Thank you. Thank you. Good morning, everyone. Warm welcome to our Capital Markets Event 2024, so again, welcome to those who are in the room and also to those who are connected online, so yesterday we had a fantastic visit in our MassLab in Geneva, and we have continued to discuss and to talk together in the evening on how we will continue to transform our company by implementing our strategy for growth, so during this second day, we will go through our main growth drivers and the execution of Strategy 27 that is going at full speed. First, I will give an overview during this plenary session, and then there will be breakout sessions with our management teams, and you will be able to deep dive into specific topics with them, and after that, we will keep time to discuss your questions and your thoughts.
Finally, before we leave you, you will attend to a live drone demonstrations, and that will showcase how SGS is at the top of, or the forefront of technology and innovation. Hopefully, there will be not too much wind and we can all enjoy it. An important slide here. SGS is becoming a company able to deliver consistent, competitive, profitable, and sustainable growth. I hope that tonight, when you leave us, you have a strong sense of this. We have changed the organization to improve empowerment. We have created a performance culture across the group with the senior leaders. We have identified areas of expertise which constitute fantastic growth pockets, sustainability, and digital trust. The entire group is now focused on growth, and I strongly believe we are ready to deliver. So I will now give you more color on this plan.
Before talking of transformation, let's look at what SGS is today. We are the leader in the testing, inspection, and certification industry with a worldwide presence, a strong history, strong brands, and technical expertise, and a high level of recognition. We are well positioned in all regions across the globe with our best-in-class network of laboratories. Thanks to this international presence and the level of expertise and quality we provide all around the world, we can serve our clients wherever they are. With nearshoring, our clients are moving their supply chain, and we have the agility to accompany them. You know, this is key when you have a statement such as ours. This SGS statement is when you need to be sure. We're helping our customers to be sure wherever they are around the globe.
This is why SGS has strong assets and very well-positioned assets. I will comment in a few minutes on how we are going to transform, and we are transforming our organization, the geographical footprint, and the services portfolio to further that we want to focus and to further improve our ability to capture growth where it is. Now it's time to detail our strategy so that you fully understand how we will deliver on the financial targets we are committed to achieve. Last January, I presented Strategy 27, and it's based on three pillars. Now, on this Capital Market Event, I want to take the opportunity to develop these pillars a bit more. At the center of our strategy is how we guarantee we grow in a sustainable and profitable way.
You know, we are in a growing market, and there are four megatrends which lead the business of SGS and any tech company, but especially a tech company like SGS. First, the need for more sustainability and beyond the regulation, which continue to develop in several countries. There are strong expectations from end customers. People are more and more conscious about their well-being and about their health. So the next pillar you can see is the development and the extraordinary development of IT technologies such as artificial intelligence, for example, that needs to be accompanied by solutions to guarantee integrity and security. Therefore, digital trust is a key element of our strategy. Last but not least, after decades of globalization, we see nearshoring of supply chains, especially in mature markets.
But in parallel, in emerging markets, we also see the need of supply chains on the growing, which is growing due to the local demand, which is fed by a middle class, which is becoming stronger and stronger. So let's talk about sustainability. There has been a huge number of regulations over the last 10 years, more than 150 more regulations. Therefore, there is an increasing complexity of the regulatory framework, which goes together with a rising public awareness. At SGS, we have the best credentials to provide the required certainty and bring the technical expertise. We are leading in several countries and several key segments there, as it is transversal. We, as you will see, have the possibility to expand much more, and you will discover more about that during the specific breakout session.
So we expect to reach CHF 1 billion in sales from sustainability services by 2027. This compares to CHF 400 million in 2023, and it represents more than 25% average annual growth that we will achieve through both organic initiatives as well as bolt-on acquisitions. As a first example, I'm very proud of the recent launch of Impact Now, which consolidates our entire sustainability offering. Let's now move on to digital trust, and it's another key issue of our modern world. Over the past years, topics like privacy, data protection have been in the spotlight. The recent development of AI, artificial intelligence, as well as the numbers of major cyberattacks have emphasized the need for security solutions. It is a very fast-growing market here. And in addition, we are very confident that the regulatory framework, which has been slower than the market, will catch up.
So we are especially well-positioned here with top skills, first-mover advantage, and leading positions. And the breakout session will demonstrate that in detail. So we're ready here to add at least CHF 200 million of sales in digital trust by 2027. We already have a solid offering and a strong awareness with great brands such as Brightsight and Gossamer in the U.S. And you will understand with Aymeric, Martin, and Xavi here how we will develop further in that area. The last megatrend we have identified is about supply chains. And as of today, we have a very strong position in Asia-Pacific, and I want to be very clear that we are fully satisfied with the performance of our Asian markets, which record a strong growth supported by the local consumption of goods coming from a middle class, as I said, which becomes larger and larger.
At the same time, we want to increase our presence in North America, which benefits from the nearshoring, and today, we announced our intention to double our sales in this region by 2027. This is our priority. Again, we will have two interesting breakout sessions on these regions a bit later today. Let's now focus on our portfolio by end market, and I will start with our Testing and Inspection activities, which are managed locally. Industry and Environment is our largest end market, and among the subsegments of Industry and Environment, environmental testing is a key priority, consistent with what we said on sustainability. There will be, and I'm sure now you're very convinced that, you know, we're right to have this strong focus on PFAS, and there is a strong awareness around PFAS, around the harmful persistent chemicals testing, especially in North America and in Europe.
In safety, we will accelerate growth by focusing on health and safety in Asia-Pacific, Europe, and North America, where we are very well positioned, and this is why it is a priority for us, as we are very strong, notably in industrial safety, digital safety, and security for industrial operations. Project and advisory is driven in particular by contracts that are related to the energy transition. For example, we're very proud to have signed over CHF 10 million of contract in wind energy in Europe to date in 2024. These kinds of projects are obviously at the center of our strategy. Industrial testing market is partly driven by non-destructive testing, which is rather commoditized and a low-profitable activity, so less than a focus.
Industry and E nvironment, all in all, as you can see here, will deliver mid- to high single-digit organic sales growth on average between 2024 and 2027. Let's move to Natural Resources. We are scaling up in services, in particular in minerals. This allows us to capture the rising demand for critical minerals and battery metals such as lithium, copper, and cobalt. In this mining sector, SGS has a strong expertise and a proven track record. In oil, gas, and chemicals, we have a strong position in traditional fuels. In addition, we are ready to capture new opportunities coming from biofuels, biogas, green ammonia, and hydrogen. In agriculture, we will leverage our leadership position in selected segments with focus on main agricultural markets in North America, both U.S. and Canada, in Europe, France and Romania, as well as Brazil, India, Australia, Europe, Eastern Europe, and Middle East.
In Natural Resources, we will deliver mid-single-digit organic sales growth on average between 2024 and 2027. Let me now turn to Connectivity and Products. Here we will focus on connectivity, in which we expect strong growth coming from artificial intelligence and from nearshoring. Of course, we will keep our leading positions in Hardlines and Softlines , which will continue to benefit from strong market growth. Here you can see we will also grow on average between 2024 to 2027, mid to high single-digit. In Health and Nutrition, we will prioritize the growth in pharma and cosmetics, where we have strong assets and specialized testing capacities in segments such as large molecule, advanced therapies, biosafety, and bioanalysis, including diagnostic and bioassays. Food is a highly fragmented and local market to be developed on a case-by-case basis, mostly at country level.
As such, we commit to delivering mid to high single-digit organic sales growth on average between 2024 and 2027. Finally, let's look at our Business Assurance. Growth will continue to be strong, fueled by certification and ESG services. Certification, where we are the global leader, will continue to accelerate, supported by supply chain compliance, food certification, medical devices, and digital trust. We will continue to focus on ESG services, notably on our core strengths, social audits, and non-financial data reporting. Growth in consulting will rebound after challenging 2024, driven by increased demand from companies for operational efficiency assessments and supply chain optimization. Here, we commit to deliver double-digit organic sales growth on average between 2024 and 2027. I will now comment on the second pillar of our strategy. As you know, we are a people business, and the almost 100,000 people working for SGS are our main asset.
We have a high level of expertise and technical skills. What needs to be done is to make the organization more efficient. This picture you can see here is from the senior leadership meeting. It took place in April, gathering our 200 top leaders, but before that, we put in place a new incentive scheme, fully aligned with group targets. In implementing these actions, we've been consistent with our objectives. There are three: unlock agility, embed empowerment, and implement a performance culture. These objectives have also led to the composition of the executive committee, with P&L leaders fully accountable for their markets and a reduced organization to get more efficiency, and you will have the opportunity to meet again with our executive committee members today. In the same spirit, we have identified and suppressed overlapping functions across the organization, especially at corporate level.
In January, we have announced a cost reduction plan of CHF 100 million . I want to say we are well on track on the objective, and Marta will give you more details in a few minutes. So the first two pillars, yes, here we are, the first two pillars. I believe that with these two pillars, the group is fully ready to deliver and is ready to grow in a sustainable and a profitable way. The strategic segments and the geographies have now been identified, and the organization and the right mindset are there. The last pillar of our strategy is to keep a strong balance sheet. This is part of our strategic goals because a strong balance sheet is necessary to be able to invest when needed, and of course, this is key to succeed in the implementation of our first pillar.
So the 2027 targets here represent what we know is fully achievable based on the work we have done and based on all the initiatives that we have in flight. We see organic growth between 5% and 7% on an annual basis, fueled in particular by sustainability and digital trust. We are also confident that you will see an improvement in our adjusted operating income margin by more than 1.5%. Of course, we remain exposed to foreign currency exchange, but we have enough efficiencies to commit on this on a reported basis, and Marta will give more color in a minute. With a strict financial discipline on CapEx and on our working capital, the cash conversion will exceed 50%. Now with that, I now hand over to Marta.
Thank you, Geraldine, and a very good morning to everyone. I'm excited to walk you through the financials of Strategy 27.
We will capture the growth from the target end markets we just presented. We aim to deliver a high growth of 6%-9% on average at constant currency, with 5%-7% coming organically and 1%-2% from acquisitions. Let's now look at the regions in our Testing and Inspection division. North America will leverage the strong fundamentals and will be the primary focus of our M&A program. During the breakout sessions, you'll get more insights into our growth plans for this strategic market. Europe will benefit from increased regulations, the energy transition, and accelerated investments in the pharmaceutical sector. In Asia-Pacific, we expect continued expansion driven by a growing middle class and rising regulatory standards. Steven, Geraldine, and Olivier will share more details on the region in the breakout sessions.
Eastern Europe, Middle East, and Africa will continue growing, supported by our strong footprint in natural resources and industrial. Latin America will leverage our leading positions in the critical minerals mining sector. And finally, our Business Assurance division will deliver double-digit growth on average, fueled by certification and ESG services. Let's now look at how sustainability and digital trust services will contribute to the growth. These services accounted for 8% of our 2023 sales. And by 2027, we aim to exceed 15%, thanks to more than CHF 600 million incremental revenue in sustainability and more than CHF 200 million in digital trust services. The growth will come both from organic sales and through acquisitions. In our breakout sessions, you'll gain a deeper understanding of our sustainability and digital trust services offerings. Let's now move on our organizational efficiency programs.
As presented by Geraldine, the leaner operating model will bring CHF 100 million savings, of which more than CHF 40 million are already visible in our 2024 results. In addition to that, we have identified CHF 50 million procurement savings, with the new run rate to be achieved by the end of 2025. The main levers are the harmonization, consolidation, and renegotiation of our consumables and maintenance category, which represented around CHF 550 million spent in 2023. In addition, we are optimizing our indirect spend, which amounted to around CHF 650 million in 2023. Let's now have a closer look at the Adjusted Operating Income. We aim to achieve at least 16.2% margin on sales by 2027. This represents an improvement by more than one and a half percentage points compared to 2023. There are three key levers.
First, the positive mix coming from the focus growth in sustainability and digital services. Second, the volume growth and continuous focus on our laboratory network optimization will bring positive operational leverage, as most of our costs are fixed. And third, the organizational efficiencies we just went through will bring CHF 150 million savings, equivalent to around two percentage points of margin. Those levers will more than offset a potential negative forex impact on our margin arising from a very strong Swiss franc. Looking now at the free cash flow. With Strategy 27, we aim to achieve more than 50% cash conversion. This will translate to around CHF 800 million in 2027, up from CHF 604 million in 2023. This improvement will be driven by higher EBITDA, supported by the sales growth and the margin uplift.
Additionally, we will maintain net working capital below 3% of sales and CapEx below 4% of sales, while keeping the effective tax rate broadly stable. Let's now look at our capital allocation principles. We are executing Strategy 27 with disciplined cash allocation, ensuring we maintain our strong investment grade and provide attractive shareholder returns. We target bolt-on acquisitions that are highly synergistic and margin accretive, with double-digit ROIC by year five. The CapEx spend will remain below 4% of sales, focusing on growth projects with average payback of below three years.
As we already saw, delivering on the growth and margin improvement, we will increase the free cash flow generation by around CHF 200 million by 2027 and free up leverage headroom of at least CHF 300 million. In addition, we leave ourselves the flexibility to propose a scrip dividend, optional shares, or cash. With that, I hand over back to you, Geraldine.
Thank you, Marta. Thank you very much. Now, before you go to the breakout sessions, I feel it is important that I share with you all the achievements that we have done already so far this year. One of our first initiatives, you all remember, was to implement more regular communications with you through the publication of our quarterly sales. I hope that with the high level of transparency we have with you, we have set the foundations for trust and clarity. Next, on the growth side, we have relaunched M&A. We have executed 10 deals so far this year, and today we are very proud to announce the acquisition of MP Machinery, a nuclear testing specialist in North America. You will hear more about these bolt-on acquisitions during the breakout session, which is dedicated to acquisitions.
In parallel, we have launched several organic initiatives on our sustainability offering. Let me give you a bit of details on these initiatives. We're very proud, for instance, very proud about the contract wins in the area of renewable energy, for example, in the U.K. and in Taiwan. We continue to develop our leading expertise in PFAS in a very fast-growing market, and we are quadrupling, as you know, our capacity by 2025 in North America. More recently, we have launched Impact Now, our new sustainability offering, which allows us to support our clients' ambitions with a range of solutions addressing practical market needs. Looking now at our second pillar, people, performance, and agility, we have implemented the main changes already. Of course, maintaining the performance culture and keeping talented people is a day-to-day job.
I take the opportunity to warmly welcome James Roberts, who joined the group three weeks ago as our Chief People Officer. Finally, we are well on track on our expectations as we put them to you in January. Therefore, I'm happy to confirm our guidance for this year with mid to high single-digit organic growth, a contribution from bolt-on acquisitions already, and an improvement of our Adjusted Operating Income margin. Of course, cash generation will be on track. In summary, we have identified our market priorities. We are allocating resources against clear strategic choices, and we are well advanced on the changes in the organization and the culture across the regions and the businesses. We are also ideally positioned to capture the extraordinary growth coming from Digital Trust and sustainability.
So now, with this, I want to thank you very much for your attention, and I look forward to gathering again at 1:15 P.M. sharp CET here for Q&A, and I will.