Slide 1: SGS Group Results: 2019 Half Year Results Presentation
SGS GROUP RESULTS 2019 HALF 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: Good Revenue and Free Cash Flow: H1 2019 Highlights
GOOD REVENUE AND FREE CASH FLOW H1 2019 HIGHLIGHTS CHF 3.3 BN CHF 489 MIO CHF 216 MIO 23.9% +3.9% CCY1 +5.4% CCY1 +3.5% ORGANIC1 3.3 3.21 489 216 23.9 4641 20.8 176 2019 2018 2019 2018 2019 2018 2019 2018 ADJUSTED RETURN ON REVENUE OPERATING INCOME2 FREE CASH FLOW3 INVESTED CAPITAL IN %4 1. Constant
Slide 5: Executing on Portfolio Evolution Strategy
EXECUTING ON PORTFOLIO EVOLUTION STRATEGY ·· The 2020 Plan targets accelerating acquisitions and exiting CHF 350 million of revenue ·· The disposal of Petroleum Service Corporate (PSC) and acquisition of Maine Pointe LLC, both in June, are significant milestones in the execution of these pillars of
Slide 6: Acquiring Higher Value-Added Services
ACQUIRING HIGHER VALUE-ADDED SERVICES H1 2019 ACQUISITIONS SUBSEQUENT EVENTS LEANSIS FLORIAAN B.V. TESTING, ENGINEERING PT WLN INDONESIA FORENSIC ANALYTICAL PRODUCTIVIDAD AND CONSULTING LABORATORIES, INC. SERVICES, INC. Business line: CBE Business line: EHS Business line: IND Business line: EHS Busi
Slide 7: Financial Review
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX
Slide 8: Good Revenue Growth and Higher Adjusted Operating Income Margin
GOOD REVENUE GROWTH AND HIGHER ADJUSTED OPERATING INCOME MARGIN H1 2019 FINANCIAL HIGHLIGHTS JUNE 2018 Change Change (CHF million) JUNE 2019 CCY1 in CCY 1 % JUNE 2018 in % REVENUE 3 341 3 215 3.9 3 306 1.1 ADJUSTED OPERATING INCOME2 489 464 5.4 481 1.7 ADJUSTED OPERATING INCOME MARGIN2 14.6% 14.4% 1
Slide 9: Financial Review: Revenue
HIGHLIGHTS FINANCIAL REVIEW REVENUE ADJUSTED OPERATING INCOME BALANCE SHEET CASH FLOW FINANCIAL SUMMARY BUSINESS REVIEW OUTLOOK Q&A APPENDIX
Slide 10: A Good Level of Organic Growth in H1
A GOOD LEVEL OF ORGANIC GROWTH IN H1 H1 2019 REVENUE GROWTH COMPOSITION CHF MIO 3.5% 0.5% (0.1%) (2.8%) 1.1% 114 15 (3) (91) 3 341 3 306 Constant currency growth 3.9% REVENUE ORGANIC ACQUISITIONS DISPOSALS CURRENCY REVENUE JUNE 2018 IMPACT JUNE 2019 HALF YEAR RESULTS PRESENTATION © SGS SA 2019 10 18
Slide 11: Positive Organic Development Across the Majority of the Portfolio
POSITIVE ORGANIC DEVELOPMENT ACROSS THE MAJORITY OF THE PORTFOLIO H1 2019 REVENUE GROWTH BY BUSINESS GROWTH1 H1 2019 (0.2%) 4.8% 0.2% AFL 4.8% 5.3% MIN 5.3% (0.3%) 3.6% OGC 3.3% 5.5% 0.4% CRS 5.9% (0.5%) 3.1% CBE 2.6% 6.8% 0.6% IND 7.4% 4.9% 0.8% EHS 5.7% (4.5%) 0.4% TRP (4.1%) (4.4%) GIS (4.4%) (0.
Slide 12: Organic Revenue Growth Driven by Asia/Pacific and Americas
ORGANIC REVENUE GROWTH DRIVEN BY ASIA/PACIFIC AND AMERICAS H1 2019 REVENUE GROWTH1 BY REGION GROWTH1 H1 2019 (0.1%) 2.0% 0.6% EUROPE/AFRICA/ 2.5% MIDDLE EAST (0.1%) 5.1% 0.5% AMERICAS 5.5% 4.4% 0.2% ASIA/PACIFIC 4.6% (0.1%) 3.5% 0.5% TOTAL GROUP 3.9% Organic Acquisitions Disposals 1. Constant curren
Slide 13: Controlled Headcount Management
CONTROLLED HEADCOUNT MANAGEMENT FTE1 END OF PERIOD FTE1 AVERAGE BY REGION 1 423 336 (4 630) 96 230 (818) 740 96 140 96 259 (12) 93 388 Decrease: (2 871) (3.0%) Decrease: (90) (0.1%) JUNE ORGANIC ACQUISI- DISPOS. JUNE JUNE EUR./AFR./ AMERICAS ASIA/ JUNE 2018 TIONS /RESTR. 2019 2018 MID. EAST PACIFIC
Slide 14: Financial Review: Adjusted Operating Income
HIGHLIGHTS FINANCIAL REVIEW REVENUE ADJUSTED OPERATING INCOME BALANCE SHEET CASH FLOW FINANCIAL SUMMARY BUSINESS REVIEW OUTLOOK Q&A APPENDIX
Slide 15: Strong Organic Adjusted Operating Income
STRONG ORGANIC ADJUSTED OPERATING INCOME H1 2019 ADJUSTED OPERATING INCOME1 GROWTH CHF MIO 4.7% 0.7% 0.0% (3.7%) 1.7% 22 3 - (17) 489 481 Constant currency growth 5.4% ADJ. OP. INC. ORGANIC ACQUISITIONS DISPOSALS CURRENCY ADJ. OP. INC. JUNE 2018 IMPACT JUNE 2019 1. Before amortization of acquired in
Slide 16: An Increase in H1 Margin
AN INCREASE IN H1 MARGIN H1 2019 ADJUSTED OPERATING INCOME1, 2 MARGIN 30% 28.9% 24.9% 24.9% 25% 19.4% 20% 17.8% 17.9% 16.0% 14.9% 15.3% 15% 14.4% 14.6% 13.6% 13.9% 13.6% 9.7% 10.1% 10.1% 10.7% 10% 8.7% 7.7% 5% 0% AFL MIN OGC CRS CBE IND EHS TRP GIS TOTAL GROUP June 20182 June 2019 1. Before amortiza
Slide 17: Financial Review: Balance Sheet
HIGHLIGHTS FINANCIAL REVIEW REVENUE ADJUSTED OPERATING INCOME BALANCE SHEET CASH FLOW FINANCIAL SUMMARY BUSINESS REVIEW OUTLOOK Q&A APPENDIX
Slide 18: H1 2019 Consolidated Balance Sheet
H1 2019 CONSOLIDATED BALANCE SHEET ASSETS EQUITY AND LIABILITIES (CHF million) JUNE 2019 DEC 2018 (CHF million) JUNE 2019 DEC 2018 Property, Plant and Equipment 1 557 969 Share capital 8 8 Goodwill 1 294 1 224 Reserves 1 280 1 660 Intangible assets 181 202 SHAREHOLDERS’ EQUITY 1 288 1 668 Other Long
Slide 19: Financial Review: Cash Flow
HIGHLIGHTS FINANCIAL REVIEW REVENUE ADJUSTED OPERATING INCOME BALANCE SHEET CASH FLOW FINANCIAL SUMMARY BUSINESS REVIEW OUTLOOK Q&A APPENDIX
Slide 20: Solid Cash Flow Generation
SOLID CASH FLOW GENERATION H1 2019 CONDENSED CASH FLOW (CHF million) JUNE 2019 JUNE 2018 PROFIT FOR THE PERIOD 399 296 Non-cash and non-operating items 295 284 Increase in working capital (205) (124) Taxes paid (148) (140) CASH FLOW FROM OPERATING ACTIVITIES 341 316 Net purchase of fixed assets (125
Slide 21: Capex 3.9% of Revenue
CAPEX 3.9% OF REVENUE H1 2019 CAPITAL EXPENDITURE BY BUSINESS CAPEX IN % OF THE REVENUE 4.4% 4.4% 4.4% 3.9% 4.7% 15.6% 170 4.5% GIS AFL 150 4.0% 10.7% 130 144 3.5% 135 130 TRP 13.3% 129 3.0% MIN 110 7.6% 2.5% EHS CHF 130 MIO 90 2.0% 18.8% 70 10.2% OGC 1.5% 50 IND 1.0% 30 0.5% 1.5% 17.6% CBE CRS 10 0
Slide 22: Operating Net Working Capital 2.9% of Revenue
OPERATING NET WORKING CAPITAL 2.9% OF REVENUE OPERATING NET WORKING CAPITAL IN % OF LTM REVENUE 4.0% 3.1% 3.1% 2.9% 350 4.5% 4.0% 300 3.5% 250 3.0% 200 230 2.5% 201 196 186 2.0% 150 1.5% 100 1.0% 50 0.5% 0 0.0% HY 2016 HY 2017 HY 2018 HY 2019 Operating Net Working Capital (CHF MIO) In % of LTM Reven
Slide 23: Financial Review: Financial Summary
HIGHLIGHTS FINANCIAL REVIEW REVENUE ADJUSTED OPERATING INCOME BALANCE SHEET CASH FLOW FINANCIAL SUMMARY BUSINESS REVIEW OUTLOOK Q&A APPENDIX
Slide 24: Structural Optimization Measures
STRUCTURAL OPTIMIZATION MEASURES ·· Structural optimization measures will be taken in H2 2019 to run the business more efficiently going forward ·· Focused on simplifying the business by eliminating duplication and reducing layers within the organization ·· A cost of CHF 75 million in H2 2019 is exp
Slide 25: H1 2019 Financial Summary
H1 2019 FINANCIAL SUMMARY ···· Revenue growth1 of 3.9% of which 3.5% organic Increase in Adjusted Operating Income1,2 by 5.4% and increase in Adjusted Operating Income Margin to 14.6% ···· Profit for the period increased by 34.8%, up to CHF 399 million Investment of CHF 268 million in Capex and Acqu
Slide 26: Business Review
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX
Slide 27: Food and Life Driving Good Growth
FOOD AND LIFE DRIVING GOOD GROWTH AGRICULTURE, FOOD AND LIFE (AFL) ·· JUNE 2018 Change Change OVERVIEW ·· (CHF million) JUNE 2019 CCY 2 in CCY % JUNE 2018 in % Solid market fundamentals drove growth in REVENUE 525 501 4.8 516 1.7 Food and Life ADJUSTED OPERATING INCOME¹ 73 68 7.4 71 2.8 Trade and Lo
Slide 28: Performing Against a Challenging Comparable
PERFORMING AGAINST A CHALLENGING COMPARABLE MINERALS (MIN) ·· JUNE 2018 Change Change OVERVIEW ···· (CHF million) JUNE 2019 CCY 2 in CCY % JUNE 2018 in % Strong growth in Minerals across all activities REVENUE 375 356 5.3 370 1.4 and geographies ADJUSTED OPERATING INCOME¹ 60 53 13.2 56 7.1 Double-di
Slide 29: Strong Margin Improvement
STRONG MARGIN IMPROVEMENT OIL, GAS AND CHEMICALS (OGC) ·· JUNE 2018 Change Change OVERVIEW ·· (CHF million) JUNE 2019 CCY 2 in CCY % JUNE 2018 in % The disposal of Plant and Terminal Operations REVENUE 620 600 3.3 605 2.5 in the USA (Petroleum Service Corporation) ···· ADJUSTED OPERATING INCOME¹ 60
Slide 30: E&E Growth Continues to Drive Performance
E&E GROWTH CONTINUES TO DRIVE PERFORMANCE CONSUMER AND RETAIL (CRS) ···· JUNE 2018 Change Change OVERVIEW (CHF million) JUNE 2019 CCY 2, 3 in CCY % JUNE 20183 in % High double-digit growth in new sourcing countries REVENUE 502 474 5.9 485 3.5 Increased volumes in Safety testing, restricted ·· ADJUST
Slide 31: Growth Impacted by Standards Transition
GROWTH IMPACTED BY STANDARDS TRANSITION CERTIFICATION AND BUSINESS ENHANCEMENT (CBE) ·· JUNE 2018 Change Change OVERVIEW ·· (CHF million) JUNE 2019 CCY 2, 3 in CCY % JUNE 20183 in % Certification and training decreased year on year REVENUE 196 191 2.6 196 0.0 due to transition work in 2018 ADJUSTED
Slide 32: Benefiting from Portfolio Management
BENEFITING FROM PORTFOLIO MANAGEMENT INDUSTRIAL (IND) ·· JUNE 2018 Change Change OVERVIEW (CHF million) JUNE 2019 CCY 2 in CCY % JUNE 2018 in % Portfolio management resulted in margin ·· REVENUE 476 443 7.4 462 3.0 improvement across the business unit, while ADJUSTED OPERATING INCOME¹ 48 34 41.2 34
Slide 33: Continued Strong Performance
CONTINUED STRONG PERFORMANCE ENVIRONMENT, HEALTH AND SAFETY (EHS) ·· JUNE 2018 Change Change OVERVIEW (CHF million) JUNE 2019 CCY 2 in CCY % JUNE 2018 in % Good organic growth driven by an improving market ·· REVENUE 261 247 5.7 252 3.6 position and a strategic focus on laboratory and ADJUSTED OPERA
Slide 34: Testing Offset by Regulated and Field Services
TESTING OFFSET BY REGULATED AND FIELD SERVICES TRANSPORTATION (TRP) ·· JUNE 2018 Change Change OVERVIEW ···· (CHF million) JUNE 2019 CCY 2 in CCY % JUNE 2018 in % Testing growth offset by Regulated and Field REVENUE 257 268 (4.1) 279 (7.9) services declines ADJUSTED OPERATING INCOME¹ 35 41 (14.6) 43
Slide 35: Delays in Execution & Collection to Improve in H2
DELAYS IN EXECUTION & COLLECTION TO IMPROVE IN H2 GOVERNMENTS AND INSTITUTIONS (GIS) ·· JUNE 2018 Change Change OVERVIEW ·· (CHF million) JUNE 2019 CCY 2 in CCY % JUNE 2018 in % Higher volume in Single Window offset by delay REVENUE 129 135 (4.4) 141 (8.5) between signing to execution of new contrac
Slide 36: Outlook
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX
Slide 37: Guidance 2019
GUIDANCE 20191 SOLID ORGANIC HIGHER ADJUSTED ROBUST REVENUE GROWTH OPERATING INCOME CASH FLOW 1. At stable market conditions. HALF YEAR RESULTS PRESENTATION © SGS SA 2019 37 18 JULY 2019 ALL RIGHTS RESERVED
Slide 38: Outlook 2020
OUTLOOK 2020 ···· To deliver mid-single-digit organic growth To accelerate mergers and acquisitions and remain disciplined on returns ··To achieve an adjusted operating income margin of above 17% by end of period supported by network optimization ···· To ensure strong cash conversion To maintain bes
Slide 39: Q&A
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX
Slide 40: Appendix
HIGHLIGHTS FINANCIAL REVIEW BUSINESS REVIEW OUTLOOK Q&A APPENDIX
Slide 41: Acronyms and Other Abbreviations
ACRONYMS AND OTHER ABBREVIATIONS E&E Electrical & Electronics IATF International Automotive Task Force PSC Petroleum Service Corporation HALF YEAR RESULTS PRESENTATION © SGS SA 2019 41 18 JULY 2019 ALL RIGHTS RESERVED
Slide 42: Historical Data
HISTORICAL DATA REVENUE ADJUSTED FREE CASH FLOW2 RETURN ON OPERATING INCOME1 INVESTED CAPITAL3 3.3 3.3 481 489 242 24% 3.0 216 2.9 428 210 21% 2.8 412 411 20% 19% 19% 173 176 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 1. Before amortization of
Slide 43: Well-Balanced Revenue
WELL-BALANCED REVENUE H1 2019 REVENUE PORTFOLIO Change 1 Change 1 3.9% (0.3%) 0.1% 15.7% GIS AFL 7.7% (0.6%) TRP 0.1% 11.2% MIN 7.8% 0.1% EHS (0.1%) 18.6% OGC 14.2% 0.4% IND 5.9% 0.0% 0.3% 15.0% CBE CRS 1. Constant currency basis. HALF YEAR RESULTS PRESENTATION © SGS SA 2019 43 18 JULY 2019 ALL RIGH
Slide 44: Well-Balanced Contribution
WELL-BALANCED CONTRIBUTION H1 2019 ADJUSTED OPERATING INCOME1 PORTFOLIO Change 1, 2 Change 1, 2 5.1% (3.3%) 0.2% 14.9% GIS AFL 7.2% (1.6%) TRP 0.8% 12.3% MIN 5.7% 0.3% EHS 1.1% 12.3% OGC 9.8% 2.5% IND 7.1% (0.2%) 0.2% 25.6% CBE CRS 1. Before amortization of acquired intangibles and other non-recurri
Slide 45: EUR, USD and CNY Represent 55% of H1 2019 Revenue
EUR, USD AND CNY REPRESENT 55% OF H1 2019 REVENUE H1 2019 FOREIGN CURRENCY REVENUES 26.4% 14.7% EUR USD 14.3% CNY 25.3% 3.6% OTHER TWD 3.4% CAD 2.2% 2.6% RUB GBP 2.5% CLP 2.5% 2.5% BRL AUD HALF YEAR RESULTS PRESENTATION © SGS SA 2019 45 18 JULY 2019 ALL RIGHTS RESERVED
Slide 46: Upcoming Investor Relations Event Dates
UPCOMING INVESTOR RELATIONS EVENT DATES INVESTOR DAYS – CHINA AND TAIWAN Thursday and Friday 7 and 8 November 2019 2019 FULL YEAR RESULTS Tuesday, 28 January 2020 ANNUAL GENERAL MEETING OF SHAREHOLDERS Tuesday 24 March 2020 Geneva, Switzerland HALF YEAR RESULTS PRESENTATION © SGS SA 2019 46 18 JULY
Slide 47: 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 48: © 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