Slide 1: SGS Group Results: 2018 Full Year Results Presentation
SGS GROUP RESULTS 2018 FULL YEAR RESULTS PRESENTATION
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: Highlights
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX
Slide 4: Strong Revenue Growth and Margin Progression
STRONG REVENUE GROWTH AND MARGIN PROGRESSION 2018 HIGHLIGHTS 6.0%¹ 15.7% CHF 690 MIO CHF 796 MIO 24.2% CHF 78 CHF 6.7 BN CHF 1 050 MIO 3.9% 12.7% FX (0.4) % 8.4% 1 6.0% 15.7% 15.3 %1 690 796 24.2% 78 664 75 5.4 % 706 21.3% 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 ADJUSTED REVENUE
Slide 5: 2018 Acquisitions and Subsequent Events
2018 ACQUISITIONS AND SUBSEQUENT EVENTS ACQUISITIONS SUBSEQUENT EVENTS VANGUARD LABORATOIRE TRAITGENETICS GMBH SIT SKIN INVESTIGATION LEANSIS SCIENCES INC. DE CONTRÔLE AND TECHNOLOGY PRODUCTIVIDAD ET D’ANALYSE HAMBURG GMBH USA BELGIUM GERMANY GERMANY SPAIN OLEOTEST NV POLYMER SOLUTIONS ADVANCED METR
Slide 6: Financial Review
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX
Slide 7: Strong Revenue Growth and Increased Adjusted Operating Income Margin
STRONG REVENUE GROWTH AND INCREASED ADJUSTED OPERATING INCOME MARGIN 2018 FINANCIAL HIGHLIGHTS DECEMBER 2017 (CHF million) DECEMBER 2018 PRO-FORMA1 DECEMBER 2017 REVENUE 6 706 6 329 6 349 Change in % 6.0 5.6 ADJUSTED OPERATING INCOME2 1 050 969 969 Change in % 8.4 8.4 ADJUSTED OPERATING INCOME MARGI
Slide 8: Financial Review: Revenue
HIGHLIGHTS FINANCIAL REVIEW REVENUE ADJUSTED OPERATING INCOME BALANCE SHEET CASH FLOW SECOND HALF 2018 FINANCIAL SUMMARY BUSINESS REVIEW OUTLOOK Q&A APPENDIX
Slide 9: A Leader in TIC Market Organic Revenue Growth
A LEADER IN TIC MARKET ORGANIC REVENUE GROWTH 2018 REVENUE GROWTH COMPOSITION CHF MIO 5.3% 0.7% 0.0% (0.4)% 5.6% 332 45 - (20) 6 706 6 349 Constant currency growth 6.0% REVENUE ORGANIC ACQUISITIONS DISPOSALS CURRENCY REVENUE DECEMBER 2017 IMPACT DECEMBER 2018 2017 4.2% 1.2% 0.0% 0.7% 6.1% FULL YEAR
Slide 10: Positive Organic Revenue Growth Across the Majority of the Portfolio
POSITIVE ORGANIC REVENUE GROWTH ACROSS THE MAJORITY OF THE PORTFOLIO 2018 REVENUE GROWTH BY BUSINESS GROWTH1 2018 2017 2.4% 2.0% AFL 4.4% 7.7% 11.4% 0.0% MIN 11.4% 5.6% 7.2% 0.0% OGC 7.2% 3.2% 5.2% 1.0% CRS 6.2% 10.4% 6.2% 0.8% CBE 7.0% 4.9% 4.0% 0.8% IND 4.8% 0.0% 5.7% 0.0% EHS 5.7% 3.0% (0.7)% 0.5
Slide 11: Strong Organic Revenue Growth in the Americas and Asia/Pacific
STRONG ORGANIC REVENUE GROWTH IN THE AMERICAS AND ASIA/PACIFIC REVENUE GROWTH1 BY REGION GROWTH 2018 2017 3.4% 0.7% EUROPE/AFRICA/ 4.1% 4.2% MIDDLE EAST 6.4% 1.1% AMERICAS 7.5% 4.6% 7.1% 0.3% ASIA/PACIFIC 7.4% 7.9% 5.3% 0.7% TOTAL GROUP 6.0% 5.4% Organic Acquisitions 1. Constant currency basis. FULL
Slide 12: Controlled Headcount Increase
CONTROLLED HEADCOUNT INCREASE FTE1 END OF PERIOD FTE1 AVERAGE BY REGION 2 129 222 (728) 1 034 96 492 97 368 1 417 95 745 485 93 556 Increase: 1 623 1.7% Increase: 2 936 3.1% DECEMBER ORGANIC ACQUISI- DISPOS. DECEMBER DECEMBER EUR./AFR./ AMERICAS ASIA/ DECEMBER 2017 TIONS /RESTR. 2018 2017 MID. EAST
Slide 13: Financial Review: Adjusted Operating Income
HIGHLIGHTS FINANCIAL REVIEW REVENUE ADJUSTED OPERATING INCOME BALANCE SHEET CASH FLOW SECOND HALF 2018 FINANCIAL SUMMARY BUSINESS REVIEW OUTLOOK Q&A APPENDIX
Slide 14: Good Organic Adjusted Operating Income Growth
GOOD ORGANIC ADJUSTED OPERATING INCOME GROWTH 2018 ADJUSTED OPERATING INCOME1 GROWTH CHF MIO 7.6% 0.8% 0.0% 0.0% 8.4% 74 7 - - 1 050 969 Constant currency growth 8.4% ADJ. OP. INC. ORGANIC ACQUISITIONS DISPOSALS CURRENCY ADJ. OP. INC. DECEMBER 2017 IMPACT DECEMBER 2018 2017 4.6% 0.8% 0.0% 0.0% 5.4%
Slide 15: Majority of Businesses Realized a Margin Uptick
MAJORITY OF BUSINESSES REALIZED A MARGIN UPTICK 2018 ADJUSTED OPERATING INCOME1 MARGIN 30% 28.7% 25.6% 26.0% 25% 21.5% 20% 18.9% 19.0% 16.9% 16.0% 16.0% 16.1% 15.1% 15.3% 15.3% 15.7% 15% 10.6% 11.1% 10.1% 10% 9.5% 9.0% 8.2% 5% 0% AFL MIN OGC CRS CBE IND EHS TRP GIS TOTAL GROUP 2017 2 2018 1. Before
Slide 16: Procurement Efficiency Exceeding Expectations
PROCUREMENT EFFICIENCY EXCEEDING EXPECTATIONS PROCUREMENT SAVINGS BY REGION PROCUREMENT SAVINGS BY NATURE 80 75 35 70 65 12% 60 30 OPEX Cost avoidance 50 29% 40 CAPEX 24 30 21 59% 20 OPEX P&L 10 14 16 0 TARGET 2018 ACTUAL 2018 Americas Asia Pacific EAME FULL YEAR RESULTS PRESENTATION © SGS SA 2019 1
Slide 17: Financial Review: Balance Sheet
HIGHLIGHTS FINANCIAL REVIEW REVENUE ADJUSTED OPERATING INCOME BALANCE SHEET CASH FLOW SECOND HALF 2018 FINANCIAL SUMMARY BUSINESS REVIEW OUTLOOK Q&A APPENDIX
Slide 18: Solid Consolidated Balance Sheet
SOLID CONSOLIDATED BALANCE SHEET ASSETS EQUITY AND LIABILITIES DECEMBER DECEMBER DECEMBER DECEMBER (CHF million) 2018 2017 (CHF million) 2018 2017 Property, Plant and Equipment 969 1 002 Share capital 8 8 Goodwill 1 224 1 238 Reserves 1 660 1 911 Intangible assets 202 222 SHAREHOLDERS’ EQUITY 1 668
Slide 19: Financial Review: Cash Flow
HIGHLIGHTS FINANCIAL REVIEW REVENUE ADJUSTED OPERATING INCOME BALANCE SHEET CASH FLOW SECOND HALF 2018 FINANCIAL SUMMARY BUSINESS REVIEW OUTLOOK Q&A APPENDIX
Slide 20: Strong Cash Flow Generation
STRONG CASH FLOW GENERATION 2018 CONDENSED CASH FLOW (CHF million) DECEMBER 2018 DECEMBER 2017 PROFIT FOR THE PERIOD 690 664 Non-cash and non-operating items 554 565 (Increase)/Decrease in working capital 95 (1) Taxes paid (265) (241) CASH FLOW FROM OPERATING ACTIVITIES 1 074 987 Net purchase of fix
Slide 21: Further Improvement in Networking Capital and Controlled Level of Capex
FURTHER IMPROVEMENT IN NETWORKING CAPITAL AND CONTROLLED LEVEL OF CAPEX OPERATING NET WORKING CAPITAL % REVENUE¹ 2018 CAPITAL EXPENDITURE BY BUSINESS 3.1% 2.1% 2.0% 0.6% 4.4% 16.0% GIS AFL 250 3.5% 12.2% 3.0% TRP 12.9% 200 MIN 7.3% 2.5% EHS CHF 304 MIO 176 16.0% 150 10.0% OGC 2.0% IND 127 126 1.5% 1
Slide 22: Best-in-Class ROIC
BEST-IN-CLASS ROIC 24.2 21.3 19.7 19.3 ROIC (IN %) 1 2.36 1.97 2.03 1.93 ASSET TURNOVER2 2015 2016 2017 2018 1. Profit for the period/(Non-current assets + Net Working Capital). – 2. Revenue/(Non-current assets + Net Working Capital). FULL YEAR RESULTS PRESENTATION © SGS SA 2019 22 22 JANUARY 2019 A
Slide 23: Growth Opportunities and Shareholders Returns Funded by Operations
GROWTH OPPORTUNITIES AND SHAREHOLDERS RETURNS FUNDED BY OPERATIONS CHF 1.1 BN CHF 1.0 BN GROWTH OPPORTUNITIES CHF 0.3 BN • Organic growth1 • M&A SHAREHOLDERS RETURNS CHF 0.7 BN • Dividends paid OPERATING CASH • Share buy-back program FLOW GENERATION SOURCES USES 1.Net Capex. FULL YEAR RESULTS PRESEN
Slide 24: Second Half 2018 Financial Summary
HIGHLIGHTS FINANCIAL REVIEW REVENUE ADJUSTED OPERATING INCOME BALANCE SHEET CASH FLOW SECOND HALF 2018 FINANCIAL SUMMARY BUSINESS REVIEW OUTLOOK Q&A APPENDIX
Slide 25: Strong Revenue Growth and Increased Adjusted Operating Income Margin in H2 2018
STRONG REVENUE GROWTH AND INCREASED ADJUSTED OPERATING INCOME MARGIN IN H2 2018 H2 2018 FINANCIAL HIGHLIGHTS 2017 H2 (CHF million) 2018 H2 PRO-FORMA1 2017 H2 REVENUE 3 400 3 225 3 302 Change in % 5.4 3.0 ADJUSTED OPERATING INCOME2 569 528 540 Change in % 7.8 5.4 ADJUSTED OPERATING INCOME MARGIN2 IN
Slide 26: Positive Organic Revenue Growth Across the Majority of the Portfolio in H2 2018
POSITIVE ORGANIC REVENUE GROWTH ACROSS THE MAJORITY OF THE PORTFOLIO IN H2 2018 H2 2018 REVENUE GROWTH1 BY BUSINESS GROWTH1 2018 H2 2017 H2 2.2% 1.8% AFL 4.0% 7.3% 9.1% 0.0 % MIN 9.1% 8.0% 6.8% 0.0 % OGC 6.8% 5.0% 5.6% 0.6% CRS 6.2% 9.1% 6.2% 0.4% CBE 6.6% 5.9% 5.0% 0.7% IND 5.7% 1.2% 5.4% 0.0 % EHS
Slide 27: Strong Margin Improvement in AFL, CRS and IND in H2 2018
STRONG MARGIN IMPROVEMENT IN AFL, CRS AND IND IN H2 2018 H2 2018 ADJUSTED OPERATING MARGIN1 BY BUSINESS 35% 30.9% 30% 27.9% 27.1% 26.0% 25% 20.6% 20.4% 20% 18.3% 16.9% 16.5% 17.0% 16.4% 16.7% 15.4% 15.2% 15% 11.8% 11.8% 10.9% 10.5% 10.2% 10% 9.2% 5% 0% AFL MIN OGC CRS CBE IND EHS TRP GIS TOTAL GROUP
Slide 28: Financial Summary
HIGHLIGHTS FINANCIAL REVIEW REVENUE ADJUSTED OPERATING INCOME BALANCE SHEET CASH FLOW SECOND HALF 2018 FINANCIAL SUMMARY BUSINESS REVIEW OUTLOOK Q&A APPENDIX
Slide 29: Financial Summary
FINANCIAL SUMMARY ·· Revenue growth1 of 6.0% of which 5.3% organic ·· Increase in Adjusted Operating Income1,2 of 8.4%, reaching a historical mark, and stronger Adjusted Operating Income Margin at 15.7% ·· Profit for the period increased by 3.9%, up to CHF 690 million ·· Investment of CHF 323 millio
Slide 30: Business Review
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX
Slide 31: Continued Strong Performance for Food and Life
CONTINUED STRONG PERFORMANCE FOR FOOD AND LIFE AGRICULTURE, FOOD AND LIFE (AFL) ·· 2017 OVERVIEW (CHF million) 2018 PRO-FORMA2 2017 Strong growth trends for Food and Life continued ·· REVENUE 1 062.6 1 018.0 1 016.3 in second half Change in % 4.4 4.6 Agriculture remained challenging, intensified ··
Slide 32: Momentum Continues to Build
MOMENTUM CONTINUES TO BUILD MINERALS (MIN) ·· 2017 OVERVIEW (CHF million) 2018 PRO-FORMA2 2017 Robust revenue growth across all activities throughout ·· REVENUE 750.1 673.5 683.6 the year Change in % 11.4 9.7 Trade inspection volumes remained strong for ·· ADJUSTED OPERATING INCOME¹ 121.1 102.0 104.
Slide 33: Stabilizing Market Drives Demand
STABILIZING MARKET DRIVES DEMAND OIL, GAS AND CHEMICALS (OGC) ·· 2017 OVERVIEW (CHF million) 2018 PRO-FORMA2 2017 Strong double-digit growth in Plant and Terminal ·· REVENUE 1 220.2 1 137.8 1 138.8 operations (PTO), mainly in the USA Change in % 7.2 7.1 Overall low single-digit growth in Trade-Relat
Slide 34: Electrical & Electronics (E&E) Remains Strong
ELECTRICAL & ELECTRONICS (E&E) REMAINS STRONG CONSUMER AND RETAIL (CRS) ·· 2017 OVERVIEW (CHF million) 2018 PRO-FORMA2 2017 Double-digit growth in South East Asia Pacific, ·· REVENUE 1 025.4 965.8 963.2 Eastern Europe & Middle East Change in % 6.2 6.5 New restricted substances and strong level ·· AD
Slide 35: Conversion Audits Exceed Expectations
CONVERSION AUDITS EXCEED EXPECTATIONS CERTIFICATION AND BUSINESS ENHANCEMENT (CBE) ·· 2017 OVERVIEW (CHF million) 2018 PRO-FORMA2 2017 Solid organic growth driven by Management System ·· REVENUE 366.0 342.1 340.3 certification and transition to the new 2015 standards Change in % 7.0 7.6 Improved mar
Slide 36: Growth in Major Business Segments
GROWTH IN MAJOR BUSINESS SEGMENTS INDUSTRIAL (IND) ·· 2017 OVERVIEW (CHF million) 2018 PRO-FORMA2 2017 Growth in Oil & Gas market driven by large REVENUE 940.2 897.3 906.5 supervision contracts and refinery shutdown ·· Change in % 4.8 3.7 inspections across all regions ADJUSTED OPERATING INCOME¹ 84.
Slide 37: Strength of Portfolio Confirmed
STRENGTH OF PORTFOLIO CONFIRMED ENVIRONMENT, HEALTH AND SAFETY (EHS) ···· 2017 OVERVIEW (CHF million) 2018 PRO-FORMA2 2017 Strong performance from all business segments REVENUE 517.2 489.2 485.8 Improved contribution from Laboratory and ·· Change in % 5.7 6.5 Health & Safety services ADJUSTED OPERAT
Slide 38: Testing Grows Across All Segments
TESTING GROWS ACROSS ALL SEGMENTS TRANSPORTATION (TRP) ·· 2017 OVERVIEW (CHF million) 2018 PRO-FORMA2 2017 Double-digit growth in Testing services reflecting ·· REVENUE 540.5 541.4 546.5 the return of past investments Change in % (0.2) (1.1) Slight revenue decrease for Regulated services ·· ADJUSTED
Slide 39: Strong Margin Growth
STRONG MARGIN GROWTH GOVERNMENTS AND INSTITUTIONS (GIS) ·· 2017 OVERVIEW (CHF million) 2018 PRO-FORMA2 2017 Solid double-digit growth delivered in Single window ·· REVENUE 283.6 263.9 268.1 from strong trade volume Change in % 7.5 5.8 New marketing strategy for TransitNet translated into ·· ADJUSTED
Slide 40: Outlook
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX
Slide 41: Guidance 2019
GUIDANCE 2019 SOLID ORGANIC HIGHER ADJUSTED ROBUST REVENUE GROWTH OPERATING INCOME CASH FLOW FULL YEAR RESULTS PRESENTATION © SGS SA 2019 41 22 JANUARY 2019 ALL RIGHTS RESERVED
Slide 42: Outlook 2020
OUTLOOK 2020 ·· Mid single-digit organic growth ·· Accelerate M&A activities and remain disciplined on returns ·· Adjusted Operating Income Margin of above 17% by end of period ·· Strong cash conversion ·· Solid returns on invested capital ·· Dividend distributions, at least maintained or in line wi
Slide 43: Q&A
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX
Slide 44: To Register for Questions
TO REGISTER FOR QUESTIONS PRESS* AND 1 ON YOUR TELEPHONE
Slide 45: Appendix
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX
Slide 46: Acronyms and Other Abbreviations
ACRONYMS AND OTHER ABBREVIATIONS CAPEX Capital expenditure CPCH Cosmetic, Personal Care and Household D-tect Innovative universal image analysis solution EU European Union IoT Internet of Things SaaS/PaaS Software as a solution / Platform as a solution FULL YEAR RESULTS PRESENTATION © SGS SA 2019 46
Slide 47: Global Expertise with Local Execution
GLOBAL EXPERTISE WITH LOCAL EXECUTION 2018 LOCATIONS AND EMPLOYEES Locations1 2 600 97 400 1 440 1 400 39 100 39 700 Employees2 1.7% 2018 2017 2018 2017 TOTAL EUROPE, AFRICA AND MIDDLE EAST 33 700 32 900 620 520 2018 2017 2018 2017 24 600 ASIA PACIFIC 23 100 540 480 2018 2017 2018 2017 AMERICAS 1. O
Slide 48: A Leader in TIC Market Organic Revenue Growth in H2 2018
A LEADER IN TIC MARKET ORGANIC REVENUE GROWTH IN H2 2018 H2 2018 REVENUE GROWTH COMPOSITION CHF MIO 4.9% 0.5% 0.0% (2.4)% 3.0% 157 18 - (77) 3 400 3 302 Constant currency growth 5.4% REVENUE ORGANIC ACQUISITIONS DISPOSALS CURRENCY REVENUE H2 2017 IMPACT H2 2018 H2 2017 4.9% 0.9% 0.0% 1.3% 7.1% FULL
Slide 49: Well-Balanced Revenue
WELL-BALANCED REVENUE 2018 REVENUE PORTFOLIO Change 1 Change 1 4.2% 0.0% (0.3)% 15.8% GIS AFL 8.1% (0.4)% TRP 0.6% 11.2% MIN 7.7% 0.0% EHS 0.2% 18.2% OGC 14.0% (0.2)% IND 5.5% 0.1% 0.0% 15.3% CBE CRS 1. Constant currency basis. FULL YEAR RESULTS PRESENTATION © SGS SA 2019 49 22 JANUARY 2019 ALL RIGH
Slide 50: Well-Balanced Contribution
WELL-BALANCED CONTRIBUTION 2018 ADJUSTED OPERATING INCOME1 PORTFOLIO Change 2 Change 2 7.8% 2.0% (0.6)% 16.2% GIS AFL 7.9% (1.6)% TRP 1.0% 11.5% MIN 5.5% 0.4% EHS (1.3)% 11.1% OGC 8.0% 0.4% IND 6.6% (0.1)% (0.2)% 25.4% CBE CRS 1. Before amortization of acquired intangibles and other non-recurring it
Slide 51: EUR, USD and CNY Represent 55% of H1 2018 Revenue
EUR, USD AND CNY REPRESENT 55% OF H1 2018 REVENUE 2018 FOREIGN CURRENCY REVENUES 26.4% 14.5% EUR USD 14.1% CNY 25.7% 3.7% OTHER TWD 3.4% CAD 2.2% 2.6% RUB GBP 2.6% AUD 2.3% 2.5% BRL CLP FULL YEAR RESULTS PRESENTATION © SGS SA 2019 51 22 JANUARY 2019 ALL RIGHTS RESERVED
Slide 52: EUR, GBP and CNY Strengthened in 2018
EUR, GBP AND CNY STRENGTHENED IN 2018 FOREIGN CURRENCY AVERAGE RATE CHANGE 2018 VERSUS 2017 RATE 5% 3.9% 3.0% 1.6% 0.3% 0.0% 0% (0.7)% (0.5)% (5)% (3.1)% (7.1)% (10)% (15)% (12.7)% EUR USD CNY TWD CAD CLP GBP BRL AUD RUB 2018 1.1554 0.9784 0.1481 0.0325 0.7553 0.0015 1.3061 0.2694 0.7314 0.0157 2017
Slide 53: Upcoming Investor Relations Event Dates
UPCOMING INVESTOR RELATIONS EVENT DATES ANNUAL GENERAL MEETING DIVIDEND PAYMENT DATES OF SHAREHOLDERS Ex-Date: 26 March 2019 Friday 22 March 2019 Record data: 27 March 2019 Geneva, Switzerland Payment date: 28 March 2019 2019 HALF YEAR RESULTS Thursday, 18 July 2019 INVESTOR DAYS – LOCATION TO BE DE
Slide 54: Investor Relations Information
INVESTOR RELATIONS INFORMATION SGS SA CORPORATE OFFICE MEDIA RELATIONS 1 place des Alpes Daniel Rufenacht P.O. Box 2152 SGS SA CH – 1211 Geneva 1 1 place des Alpes t +41 (0)22 739 91 11 P.O. Box 2152 f +41 (0)22 739 98 86 CH – 1211 Geneva 1 e sgs.investor.relations@sgs.com t +41 (0)22 739 94 01 www.
Slide 55: © SGS Group Management SA – 2019 – All rights reserved – SGS is
© SGS Group Management SA – 2019 – All rights reserved – SGS is a registered trademark of SGS Group Management SA. WWW.SGS.COM