Slide 1: 2020 full year results presentation
2020 full year results presentation SGS GROUP RESULTS
Slide 2: Disclaimer
Disclaimer Certain matters discussed in this presentation may constitute forward-looking statements that are neither historical facts nor guarantees of future performance. Because these statements involve risks and uncertainties that are beyond control or estimation of SGS, there are important facto
Slide 3: A strong operational performance in 2020
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX A STRONG OPERATIONAL PERFORMANCE IN 2020
Slide 4: Rising to the challenge in 2020
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX Rising to the challenge in 2020 Protecting our employees and supporting our communities ■■ Employee health and safety through the provision of Personal Protective Equipment ■■ Supporting and equipping remote working ■■ Focusing on empl
Slide 5: Resilient adjusted operating income performance
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX Resilient adjusted operating income performance 2020 highlights REVENUE ADJUSTED OPERATING INCOME* PROFIT FOR THE PERIOD CHF 5.6 BN (8.8%) (6.5%) ORGANIC* 1 CHF 900 MIO (8.0%)1 CHF 505 MIO (28.1%) 2020 | 5.6 2020 | 900 2020 | 505 20191
Slide 6: Rising to the challenge in 2020
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX Rising to the challenge in 2020 Service innovation and focused investment ■■ Evolving our services to help our customers address their operation and supply chain challenges through remote inspection, audit and training ■■ Launch of inn
Slide 7: Strategic focus on higher value-added services through portfolio evolution
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX Strategic focus on higher value-added services through portfolio evolution Acquisitions Thomas J. Stephens Engineering Control & Associates, Inc. Limited Business line: CRS Business line: IND Location: USA Location: New Zealand CTA Gal
Slide 8: Strategic focus on higher value-added services through portfolio evolution
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX Strategic focus on higher value-added services through portfolio evolution Subsequent acquisitions and announcements Disposals Analytical & Development Services Pest management and fumigation operations Business line: AFL Business line
Slide 9: Our portfolio demonstrated resilience in 2020
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX OUR PORTFOLIO DEMONSTRATED RESILIENCE IN 2020
Slide 10: Margin improved in 2020 despite revenue decline
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX HIGHLIGHTS Margin improved in 2020 despite revenue decline 2020 Financial highlights December December Change December Change in (CHF million) 2020 2019 in % 2019 CCY1 CCY1 % REVENUE 5 604 6 600 (15.1) 6 148 (8.8) OPERATING INCOME (EBI
Slide 11: Resilient organic revenue growth
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX REVENUE Resilient organic revenue growth 2020 Revenue composition (CHF million) (6.5%) 0.7% (3.0%) (6.3%) (15.1%) 6 600 (401) 45 (188) (452) 5 604 Constant currency* (8.8%) Revenue Organic Acquisitions Disposals Currency Revenue Decemb
Slide 12: CRS and AFL delivered organic growth
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX REVENUE CRS and AFL delivered organic growth 2020 Revenue growth by business Growth1 2020 (1.5%) 0.3% 0.1% AFL (1.1%) (6.9%) MIN (6.9%) (15.2%) (7.7%) OGC (22.9%) 1.0% 1.3% CRS 2.3% (12.0%) 3.9% CBE (8.1%) (2.0%) (13.4%) 0.2% IND (15.2
Slide 13: Regional growth impacted by variable lockdown measures
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX REVENUE Regional growth impacted by variable lockdown measures 2020 Revenue growth1 by region Growth1 2020 (0.6%) (7.9%) 0.3% EUROPE/AFRICA/ 44.8% MIDDLE EAST (8.2%) (12.2%) (12.0%) 2.5% 19.7% AMERICAS (21.7%) 0.0% (0.7%) 35.5% ASIA/PA
Slide 14: Efficient workforce management
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX REVENUE Efficient workforce management (CHF million) (6.9%) (1.9%) (9.3%) 1.3% (16.7%) 3 357 (230) (63) 3 064 49.8%4 2 753 44 2 797 49.1%4 (10.2%) Salaries Currency Restructuring 20191,2 Active Structural Remaining 20202 Restructuring
Slide 15: Average headcount decreased by 6%
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX REVENUE Average headcount decreased by 6% FTE1 End of period FTE1 Average by region 2 536 (1 757) 94 494 (1 596) (3 985) (488) (1 254) 92 661 185 89 098 91 698 Decrease: (963) (1.0%) Decrease: (5 396) (5.7%) Dec. Acqui. Dispos./ Cost R
Slide 16: Strong organic adjusted operating income performance
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX ADJUSTED OPERATING INCOME Strong organic adjusted operating income performance 2020 Adjusted operating income* (CHF million) (6.7%) 0.1% (1.4%) (7.3%) (15.3%) 1 063 (65) 16.1% 1 (14) (85) 900 16.1% Constant currency* (8.0%) Adj. Op. in
Slide 17: Adjusted operating income
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX ADJUSTED OPERATING INCOME Adjusted operating income 2020 Adjusted operating income* bridge December December ■■ In 2020, the termination of the single-window contract (CHF million) 2020 2019 with the Government of Ghana and the vehicle
Slide 18: FY margin increased driven by a strong performance in H2
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX SECOND HALF 2020 FY margin increased driven by a strong performance in H2 Revenue growth evolution AOI* margin evolution 2020 CCY¹ 2.0% 20.0% 19.3% 0.0% 19.0% 18.0% (2.5%) (2.6%) 17.3% -5.0% 17.0% 16.1% (6.5%) 16.0% 15.9% (8.8%) -10.0%
Slide 19: Rising to the challenge in 2020: Financial discipline
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX FINANCIAL DISCIPLINE Rising to the challenge in 2020 Financial discipline ■■ Placement of CHF 175 million and CHF 325 million bonds at attractive pricing ■■ Strong focus on pricing discipline ■■ Annualized structural optimization of ab
Slide 20: Strong margin performance reflects our financial discipline
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX FINANCIAL DISCIPLINE Strong margin performance reflects our financial discipline 2020 Adjusted operating income margin1,* 30% 25% 25.0% 24.6% 20% 19.7% 19.1% 19.9% 18.3% 17.6% 17.4% 16.0% 16.6% 15.9% 16.1% 15% 12.4% 10.8% 10.5% 10% 9.8
Slide 21: Continuous EVA performance management
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX FINANCIAL DISCIPLINE Continuous EVA performance management ■■ Progression made on the 150+ business units under review but in some cases slower than expected due to Covid-19 29% 17% ●● 17% closed CRITICAL FOCUS CLOSED ●● 40% created va
Slide 22: 2020 Consolidated balance sheet
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX BAL ANCE SHEET 2020 Consolidated balance sheet Assets Equity and liabilities December December December December (CHF million) 2020 2019 (CHF million) 2020 2019 Property, plant and equipment 872 926 Equity holder of SGS SA 1 060 1 514
Slide 23: Strong cash flow generation
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX CASH FLOW Strong cash flow generation 2020 Condensed cash flow December December December December (CHF million) 2020 2019 (CHF million) 2020 2019 PROFIT FOR THE PERIOD 505 702 CASH FLOW FROM OPERATING ACTIVITIES 1 186 1 149 Non-cash a
Slide 24: Strong net working capital performance
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX CASH FLOW Strong net working capital performance ■■ Improved Days Sales Outstanding (DSO) Operating net working capital in % of revenue * supported by solid cash collection ■■ Sustainable Days Payable Outstanding (DPO) 150 2.5% 1.9% ■■
Slide 25: Continued investment in strategic priority areas
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX CASH FLOW Continued investment in strategic priority areas Capex in % of revenue Capital expenditure by business (CHF million) 5% 400 GIS 4.8 % 4.6% 5% 350 4.5% 4.4% 1% 300 4% CBE 302 304 250 290 259 3% 32% 200 CRS 8% 150 2% EHS 100 1%
Slide 26: Financial summary
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX FINANCIAL SUMMARY Financial summary (8.8%) CHF 736 MIO REVENUE GROWTH1 OF WHICH (6.5%) ORGANIC* NET CAPITAL INVESTMENT AND ACQUISITIONS (8.0%) CHF 1 186 MIO DECREASE IN ADJUSTED OPERATING INCOME1,*, CASH FLOW FROM OPERATING ACTIVITIES
Slide 27: Business review
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX BUSINESS REVIEW
Slide 28: Structural growth drivers increasingly relevant
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX Structural growth drivers increasingly relevant Agriculture, Food and Life (AFL) December December Change December Change in Overview (CHF million) 2020 2019 in % 2019 CCY1 CCY1 % ■■ Organic revenue increased by 0.3% REVENUE 996 1 074
Slide 29: Momentum improved in H2
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX Momentum improved in H2 Minerals (MIN) December December Change December Change in Overview (CHF million) 2020 2019 in % 2019 CCY1 CCY1 % ■■ Organic revenue declined by 6.9% with a strong REVENUE 639 753 (15.1) 686 (6.9) improvement ac
Slide 30: A challenging market
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX A challenging market Oil, Gas and Chemicals (OGC) December December Change December Change in Overview (CHF million) 2020 2019 in % 2019 CCY1 CCY1 % ■■ Revenue declined following the disposal of Plant REVENUE 776 1 075 (27.8) 1 006 (22
Slide 31: Impacted by site access and travel restrictions
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX Impacted by site access and travel restrictions Certification and Business Enhancement (CBE) December December Change December Change in Overview (CHF million) 2020 2019 in % 2019 CCY1 CCY1 % ■■ Organic revenue declined by 12.0%, impac
Slide 32: Oil & Gas end-market under pressure
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX Oil & Gas end-market under pressure Industrial (IND) December December Change December Change in Overview (CHF million) 2020 2019 in % 2019 CCY1 CCY1 % ■■ Organic revenue declined by 13.4%, while the drop REVENUE 847 1 091 (22.4) 999 (
Slide 33: Fundamentals remain strong following challenging year
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX Fundamentals remain strong following challenging year Environment, Health and Safety (EHS) December December Change December Change in Overview (CHF million) 2020 2019 in % 2019 CCY1 CCY1 % ■■ Organic decline of 9.0% with significant i
Slide 34: A recovery in mobility solutions in H2
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX A recovery in mobility solutions in H2 Governments and Institutions (GIS) December December Change December Change in Overview (CHF million) 2020 2019 in % 2019 CCY1 CCY1 % ■■ Revenue declined in all strategic business units except REV
Slide 35: A very strong performance
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX A very strong performance Consumer and Retail (CRS) December December Change December Change in Overview (CHF million) 2020 2019 in % 2019 CCY1 CCY1 % ■■ Moderate organic growth as all strategic business REVENUE 1 054 1 091 (3.4) 1 030
Slide 36: SGS' strategic evolution
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX SGS’ STRATEGIC EVOLUTION
Slide 37: The next stage of SGS' strategic evolution
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX The next stage of SGS’ strategic evolution ■■Structural growth drivers of TIC industry remain intact, ■■Six focus areas: but some opportunities will grow faster than others ●●Four new divisions: Connectivity & Products ■■Key expectatio
Slide 38: Simplifying the divisional structure
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX Simplifying the divisional structure Agriculture, Food and Life Health Science Connectivity & Products Crop Science Food Trade & Inspection Consumer and Retail Cosmetics & Hygiene Softlines Health & Nutrition Hardlines Electrical and E
Slide 39: Operations Council (OC)
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX Operations Council (OC) Frankie Ng Chief Executive Officer Regions Divisions Cross-divisional strategic units Functions Chief Operating Officers (COO) Executive Vice Presidents (EVP) Senior Vice Presidents (SVP) Teymur Abasov Olivier C
Slide 40: Outlook
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX OUTLOOK
Slide 41: 2021 Outlook
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX 2021 OUTLOOK ■■Solid organic growth normalizing for the impact of Covid-19 ■■Improving adjusted operating income ■■Strong cash conversion ■■Maintaining best-in-class organic return on invested capital ■■Accelerating investment into our
Slide 42: Q&A
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX Q&A
Slide 43: Questions press *
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX TO REGISTER FOR QUESTIONS PRESS * AND 1 ON YOUR TELEPHONE
Slide 44: Appendix
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX APPENDIX
Slide 45: Acronyms and other abbreviations
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX Acronyms and other abbreviations Al Artificial Intelligence CAPEX Capital Expenditure EVA Economic Value Added FTE Full Time Equivalent NIRT Non-Inspection Related Testing OPEX Operational Expenditure PPE Personal Protective Equipment
Slide 46: Long-term shareholder value creation
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX Long-term shareholder value creation REVENUE CHF BN ADJUSTED OPERATING INCOME* CHF MIO FREE CASH FLOW CHF MIO 2020 | 5.6 2020 | 900 2020 | 758 2019 | 6.6 2019 | 1 063 2019 | 673 2018 | 6.7 2018 | 1 050 2018 | 796 2017 | 6.3 2017 | 969
Slide 47: A resilient performance in H2
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX A resilient performance in H2 H2 2020 revenue composition (CHF million) (2.6%) 0.4% (0.4%) (6.8%) (9.4%) 3 259 (78) 11 (12) (226) 2 954 Constant currency* (2.6%) Revenue Organic Acquisitions Disposals Currency Revenue H2 2019 impact H2
Slide 48: Reflecting the strength of the portfolio
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX Reflecting the strength of the portfolio H2 2020 revenue growth by business Growth1 2020 (1.6%) 5.6% AFL 4.0% (5.0%) MIN (5.0%) (8.6%) 1.0% OGC (7.6%) 7.5% 1.1% CRS 8.6% (7.3%) 0.4% CBE (6.9%) (1.6%) (8.4%) 0.2% IND (9.8%) (6.8%) 0.0%
Slide 49: Strong H2 margin improvement in AFL, MIN, CRS, CBE & GIS
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX Strong H2 margin improvement in AFL, MIN, CRS, CBE & GIS H2 2020 adjusted operating margin1,* by business 35% 30% 27.8% % 25.2% % 25.3% % 25% 22.2% % 21.5% % 20.8% % 20% 19.9% % 19.3% % 17.9% % 17.5% 17.4% 16.9% 15% 13.9% % 12.9% 12.5%
Slide 50: Adjusted operating income margin improvement in H2 2020
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX Adjusted operating income margin improvement in H2 2020 H2 2020 financial highlights H2 H2 Change H2 Change in (CHF million) 2020 2019 in % 2019 CCY1 CCY1 % REVENUE 2 954 3 259 (9.4) 3 033 (2.6) OPERATING INCOME (EBIT) 493 446 10.5 400
Slide 51: Well-balanced portfolio
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX Well-balanced portfolio 2020 revenue portfolio Change1 Change1 7.0% GIS (0.2%) 18.8% 7.7% 2.1% CRS CBE 0.1% 8.4% EHS 0.1% 11.4% MIN 0.2% 17.8% 1.4% AFL 13.8% OGC (2.6%) 15.1% (1.1%) IND 1. Constant currency (CCY)* * Alternative Perform
Slide 52: Well-balanced portfolio
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX Well-balanced portfolio 2020 adjusted operating income* portfolio Change1 Change1 4.7% EHS (1.7%) 8.0% 29.3% IND (2.7%) 3.4% CRS 8.4% OGC (2.7%) 9.2% CBE (0.2%) 8.7% GIS 0.4% 19.4% 2.9% AFL 12.3% MIN 0.6% 1. Constant currency (CCY)* *
Slide 53: EUR, USD and CNY represent 51% of 2020 revenue
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX EUR, USD and CNY represent 51% of 2020 revenue 2020 foreign currency revenues 25.5% 16.0% EUR CNY 9.4% USD 29.9% 2.3% OTHER KRW 3.5% CAD 2.2% 2.4% RUB AUD 4.5% TWD 2.4% 1.9% GBP CLP 53 Full year results presentation 28 January 2021 © S
Slide 54: Currencies' depreciation against CHF in 2020
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX Currencies' depreciation against CHF in 2020 Foreign currency average rate change 2020 versus 2019 rate 5% 0% (0.9%) (5%) (3.8%) (5.5%) (5.5%) (5.1%) (6.5%) (6.3%) (6.7%) (10%) (15%) (14.8%) (16.3%) (20%) EUR CNY USD TWD CAD AUD GBP KR
Slide 55: Investor relations information and events dates
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX Investor relations information and events dates INVESTOR DAYS SGS SA CORPORATE OFFICE MEDIA RELATIONS COMMON STOCK SYMBOLS Thursday and Friday 1 place des Alpes Daniel Rufenacht Bloomberg: Registered Share: SGSN.SW 27 – 28 May 2021 P.O
Slide 56: Thank you
THANK YOU www.sgs.com SGS is a registered trademark of SGS Société Générale de Surveillance SA