Bureau Veritas Sa

Hello and welcome to the Bureau Veritas Full Year 2024 results. My name is Caroline and I'll be your coordinator for today's event. Please note this call is being recorded and for the duration of the call, you'll answer beyond listen-only mode. However, you'll have an opportunity to ask questions at the end of the call. This can be done by pressing star 1 on your telephone keypad to register your questions. If you require assistance at any point, please press star 0 and you'll be connected to an operator. To this conference, we have Inder Garbi, the CEO, and Francois Sarbas, the CFO and Executive VP. I will now hand over the call to your host, Inder Garbi, the CEO, to begin today's conference. Thank you.

Thank you. Thank you, Caroline. Good morning, good afternoon, and good evening to everyone. Welcome to the full year 2024 results on the webcast or on the call. I'm joined by François Chabat, our group CFO. In the past year, Bureau Veritas delivered on its strategic commitments, demonstrating a strong performance of the top line, the margins, earnings per share, and cash. I'm delighted to report that we have exceeded all the objectives we set for 2024, showing predictability in our execution while navigating a complex macro environment. This robust financial and operational execution is fully aligned with the objectives set out in our LEAP28 strategy. These results show the excellence and dedication of our global teams in action. I would like to thank all my colleagues around the world for their contributions to these results and for their superior engagement to Bureau Veritas' mission. We ended the year with Bureau Veritas' inclusion in the CAC 40 Stock Index as one of France's highest valued companies. This milestone is a recognition of the group's consistent operational delivery and performance and denotes confidence in our future outlook. Our financial highlights for the year. A revenue of 6.2 billion euros, up 6.4% on a reported basis and 10.2% organically, with 9.6% organic growth in quarter four. Growth was driven by high volumes and dynamic pricing and was steady throughout the year. Adjusted operating profits increased by 7.1% year-on-year to €996 million, generating a margin of 16%, up 11 basis points year-on-year and up 38 basis points at constant currency. Our adjusted EPS is up 8.7% to €1.38 and by 17% at constant currency. Free cash flow totaled 843 million euros, representing 13.5% of our revenue and growing 27.9% year-on-year. This is a record high and reflects our disciplined capital allocation and our rigorous working capital management. As a result, we are committed to shareholders' returns and will propose a cash dividend of 90 cents per share, up 8.4% year-on-year and corresponding to an unchanged payout ratio of 65%. Turning now to our CSR commitments. In 2024, we continue to roll out our new CSR plans to meet our newly 28 strategy targets. In June 2024, for the first time, we presented the group's climate strategy at our annual general shareholders meeting, reinforcing Bureau Veritas' position as a leader in sustainability within our industry. Our performance this year is as follows. In health and safety, our ongoing prevention programs further reduced our accident rate versus last year. On decarbonization, we reduced our scope one and two emissions by 10% year on year. This is in line with our science-based target initiative targets for the year. For gender diversity, we still have a way to go, and we are reassessing our programs. I'm pleased to report that we have improved all our non-financial ratings in 2024, and this year we've been included in the Carbon Disclosure Project A-list. Back to the financial results for the year. We recorded broad-based growth across all business lines and regions and benefited from very strong growth in sustainability, energy, decarbonization, and cyber. Over 50% of the portfolio delivered high single-digit or double-digit organic growth. From a geographical perspective, all regions performed well. The fastest growth was recorded in the Middle East and Africa, supported by buildings and infrastructure and energy projects in the Middle East. the Americas grew double-digit buoyed by the momentum around energy and data centers. In our mature Europe business, we delivered 5.6% organic growth, benefiting from a strong reoccurring revenue that is underpinned by regulations and accredited activities. Lastly, business in Asia Pacific was strong, showing our new engines of growth in Australia, South and Southeast Asia, and continued resilience of China, which made mid-single-digit organic growth for the year. 2024 was the year we launched and operationalized the Leap 28 strategy. I'm pleased to report that we boosted our organic growth through business development and rigorous execution and have accelerated our capital allocation through M&A. On the revenue front, we delivered 6.4% total revenue growth. This performance was achieved while facing foreign exchange headwinds. On the performance side, we delivered a margin improvement of 11 basis points on a reported basis and 38 basis points at constant currency. Concurrently, we built the foundations needed to accelerate our performance programs and to make an impact on our margins from this year onwards. On the cash front, we are very pleased with the cash conversion of 114% that denotes a well-executed working capital program and a disciplined capital allocation that fuels our lab testing businesses and accelerates our digital development. Finally, in March 24, we said we would deliver double-digit growth in shareholder returns based on EPS, CAGR, and dividend yield. I'm happy to report that we have achieved more than a 20% increase, inclusive of the impact of our share buyback program earlier in the year. I would like now to share with you a brief update on our strategy progress, covering two out of the three pillars, a focused portfolio and the performance-led execution. Starting with our focused portfolio pillar, our growth is fueled by the accelerated organic growth of the existing services from market share gains and from sales of high demand and new services. In 2024, our more mature businesses in the optimized value and impact stream contributed the most in terms of incremental revenue. From 2025 onwards, businesses in our new stronghold and expand leadership are expected to gradually take over as the primary growth engines. The rapid business development and deployment of a select group of high demand and high growth services contributed to this growth. They collectively represent 15% of group revenue in 2024. These new services are critical and contributed strongly to our performance in 2024, specifically within our new stronghold streams. We expect them to continue to drive our future growth. Looking at the inorganic front now, we are actively managing our portfolio with an accelerated and focused M&A program, including some bolt-ons. I would like to make an important comment here. The essence of Leap 28 strategy focused portfolio is to attain leadership position in the markets where we operate. One approach is to pursue exclusively bolt-ons that tend to be gradual and that take time. The second approach is to pursue targets or transactions that could address all portfolio leadership needs in one go. The Bureau Veritas-SGS combination was in line with the latter. As you all know, such combinations do not always close. This was the case, and I will not be able to comment more on this matter for obvious confidentiality reasons. Turning now to the dynamic of our M&A in 24. In our expand leadership stream, we are in line with our execution plans. We completed two acquisitions, adding €115 million of revenue, and we divested a small business in China with €30 million of revenue. In our growing new stronghold stream, we completed seven small acquisitions, adding only 55 million euros of revenue, showing the fragmentation of this space and prompting us to consider other avenues to accelerate growth. Finally, in our optimized value and impact stream with more mature businesses, we are only considering M&A on an opportunistic basis. We completed one small acquisition in consumer soft lines and one significant divestment of our global food testing business with a revenue of 133 million euros. Reflecting on this first year of our LEAP 28 M&A programs, we know that we will continue to do bolt-ons for very specific needs and capabilities. We also must consider larger opportunities while maintaining discipline around targets performance, potential and returns. I would like to share specific comments on the progress of our strategy execution for key businesses. Starting with buildings and infrastructure, we have set three priorities for growth. First, we aim at market leadership in building CAPEX and specifically in code compliance and data centers. Second, we will be expanding our building OPEX services in regions where we are undersized. And third, we will grow fast our infrastructure CAPEX business. As outlined in our strategy targets, we expect B&I to generate 35% of our organic revenue over the duration of the plan, and we need M&A to reach this level of growth. The two acquisitions closed last year and the one signed last month with a collective €150 million of annualized revenue are aligned with this goal. The new stronghold stream includes renewables, sustainability, cybersecurity, and the consumer products technology segment. Most of these businesses are growing at very high rates, but only account for 10% of group revenue. Our LEAP28 target is for these businesses to generate 25% of our organic revenue at group level by 2028, requiring an acceleration of M&A to build our capabilities and footprint. In 2024, we acquired seven companies, adding an annualized revenue of 55 million euros. If we look at renewables, our intent is to expand our global platform, broadening our capabilities to support the build-up and operations of renewable assets across the world. The two acquisitions you see here are aligned with these goals. If we look at sustainability and specifically transition services, the intent is to develop needed skills and digital tools to support customers' sustainability program. In 2024, we acquired a comprehensive product circularity solution built around a leading digital and AI-enabled platform, which will be expanded to new sectors. Let me give you an update now on our sustainability program's progress. We monitor two revenue streams under the sustainability program. One is green objects and the other transition services. Transition services are the fast-growing services that are helping our customers in their sustainability transition. This includes initial carbon footprint assessments, design of transitional roadmaps, effective operational implementation and monitoring, and, of course, reporting programs. They cover decarbonization, circularity, climate risks, and supply chain resilience. The green object-related services focus on assets such as solar farms and products such as sustainable fuels that enable the transition to sustainable energy. For transition services, while the regulatory landscape continues to evolve, customers are still approaching ESG imperatives as a matter of risk management where they must protect their brand, their reputation and their competitiveness. Our revenues grew for these services at double digits carried by carbon footprint, decarbonisation programmes, supply chain resilience actions and product circularity. For green objects, we are witnessing an ever-increasing need for energy and power that conventional fossil fuels won't fulfil alone. Therefore, the build-up of low-carbon and renewable energy sources continues and customers' demand for support increases. Our revenues grew at double digits from renewables and sustainable fuels. Sustainability revenue, as the sum of these two revenue streams, was 5% of group revenue in 2023, and it is now representing 6% of group revenue in 2024. By 2028, our ambition is to derive 15% of our revenue from sustainability. That would come from both organic and inorganic growth. Finally, for the optimised value and impact group of businesses, we remain opportunistic and will consider M&A on this basis only. As mentioned earlier, we completed a small acquisition in the softline, toys and hardline business, where we continue to diversify sectorally and geographically. We also made the assessment that we don't have the capacity to scale the food testing activity. and concluded an agreement to sell it to Merieux Nutrition. The closing is ongoing and will be completed by the end of half 1.25. To conclude the strategy update, some points on the second pillar of the LEAP 28 strategy, the performance-led execution. 2024 was the foundational year for our performance programs, which are designed to capture efficiency and productivity gains across the organization. We structured these performance programs around two streams. The first is focused on creating operational leverage through modernized and digitalized process delivery, as well as through new commercial and pricing methods. The second covers functional scalability, where we are working to keep our SG&A costs as low as possible, leveraging the company's scale and digital enablement. When completed, both will benefit our operating margins with 100 basis points and 80 basis points of improvement, respectively. Importantly, we will reinvest half of those gains to modernize our systems and to drive future growth. To kickstart this part of the strategy, we completed a comprehensive process mapping exercise to identify opportunities for improvement across the company. Armed with these collected insights, we have launched well-defined programs to evolve some functions operating models to define and structure our data, bringing visibility to our delivery workflows and to capture scale benefits for different processes. In the short term, our performance management program's focus is on increased granularity and visibility on key operational metrics to capture some operational efficiencies. It also includes the deployment of pricing enhancement tools. Both of these have contributed to the 33 basis points year-on-year organic margin improvement in 2024. One example of such performance management program is in marine and offshore. The business implemented new digital tools to reduce contract leakage and improve pricing applications. This implementation helped optimize the invoicing of ad hoc services and boost revenue on margins. We will replicate this approach to other business lines like building and infrastructure and industry. The insights from the process mapping allowed us to invest into modernizing our certification service delivery. In 2024, we introduced a smart certification program, building a platform that is automating audit planning, reporting, and back office tasks, helping to optimize time-consuming manual work. This is a multi-year program that requires investment, learning, and comprehensive change management. Early implementation is promising. I would like now to pass to François for the financial review. François.

Thank you. Thank you, Linda. Good afternoon to everyone. Before we deep dive into the detailed numbers, a few words on the key financial achievements of the year, as they clearly demonstrate a step change in both growth and returns. As you see on the slide, we've delivered consistent, strong organic growth throughout the year at 10.2% on a full-year basis. This is the fourth year in a row where we closed with an organic revenue growth of at least 8%. Profitability-wise, we increased our adjusted operating margin by 38 basis points at constant currency, perfectly in line with our ambitions. On the bottom line, our adjusted earning per share increased by 8.7%. It reflects the focus on shareholder returns that we've introduced with the D28 programs. Overall, the adjusted EPS has been consistently increasing over the last four to five years, regardless of a fixed fluctuation. On a reported basis, the adjusted EPS is up now 35% compared to pre-COVID times, and dividends follow a similar pattern, as you know. Rewarding long-term shoulder is at the core of the LEED 20A strategy. Lastly, when it comes to a free cash flow generation, we delivered a 27.9% increase in 2024, again, inclusive of FX Edwins. This reflects our strong operating performance and a disciplined work in capital management. Starting now with the revenue bridge. So we delivered above 6.2 billion in the year, strong organic growth, 10.2%. This is counting the 10th quarter of organic revenue growth at or above 8% over the last 12 quarters. So a pretty sustainable achievement. Acquisition added 0.6% on the Netscope basis reflected the impact of the Bolton acquisition realized in the past few months, offset by the disposal of a non-core construction inspection business in China back in July 2024. To be noted, in the last quarter in Q4, the scope effect was stronger at 1.6% due to the acceleration on the M&A front, pretty much back-and-loaded when it comes to the seasonality in the year. Forex impacts represent a drag of minus 4.3%, leading to a total growth of 6.4% on a net reported basis. Again, on the FX, mainly attributed to the strength of the euro versus several emerging market currencies. Now, on a more short-term basis, the strengthening of the US dollar and the Chinese currency that we have observed already in Q4, The exit rate of December and the current spot rates could make us consider a somewhat more positive impact on FX for 2025, between neutral and positive as we stand. When it comes to the performance of the different businesses in the full year, including the last quarter, as you see them on the page, all businesses delivered good, if not strong growth. Three activities led the pack, marine offshore, industry, and certification. They all delivered double-digit organic growth in the full year and in Q4 on the back of a continued momentum in sustainability services. Agri-food and communities and building infrastructure both delivered mid-single-digit organic revenue growth in the year. BNI was led by both in-service and new-built activity and was mainly led by the U.S. and Middle East operations. Agri-food and community growth was driven by the strong demand for agri-food and oil and petrochemical. Finally, consumer products continued to recover throughout the year. The 10.2% growth in the last quarter led to an overall 8% performance in the full year and a gradual but constant recovery compared to the comparables of 2023. Now on the margin bridge on this next page, organically we improve our margin by 33 basis points to 16.2. Scope had a positive impact of 5 basis points. So at constant currency, we delivered 38 basis points of improvement year on year. This is aligned with our commitment to deliver consistent margin improvement every year of the 2028 plan. Forex was a drag of 27 basis points to the group margin. So on a reported basis, we delivered a margin of 18 basis points to 16% in the year. Now within the portfolio. The revenue growth and operating leverage drove organic margin higher in marine offshore, up 34 basis points. In certification, up 114 basis points, so slowly getting close to the 20% margin level. And in consumer product, up 200 basis points organically, more of a recovery frontier. In addition, where efforts to be more commercially selective by focusing on profitable contracts in industry have continued to bear fruit, the industry division generated a 74 basis point organic improvement to reach 14.3% on a four-year basis. Elsewhere, our agri-food and commodity margin declined by 91 basis points. It reflects a negative mixed effect from metal minerals, mainly in H1. And BNI margin eroded slightly by 18 basis points. The strong recovery of the U.S. operation could not fully compensate the soft performance in China throughout the year. Turning now to other financial performance indicators. On the bottom line, our net financial expense remained stable at 69 million, despite a total of more than a billion of refinancing in 2024. On the tax front, our adjusted effect tax rate dropped by 60 basis points versus 2023, lending close to 30.5%. Here, a better management of the administrative workload has enabled to reduce withholding taxes incurred over the period. We expect 2025 to be in the 30-31% range. So overall, a good scalability on the financial and tax expenses lines. So no surprise, it leads naturally to the EPS momentum that we see on the next page. So as you know, 2024 marked the first year of our LIB28 strategy, which aims to deliver a clear increase in childhood returns through EPS growth and dividend yield. I'm pleased to report that we are off to a strong start on this front. Our adjusted EPS stood at 1.38 euros in 2024. which is an 8.7% increase versus 23% and 17% increase on a constant currency basis. So this reflects our solid operating performance and the early success of our active portfolio management. We've also maintained a strict discipline in our financial and tax costs. As you can see on the slide, this is not a one-off, but a steady increase year on year on a reported basis. As you know, there is a direct correlation within Bureau Etas between our adjusted EPS and our dividend, as we de facto distribute 65% of the adjusted EPS. So for 2024, it represents $0.90 per share, resulting in a 3.1% yield as of year-end and an increase above 8% for our shareholders compared to last year. So we remain confident in our ability to maintain this favorable momentum and continue delivering enhanced value to our shareholders. So, a healthy EPS is important indeed, but a strong cash flow remains the ultimate proof of the solidity of Boa Verde's business model. Our free cash flow generation has been very strong in 2024, up almost 28% compared to last year. So, this good performance denotes, first, a rigorous working capital management strategy. The work on that front, you know, has been started five, six years ago. I'm pleased to see with you all here that this is paying off. Our working capital further reduced to 4.7% of the group revenue, which is a record low, but on the trend that you have been witnessing with me for the last five, six years. So over the last five years, we have improved our DSO by 11 days, from 62 to 51 days. And second, we've maintained a disciplined approach to CapEx, which was maintained at 2.2% of the group revenue and represents a similar level as last year in terms of cash outflow at €140 million during the year when it comes to investment. Moving now to capital allocation. Here, no surprise as well, the strategy is well-defined and disciplined. In 2024, we met our LEAP 28 ambition on all metrics. Number one, we accelerated our M&A spend from 71 million in 23 to 270 million almost in 24. These are the 10 acquisitions in Darifatou, net of a portion of our food testing divestment that we've made at your hand. On the CapEx side, we remain disciplined, as I mentioned, 2.2%. For 2025, we expect our CapEx as a percentage of group revenue to be within the leap 2028 range. And on the leverage, we're on the low end of the guidance, but within the guidance at 1.06 times, as we benefited from favorable timing of the early disposal of our food testing business. So this gives us a lot of room to accelerate our M&A program moving forward. As a conclusion, we closed 24 with a very robust financial structure. Our adjusted net financial debt stood at $1.2 billion at the end of 24. We have no major refinancing requirement before 27, and 100% of debt is at fixed rate. Maturity five years, cost of debt 3%. And regarding the $500 million bond that was due in January 25th, It's been redeemed through a successful half a billion debt issuance completed in May 24. So in summary, Duetas has delivered another set of strong financials in 24. And I would like to thank all teams across the organization for their commitment in achieving these performance milestones quarter after quarter, year after year. And I'll hand over back to Inda to share with you the portfolio business highlight for 24.