Bureau Veritas SA ($BVI)

Welcome to the Bureau Veritas Q1 2026 Revenue Presentation. [Operator Instructions]. Now I will hand the conference over to the speakers. Hinda Gharbi, Chief Executive Officer; and François Chabas, Chief Financial Officer. Please go ahead.

Thank you. Good morning, good afternoon and good evening to everyone. Welcome to Bureau Veritas' First Quarter 2026 revenue presentation, and thank you for attending this call. I'm joined by François Chabas, our Chief Financial Officer. This quarter, Bureau Veritas delivered a steady performance in a changing macroeconomic environment, reflecting continued momentum in the execution of our LEAP 28 strategy. I'd like to thank our teams worldwide for their commitment and contribution. I would like now to go through our Q1 revenue performance. Revenue reached 1.5 billion. Organic revenue growth stood at 4.5%. While this quarter is slightly below historical organic growth averages, I'm pleased to see that a number of our businesses are delivering on or above expectations offsetting the impact of project delays and the Middle East disruptions on others. External growth contributed 1.8% from recent bolt-on acquisitions, largely offset by last year disposal. We expect the recent midsized acquisition Lotus works to take effect in half 2 2026. As expected, the appreciation of the euro against most currencies led to a negative currency impact of 5.2% in the quarter. I will elaborate further on our new full year growth guidance at the end of this presentation. I'd like to say, though, that this year is shaped by complex geopolitics and our decision to exit specific contracts in the subsegment government services. Moving now to our revenue performance by business and geography. From a business perspective, Marine & Offshore and Buildings & Infrastructure delivered the strongest organic growth in the high single digit to double-digit range. Marine Offshore delivered 11.2% organic growth supported by strong new build activity as the global fleet modernization continues. Buildings & Infrastructure grew 7.3%, demonstrating the value of our recent portfolio expansion with data centers up more than 30% year-on-year organically year-on-year. The rest of the portfolio posted low to mid-single-digit growth with the lowest growth in Agri-Food & Commodities and Industry reflecting tougher comparables and disruptions from the Middle East conflict project delays and disruptions from the Middle East contract for the lab. From a geographical standpoint, Asia Pacific delivered a strong growth of 7.9%, driven by solid momentum across the region, primarily in China, Korea and Australia. The Middle East and Africa delivered a resilient 5.5% while navigating disruptions across operations in the Gulf cooperation countries. Europe continued to outperform GDP with organic growth of 3.4%. In the Americas, growth reached 1.7% with a strong growth in North and Central America, offset by contract delays and end of contracts in Latin America. I would like now to give you a quick update on the Middle East. We have 10 countries impacted across the region, and I'm pleased to report that our people and their families are safe and our facilities and laboratory did not sustain any damage. These countries account for 6% of group revenue, with activities distributed across industries, Agri-food and commodity and buildings and infrastructure for the most part. The security situation varies by country, impacting operations in different ways. We work closely every day with our customers to maintain business continuity in a safe way. I would like now to give you an update on LEAP 28 strategy execution. Few words, first, on the AI-driven secular trend. The technology rates we're witnessing in this age of intelligence will have a profound impact on reindustrialization and urbanization. In addition, the rapid development of AI and the associated needs in computing capacity and data storage are seeing a massive buildup phase for data centers and semiconductor manufacturing. These dynamics translate into significant CapEx commitments from hyperscalers and others and chips, manufacturers, particularly with the rapid buildup in the Americas and Europe. Just on the right there on the slide, you can see that data center capital expenditures projected to rise 17% annually from 2023 to 2030 across the world. Semiconductor manufacturing CapEx spend in the Americas and EMEA is expected to grow at a CAGR of 8% from '24 to 29, highlighting a multiyear investment cycle. Taking back into account and specifically looking at Buildings and Infrastructure. B&I represents 30% of our portfolio today. It's our biggest market and a legal business in our Xtend leadership stream of the LEAP 28 strategy. The B&I strategy is built around 3 clear growth areas: building CapEx, building OpEx and infrastructure. I would like to focus on building CapEx, which represents 38% of the divisional revenue. Our strategy is to expand our capabilities in code compliance and to increase our position in mission-critical assets. These assets such as data centers, semiconductor fabs, and high-performance facilities are complex, highly regulated and have high expectations of operational performance and uptime. These factors naturally drive higher testing inspection and certification intensity. With the acquisition of Lotus works, we significantly reinforced our exposure to these mission-critical segments. So about Lotus work. Lotus Works brings highly complementary technical expertise that significantly enhances our end-to-end service offering across mission-critical assets from construction site through to the operations space. Together, we are building a platform of around 300 million in revenues, fully dedicated to mission-critical assets such as data centers and semiconductor facility. This platform, when put together, will represent roughly 15% of our B&I revenues and will materially strengthen our positioning in high-growth markets. This acquisition will also support Bureau Veritas organical will be accretive to the group's adjusted operating margin and slightly accretive to earnings as early as '26. I will now pass it on to Francois to share some financials.

Thank you, Hinda. Good afternoon, everyone. So we do a bit of a detail on the numbers. In the first quarter, as you see on that page, we delivered a revenue of EUR 1.65 billion. Organic growth was robust at 4.5%. And Bolt-on acquisition closed in past quarters contributed 1.8% to the growth, mainly in the B&I Industry segment, where we have reinforced our positions in Europe, in particular. Divestments accounted for minus 1.9%. As you may remember, as part of our active portal management, we have divested in our protesting activity business and part of our technical supervision services in China at the end of 2025. So on a net basis, the scope had a marginal impact of minus 0.1% in the first quarter. Currency, so steel headwind this quarter at minus 5.2%. So it's mainly due to the strength of the euro, the usual suspects, clear currency, U.S. dollar, Chinese renminbi, strander and Canadian dater. I think the good news is if we assume the transport rates, we expect the FX drag to ease significantly from Q2 onwards. If you remember, the -- those currencies moved against the euro following the announcement of tariffs 12 months ago. So we are now coming out of this comparison phase. So we expect Q2 and the rest of the year, be much better perhaps current or trade, of course. If we have a look now at our business performance in the first quarter, both on organic and scope aspects of total big constant currency on the right. Marine Offshore it's another very strong quarter, double-digit organic growth, a bit more than 11%, driven in particular by new construction has been mentioned. Second element, we're happy and pleased to see bidding infrastructure delivering strong growth of 7.3% organically, 8.2% at constant currency. So the revenue growth is late year on 3- or structured around 3 main aspects that will be further developed, 1 data center and mission critical commissioning services; two, an increased demand for infrastructure risk services and three, the contribution from recent acquisitions I mentioned, specifically in Australia and Europe, which are now slowly getting into the organic contribution in terms of revenue is Consumer Products, 4.3%, driven by the recovery of our technology business. We bottom out as I think we've told you during our February call. So we are now back into the positive here. Certification with an organic growth of 2.3%. [indiscernible] was encouraging, reflecting steady demand for insurance and compliance services. Food & Commodity delivered 2.1%. And finally, industry growth was limited to 0.7% organically, but we reached almost 3% at constant currency, so if we reflect the recent reinforcement of our portfolio offering, in particular, in [indiscernible] Services and power generation services. Organically, let's face it, we faced offer comparable in Q1. If you remember, we delivered deliver most above 4% to 14% growth in Q1 '25 as well as some impact from the Middle East situation. So here, we expect a sequential acceleration throughout throughout the year 2026. I will now hand over to -- back to Hinda for giving you more elements on the business side lines of the quarter.

Thanks, Francois. Let's start with the Marine & Offshore. So the division continued its strong momentum in quarter 1 26, delivering 11.2% organic growth we're forcing the excellent momentum we have seen actually over the last few years. Looking at it by subsegments. New construction once again posted strong double-digit growth supported by accelerating deliveries and the capacity expansion that we have talked about with the new shipyards coming online. The order backlog is solid. We have reached 33.6 million gross tons up essentially 24% year-on-year. Now looking at the OpEx activity or the port in service activities as we call them, that grew modestly, considering the tough comparables we have. But the fleet continues to expand with some key new wins, as you can see on the slide more recently. The Marine sector continues to dress form fast, and we are developing solutions to support rapidly digitalizing ships. We have recently partnered with the Hong Kong shipping company to class and augmented ship. If we look at Agri-Food and commodities, the business delivered 2.1% organic growth in the first quarter with contracting dynamics across subsegments. Oil & Petrochemicals faced a challenging environment and delivered modest organic contraction driven by trade disruptions in the Middle East. The impact was partly offset by volumes redirected through alternative routes and in other markets. Metals and Minerals continued to perform well, delivering high single-digit organic growth. Activity was sustained in gold and copper. And also we have seen higher exploration spending. The deployment of new laboratory services on-site laboratories also contributed to this performance. The Agri segment contracted in the quarter, reflecting volatile global trade war flows. Moving on to industry. The division delivered 0.7% organic growth in the quarter and aggregate performance with different dynamics across the subsegments. Additionally, the Middle East conflict and OpEx project delays were two important factors in the performance this quarter. If we look at oil and gas, it achieved mid-single-digit organic growth, supported by double-digit growth in the CapEx activity with several important inspection and technical support contracts secured, both in the Middle East and Latin America. OpEx activities were temporarily impacted by conflict-related delays in the Middle East and by reduced activity in Latin America. I would like to add that some of the OPEC delays actually predated the Middle East conflict up. Power & Utilities delivered low single-digit organic contraction, reflecting the postponement of major inspections in the Middle East. Solid CapEx momentum is maintained, and we have seen a mid- to high single-digit organic growth there, sustained by spend in renewables and nuclear projects. And as an example, Bureau Veritas was selected to perform quality assurance and regulatory compliance second-party inspection as a major European nuclear fusion project. in the industrial product certification, we delivered high single-digit organic growth, supported by pressure vessels and increased demand for machinery. I would like to finish this update on industry by saying that customer spend remains robust, driven by growing energy needs and increased concerns around security of supply. The Middle East conflict provides a catalyst for increased spend across all energy sources in the rest of the world. This quarter should represent the trough of the industry activity, and we expect growth recovery from Q2 onwards. Moving on to Building & Infrastructure. The division was once again among the strongest performance this quarter, delivering 7.3% organic growth in Q1. This performance is a result of portfolio pivots that we have completed over the last 24 months, coupled with a solid backlog and sustained demand for CapEx service. The building CapEx delivered double-digit growth, driven primarily by multiyear data center projects with a strong momentum in the United States. Buildings OpEx achieved low single-digit growth with a steady growth in our largest market front from increased volumes and high demand for energy-efficient services. The U.S. activities were more focused on asset condition assessment. Infrastructure recorded a high single-digit growth, supported by government-led programs in Europe, strong momentum across North America and Asia Pac and continued large-scale projects in the Middle East. Turning to Certification. The division delivered 2.3% organic growth in the first quarter, against challenging comparables, with momentum improving in March. Performance was temporarily impacted by some timing effects of schemes and specific contract terminations or scope reduction. Looking at the different subsegments. The QHS&E and specialized schemes posted moderate organic growth, while demand remained robust for customized, voluntary and transition-related certification programs. The state for sustainability and digital certification, it continues to perform strongly well, delivering high single-digit organic growth, driven by rising demand for bulk carbon assessments ESG services and supply chain-related services as well as a solid momentum in cybersecurity certification in Europe. Overall, certification continues to benefit from strong structural drivers in assurance, sustainability and risk management, supporting a pickup from Q2 onwards. During the quarter, we secured a contract to perform ESG performance and supplier audits for a large European hospitality company. Lastly, turning to Consumer Products Services. The division delivered 4.3% organic growth in the first quarter. Soft line stores and hard lines demonstrated resilience despite very strong comparables from pulling ahead of tariffs last year. Technology Services performed particularly well, delivering double-digit organic growth as the electrical and electronic platform develops in Eastern Asia from acquisitions we have completed in the last 24 months. Finally, transition services within this division continued to expand in the first quarter, we were selected to provide social audit support for a major U.S. retailer. Now prior to talking about the outlook, I'd like to come back to the decisions linked to certain activities that we have taken this quarter. Pursuing internal alerts, the company has conducted investigation that uncovered compliance deviations in the Middle East and Asia region mostly in Africa and primarily in the Government Services legacy subsidies. We have proposed several remedial measures needed in the short and medium term to our Board of Directors. And at its meeting on April 21, the Board of Directors supported and approved all of these actions. First, the company took the decision to immediately and voluntarily disclose the situation to the French authorities in the spirit of transparency and cooperation. We will provide an update on the financial consequences of these deviations and disclosure as soon as we can do so. Furthermore, the company would terminate the contracts in questions and will continue the in-depth review of its activities within the Government Services legacy subsegment, which represented EUR 185 million in revenue in '25 to determine the appropriate terms of exits from this subsegment. As a result, we have updated our full 2026 growth outlook. I would like to say that our existing compliance try work will be reinforced to ensure that all activities fully adhere to the group's ethics and compliance standards. We have implemented disciplinary measures, and Bureau Veritas is committed to implementing all necessary measures to prevent the reoccurrence of such events. Turning now to the outlook. Complex geopolitics and an uncertain macro environment are shaping 2026. In addition, to the launch of an in-depth review the terms of an exit from the group's government services, legacy subsegments as I did explained earlier. In particular, after we have decided to terminate certain contracts in the Middle East and Africa region. We have therefore updated the guidance for full year 2016 as follows: on the growth side, mid-single-digit organic revenue growth. On the margin side, improvement in adjusted operating margin at constant exchange rates, and on the cash side, strong cash flow generation. The group is fully committed to the LEAP 28 financial guidance, benefiting from favorable market trends and from the sustained execution of FLEET28 portfolio and performance programs. I would like to close now on this first quarter performance, a number of factors, including project delays in various parts of the world, the conflict in the Middle East and very challenging comparables in key divisions contributed to what we consider a low point in our growth journey. We have a solid backlog, sound and scalable execution capabilities and ongoing performance programs that will all contribute to what we expect to be a recovery throughout the year. Our business model is resilient with a well-balanced mix of activity our portfolio composition continues to evolve, and we have a solid financial position. On the B-28 strategy front, I'm pleased with the progress achieved so far around our portfolio priorities. The acquisition of Floaters Worth is a significant milestone as we accelerate the buildup of our new -- of new platforms for future growth. We have proactively disclosed the compliance event that is triggering certain government services contract termination. Based on that, we have accelerated an in-depth review of this legacy subsegment activities to determine the appropriate terms of exit. [indiscernible] tough is committed to the highest standards of ethics and integrity in the conduct of its activities anywhere in the world. I would like to finish by saying that our updated full year 2026 revenue growth guidance is only a temporary step out of our LEAP 28 task. I reiterate our commitment to our 2028 financial condition. Thank you for your attention, and Francois and I are now ready to take your questions.

[Operator Instructions]. The next question comes from Annelies Vermeulen from Morgan Stanley.

I have two questions, please. So firstly, regarding the downgrade for your organic guidance, could you elaborate just on how much of the downgrade is more macro driven, i.e., you're seeing slower-than-expected activity in some of your end markets even beyond Middle East and how much is simply the exit of those contracts that you referenced. From memory, you typically start the year with the vast majority of your revenues locked in. So I'm just curious as to what has significantly changed in the last couple of months, as I said, beyond the Middle East? And then secondly, regarding the investigation into the Government Services subsegment, you've mentioned in your remarks, implementing additional compliance controls. So how confident are you that this is an isolated situation within the group? And to that end, are you planning any additional compliance checks or business reviews across the rest of your portfolio?

Thank you, Annelies. Let me start with the second question, and I'll get back to the first one. I think -- we obviously -- this is still an ongoing investigation. There are a number of things we cannot share. But I would like to say that our actually compliance programs are effective in finding such deviations. And therefore, we have we have an organic way of finding this and we have been very clear in our approach to this issue investigated. We voluntarily are disclosing to the authority and based on our findings, we are stopping some contracts. So there's no -- this is a clear case of compliance for us. We did what we will do in these cases. Now the fact that we are considering the exits from government services in many ways, there's a natural thing. I have mentioned in my prepared remarks that this is a legacy segment. This is a business we had for a very long time. It's low growth. It is subscale and it's a segment that is -- that fits in our bucket of optimized value and impact. And the fact that we had to stop these contracts because of this particular case, I've mentioned to really, in a way, accelerate the review that we would have got to at some point. So there is no -- there is no major drama here. This is us acting on that information we have found. And I'm quite confident that as we learned from this investigation, we will implement the necessary measures to ensure such events do not reoccur. On the first one, we're -- obviously, again, because we are in the middle of this and also because the contract terminations will take a certain time that we are not able to tell you right now because the key thing that Dover focused on is business continuity for our customers and finding an orderly and professional way to exit these contracts or terminate them. It's really very hard to give you an exact number there. I think at this point, we'll just stay on that Annelies.

Okay. But the change in the guidance is those exits. It's not that you're seeing slower activity elsewhere in the business?

No, I think that the change in guidance is the impact of these contracts, absolutely. And there is, of course, the fact that we have a very uncertain and certain situation around the world. And I've mentioned a few times in my prepared remarks that we have project delays. These project delays are a bit everywhere, and we wanted to make sure that we take that into account as we revisited our plans for the year.

The next question comes from Will Kirkness from Bernstein.

I've got three questions, please. I just wonder if I could follow up on the government services and just ask if you can give us the revenue number for what you've exited and whether the margin profile is different for government services as a whole versus group? The second thing was just looking at group organic growth, if you could give a split of price versus volume? And then finally, just thinking about M&A and optionality and news flow we've had recently. I just wonder how the Board thinks about deals and whether you potentially revising discussions from late '24 or early '25 would ever come back on the table?

All right. Thank you for the question. I'm going to let Francois take the first one. Go ahead, Francois.

Yes. Thanks for the question. So refrain this a little bit, the government services we disclosed, it is 3% of the group ran EUR 185 million. It's a subsegment. As a matter of fact, we do not disclose margin by subsegment or for any subsegment in particular in this business where the competition landscape is super restrictive. The overall impact is captured in the guidance. And you've seen we haven't changed guidance on margins. So what reshow you. And then when it comes to making that very clear when it comes to the process to review various exit options. So at that stage, we will take a cautious look at it with respect to clients in to. So that's why we have a broader guidance whether it's revenue or margin that encapsulates various options for which today, we don't have a certain certainty, but which are broad enough that we know we'll be able to stick to those items as we speak. When it comes to the price volume. So we start to see a bit of discussion about inflation coming back, not that easy, though, for various reasons to elaborate, if you wish. But at that stage, we haven't changed our plans for the year, meaning 1/3 inflation 2/3 volumes on a full year basis, I mean on a full year basis. That's where we are. Again, if you want to further elaborate on mission, we have to do some.

All right. On the first question on the M&A and optionality, I think we've been clear, and it's very important to reiterate that we have two trends in our M&A. We have the bolt-on stream, which we will continue to do very opportunistically based on the gaps we have, be it on capabilities or in terms of geographies, on the different businesses. That will continue, and it's a very well-oiled machine in terms [indiscernible]. The other stream we had is midsized acquisitions that we tended to essentially put that between EUR 100 million and EUR 500 million, mostly to build new platforms, the Lotus Works acquisition fits exactly into that. We have at this point, no plan to change that approach. But of course, we're watching very carefully what's happening today in the market. But as to coming back to cases in '24, that's not the case.

The next question comes from James Rowland Clark from Barclays.

So just looking back at the first quarter, you slowed down by 2 percentage points in terms of organic growth from Q4. Can you try to split out the drag of that slowdown between the Iran conflict and anything else you think is important to flag or perhaps could you give us the trend up until the conflicts and the organic trend for March? Secondly, on Series been a slowdown here. Can you provide the sort of current trends there maybe and what is actually sustainable something that timing impact in certification? And then finally, you mentioned in your presentation the industry should recover in the second quarter. The situation in Iran is still not resolved. So I just wondered what gives you the confidence in that commentary.

Yes, the line was really very bad. So I will at my understanding is with what is the -- I guess, the sequential dynamic there between Q4 and Q1, if I heard you well. And what's happening in Q1. So a couple of things that I mentioned earlier. I think it's very important to mention that is -- it's true the conflicts in the Middle East, which impacted some of the industry and some of our oil and petrochemical activity. But that is -- some of it is linked to the conflict delays linked to that, but there are a number of project delays that predated the conflicts that were actually in play as well, particularly for industry. And you can see industry in grew 4.9%. And then it grew 0.7% in Q1. It's very important to mention that last year, industry in Q1 '25 grew 14.3%. So we are against very, very tough [indiscernible] designed for certification. Certification in Q1 last year grew 10.9%. So you're dealing here with tough comparables, project delays in general because some of them are not only in the Middle East, plus the conflicts in the Middle East. Now why am I profit in that industry in quarter 2 should recover a number of things. We have projects that will start in different parts. I talked about some of the wins we have had. We can't, of course, predict too much what will happen in the Middle East, considering the fluidity of the situation there, but we have a backlog that we work with. A number of the OpEx projects should recover and should restart. So we have, I would say, reasonable and good reasons to think that we can -- industry will recover. Certification actually is a clearer story there. tough comparables, it's true, but we exited the quarter with 5% growth in certification in March. So we are starting fully cover, and we are -- and we expect to again, some -- there were some timing effects we talked about in some of the schemes, we expect those to go away. So again, specification should recover. So there are very, very tangible things there that, James, that we have taken into account in our views of Q2.

The next question comes from Geoffroy Michalet from Auto BHF.

I have three quick ones. First one, we see 5.5% organic growth in Middle East, which is quite impressive. Do you have an idea of how much growth you left on the table because of Middle disruption in your view or let's say, versus your previous budget before Middle East disruption. Second question, when you did the full year '25 call, you mentioned your willingness to double the portfolio rotation versus what was done in the last 2 years. At this stage, had you already the government services in mind in your portfolio rotation? And did you already know or had the alert of potential on doing in this division? And can you also reassure us on the financial impact, meaning that you will assess only the potential exit and not any accounting fraud that might trigger, let's say, treasury impact. And the third point and last question on your new guidance on sales this new mid-single-digit target? Is it including government study that will be exited or runoff? Or will it be stripped out?

Sorry, Geoffroy, could you repeat the last question? I didn't hear that properly.

Yes, on the mid-single-digit new target that you have? Is it including the government service business within your portfolio? Or will it be stripped out of your portfolio?

On the on the business impact, so we still see in here, but the impact in March. A big scheme of things, we have a bit of an impact on the industry segment and to a lesser extent, on the B&S segment as well as on the oil and petrolum testing within pro I think the bulk of the impact in March has been led to disruption in industry and are for formality. What we see today is the activity is getting back, I would not say to normal April, but with less disruptions in the industry field, where we can go at least fractionary and such locations. The show testing business remains subdued. So how much we've left I think we know by the end of June a little bit, but not a master that state. I think what we indicate when it comes to mid disruption is more for the year to come. is more broader disruptions in the global economy because most of what we have technically left on the far in Q1, OpEx rated services that will have to happen in year and vetting of petrochemical flows, which we move disruptions than someone else. So this we would recoup anyhow or in Q2, Q3 or Q4. but the broader disruption is something which is more difficult to assess in a rate with the global bleconomyhe. So that answers the first point. The second was on so just precision on the financial impact and accounting call just for it wants to be very clear on this. The financial gave you an update on the financial consequences of this comment even as soon as we can do so. But for and great work to make more comments to answer bluntly to your question, there is no accounting problems.

All right. Thanks, François. On the third question, the question is whether government services is included in the numbers removes from the numbers?

To be clear on the question. I think far you asked the new guidance was including the [indiscernible] mentioned, the existing of the contract. And the answer is yes. It does include the exiting of [indiscernible] so that means we're going to remove [indiscernible] do a number there would be no such numbers, but it's top of the guidance. In case of doubt you can channel your further questions to Laurent. We'll be happy to answer that level of detail. So it's within but being released.

The next question comes from Virginia Montorsi from Bank of America.

Just a quick one on the industry. If I think about the sequential dynamics for Q2 and onwards, obviously, comps get easier, but I would assume that Q1 only had the effect of Middle East related options in March if the comps being ongoing, Q2 will likely book an impact from April onwards. Are you still confident that the impact from the easier comp kind of affect offsets the Middle East disruption? Or how should we think about industry essentially with these key two moving pieces into the remainder of the year?

Yes. Thank you, Virginia, for the question. Look, Q2, first of all, the comps are a little there, but last year, industry grew 10%. So we are -- so we are confident that we will have a pickup in Q2 versus what we have seen in Q1 in terms of growth. The impact, as we said, was 1 month in Q1, and it's not only the conflict itself, but project delays in the region. So we tend to talk about the Middle East. There are two dynamics that are project delays and then there is some of the impacts of the conflict specifically to it, but 2 different dynamics here. And we've seen this project delays mostly in OpEx both in oil and gas and in power and utilities, meaning non-oil and gas energy sources. The CapEx is growing nicely. So again, we've also seen project delays in Q1 in other parts of the world that will recover in quarter 2. So when we take that, we take the backlog we have, we are confident that in Q2, we'll see a recovery of our industry -- our industry division.

The next question comes from Victoria Chang from JPMorgan.

I have three questions, please. Firstly, on growth by region. In the Americas, you posted 1.7% organic growth despite a 6.8% organic increase in North and Central America. So can you talk about what the offset to that was, please? Was it driven by weakness in the LatAm region perhaps Secondly, if I remember correctly at the full year results, you saw project delays in the industry and had a negative effect on your margins. Would you expect a similar impact on first half margins this year, given that the product delays have continued? Or was that more of a one-off timing effect in 2025? And then my last question is on certification. At full year results last year, you talked about rolling out in your production system. How has this been progressing? And did the rollout of that new production system impact growth at all in certification?

Thanks for the questions, Victoria. So on the Americas, Latin America has a combination of project delays and some nonrenewal of contracts. And that's really impacted the growth this quarter. We continue to work very hard on the sales front, on the pipeline, on the sales front, and we secured some new contracts there in the industry. that was really some of the industries, some of the D&A. So that's really what was driving that lower performance in Latin America. So we expect to see that starting to move. The project delays in industry. The second question you mentioned is whether there was, can you please clarify the it's mostly on one-offs. We have. Yes, that was last year. We have done some -- we stopped some contracts because we were managing -- we were looking for more of the commercial and profitability of these contracts. That was last year. We're not -- we don't have that this year. This year, we have continued project delays that we explained and some nonrenewal of contracts that occurred. But there is no voluntary stoppage of contracts. And then on certification, we have a smart Serve platform that we have been deploying, and that's ongoing. We have deployed it in a number of countries. So -- we have been able to see some really good feedback from our teams around the world. And we should be completing probably the deployment by mid next year because we have some very big regions that needs a bit more adaptation during the implementation of that. But all in all, it's going according to plan.

Okay. I understand. I mean just a follow-up on my second question actually on the margins. So just to clarify, will your first half margins be unaffected by the project delays in that case?

I think the simple answer is not materially if it is I mean we do the guided margin by semester by segment, but we do not expect any material drop in margin for industries in is.

The next question comes from Francois Digard from Kepler Cheuvreux.

Sorry to come back to this, but I still feel I do not understand the nature of the misconduct. This is not an accounting fraud. So what exactly is it corruption? If so, why not if the French authorities rather than the local authorities? And to your best knowledge, when this deviation have started?

Yes. Thank you for the question, Francois. As you can understand, this is an ongoing investigation, and we are disclosing to the authorities. So there is a little bit of things that I can share on a public call. So at this point, all what I can say, it's a compliance event that we have investigated and continue to investigate. We are talking to the authorities and the investigation will take it of course in the hands of these companies and authorities. I really cannot say more than that. It impacts the Middle East and Africa region, mostly in Africa, and it does impact government services as we have explained. That's all what I can tell you at this point.

But as you understand, the answer was [indiscernible] driven, and they are clearly not sufficient for investors with a share price down 13% today, mainly because of that. So when do you plan to are more details?

I think as soon as we can disclose more, we will, of course, disclose more for investors.

The next question comes from Rory McKenzie from UBS.

It's Rory here. Just one follow-up on the margin, please. So as discussed, you haven't changed the wording of the margin guidance despite the lowering of growth guidance and a slower Q1. Can you just talk about your cost actions you've taken as the result of any of these project delays and your attitude towards cost management, what's proving a year in general? And also related to that, if you can't talk about subsegment profitability, you please commit to disclosing the margin impact of any contract exits as that happens over time?

Rory, just on the margin guidance, I think we have enough means within our viable cost structure to be able to adapt in a very time way as soon as there is a little bit of a slowdown. I think we have as well to put that bit on the wider context. Moving from the mid- to high to mid remains something that is pretty much manageable in a service-based company. So as you know, we have a good chunk of our business that is run through contractors that enables us to adapt to the ups and downs. And the company is used to manage its cost structure in a very, I would say, roughly efficient manner. So no big drama here. To [indiscernible], we are talking about 3% of the business. So if you want me to disclose each and every contract, we're going to stop in terms of margins, they can ready for a long night, my friends because that would be a long list. So I think the company is managing portfolio. We have -- if you remember, last year, end of 2024 with vested. Food testing business in trenches, not in 1 go, and I think it's been well managed from a guidance point of view, well managed in terms of making sure everyone is involved and know what's happening. With the same thing here. And I think that should make everyone comfortable. That's our guidance is well propose and that we know how to navigate this. Again, let's put that into consideration, we are talking about 3% of the revenue of the company. And by the way, just as it's as we say in French, but we end up having a lotus works coming with probably almost the same size. So we are in the transformation of the portfolio with -- and it is true. This is quite unique in this sector. Not many companies in the sector are shaping the portfolio the way Hinda doing it. And I think we have some financial in being successful in this.

Yes. And I think -- look, I mean, obviously, it's -- we haven't discussed government services. We considered a mature legacy business that at some point we will deal with it in terms of portfolio activity, but it just so happened that we had to do it now. I think it's very important to for us to execute that with and to business continuity for the customers, which we have done with our food business will continue to do so. We are, of course, managing the whole of the announcement and its impact on our employees. And we will make sure that as this investigation progresses, we -- and when we can, we'll give you more information on that. But it's full transparency on this matter, but I hope you understand that there are some limitations to what we can disclose at this point. And with that, [indiscernible] Yes. Thank you very much. And again, with that, I think we are coming to the end of the call. Thank you all very much for joining our call, and have a good day.

The live conference is now over. You may now disconnect.