Bureau Veritas S.A.

Didier Michaud-Daniel - CEO Nicolas Tissot - EVP and CFO Philippe Donche-Gay - Group International Operations & Support Marine & Offshore

Toby Reeks - Morgan Stanley Paul Sullivan - Barclays Capital Josh Puddle - Berenberg Bank Robert Plant - JP Morgan Cazenove Tom Sykes - Deutsche Bank George Gregory - Exane BNP Paribas Rajesh Kumar - HSBC Aymeric Poulain - Kepler Cheuvreux Emira Sagaama - Oddo Securities

Thank you. Good morning, good afternoon, and good evening to everyone.

Thank you for joining Bureau Veritas H1 2017 Results Call. Nicolas is as usual, with me, Nicolas.

I also have Philippe Donche-Gay, who is driving the implementation of BV’s transformation plan, to join us today. Welcome, Philippe.

Let’s start with the highlights for the semester. Revenue for the half year was €2.36 billion, up 6.2% versus H1 2016.

We confirmed our return to organic growth of 1.3%. All businesses, apart from Marine & Offshore, are on improving trends versus full year 2016.

This growth is supported by our five initiatives, which have accelerated to 7.1% growth in H1. Our adjusted operating margin stands at 15.2%.

The impact from cyclical markets, notably Marine, was partly mitigated by operational excellence at BV. We continue to adapt our cost base in markets where there is a down-cycle.

And in addition, we made structural efforts to improve our margin. This led us to book a restructuring charge of €31.4 million in H1 2017.

Our underlying free cash flow improved year-on-year, and our outlook for the year is confirmed. Our five initiatives accelerated at plus 7.1% growth in H1 2017 to compare to 4.9% in 2016.

Key performers were automotive, up 26.7%; SmartWorld, up 12.9%; and OPEX, up 7.1%. On the M&A front, we have closed 4 strategic acquisitions in the first half, supporting the Building & Infrastructure, Agri-Food, SmartWorld growth initiatives.

They represent around €100 million of annualized revenue. Now Nicolas is going to walk you through the financial review.

Nicolas?

Thank you, Didier. Hello, everybody.

Starting with the revenue bridge, the group’s half year 2017 revenue came in at €2.36 billion, up 6.2% versus H1 2016. In H1, organic revenue growth is confirmed at 1.3%.

Acquisitions contributed 3.3% to group growth. ForEx had a 1.6% positive impact.

This is mainly driven by the acquisition of the USD and emerging countries’ currencies against the euro, in particular, the Brazilian real, although it has eased in Q2 and more than offset the impact of the British pound depreciation. In Q2, our organic revenue growth was 0.8%.

Adjusted for estimated calendar effect, the positive growth trend was similar in Q2 compared to Q1 despite the Marine shortfall, which impacted the group’s organic growth by 1.2 points. Looking at growth by business.

Four out of six businesses are growing organically, and all of our businesses are on improving trends, with the exception of Marine & Offshore. This performance is driven by good commercial wins spurred by our growth initiatives and stabilizing Oil & Gas CapEx as well as upstream Metals & Minerals.

By business lines, the best organic growth performers are Certification, up 6.1%; Consumer Products, up 5.2%; and Building & Infrastructure, up 4%. Industry, our largest business, is now close to stability with minus 0.4% in Q2, as adverse conditions in the oil and gas market are compensated by end market diversification.

Only Marine & Offshore is under pressure, being down 7.5% year-on-year as expected, driven by the slump in new orders experienced in past quarters and challenging comps. Growth initiatives contributed €45.9 million to organic revenue in H1 and more than offset the negative impact from activities in down-cycle, mainly Marine & Offshore and Oil & Gas CapEx.

Reviewing other key financial metrics, we see that our adjusted operating profit is up 2.5% at €359.4 million. Our margin of 15.2% stands at the high level, flat organically if we treat out the negative impact of Marine & Offshore and Industry.

These two combined have a negative impact of 50 basis points. As you see, adjusted net profit and adjusted EPS are broadly favorable at constant currency compared to last year.

I’ll go further into cash flow and debt later on. Adjusted operating margin reflects a 10 bps negative ForEx impact, a neutral impact of acquisitions, with margins in line with the group’s average.

The whole of the negative 50 bps organic impact is linked to Marine & Offshore and Industry, with minus 30 bps coming from Marine & Offshore due to lower volume of activity, notably for certification of equipment and offshore services; minus 20 bps resulting from price pressure and change of mix in Industry. Therefore, our organic margin is flat, excluding Marine & Offshore and Industry.

Details on the operating margin by business would be covered in the business review. Addressing the nonrecurring items.

The point to highlight is the level of restructuring of €31.4 million in H1, with further restructuring in Oil & Gas and Metals & Minerals; the launch of significant restructuring plan in government services; lastly, efficiency action aimed at improving margin. This restructuring is expected to protect our margin as early as H2 2017 onwards.

Our half year operating profit is €286.2 million. And our net financial expenses.

We have, first, an increase of financial charges due to the increase of our average net debt and the remaining impact of the anticipated refinancing of May 2017 bond at very attractive conditions. This is partly offset by lower cost of debt, which is down from 3.6% to 3.2%, thanks to active liability management.

It will fully benefit to the H2 2017 financial expenses. Secondly, a €10.9 million ForEx loss due to the impact of currency fluctuations on accounts receivables and payables due primarily to significant depreciation of currencies in some emerging countries and the decrease of USD against several currencies.

On the tax rate, you see that the adjusted effective tax rate of the group came in at 33.9%, down 0.7 points compared to H1 2016. This is mainly resulting from the positive impact of utilizing losses carried forward, essentially in Australia.

For the full year 2017, we expect our adjusted ETR to be in the 34% to 35% range. Finishing with the P&L, adjusted attributable net profit totaled €187.6 million, broadly stable at constant currency.

Moving to cash flow. There are several elements to mention.

The decrease in free cash flow is mainly driven by the evolution of profit before income tax. The working capital change is similar compared to last year despite the revenue increase.

As a result, operating cash flow is at €149.9 million. Net CapEx stands at €58.2 million and interest paid at €63.3 million.

Importantly, our €28.4 million free cash flow includes significant one-off outflows for a total of €46.1 million, with restructuring cash out of €28.2 million versus €9.1 million in H1 2016, one-off tax items of €17.9 million versus 0 in H1 2016. Therefore, adjusted from these one-off items, free cash flow improved by €21.7 million in H1 2017.

On our financial structure, the adjusted net debt stands at €2.27 billion, a €274 million increase from December 2016. This reflects €76.7 million in acquisitions completed in H1 2017 and earn-out from prior acquisitions; €254 million of dividends, which were distributed in H1; EUR 15.6 million on share buybacks to cover the ADAPs of BV managers; and a €41.6 million ForEx positive impact.

The net debt-to-EBITDA ratio stands at 2.51 times, well below our 3.25 times bank covenant. Thank you for your attention.

Didier will now continue with the business review.

Thank you, Nicholas. Turning to the business review.

As anticipated, Marine & Offshore was down 7.5%. On the downside, in Marine & Offshore new construction, the Certification business accelerated the decline.

On the upside, new orders increased to 2.9 million gross tons at the end of June 2017, up from 1.3 million gross tons in the prior year period. The order book has now stabilized at 13.6 million gross tons at the end of the semester.

Margin remains under pressure. We are proactively restructuring to adapt our cost base to the activity.

Looking ahead in 2017, the in-service ship segment is expected to remain resilient. The offshore market remains sensitive to oil price’s fluctuation.

We expect a further decline in new construction as a reflection of the challenging market conditions. Looking further at Marine & Offshore.

We can observe some positive trends in new construction, in particular, dry bulk tankers and LNG carriers. Our fleet in service continues to grow, and thanks to the international trend recovery, there are less and less laid-up ships.

Turning to Agri-Food and Commodities. Revenue increased by 0.8% organically.

This is due to several factors. The Oil & Petrochemicals segment is up by 2.6% organically, with particularly strong expansion in Europe and in China.

The Metals & Minerals segment reported 2.5 organic growth. Overall trade activities are supported by European and Asian operations.

Upstream activities, excluding coal, showed good growth, mostly driven by iron ore and Australia. Agri-Food, which represents 20%, is now stable after a slow start in Latin America.

Government services was down by 5.4%, still impacted by a further decline in the Iraqi VOC program and the end of a PSI contract in Guinea. Margins declined 90 basis points mainly due to the negative consolidation of Schutter.

Outlook 2017, market conditions should continue to progressively improve in 2017. Industry.

Organic growth was down by 1.1% in H1 2017. Oil & Gas CapEx-related activities remained under pressure with the end of large contracts.

It was partly compensated by accelerating growth in Oil & Gas OpEx of 6.4% and favorable trends in other end markets such as Power & Utilities and Transportation. The group registered a high single-digit growth in OpEx-related activities.

In the Automotive sector, the group is currently working on several outsourcing projects, such as the Code’Ngo stories for the French driver’s license. By geography, growth was robust in Brazil, China and the Middle East.

North America was back in positive territory in Q2. For 2017, we still expect organic growth to be slightly negative.

Looking at the OpEx model. It’s clearly about the evolution of the margin through the contract life cycle.

Initially, we invest heavily in mobilizing people on tools, resulting in lower margin. Then we see, into the third year, the margin increasing, and by year 5, in line with BV standards.

For Building & Infrastructure, revenue increased by 4% organically, a 2% growth in the building in-service activity, a stronger organic growth in construction-related activities, led by Asia and Latin America. We are growing, thanks to regional expansion for new construction projects in LatAm and energy and infrastructure project management in China.

In France, where we have seen subdued growth, but we are confident growth will resume in the second half. Margins have improved due to volume and geographical mix.

Looking ahead, our order book points to good growth, with an acceleration in Europe, which remains our largest region. Business is also expected to be positive in the Americas and Asia.

Certification is our top performer this semester, posting a 6.1% organic growth, with good performance across all major services, categories and regions. Our success relies essentially on our broad offering, our capacity to address large contracts with international companies.

This sector allows us to apply our innovation around new services we launched, such as cyber security, data privacy, anti-bribery and business continuity services. In 2017, the Certification business is expected to maintain good growth, thanks to our work on well-established contracts on their revised version.

Consumer Products delivered a robust organic growth of 5.2%, thanks to consistent activity across all major regions, particularly in Asia. E&E is our best-performing activity, driven by Automotive and connected object testing.

Softlines grew above divisional growth rate, while the strong-performing Hardline business more than offset the decline in Toys. Margins were slightly down, a reflection of the change in mix but included was also seasonal FX.

In H1, we completed the acquisition of Siemic, a company specialized in SmartWorld and automotive with presence in China and in the Silicon Valley. In 2017, we expect robust growth.

Now we are going to look at the digital strategy at BV. Philippe Donche-Gay, Senior Executive Vice President, who is driving the implementation of BV transformation plan, is going to take you through our digital strategy implementation.

Philippe?

Thank you, Didier. Digital is, indeed, a main lever for BV to achieve its transformation, and we have maintained a strong focus on it in first half 2017 and launched new offers and tools in numerous builds.

First, we’re trying to capture strong potential for efficiency and productivity gains for our existing services. We’re addressing these through the deployment of remote inspection procedures, leveraging Google Glasses, drones.

We are also deploying a new generation of cloud-based flexible audit and reporting tools, quite convenient and helpful in order to grow food. And then we have also launched two e-commerce platforms for selected B2B mass market segments, notably ISO 9000 and Ballast Water Management Plan review, which are due in September.

We also try to leverage digital to support the growth ambition of our strategic initiatives. For OpEx, a key trend is the 3D modeling of assets to support Asset Integrity Management activities and services.

We have launched, in H1, offers with partners for Marine & Offshore, first, Veristar Asset Integrity with vessel systems; and for Oil & Gas downstream, reality modeling offerings in partnership with the software company, Bentley. In the same field, we continue to deploy worldwide our Building in One platform, which is a register for -- that are related to building and their regulatory constraints.

Talking about data. We are also progressing in Big Data analytics and simulation, notably with the new offer, SafeSupply, that enables to do risk assessment of suppliers in the food market.

Finally, we are addressing the pure digital TIC market, potentially a very large one, which is shaping up. Of course, we do that through the certification of smart and connected devices.

This is a SmartWorld initiative, which is progressing well and was illustrated also by the acquisition of Siemic. But we also address, initially through certification services, the emerging standards and regulations in field, such as cybersecurity or data privacy.

After two years of investigation, raising internal awareness and mobilizing resources, we are definitely entering now a phase of concrete initiatives with positive financial impact.

Thank you, Philippe, for this very interesting update. Our outlook for 2017 is confirmed.

Thanks to diversified portfolio and the ramp-up of our growth initiatives, the group still expects organic revenue growth to be slightly positive, with accelerating growth in the second half, and adjusted operating margin to be maintained at around 16%. The group also expects its cash flow generation to improve compared to 2016.

Thank you very much for your attention. The floor is now open for Q&A.

Could I ask a couple, maybe, of interest, if possible? And the first is on Marine orders.

You saw a pickup -- a very nice pickup from a low level, I would say. And we’ve also seen Clarkson contracting data improving, and your orders normally match that progression.

One is, do you anticipate orders to improve along with Clarkson? And is there any reason why that relationship with Clarkson would change relative to the past?

The second one is around key initiatives. Could you update -- you sort of referenced on the statement your key client -- key accounts which are materializing in significant wins.

And you’ve given us some data around the number of key clients in the past and growth rates you expect from them. Could you update on that and maybe talk about some of those significant wins and whether they are giving you that 2% that you expected from growth?

And then finally, could you talk about the positive financial impact that was just referenced from some of the digital solutions? If there is a positive financial impact, could you talk about -- maybe if you can’t quantify exactly the euro amount in terms of revenue, but could you talk about the margins, investment, the returns you expect from that investment, please?

Okay. Thank you, Toby, for your questions.

I’m going to start with your question about Marine. As you could see, in the first semester, our orders are above last year.

And in fact, at the end of last year, we were at the same point or the same level of orders as we are only at the end of the first semester. Our market share is at the same level, and we expect, of course, this year, a better year than last year because we are already at 2.9 million gross tons at the end of the semester.

Of course, these orders are not going to impact our results positively this year, and it will probably start before midyear next year. On the key -- yes, Toby, go ahead.

Is it fair to say you would be anticipating that order growth rate to accelerate as we get into the second half given what we’re seeing in Clarkson contracting?

We think it might be on the same magnitude for the second half, which is, again, better than last year because this is what we achieved for the full year last year. But we think it would be probably in the same level, more or less.

Okay. On the key initiative, so your question is very good.

So in fact, it’s very interesting to see that we have a very different situation between the key accounts, which are still [indiscernible] and CapEx really key type of account, where we’ve seen a negative organic growth; and what I would call the new key accounts, which are, for instance, the key account that we work with, with our Chinese companies or with the Power & Utilities companies, and these ones are going interest. Your question is good, and we will update you at the end of the year and probably at Investor Days in December -- more in December about this growth rate.

Of course, for the month, it’s quite stable because of the impact of the Oil & Gas companies, which are [indiscernible] our highest key account in term of revenue. On the financials, positive from digital.

Maybe, Philippe, you want to say one word on this one? Probably, the impact on the financials is probably a little bit too early, but we know that we have some opportunities with productivity, in particular.

Yes. As mentioned, we certainly will have impact in helping sustain the margin.

Part of the growth we see today, the strategic initiatives, is already enabled by new digital developments, whether to support the execution of our OpEx contracts or whether it ought to be to support the new projects we have in the food arena, which requires this very flexible generation of reporting and audit tools.

Yes. So if I can complete what Philippe said.

Philippe, we take for example the big contract that we win now in Power & Utilities OpEx. As you could imagine, to achieve the margin in this domain, it’s very important to have scheduling, and then we can do it for digitalization, of course, of our laptops and so on.

So we are working on it. Giving you precise number, it’s a little bit too early.

But at least, what you could see that we can mitigate the issue of price pressure, in particular, Oil & Gas, to achieve our margin of around 16% at the end of the year.

Just firstly for me. I’m just trying to get my head around some of the margin dynamics.

And you’ve got 4 out of the 6 businesses growing organically. You’ve got margin erosion in 4 out of the 6 divisions.

And you’re targeting to turn a 60 bps reduction in the first half to a 20 bps uplift in the second half. So perhaps could you go through the key swing factors there?

Of a divisional [ph] that’s all that we should be looking out for? And just sort of attached to that, restructuring has been running at around €20 million to €40 million a year for the last 5 years.

Clearly, you’ve had lots of cyclical pressure in some parts of your business. When we look at the benefits from restructuring that impacted the first half of this year, could you perhaps quantify those?

And then give us an indication of the benefits from continued restructuring into the second half of this year and into 2018?

Okay, Paul. Thank you very much for your question.

We are going to leer [ph] to move to a better margin in the second part of the year to achieve again around 16% at the end of the year. If we come from three major factors, the first one, the stabilization or return to growth of end markets, notably in the commodity space.

The second one is the positive impact of our efforts on the cost base. You mentioned it, but also in management but of course, the restructuring.

And for instance, we have accelerated at the beginning of the year the restructuring of the Marine division, which makes us optimistic to achieve. Even if it’s a little bit of decline of margin compared to last year, it’s still a good margin in Marine & Offshore division.

And the third point for your question, liberated Consumer Products sustained by growth. We know that we should deliver mid-single-digit growth at the end of the year for the Consumer Products division.

And of course, it is done with a very high margin. Maybe you could complete this answer, Nicolas, with the question from Paul about the restructuring, and the fact that we already made €30 million of restructuring compared to €40 million last year?

Yes. Absolutely.

I would simply say the comment first that when you talk about the last five years, I think you should more talk including this year, about the last three years, because this is the period when we actually proactively manage our cost base in order to adapt to a number of businesses being under pressure, under cyclical pressure, market downturn. So yes, we have to say that we’ve addressed this issue in 2016 included.

We have actually got the benefit, if you look at the level of the margin we delivered in these last few years. Because despite the impact of those down cycle markets, we delivered a very high level of margin, which is probably the best of the industry.

And you’ll find here actually an explanation of this. Of course, we certainly believe that with the additional effort we made during the beginning of this year, we will get the benefit in the second part of the year, which is one of the reasons, as mentioned by Didier, of our confidence for the second part of the year on our full year guidance.

Can I just ask one more? Just in terms of net debt to EBITDA on the balance sheet, it’s 2.5 times.

Do you think that’s the ceiling as to -- or will you be -- are you prepared for that number to grow entirely as you continue to make acquisitions?

Well, as we always said, we remain very comfortable with those levels, which are well within our bank covenant of 3.25 times. And we know that in case we were to compensate a very significant acquisition, we might go beyond those levels but rely on the very strong cash flow generation of the company to deliver it very fast.

And while we [indiscernible] last year on the same period. We know that we have distributed EBITDA at the end of the first semester, which has an impact.

But again, we feel comfortable with this type of leverage on.

And we are indeed 10 basis points above the level of last year, so very similar.

Three questions, please. Firstly, on consumer.

You did just over 6% organic growth in Q2. Am I right that number was negatively affected by fewer working days?

And if so, can you give us the number on an adjusted basis. Secondly, I wondered if you could give any comments around pricing in the consumer division, and perhaps give us the margin performance if you exclude mix?

And then the final question on restructuring charges. Can you say what you’re expecting for H2, please?

Okay. So I’m going to start with your first question, which is a very good one.

We achieved quite a good organic growth in Q2, even if we had 2 days less than last year, you may recall in China. So, of course, it impacted our organic growth a little bit this year, this quarter, sorry.

Regarding the pricing pressure, there is always pricing pressure, sorry. Sorry, Josh, do you want to go, add anything?

Yes. I was going to say, would you be able to quantify what the impact of the few days in China was?

It’s probably not as meaningful as it is for the entire business. I’m thinking about in particular, our inspection in-service and construction.

It has a little bit of impact but not as big. What is more, the impact is more the mix of businesses that you talked about.

As you know, all our businesses are doing very well, Softlines, Hardlines and what we call now SmartWorld. Even SmartWorld is now double digit.

The one which is still suffering is Toys business. And as you know, in our mix, we still have quite a large revenue with Toys.

And give me the opportunity to tell you that, in fact, as you may know, I’m sure you do, the Toys business is delivering quite a high margin. And we are, we are to the margin which is quite similar to last year, very close to, with the Toys business moving down and the SmartWorld business moving up.

Meaning, that we’re doing a very good job in optimizing the margin, thanks to the lean management in permutation and the volume in the SmartWorld. So it’s the reason why we believe that the margin at the end of the year would be at a similar level last year for the Consumer Products division.

On the restructuring aspect, maybe Nicolas has something. Nicolas?

Yes, I think regarding restructuring in H1, the comment is we, it’s at a very high level for half year, and we expect it to be lower during the second part of the year.

You mentioned that in OpEx there’s still price pressure. When do you think that’s going to come to an end, please?

That’s a good question. There is still price pressure, but that’s a very interesting one because clearly, we see an opportunity of consolidation.

Because you have a lot of small suppliers, which are working for oil and gas companies here in OpEx. In CapEx, not the case.

But in OpEx, it is. So thanks to the consolidation, we can mitigate the issue of the price pressure because, of course, we can get more volume, more density, helping us to cover our fixed costs.

We do not see the pressure being relieved before the oil price moves back up probably in the region of $60 or $270 a barrel.

Just following on from that question on pricing, just I wonder if you could talk about the pricing in in-service in Marine. You referenced it in the statement.

Just maybe because there’s not a huge amount of visibility on it. Could you talk about the long-run with trends in pricing and in-service?

And maybe what you see happening in the short term and whether there are major contract renewals or not that lead to any further erosion in that? And then just again following on some specific questions on the debt really is just on the working capital.

Could you just remind us how significant or not the movement from quarterly to monthly -- it’s actually insurance contributions was for you in France last year and whether that particularly affected first half and second half? And then if you could just remind us of the FX split of your debt versus the FX split of your EBITDA or rather just the euro versus non-euro if that’s easier, please?

Okay. Thank you, Tom.

So regarding the pricing for the in-service in the Marine division. There was some erosion in 2015 and in 2016.

It is stabilizing now. In fact, this is a manageable price pressure.

There is nothing to be compared with the type of pressure we got from the Oil & Gas business. But of course, we have decided and we are working on digitalizing the service in Marine, and we say that the division is the most advanced within Bureau Veritas.

And we are working on margin protection. The good news is as you know, we have more ships in service.

And when you have more volume, of course, it’s helping you also to manage your margin. On the debt, Nicolas, that was the question on the working capital, sorry.

Yes, so first maybe on the working capital. We estimate we can share with you is that basically you have one third of the working capital outflow in H1 2016, corresponding to working capital change in France.

And talking about our balance, it’s coming out of -- it’s mainly in euro, more than €2,000, as it was always [indiscernible] for a long time. And we have a little bit less than 30% of the balance in USD and the rest is not material.

And this is slightly less than the proportion of EBITDA that is generated in USD in the company at the higher level.

Okay. And just coming back to your comments on pricing in in-service.

When you look at the pricing relative to orders versus order, when have you historically seen the greatest amount of pricing pressure in in-service? Would you have expected to have already seen it by now?

Or have you historically seen it with some degree of lag as orders come down, please?

Well, we say that again because the orders came down last year, there was some erosion, in particular last year and the year before. But we could clearly mitigate this erosion, thanks to a very good job done by the management division, implementing digital tools.

This year, I do not see the -- I would say, it’s stable. The pressure is not higher than this year.

It’s not lower. It’s at a similar -- it’s similar and also meaning that we have stabilized the pricing in the in-service business in the Marine division today.

Two please for me. Firstly, just going back to the outlook for the Marine industry.

You’ve talked I think in your section about positive trends across bulk, tankers, LNG. Maybe if you could elaborate a bit on that.

Is that a prolonged improvement you see or is that mainly reflecting of the orders you see in the first half? Is that something you expect to continue for the years to come?

And secondly, maybe just thinking about oil and gas. We’d be keen to get your -- some color around the various trends of oil and gas, what you’re seeing upstream, midstream and downstream, please?

Okay, George. Thank you for your questions.

So we’re giving the outlook for the Marine industry. As you could see from the beginning of the year, we clearly improved our [Indiscernible].

Because if you look, for instance, at the bulk market and because you asked about the various ships, for two years, there was no order. So it has restarted a little bit.

And regarding the tankers and the LNG, the demand is stable, which is probably a better news, and we can see the demand being stable for the months to come, which makes us, of course, more optimistic in terms of new construction order trend. Now if you look at the oil and gas, the various trends, clearly, there is no real CapEx which has restarted.

I’m sure you know the oil and gas markets very well. Some companies, oil and gas companies are working on new CapEx, but we have not won any for the moment just because they are still in the bidding process.

So regarding the CapEx, it’s not going to be at the level it were just three years ago, that’s for sure. But we can see some new small CapEx, probably more maintenance CapEx, coming back that might impact if we win some of this contract.

Our reserves not before ‘20 or ‘19, 2020. You asked about the down -- the downstream, we do very well because our organic growth is 5.3% on the oil and petrochemical testing’s regarding trade there.

So it’s quite good. And the last point, which is interesting, is the fact that again, there is some consolidation on the oil and gas OpEx market because there were some small suppliers working for the oil and gas company, and now they prefer to go to framework with big companies, global companies like ours.

This is a trend of the oil and gas market today.

Just looking at the restructuring expenses or -- could you help us understand if your staff are remunerated on margin targets which are free these expenses? Or is it something that is treated at a group center level?

Second is on the Marine order -- new orders, thanks a lot for giving the new order trends. What sort of new order do you need to stabilize the churn or the total decline pace?

And based on the pipeline you are bidding for, when do you hope to get back? And finally, on the digital initiatives, you’ve given quite a lot of color, very helpful.

Do you worry that these digital tools available, some of the local players may start competing at a more international level with you?

I want to start, if I may, Philippe, with the last question, about the digital? And the question is, do we think that an international player could compete on the digital side?

That was your question? Looking [indiscernible] becoming international on the digital staff.

Of course. Yes, the spectrum is quite wide there.

I would say that you would expect some firms already specialized in the digital market like cybersecurity or testing wireless devices like the ones we have acquired like Siemic. So those, of course, those niche players could potentially internationalize, just like we internationalized the service offerings of companies like Siemic.

These are markets, however, where we all know that especially for the inspection work, you need networks of inspectors. If you have labs, you need network of labs.

So internationalization requires creation of such a footprint. And digital is not a magic stick that enables you to avoid us.

So I don’t see a major danger of suddenly a traditional player, even if when enabled by digital tools, to suddenly threaten in a major way the large international tech companies into traditional business [indiscernible].

Thank you, Philippe. So coming back to your question about Marine, clearly to achieve and to get back to a positive organic growth, we need €6 million of ...

[Indiscernible]

[indiscernible] Sorry, sorry. Million gross tons for the year.

So if we get to 6 million gross tons for the year, we should come back to positive growth, hopefully, second part of 2018. But if we are below that level, this year I mean, this year of course is going to be again tight last year.

But we will discover Marine orders at the end of the year to give more details about what could be in 2018. There was a question on the incentive margin.

Yes, absolutely incentives. And on your question on incentives and the restructuring, obviously, adjusted operating profit and adjusted operating margin are part of our incentives.

But you have to know that first any restructuring has to go through a central approval, first point. And the second point, the target setting in terms of both adjusted operating profit and adjusted operating margin is set taking into account the restructuring, and we set the targets in a way that these are absolutely taking this into account.

That’s very useful color on how you’re using that. You made an earlier comment that in the past, you’ve been overconfident about how much restructuring yielded you.

So have you done any IRR calculations on what sort of returns you have achieved on this restructuring spend in the past?

Yes. We select -- we are quite selective on restructuring charges with our global reference target that I can share with you, which is to stay basically €1 -- with €1 of restructuring.

That’s the basic average with which we authorize restructuring.

I’ve got two follow-up questions, one on FX and the other one on digital. On the FX, obviously we had quite a reversal in the currency market in the last quarter.

And so my question is what is your best guess of the reversal of the positive FX you got in the operating profit in the first half into the second half? In particular, I note that you had a 6% boost in FX in the sales of Certification.

I was curious to see which country contributed to that. My recollection is that it’s not so exposed to the Americas, so that’s on the EBIT.

And also we saw quite a charge on the net interest expense coming from the FX. And would you expect that to reverse as well in the second half?

That’s for the FX questions. And on digital, your main competitor is spending 60 million a year and will do again at the same next year to invest in digital initiatives, which are comparable to yours.

Could you quantify exactly the amount you’re investing and/or whether that it might result into additional OpEx investments in the coming year?

And Nicolas, the first question, please, could you answer on the FX part?

So on the top line, as you mentioned, and you saw the impact of currencies after 1.6% for the first part of the year, with mainly impact of USD appreciation and also against the U.S. -- against the euro.

And obviously, even some countries’ currencies also, some of them appreciated against the euro, in particular the Brazilian real. This effect has started to ease during Q2, and we expect it to turn quite the negative during the second half, based on current consensus.

So we more expect probably a bit for Asia a negative impact from the top line during the second half. As you know, regarding the margin, our level of operating margin is not very sensitive to ForEx because we have pretty good global match between our invoicing currencies and the currencies we apply for our costs.

You see that despite the 1.6 positive impact, we have a very limited impact of operating margin. Lastly, regarding your question on financial charges, financial expenses, it’s really a mix of many currencies impacting our ForEx losses or profit on accounts receivables and payables, and it’s really an area where it’s very difficult to make any precise forecast for the second part of the year.

Apologies for that.

Sorry. And the 6% boost to Q2 assessment certification, which country contributed, which currency contributed to that boost?

It’s mainly coming from Latin America.

Yes, that’s coming mostly from Latin America. Okay, Nicolas, thank you for the answer.

Before we moved to the next question, there was also a question from Aymeric on the digital. And Philippe, could you answer this question?

Well, it depends on what you call digital initiatives. It’s difficult today to disassociate the investments from what you do to rejuvenate your ISIT systems and what you do for new innovative solutions.

So you should take all of it like most companies. Our spend is about 2% of the turnovers.

So it’s the same order of magnitude, but we decided not to communicate precisely since again, the definition of those numbers is subject to lots of interpretations or analysis.

Yes, thank you, Philippe. So if we move to the last question.

Actually, there is one last question here. Okay?

I just had the question on the FX impact from the margin and it just has been answered.

Okay. I think you got your answer.

Okay. Thank you very much.

Thank you for your attention, and I wish you good morning, good afternoon and good evening to everyone, and a good weekend, of course. Bye-bye.

Thank you. Bye.