SGS Geological Services · SIX:SGSN
SGS Geological Services — SGS — FY2022 Earnings Presentation
52 slides from SGS Geological Services's earnings presentation, Jan 26, 2023
Slide 1: 2022 Full Year Results Presentation
SGS Group Results 2022 Full Year Results Presentation
Slide 2: Disclaimer
Highlights Financial review Business review Outlook Q&A Appendix 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 a
Slide 3: Highlights
Highlights Financial review Business review Outlook Q&A Appendix 1 2 Full Year Results Presentation 26 January 2023 © SGS SA – 2023 – All Rights Reserved.
Slide 4: Successfully navigating the challenges of 2022
Highlights Financial review Business review Outlook Q&A Appendix Successfully navigating the challenges of 2022 3 Full Year Results Presentation 26 January 2023 © SGS SA – 2023 – All Rights Reserved.
Slide 5: A resilient performance in a challenging environment
Highlights Financial review Business review Outlook Q&A Appendix A resilient performance in a challenging environment 2022 highlights Revenue Adjusted Operating Income* Profit for the Period CHF 6.6 BN +6.8% CCY +5.8% Organic* +3.7%² 1 CHF 1 023 MIO +0.1% CCY 1 CHF 630 MIO (3.8)% 2022 6.6 2022 1 023
Slide 6: Strategic progress across People, Planet and Performance
Highlights Financial review Business review Outlook Q&A Appendix Strategic progress across People, Planet and Performance A purpose-driven company People* Planet* Performance ● 29.1% women in senior leadership positions ● First TIC company to receive approval for ● Pricing initiatives contributed ha
Slide 7: Focused bolt-on acquisitions in 2022
Highlights Financial review Business review Outlook Q&A Appendix Focused bolt-on acquisitions in 2022 2022 Acquisitions Gas Analysis Ecotecnos AIEX Advanced Metrology SGS Digicomply Services Solutions (ACQUISITION OF THE REMAINING 49% MINORITY STAKE) (ACQUISITION OF THE REMAINING 32% MINORITY STAKE)
Slide 8: Focused bolt-on acquisitions in 2022
Highlights Financial review Business review Outlook Q&A Appendix Focused bolt-on acquisitions in 2022 2022 Acquisitions and disposals 2022 Disposal Silver State Analytical proderm GmbH Penumbra Security, Industry Lab Drilling business Laboratories, Inc. Inc in USA and Excelchem Laboratories, Inc. Di
Slide 9: 2022 financial review
Highlights Financial review Business review Outlook Q&A Appendix 2022 financial review 8 Full Year Results Presentation 26 January 2023 © SGS SA – 2023 – All Rights Reserved.
Slide 10: Strong revenue growth, AOI in line with prior year in constant currency
Highlights Financial review Business review Outlook Q&A Appendix Strong revenue growth, AOI in line with prior year in constant currency 2022 financial highlights (CHF million) 2022 2021 Change in % 2021 CCY1 Change in CCY1 % Revenue 6 642 6 405 3.7 6 222 6.8 Operating income (EBIT) 898 977 (8.1) 94
Slide 11: Strong organic revenue growth
Highlights Financial review Business review Outlook Q&A Appendix Strong organic revenue growth 2022 Revenue growth composition (CHF million) 5.8% 1.0% (0.0%) (3.1%) 3.7% 362 60 (2) (183) 6 642 6 405 Constant currency* 6.8% Revenue Organic Acquisitions Disposals Currency Revenue December 2021 impact
Slide 12: Broad organic growth across the portfolio led by NR and Kn
Highlights Financial review Business review Outlook Q&A Appendix Broad organic growth across the portfolio led by NR and Kn 2022 Revenue growth1 by division Growth CCY1 2022 3.9% 0.6% 19.8% C&P 4.5% 4.1% 3.5% 13.4% H&N 7.6% (0.1%) 4.8% 0.7% 32.5% I&E 5.4% 8.7% 0.6% 23.8% NR 9.3% 8.7% 10.5% Kn 8.7% 5
Slide 13: Organic growth driven by the Americas and Asia Pacific
Highlights Financial review Business review Outlook Q&A Appendix Organic growth driven by the Americas and Asia Pacific 2022 Revenue growth1 by region Growth CCY1 2022 3.7% 1.7% 44.3% Europe/Africa Middle East 5.4% (0.2%) 10.2% 1.1% 20.5% Americas 11.1% 6.0% 35.2% Asia Pacific 6.0% 5.8% 1.0% Total G
Slide 14: Disciplined workforce management
Highlights Financial review Business review Outlook Q&A Appendix Disciplined workforce management FTE1 end of period FTE1 average by region 96 216 255 2 856 98 152 1 278 1 517 96 759 93 297 667 (1 175) Increase: 1 936 2.0% Increase: 3 462 3.7% 2021 Acqui. Dispos./Restr. Remaining 2022 2021 Eur./Afr.
Slide 15: AOI at the same level as prior year in constant currency
Highlights Financial review Business review Outlook Q&A Appendix AOI at the same level as prior year in constant currency 2022 adjusted operating income* (CHF million) (0.1%) 0.2% (3.1%) (3.0%) 1 055 (1) 2 (33) 1 023 16.5% Constant currency* 15.4% 0.1% Adj. op. inc. Organic Acquisitions Currency Adj
Slide 16: Building a platform for growth through Level Up
Highlights Financial review Business review Outlook Q&A Appendix Building a platform for growth through Level Up 2022 achievements 2023 objectives 2024 objectives ● Project “Prometheus”: full ● Full realization of cost saving ● Leverage the BO to develop outsourcing of IT infrastructure, potential o
Slide 17: A resilient performance in 2022 in a challenging environment
Highlights Financial review Business review Outlook Q&A Appendix A resilient performance in 2022 in a challenging environment AOI* margin evolution CCY¹ 20% 20% 18.0 Adjusted operating income margin 18% 18% 16.7 16.4 negatively affected by: 16% 15.4 16% 14.1 14.8 ● Worldwide supply chain disruption
Slide 18: Margins temporarily impacted by a challenging environment
Highlights Financial review Business review Outlook Q&A Appendix Margins temporarily impacted by a challenging environment 2022 adjusted operating income margin1,* 23.9 24.2 25% 21.0 20.3 20% 17.1 16.4 15.4 14.2 14.4 15% 13.3 11.3 10.4 10% 5% 0% C&P H&N I&E NR Kn Total Group December 2022 December 2
Slide 19: Higher net working capital requirement to support strong revenue growth
Highlights Financial review Business review Outlook Q&A Appendix Higher net working capital requirement to support strong revenue growth Operating net working capital as a % of revenue* 50 1 ● Days Sales Outstanding (DSO) 0.3% 0.0% remains strong and sustainable 19 0 0 3 Continue to be driven by: -5
Slide 20: Cash flow continues to support our growth and capital allocation
Highlights Financial review Business review Outlook Q&A Appendix Cash flow continues to support our growth and capital allocation Cash flow (CHF million) CF from Operating Activities CF used in Investing Activities CF used in Financing Activities 1 030 (369) (448) 812 (250) 630 (162) 17 (321) (65) 4
Slide 21: Growth capex focused on our strategic priority areas
Highlights Financial review Business review Outlook Q&A Appendix Growth capex focused on our strategic priority areas Capex as a % of revenue Capital expenditure by business (CHF million) 2% 500 6 Kn 5.2% 5.0% 4.6% 5 16% 400 4.4% H&N 336 4 329 27% 300 290 I&E 259 3 200 2 CHF 329 MIO 100 1 32% 0 0 C&
Slide 22: 2022 financial highlights
Highlights Financial review Business review Outlook Q&A Appendix 2022 financial highlights ● Revenue increased by 6.8%1 of which 5.8% organic* ● Adjusted operating income* broadly stable with a slight increase of 0.1%1 ● Decrease in adjusted operating income margin* by (1.0) pp1,2 to 15.4% ● Profit
Slide 23: Divisional review
Highlights Financial review Business review Outlook Q&A Appendix Divisional review 22 Full Year Results Presentation 26 January 2023 © SGS SA – 2023 – All Rights Reserved.
Slide 24: Connectivity & Products (C&P)
Highlights Financial review Business review Outlook Q&A Appendix A very strong performance given the impact from Covid in China Connectivity & Products (C&P) Change 2021 Change in Overview (CHF million) 2022 2021 in % CCY1 CCY1 % ● Organic growth of 3.9%, a solid performance given Revenue 1 311 1 28
Slide 25: Health & Nutrition (H&N)
Highlights Financial review Business review Outlook Q&A Appendix Health Science to reaccelerate in 2023 Health & Nutrition (H&N) Change 2021 Change in Overview (CHF million) 2022 2021 in % CCY1 CCY1 % ● Organic growth of 4.1% Revenue 892 861 3.6 829 7.6 ● Food organic growth well above divisional av
Slide 26: Industries & Environment (I&E)
Highlights Financial review Business review Outlook Q&A Appendix Growth led by industrial businesses Industries & Environment (I&E) Change 2021 Change in Overview (CHF million) 2022 2021 in % CCY1 CCY1 % ● Organic growth of 4.8% from both volume and price Revenue 2 157 2 120 1.7 2 047 5.4 ● Double-d
Slide 27: Natural Resources (NR)
Highlights Financial review Business review Outlook Q&A Appendix Strong momentum in minerals Natural Resources (NR) Change 2021 Change in Overview (CHF million) 2022 2021 in % CCY1 CCY1 % ● Organic growth at 8.7% reflects an overall Revenue 1 583 1 473 7.5 1 448 9.3 strong commodity market, mainly i
Slide 28: Knowledge (Kn)
Highlights Financial review Business review Outlook Q&A Appendix Certification growth ahead of market and very strong growth in consulting Knowledge (Kn) Change 2021 Change in Overview (CHF million) 2022 2021 in % CCY1 CCY1 % ● Organic growth of 8.7% with good performance Revenue 699 663 5.4 643 8.7
Slide 29: Outlook
Highlights Financial review Business review Outlook Q&A Appendix Outlook 28 Full Year Results Presentation 26 January 2023 © SGS SA – 2023 – All Rights Reserved.
Slide 30: Outlook 2023
Highlights Financial review Business review Outlook Q&A Appendix Outlook 2023 ● Mid-single digit organic growth ● Improved adjusted operating income* and margin* ● Strong cash conversion ● Maintain best-in-class organic return on invested capital* ● Accelerate investment into our strategic focus are
Slide 31: Mid-term targets 2020-2023
Highlights Financial review Business review Outlook Q&A Appendix Mid-term targets 2020-2023 People Planet Performance Ensuring diversity Reducing our CO2 emissions High-single digit constant currency revenue Nurture diversity and inclusion based on merit by ensuring equal Support the transition to a
Slide 32: Q&A
Highlights Financial review Business review Outlook Q&A Appendix Q&A To register for questions press* and 1 on your telephone 31 Full Year Results Presentation 26 January 2023 © SGS SA – 2023 – All Rights Reserved.
Slide 33: Appendix
Highlights Financial review Business review Outlook Q&A Appendix Appendix 32 Full Year Results Presentation 26 January 2023 © SGS SA – 2023 – All Rights Reserved.
Slide 34: Our progress so far: 2023 objectives and our performance
Highlights Financial review Business review Outlook Q&A Appendix Our progress so far: 2023 objectives and our performance Invest to consolidate Kn NR C&P H&N I&E No. 1 No. 1 No. 1 > CHF 1 BN E No.1 leadership position 2023 2025 Become most Digitalizing >50% applicable >50% FAIR* data A data-driven o
Slide 35: Business portfolio
Highlights Financial review Business review Outlook Q&A Appendix Business portfolio (Growth/rel. MS/return-profile – December 22) ● Increased exposure to msd/higher single +++ +++ digit growth of 70% vs 49% (2018) + Higher +++ 21% + 2% 2% ● Increased exposure to leading market = position of 46% vs 3
Slide 36: 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 2022 | 6.6 2022 | 1 023 2022 | 507 2021 | 6.4 2021 | 1 055 2021 | 635 2020 | 5.6 2020 | 900 2020 | 758 2019 | 6.6 2019 | 1 0
Slide 37: H2 2022 revenue growth
Highlights Financial review Business review Outlook Q&A Appendix H2 2022 revenue growth (CHF million) 5.9% 0.9% (0.1%) (4.4%) 2.3% 186 28 (2) (136) 3 387 3 311 Constant currency* 6.7% Revenue Organic Acquisitions Disposals Currency Revenue H2 2021 impact H2 2022 * Alternative Performance Measures (A
Slide 38: H2 2022 revenue growth by business
Highlights Financial review Business review Outlook Q&A Appendix H2 2022 revenue growth by business Growth1 2022 4.7% C&P 4.7% 3.1% 3.3% H&N 6.4% (0.2%) 3.9% 1.0% I&E 4.7% 9.7% 0.5% NR 10.2% 9.0% Kn 9.0% (0.1%) 5.9% 0.9% Total Group 6.7% Organic Acquisitions Disposals 1. Constant currency (CCY)*. *
Slide 39: H2 2022 adjusted operating margin by business
Highlights Financial review Business review Outlook Q&A Appendix H2 2022 adjusted operating margin1,* by business 30% 25.5 25% 24.5 22.2 21.4 20% 18.7 18.0 16.2 16.7 15.5 15% 14.2 13.0 12.1 10% 5% C&P H&N I&E NR Kn Total Group 2022 2021 1. Constant currency (CCY)*. * Alternative Performance Measures
Slide 40: H2 2022 financial highlights
Highlights Financial review Business review Outlook Q&A Appendix H2 2022 financial highlights (CHF million) 2022 H2 2021 H2 Change in % 2021 H2 CCY1 Change in CCY1 % Revenue 3 387 3 311 2.3 3 175 6.7 Operating income (EBIT) 475 547 (13.2) 523 (9.2) Operating income margin 14.0% 16.5% 16.5% Adjusted
Slide 41: 2022 revenue portfolio
Highlights Financial review Business review Outlook Q&A Appendix 2022 revenue portfolio Change1 Change1 10.5% Kn 0.2% 19.8% (0.4%) C&P 23.8% NR 0.5% 13.4% 0.1% H&N 32.5% I&E (0.4%) 1. Constant currency (CCY)*. * Alternative Performance Measures (APM), refer to the ‘2022 Full Year APM’ document. 40 F
Slide 42: 2022 adjusted operating income portfolio
Highlights Financial review Business review Outlook Q&A Appendix 2022 adjusted operating income* portfolio Change1 Change1 13.9% Kn 0.7% 30.6% 0.9% C&P 22.0% NR 1.5% 21.9% I&E (0.8%) 11.6% (2.3%) H&N 1. Constant currency (CCY)*. * Alternative Performance Measures (APM), refer to the ‘2022 Full Year
Slide 43: 2022 condensed consolidated balance sheet
Highlights Financial review Business review Outlook Q&A Appendix 2022 condensed consolidated balance sheet Assets Equity and liabilities (CHF million) December 2022 December 2021 (CHF million) December 2022 December 2021 Property, plant and equipment 907 925 Equity holder of SGS SA 682 1 117 Right-o
Slide 44: Cash flow statement
Highlights Financial review Business review Outlook Q&A Appendix Cash flow statement 2022 condensed cash flow statement (CHF million) 2022 2021 (CHF million) 2022 2021 Profit for the period 630 655 Cash flow from operating activities 1 030 1 169 Non-cash and non-operating items 812 828 Purchase of p
Slide 45: EUR, CNY and USD represent 50% of 2022 revenue
Highlights Financial review Business review Outlook Q&A Appendix EUR, CNY and USD represent 50% of 2022 revenue 2022 foreign currency revenues 24.8% EUR 30.1% OTHER 16.0% 2.0% CNY KRW 2.2% RUB 9.5% 2.2% USD CLP 2.4% AUD 2.8% 4.4% GBP TWD 3.6% CAD 44 Full Year Results Presentation 26 January 2023 © S
Slide 46: Key currency movements in 2022
Highlights Financial review Business review Outlook Q&A Appendix Key currency movements in 2022 Foreign currency average rate change 2022 versus 2021 rate 20% 20% 15.2% 15% 15% 10% 10% 4.4% 5% 5% 0.2% (1.9%) 0.6% 0% 0% -5% -5% (3.4%) (6.1%) (7.1%) (7.3%) -10% -10% (9.2%) EUR CNY USD TWD CAD GBP AUD
Slide 47: Testing business model
Highlights Financial review Business review Outlook Q&A Appendix Testing business model Customer 1 Customer need 2 Process planning 3 Sampling 4 Sample registration Job scope agreed with Define the correct Collected by SGS Digital registration of customer encompassing methodology (including digitall
Slide 48: Inspection business model
Highlights Financial review Business review Outlook Q&A Appendix Inspection business model Customer 2 Process planning Define the correct 1 Customer need methodology including Job scope agreed with customer. safety and ESG considerations Inspection of quantity or compliance to measurement or a build
Slide 49: Certification business model
Highlights Financial review Business review Outlook Q&A Appendix Certification business model Customer 1 Customer need 2 Process planning 3 Stage 1 4 Stage 2 Agree with customer Audit/assessment dates, Preparedness Audit on which standard to sites and processes to review Evaluation of compliance be
Slide 50: Acronyms and other abbreviations
Highlights Financial review Business review Outlook Q&A Appendix Acronyms and other abbreviations AGM Annual General Meeting CAGR Compound Annual Growth Rate CRM Customer Relationship Management DLC Digital Lab Concept ERP Enterprise Resource Planning ESG Environmental, Social and Governance FSSC Fi
Slide 51: Investor relations information and events dates
Highlights Financial review Business review Outlook Q&A Appendix Investor relations information and events dates 2023 Half Year Results Investor Relations Media Relations Common Stock Symbols Monday, 24 July 2023 Toby Reeks Magali Dauwalder Bloomberg: Registered Share: SGSN.SW SGS SA SGS SA Reuters:
Slide 52: © SGS SA – 2023 – All Rights Reserved. SGS is a registered trademark
© SGS SA – 2023 – All Rights Reserved. SGS is a registered trademark of SGS Société Générale de Surveillance SA.