Ladies and gentlemen, welcome to the 2022 full year results conference call and live webcast. I am Sandra, the Chorus Call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star one on your telephone. Webcast viewers may submit their questions or comments in writing via the relative field. For operator assistance, please press star zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Toby Reeks, Investor Relations, Corporate Communications and Sustainability. Please go ahead, sir. Hi there. Welcome to SGS full year results conference call. As per usual, Frankie and Dominik will present. I'll return to host the Q&A. As the operator just said, there are two ways to submit questions. One is by joining the conference call and speaking live. The other one is via webcast. Please write your questions on the webcast and I will read them out afterwards. Please note that we will restrict it to two questions maximum for each person. If we have time at the end of the call, you can join the back of the queue and start again, and we may have time to answer them. With that, I will hand over to Frankie. Thank you, Toby. Good afternoon, everyone. As usual, I will give you a highlight of our performances for the year. Dominik will then provide you a more detailed financial review, and then I will cover the business outlook for 2023, followed by Q&A. Before we start on the result, I would like to take this opportunity to thank all my colleagues across the SGS network for their contribution to the group. Many of them in their personal and professional lives were impacted by some significant challenges in 2022, including the war in Ukraine, COVID in many countries, and particularly in China recently, and the impact of high inflation. Beyond their dedications to keeping our operations running, the sense of community and the support provided to each other during these challenging circumstances is something that I have really appreciated and I have learned from. Thank you to all of them. As for the results, just before the Investors Day of last November, we issued an ad hoc communication revising our guidance for the full year 2022. Since then, some further operational disruptions have occurred in China. The lifting of all the COVID restrictions resulted in high sickness rate, which is impacting us and our customers' operations. However, I'm pleased to report that despite the unforeseen event, our operations performed strongly, and we have closed the year in line with our revised guidance. For the full year 2022, total revenue increased by 6.8% at constant currency, while organic growth was 5.8%. Adjusted operating income stand at CHF 1.023 billion at the same level in constant currency as 2021. Free cash flow stands at CHF 507 million. This is a decline of 20.2% compared to prior year, partly due to the increased working capital required to support the growth of our activities. The board of director is proposing a dividend of CHF 80 per share at AGM, same as last year. Despite the difficult market conditions, we are continuing our journey as a purpose-driven company. We're convinced that the balanced approach to planet, people, and performances will result in the best long-term value creations for all our stakeholders. This slide shows some of the progress we made during 2022. Maybe one of the most important changes in this slide is the approval of our SBTi 1.5 degree ambitions by the Science Based Targets initiative. Our commitment to 1.5 degree is the first step in our new trajectory. This requires to step up our effort on current reduction program on Scope 1 and 2, and to launch additional programs to tackle our Scope 3 emissions is related to our supply chain in a more systematic way. We're also looking at expanding the sustainability-related short-term incentive KPIs across a larger population of managers. This to create more accountability and to give a stronger focus on achieving our goals. We'll further update you as those programs are implemented. In line with our strategic focus, we made four more acquisitions during the second half on top of the three companies we acquired during the first half. proderm, based in Germany, is a leading players in the cosmetic and personal care testing sectors with strong scientific expertise. Significantly reinforce our global positions in Europe and globally. Sorry. Silver State Analytical Laboratories, based in the U.S., complement our network of EHS laboratories in North America. They are specialized in the environment testing of water and soil. Penetria Security in the U.S. helps SGS to continue the expansion of its cybersecurity testing network, adding accreditations and competences in information security conformance and regulatory compliance testing. Industry Lab in Romania are specialized in food microbiological testing. These acquisition reinforce our service offering in Romania and our food network in Eastern Europe. As a reminder, the three companies acquired during the first half were Gas Analysis Services, based in the UK, bringing the pharmaceutical, semiconductor, food and beverage expertise in gas instrumentation and calibration. Ecotecnos, based in Chile, is specialized in monitoring the impact of industrial activities on biodiversity in aquatic and marine ecosystems. AIEX, based in France, is a technical inspection and NDT specialist in the nuclear sector. We have also acquired the remaining minority, sorry, stake of two companies during the first half. 32% of Advanced Metrology Solutions based in Spain, specialized in metrology and dimensional measurement in the aviation industry. 49% of SGS Digicomply, a JV created by SGS that specializes in regulatory monitoring in the food sector using digital technology. On that, I'm gonna hand over to Dominik for more detailed financial numbers. Dominik? Thank you, Frankie. Good afternoon, ladies and gentlemen. I will start with the overview of the financial highlights for fiscal year 2022. Frankie already mentioned the operating highlights in his introduction, with revenues of CHF 6.3 billion and adjusted operating income of CHF 1.023 billion, and a free cash flow of CHF 507 million. Revenues for the group in constant currency increased strongly by 6.8%. Adjusted operating income was, with CHF 1.023 billion, in constant currency broadly stable, fully in line with our trading update provided a couple of days prior to our Investor Days. Consequently, AOI margin dropped by 100 basis points in constant currency to 15.4%. We incurred restructuring costs of CHF 46 million versus CHF 50 million the prior year, and one-off costs of CHF 29 million due to our decision to cease two key upstream projects in Libya following the absence of cash collection. Net profit after minority interest declined by 4.1% to CHF 588 million, which is to a large extent a function of currency. Adjusted EPS increased by 3.4% to CHF 92.46. Cash flow from operating activities declined by 11.9% to CHF 1,030 million, mainly due to higher net working capital requirement to support the strong revenue growth. For 2023, we expect less net working capital need than in 2022 and therefore a stronger cash conversion. Organic revenues increased by 5.8% in 2022, equally split between volume and price growth. The contribution from acquisition is with 1% limited and reflect several smaller, but strategically very important additions to our network. The currency impact was the 3.1% negative, as the Swiss franc continued to strengthen against several important currencies, leading to a revenue growth rate at actual rates of 3.8%. Moving on to the revenue growth by business. Organic growth in Connectivity and Products was, with 3.9%, very solid, especially considering the COVID-related impact in China. Growth accelerated strongly after the lockdowns in the second quarter 2022 in China, but slowed towards the end of the year as higher sickness rates occurred given the reopening of the economy. The strongest growth was achieved in soft lines, given very strong performance outside China, namely Turkey, India, and Bangladesh. Connectivity experienced above average growth given recent investments and the strong performance of PriceRight. Hard lines organically declined given the challenging situation in China and supply chain disruptions. Revenues in Health & Nutrition increased by 7.6%, supported by the continued focus on M&A. Organic growth was 4.1%. Food grew organically above the division average, supported by growth across the network. Health science has replaced much of COVID vaccine-related work. However, organic growth declined slightly. Revenues in Industries & Environment increased by 5.4% in constant rate, while organic growth was 4.8%. Field services and inspection grew above divisional average, driven by good performance in environmental field and marine services. Technical assessment advisory delivered double-digit organic growth, continuing to benefit from the increase in supervision and consulting work in Latin America, as well as strong performance in Middle East and Southeast Asia and Pacific. Public mandates revenue declined due to loss of contracts in Africa, partly compensated by price increases in Latin American vehicle and compliance services. The 8.7% organic growth in Natural Resources was driven by double-digit growth in laboratory testing and metallurgy and consulting. Growth in trade inspection was strong, primarily driven by good momentum in minerals and in oil and gas commodities. Knowledge fostered strong organic growth of 8.7%. Growth was achieved across all SPUs and regions. The strongest growth was delivered by consulting, primarily driven by the strong performance of Mainpoint, benefiting from strong demand for supply chain optimization and performance improvement services. From a regional point of view, growth was primarily driven by the Americas and Asia Pacific. The Eastern Europe and Middle East countries achieved double-digit growth across the majority of its key end markets, with the exception of Russia. Growth in the African countries was mid-single digit, while growth in the key European countries was to a large extent modest to moderate. In the Americas, revenues increased strongly by 11.1% in constant rate, while organic growth was 10.2%. The strong growth was notably driven by double-digit growth in several Latin key countries, while growth in North America was also strong. The organic growth in Asia was at 6% strong, especially considering that China was impacted by COVID. In most markets, mid to high single-digit growth was achieved, while India, Singapore, Vietnam and Japan posted double-digit growth. FTEs at the end of 2022 increased by 2% versus prior year, primarily driven by organic additions, partly offset by the impact of restructuring. Average FTEs in 2022 increased by, with 3.7%, clearly lower than the total revenue growth of 6.8%. Trust operating income was with CHF 1,023 million, broadly stable in constant currency. Currency had a negative impact of 3.1%, leading to a decline in AOI of 3% in the period under review. On this slide, I would like to provide an update on our Level Up initiatives. In 2022, Project Prometheus was implemented. The purpose of the program was to outsource IT infrastructure, application maintenance and application development to reduce the time to market for new solutions and to reduce costs. This program is the basis to roll out new solutions globally in an accelerated manner. For 2023, we expect the full realization of the benefits of this program. We established the Builders Organization to design and develop new technology-based products, initially focusing on higher productivity internally, leading to 5 MVPs in 2022, and we're aiming for 12 MVPs in 2023. We introduced Salesforce as the new global CIM tool. We implemented CertIQ as the global Knowledge platform. Almost 20% of our lab revenues are covered by the digital lab concept, while we expect the coverage to increase to 30% in 2023. At the same time, additional functionalities will be considered via release upgrades. We added 15 additional countries to our financial service center set up, covering now 60% of group revenues with regional financial service center support. For 2023, we'll add an additional shared service center in Mexico to cover the Americas, we expect to add globally 20 additional countries to cover 70%+ of our group revenues. We also implemented billing centralization. We added 17 countries covering 13% of group revenues in 2022. We will add more than 20 additional countries in the current year to cover more than 30% of group revenues. For our World Class Services program, 65% of the labs are audited, we expect that 20% of the labs will reach Bronze Award level during 2023. With these initiatives, we're building a strong platform for growth, positioning SGS as a more resilient and more and a higher productive business. With the benefits realizing from those investments, margins and returns will further increase. Our adjusted operating income margin dropped by 100 basis points to 15.4% in constant rate in 2022, as strong revenue growth didn't result in an increase in AOI. As I mentioned before, the AOI was broadly stable in constant rate. Our margin performance in 2022 was negatively affected by more impactful lockdowns in China, primarily in the second quarter. Worldwide supply chain disruptions and subsequent effects of geopolitical events, leading to notably higher inflation in the second half and softening of demand in some of the European markets. Higher sickness rates in December in China and temporarily higher bad debt expenses in the second half. Our Connectivity & Products business is mostly geared to China. Given the COVID-related impact in China in 2022, the margin decline is with 30 basis points rather limited as an improved profitability in cybersecurity and a strong performance of some key affiliates partly offset the negative COVID effect in China. The AOI margin in Health & Nutrition decreased to 13.3% from 17.1% the prior year, affected by the end of COVID vaccine-related testing, the impact of the lockdown in China in Q2, as well as the continued investment into our global network and inflation pressure, which was partly offset by price increases. AOI margin Industries & Environment decreased by 90 basis points to 10.4% due to COVID restrictions in China, the ramp-up of new contracts and collection delays from certain government contracts. This was partly offset by the positive performance of recent acquisitions. AOI margin Natural Resources decreased by 20 basis points to 14.2%. Strong operational leverage in minerals was offset by changes in portfolio mix in oil and gas and agriculture commodities. The margin decline of 70 basis points to 20.3% in Knowledge is primarily a function of change in the service mix as an easing of travel restrictions and return to on-site orders resulted in increased travel costs, with the full impact of price increases will be in 2023. Operation net working capital stands at 0% of revenue. While not any more negative as in the last two years, it is still the third best net working capital position in the history of SGS. The high net working capital need is primarily a function of strong growth as well as some collection delays, especially in China at the end of 2022. In general, somewhat lower levels of provisions. For the whole year, these all levels remain strong and sustainable, supported by centralized cash collection years to come, as well as net working capital benefits from our centralized billing initiatives. Cash flow from operating activities decreased by 11.9% compared to the prior year, primarily due to higher working capital needs, given the growth of the corporation, partly offset by lower tax payments. We spent net CHF 369 million investing activities, which considers also CHF 65 million for several smaller bolt-on acquisitions. Dividend payments as well as NCI transactions amounted to CHF 651 million. We bought back own shares for an amount of CHF 268 million. We paid back a CHF 250 bond and issued CHF 500 million bonds. All this leads to a cash position of CHF 1.6 billion at the end of 2022. For 2023, our cash conversion will be stronger as less net working capital need is expected to be required compared to 2022. Gross CapEx for 2022 decreased by 2% to CHF 329 million, and is in percentage of revenues with 5%, slightly lower compared to the prior year. Net CapEx stood at 4.8% in 2022. To sum it up, our revenue in 2022 increased by 6.8%, which 5.8% is organic. Our adjusted operating income is broadly stable as guided during the Investor Days in November. Our return on invested capital remained strong, but decreased by 100 basis points to 18.6%. We will propose a stable dividend of CHF 80 to the AGM. With this, I hand back to you, Frankie. Thank you, Dominik. Let me go through the outlook of the five divisions. As usual, all the divisional group outlook compared to relate to our expectation for full year 2023 organic growth and are relative to the total group organic growth. Let me start with CMP. Connecting products should grow above the group average. We're expecting some short-term market disturbance to continue in Q1 in China following the lifting of COVID restrictions. The situation should gradually improve in the second quarter, and we anticipate some catching up for some of those activity in the second half. Connectivity is a key growth driver for CMP. We expect the market to continue to grow strongly in 2023 as product development cycles and new testing requirement continues to evolve. For example, our order book for our cybersecurity lab network is already secured for the full first half. The investment we have made in both our capabilities and capacity in CMP globally will continue to generate positive momentum, especially as part of the supply chain continues its transition from China, particularly in hard good and soft line. At the same time, as the Chinese market reopens, we are seeing new market opportunities for operations supporting our domestic market growth. For Health & Nutrition, growth should outperform the group average. Our largest headwinds in 22 for health science were decreasing volume of COVID vaccine testing and talent retention in the very tight market. Both of these factors should ease as we move into the new year. The underlying market remains strong and our continued investment across the network should help to add further growth momentum. Our food testing services will see pressure in Europe as customers are becoming more cautious due to the current economic volatility. However, as Asia and particularly China reopens, following COVID, we expect our food services related to the hospitality sectors to pick up. Together with new investment made in testing facilities in North America and South America, we're expecting growth in these sectors, but slightly below the divisional average. The recently acquired proderm in Germany strengthened our leadership in the cosmetic and hygiene sector. With product becoming more complex and a greater regulatory focus on ingredients, we're seeing increasing market demand for our solutions. Industries & Environment growth should be below the group average. Our strong momentum in health and safety-related services will continue into 23 with expansion of our scope into the renewable energy sectors. New contract wins in LatAm, Latin America, and Europe will start this year. Technical assessment related to the infrastructure and construction sectors is also expecting to have a strong year with new project in Asia and Latin America. Market condition remains difficult for now in our environmental testing activities, particularly in Europe. Low economic growth and project delays are having an impact. However, growth in 2023 should be better than last year. The structural drivers of the environmental market remain healthy and will strengthen as environmental concern and regulatory control increases. Our perk mandate and fuel services will continue to be impacted by end of contract in certain countries, as well as some project delay. Natural Resources. Natural Resources growth should be above the group average. While overall mining explorations expenditure is expected to decrease in 2023, it should not have a significant impact on our activities. Demand for minerals related to the renewable sectors, such as copper, should remain strong. SGS is the leading service provider in on-site laboratory activities, and we are continuing to expand our network with new project. For the agricultural sectors, while a better crop season is expected, global market has been significantly disrupted by the war in Ukraine. As new supply chain emerges, we will see new opportunities within our network. Demand for oil and gas is increasing and drive better volume for our inspection and testing services. However, current pricing can be very competitive, particularly in the inspection services. The oil and gas supply chain are also being impacted by the war in Ukraine, and we expect the market to remain volatile throughout this year. As a consequence, we are continuously redistributing our network resources to manage these changes. Finally, Knowledge. Knowledge should grow above the group average. The underlying market conditions for Knowledge remain healthy, supported by increasing demand in certification scheme such as medical devices, information security, and food safety. We're also seeing a noticeable increase of market interest in services related to ESG, including gap analysis, consulting, and auditing. The growth impact is still limited, but as the market develops, we should see ESG-related services becoming our clear growth drivers for the division in coming years. Technical consulting services had a strong year in 2022, and we're seeing the same momentum moving into 2023. With expansion of our services in Asia. Interestingly, the evolution of our technical consulting is partially driven by our customers seeking help to reduce their operational environmental impact. Our field and testing expertise in enabling us to provide a broader ESG solution than pure auditing. going to the outlook. In terms of outlook for 2023, many of the uncertainties of last year continue, including the current macroeconomic environment, uncertainty over the impact from COVID in China in Q1, and the ongoing war in Ukraine. However, I'm confident that with our focus on key tech market growth sectors, continuous improvement in operational efficiencies, and our abilities to get better pricing in sectors of expertise, will deliver growth and margins improvement with an acceleration in the second half. Given that, the expectation for next year is mid-single digit organic growth, improving adjusted operating income and margin, strong cash conversion, maintain best-in-class organic growth week, to continue to accelerating investment into our strategic focus area with NME as a differentiator, and to at least maintain the dividend. The last slide. We are entering the final year of our plan 2023, this slide is a reminder of the different objective we set up at the beginning of the period. With the outlook I have just given for this year and the progress we made in our strategic ambitions, we're well on track to achieving all our midterm target by end of this year. However, while we expect an improvement, we improved adjusted operating income and margin for '23. The 10% plus adjusted operating income CAGR target for the period of 2023 becomes more challenging given the progress in '22 and our disciplined approach toward M&A. As a conclusion, the long-term drivers of the tech market remain intact, will continue to develop positively, and in many cases are strengthening. We're investing in the business, building our platform for growth, and HS is well positioned to capture on this evolution. On that, I think, Toby, we can go through the Q&A. Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question or make a comment may press star and one on the touch-tone telephone. You will hear a tone to confirm that you have entered a queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Webcast viewers may submit their questions in writing via the relative field. Please limit yourself to two questions only. Anyone with a question may press star and one at this time. The first question comes from Kate Carter from Bank of America. Please go ahead. Hi, everyone. Thanks for taking my question. Two from me. If I look at the organic growth for the second half relative to what you reported for July to October, it looks like organic growth decelerated quite sharply to 3% in those last two months of the year. Just want to check how much of this deceleration was a function of one-offs from absenteeism in China and COVID revenues leaving the system versus a broader slowdown in activity. Second question, just if you could clarify how much you expect pricing to contribute to growth this year, and also what the underlying cost inflation assumptions are. Thank you for the question, Kate. Basically, if we look to this two month, the organic growth in this two month was actually 3.8%. November, December. You take the organic, which we said to the Investor Days October year-to-date, and then this 2 month was 3.8%. If I would take out the effect from China, we would be by roughly 5% growth for this 2 month. The pricing- Regarding the pricing environment. I mean the half of the organic growth is basically was the price increase. This is basically fully in line with what we expected. That obviously means there was a good acceleration also into the end of the year. We expect a further acceleration into this year. We have seen good momentum for price increase the second half, which would be effective this year. There's definitely a higher, clearly higher impact on price increases in 2023. On the cost inflation, surely, in some labor markets there's higher wage inflation in 2023 than in 2022. There are also some areas where we proactively tackled some, yeah, some personal cost already in 2022. It will also accelerate. Yeah, we will see how it's moving on. Overall, the vast majority of the cost will be passed on. Thank you very much. Can I remind everyone, all media inquiries should be directed to corporate communications or directly to me. This call is aimed at analyst investors, so we will stick to analyst investors on the call. The next person to ask questions, and please keep them to two, is Daniel. Please go ahead, Daniel. Yes. Hello, everybody. I would have another question on pricing. If I look at your guidance for 2023, you also expect some volume growth? You would be happy to trust our stable in volumes and pricing will do the rest. That's the first one. You mentioned higher labor costs, probably more acceleration than 2022. Could you maybe also discuss other costs, like energy, for example, what impact to expect in 2023? Thank you. I mean, obviously, let's say that there is no. Let's put it this way. Obviously, we look for mid-single digit organic growth, which is a certain range, and I think it's now too premature what is the exact growth number. I know where you're coming from, but our view would be the majority of this growth is coming from pricing, given the environment in which we are in, and we see how things are going on in that regard. If you think about cost inflation, there are obviously some areas where the kind of cost run rate which we experienced in the second half of last year is not yet in the full year, so there is a little bit of catch up. For example, if we think about energy costs, energy costs was of course a clear increase in certain jurisdictions like Europe, where we in the first half last year still benefited from contracts in place prior to the increase in energy costs. They are renewed, they are now on a different level. That's definitely some, I would say, additional cost moving from, or incremental cost as the full run rate of H2 was lower in H1 coming into next year. Other part is also if you think about travel-related costs. In the beginning of last year, we were still not traveling that much. We went then up. But a country like China, traveling or wheel traveling only started with the opening up. There will be also some cost increases which would be higher than what you normally expect from inflation point of view to get it to the right level. Thank you very much, Dominik. The next question or questions I guess come from Annelies from Morgan Stanley. Please go ahead, Annelies. Hi. Thanks, Toby. Thanks for taking my questions. Just firstly, just a quick one on the replacing of the vaccine volumes in Health & Nutrition. I think in the comments, Dominik, you said that most of that had been replaced. Do you have a timeframe over replacing the rest of it? If you could give some flavors to what kind of work you're replacing that with and how the margin compares to the COVID vaccine work you were doing last year. Secondly, just on Industries & Environment where you sound fairly bearish for this year. Clearly there's been a lot of talks, you know, from capital goods and chemicals around destocking and slower volumes there. Is that the main dynamics that you're seeing in your end markets? Do you see that continuing through to at least the second half, or are there other dynamics at play? Any color on that would be helpful. Thank you. If you first think about the COVID-related work, basically the health science part had a very slight decline in terms of organic growth, but it was really very slightly. The most of the COVID-related work is replaced. There was still some remaining work there which is phasing out, but it's not anymore very relevant in that regard. Obviously it has taken also some time until certain projects are coming in, so there are sometimes a bit of a time delay during 2022, where the vaccine work to a large extent reduced a lot after Q1 and until new businesses is ramping up. That's one of the key reasons why the margin is more materially down than other segments in Health and Nutrition. Surely the vaccine work had rather high profitability. That being said, it's now in the baseline, the new businesses and projects started. You should expect a strong margin increase of the Health & Nutrition business in the current year. On the second question, Annelise, I think the I&E portfolio is quite large. In fact, there's a lot of moving part in there. Clearly the health and safety related activities or the construction supervision related activities, we're looking at the positive development, especially that we have secured quite a few contracts related to. Renewable energy, wind farm, and so on. On the environmental sector, the year is still going to be positive, but a little bit more challenging than the other two services I just mentioned because of the fact that there are some delay in information regulations as well as some project in Europe. This is how we're looking at it, but it should be slightly better than last year for sure. You have sectors like the adoption sectors, where it could be a little bit more negative in power outlook. The automotive, statutory injection sectors would be flat, flattish. Also, all the strategic work with the NDT and so on, as well as some of the transportation sectors will be pretty soft in our views, in particularly in Europe and to some extent in North America. Thank you very much, Frankie. Thank you. The next person we have on the call is Simon from Stifel. Please go ahead, Simon. Yes. Thanks, Toby. 2 question, please. First all, on the 2023 outlook, could you give us some details on the phasing of margins between H1 and H2? Secondly, on the working capital, if you could give us some details on the dynamics there, and should we expect another outflow for 2023? Thank you. If we think about the phasing of the margins, there should be clearly stronger margin increase in H2. What are the kind of events? Obviously H1 was already more impacted last year by China. Excluding China margins were in H1 still okay. We need to see probably the first or second month in China, there will be still a little bit of higher sickness rates even though we hear good signs. Which could have a little bit slower start. It should ramp up and have then the second quarter easier comp as there was the lockdown in China. In the second half, the margin should basically more accelerate. To certain extent, the question is a little bit how the bad debt recovery is happening. We assume obviously, the majority of the kind of incremental bad debt expense which occurred in 2022, will be collected, in general more in the first half, but it could be also throughout the year. In general, I would say the margin increase is more geared to the second half. On the working capital. The working capital there will be with mid-single digit growth. There will be some outflow, but the outflow will be surely lower than what we experienced in 2022. Because while for the whole year DSO we are stable, it's clear that towards the end of the year, with especially in China with having high sickness rates, there was also much less collection, which should move into this quarter and into this year in that regard. Also in general provisions were somewhat lower end for last year. Yes, there will be outflow, but it will be less so. Cash conversion should clearly increase for 23. Thank you. Next up, please, is Sylvia from J.P. Morgan. Please, go ahead. Thank you. Hi, good afternoon, everyone. First question, could you discuss a little bit more kind of the margin trajectory? You said margin's up, but, I guess you've identified the bad debts. You still expect to collect those. What about the cost savings of CHF 50 million? How much of that has been done already? Is that fully going to benefit 2023? Could I just check within the Knowledge business, what margins is that consulting business coming in at? It seems to be growing very quickly. Thank you. Maybe the second one first. Basically the Knowledge business has good margins, but it's below. Sorry. The consulting business within Knowledge has good margins, but it's below the average within Knowledge. Yeah. It's slightly lower, so you could argue it's a bit dilutive. I would not say that's the reason of the margin decline last year. It's really more that in the year before we did a lot of work remotely and had with this, so basically in the year 21, a situation where our delivery model was simply cheaper, right? Because we do it more remotely. We definitely expect a margin increase in Knowledge even if the consulting piece, which probably will outgrow the rest, has slightly lower margins because the difference is not that big, but they are somewhat lower in the consulting business than in the more legacy management system certification businesses. Regarding the margin development, I mean, we're not guiding for exact margin. I mean, I think we are very confident that we have a good margin increase, but I can give you some, of course, some moving parts. Basically the CHF 50 million restructuring is in implementation, is in motion. This should will be, is expected to be achieved in 2023. The majority of the bad debt is CHF 20 million was the higher bad debt last year. The majority should be collected. This is definitely on the positive side. Obviously, we should also get the first benefits from the digital lab program in terms of productivity. There are also some offsetting items which we need to consider. For example, bonuses in 2023 are assumed to be on target. Bonuses in 2022, they were clearly lower given the fact that we had to raise our guidance and certain KPIs related to it. We have, as I mentioned before, on the question regarding cost for gas, electricity, it's not the new norm of these costs. It's higher than what we have in 2022. The H2 run rate needs to be considered. What I also mentioned before on the travel costs, yeah, there will be more traveling. Also with China opening up, there will be more traveling in one of our biggest markets in that part. We will also further accelerate our investments into IT, into digitalization, into Level Up. Thank you very much. The next on the call is Alan from Jefferies. Alan, please go ahead. Hey, good afternoon, guys. Just two quick follow-ups from me if it's okay. I just wanted to go back to kind of the November comments from the first question. Obviously, at the time, the run rate was pretty good. The guidance was for the upper end of mid-single digits. I just wanted to just dig into, was it purely the China recovery that kind of caught you off guard? I just wanted to check, was there anything else in those November, December months that maybe was slightly weaker than you were expecting back in November? That's my first question. Secondly, I just wonder if you could provide a little bit more color on China specifically. Like, what exactly are you seeing in terms of the group level, you know, the sickness levels, the impact on activity and margins? How has that been trending through January? Just thinking about kind of Q1 versus Q2, impact for 2023. Obviously, already you're for a low base and the restrictions in there. Would you expect China to still be down year-on-year in the first half or net, you know, a positive? Thank you. If we first start with the guide. Basically when we had Investor Days, our guidance was, we said we're looking for organic growth more on the upper end of mid-single digit. Yeah. If I say mid-single digit is between four and six, I think the 5.8, we are basically there. What we assumed, obviously we could not know mid of November when we had Investor Days, the sickness challenge in mid of December in China. Obviously this was not considered. What we assumed, like we also said at the Investor Days, we see some softening in some of the European markets, yeah, which occurred. That was the assumption. The only difference is really the China part. Again, if we adjust for China, this 2 months we were about 5. Yeah. From this point of view, and 5.8 was achieved. Yeah. It considers a bit of slowing in Europe what we kind of expected. On the second part regarding China, if you think about China, it is actually of course there were often challenges. If you think about the big lockdown, yeah, or the COVID start back in H1. When was it again? H1 2020. We recovered very well in the second half. I mean, I think our team did a fantastic job to recover in the second half. Yes, we were helped also by all this work for the masks. If you think about the lockdown in the second quarter, we had after the lockdown in the big cities in the second quarter, we had very quickly strong growth, basically up to late autumn. From this point of view, I think our business, our ability to recover fast is very strong. I'm not concerned about the growth rate in H1. Maybe just to add on. End of the year, more or less toward the end of the year, we were about 70 plus% sickness absence, so the operation was pretty down. By the second week, just before Chinese New Year, we're more or less back up to not fully 100%, but pretty much close to 100%. This also consider that our customers has their own problems, so it's one thing that we are back up. The second thing is whether the supply chain and our customers are back up to 100%. We're going to monitor the situation after Chinese New Year to see how things goes. Quarter one will be challenging. Quarter two will pick up again once the situation stabilize. Thank you very much, Frankie. The next question or questions we have is from Michael Vontobel. Please go ahead, Michael. Yes, thank you. Good afternoon. 2 questions. The first one is regarding capital allocation priorities, and if you have identified any further areas of potential divestments, with the possibility to de-deploy the cash elsewhere. The second question tying into that is your equity dropped quite a bit, so net debt to EBITDA continuously increasing. You mentioned that cash flow will be better in 2023, are you planning any other measures to improve the balance sheet? Thank you. If you think about capital allocation, obviously we focus first of all, of course, on organic growth. We put two years ago our CapEx more towards the higher end of the range, 4.5%-5%, which we'll continue to do, and allocate especially capital into above average allocation into areas like connectivity, into areas like health science. What we'll continue to do, we are obviously open for acquisitions in the core segments which we defined, where acquisitions would also help. As I mentioned at the Investor Days, we're not seeing currently a lot of acquisitions. We are very disciplined on pricing, so we'll be more smaller bold on acquisitions in that regard. We also continue to work on our portfolio, so there are a couple of businesses where we have current discussions about, as with external parties about divesting. Maybe there's one or the other could be announced in the course of the year, but this will be more smaller ones in segments like we outlined at the Investor Days where we have which are not of higher strategic priority, where we have a low market share and also not the right or the best returns. Net debt to EBITDA increased. Now obviously we had some years ago was a very, I would say, unleveraged balance sheet. It increased. We also had a share buyback throughout last year. Share buyback is definitely not a priority. It's really about hold on acquisitions, organic growth, and of course a stable dividend. Otherwise, we feel comfortable with our leverage. There is no other actions needed. Thank you. Next up, please, is Arthur from Citigroup. Please go ahead, Arthur. Thanks, Toby. First question from me, just on the working capital outflow again. Are you just able to sort of specify how much of that you know, you think is China driven? I know you've mentioned it, some of it, but whether you could just put a number on that, and likewise, sort of what the outflow is likely to be in 2023. The second question I had was just within Connectivity & Products. Obviously, you talk quite a lot about connectivity, but in the autumn, some of your peers were talking about destocking cycles having an impact on soft lines and hard lines, and I'm just wondering whether that was something you were seeing any impact of now or not so much. Thank you. I'll go on the second part of the questions. Certainly there's a lot of cautions from the retailers about the inventory level and so on. But on the soft line side, we are still seeing quite good growth for 2022. Moving to the new year, I think that the growth trajectory might be slightly lower than last year, but I'm not too concerned about that. How good? Some trajectory, I would say last year was maybe more difficult. We're looking at the better year this year. Again, while the destocking is an important factors, we're also looking at the number of SKU and so on. There's not always a one-to-one ratio between the large inventory of our customers and retail sectors versus what we do in the production countries. The last point as well, I think we also extended our network to capture different sources of supply chain away from China. As I mentioned, we've invested quite a lot over the past few years into Turkey, Vietnam, and so on, and we're seeing this to be part of the drivers in term of the way we're growing our unit there. Regarding the development in terms of net working capital movement, it will be in the ballpark, I would say, outflow this year around CHF ±75 million for 2023 in 2022. China effect, it's a bit hard to say what if and so on, right? But it most likely was around CHF 25 million-30 million. There is a bit of a timing issue, but also, I know there were also, you know, bad debt which we still want to recover or which we'll recover, which impacted also working capital in this 2022. Thank you very much. As a reminder, if you would like to ask a question, please press star one. The next person on the call is Carl from RBC. Please go ahead, Carl. Yeah. Thanks, Toby. Just two from me as well. Back on the Health & Nutrition business, just looking at the second half margin developments, I mean, it dropped back almost 500 basis points. That's created a super easy comp for you next year. The question would be, you know, the extent to which you believe that that margin can recover for the full year 2023 to levels that we saw in 2018 and 2019, i.e. sort of 14% to 14.5%. That's my first question. The second question, I just wanted to check I heard it rightly. It seems that all of the divisions on the outlooks were going to outperform the group average with the exception of I&E. Just mathematically, are you signaling there that I&E is gonna be, you know, particularly weak versus the group average? Perhaps I've misheard one of the, one of the divisions. In fact, yes, it's a bit confusing, I agree. Because the, they're all pretty close to the average, let's put it this way. We have a clear view on where we can land as a company. Most of those that I say are both outperformed, they are pretty close to each other, as well as the I&Es on the other side of the middle point. Considering the size of I&E is much larger, so yeah, has an incident on the average. I would say they're pretty close to each other. There's no, a massive drop on the I&E versus the other four. That's clear. Thank you. On the margin in Health & Nutrition, if we think about, definitely the second half, if you compare second half 2022 with second half 2021, definitely you recall, probably after the year 2021 when we had our announcement and we had a margin at the time of 16.5%, which was a very strong impact also from the second half at the time, was also a lot related to Health & Nutrition and the fact that we had, a big part of this vaccine work, in this second half of 2022. Obviously, now, it's very small, so this is the main reason, obviously, in that regard. There will be a good recovery because the projects are running. There should be definitely, clearly higher than in very prior years. Obviously, the margin, as we outlined at the time, the margin 2021 was definitely more on the higher end given the special impact of this vaccine work, which was nicely priced. Thank you very much. Next on the call is Suhasini Varanasi from Goldman Sachs. Please go ahead. Hi. Thank you. 2 for me, please, as well. The decision to cease the 2 upstream projects in Libya due to the absence of cash collection, can you please give some color on how big it is and what impact you expect on revenues and margins for 2023? What exactly are you thinking about wage inflation for 2023, please? I know you have the offsetting factors, et cetera, for restructuring and so on. Is it like mid to high single-digit wage inflation that you're penciling in? Thank you. Basically, if we think about this business, the revenue which we recognized and reversed was for last year was around CHF 15 million. It's really a kind of one-off, and we put basically everything in the one-off line. From this point of view, there will be no real impact on a year-over-year comparison in that regard, because obviously we also not recognize revenue in the base case as we basically decided to cease this business and given the absence of cash collection. In terms of cost inflation, it, you know, really depends market to market about inflation. Our inflation you need to see is more geared to wages, right? It's probably not high to mid to high single digit in that regard because it's more geared to wages. Things like traveling and so on, what I outlined into the second half, first half is more a question of volume. Yeah. Thank you. Now we move to the last questions on the call. As I said, you can rejoin if you would like, and if we got time at the end, we'll get around to you again. The final caller, please, is Rory from UBS. Please go ahead, Rory. Afternoon. Thank you. 2 for me, please. Can you give us the pricing contribution by division, or even just rank them in terms of where it has been hardest or easiest to increase contract prices? Just thinking about your performance dashboard on slide 34. Is it those businesses that have the lower market share where you've struggled to pass on cost inflation? Does that then influence any decisions about disposing of units? Secondly, just on the Knowledge division, do you see any risks that the consulting service lines face a tougher outlook over the next few years? I know there's quite a few companies talking about wanting to cut back on consulting bills and other areas of spend. Any headwinds you're anticipating there? Thank you. If you think about pricing, I mean, first of all, we see price upticks in basically all the businesses. Now, it's fair to say there are for sure certain businesses where barriers to entry are materially higher, where it's easier to pass on. In other areas, when it's more to commodities, it's more challenging. It's also fair to say if we think about our large accounts, there is also a realization that this inflation was really high and an openness to accept price increases. I think it's more in that regard. Certain businesses, I think the kind of what we dispose or what we'd like to change the portfolio is less a function of inflation or price. It's more our view about the structural outlook of these businesses, our market positioning, and our ability to achieve strong returns because we are obviously very, very return-focused. On the consulting part, what we're doing in consulting has a lot to do with supply chains, or the portfolio, what we're doing there. Actually we are pretty optimistic because in this part there's rather more incremental demand of advice needed. From this point of view, we have a rather positive outlook also for the years to come. Thank you very much. We're now moving to the questions which have been sent via the web. I will read this out, so please bear with me. The first two are from Neil Tyler from Redburn. How are we thinking about headcount into the next 12 months, keeping in terms the balance between capturing growth and keeping costs in check? I mean, we drive. We have our objectives to basically drive productivity, very clearly. Obviously, headcount planning and headcount deployment is a key parameter, and we adapt the headcount to the needs, to the market demand, yeah. It's obviously if we see opportunities for growth and potential to have good returns, we will invest. Yeah. Frank, you want to add something? I would say also it depends on the mix of our portfolios, certainly. As you know, that for quite some time, it's been pushing more into the testing part of the portfolio. The testing in term of headcount and the manpower intensity is different than the field activities. I would say, as we migrate, including the Level Up initiative to help to optimize the efficiency across the laboratories. As we migrate toward these directions, certainly the labor intensity will change over time towards more the laboratories and more automated level of initiatives that we've been trying to push for the past couple of years already. Thank you. The second question from Neil is specific to Health & Nutrition. Following the fall in profits in the first half and second half, and based on the assumption that that is based upon the vaccine development work coming out of the business, we'd also mentioned the cost of network investment. On that, is the 2022 base now clear of vaccine work? Secondly, how are we budgeting for network investment this year? So the- No, go ahead. Go ahead. There are. Again, in 2022 was still some related vaccine work, but it's really the minor part. Regarding investments, especially in Health & Nutrition and health science, we see good opportunities for the midterm and also opportunities to enlarge our footprint, so we will continue to invest in certain labs across the world. Yeah, absolutely. I mean, the health science is a strategic direction that we set with Health & Nutrition a few years back. We'll continue to invest into a network, and this will include some additional investment in 2 Asian countries, in Europe, partially to just up-create some of our facilities and probably in North America. Thank you. We have one from Guillaume Delmas from Lombard Odier, and he would like to have an update on the M&A pipeline and our vision for FX in 2023. The M&A side, I mean, it has nothing changed to what we discussed at the investor days. We're not seeing, for the time being, more sizable opportunities on the market. It's more smaller things and if they... You know, we're looking after this and conclude certain things like a Proderm, which was a very nice addition for our cosmetic business. I would expect for this year, not too much M&A part because we're simply not seeing enough supply on the market in the areas of our high interest. Also given that last year was of course also very demanding, I would say from a pricing point of view, we are very disciplined in that respect. We have to see when more supply comes back to the market, whether from in the private market how pricing has adjusted. Thank you very much. There are two from Pablo from Kepler Cheuvreux. I'll start with the sort of more technical one, which is an update on cost of debt, and tax, for 2023. If we look to our cost of debt, our overall portfolio of debt instruments, or outstanding ones, which is biggest part, is 0.8% interest expense. Obviously, we'll have more interest income, but also hedging costs. Finance expense mid CHF 50 million should be a good number. Tax rate improved. We would foresee and we believe this tax rate is more or less sustainable, which we posted. We expect the tax rate going forward between 26%-27%. Thank you very much. Then one which is similar to a question we had before actually, but back in November, we expected to get... I'm not saying we expected to, but the expectation from Pablo was that we would get 100 basis points of margin benefit in 2023 from the factors of cost savings and bad debt recovery. Could you talk around those points and what we expect to realize in 2023? I mean, there are positive items. There are like I outlined before, the CHF 50 million restructuring benefits which would fully occur in 2023. We have a reversal of bad debt to expect it to be a large extent. All these things, of course, have a positive impact. As I mentioned to one of the questions earlier, there are also some offsetting items like higher bonuses than in 2022 we expect for 2023 if Assuming bonus at target, obviously. A higher, kind of the facing of electricity gas costs, which is more the run rate of H2 versus what we had in H1. The same is true for traveling and more traveling given, the opening of China. Overall, yeah, we, we expect, you know, very nice margin increase, but we're not guiding now to a fixed margin. Absolutely. Thank you. I'll cover two capital allocation questions at the same time, 'cause I think it's gonna be easier to do that. Patrick from ZKB is asking whether we would consider a share buyback program this year, and what factors does it depend upon? Secondly, and, you know, part of the sort of overall picture, I think, net debt has gone up, and free cash flow hasn't covered the dividend. Is there a case for cutting the dividend rather than holding it flat? To the first question, We concluded a share buyback program, which we announced a good half year ago, and with this, we are done. I'm not foreseeing share buyback programs in the near term. Clearly not. In terms of capital allocation, it's really the dividend of CHF 80, which should be stable. Yes, the free cash flow is, it was last year lower. We expect a clearly better cash conversion into this year, and the dividend will stay stable at CHF 80 until the moment that the payout ratio will move down towards 70%-75%, and then dividend increase is an option. Up to this moment, it's basically CHF 80 and no share buybacks. Thank you very much. We have the final two. The first one is from Kulwinder Garcha from AlphaValue. We're targeting 50% of revenue from sustainable sustainability solutions. Based on interactions with customers, where do we think or which divisions do we believe have the most room to introduce new services and solutions into 2023? You know, the way we calculate our sustainability solution framework includes some of the existing activities. I would say Knowledge will be certainly one of the beneficiary because the fact that there's already increased demand on the market about sustainability related audit assessment and consulting. I would also believe that the way we continue to grow our Health & Nutrition portfolio would be contributing to this segment. On the CNP side, we also have some new project is linked to our sustainability solution in terms of product certificate and so on, as well as the transitions from our INE. But I would say if I have to pick two that would contribute the more would be Health & Nutrition and Knowledge. Thank you very much. Then our final question, 'cause I think we're, we've overrun already, so we'll cover it off there. Going back to health, could you break down the difference in margin impact from China and investment, and how much of that will reverse into 2023? We don't have this detailed number now. Okay. Maybe Alfonso Edeso from Barclays, if you send me that question, we can come back to you in a bit more detail. Thank you very much. It's been a long call, and I think we've got through a lot of questions. Thank you for attending the call. With that, I'll hand over to Frankie for a couple of words at the end. Thank you, Toby. I think just to conclude that the team and I are really focused on delivering the outlook we set here. We are clear that productivity, growth, and really focus on mid and long term of the original market is essential. As we discussed last November, for those of you who attended the Investor Days, the long-term drivers are still there. We're investing for the long term, and the reasons are company's clear, and we are looking at a strong year for 2023. Thank you. Thank you very much. Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.