Intertek Group plc (ITRK) Earnings Call Transcript & Summary

Hello, and welcome to the Intertek November 2023 Trading Update Conference Call. My name is Laura, and I will be your coordinator for today's event. Please note, this call is being recorded. [Operator Instructions] I will now hand you over to your host, Andre Lacroix to begin today's conference. Thank you.

Good morning to you all, and a warm welcome from London. In front of me, I'm just watching the beautiful sunrise. It's a great way to start our trading update today, which is full of good news, as you would have read in our statement this morning. Thanks for making the time, Colm, our CFO; and Denis, our Head of Investor Relations are with me here in the room. Essentially, if you step back from a statement that we just issued a few minutes ago, there are 5 key points and messages that we are trying to communicate today. First and importantly, the demand for ATIC solutions is robust. I'm not worried about demand. And in the first 10 months of the year, we have delivered the highest like-for-like revenue growth in the last 10 years, something that the organization is tremendously proud of. The second thing is we are confirming our targets. We are on track to deliver full year targets, which you know very well. It's mid-single-digit like-for-like revenue growth at constant currency with margin progression and strong free cash flow essentially given where we are on a year-to-date basis. And as we talk today, we have 10 months of actual. So we are confident in our full year outlook. Importantly, our margin progression is healthy. We are benefiting from 3 important drivers. Our pricing initiatives are obviously kicking in after the price increase we took over the last few years. The faster we grow, the better operating leverage we have. So we've got a really good operating leverage. And as you know, we are very disciplined on cost. Importantly, in this higher interest environment, cash is super king, and we are delivering a strong cash performance, which, combined with our strong balance sheet enables us to invest in growth and accelerate performance. That's the firepower we have moving forward. And last, but not least, we are laser-focused inside the company to execute the AAA strategy we presented to all of you a few months ago to unlock the significant value growth opportunities ahead. While I'm pleased about the 2023 performance, I'm super excited about '24 and beyond. I'd like to start our call today answering some of the most frequent questions that Denis and I get in our meetings because I thought it will give you some color on how we think about the big things when it comes to Intertek. The first question we get is, do you see any sign that the inflationary pressure is easing? And how is your pricing approach working? Well, it's good news. The inflationary pressure peaked in Q2 in North America and Europe. And indeed, we are seeing a gradual reduction of the cost increase in our P&L. We continue, of course, to implement our pricing policy, and you know that well, we are absorbing 50% of the wage increase through productivity, and we are passing 50% through the price increases. In July to October period, 2/3 of our revenue growth was driven by volume and 1/3 by pricing. The second important question we get is, how is your China business doing? Following a like-for-like revenue growth of 7.1% in H1, our China business delivered a low single-digit like-for-like revenue growth in the last 4 months. And this slight slowdown in revenue momentum in like-for-like revenue growth is driven essentially by 2 factors: first, we have a baseline effect. You would remember that past the serious lockdown that we faced in Q2 last year, we benefit from a rebound of activities in the summer, particularly in the Consumer Products division. And second, I'll come back to that later. Retailers in North America and Europe are concerned about demand and are not investing as they have invested in the past in new product developments to control cost and reduce inventory. Now if you step back from these short-term trends, right, let's recap what the data is telling us, i.e., where is the Chinese export business really compared to 2019. And as you would remember, the Chinese economy didn't see a big impact from COVID in 2020, and benefited from a significant increase in Consumer Products demand in 2021 and the first half of 2022. While the data shows indeed that the Chinese export is down 11% year-on-year in Q3, the Chinese export is up 32% compared to 2019. China has increased its share of global export since 2019. Now we are very passionate about China. We have a very strong business and our consumer business is very resilient. And we did outperform the overall export sector in July, October period because despite the number I just quoted, we delivered a low single-digit like-for-like revenue growth. Moving forward, we remain super confident about the growth opportunities in China, as I explained at the Capital Markets event, China has got 1 big USP in the world of manufacturing. It's manufacturing excellence and 24/7 high-quality service. This is something that they offer to all Western brands, existing and new, and this is a big growth opportunities going forward. And of course, let's not forget the untapped opportunities in the domestic market. So the third question that we get most of the time is when do you expect the destocking of retailers to end? Now what is the data telling us? The level of inventory remains higher than normal within the North American and European fashion retailers indeed, while the general retailers are back on track. And I meet our customers on a regular basis, as you know. And at the moment, most of the retailers that I meet are concerned about a slowdown of demand in discretionary category. That's where the concern is. We will continue to monitor the situation a quarter at a time. We are now starting in our business the testing for the spring season, which honestly speaking, we expect to be a mix. What do we see and what we expect? Essentially, the brands have got a good value proposition -- price that people are ready to pay for the quality they get. These brands will continue to benefit from a higher demand, and we'll continue to invest in new product development. We are seeing it today, and we expect it to continue. The premium brands that have some value issues in the market will have to keep the investment in new products on the review for a little while. But how long could they do that? Well, that's the next point I want to address. What does it mean moving forward? If you look at the last few years, several brands took significant price increases in '21, '22 and '23. And sometimes, this price increase were ahead of the inflationary cost in their -- in the inflation basket. And these brands now are seeing some issues in terms of volume performance. Now we know that once a big company has increased prices, it's very difficult to reduce prices because you cannot change your economics by reducing prices. What you need to do is you need to increase the value proposition in your business to regain market share. And this is why we believe, and certainly I believe, that these brands will have to invest in innovation to increase the value proposition, which obviously will be very beneficiary for on consumer testing business. So net-net, while we recognize a slowdown in new product development by retailers, I really believe that this is temporary. The fourth question that I typically get with Denis, given the fact that your like-for-like revenue growth pre-COVID like your peers was around 3%. What makes you confident that you will deliver mid-single-digit like-for-like revenue growth moving forward? Well, there are 3 reasons for -- or high level of confidence in mid-single-digit like-for-like revenue growth moving forward: first, our industry always had and has some very strong structural growth drivers that are now going away, and let's not forget, intrinsic defensive characteristics. Our solutions are mission critical for corporations to operate safely and regulatory requirements will continue to increase step by step. Second important reason in a world where real-time information is available to all consumers on social media, stakeholder expectations in quality, safety and sustainabilities are getting higher every day. We just need to look what's happening in the news also for media. And we've done some research over the last few years, and we believe that the attractive structural growth drivers that we all know very well in our industry will be augmented by 5 accelerators: first, you should expect increased investments in safer supply from companies because companies have learned during COVID that they have to make their business more resilient. The supply chain breakdowns cost a lot of money to everyone. Second, the increase in investment in innovations that I just talked about will happen and will make their business stronger. We'll know that sustainability is the movement of our time, and there will be increased investments in sustainability assurance, including, of course, ESG reporting. What's happening in the World of Energy is significant. I'll come back to that later. The increased investments in renewables to get net zero are the only solutions to get there. And last but not least, consumers today want more choice. It doesn't matter if they are here in the U.K. or in North America or Asia or Africa or Australia. And we're seeing an increase of new brands, which means new clients for Intertek. The third important reason for our confidence in mid-single-digit like-for-like revenue growth going forward is our portfolio. We've explained in the Capital Markets event, our portfolio is poised for faster growth at the global and local level. Pre-COVID, we had some global business lines facing headwinds. Now all of our business lines are going to benefit from structural growth drivers. And then we've done a lot of work at the local level on our portfolio. And you'll recall what I said during the Capital Markets event, 55% of our local business is exposed to faster growth. The fifth question before we talk about the trading data is, how is the M&A market today? And are you seeing more or less opportunities? Well, the reality is the M&A market has been more active in the last 12 to 18 months, but it's not to the level we saw pre-COVID. We've made, as you know, a few bolt-on acquisitions, and we remain and will always be very selective when it comes to M&A. Our view is that we'll have to wait for lower cost of borrowing before we see a higher level of M&A activities. But based on the trend we're seeing, that will happen over time. So now that we've covered what we believe are the 5 most topical themes that are in the market at the moment, let's talk about our trading performance. In the last 4 months, the group have delivered 5.2% like-for-like revenue growth at constant currency, and this was in line with our guidance and expectations. Our Consumer Products division delivered like-for-like revenue growth of 1%. We saw a very, very commendable performance in Electrical & Connected World with high single-digit like-for-like revenue growth. There is real, real momentum there. This is all about the electrification of the society and I'm really, really proud about what's happening globally with our electrical business. However, that was offset by low single-digit negative like-for-like performance in Softlines and Hardlines for the reason I just talked about, i.e., some of our clients are reducing investment in new products, and we continue to see double-digit like-for-like negative performance in GTS. As you know, we exited contracts, which were launched last year, and it takes time to basically get this off the base. Moving to Corporate Assurance. I'm really pleased with the performance. The like-for-like revenue growth was 6.6% at constant currency. High single-digit like-for-like revenue growth in Business Assurance. And negative mid-single-digit performance within Assuris. Assuris, as you know, is a very small business in the scheme of things. It's very consolidative, and we had some exceptional strong projects last year, and we are cycling against very strong comparative, but I'm not worried about the intrinsic demand for Assuris. Our Health and Safety division delivered like-for-like revenue growth of 6.5% and that was driven by mid-single-digit like-for-like performance in Food, Chemicals & Pharma and AgriWorld, really, very strong performance across the board. Our Industry & Infrastructure division delivered like-for-like revenue growth of 5.7% constant currency. We saw double-digit like-for-like performance in Minerals and Industry, and B&C delivered a low single-digit like-for-like performance. Some of you might recall, we had a really strong summer last year in North America with B&C. So there is a bit of a baseline effect here. Our World of Energy division delivered like-for-like revenue growth of 8.7% at constant currency. We saw double-digit like-for-like performance within Caleb Brett and CEA and low single-digit like-for-like performance within our TT business. So now if we look at the performance at the group level on a year-to-date basis, revenue for the 10 months is about GBP 2.8 billion, 7.3% up year-on-year at constant and 5.1% up at actual rate. Like-for-like revenue growth for the first 10 months is broad-based at 6.3%. And as I said earlier, we're benefiting from both volume and pricing. Acquisitions have contributed to GBP 26 million of additional revenue on a year-to-date basis. I have to say that the SAI, JLA and CEA acquisition we made in '21 and '22 to scale up our portfolio in attractive growth and margin sectors are performing very well. And the integration of the recent acquisition we made, Controle Analtico and PlayerLync are also on track. In terms of year-to-date margin, our margin progression is in line with our expectations. As I said earlier, we are benefiting from our pricing initiatives, good operating leverage linked to faster growth and disciplined cost control. We've delivered a strong free cash flow, enabling us to operate with a very strong balance sheet. We continue to invest in organic and inorganic opportunities. So let's discuss our guidance for the full year, which as you know, is unchanged. I'm going to go rapidly quickly through that. We continue to expect to deliver mid-single-digit like-for-like revenue growth at the group level at constant currency, low single-digit like-for-like in Consumer Products, high single-digit like-for-like in Corporate Assurance, Industry & Infrastructure and World of Energy and mid-single digit in Health and Safety. We continue to expect to deliver margin progression and strong free cash flow. Our net finance cost guidance is unchanged in the range of GBP 40 million to GBP 42 million. Our guidance in terms of tax is slightly better than previously guided between 25% and 26%. Our minority interest guidance is unchanged between GBP 22 million and GBP 23 million. Our CapEx guidance is also unchanged in the range of GBP 115 million to GBP 125 million. Currency, however, I want to make a few points here, have remained very volatile, as you know, and we're updating our currency guidance. The average Sterling rate since the beginning of the year applied to the full year results of 2022 would reduce our revenue by 300 bps and our earnings by 500 bps. And lastly, our financial net debt guidance, excluding future change in ForEx and M&A is also unchanged between GBP 630 million and GBP 680 million. Before we address your questions, I would just like to make a few remarks on strategy, if you allow me to. Our good-to-great journey continues, and all of us at Intertek are super energized about the significant value growth opportunity beyond 2023. If you have time, go through social media and you will sense and feel the energy in all parts of our business. With our You'll be Amazed campaign, which is basically dramatizing our competitive advantage to our clients, existing and future clients to basically accelerate growth. We are laser-focused internally in terms of execution and everything is in place to execute the strategy we talked about in London a few months ago. The important point is that our clients understand the need to increase the investment in risk-based quality assurance because they have to operate with high-quality, higher safety and higher sustainability standards. This is the only way they will make the business stronger, gain market share and deliver value. That's why we are experiencing a faster growth for ATIC solutions, and we expect that to continue. Geographically, as we talked about, the business is extremely well diversified from an earnings standpoint, and we have the right exposure to the right growth opportunities in the global economy. When it comes to our targets in the medium to long term, let me remind our targets. We are targeting mid-single-digit like-for-like revenue growth at constant currency with the following guidance by division, low to mid-single digit in Consumer Products, high single to double-digit in Corporate Assurance, mid- to high single digit in Health and Safety, mid- to high single digit in Industry & Infrastructure and low to mid-single digit in the World of Energy. Let's talk about margin. Margin accretive revenue growth is central to the way we deliver value. You've seen it in the pre-COVID-19 period. We've increased our margin significantly, and you've seen it in our recent announcement where we are outperforming the industry. I'm talking about H1. Our target is that over time, we will return to a peak margin of 17.5% and then go beyond from there. We can see the path, and we'll get there step by step. That's what the Intertek leadership team is committed to and it's what we're working on, starting with '23 making progress on margin. To continue to deliver sustainable growth and value for our shareholders will be very focused on what we call our virtuous economics. And the virtuous economics is simply the compounding effect year-after-year of mid-single-digit like-for-like revenue growth, margin accretion, strong free cash flow and, importantly, disciplined capital investments in high-growth and high-margin sector to accelerate growth in the right margin segments. Last but not least, let's talk about capital allocation. We believe in the value of accretive disciplined capital allocations. If we invest capital, it's going to make a difference in terms of return on investment over time. So we pursue the following priorities: first, we support organic growth through capital expenditures and investment in working capital, as you would expect. Second, we deliver sustainable returns to our shareholders with the payment of progressive dividends. And we target, as you know, a payout ratio of circa 50%. Third, we pursue M&A activities that strengthen our portfolio in attractive growth and margin areas provide, of course, we can deliver good return on investment. And fourth, we try to maintain an efficient balance sheet with the flexibility to invest in growth, targeting 1.3 to 1.8 net debt-to-EBITDA range. So let me summarize the highlights of our trading statements today before we take your questions. First, the demand for solutions is robust and we are delivering the best like-for-like revenue growth in the last 10 years. We are converting our robust revenue growth into healthy margin progression and strong cash performance. We are on track to deliver our 2023 targets and we are laser focused to implement our strategy, which we presented to you a few months ago to unlock the significant value growth opportunity ahead. Thank you very much for your time, and we'll now take any questions you might have.

[Operator Instructions] We'll now take our first question from Harry Martin at Bernstein.

I'll ask some questions. But first of all, I wondered if you could give a little bit more perspective on performance by region. And thanks to the China update. But in the first half, APAC was almost 10% growth and driving a lot of that growth. So has there been any change around in that part of the growth in the second half of the year? A second one on the return to the 17.5% margin, do we realistically need a reversal of some of the currency moves in the last year to get there? Or is there still a good runway even if the currencies stay where they are today? And then a final one on the Consumer Products, you kind of outlined the -- that there's another period of waiting for the volumes to return in Softlines and Hardlines. I understand that you have been disciplined within that market, but I wondered if you could comment on the discipline among competitors on pricing and chasing volumes as the recovery takes a little bit longer than expected?

Yes. Thanks, Harry. Look, we didn't give the regional performance in our trading statement. We'll do that at the half year and full year results. So we'll do that in March for '23. The reality is that our performance from a regional standpoint is very, very broad-based. We really pleased with APAC including or excluding China. Europe, Middle East, Africa is having a really very, very good momentum, and it's the same in North America and LatAm. So there is nothing really to worry there. It's broad-based. I mean that's the beauty of our earnings model. We are diversified from an industry standpoint. We are diversified from a solution to ATIC and we have diversified from a regional standpoint. So there is nothing to worry about, and you will see the numbers when we announce our full year results in March. Look, I think your question on the margin is important, Harry, because we -- you were not there at the time, but if you talk to colleagues, we are there -- I mean when we achieved our 17.5%, the view was that, that's it, right? These guys are not going to go beyond 17.5%. And we always believed in a different path moving ahead. Of course, COVID stopped the margin progression. And we had the opportunity then to go beyond 17.5%, and we have the opportunity today to go to 17.5% and beyond no matter what happened to currency. The margin opportunity for us is, of course, very complex from the outside to truly comprehend, but when you run the company, you start at the local site level, right? And there is no site out there in the world of Intertek that cannot do a better job in terms of economics, right? And I always use the example of a law firm, right? If you're a law firm in New York City and you got 100 high-quality lawyers and you only do rental contracts for 1 bedroom apartment that students or youngsters basically hire, you're going to make x margin. If you basically do M&A and bigger transactions, you're going to be much more profitable. And that's 1 thing that we believe in, we have the opportunity in every single site to make sure that the way we allocate our variable time, engineers, scientists, PhDs, can be beneficial at the volume price/mix level. And that's where it starts, Harry, right? And of course, it's not only that. It's also the volume growth versus the fixed cost management. It's also pricing, but there is a significant mix opportunity. And then if you go above the local site, Harry, you've got the span of performance, which is take electrical in North America, we have 15 sites and our best sites will have a very, very strong margin. But the worst sites will have a margin achieved very, very, very low compared to that. It's normal, right? It's called operational delivery and variability in terms of excellence based on skills and process discipline. And we have a process in place that we basically call best-in-class, where we basically help our colleagues to basically measure themselves not against budget of last year best-in-class. And then finally, of course, it's about how we allocate capital and the decision that we make in terms of growth moving forward. So look, there is plenty to go for, of course, our extra currency swing also. But the past to 17.5% and beyond is not dependent on currencies. And as you know, we don't run the company for translation. We run on constant currency. Then in terms of Consumer Products, Softlines and Hardlines. Look, I typically don't talk about what my competitors do from a pricing standpoint in the local market. We are the market leader in Hardlines and Softlines. We are the best in terms of quality. We are very confident in our own business, and we don't compromise on price. And if our competitors want to undermine the future ability to grow margin and become a bit of a community, let them do so. But we are very, very disciplined. We are the best in terms of quality and there is a pricing power that we want to maintain. So I'm not saying there is none of this, Harry, right? But I would rather not talk about it because that's a responsibility if they want to damage the earnings model, right?

And we will now take our next question from [ Himanshu ] at Bank of America.

[ Himanshu ] from Bank of America. I just wanted to ask about the exit rates. It sounds like as the 4 months period progressed July to October, the exit rates might have improved because we're expecting a slightly weaker number on the organic growth in Q3. And also if I am doing my math right, based on the 6% consensus for full year and year-to-date 6.3%, I think, it implies around 5% organic growth for the last 2 months, which should also benefit from the easy comps because the previous year was only 3.6%?

Yes. Look, I think nothing escapes you in this exit rate analysis. So you're right. We had a weak November, December last year given what happened to COVID in China. I'm not worried about revenue momentum, as I said during my remarks. July-October is a long period, right? It's 4 months. I can tell you that the month of October was quite good. So we are pleased about that. So we are getting into the final quarter with confidence, and I'm not worried about revenue momentum. And as you know, for us to go back to the previous point, revenue is volume price mix, right? We don't chase volume at the expense of price, right?

And we'll now take our next question from of Will Kirkness at Societe Generale.

Just 2 questions, please. Firstly, just on margin progression. Obviously, you've had FX go against you, mix has been unhelpful within divisions thinking about products. So I just wonder if you could talk a bit about -- a bit more or quantify any of the improvements you've seen from the initiatives discussed at the CMD perhaps because obviously, some things have gone forward, you've gone in the right direction. Linked to that, I guess, I think [ D&A ] was a small tailwind to margins in the first half. I just wonder if you could talk about how that developed in the second half. And then the second question was just a bit on assurance. And whether you could just talk a bit more about the underlying picture there? So obviously, the slight slowing is that related to comps? Is it a fact that you can't just grow double digit forever? Or are you seeing clients hold back spend a little bit on some assurance projects?

Yes. I mean, look, it's a trading statement, right? So I try to be as helpful as I can in terms of guidance and what we are seeing in terms of the key lines in our P&L. I mean, I cannot give you a detailed breakdown of the margin at this stage. Of course, I have it. But this is not what the trading statement is all about. I mean you saw the H1 results. And I think it's a good proxy for what could happen for the full year. I mean there's no question that you talk about ForEx, which is obvious in terms of dilution at the actual level from a mix standpoint, yes, our concern, understandably so is Consumer Products because until you see a revenue growth that is ahead of your cost growth, you have a bit of margin pressure. And look, we've had such a great ride with Consumer Products over the years, you cannot have it all. And sometimes you have to accept that there will be some change in the market and your margin will be adjusted. But it doesn't change the fundamentals that we can get margin accretion on Consumer Products moving forward once the top line is more attractive. As I said, to Harry, the drivers of the margin progression putting these 2 topics that are basically negative, right, in terms of offset, the positive points. Look -- and then sometimes it gets overlooked because this industry has not been a very exciting industry in terms of growth pre-COVID. But in a well-controlled business with a significant fixed cost, every 100 bps of revenue acceleration is having a significant impact on the operating leverage provided that you're good at fixed cost management and variable cost management, right? And for us, in our P&L to grow at 3% and deliver margin is one thing, but to grow at what we're doing at the moment and deliver margin it's much easier, right, because you got to operate. So that is a very important fact. We are very focused on the local span of performance, as we talked about side-by-side. And then in terms of costs, we are very disciplined in cost. As you know, we've taken some cost reductions that are going to help us. And I talked about it at the H1, but you remember what we said is the cost initiatives of 2022 and first half of H1 should deliver an annual saving of GBP 19 million, and this year will contribute to GBP 7 million to GBP 8 million. So that's obviously adding to the operating leverage and to the side-by-side performance. And of course, notwithstanding the mix and ForEx effect we just talked about. Look, I'm not saying that's easy because if it was easy, our competitors would do a better job in margin. But we are very, very focused on that, and it's working for us, right? As far as assurance is concerned, look, I get your point. I talked about Assuris. We had a very strong acceleration last year in the second half in Business Assurance. And I know that we talked about double digit. But in that case, last year, it was not 10.1% to 10.5%. It was much more than that, right? So look, the structural drivers for Assurance remain very, very strong, right? The ISO standards continue to be paramount for companies to manage risks. We are seeing a lot of development in Supply Chain Assurance, as we talked about, of course, sustainability is playing a big role. And we also have our People Assurance business. So I recognize the point, but I wouldn't worry about the demand for assurance.

We'll move on to our next question from Rory McKenzie at UBS.

Two questions, please. So firstly, on Consumer Products. I really appreciate your insight on the destocking cycle. Do you think the overall picture is going to stay mixed until the spring season? Should we expect Softlines and Hardlines revenues to remain in low declines until then? Or are you going to challenge your teams to get back to growth by pivoting to serving things like the value segments? And then also, sorry if I missed it, but I wasn't clear why Electrical & Connected World revenues accelerated so much in the 4 months. So more detail there would be great. And then secondly, just following up on the comments on Corporate Assurance. We haven't had visibility over this business for very long externally. So if you just talk about how contracts phasing works here and also talk about any new contract discussions you're having with clients today ahead of CSRD kicking in next year?

Okay. Sure. Look, on the Consumer Products question, Softlines and Hardlines, maybe I miss-explained that. We are the market leader globally in Softlines and Hardlines. So in our portfolio, we work with luxury brands, premium brands and value brands. So when I say I expect the spring season, which we're starting to test now, to be mixed because I'm seeing, of course, certain type of brands investing in new product and seizing the momentum. I mean, it's very difficult for me to talk about these companies, but I just take a very well-known example here in our home market. I mean, the M&S turnaround that we all have applauded is pitch-perfect on many, many, many areas, but they also get the value proposition right, right? And there are many examples like this around the world where these retailers get the very proposition right and are seeing growth and investing. So of course, we are working with value brands. And when it comes to how we manage our teams, what's really important is that we keep or improve market share within every single brand we have a nomination with. That's the priority. Of course, that we get our price increases as we should. And then, of course, lastly, that we upsell and drive obviously, the acquisition of new contracts. So that's the way the sales teams operate inside Intertek. And when I said we're going to take it a quarter at a time is because until I see a challenge of trend, I don't want to call it, right? It would be silly to say I think the industry is turning around. I think we'll wait until we see it because there are lots of moving parts. But my view, it's temporary. And certainly, the brands that are not investing in innovation, will have to invest innovation because they will lose market share and they will lose value, right? As far as electrical is concerned, look, this is a business that we don't talk a lot because we typically talk about Softlines and Hardlines. And you saw the presentation from Sunny at the Capital Markets event. Essentially, we are the market leader in electrical total quality assurance outside the United States. We are #2 in the United States. Where is the growth coming from? Number one, SKUs continue to increase. So we have not seen a reduction of new product development within the electrical world because there are essential SKUs or prices at home, there is a huge replacement of what you try to move from, let's just say, lights that are basically not LED to LED, and energy efficiency measurement in terms of appliances. We all know that. So the product side of electrical is very, very positive, and it's about testing and certification, SKUs, a number of tests we do SKUs. We also are investing in new segments. So we are really very, very strong in medical devices. I talked about some of our center of excellence there. We have a center of excellence in Boxborough, on the East Coast of the U.S., and this is a very, very, very positive segment in the U.S., in Europe and also in Asia. There is no question that when it comes to air conditioning and air quality, there is a lot of investment there, regulation is also helping. And last but not least, and I'm keeping the biggest opportunity for the last point in your question is what I call energy storage, right? If you think about the electrification of society, the higher mix of renewable is going to make the grid management, doesn't matter if it's London or New York or Frankfurt, very, very complicated, right? And energy storage has to play a big role. So we are seeing significant development in energy storage capacity within operations of factories. We are seeing a significant development of energy storage units at home. I mean you've seen what Tesla has done. And essentially what it's all about, right? It's testing small, medium and very large batteries. And it's public information. We just opened a center of excellence in Southern Italy, near Venice and we had a customer event. And I can tell you that our order book is full for quite a long period, right? Because every single company that has to invest in energy storage need independent testing because battery technology is a very impressive technology, but it's not always very, very safe. So more to come on electrical, and we are investing in the right segments. As far as assurance is concerned. Look, the beauty of our assurance is that typically, the ISO contracts or the audit contracts are for a 3-year period. So you've got a very good visibility on where your clients want you to do the work. And the opportunity is not only ISO, but ISO is growing, right? It's a very important part of our business. The standards at ISO obviously, as a company to certify against are very, really important. But companies are investing in supply chain assurance, which is essentially the end-to-end risk assessment with better data and independently verified data on what's happening in your supply chain. And you heard me talk about at prior call, InLight, which is a SaaS model that basically map out end-to-end Tier 1, 2, Tier 3 supplier data and the risk inside your supply chain. And this is one of the hottest progress that we have at the moment, really, really good. When it comes to CSRD and the independent audit of nonfinancial metrics, look, companies have to get ready. I mean, CSRD is happening in 2025, companies in Europe have to report on the nonfinancial metrics, and these will have to be independently auditors. And we are right in the sum of it. As you know, I chair the working group at the industry level for that, and I'm very, very involved in discussion with the parliament in Brussels. And we are seeing essentially 3 opportunities, right? One is training, believe it or not, CSRD is not going to be a walk in the park. I mean if you have the time, I can send you the file, I've got the FRAC standards. It's quite a long list of standard the company are going to have to comply with. So we need to train our clients. Then they need to start doing some benchmarking. Where are they? And of course, they need to do the independent certification. So this is happening, but just not only in Europe, right? The U.S. is working on similar approach. In our market in the U.K. will come to grip with the approach at one point of time. We are seeing some similar development in India, in Hong Kong, in Singapore. I mean I was in Australia the other day, and I was talking to our teams. And while the regulator in Australia is still deciding which -- where they will go because everybody wants companies to report on nonfinancial metrics to make sure that sustainability is for real, right? So the opportunities are very, very, very significant here.

We'll now take our next question from [ Carl Waynes ] at Berenberg.

Just a couple from me, please. The first, just digging into a couple of seconds in a bit more detail. On Food, you reported through testing, you reported a mid-single-digit growth. I was wondering if you could give us any further color by region? If there's sort of some stronger, some weaker areas? And the second is obviously, World of Energy, you reported a good quarter. Clearly, Caleb Brett has suffered with its margin. It seems to be the main problem there. So I mean with growth being so high in Caleb Brett, could margin progress more quickly than perhaps you expected initially? And furthermore, clearly, Minerals is another area where growth is happening quite strongly. So is that benefiting from scale and volume? I'll leave it there.

Yes. Thanks. Everything as well. Thank you. So as you know, in the Food business, we are not a very big global player, right? We tend to focus on niche segments, which are high-value, high growth, high margin, where we are #1 in the local market, right? So yes, I mean the -- you're right, the 5.6% was lower than what we had in H1. We had a really good second half last year, right? Our like-for-like in July, October last year was 7.1%. So look, sometimes you have to look at 2-year like-for-like to get a sense of the real trend. So there is nothing really to worry about here. Our business in Germany where we are very strong in honey testing is doing very, very well. We are very strong in the U.S. in vitamin testing, is doing very well. We've got a good business also in India. And so look, there is nothing to worry about. As far as the World of Energy and Caleb Brett, look, you're right. I mean there is some catch-up to do on margin with Caleb Brett, and the team is on it. So we are seeing some good margin progression there, and we're not going to stop there, right? There is lots of opportunities. We talk about as we test greener fuels with a higher percentage in our mix. This is also going to be beneficial to our margin because it's high-value testing, right? And Minerals, look, it's like Food, right? We are not everywhere. We are in the markets that, from our perspective, provide the best growth and margin opportunities. And -- there is no question that we are having a gangbuster year after a very strong year last year. You might have seen some of the marketing around center of excellence in Perth. If you're not, I'll suggest you look into it, I was there a few weeks ago, and this is really the center of excellence in the minerals industry in Australia and doing extremely well, and it's both volume price and mix. And we've not talked too much about it, but something that we'll talk moving forward. There is also a shift in the mix in minerals to green minerals, essentially minerals that I use for battery. And we all know, we just talked about the importance of battery technology, energy storage. This is a very attractive market, too.

[Operator Instructions] We'll now move on to our next question from Suhasini at Goldman Sachs.

Great. I have 2 questions, please. Is it possible to talk about price versus volume mix for this quarter? I appreciate it was probably 1/3, 2/3 previously, but that was off maybe a 7-ish number. So has the mix changed in favor of pricing as a result at this point in time? And the second one is on the Corporate Assurance business, please. The drag effect from Assuris, is that something that was just for third quarter? Should we expect a drag effect to continue into the next few quarters?