Bureau Veritas SA

PAR:BVI

Earnings Call Transcript 2021-Q1

[Operator]

Hello, and welcome to the Bureau Veritas Q1 2021 revenue presentation. My name is Judy, and I'll be your coordinator for today's event. Please note that this call is being recorded. [Operator Instructions] I will now hand you over to your host, Didier Michaud-Daniel, CEO, to begin today's conference. Thank you.

[Didier Michaud-Daniel]

Thank you, Judith. Good morning, good afternoon and good evening to everyone. Thank you for joining Bureau Veritas First quarter 2021 Revenue on the webcast and on the call. François Chabas, our group CFO, is here with me to present the results, along with Laurent and Florent. Since the beginning of the year, we continue to operate on the crisis management footing, particularly as pandemic is still very present in several parts of the world. We have continued to take every possible measure to ensure the health and safety of all our employees. This is paramount for me. In the first quarter of 2021, we accompanied and helped our carriers in managing their risk and in restarting their operations. After last year's excellent cash generation performance, we have maintained the key measures in place to protect the financial solidity of the group. I would like to take the opportunity to thank again all our teams who remain highly mobilized and proactive. Before talking about the Q1 revenue, there have been some key developments of particular interest during this quarter. First, the strength of our organic development. Our organic revenue performance has shown the strong recovery potential. We are today reaping the fruit of our business and geographical diversification and market positioning. The growth of our Chinese engine have strongly resumed. Secondly, as expected, the focus on health, safety, quality and environmental stewardship continues to gather momentum and prominence. We have seen accelerating demand for our BV Green Line of services and solutions. Thirdly, since the start of the year, we have also resumed the development momentum with fully promising bolt-on deals. One, strengthens our expertise in cybersecurity compliance, a very promising long-term market; another expands our consumer products activities in the Chinese domestic market; and the third, position the group in the U.S. renewable energy market. Looking now at the figures. In Q1 2021, revenue for the quarter was EUR 1.15 billion, up 6.2% at constant currency. Organic increase was 6.6%, showing a clear sequential improvement compared to the 2% decrease recorded in the last quarter of 2020. It shows a solid underlying performance with an organic revenue growth of 5% compared to Q1 2019 level. Amongst our businesses, 3 grew truly organically. Certification by 21.6%, consumer products by 18.7% and buildings and infrastructure by 13.3%. Our full year 2021 outlook is confirmed. Sustainability, one word on sustainability. Sustainability is at the heart of Bureau Veritas and is a key underlying driver to the group future goal. I am aware of your need to comply with the EU taxonomy regulation, and this additional information will be of help. The chart on this slide shows the current weighting of sustainability in our portfolio. As a first step, the analysis of 65% of Bureau Veritas operations in 2020 shows that approximately 2/3 contributed toward sustainable development objectives. We expect a significant ramp-up in the pace of growth of environment and social on the back of our busy Green Line of services and solutions development. Health, safety, quality, and environmental stewardship have particular growth potential in emerging markets as well. With this, I give the floor to Francois for the financial and business review, Francois.

[Francois Chabas, Executive VP of Finance & Group CFO]

Thank you, Didier Hello, everyone. So we posted a strong organic revenue performance in the first quarter. 58% of the group revenue was on the growth path in this quarter, 3 businesses, as mentioned by Didier. B&I, certification and consumer products were up double digits organically. This demonstrate the robustness of our portfolio and the quality of our mix. As shown on the chart on the right-hand side of the slide, the momentum, as you can see, has improved sequentially since the low point of Q2 last year. Looking at the revenue bridge. On Page 11, we delivered EUR 1.15 billion in the first quarter of 2020, up 1.3% and 6.2% at constant currency. Organic increase reached 6.6%, showing a strong recovery from the minus 2% achieved in the last quarter of 2020. ForEx had a negative impact of 4.9%, mainly due to the depreciation of some emerging countries' currencies and the USD against the Europe. In the current situation, this should normalize from Q2 onwards. Turning now to the revenue growth by business for the quarter. As mentioned, 3 businesses delivered strong organic performance. First, the continued strong rebound in the certification business, benefiting from both catch-up of audits and strong momentum on CSR-related services across most geographies. Second, recovery of the building and infrastructure portfolio, mainly driven by the Chinese and U.S. platforms. And finally, strong return to growth for consumer products, fueled by Asia. Marine and offshore demonstrated a 33.4% organic revenue growth against challenging comparables. The growth was mainly fueled by the in-service activity of the business. Conversely, we had a mixed environment for Agri-Food & Commodities and industry, both being impacted by subdued oil and gas markets. Regarding our bolt-on M&A in 2021. We've continued the disciplined acquisition strategy year-to-date, adding a total of EUR 25 million of annualized revenue. As Didier mentioned, we have recently acquired a U.S. renewable energy service business. This is Bradley Construction Management with EUR 11 million of revenue in 2020 and approximately 50 employees. Bradley provide construction and site management assistance for wind, solar and energy storage projects. This acquisition reinforces both our diversification and growth in the renewable energy sector in the United States. We also made a small acquisition of a certification business in Australia focusing on ESG-related services, adding another EUR 2 million of revenue. Moving to the business review to give you some more color. Let me share with you the highlights of the first quarter for each of our 6 businesses. First, on Marine and Offshore, 3.4% organic revenue growth in the quarter, mainly led by strong growth in the in-service activity. We benefited from a favorable timing of inspections with a catch-up from 2020. The order book stood at $14.2 million gross down at the end of the quarter, up 0.7% compared to the end of 2020. So the book remains very well diversified. In 2021, the group is working on several key projects and initiatives for sustainable shipping, alternative fuel, carbon intensity assessment and research projects such as the use of new fuel to support decarbonization on the next generation of cruise liners. For Agri-Food & Commodities on the right side of the chart, the business slightly improved from Q4, with the decline of organic revenue limited to 3.6% in Q1. Within this division, it is worth noting that our Agri-Food business delivered robust growth. It is supported by strong growth drivers around increased food traceability and outsourcing. In Asia, where the group has leading positions, we delivered double-digit organic growth. For metals and minerals, our product mix geared towards gold, copper and iron ore, and our increased exposure to outsourcing contracts give us pretty good visibility and growth prospects. And finally, in on petroleum, the environment remains tough due to low oil consumption and high inventories. Moving to industry now. Revenue eroded by 0.4% organically in the first quarter of 2021. The strategy of diversification towards OpEx and power and entity markets continue to bear fruit and cushion the further decline of serve in oil and gas markets. The power utilities segment continue to be a key growth driver of the portfolio with high single-digit organic performance achieved in the quarter. This illustrates the good execution of our diversification strategy. In the long run, renewable energies are providing strong growth opportunities for the business. Across most geographies, we are currently bidding for several wind and solar power generation projects, Europe, Asia and in the Americas. For building and infrastructure. Revenue growth strongly improved organically to 13.3% in the first quarter from 2.8% in the last quarter of 2020, confirming the recovery of the activity. The group is well positioned, thanks to a 3 growth platform across different geographies, Europe, Asia Pacific and North America. Our performance was very strong for CapEx-related activity, up double-digit organically in the U.S. and in China. The growth was strong as well for OpEx-related services, up single-digit organically, benefiting here from a catch-up of regulatory-driven businesses not delivered at the end of 2020. By region, we delivered strong growth in Asia led by the recovery of China, up 88%, obviously against favorable comparable last year. Here, the business remains driven by public transportation and energy infrastructure projects. Double-digit growth was delivered in the U.S. led by a strong rebound of our U.S. operation. It's a combination of large project, management assistance and an acceleration of the data center commissioning services. Coming now to certification. It's been the best performer within the portfolio, up 21.6% in the quarter and continue to benefit from a catch-up of 2020 postpone audit as well as from the success of new services, including Restart Your Business with Bureau Veritas. Within this, the group portfolio, high double-digit growth was achieved in audits related to QHSE sustainable development and CSR as well as automotive. During the first quarter, Bureau Veritas assurance of CSR and sustainability reporting services grew by more than 20%, driven by a strong demand for green oil gas emission verification and wood management system certification. Food continued to perform strongly with double-digit growth. Moving now to customer products. The business strongly recovered with an organic growth of 18.7% in the first quarter of 2021, benefiting from a large pickup of activity in China, which was up 38% across all geographies. You remember, of course, that last year, China was in lockdown at that time. Testing activities rebounded the most, while the inspection and audit services grew low double digits. By geography in this division, very high growth was achieved in China, as I mentioned, and Southeast Asia, whereas activity levels remain more muted elsewhere, disrupted still by lockdown measures and restrictions in mobility. Overall, the strategy of diversification by service, clients and markets has continued in the quarter with a more particular focus on domestic China. And in addition to the soft client testing business acquired focusing on domestic brands and e-shops, we have started to operate a wireless product testing lab to address the domestic market as well. So it's a good start to the year with some catch-up, as you could see during the presentation. One should not forget that the situation remains volatile. And I hand back now to Didier for the outlook for the rest of the year.

[Didier Michaud-Daniel]

Thank you, Francois. Regarding now the 2021 outlook. We confirm that the group remains uniquely positioned with the diversity, the resilience of its portfolio around its numerous growth opportunities. Based on the current uncertainties around the COVID-19 pandemic and assuming no severe lockdowns in our main countries of operation, we expect to achieve solid organic revenue growth, improve the adjusted operating margin, generate sustained sound cash flow. In this volatile environment, we are demonstrating a strong potential to recover for sure benefited from our pro forma transformation. This bodes well for the year. Moving forward, Bureau Veritas is well positioned to benefit from strong macro drivers such as sustainability. With the 2025 strategic plan, we will capitalize on our strength and continue our successful journey of delivering a value-creating strategy for BV. Thank you very much for your attention. Francois and I are now ready to answer your questions.

[Operator]

[Operator Instructions] The first question in the queue is coming from the line of Paul Sullivan from Barclays.

[Paul Daniel Alexander Sullivan, Director & Analyst]

Two from me. On consumer, I'm sort of intrigued by the bounce back given your relative previous caution on some of the structural dynamics that you saw last year. So putting the comps aside, what's changed in your view there? And then secondly, in terms of the outlook, I mean given the comparison and how it changes into the second quarter, I mean it would imply north of 20% growth in Q2. So how much of Q1's growth was catch-up and shouldn't be extrapolated? And what's preventing you from being more specific in terms of guidance for the full year?

[Didier Michaud-Daniel]

Okay. Thank you, Paul, for your questions. First, on the consumer, it's a very good question, of course. It's true that the consumer division has clearly delivered a very stronger quarter. When you look at it, in fact, it's close to 2% less than Q1 2019, showing that we are clearly recovering. So it's coming from several factors. The first one, because of the issue of some countries which are locked down in the south part of Asia, the testing of softlines, hardlines, even technological products went back to China, and we were very well equipped to just deliver the best testing. The second point here is, as you know, we decided to invest in 5G connectivity testing. And there is a clear ramp-up, which is probably even stronger than what we anticipated on this type of testing. And the third one, we can see already the impact of the diversification, both geographical diversification and product diversification strategy that we started already last year and even the year before. You remember, Paul, we had these discussions and the fact that we were very exposed to U.S.-China channel. And we decided already a little bit more than 1 year to work on, again, diversification strategy, and it has started to pay off. On your second question, clearly, there was a lot of catch-up in the first quarter; inspection and audits, which were not conducted last year in B&I, in certification and in Marine. We may have a little bit more in Q2. But honestly, I think that we did already a lot in Q1. So the Q2 will be more about the comparison with last year. A lot of countries were locked down last year in Europe, in particular. So of course, we should have a good Q2. I'm not going to say the number that you proposed. We will see at the end of Q2. It's too early to talk about it and there are still uncertainties as regard to the pandemic, as you know it. India, very difficult situation in India at the moment. The LatAm situation and Brazil, Peru are going through very difficult times. So I am cautiously optimistic for the remaining of the year because of this uncertainty, even if, of course, I'm very happy with the results that we are delivering at the end of Q1.

[Paul Daniel Alexander Sullivan, Director & Analyst]

That's very kind. And would you like to be sort of more specific on how much the growth in Q1 was catch-up in your view?

[Didier Michaud-Daniel]

It's not as easy to be more specific because, Paul, I would have to do it business by business. And again, to measure it is not really easy. What I can see, I can say, for marine, clearly, the catch-up of inspection and audit is giving the organic growth that you are getting for marine. This one is very clear. Now measuring for B&I with a geographical diversification, the countries and the number of services we are capable to deliver, it's just absolutely challenging. And the same for certification. You need to note, by the way, that we have 2 more working days in France in Q1 versus -- in Q1 2021 versus Q1 2020. Of course, even with these 2 days, it does not explain the very good performance of BV in Q1.

[Operator]

And the next question in the queue is coming from the line of Edward Stanley from Morgan Stanley.

[Edward Stanley, Equity Analyst]

I've got 3, please. The first one, as growth has recovered pretty rapidly in consumer and certification, well, in building and infra, obviously, are you having to reinvest in headcounts? Or are you able to operate with a leaner cost base for the time being? I guess, particularly in consumer would be useful. The second question. I know you're not too fussed about oil and gas, but in terms of the sort of performance in the industry division that's recovering in Q1, do you expect that growth to carry on and be -- mimic almost the underlying oil price? Or is it much more dependent on comps at this stage? And the third question. You've given a lot of detail on the BV Green Line, which is very helpful, and we know a portion of sales coming from ESG activities. And I guess in the release, you've also given a flavor for 20% growth coming from greenhouse gas certification, for example, but it's difficult to know how much of that is comps or genuinely new business. So in actual EUR 1 million terms, maybe, are you seeing meaningful growth contributions already from some of these ESG-related activities? Or do you think that will come more gradually as you win these wind and solar contracts that you talked about, for example?

[Didier Michaud-Daniel]

Thank you, Edward, for your question. We are going to start with your first question, Francois, maybe this one, you could take it.

[Francois Chabas, Executive VP of Finance & Group CFO]

Yes, sure. Ed, so I think the one line you need to keep in mind is the -- we remain very disciplined in the approach we have in terms of cost engagement. As Didier mentioned, the first quarter, I think, has shown some good news. We are very cautious. 2021 is again a specific year. So we are driving the company quarter after quarter. So cautiousness is really our #1 concern, which drives us to take several decisions, first, to start to reengage in recruitment in activities where we have, I would say, a good visibility. So as an example, the B&I business in France, we think, we are pretty confident here, and we are actually -- we're ramping up our efforts to re recruit, the same in the U.S. But obviously, the area is -- and especially in terms of consumer product, where we've made tough decision last year, and I think we were right to do them early in the year 2020. And obviously, here, we've managed to deliver the service in the first quarter with, I would say, a lower cost base compared to the historical comparables in Q1 2020. So that's the way we are today, and we are gradually taking decision country by country, business by business. As soon as we see that we have a perspective that goes beyond the semester, then we start to re recruit, I think, at the right path. And again, we are very careful here not to overshoot and to take the decision at the right time.

[Didier Michaud-Daniel]

Thank you, Francois. Regarding your question on the industry, I'm going to start with oil and gas CapEx. Now it's really meaningful for the company. Honestly, this is not the question anymore now when I'm thinking about what we need to work on. This is clearly not for me today. In terms of strategy where I want to go, if we -- if there are some new CapEx, we'll take it. But now it's down to 3%, even a little bit less of the company revenue. In the past, it was more than 10%. So this is not for me in the strategy anymore. In fact, in industry now, we are focusing on hydrogen. New energy like wind, solar, power and utilities, OpEx. So these are the -- this is the focus of the company today, clearly, and we can see that it's paying off already. There are some new also new activities in the -- for instance, the plastic tool, which is a new industry. So we can clearly see a shift now moving to renewable. And again, strategically-wise, today, I don't count on the oil and gas CapEx, which are, again, meaningful for the company. I am working on new businesses which are developing exponentially. A good example for me is wind. When you think that, for instance, that the U.K., they want to be in wind what Saudi Arabia is in oil. It shows something about a big change. And even today, the oil companies, and we are used to work with them and we work -- we still work with them, of course, are moving all of them to renewables. So it's a trend, a mega trend which is accelerating, and we want to be the leader in this market. This is what is going to give us the leadership in industry and also the organic growth in industry in the future. It is linked with your third question, which is about the BV Green Line. Because the BV Green Line, it is covering services and solutions all along the chain of sustainability, if I could say that. From construction, I'm talking about wind farm construction, offshore farm construction, new hydrogen plants, new green buildings to traceability, full traceability and to the end which is CSR certification. For instance, I'm sure you read the same article as I did today. The European Union has decided to identify 250 companies which are delivering over EUR 50 million of revenue. These companies will be obliged to certify, I could say that, or to be audited on their carbon footprint. And the non -- they are working on a normal ready. So we know that we can cover the whole chain regarding sustainability. So you talked about the 20% greenhouse gas certification, it's a good point. We are happy. Of course, we started now we have 20% organic growth, but there is a ramp-up to come. And again, if you think about our Q1 and probably our Q2, you can think that a part of our growth will come from it, but there is substantial growth to come longer term or I should say even midterm. And it's in Europe, clearly, with a green deal. It is in the U.S. now because the President of the U.S., Mr. Biden, has decided to accelerate also on the climate change initiatives, and we will be part, of course, as a player in audit inspection and certification, we will be part of it. And by the way, we are very proud to be a business-to-business to society company and to lead the pack.

[Operator]

And the next question in the queue is coming from the line of David Roux from Bank of America.

[David Roux, Associate]

Congratulations on the strong update. I've just got 3 questions from my side. I think, firstly, just to revert back to Slide 8 in which you split out the revenues from sustainable services. I just wanted to get your sense about the 35% of revenue not yet annualized. Is this still to be annualized? Or is this part of the business that you know for certain doesn't have exposure to sustainable revenue? My second question is on the growth by region. I'm a bit surprised that the growth in the Americas region wasn't a bit higher given the obvious strength in the U.S. economy. Is this down to mix? And can you please remind us of the sort of major end markets for that region? And then lastly, for Francois, what was the exit rate in March, please, in terms of organic growth?

[Didier Michaud-Daniel]

Francois, you can take the third question, please, the exit rate.

[Francois Chabas, Executive VP of Finance & Group CFO]

Yes, for the month of March, again, let's be a bit careful here. The March 2020 was a bit particular, but I would say -- what we could say is a low double-digit for March this year exit rate organically.

[Didier Michaud-Daniel]

Thank you, François. On your first question, in fact, it is still to be annualized. The reporting systems, we are not initially supposed to address these dimensions. And I can tell you this has been addressed actively because we want to measure the evolution and the organic growth coming from the Green Line. So we are working today to add codes, which will be specifically dedicated to this big initiative. It's not even not an initiative, it's a strategy. So in the future, we'll have more detail clearly about the potential incremental organic growth that we can get from the Green Line. By the way, we know that there will be some conformity with the regulation and expectation from our stakeholders. So this is something which has to be measured, and we are working with our system to be ready to deliver this type of measure in the future -- in the near future, I'm not in -- we hope even before the end of this year. Regarding the U.S., in fact, we have strong growth in B&I, strong growth in certification, strong growth in Agri-Food. The only issue is oil and petroleum product testing. And in fact, it is coming from the drag from the oil market. You have 2 phenomenons. The first one, because the price of the oil was very low, the U.S. built a lot of reserves. So meaning that we don't need to test these reserve. We did it in the past. The second point is the consumption has not restarted yet. So it's a real drag on the result of the U.S. If you exclude this drag, our organic growth in the U.S. would be probably closer to double -- low double-digit organic growth.

[Operator]

And the next question in the queue is coming from the line of Oscar Val Mas from JPMorgan.

[Oscar Val Mas, Analyst]

Two questions for me. The first one on a few of your competitors, and you've talked about this as well about remote inspection and how you've been able to do that kind of during COVID. How do you think that sticks when you reopen? Can you still have some more remote inspection in the future? And then the second question is just on M&A. What's the pipeline looking like? And what are the areas of focus? I know you've talked about cybersecurity in China domestic, but where do you think the opportunities are for M&A?

[Didier Michaud-Daniel]

So on the M&A side, we have a large pipeline. We want to remain extremely disciplined. When you think about our M&A track records in terms of multiple by going to bolt-on acquisitions as we do, in fact, we are making some very good acquisition in terms of organic growth for control and even in terms of margin at multiple, which are affordable and not crazy. So for me, it's very important. And for Francois, it's the same. Maybe you want to comment on M&A because we know you and I were -- I think it's important to comment on that one, and I will come back on a remote inspection.

[Francois Chabas, Executive VP of Finance & Group CFO]

I think, Oscar, what you need to keep in mind for M&A is that we do not change anything. I mean same approach, bolt-on good return on investments focused on domestic China, cybersecurity, B&I and Agri-Food. And for bolt-on M&A to be successful. The most important thing is that you keep on doing the same for long enough. Otherwise, it's a waste of time, money and energy. So we will keep on with this, and I think it has proven very efficient in terms of return to the shareholder. So we will keep on that path. And as Didier mentioned, we have always a very rich pipeline. That's the nature of bolt-on M&A. You need 10 to do 1. So don't worry about the pipeline. We will keep on closing those deals at good conditions.

[Didier Michaud-Daniel]

Thank you, Francois. Regarding remote inspection, in fact, you may remember -- it's a very good question. First, we decided already in 2015 to move for digitalization and, of course, for remote inspection. Since then, remote inspection has developed strongly. It accelerated last year, of course, because of the pandemic. But to give you some numbers, today, in certification, for instance, in Q1, 19% of our audits were done, 19, 1-9, remotely. It's quite impressive. In Marine and Offshore at dock service, 20% with remote inspection. Again, a very impressive number. Safeguard, for instance, as you remember, safeguard restarted your business with Bureau Veritas, 25% of the audits are done remotely. And another, for me, very good example, and this one is going to accelerate because notably of the renewables, today, approximately 10% of remote inspections in industry, in particular, of course, in OpEx. So we can clearly see an acceleration. The fact that we had the pandemic last year, it's not over yet, is accelerating it, and we will continue in the future to work on remote inspection.

[Operator]

And the next question in the queue is coming from the line of Rajesh Kumar from HSBC.

[Rajesh Kumar, Analyst]

Just on Marine, you've shown that the new orders are up, but order book is down 3.8% year-on-year. Can you unpack that for us a bit? Are the order books down because you have delivered the service and you now need to build these new orders? And then just conjugate to that, how comfortable are you with the current market expectations for Marine? The second question is a follow-up on consumer, really throughput performance there. How much of that is -- you indicated earlier that there's a lot of change in the supply chain and you're adjusting with that. So the growth we have seen, is it coming purely from the old network, and the growth from the new locations is yet to come? Or is it that you're getting growth from both the areas, and that is why the growth is so strong?

[Didier Michaud-Daniel]

Okay. Rajesh, thank you very much for your questions. The order book, in fact, in Marine, I'm talking about new equipment is up 0.7%, 0.7% versus December 2020. In fact, in Q1, we had quite good level of deliveries. This year, we expect a flattish, probably, organic growth. Because as you know, last year, we had -- we won a lot of new orders, in particular, with LNG ships, which are in terms of revenue very good ship for Bureau Veritas, but it takes longer for this ship to be built. The good news is probably for '22 already because this market has restarted. It is strongly recovering clearly. And we hope, of course, taking again the share that we enjoyed in the past, meaning that in terms of order, we should have, and we will discuss it at the end of H1, a good year or at least a better year than last year. But I'm sure you know it. Now if you look at the footprint for consumer division, it's important. We explained it to you last year. We revisited the Chinese laboratory footprint. So could I say it's the whole network? I'm not sure. Because last year, we decided -- I said we because we worked a lot with Francois and the Head of Consumer Product division on that, too. We'll distribute the lab footprint in China to optimize the cost. And also, it has to be done after several years to be sure that we could deliver a better turnaround time to our clients, but also, again, to optimize our cost. So today, we are mainly, in Q1, delivering our testing services from existing locations or locations that we rebuilt, if I should say -- if I could say so, last year. This is the way we are organizing our consumer product division. We rationalized a lot last year, in particular in China, the number of laboratories, the organization and so on and so on. So we don't know if you remember well, at the end, over the year, we really turned around the margin level, thanks to this rationalization.

[Rajesh Kumar, Analyst]

Got it. That's very helpful. And the third one, which I didn't pose earlier, just on the labor cost inflation. How are you seeing that trend in your delivery locations? Are there any markets where you're worried about the level of inflation you're getting or you're excited about it?

[Didier Michaud-Daniel]

Okay. So except the U.S., I do not have any problem, 0. In the U.S., the market has restarted. As you know, I'm talking about the labor market. So we have a very good backlog in the U.S. Our challenge today is to hire people and find the right people to deliver the services, meaning engineers. So it's -- the market is not as easy in the U.S. today. Of course, we are very attentive to monitor the situation, but we do not have any problem elsewhere.

[Operator]

And the next question in the queue is coming from the line of George Gregory from Exane.

[George Nicholas Gregory, Research Analyst]

I have 3, please. Firstly, starting with B&I, how should we read the trend in China, Didier, where you saw 88% growth in the first quarter? I appreciate the comp is easy, but I presume it implies a level of activity that's well north of the first quarter of '19. Secondly, thinking about the group exit rate you referenced, Francois. I believe March last year was down 5.5%, which suggests you exited the quarter comfortably ahead of March '19. Was that continued outperformance due to the catch-up effect, which fades from the second quarter? Or are there any other variables at play there? And finally, one on consumer, please. I think you highlighted in the release that growth was stronger in testing than it was in inspection and audit. Could we assume that the inspection and audit piece catches up towards that of testing in the coming quarters, thereby strengthening the trend relative to the down 2% versus '19 that you referenced, Didier?

[Didier Michaud-Daniel]

Thank you, George, for your questions. The group exit rate, Francois, I'll let you answer that one.

[Francois Chabas, Executive VP of Finance & Group CFO]

Yes, sure. So comparable, I mean you're doing your math correctly. Two elements to keep in mind when it comes to March '21. I think as Didier mentioned, there is a 2 working days additional, especially in Europe that are somewhat helping the comparable. And this is as well, the months where most of the accreditation bodies have given their deadline to perform 2020 audits. So especially in certification, there was really a peak in March. So it is not a reference for Q2. I think we're happy to have delivered those work, but I don't expect it to become the norm, I would say, for the second quarter.

[Didier Michaud-Daniel]

Okay. Regarding your first question, George, about B&I and the trend in China. Of course, growth will ease as comparable will get tougher, and there were already some catch-up. But after -- and again, in terms of strategy, we decided to move to B&I China, principally infrastructure and energy. That was a very good move because this is where the Chinese government is putting money. And we know already that the organic growth, even if it's not going to be at the level of Q1, of course, because the compare will be different, is going to be good in the future. There is no doubt about it, and it's a factor of differentiation. We are the only one also, as you know, having the expertise on building an infrastructure in China, not just in China, in the U.S. and in Europe. Now if I look at the -- if I answer your question about the consumer product division, you are partly right because there are some countries today where we cannot do inspection and audit. I'm thinking in particular of India and Bangladesh because these countries are locked down. And in these countries, we had to do some inspections, particularly, again, linked to CSR and the Green Line with the inspection on the social, children and so on and social -- but not just -- by the way, social audit, but also more and more the working conditions. I'm talking about the building and so on. So clearly, in inspection and audit, we are [ up here ] where we were in 2019. It will accelerate along the way as long as, of course, these countries open again.

[Operator]

And the next question in the queue is coming from the line of Neil Tyler from Redburn.

[Neil Christopher Tyler, Research Analyst]

Two for me, please. Firstly, I'd like to stay with the topic of the consumer growth and ask for a bit of clarification on your thoughts on the migration that you said you saw back to China in terms of some production and whether you have any perspective on how long that might last for or whether it literally is a case of once lockdowns are lifted, that business moves back elsewhere. And I know this is only a revenue call, but whether -- if you can help us understand whether there's been any meaningful margin effect of that migration, that would be helpful. The first question, please. And then secondly, tying some of your previous comments together around your optimism on the Green Line and caution with regards to hiring plans. I wonder whether there are any limitations on your ability to hire, to staff, those obviously very rapidly growing areas, and what your investment plans are or whether you're able to simply reallocate existing resources primarily.

[Didier Michaud-Daniel]

It's a good question. Regarding the Green Line, I have strong ability to hire. So I was talking about the U.S. because in the U.S., it's more in the B&I business, it's challenging at that time. But for the rest of the world, I have 0 problem in recruiting. In fact, it's exactly the opposite because younger people, millennials want to work for a company, which is working around safety, hygiene, environment and quality. So we are extremely attractive for young generation because this is what they are looking for now, protecting the world, working for business-to-business to society company, shaping a world of trust. This is what Veritas is about. So we are extremely attractive, and we do not have any program in finding people. U.S. is a different story today because, again, the market is recovering. We are working on it, and we will find the people that we need as we did in the past. Regarding the first question on the consumer, it's a migration today because some countries are locked down. I'm thinking about India, again, and Bangladesh, for instance. So this is a structural shift. After, it's very interesting because you had also some issues, and I'm sure you're aware of it, with the supply chain. Because these countries are locked down, the supply chain that moved from China to these countries is now at risk. And you may wonder if some even American companies are not going to go back to China because they are not capable now to deliver what the clients are looking for. So this is a very interesting situation. After whatever happens, we have the capacities today in Southeast Asia to deliver the service, and we have strong capacities in China. Regarding the margin. As you know, the margin is always impacted by the volume. We did a very good job last year in restructuring our footprint. So I'm not going to talk about margin today, and this is not the call for today. We will, at the end of H1, but we should not have any issue with the margin in '21 and the years to come, again, as long as we are not all locked down for any potential problem that we could have with whatever variant or -- is still very uncertain all around.

[Operator]

And the final question in the queue is coming from the line of Nicolas Tabor from Stifel.

[Nicolas Tabor, Analyst]

Congratulation again for the great result. The first one, I wanted to come back quickly on certification. Just to sum up, you said that you had a lot of catch-up in Q1. But does that mean that because you had to push the 2021 audits and certifications into the next 3 quarters that, that means that this pent-up demand has to be caught up again in the remainder of the year? And how has the -- we start your business with BV Green developing, is it still accelerating as lockdowns are ending? Is it transforming into new business, let's say, beyond the COVID one-off? So that's the certification. And then just coming back on the consumer. Is there a risk in the opposite side that once these Southeast Asian countries reopen, then suddenly, there is demand going away to this country in testing? Or do you think it would mean that China is even more accelerating and you will not see a slowdown or any negative effect? It's just going to be more demand for everyone? And then on the third question. In terms of the infrastructure spending, where do you think you are -- I mean the impact in the first quarter was already quite significant, how much of that should still continue to accelerate over the next 12 to 24 months, especially if we think about Europe and what Biden has talked about, but not yet, let's say, spent?

[Didier Michaud-Daniel]

Thank you, Nicolas, for your question. I'm going to start with infrastructure, your last question, move to consumer, and Francois will cover certification. On the infrastructure side, you are absolutely right. We have a lot of opportunities with the Green deal midterm opportunities and long term. We are very well equipped in Europe and to deliver the service on the infrastructure. In the U.S., it's a little bit a different story. And I must say that in the U.S., even if, for instance, we got a very nice contract, more than $6 million with Laguardia Airport, 2 years ago, showing that we are capable to deliver infrastructure projects, I would be very happy to find the potential acquisition, helping me to deliver the services in infrastructure, and we are looking clearly already at doing it because there is a huge opportunity for the years to come. For the moment, it's too early. I don't think it's going to start before 2022, maybe end of '21. But after, for the next 4 or 5 years, I want to be a player in this domain in the U.S., no doubt about it, as we are and will be in Europe. On the consumer side, I do not see any risk. I mean, again, it might be even opportunities, in fact, because of the supply chain issues that some -- even American clients had in front of them. They may stay as they are now with China, and we will use our capabilities in Southeast Asia for some other clients or why not the same one. But for us, it's not going -- I mean there is no risk there because our footprint in that is there. We rationalized it. We are ready to take more volume. Now it's all about, as I said, diversifying our business geographically and also by product. So I see more opportunities than risk in this area. And certification, Francois, I'm going to let you answer this question.

[Francois Chabas, Executive VP of Finance & Group CFO]

Yes, Nicolas. So it's a simple question, it's a complex answer. So I will try to be as clear as possible. The first part, the one on the sequencing and what is postponed, not postponed. Normally, in a normal year, Q1, Q2 are small quarters in terms of activity. Q3, Q4 are very strong and very high in terms of activity. That's the way this business has been functioning for years. In 2020, Q2 2020, those audits, which were due on that quarter, could not happen for obvious reasons. And they have been moved partially to Q3 or to Q4. As those 2 quarters, Q3 and Q4 2020, where, by a sense, large ones already, we could not deliver everything due to capacity constraints. So a part of it has moved to Q1 2021. That's what we have been saying for -- since the beginning, a bit of a catch-up of audits. Those ones were due mostly for Q4 across the line and moved into Q1 2020 because it's been allowed again -- it's not Veritas decision. It's been allowed by the accreditation body who are allowing us to perform those audits. They have allowed to extend the limit. Now what would that mean for 2021? If this is the core of your question. I would say, if 2021 is a normal year, meaning no major disruption related to the pandemic in Q2 and Q3 in Q4. Then normally, in a normal year, we should be able to close the year 2021, having delivered the revenue for 2021. The question mark we have right now is -- Didier was just mentioned in India and Bangladesh, and we had Japan earlier this year. We know 2021 will not be a normal year. So in those 3 countries I have mentioned, we are further pushing because in those 3 countries, we could not deliver most of the audits. So I think the bulk of the catch-up coming from 2020 has been absorbed in Q1. In countries where there is no disruption, we are back to delivering the usual level of audits we have been delivering on the certification path, and we'll be able to tell you a bit more at the end of June the -- how H2 will unfold and if we would expect some more pushing to 2022. I hope I've been clear enough. And if not, I think you can reach out to Laurent Brunelle. But in a nutshell, strong H1 '21 and expected a weaker H2. On the Restart Your Business, I think we had the first wave, a very successful first wave mid last year, as you remember. And what we see today is we are still delivering, Didier just mentioned, 25% this year in Q1 of the audits related to this first wave, have been done remotely. So we are -- we keep on delivering. We are moving from a one-of-a-kind type of contract to regular inspection now. And for me, the most interesting is we start -- to give you an example, we've contracted with Sodexo on the Restart Your Business. And we just announced, I think, publicly that, for example, a subsidiary in Spain had a business extension with Sodexo to help them to monitor their waste management in term of food. It would have never happened if we had not signed in the first place the Restart Your BV contract a year ago. So we are now entering in a phase where we start either to be in a regular inspection scheme. So we started a year ago with the new scheme, Restart Your Business, and now we are delivering inspection on a regular basis and/or extension of scope because we have entered those companies at the right level, meaning a CEO or management level. And now they see the benefit of working with a company like Bureau Veritas to convince their own stakeholders that they are caring about their employees, caring about their clients and caring about the environment.

[Didier Michaud-Daniel]

Thank you very much, Francois. We're at the end. Maybe 2 comments before we're through the call. The first one, of course, I believe we are happy with the results in Q1. This is pure consequence of the profound transformation that we started in 2015. This is my first comment. The second one, there is still some uncertainty and some volatility linked to the pandemic, which is not over yet. It's the reason why I remain cautiously optimistic. Thank you for your time, and I wish you good morning, good afternoon and good evening.

[Operator]

Thank you, everyone, for joining us on today's call. You may now disconnect your handsets.