SGS S.A.

Good morning, everyone. Thank you for being here for our annual 2025 results presentation. So let me start now here with our first performance. Marta and I will go through the full financial presentations, but here I would like to start with a couple of remarks. As we know, for the whole world, 2025 has been a challenging year marked by international conflicts and fluctuating volatility in economy. I'm happy to say that at SGS, we've kept the course and even executed our best financial performance ever. We have recorded the highest sales in Swiss francs, highest adjusted operating income and highest free cash flow in the group history. Sales grew by 2.2% despite a strong adverse forex during the year again, offset by a strong organic growth of 5.6% and good contribution from acquisition. The adjusted operating income margin has reached 16%, boosted by operational performance and cost-saving plans. Cash generation and earnings per share have recorded excellent growth and Marta will give more color about this. For 2026 now, we expect to follow the same trends. Organic growth should remain between 5 and 7%. You may remember that we signed the acquisition of Applied Technical Services in July 2025. ATS deal was successfully closed early January 2026. And together with the bolt-on acquisitions, we will exceed an additional 5% sales coming from acquisitions. In terms of margin now, we want to keep full flexibility to invest in innovative solutions. Therefore, we don't want to put more pressure on profitability for 2026, which I remind you is also subject to forex fluctuations. Therefore, we will maintain 16% adjusted operating income margin minimum in reported terms. And similarly, cash generation will remain high. On top of our excellent 2025 results, I'm also very proud of how we have executed our strategy 27. I can now say that we have achieved all necessary milestones to reach all of our initial objectives. We have launched, for sustainability and digital trust, we have launched powerful offerings designed to match client needs. And these offers are the foundation of double-digit organic growth. Together with a targeted bolt-on policy, we are already in 2025 close to where we are expecting to be in two years. In July, I already had the opportunity to share with you that we had achieved 80% of our objective to double sales in North America compared to the baseline of 2023. And now ATS is closed. So it's a great achievement that we have accomplished. And this will be obviously an excellent complementary of expertise and services for SGS. Finally, as you know, we've completed the reorganization that gives us more agility and performance. So with all these actions, we have reached the excellent level of profitability, cashflow and balance sheet that we report today. So focusing on sustainability, we have recorded above 15% growth. The four pillars of impact now strongly contributed leading to a very strong performance on an organic basis. And we also added complementary offers through bolt-on acquisitions, especially in environmental testing. Digital trust services are really at the heart of our strategy. more than ever and in this area we have a very solid basis to our clients growing needs in connectivity cyber security and in ai here we also recorded a very strong organic growth and a double digit growth from acquisitions in our strategic plan 2027 we included the objective to significantly increase our presence in north america We believe that North America will provide the foundations for sustainable growth on a long-term basis. The reasons for this are that it's a market with high consumption levels. There is high consumer demand and regulatory requirements, notably for life sciences. In addition, a few years ago, as you know, the country entered into a phase of reindustrialization, which is now further accelerating. So we definitely needed to be there, we definitely need to be there, and this is done with the acquisition of ATS. Now let me give you a short update on Bolton acquisitions. Since our last sales update call in October, we have acquired seven additional companies. Let me go briefly into these companies. And I remind you that all these boltons represent 190 million Swiss francs of additional sales on an annual basis. So who are the newcomers? Semi in France, essentially a carbon accounting platform. Australian Superintendents Company provides inspection and laboratory services for exported agricultural products. Information Quality, again in Australia, is a digital engineering services company. Panacea InfoSec is a leading cyber security services company based in India. MSMEAN in Chile provides asset reliability and integrity services for the mining sector. Murray Brown Laboratories is specialized in food safety in the US. Qian Rui, finally, is a digital trust player with an expertise in digital forensic in South Africa. So I'm very excited to welcome the talented employees of these companies. Before reviewing the business drivers of 2025 in more detail, we wanted to give you a sense of the group development since we implemented our strategy 27. Sales has regularly expanded, sustained by organic growth between 5 and 7%. Adjusted operating income and free cash flow have both grown over proportionally to the sales growth. and also benefited from improved organisations and improved operations. Earning per share has followed the same positive trend. Let's start with industries and environment. The business here delivered strong organic sales growth of 6.5% and an improved adjusted operating income margin of 13.1% driven by inspection, safety and supervision. Safety, for instance, delivered double-digit organic growth fueled by robust demand in the Americas and in Eastern Europe, Middle East and Africa. Inspection and supervision of construction projects recorded also a double-digit growth. It was driven by new project wins and robust execution, particularly in Latin America as well as Asia Pacific, which benefited from infrastructure development and energy transition-related activity. Industrial testing delivered solid performance across all regions supported by construction material testing. And finally, environmental testing achieved solid organic growth with sustained momentum in field monitoring and sustainability related services like PFAS, supported by tighter regulation and growing customer focus on environmental quality. Let's now move on to natural resources. Natural resources delivered a solid performance in the year with organic sales growth of 3.4% and an adjusted operating income margin of 13.6%. Minerals delivered solid growth led by trade services in Europe, Latin America and Asia-Pacific. This growth was supported by strong demand for metals, including gold and copper, and critical minerals. This demand, as you know, was driven by electric vehicles, battery-related regulations. When we look at oil, gas, and chemicals, they achieved a solid growth, reflecting resilient demand, particularly in Asia-Pacific and also in Latin America. Finally, agriculture grew moderately with strong activity in the Americas, but that was partly offset by softer market conditions, notably in Europe. If we look at connectivity and products now, they delivered a strong organic sales growth of 6.4% and an improved margin of 22.8%. That was driven by positive momentum across all the business segments of connectivity and product. And let's start with connectivity, which delivered strong organic growth led by product safety, continued electric vehicle momentum in Asia-Pacific, and robust wireless demand in North America. The demand for technology security and compliance continues to increase as connectivity requirements expand across devices, platforms, and networks. This reflects a strong demand for digital trust services. Hardline achieved excellent organic growth benefiting from strong demand for home appliances. When we look at Softline, they posted a very strong organic growth driven by performance testing in what we call athleisure, the athletic leisure garment and all the wellness products alongside with high demand for eco-friendly products. Government services also recorded solid organic growth that was led by anti-fraud and conformity assessment services as authorities continue to strengthen consumer protection and trade compliance. Let's turn to health and nutrition. This business line recorded a strong performance with 7.3% organic sales growth and an improved adjusted operating income margin of 14.1%. Food delivered double digit organic growth, was supported by strong demand for food safety services and contaminant testing that was across all regions. This growth reflects tightening regulation and an increased focus on food toxicology, rising consumer health awareness, and growing expectations around product safety and transparency. We have continued to invest in analytical capabilities, particularly in Southeast Asia, to support this growing demand. Pharma. Pharma delivered a solid growth. It was led by clinical research activity in Europe, which was partly offset by softer performance in drug development, despite improving pipeline conditions in the United States. Here we continue to focus investment on higher value areas, including biologics and advanced drug developments. And that will support our long-term growth in pharma. Cosmetics and personal care recorded solid organic growth. Performance was partly impacted by mid-year tariffs, followed by a recovery in activity toward the end of the year. That was supported by new project wins and an improving demand. Let's now turn on to Business Assurance. Business Assurance delivered organic growth of 4.2% and adjusted operating income margin of 19.6%. Performance was led by sustainability and digital trust. Digging into more details, all the quality management systems, the ISO certification schemes, were impacted by a high comparable of last year, that was coming out of a post-certification cycle. Consulting also remained soft in business assurance. But by contrast, sustainability continued to deliver double-digit growth, driven by strong demand for supply chain audits and greenhouse gas emissions verification. It was also supported by increasing regulatory requirements and stakeholders' expectations there. Food and medical devices certification also maintained double-digit growth, reflecting tightening regulation. And you know that certification here plays an absolute key role in protecting product integrity, safety, and market access. Digital trust delivered strong double-digit growth as demand for cyber resilience and data protection continues to accelerate. So with that, I will now hand over to Marta to review our 2025 financial performance.

Thank you Geraldine and a very warm welcome to everyone. Let me start with the main financial indicators of 2025. sales reached a record high of 6.95 billion Swiss francs, supported by the strong organic growth of 5.6%. The adjusted operating income also hit a record high of 1.1 billion, or a 16% margin on sales. This is an excellent improvement of 70 basis points compared to 2024, and 130 basis points when compared to 2023, which is the baseline of Strategy 27. Earnings per share before the gain on disposal of our former headquarters in Geneva amounted to 3.21 Swiss francs, up 3.5%. Lastly, the record results were confirmed by a record free cash flow generation of 774 million Swiss francs, representing 57% cash conversion, in line with the already very strong cash conversion in last year. Moving to the sales breach, you can see the strong 7.3% growth in constant currency, comprising of 5.6% organic growth and 1.7% from M&A. The Swiss franc continued its appreciation, generating 5.1% negative forex, reducing the growth to 2.2% in reported terms. As you can see, sales growth was supported by all regions. In testing and inspection, Europe added 2.4% organically, with solid growth in health and nutrition and industries and environment. This was partially offset by low trading volumes in natural resources and connectivity and products. Asia Pacific delivered high 7.7% organic growth with strong performance across all business lines. And in particular, double digit growth in food and high single digits in connectivity and products. North America expanded 3.9% organically, led by a double-digit growth in safety, connectivity and food, and moderate growth in environment. Minerals and pharma remained stable. Eastern Europe, Middle East and Africa grew by 5.3%. despite low trading volumes in natural resources impacted by the political uncertainty in the region. Latin America added 13.6 percent organically, supported by new project wins in Chile. We saw double-digit growth in inspection and supervision, environment, safety, and food. And finally, As presented earlier by Geraldine, Business Assurance delivered 4.2% organic growth led by sustainability and digital trust services, while quality management systems were impacted by a high comparable from a post-certification year. Consulting remained soft. Looking now at the adjusted operating income of 1.1 billion. which is 16% margin on sales. It expanded organically by 108 million Swiss francs, equivalent to 70 basis points of margin improvement, boosted by the successful execution of the organizational efficiencies plans. Accretive bolt-on acquisitions added 26 million Swiss francs, contributing 20 basis points of margin progression. Lastly, the negative forex impact of 66 million, equivalent to minus 20 basis points, was driven, as commented earlier, by the strength of the Swiss franc. Zooming now at the forex, which remained a headwind. You can see here the main currency's impacts. Overall, the negative 5.1% forex on sales was equivalent to minus 6.4% on adjusted operating income, or 20 basis points in the AUI margin, as commented earlier. Moving at our efficiency plans update. We are proud to confirm that both the lean operating model and the procurement savings plans are now fully executed. They delivered 115 million Swiss francs visible in the P&L since 2024, with 150 million run rate reached at the end of 2025. In terms of phasing, you remember that in 2024, we already accounted for 50 million savings. This was followed by 65 million in 2025, bringing the cumulative impact to 115 million Swiss francs. The remaining part of the savings will flow through the P&L in 2026. Let's now dig into the full P&L. As presented earlier, sales grew by 2.2% and the adjusted operating income expanded over-proportionately by 6.5%, or 68 million CHF in absolute. When we look below the adjusted operating income, you can see the decrease in restructuring expenses as the lean operating program is now fully executed. The other non-recurring items and transaction costs include the gain on the HQ disposal, which was set by acquisitions and legal costs and loss on investments from non-core businesses in Eastern Europe, Middle East and Africa. The financial expenses improved slightly thanks to the net debt decrease. And the effective tax rate improved as well to 25% from 26% in prior year. Thanks to all that, the earnings per share reached 3.48 Swiss francs or an increase by 12.3%. When we exclude the HQ disposal gain, this becomes 3.5% expansion. Now, and as we report in Swiss francs, often regarded as the strongest currency in the world, especially today, we wanted to show how this compares when presented in Euro or US dollars. In terms of sales growth, The 2.2 percent in Swiss francs correspond to 3.9 percent in euros and 8.3 percent, should we report, in US dollars. The earnings per share before HQ disposal, which grew by 3.5 percent in Swiss francs, translates to 5.3 percent in euros and close to 10 percent in US dollars. Coming to the free cash flow, where I'm happy to report that the record 25 results were confirmed by the strong free cash flow record high as well of 774 million. This is 57% cash conversion on adjusted EBITDA in line with last year. Furthermore, The net proceeds from the former Geneva HQ disposal brought additional 67 million Swiss francs, bringing the total free cash flow to 841 million francs. Moving now at the return of invested capital ratio. In 2025, the ROIC remained at the industry-leading 24%. This illustrates our highly efficient operating model and disciplined M&A program execution. Now, in terms of debt leverage, the excellent profitability and high cash conversion further improved the ratio, which stood at 1.7 times of net debt on adjusted EBITDA. This improvement reflects our commitment to maintaining a solid financial profile, which is crucial for supporting growth initiatives. Finally, our excellent results allow us to maintain a highly attractive dividend of 3.20 CHF per share. This will be proposed as a script dividend, giving shareholders the option to receive it in cash or shares. 2025 was also a year of big progress in terms of ESG. Most notably, customer satisfaction increased to 92%. and we provided 7.7 million training hours to our customers and employees. We also maintained our leading ESG ratings position, and SGS was included for a second consecutive year in Time's World's Most Sustainable Companies list. And with that, I hand over to you, Geraldine.

Thank you, Martha. So now let's turn on the outlook again. And for 2026, I see that part of Omegatrend is becoming even more stronger and stronger. More precisely, cybersecurity and AI, as well as customer awareness and well-being, also called conscientiousness, that will drive growth in the future. And this will especially benefit digital trust services and life science activities. And we will provide more color at our next capital market event. So thank you for listening. And with that, we will now move to Q&A.

Thank you. Yeah, thank you. So we're now moving to the Q&A session. If you've got a question, please wait for the microphone as this event is webcasted. State your name and may I ask you to limit yourself to two questions per person. Thank you very much.

Thank you. Good morning. Annalise Vermeulen from Morgan Stanley. Firstly, just on the margins, you've clearly delivered more rapid progress than you originally guided for. So could you talk a little bit more specifically about what contributed more positively to that margin expansion than you originally anticipated when you set the plan two years ago? And if you think about margin progress from here, do you still see further upside opportunity from cost cutting, productivity gains, et cetera, as you think about the future? And then secondly, on organic growth and the guidance, you had quite a range between the divisions in 2025. Do you expect growth to be more balanced between the divisions in 2026? And if not, where do you see the strongest and slowest growth? Thank you.

Thank you, Annie. So on your first question about the margins, when you start to have cost-saving plans, you better execute them fast. So that's what we've done. And I'll communicate on that year on year. So that's what we've done, and that's just the speed of the execution that lead us to basically get to our 2027 target faster than planned initially. We have overperformed in terms of, let's say, in terms of speed of execution and we are ahead of schedule, that's clear. That's also why we are positioning a new capital market event at the end of this year. So basically speed of execution is key. When it comes to the future, you're asking what the future margin is going to look like. And I think I've said, at least for 2026, that we want to maintain at least, again, at least a 16% adjusted operating income margin. And, you know, remember that I'm guiding in reported terms. You've seen the slide of MATA, there was 20 basis points as a headwind this year on the margins on top. So this is not going to fade away. There's going to be some headwind on the margins next year. So that means we need to get efficiencies. We need to go always for more efficiencies, and there are some that we can get. So we will get the surplus, but my message here is that I'm keeping the right to investing this surplus into innovative solutions as we need to provide more digitalization and offering and so on and so forth. And then I want to keep that possibility. That's why you have this guidance. And then you mentioned about the organic growth. We are just at the beginning of the year. It's a bit too early to say. I think the megatrends that I described are here to fuel the growth. So that's where, when you look at it, these megatrends are selected because they are impacting our customer the most and therefore are propelling and fueling our own growth. And this is where, of course, we need to always see how things are evolving because things are evolving and accelerating very fast. So you need also to adapt. That's also a good reason for doing another capital market even at the end of this year. But let us enter the year and we'll give more color for the Q1, right?

Thanks, Tom Bolton here from BNP Paribas. I just had a couple of questions, one on the US. You talked about signs of, or at least the theme of US reindustrialization. Just curious as we think about that US upcycle, what evidence are you seeing already within your business of the early signs or sort of green shoots of that? And then separately, if I think about your health and nutrition business, I wonder if you comment on your exposure to this building infant formula recall issue that we're seeing from some of the staples companies, what exposure you might have already there, what services you might provide or what services you could in theory provide as that crisis builds. Thank you.

Sure, so in the US we see a lot of demand around all the energy needs with regards data centers and obviously NAI and that provides a need for safety, a need for compliance, a need for ensuring that the environmental testing needs are also required there. So that is driving the demand. Everything around digital is also very, very strong in the US. All the cyber resilience, AI, you know, well, easy AI, true. Is it fake? Is the algorithm proper? Is it biased or not biased? And so on and so forth. So we see a lot of demand in the US, as I said. And in terms of reindustrialization, basically all the building construction sites for sure, but also All the IEO space, military industry, defense industry are also effectively driving this reindustrialization that has taken place already for some years. It's just not yesterday. But, you know, it's accelerating. On the infant formula recall, well, first, I mean, it's a big topic. I mean, we're talking about nutrition for babies. So our role here is to be side by side with our customers and to accompany them and obviously to help them to do the new test and the new test. fulfill the regulations requirement that are effectively changing and becoming stronger. And we are there all over our network to accompany our clients and be with them so that they can ensure safety for the consumers.

Thanks. It's Will from Bernstein. If I could just go back to the margin point. So just thinking about the bridge for 25, because I think the 115 million of cost savings would give you a decent uplift, maybe 170 bits. You had 20 off for FX. So there's still a bit to bridge that gap, which I guess is sort of investments M&A. So it'd be good to run through what that is. And then how we think for 26 as well, because I guess you've got 50 basis points that should flow through just from the incremental cost savings to come in. And then secondly, I just wondered if you could talk a bit about AI tooling, so how that's driving efficiency in the business, where those efficiencies are, and whether it's really realistic to think about them as margin accretive.

On the AI. So I let the first question to Marta. She's going to go to the bridge for you. I'll take the second one.

So indeed, if you look at the 2025 margin bridge, you have 70 basis points coming from the organic growth of the margin. Into that, a bit more than 80 basis points are coming from the lean operating model and procurement savings. And then the difference is to be attributed to the investments we did in commercial excellence, in marketing, and also building new service offerings, especially in digital trust.

So on AI, obviously, we are looking at it to generate more efficiency and more productivity. We are a people business, so there is a potential, as you can imagine, to optimize greatly SGS. the first thing we see is there's going to be an upskilling. So as we put AI into more and more of our business lines, it's going to be an upskilling. And then we will obviously identify productivity gains clearly and that's part of the part of the journey and part of the constant improvement and efficiency that i've mentioned that we have to produce each year and we are committed obviously to to use ai also for ourselves but also for our customers it's also a source of growth as we're putting AI into our services that we're rendering to our customers. You have to see it both ways, externally and internally.

Good morning, everyone. Arthur from Citi. So a couple of questions from me. So the first one was just around the script dividend. So I was just wondering when you think that will stop and where do you want the net debt EBITDA to go to kind of within that context? And then second question, going to sort of soft lines hard lines within connectivity and products um obviously there has been some sense in the market that that has been performing sort of unusually strongly um in the last couple of years um how are you thinking about that as it progresses forward uh into 2026 and are you seeing any sign of any sort of slowing or tough comps or any of that thank you

Thank you, Arthur. Look, on the South China Island, we're very happy about the performance. It's very strong in effectively in Asia-Pacific region. It continues. We see it continuing, actually. We don't see it slowing down as we are also enhancing our services here. Connectivity also is a part that remains particularly strong, as you have more and more cyber-resilience required, AI sometimes embedded into the devices that you're using. So we see also a strong demand, part of this digital trust megatrend. And on the script dividend, do you want to comment on our ideal net debt EBITDA level?

Yeah, you have seen we started in the baseline year 2023 with two times that leverage. This improved to 1.8 in 2024 and now at 1.7. Of course, we have closed ATS at the beginning of 2026, so the net debt leverage will temporarily go up to around 2.1, 2.2 times, and then gradually reduce in the three years following the acquisition. Now, you have seen also the attractive dividend we have committed and we distribute of 320 Swiss francs per share. So it's important for us, it's important to keep this highly attractive remuneration to shareholders. And the elegant way to reconcile growth and investments with attractive remuneration is the script dividend. It's optional. Taking shares is also tax-effective, so proven successfully over the last two years with more than 60% take-up. So, yeah, we are happy with that setup and our investors as well.

Continue with the script beyond 25 year end. Would you expect to be doing a script at the start of 27 as well?

I remind you that's part of the strategy, 27, to ensure a solid financial profile. So that's part of the strategy. It was announced in January. So yeah, for the moment, yes.

Good morning, Alan Wells from Jefferies. Just a couple from me. I'd like to follow up on Will's question on the margin progression in 2026. If you look at 2025 and as you kindly provided you strip out the investment, the savings, it looks like underlying margins are broadly flat, which is explained by the reinvestment you're putting in the business. How should we think about the underlying margin progression in 2026? I mean, the savings will come through, there'll be an FX, will be what it is, but would you expect underlying margins to broadly be flat again as you reinvest most of that back into growth. And maybe you can elaborate on building blocks there, to what extent you think mix, operating leverage, reinvestment will play a part in that. And then second question, just on M&A, obviously post the ATS deal, can you maybe just talk about appetite for slightly larger deals in 2026, what the pipeline looks like? I guess it feels like with the 5% to 7% guidance, 1% to 2% from additional deals, it's maybe a bit more a year of bolt-ons, but any expansion would be helpful. Thank you.

Yes, I'll take your second question. And Marta, you can maybe build on all the positive actions that we have to boost our margins and underlying margins, even though I don't like this underlying margin because it looks like you're slicing down everything. But when a lab manager make an effort to reduce cost, it's not a bucket separately. It is part of his operating leverage. When he increases the business, it's part of his operating leverage. You know, slicing it down to bits and pieces like that is not really how we look at it, but Marta will answer you. So about a big acquisition, another one. Look, we will continue certainly our Bolton's acquisition program, and you've seen that we've done already five or six already since the beginning of the year, and that is something we want to continue to do. because it's accretive to the growth, it's accretive to our margins. We have to consolidate our offering into the megatrends I described in the right geographies and the right segments. So that's something we will continue to do. And look, if something happens that we have or we can't miss, then we'll see in due course. Don't have a crystal ball for now, no, but who knows.

And on 2026 margin, you have seen that we have another 35 million to flow through the P&L from the 150 million operational efficiencies plans. So that is there, that's secured. Then, of course, we are, you may say, a fixed cost business to a big extent, especially for the testing part of the business. Then... Naturally, when we grow volumes, when sales are growing, this drives positive operating leverage. But now we are also a high growth business and its services. So you have to see the investment in the business on one side as CAPEX for our facilities in our testing labs, but on the other hand as pure OPEX investments to build those new service offerings. And our ambition, and this is constantly the feedback I give, don't expect from us to be a business at 17, 18% margin, but flopping sales. So right now, I think we are lean, we are agile, we are hungry to continue growing fast, and that's our focus. So we will continue to invest, and it is not margin-based. at all costs. We have now breached the gap with peers, if you had to compare us. We are happy with that. Important to remain at those levels, to keep agility. And again, I'm confident it is the case. I think the key word is keeping flexibility.

That's the thing. So yes, we'll get the surplus. We'll get more than 16. The point is we want a flexibility to invest that surplus. And we will or we will not, but we want that flexibility.

Yes, Daniel from . I have two questions. One about the extraordinary costs. You had like 90 million in 25 plus the headquarters, so it was about 150 million. Could you give a run rate on extraordinary cost restructuring? And the second one, could you remind us of the integration plan you have for ATS? How you can... get stronger growth in the US because of it, and also of the 30 million savings you plan there when they will come through.

Yes, I'll start with the ATS and give the first question to Marta. So we were ready day one. We appointed an SGS talented director to lead ATS, lead the four P&L leaders of ATS that you remember are testing, inspection, calibration, forensic. in order to ensure that we can get the cross-selling synergies and we can get the best of the two worlds between SGS North America and ATS. Because it's not an integration where you're putting a bolt-on into your systems. Here they are a big group. They have already very good and very best practices. It was important to have things going both ways. And this is ensured through a governance, which is Marcus is taking the lead on ATS, and he reports directly to me.

Regarding the items below the adjusted operating income. So the first big line is restructuring expenses right where you saw the peak in 2024 with the lean operating model program which is now in 2025 reduced to around 45 million level. In 2026 again You should expect there 20 to 40 million restructuring expenses, which is, you know, continue the business to operate. They are always in need of some level of restructuring expenses. Then the level below, what we call other non-recurring items or extraordinary items, we don't usually guide on that. Again, reasonable level, if you look at the historical trend over the average few years, you will be at the level of 120 million, something like that, but it can fluctuate. So again, we don't guide on that. Those are buy-write items that are not easy to forecast. They wouldn't be extraordinary otherwise.

So in short, the restructuring costs are going to continue to decrease. They've already halved compared to 24, and we are going to continue to lower this. The rest is non-cash costs that Marta has, and that, you know, might not have in the years to come, or it's kind of difficult to predict. But in any case, what doesn't lie is the free cash flow.

Hi, Victoria Chang from JP Morgan. My first question is on the margin phasing between first half and second half. So given that you still have the run rate savings from the procurement done in 2025 to be seen in the first half, would you expect first half margin expansion to be higher year on year versus second half? And my second question is on natural resources. and on the margins specifically. Marta, I think you mentioned in your opening remarks that there was some political uncertainty impacting growth in Middle East within natural resources. Could you also expand a little bit more on the key drivers on the margin in 2025 and the weakness there? Thank you.

Okay, Marta, do you want to start with the natural resources, maybe?

Yeah, so you see all the news, be it in the Middle East or in Africa. So, again, this leads to uncertainty, this leads to less trading volumes. and is reflected in the slower growth of natural resources, specifically in the Middle East. Now the margin, it's a business, there is an inspection component and of course testing, but when the top line is temporarily down. We have chosen not to reduce our inspectors because it's a cyclical business by definition. So natural resources, if you also look back at the historical data, it fluctuates. But it always comes back because it's driven eventually by consumption. You can have, you know, temporarily slow down, inventories are depleted, then it has to pick up. So you see it that way. And again, Eastern Europe, Middle East and Africa It's a difficult region, politically speaking.

It's been fairly challenging on the political uncertainties, and you've got three components on natural resources. So you've got agriculture, you've got minerals, and you've got oil and gas and chemicals. And we really have suffered from a very bad crop in Europe for agriculture. So that has really lowered our performance in agriculture. Minerals, we've done super well. Metallurgical testing is booming because of gold, copper, critical minerals. But that has been offset by a, I would say, sluggish or slowdown in oil, gas, chemicals. But in this crop, this agricultural crop, But, you know, as Marta says, it's bouncing back. And, you know, two years ago, that was almost the opposite. So it's changing. And the fact that we are having this exposure to these three areas makes us quite resilient.

And maybe on the procurement savings and the phasing of their impact in 2026, again, those are structural procurement savings, and they are really driven by the renegotiation of our main suppliers' contracts, which happened at the end. in Q4 of 2025. Therefore, in terms of phasing, it is really throughout 2026. There is no biggest portion to fall in H1. It is more evenly spread because the new contract and new price lists were signed at the end of 2025.

Arnaud Pellier, CIB. On sustainability products and solutions, do you see any change in trend following the environmental backlash in the US and softer regulations in Europe, or are we still on the same kind of trend?

No, that's a good question. But look at our performance in sustainability. We have 15% of growth, reported growth, organic growth, 15%. So there's still a very strong demand in all areas related to the energy transition. I would say also to what I described at this... consumer conscientiousness. And it's not only the X or the Y and the Z generation, you know, but people want to know where the product they use has been produced, how it has been produced. Does it contain heavy metals, PFAS, contaminants? They want to know it. And this trend is really fueling the growth on the sustainability impact now framework that we have elaborated. So it's really, no. And there's not only US, there's also Europe. And in Europe, the carbon emissions still matter. and still matter a lot. So overall, no, I don't see any decline here on this megatrend.

Morning. Virginia Montorsi from Bank of America. Could I ask you, if we think about I&E for 2026, what are the key moving pieces for growth when I think about end markets? Because you obviously had a very strong Q3 and a little bit of a sequential slowdown in Q4, despite easier comps. And obviously, it's a very good end market for you guys. So how should we think about the full year and what's really driving the strength? Thank you.

Yes, thank you. Look, we have a very good performance that we see continuing in everything we call safety. You see inspection, testing. That is something that we feel is going to continue. Remember that we were impacted also a bit by a shutdown in the U.S. also in Q4. That didn't help. But everything around construction is an area that we need to definitely focus more because construction material testing is effectively growing fast, notably in APAC, actually. So, look, we see fundamental strong growth for I&E.

Hi, good morning. Suhasini from Goldman Sachs. Just a couple from me, please. Given the growth rates that you saw, first half, second half in 25, when you think about the growth for 2026, underlying organic, do you expect growth to be weighted maybe a little bit to the first half or the second half? That's the first question. And do you anticipate doing any more portfolio review work that can be a drag on numbers in 26? The second is just more housekeeping, to be honest. When we think about including ATS in the numbers, do we expect it to be accretive to EBIT margins? What is the current FX drag on revenues, profits, interest tax, if you could just run through those?

So there's several questions. So we are going to start with the FX question with Marta. And then I'll take on ATS, the portfolio. And about the growth, it's a bit too early to really give us something. Really, as I said to Anne-Lie, I think I prefer to wait for the Q1 call to give more perspective on how the organic growth is going to unfold for us during 2026. Marta, are you taking the Forex?

Yeah, so ATS, they are operating exclusively in the United States. So their margin per se is not really impacted. Of course, if the US dollar depreciates further, it is proportionate between sales and and EBIT. In terms of is it accretive, we were showing 20 basis points here in 2025 from our botons. Now that we have reached the 16% EBIT margin level, I would say ATS is slightly accretive in our EBIT, but don't expect the same proportions. Obviously, we are now at a higher level compared to 24 and 23.

It's accretive with the synergies. I want to insist on that. So let us put the synergies in place. But I think it's the Forex for 2026, the impact on sales. I think that was more your question, right?

Now, the overall impact of Forex You remember in terms of evolution in the baseline last year, Q1 actually, the Swiss franc was stable compared to other currencies until liberation day in early April 2025. So now in 26, when you compare, we are having huge forex in Q1. You should expect 8%. Forex and then easy comps in terms of Forex from Q2, Q3, Q4. Again, this is if we take the current levels.

Yeah, so be prepared for another strong Forex adverse impact as we are going to publish Q1. We're on a minus eight, minus nine, probably if rate stays as is for Q1. That's what it is. Again, you can make the translation and see the impact if we were publishing in another currency. You mentioned about portfolio. I would say that if you're thinking in terms of sales of potential activities, there's nothing we want to sell apart from little things here and there, but that's not worth really making an announcement about that. We've done some in 2025. de-risk clean, and that's part of the things that we are going to continue to do. But overall, we are happy with our businesses. They have good margins.

Good morning. It's Neil Tyler, Rothschild & Co, Redburn. Two questions, please. Coming back to margin, divisionally, the two areas that grew the strongest of those with typically the kind of higher fixed cost, you know, the testing-based businesses that CP and health and nutrition. Is that sort of right to draw a line between that cost structure and the margin progression or was there more efficiency to be gained within those businesses? Taking that sort of one step further into your comments about reinvesting, you know, are you looking at that sort of reinvestment of margin on a division by division basis or, you know, if one division produces more gain, you know, is there scope to reinvest it elsewhere? Second question on capital allocation M&A, it's a pretty impressive and diverse list of bolt-ons, both sort of regionally and business line-wise. Can you talk a little bit about the process of selecting those businesses, how many you have to sift through to kind of get to that point? And some of these are sort of relatively small and emerging and fast-growing businesses. And how you get comfortable, given you've said that the sort of megatrends and the backdrop are changing so quickly, that you get comfortable that these businesses aren't those that are going to be sort of potentially disintermediated or at risk as things continue to change?

Right, that's a good question. Look, on the bolt-ons, we have a very strict process. But first and foremost, it is the business leader that source the deals. It's not coming out from any fancy consulting, consultant presentation or whatever. It is really sourced by the business. The business has to know its market, has to liaise with competitions or with complementary services that is missing in its offering. And obviously, we look at it. There's a very big pipeline. We're very selective. We describe during a capital market event the criteria upon which we do acquisitions. We look at it from a ROIC standpoint, from a payback standpoint. And we always assign a business leader in charge. So there's no one that can come with, oh, I have this idea that would be great. It looks great. It's fancy. It's fashion, whatever. without having someone that is fully committed to execute the business, the acquisition business plan. And that's really the important thing here. So it's payback and there's a business ownership that is extremely strong We obviously look and study the business, we see how resilient the growth is, how the customer base is, we see how it can fit in our portfolio as well, what kind of complementary services, and then we effectively scale what we can scale to get synergies on top. the cost side right this is what you seen it's a credit to our margin it's a credit to our growth so it is it is very important that is an industry which is growing and which is so fragmented you have an active role otherwise you know wake up one morning and then you know you stayed with your own lab but you haven't provided or evolved into a what you offer to customers and it takes time to get an accreditation, you know, that's also one of the fundamental barriers to entry we're having in our business and acquiring a lab with already the set of accreditation that you don't have just provides you an edge and allow you to speed up and that's why bolt-ons are a key component of our strategy. So that was your question on the boltons, and you asked about, what was it about the margins, right? about reinvesting, how we are going to reinvest. Look, again, it has to be accretive to the growth. It has to be accretive to margins. So this is where we're going to reinvest. I think the important thing is that when people ask a lot about digital AI, And there's a lot of fancy startups all over the place and great. But here we often prefer to do it organically and to invest into people to develop this capability internally. So that will cost some basis points of margins because we're going to have the cost internally. But I prefer big time this than taking a bet and discovering. So, you know, we take care.

Thank you, Michael. I have a question on business assurance. If you could give some more color on the trajectory of the consulting business. I think there's a big discrepancy between all the double-digit growth that you describe in many parts of business assurance and the overall growth that's only 4%. I'm trying to figure out at what point we can see a real re-acceleration of the overall business there. Thank you.

Yes, it's clearly we've been impacted in consulting. It's a business that is suffering for now two years. That's clear. Projects have been a lot delayed last year. We see and are hoping it to bounce back this year, but I will remain cautious. I hope I'll have better news to announce to you at the end of Q1, when we have our Q1 call. I always want to remain cautious. You know me, I will not start to over-promise anything and deliver, not with me. So we had to fix the business. You've seen that we changed the management of business assurance. And this is in process. But I think the environment is better for consulting this year than it was last year. So let's see.

The last question.

James Renan-Clark from Barclays. My first is, after all this M&A in the last year plus, has the competitive backdrop changed at all? Is there greater tension on the bolt-on deals that you're after? And then secondly, you've done maybe two-thirds of the deals in North America and Europe, which are organically underperforming the rest of the group. So can you just talk about whether those regions should accelerate back up to near the group average? over time as you drive growth, or is it really a margin story and a return story on those deals? Thank you.

No, there's no margin or return story on North America and Europe. We're in a process to fix these regions. It's been tough in Europe economically and politically. I mean, it's fair to say that there's been recession. in Germany with the automotive industry, there's been challenges. And I said it's been challenging here in 2025, but we are in good, let's say, in good momentum to get things much better. And the fact that we are going to have better results in all verticals, like business assurance, like environmental testing, like food, like pharma is going to help Europe and North America. And ATS is going, obviously, also to help greatly North America. So no, there's no fatality there at all, and it remains core sectors and core geographies for us to invest. And on the M&A, right? The M&A, the competitive. Yes, well, we see some competitors entering the same areas and the same vertical that we like. So that's true that on some targets we can feel a competition that we were not necessarily having when I started two years ago. That's fair to say. But we want to remain disciplined. And if we can't get synergies or anything, we won't go. we won't change our rule and our financial discipline rule, which is very simple. It's about payback, as I said, and, you know, double digit week in five years. So that's clear. And therefore, hey, that's where we are playing and we're fine with that. So I think this is the end of our session. Thank you for being here with us today. It was great having this time with you and answering your questions. I hope that you enjoyed it and bear with us because it's just the beginning. Thank you.