Ladies and gentlemen, good morning or good afternoon. Welcome to the SGS 2017 Offshore Results Conference Call and live webcast. I'm Sarah, the Chorus Call operator. I would like to remind you that all participants will be in a listen only mode and the conference is being recorded.
You.
The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Ms. Kala De Geisela. Chief Financial Officer and Mr. Frank Yang, Chief Executive Officer at STSO Deto Limin Geneva.
Good afternoon, ladies and gentlemen. First welcome to the presentation of our 2017 half day results. As usual, I will give you a highlight of our performances. CALA will provide you a detailed financial review and I will come back with a more outlook on the business and guidance for 2017. So let me start Okay.
I'm pleased to share with you a set of solid results for the insurance group. In line with our 2020 strategic plan, we have achieved a strong growth in our 4 Focus business 9, Lemony, Transportation, Agriculture Food And Life, Consumer Retail, And Strategic Business And Enhancement. Growth to the focused risk geography has also accelerated particularly in China. On the on the other hand, Market condition remained difficult in the oil and gas sectors affecting our industrial activities. As you can see on slide, the directors group revenue grew by 4.9% at constant currency, of which 3.4% is organic.
Our adjusted operating income margin standard 14.1 percent. Profit for the period improved by 5.8 percent at a 2 293,000,000 And at the end of June, we generated a storage free cash flow of 210,000,000. In the first half, in the first half, we closed 4 acquisitions. So one in the consumer retail sectors expanding on a customer of personal health care for the food in the US. 2 industrial food and life sectors it's strengthening our test activities Morocco and in the in Canada.
The last one is in the industrial sectors in the valve inspection testing activities, expanding our global expertise to Australia. We have those valve activities already in in South Africa in South Africa, sorry, in UK, and in New Zealand. So this is where an extension of expertise to Australia. And we also made a small loan to, a technological firm in system called Sensima. Scentimeter is specialized in the developer sensors for remote monitoring of assets and industrial asset infrastructure like bridges.
In fact, we're currently using Sensima Technology in some of the projects that we have in the U. S. And in Europe and that their initial response has been quite positive. After the closing of the 1st semester, we announced 2 additional acquisitions, 1 in the consumer retail sectors related to software and testing in the UK, one of the partners that we used to have that we acquire now. And although in the agriculture food and life sectors in the grain inspection in the US.
At the end of June, Perches Group has closed to 93,000 employees and over 2000 laboratories and offices. You can see the network of is well balanced across the 3 regions than regards to Europe African Middle East and Asia. On that brief highlight, I will hand over the presentation to Carla now who will give you a more detailed also review our results.
A very good afternoon, ladies and gentlemen. It's always the pleasure to present you the financial results, the OC team and the 92,000 9 12 colleagues around the world help to deliver. The first half of twenty seventeen represents 1 of many firsts. The first time that both Minerals and OTC returned to positive growth after 7 and 4 reporting periods, respectively. The first time, transportation is claiming the 4th 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, And finally, it's 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 twenty seventeen as well as into the impact of the Forex on our financial performance. Looking at the overall P and L, the first and third column reflects the half year performance for 2017 'sixteen 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 the bad debt provision related to some specific GIS related contracts as well as ongoing 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 4 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 11,000,000. We are confident that we can recover most of the amounts in question. 2nd, we were impacted by pricing pressure in both the OGC and industrial businesses.
3rd, we are still experiencing an impact of 2 underperforming assets, accretive and Bateman. And 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 293,000,000 and increased 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 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 twenty sixteen, 3 out of the 9 divisions reported an organic decline in the first half of this year, only industrial remains 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 20 '16 'seventeen as this is on a 12 month rolling basis. The inorganic growth amounts to 1,000,000 and contributes 1.5 percentage points to the growth of the group. We acquired 21 companies of which 4 during the first half of twenty seventeen.
And 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 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 importance of each of our 9 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 represents 43% of our total revenue, which is 2 percentage points lower than a year ago.
OGC remains our number one business. Agriculture FUTAL Life is our number 2 business generating a revenue of approximately 478,000,000 and representing 16% of the group's revenue. The increased relative weight of agriculture, food and life is mainly driven by the double digit in the food related and life laboratory services. CRS jumped into the top 3 from a revenue perspective. And 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 4 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 plants 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 percent and is comparable to last year. The solid performance is driven by double digit revenue growth growth portfolio, mainly in Europe and the Americas.
The growth in the regulated services is driven by the rollout 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 driven by organic. It was primarily organic. We achieved a stellar performance in Northeast Asia and want to reinforce that electrical and electronic including wireless activities 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 E toys.
And last but not least, we continued the double digit growth in Cosmetics Personal Care And Household. AFMs performed strongly with a total growth of 8.2% fully in line with last year, While the trade activity has 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 LifeLab 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 return to positive growth. The trade services achieved strong growth and the team was particularly successful in the on-site lab activities. On the Herechem side, we experienced a nice uptake in sample volumes particularly in Australian 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 single 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 2 major contracts. We are confident that the revenue development in the second half will improve.
Environmental Health And Safety, a revenue decline of minus 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 accretive business and exit high revenue low margin contracts. We achieved strong growth in traditional and 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 twenty seventeen represent the first time that OGC has also experienced positive growth.
Since 2014. The growth is mainly driven by contract secured in the petrochemical industry while trade related activities were declining. After realignment of our asset utilization and sales strategy, we managed to grow our upstream activities at mid single digit. Additionally, we achieved strong growth in sample management, oil conditioning monitoring and stock measurements. We expect to grow in the second half comparable to the 1 of the first half.
Last but not least, the only business that was which was in decline in the first half was industrial and the reason is twofold First, the ongoing depression in oil and gas capital expenditure kept the volume and price under pressure impacting the services, the industrial services mainly in mature European and North American markets. 2nd, there was reduced public investment in infrastructure infrastructure markets in South America as well as parts of Europe, parts of Europe. Unlike the Americas, and Europe, the industrial business grew in regions such as Asia and Africa, and 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 Asia Pacific region being the key driver. The Asia Pacific region delivered the highest organic growth significantly above last year. And this is driven by 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 Retail Services, Certification And Business Enhancement And Environmental Health And Safety. After 4 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 Minrose, Transportation And GIS. Last year, we invested in both the Cameroon scanning project and Uganda statutory inspection services, services project. Both projects have evolved positively and generated revenue and 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 drivers behind the Americas positive growth and related mainly to the acquisitions we made in industrial trust and environmental health and safety that have been made last year. South America performed well in transportation, industrial, certification and business enhancement. However, 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 and each of our 92,912 employees around the world contributed to our strong growth. During the first half of twenty seventeen the headcount increased by 5.1% versus a year ago The inorganic growth represents approximately 1 third of the net increase while the prior year structuring impacted 577 employees mainly in OGC Industrial And Minerals. The organic headcounts growth mainly growth mainly relates to agriculture, food and life, consumer retail services and transportation, which are driving the top line. On the right hand side of the slide, you see the fluctuation in the average headcount for the 3 super region. In 2 of the 3 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 and 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. In addition, In addition, 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 As a starting point, you see here the building blocks that contributed to our operating income of EUR 428,000,000 in the first half of twenty seventeen.
You can see the uptake the adjusted operating income, you can see that the uptake of the adjusted operating income is mainly organic are reflected in the orange box. The relatively low flow through of the incremental revenue can be explained by the 4 developments I outlined before. First, the bad debt provision of certain GIS receivables 2nd, the volume and price pressure mainly in the industrial business 3rd, the fact that we benefited from the completion of a loss non repeating environmental health and safety contract in 2016. And last but not least, the flow through was impacted by the continued investments 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 margins realized by the majority of the businesses is neutralized on adjusted operating income level.
17 acquisitions. The impact of 3,000,000, the photo of 3,000,000 corresponds to the 45,000,000 acquisitive growth. And the limited flow through relates to the 2 underperforming assets, aquitest, 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 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 STS income. 3 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 2nd contributor increased its relative weight by 1.3 percentage points.
Interestingly, transportation over 2 minerals to become the number 4 most important contributor. Industrial, GIS and environmental health and safety decreased their relative weight as a result of Let me now give you some insights 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. Ari emphasis 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 accretest. The single reason for the significant margin decrease in GIS by 7.80 basis points is the bad debt provisioning we talked before.
Without this bad debt provision, provision the margin would have been 19.8%. We are working to recover the bad debt provision duvetted going forward. Industrial suffered the most from a margin perspective mainly as a result of in the portfolio to the change in the mix in the portfolio. Considering our concern about market conditions, we remain cautious for the development Our OGC team was very successfully maintaining the margins. The impact of the weak performance in the trade leading to volume and price pressure has instrumentation, sample management and stock measurement.
Let's now take a 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 2 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, that benefited from a good flow through of the incremental revenue from Food And LifeLab Services. In addition, the team focused on lap 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. In the majority of their portfolio and recover the performance in the electronics and electric activities leading to an improvement of the margins 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 assessments 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, sorry, remains one of our strengths.
And our balance sheet at the end of June shows in a debt of 1,000,003,136,000,000. There are a couple of points worldwide mentioning here. Compared to December 2016, the net debt increased to $400,000,000 And the increase in loans relates mainly to the issuance of the million bond at the beginning of the year. The effective interest of our bond portfolio amounts to 1.3% which proves that our investor trusts 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 our net working capital with 49 days over DSO has reached a historical low.
1 of our 4 financial priorities is to continue to optimize to continually deliver a very solid cash The operating cash flow reached CHF329 1,000,000 and is the net of the increased profit partially offset by a negative networking capital movements and an increase in taxes paid. In absolute terms, the controlled uptake of the networking capital amounts to 1,000,000 and it's mainly driven by the growth of the business. These results prove our continued disciplined way of optimizing the operating networking capital, The network 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 1,000,000 in CapEx and acquisitions, and we closed the half year with a free cash flow of 210,000,000 1 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 131,000,000 of CapEx, representing 4.3% of sales which is slightly below last minerals and industrial slowdown in investments and part can be attributed to the positive impact of our procurement team and their commitment to identifying CapEx efficiencies.
Approximately 2 thirds of our CapEx is related to growth investment while one third relates to maintenance investments. Our primary CapEx investments were made in our key businesses AFL, CRS, OGC And Transportation. These 4 were the most capital intensive businesses in 20 17 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 exceed 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 trade in relative the decrease in relative weight in Asia Pacific results from the large investments in CRS 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 SDS is operating in more than 19 currencies. And this slide provides you with the top 10 currencies in 2017, representing approximately 75% of revenue. To top 3 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 francs. This includes mainly currencies as the dollar, the Brazilian real, the Taiwanese dollar and the Korean ones. The biggest depreciation in the first half of twenty seventeen relates to the pound, which declined by 11% versus the Swiss francs. The Chinese renminbi and euro were also notable declines against the Swiss franc. So to conclude my presentation, I would like to remind you of some key financial highlights The worldwide STS team helped us to deliver throughout the first half.
A solid top line growth at constant currency of 4.9 percent of which 3.4 percent organic, an increase in adjusted operating income by 4.9% We were able to keep Our profits for the period increased by 5.8 percent up to 293,000,000 And we invested EUR 131,000,000 both in CapEx And Acquisitions to continue to lay the foundation for future growth. And finally, we generated a solid free cash flow of 210,000,000 I would like to thank our colleagues around the world for their hard work and for for their hard work to deliver and and and to deliver a solid set of results during the first half. I would 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
Thank you, Kala. Let me go through quickly the different business lines and I will mainly focus on the second half. Kala give you a qualitative details already on the the first half result. If I start with agriculture food and life, we expect the trading activity in Europe to improve with the next harvest season is 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 Model's initiation act as well as with expansion of our footprint in Africa and Asia up to in China with a gradual opening of the market given us new opportunities. Life activities, volume should remain steady across the network. Additional investment has been made in Vitology in Kotlin and large molecules in the U. S.
For future development. 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 sign laboratories continues to generate new work and we are expecting 6 additional new contracts to start in the second half of the year. For the second half, we also were also seeing an improved pipeline, project pipeline for the minor plant services Those are complex technical services helping our customers to optimize their operations. These services highlight the technical competencies of HSPEON our traditional institutional testing activities.
For the meanwhile, we should expect a gradual improvement of margin in the second half. What? Polyngas and chemicals. The market condition remained challenging, but with the current extension of agreement, on production cut, we expect the market to be rather stable. However, we're not expecting we're not predicting an increase of our trade activities in the second half.
Our plan on terminal operations and non trade weighted activities by all condition monitoring and fuel retail services will continue to see solid growth in the second half. As Carlos already mentioned, for oil and gas, oil and chemical, we're expecting similar growth in the 2nd semester than in the first Consumer retail, strong momentum across the on top portfolio and we are expecting these to carry on into the second half. Our wireless activities that slow down in 2016 has been refocused and we are now producing strong contribution to both top line and bottom line. In fact, we are now planning to expand further our network in Asia and to capture more market share and also in anticipation of the strong mid term market evolution related to internet of things, but you will see a lot of connectivity aspect in it. So the the setup that we're put in place is really for the short term and medium term activities that we're seeing in the in the market.
Division business announcement. Well, again, the the deadline for the transition to the new standard, the ISO 2015 standard is in the second half of twenty eighteen and we're seeing an increase demand from our customers for training and performing traditional We expect this momentum to continue in the second half of twenty seventeen and also in the first half of twenty eighteen. For business announcement, 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 public double digit growth to close the year. We have now expanded our HS 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 well as the capacity to train the workforce across multi countries either in the classroom, full year earning or confidential booths. So this is where strength of the structure could come offer with the one footprint away from the train academy activities. In general, as expected, the market conditions were difficult in this 1st semester and we are not expecting any significant improvement moving in the second half, particularly in the oil and gas sector. However, we have put a really focused sales approach to select the segments, and we have won several contracts in the testing field in Africa and in Asia as well as where we want we have won new construction distribution project in South America. In general, as Karl already mentioned, for industrial, we remain cautious moving into the 2nd half.
I want to have a safety year test. In fact, the market drivers have not changed Undermond for chargersho testing inspection industrial hygiene and field audit have been steady. Demand for testing of the vaccine asbestos persistent organic pollutant and other hazardous substance has actually increased in the first half and should continue to to develop in the 2nd semester. Also one important point is the current stability of the mineral market should lead to increasing testing volume for our EHS laboratories. So for EHS, we're looking at the stronger second half with a better organic growth and improved margin.
Transportation. Another strong semester for translation in the first half, moving to second half, We see increasing competition in France for the driver license program with pre additional operators joining the scheme and a softer growth rate with inspection program within the US Europe after which maturity. However, investment we made in the network of laboratories in 2016 are generating increasing volume and we expect this to continue moving to the 2nd semester. For transportation, we are looking at moderate growth in the second half compared to the 1st half semester. And to conclude government and institutions, in the 2nd semester, we're planning to start 3 new E waste monitoring programs in Africa and also the implementation of the 3rd scanner in Cameroon.
Those program will help to accelerate growth and we're looking at the stronger second half in both top line and bottom line. So this is a quick overview of the 8 business lines and, let me go through the overall guidance for 2017. Both the Minerals and oil and gas, all gas and chemical market have a more of stable environment. The remaining of the business lines should perform well with exceptional industrial where the market condition will remain challenging in the second half. On that, we we confirm our guidance for 2017.
They are solid organic growth, high adjusted operating income, and a brokerage cash flow generation. And for me to finalize the presentation on the confirmation of our outlook 2020 just to remind them the mid single digit organic growth on average over the period, actuator M and A activities with accrual revenue in the range of $1,000,000,000, adjusted operating income margin of at least 18% at the end of period, strong cash conversions solid return on invested capital and solid dividend contribution line with improvement in net earnings. So on that, sir, thank you for your attention. And Karla and I would be happy to take any questions.
Hi there, Edward Stanley from Redburn Can I, can you remind us of where you are with the 4 shared service centers? Because clearly they're helping the CBU division, but I'm just wondering how much more cost benefit can we expect and when that's likely to come through.
Yeah. So where do we stand with the shared service center? I think we are progressing well. First of all, the CB activities or the back office activities from, let's say, around 16 countries are already part of the shared service center. And with respect to the finance organization, we moved part of the financial activities of 2 countries already in in the shared service center in Katowici.
And as we speak, we are moving a third country back in. So 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 with what we actually outlined before.
And maybe just to add We actually have 2 shuttle service center, 1 in Poland, 1 in Manila. The third one is being put into operation in China for the Chinese speaking Countries mainly China Hong Kong Taiwan. On the fourth one that we discussed in the past that will be in the Americas is not yet operational. So we're working on 3 strategically free first before we are we start to launch on the 4th point.
Denis Moro, UBS. 3 questions, please. The first one regarding the EUR 11,000,000 UBS. Could you detail if it's with 1 or several clients? And you're confident to recover most of the amount, but do you when do you expect that to happen?
Secondly, regarding the change in the management organization, I noticed you've created SVP positions for digital and innovation. So perhaps you could say a word on that on the opportunities and priorities. And I saw why it's happening now and not when you launched the TIC 4.0 initiative And my last question relates to the guidance. We have easier comps in the second half And you mentioned quite a few times the world improvements. So is it fair to assume an acceleration in the second half?
Compared to what we have seen in the first half.
Referring to your question on the GIS bad debt. First of all, it relates to 3 contracts. So it's not a single contract. And we are definitely confident that we will recover a major part of the bad debt. Now in terms of timing, I would say that a major part will come it will probably come in the second half and that below effect also into 2018.
Yeah.
I think the second one, for the senior VP of digital and innovation. In fact, if you look at, in 2015, dispositions, I will take them by myself. Back then, it was important for me to drive this change of structure and culture if you want to say it in the stress group to make sure that it is embedding to organizations. At this point, we can come up to two and a half years. I felt it was right times to pass over to a more full time functions so me doing that on the on a partner basis.
So we I'm trying to put the focus on these activities. The priorities are quite clear. However, roadmap, but they are two key elements is everything linked to our technology and the innovations. They focus 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're making to a Sensima. Whether it's all those technology for remote access of information and so on whether it is on the e commerce side or we are also looking at if you recall, we have this company called CLab, that does those screen of the website for information for the regularly compliance of food activities which we're using some of our artificial intelligence to help us to to monitor the change of irrigation and to formulate, response to our customers.
So this is with an external partner where we're having a focus on that. Internally, we're also having this digital team to help us to understand how it can better optimize the use of technology to help us to optimize our own operations. This is also on this department network. And the third part is 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 but typically that take longer you have to groom them and put them into the market, the turnover.
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 integrate the market we need to educate the market about the importance of discount activities on the solutions and the other value and now we're seeing an uptick of some major customers whether it's a mouse or some other customers is really keen on using our solutions now. If I go to the last question, which is about the guidance, operations. We have a mix portfolio where
we see
a lot of positive momentum in in some of those businesses like GIS or EHS where we're a bit more softening of performance in the 1st half. Consumer CB and the AFL will be in the same level of growth in terms of including seasonality so on that we're seeing. And we still have some concerns about industrial. So on the OGC is in similar level. So all in all, our view is that, kind of a similar growth in terms of guidance is a fair statement.
There may be some acceleration in here and there. So it's not going to be too different from the first half and the second half.
Afternoon, Ed Steele from Citi. I've got a few as well. Please first of all, the consumer organic growth is obviously very strong. It seems to be a bit better than peers. How much of that number do you think this market share gains please.
Is that market share gain just in E And 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. And then thirdly, I think it's 1,000,000 dollars, $25,000,000 or so of provisions movement on the balance sheet. Could you, remind us of which divisions had the biggest movements and provisions that presumably cash expenditure during the half, please?
For Consumer, I don't have the exact numbers. Speak between market share gain on the new portfolio. I would say the market share gain is mainly on the soft line industry. Where it's a quite competitive sectors in terms of development. So, growth is always a combination of more aggressive a value proposition to the market.
So market share is there. On the other hand, we have seen a lot of volume increase because of the market itself for E and E, for example, everything linked to our resources, substances into E and E sectors, the market has grown because of additional requirement in that. So it's not I would say it's not purely a question on market share gain over the overall competitors, but more about the individual market as well. Don't have the exact number because I would say the bigger part would be on the market evolutions in term market share team. For the driver's license, I think we trained a half 1000000 I think yearly there's about half million people that we're trying to do over that.
I don't have the exact numbers in terms of volumes. I will have to to to follow-up for you, but it's quite, I would say it's in I don't have it. I will have to before system receipt. I will I will I'll fund it. I'll give it to you before the end of the call.
Can you repeat to ask your question on the provisioning? Are you referring to the bad debt provisioning?
No, I was just afraid that the general provisions of about 20, I think 23,000,000 maybe movement from the separate to end of June. I'm just wondering which divisions have most of the movement.
Yes. I honestly, I would have to park that question obviously you have a lot of fluctuations in the provisioning in such a fragmented business and obviously in the first half I mean the provisions that I would say decreased are mainly related to the comp and then because of 13 months, etcetera, depending on the cycles in the different regions and the other part I would say is yes, it's probably related to some investing, but I can take it flat, yeah, offline. Yeah. Happy to come back on it. In the restructuring provisions obviously also decreased, but that is a couple of million yes, that is definitely because we are really, completely executing the restructuring plan as we proposed it last year.
Thanks very much.
So three questions, from J. P. Rolandi, Fants. 1, Acquisitions is your pipeline busy, not so busy or very busy? And 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? And 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 to what are you doing exactly in that in that field, which is a growing field.
For the acquisition, busy way busy, not busy, I would say way busy. We have, we we have not slowed down the way we're looking at acquisitions. So the pipeline is very strong and we're looking at additional companies in the second half of this year. The number of companies that we close really depend on other factors among one of the key ones is the value to us. I mean, we're looking at a lot of companies and our strategy, but certainly on the market, the also the question of valuation, so we need to be careful.
But it will create discipline in terms of financial discipline for deletion. So some of those assets will be too expensive at the current price asking price, but all those would be interesting. So we're looking at this. So I would say the pipeline in the second half would be easy.
I think the question related to the increase of the debt. Obviously, it increased, but I think it is we are very with the level where the net debt is and we would also not avoid increasing the debt if it would relate to a interesting, I would say, positions going forward.
And the last one for air quality control, I'm not sure what the large investment is, but the fact is service that we're already offering our portfolio when we talk about traditional services air, what and so are the typical services to offer and I'm not sure about the complexity of the the testing that your companies, the companies talk about, but generally speaking, air, solar and water are the 3 components of the EHS business that we offer in the transitional testing
Yes. Good afternoon. It's Paul Sullivan from Barclays. Just a few from me. Firstly, I mean, a lot of your clients are investing 100,000,000,000 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. And related to that, from an internal perspective, how far along are you now in terms of the digitalization of some of your manual processes and 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? And if we are in a $4550 oil market for 2, 3, 4 years. Is that level of margin now the new norm for that business or should we be priced for further downside pressure?
For the for the data service, the market is evolving. I would say it has not transaction for timing is evolving. As mentioned earlier about this transparency, one activities where we have you took us 2 years to educate our customers. Well, a little bit in the beginning of the process as well. We speak a lot of our customers to educate and evolve together with them.
I would say the momentum will be there. People, our customers will start to look at asset integrity in the more data point of view rather those rather than those regular visits. So this is why we're investing to these companies of cost sensitive and so on. I would say is a positive development because our colleagues himself being sent to the field to do this physical inspection on a regular basis we're first sending them to do this physical inspection at a specific time where the data tell us that there's programs that we need to go there it doesn't substitute completely to our services. It's just refining the time at which our services has to go versus a regular visit.
We're going to specific timeline because the sensor or the data is telling us that we should do something. Number 2 is also training our colleagues now to become more data integrator. It's great to have data, but you have to interpret those data. We thought the technical expertise of the field those data are just a set of numbers. So the analytic of data needs to be done by expert and we are really moving part of our our colleagues from, from this field activities for multi data analytic activities.
The training will come. I mean, as well, I would say whether it is going to be reduced or it's going to change into our landscape. It's difficult for me to say for the moment. Again, we're training where while we're educating our customers, we're working to deal with them. I would say it's a long term process and you're 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 would come in the longer term for sure because the sensor will become more and more performance. For the time being, you're not going to say the last one is also regulations. While some of the services can be done, the regulatory environment has to change for this technology to be adopted. So 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 mix, good margins. If I take the testing activities of our intellectual portfolio, they're making double digit margins. I would say more close to the mid double digit, 10 standard than in the low singles like the FFO the vis a vis the impact that we have, testing, NDT inspection and so on. So you will see more lower margins in the inspection of maintenance activities and much better margins in the the testing activities as well as some of the anti activities linked to the nuclear power and so on. So the bottom is quite mixed.
I would say for attending, we're trying to migrate the mix to the right balance where the margin will pick up in the coming semesters.
Okay.
See in Kansas City. And we've got the Capital Markets Day in 2 or 3 months. Does the board intend to reconsider the 2020 targets in advance of that, and then you'll either reiterate or tweak, or is there no intention to think about it
in advance, please? I just reconfirmed those targets. So, I'm not going to say I'm going to recourse you there. Now, not for the time being. Maybe there will be discussion with the board one day, but not for the time being.
The phone?
Yep.
The first question from the phone is from Robert Plant from JPMorgan. 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.
And also into next year?
And yes, part of the program, as I said before, will also impact next year will have a negative impact on next year.
And do you think that will be to the same degree as this year?
Yes. That's that's it. It should be a compatible a compatible level.
K. Thanks.
The next question from the phone is from Jean Philippe Burchi from Bordeaux. Please go ahead.
Good afternoon. The first one would be related to M And A. Frank, you were saying you remain financially very disciplined. And 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 where you can buy some very attractive targets at the margin of close to 30% in H1 at if EBITDA less of ten times The second one would be related to restructuring costs, a little bit surprised not to see any restructuring, and you're like having some difficulties in industrial. And you'd as well some sites orders in environmental.
So do we expect some do you expect some restructuring costs in H2? And maybe the third one in terms of e commerce, if you can quantify in absolute terms, the sales and network margin. And frankly, 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, critical research. Actually, it's performing it's performing well for the time being. We have, we have refocused this, 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. And the other half is on the early phase trial.
So we have a client significantly reshuffle the portfolio to focus also on the part of the data that we think is interesting for us in this clinical research activities. So for the time being, this is the current strategy. The margins are good and the the growth is is correct. We're going to keep monitoring that on the certainty if there's evolutions to be to evolutions that we need to do to change the direction we'll look into it before timing is quite stable. But again, more focus on data analytics in terms of biometrics analysis and than the clinical research itself.
If I go back to your restructuring question, the first one is now we don't our restructuring. We don't expect any restructuring in a in a coming semester. We have done whatever we needed to do to reshuffle the realigned organization to the new market conditions the softness or the fluctuation in some of those business nice part of the day to the operations that we will handle that. The other two questions, you want to take The one
on buyback and the other one on e commerce.
Oh, I'll take the e commerce 1. I I probably not to give you a number, for e commerce. What I can say is, we have identified 3 level of e commerce strategy. 1 is basically offline services, basically, our existing services moving to a to a online retailer or or or or on online portal. The other one is really evolving what we call level 2, evolving our services into a more digital aspect where we to complement our existing services with some digital additions to to be done online and we have a couple of those projects that we can we will discuss during the the Investors Day.
And the third level is more a vision that we have regarding the 2b to C, where we're going to look at targeting the consumer itself, but this is more from the longer term in terms of a vision and and and the and the development. So I I would say I can only tell you that in China, the growth of the e commerce activities that we have 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
It was on the first on the M and A That's okay. I'm not sure. Yeah, the fact that we remain disciplined in, I will take the question on the M and A, Jean Filip, the fact that we remain disciplined on the M and A side, I think the fact that the inorganic activities slow down during the first half is not only a result of remaining discipline. You know that in this in this area, first of all, you need to find the right targets that are in line with the strategy, etcetera, and 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.
So we will the pipeline is reasonably okay for the period to come So we will continue to work on new opportunities.
And the rationale of paying back shares at this level?
Well, we definitely launched the new share buyback program, but you probably also noticed that that's up to now we have not been active under the program, Jean Philippe. Now it's definitely our plan to buy back, but we monitor I would say the situation on a daily basis, I will be thinking the time is right. We will buy back.
Thank you.
The next question from the phone is from Tobey Ricks from Morgan Stanley.
Hi guys. Could you talk a little bit about the change in momentum between Q1 and Q2? I think sort of we're sort of expecting is maybe that Q1 was a bit higher than Q2. Can you talk about the factors behind that? And then secondly, trade inspection in oil and gas.
Could you talk about that market? And clearly, it's the growth of it under pressure a little bit there. Could you talk about the competitive landscape and where the pricing starting to have an impact?
The on on the OGG trade side, well, you know what? The current I would say the I'm not going to give you a forecast about what the price of oil and gas, the oil is so deep because I don't think it would be reasonable, but I would seem to say that what we see an agreement by by some of the OPEC and the non OPEC countries to to cut the predictions level. You're also seeing an increase in production in the shale gas in the U. S. Is compensating for this cotton.
You're not really exactly seeing a massive decrease in the reserve of the all the existing on the market. So this is kind of putting pressure on, on this market. And our problem is that we're seeing, we're not seeing that many volume movement across the supply chain and this is what we're looking at because when these transactions, these volumes, these inspection for us and we don't see that much of volume and transaction. This is where we we see a softness in that. So again, we're not we're not saying that this will be a massive in the second half.
We're just not going to see a massive increase neither. So it's going to be business more or less at the same level as we're seeing in the first half of the year. So not 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 can expect becoming more aggressive or pricing coming under pressure at all in that market, though?
Certainly, I mean, when you have a market, the software, there will be a market pressure on the on on on on this sector. We've been a quite discipline in terms of giving count to any of our customers. Only when we believe it's strategically important for us and we have enough economic scale to ensure that we can maintain margin by giving a certain discount. They will do it. Otherwise, we've been quite disciplined and if this means that we lost some of the lower margin business that we had, we decided to walk away from some of those.
Okay.
The second question was
Q1, Q2 momentum, Q2 growth rates, a different swing or 2?
The momentum of Q1 versus Q2, I think the exit rate, let me say this way, the the the May June number was global strong April was a weaker weaker month that has distorted to Q2. I would say, if I look at the momentum of the the last 2 months of the 1st semester, the momentum was quite strong.
The next question is from Tom Sykes from Deutsche Bank.
Couple, one on the cash flow, please. So you will have had a pretty decent benefit from the commodity complex declining and the longer payment terms that they generally have. So do you think that working capital to sales, although it's record low now that that might actually start edging back up again at all, please? And then just on your sustainability of margins in agri and transportation in particular. So you picked out transportation.
Sounds like you expect them the growth to moderate there. Do you expect a similar level of margin improvement in the second half? And in those divisions, are you winning business at a higher price point? Or is it SG and 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 networking 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 negative movement is more related to norm or the impact of non operational elements there. So, definitely, the operational one is actually improving So I would say that that argument is not valid. And Second one is we are also I would say from a networking capital really focusing on the contracts in the commodity areas to constantly further improve and optimize.
So it's not really a danger that that would have a big impact or would create a big deterioration going forward.
And then
with respect to transportation, you think that
Yes. Sure. I mean, if you look at the margin for AFL, there's 22 aspects. I think the margin linked to the trade activities, our inspections, they will be similar to what we we have for the time being. While the the margin for the laboratory activity that we're going to get in the second half will put more I mean incremental margin to our structure.
So the margin is usually better when we have bigger volume in the laboratory. So, for me, the market in AFL should be steady or better in in terms of if the throughput comes as we were planning. For transportation is a slightly different story where I would say we are we're looking at the more moderate growth in the second half because of maturity of some of those contracts. But 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. But the margin improvement that you've seen in transportation, is that a combination of higher gross margin work as well as any SG and A benefits? Or what would you say is the margin driver there? Could you pick out the annualization and slower growth, but some of that work been coming in at higher margin there?
The current margin is a mix of both. I mean, again, when we have bigger volume in some of those contracts. For example, those travel license, we will now optimizing the the process and we're optimizing the use of our capabilities and our network. Then it's really a mix of optimizing the SG and A and on the the additional volume that we see on the on those programs.
The next question is from Rajesh Kumar from HSBC.
Just looking at your first half net bad debt provision, you had about 30, 32 bps margin impact from receivables, which you're confident you will collect in the second half. Clearly, that should help your second half reported P and L margin as you collect them. So when you give your operating margin guidance for full year, are you making an assumption about that collection to happen? 2nd just following up on non operating working capital. There hasn't been a big flow 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 of the ForEx related issues if you could give us some color on what's going on there. And finally, are there any one off in first half of this year we should be aware of when looking at comps for the next year, like you had one in the environment business last year, which we are now getting aware of?
First to the, I think your first question with respect to the bad debt So let me just be very clear. I'm confident that we will recover that money, but I did not say with 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. And so that is the first statement with respect to the networking capital, when I refer to the non operating part, is actually an amalgamation of different elements, but I would say that the major ones actually relate to receivables more in the tax area. But as said, it is just a combination of many different elements the biggest one are tax related.
Understood. And the rising accruals that is not included in that?
Sorry?
The uninvoiced revenues that has also increased in first half. That is not reflected in that working capital part.
Definitely the unbilled revenue and our work in progress is reflected in in our operating net working capital and that is that's moved in a positive direction.
So 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 2 days. So you can quantify the impact there. And also year on year, we further optimize 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.
The next question is from George Gregory from Exane.
Good afternoon. 2 for 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. And secondly, obviously, we've talked around margin evolution and the areas that might might do a bit better. If we think about the first half, I think your margin was about 25 basis points, excluding the the government and the individual 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 2 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 SPVID NDT, laboratory testing with me, but exact numbers. I but I would say At the top of my head, if I'm correct, would be, the the larger part is the supervision work. Then you have to in the test activities, the NDT is pretty close to 2. So I would say you have for it the NDT and the laboratory work more or less the same level where the inspection the supervision project being higher in our volumes. But I'll need to come back to you with the exact numbers.
With respect to environmental health and safety, I think that's Franke. Yes, definitely. You will see an improvement in the second half. So 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.
And so 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 repeatables effect in the in the second half. That is one with respect, I would say, to the first half this this year. I was thinking because the person just prior to you asked that question too, I'm not I'm not aware of any significant also positive effects in the second 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.
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.
Question is a follow-up question from Jean Felty Burchi. Please go ahead.
Frankly, it would be on dashboards. And 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 And 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, in Australia, I guess you're talking about stacks which is rather small. Oh, yeah. Well, it's rather small. We, in fact, is the legacy software management system that we have for mine. The mining sectors, they're very much rather small, so we decided to dispose of it.
And I would say the impact is negligible. It's nothing significant. For for the other questions, which are for the driver's license, I need to check, but I do I do recall that the driver's license as a total market in a in a in a in France is in the If I'm I don't want to say something. I just don't remember that. I think it's a 20 or 30,000,000, but, in total.
So Swiss francs. So I do you have to guess how much how much market share we have, but it's in the in the range of this. On the total yearly basis, I'm talking about
Thank you. Maybe the dashboards because you had, like, safe stacks, but you have, as well, you are phasing out some other activities in environmental. Is that marginal or is it like 1,000,000 that you're doing in sales?
It's different size and shape where we stack is in Australia. Environmental is in South Africa is incorrect. Is not, I would say, at the group level, is marginal. We also walk away from from activity for licenses business in a in a in the UK. This one I know is about 5,000,000 top line that, that we walked away from because we we decided that there was not for for a strategic focus.
So 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. Which are deciding to the different course of action, whether if we cannot fix it, then we simply, dispose it or we just shut it down. So there's quite a lot of we'll have a list of those items that I think each one of them are has a certain size and shape, I would say.
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, a 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 the 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 and also just to be clear on the Cameroon project, you're actually doing well. So 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 3rd scanners to a last stage in the project, but the 2 are totally unrelated.
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 was a was a benefit. So
Yes. But the impact, I would say the positive impact of in the second half is definitely outweighing what you will see in the bottom line half coming from the Cameroon project.
There are no further questions from the phone.
For your visit, and I would say I'll see you at the end of, at a bigger next year for the year end result. Thank you.
Thank you.
Ladies and gentlemen, the conference is now over you for choosing Chorus Call and thank you for participating in the conference. You may now disconnect your lines. Goodbye.