New growth avenues drive expansion into related service segments for TICC firms

TICC includes organisations offering healthcare diagnostics as well as testing, inspection, and certification services. The sector’s index score is 113 (normalised to the base year of FY19 = 100), reflecting a slight drop from last year’s GBSI score of 114, due to profitability pressures and restructuring investments weighing on cash flows.

Testing, Inspection, and Certification sector performance, by dimension, is as follows:

• Growth: The increasing demand for AI-related solutions has enhanced organic growth for TICC companies, complemented by favourable regulatory changes that heighten the need for certification services. To further support organic growth and expedite expansion into high-growth verticals, leading firms are also engaging in strategic acquisitions.
• Profitability: Inspection and certification companies have maintained profitability despite rising costs. In contrast, healthcare diagnostics firms have faced margin declines due to higher labour costs and a reduction in COVID-19 testing, although certain segments such as veterinary diagnostics have managed to sustain higher margins compared to their generic counterparts.
• Productivity: Digital tools, and more recently AI-driven solutions, are helping enhance service delivery by automating processes and boosting workforce productivity, contributing to improved revenue per employee metrics. These solutions are also facilitating better utilisation of laboratories and other physical assets, leading to marginal improvements in asset turnover ratios. 
• Cash flow: Strong liquidity within the sector has facilitated reinvestment in strategic growth and capability expansion initiatives. Healthcare diagnostics, in particular, have focused extensively on technology and transformation investments, leading to a notable decrease in cash flow ratios due to these forward-looking initiatives.