BUREAU VERITAS | A Less Cyclical Growth Model

BUREAU VERITAS | A Less Cyclical Growth Model
Three years after the group began implementing the “BV 2020” strategic plan, its transformation is already extensive with, mainly:

• A less cyclical business model: The plan has already significantly reduced the cyclical nature of results from activities that are highly dependent on the capex of client companies. Cyclicality has also been reduced by better geographic distribution of turnover from certain segments. Although part of the group's results remain sensitive to GDP, the extent is tiny compared to some years ago and dependence on client capex has been halved to less than 22% of consolidated revenue.
• Powerful growth drivers: In order to become less cyclical, the group has developed what it calls five “Growth Initiatives”: Building & Industry, Automotive, SmartWorld, Agri-Food and Opex now represent 37% of consolidated revenue vs. 28% in 2015, and are driving robust organic revenue growth of 6-7%.
• While the group's transformation will continue until the end of the plan, strengthening the favorable cash business model with high profitability, low capex requirements and high cash conversion rate over the cycle, management has confirmed a tentative recovery in the most cyclical activities, which are no longer weighing on growth.
• Given this situation, we believe that the objectives of the plan are within reach despite current headwinds, notably the trade war which is a limited threat as less than 1% of consolidated revenue is exposed to tariff increases.

• The share price currently shows a valuation in line with the historical median multiple that we consider conservative given the transformation of the group.