definitely our plan to buy back. We monitor, I would say, the situation on a daily basis. When we think the time is right, we will buy back.
Thank you.
The next question from the phone is from Toby Reeks from Morgan Stanley. Please go ahead.
Hi, guys. Could you talk a little bit about the change in momentum between Q1 and Q2? I think what we're sort of expecting is maybe that Q1 was a bit higher than Q2. Can you talk about the factors behind that? Secondly, trade inspection in oil and gas. Could you talk about that market? Clearly, the growth a bit under pressure a little bit there. Could you talk about the competitive landscape and whether pricing is starting to have an impact? Thank you.
What you see is the trade.
Yes. On the OGC trade side, I would say I'm not going to give you a forecast about what the price of oil and gas, the oil is going to be, because I don't think it would be reasonable. I would simply say that what we see an agreement by some of the OPEC and the non-OPEC countries to cut the production level. You're also seeing an increase in production of shale gas in the U.S. is compensating for this cut, and you're not really exactly seeing a massive decrease in the reserve of all the existing on the market. This is kind of putting pressure on this market, and our problem is that we're not seeing that many volume movement across the supply chain, and this is what we're looking at.
When these transactions, these volumes, these inspections for us, and we don't see that much of volume and transaction, this is where we see a softness in that. Again, we're not saying that this will be a massive decrease in the second half. We're just not going to see a massive increase neither. It's going to be business more or less at the same level as we're seeing in the first half of the year. Nothing critical in terms of volatility, but more or less the same volume we have seen so far.
Is the market becoming more competitive? Are you seeing people like AmSpec becoming more aggressive, or pricing coming under pressure at all in that market there?
Certainly. When you have a market is soft, there would be market pressure on this sector. We've been quite disciplined in terms of giving discount to any of our customers. Only when we believe it is strategically important for us, and we have enough economic scale to ensure that we can maintain margin by giving a certain discount, then we'll do it. Otherwise, we've been quite disciplined, and if this means that we lost some of the lower margin business that we had, then we decided to walk away from some of those.
Okay.
The second question was?
Q1, Q2 momentum. Q2 growth rate, the difference between the two.
The momentum of Q1 versus Q2.
Yeah.
Let me say it this way, the May and June number growth was strong. April was a weaker month that has distorted the Q2. I would say, if I look at the momentum of the last two months of the first semester, the momentum was quite strong.
Okay. Thank you.
The next question is from Tom Sykes from Deutsche Bank. Please go ahead.
Good afternoon. Just a couple. One on the cash flow, please. You will have had a pretty decent benefit from the commodity complex declining and the longer payment terms that they generally have. Do you think that working capital to sales, although it's at a record low now, that that might actually start edging back up again at all, please? Then just on your sustainability of margins in Agri and Transportation in particular. You picked out Transportation. Sounds like you expect the growth to moderate there. Do you expect a similar level of margin improvement in the second half? In those divisions, are you winning business at a higher price point, or is it SG&A benefits you're getting in those divisions, please?
Okay. I refer first, Tom, to the question of the cash flow and the increase there in the net working capital. I would argue the argument that you bring to the table, because actually, the fact that you have a negative movement, I would say exceeding last year's negative movement is more related to the impact of non-operational elements there. Definitely, the operational one is actually improving. I would say that that argument is not valid. The second one is, we are also, I would say, from a net working capital, really focusing on the contracts in the commodity areas to constantly further improve and optimize. It's not really a danger that that would have a big impact or would create a big deterioration going forward.
Okay.
Respect to Transportation, Do you think that so ?
Yeah, sure. If you look at the margin for AFL, there's two aspects. I think the margin linked to the trade activities or inspections, they will be similar to what we have for the time being. While the margin for the laboratory activity that we're going to get in the second half will put more incremental margin to our structure. The margin is usually better when we have bigger volume in the laboratory. For me, the margin in AFL should be steady or better in term of if the throughput comes as we were planning. For Transportation, it's a slightly different story, where I would say we're looking at a more moderate growth in the second half because of maturity of some of those contracts. I would say this is more on the growth side.
On the margin side, I would say that we're not going to see a major pressure on that.
Okay. The margin improvement that you've seen in Transportation, is that a combination of higher gross margin work as well as any SG&A benefits, or what would you say is the margin driver there? Could you pick out the annualization and slower growth, but has some of that work been coming in at a higher margin there?
The current margin is a mix of both. When we have a bigger volume in some of those contracts, for example, those driver's license, we are now optimizing the process and we're optimizing the use of our capabilities and our network. It's a real mix of optimizing the SG&A and the
On the high visual volume that we see on those programs.
Okay. All right. Thank you very much.
The next question is from Rajesh Kumar from HSBC. Please go ahead.
Hi, good afternoon. Just looking at your first half net bad debt provision, you had about 30-32 basis points margin impact from receivables, which you're confident you will collect in the second half. Clearly, that should help your second half reported P&L margin as you collect them. When you give your operating margin guidance for full-year, are you making an assumption about that collection to happen? Second, just following up on the non-operating working capital, there's been a big outflow from non-operating working capital, clearly, which has offset the positive developments on the operating capital. What is driving that? Is it the accrual part which seems to be rising? Is it some other Forex-related issues? If you could give us some color on what's going on there.
Finally, are there any one-off in first half of this year we should be aware of when looking at comms for the next year, like you had one in the environment business last year, which we are now getting aware of?
I'll take your first question with respect to the bad debt. Let me just be very clear. I'm confident that we will recover that money, but I did not say we would fully recover it in the second half. We will definitely maximize efforts to maximize the part we can recover in the second half, but very unlikely the full amount will be recovered in the second half. That is the first statement. With respect to the net working capital, when I refer to the non-operating part, it's actually an amalgamation of different elements, but I would say that the major ones actually relate to receivables more in the tax area. As said, it is just a combination of many different elements, but the biggest one are tax related.
Understood. The rising accruals, that is not included in that?
Sorry?
The uninvoiced revenues that have also increased in first half, that is not reflected in that working capital part.
Definitely the unbilled revenue and work in progress is reflected in our operating net working capital, and that moved in a positive direction.
Just to understand, so your accruals have risen, your taxes have risen, so the improvement in DSO has to be quite meaningful, even after you take the bad debt provision. How do we basically tie all these three things up? It looks like you made a very significant improvement in receivables.
Yes, we made a significant improvement in receivables, so we decreased the DSO with two days. You can quantify the impact there. Also year-on-year, we further optimized the payables, so that gave us, I would say, a good result in the operating part, which is offset by movements in the non-operating area that I just outlined.
Okay. Thank you.
The next question is from George Gregory from Exane. Please go ahead.
Good afternoon. Two from me, please. Firstly, on industrial, could you remind us of the approximate split of the division between what you would describe as testing and inspection NDT activities, just so we get a sense of, we can infer the relative margins. Secondly, obviously we've talked around margin evolution and the areas that might do a bit better. If we think about the first half, I think your margin was about 25 basis points, excluding the government and the institutional services provision. You also had the headwind on environmental, which I presume doesn't repeat in the second half due to annualizing that contract. If we take those two out, is there anything going the other way or could be going the other way in the second half, please?
Yes. I don't have the numbers for the split with NDT laboratory testing with me, exact numbers. I would say, off the top of my head, if I'm correct, would be the larger part is the supervision work. You have the testing activities. The NDT is pretty close too. I would say you have probably the NDT and the laboratory work more or less the same level, where the inspection and the audit supervision project being higher in lower volumes. I need to come back to you with the exact numbers.
Okay.
With respect to environmental health and safety, I take that, Frankie. Yeah, definitely you will see an improvement in the second half. We are confident because there was no, call it, I would say, non-repeatable effects in the second half or no major repeatable effects in the second half of last year, which would, I would say impact the future uptake in environmental health and safety.
Is there anything going the other way? My point was really just around the evolution of the margin in the second half.
Look, also last year, I must say that there were definitely positive non-repeatable effects in the second half. That is one with respect, I would say to the first half this year. I was thinking because the person just prior to you asked that question too. I'm not aware of any significant also positive effects in the first half of this year.
You're not aware of any significant non-repeatable effects in the second half of last year?
Nothing that will distort, I would say the comparable next year.
Sorry. What about H2 this year?
In H2 this year? Definitely, that's what I said. We had non-repeatable events last year in the second half. Positive ones last year. Yeah.
Can you give us any sense of the magnitude?
Yeah. It is mainly, I would say related to the completion of a commercial contract in the GIS business, and the magnitude would be comparable with the one that you have seen now in the environmental health and safety.
Okay. Thank you.
The next question is a follow-up question from Jean-Philippe Bertschy. Please go ahead.
Thanks to take my question again. Frankie, it would be on discontinued operations. I saw that you divested a business in Australia and phased out some activities in agri, industrials, and environmental. Maybe can you update us on the amount or on sales you are generating in those activities and at what margin? Maybe the follow-up on the driving license contract in France if you have the number by now, please. Thanks.
For the asset that we diverted in Australia, I guess you're talking about Stax.
Yes, Stax.
Yeah, well, it is rather small. In fact, it's the legacy software management system that we have for mine. With the mining sectors, the volume was rather small, so we decided to dispose of it, and I would say the impact is negligible. It's nothing significant. For the other questions, which are for the driver's license I need to check, but I do recall that the driver's license as a total market in France is in the I don't want to say something, I just don't remember that. I think it's CHF 20 million or CHF 30 million in total. Swiss francs. You have to guess how much market share we have, but it's in the range of this. On the total yearly basis, I'm talking about.
Thank you. Maybe the dashboards because you had like safe Stax, but you have as well, you're phasing out some other activities in environmental. Is it marginal or is it CHF millions or CHF million in sales?
There's different size and shape. Stax is in Australia, Environmental is in South Africa, if I'm correct. It's not, I would say at the group level, it's marginal. We also walk away from an activity for licenses business in the U.K. This one I know is about CHF 5 million top line that we walked away from because we decided that was not for our strategic focus. There are quite a few of them. The dashboard is there. We're just following in a very disciplined way where when the growth and the margins are not where we think should be. We're just deciding to the different course of action, whether if we cannot fix it, then we simply dispose it or we just shut it down.
We have a list of those items that I think each one of them has a certain size and shape, I would say.
Thank you.
There is another follow-up question from George Gregory. Please go ahead.
Apologies. Just coming back to the non-repeatable effect in GIS in the second half, I think. In the second half of last year, you referenced some startup costs for the Cameroon contract. Should we assume that the net effect of the completion of the commercial contract and startup costs for Cameroon are broadly equivalent to the impact you saw from environmental health and safety in the first half of this year, which I think was 15, 20 basis points or so at the group level?
First of all, when I talked about a non-repeatable event, just to be clear, it's not related to the Cameroon effect. It was really the completion of a contract while the Cameroon project is actually, I would say a new project. Also just to be clear on the Cameroon project, we are actually doing well. The execution is in line with the case and it is already positively contributing to the bottom line. We will just see an acceleration from a top-line perspective into the second half as we are implementing actually what we call the third scanner to a last stage in the project. The two are totally unrelated. Yeah.
No, I appreciate that. It's more a question of the net impact on the margin. I presume that in the second half of last year, starting up Cameroon was a drag on the margin whilst the other commercial contract which you referenced was a benefit.
Yep. The impact, I would say the positive impact in the second half is definitely outweighing what you will see in the bottom line in the second half coming from the Cameroon project.
Understood. Thanks.
Okay.
There are no further questions from the phone.
In that case, thank you for your visit, and I would say I'll see you at the beginning of next year for the year-end result. Thank you.
Thank you.
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