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SGS | 2012 Half Year Results


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The SGS Group posted a strong first semester performance with revenue growth of 15.1% over prior year to CHF 2.7 billion (constant currency basis), reflecting both organic revenue growth of 11.1% and …

The SGS Group posted a strong first semester performance with revenue growth of 15.1% over prior year to CHF 2.7 billion (constant currency basis), reflecting both organic revenue growth of 11.1% and the integration of twenty four recently acquired companies contributing an additional 4.0% in revenues.

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  • 1. Half year JUNE 2012 results
  • 2. sgshalf year results The SGS Group posted a strong first semester performance with revenue growth of 15.1% over prior year to CHF 2.7 billion (constant currency basis), reflecting both organic revenue growth of 11.1% and the integration of twenty four recently acquired companies contributing an additional 4.0% in revenues. Adjusted operating income, up 12.2% over prior year on a constant currency basis, reached CHF 413 million, resulting in a margin of 15.6%. This was slightly down from 16.0% in prior year as the Group continues its investment programme towards the achievement of the 2014 plan. Restructuring activities including permanent headcount reductions during the semester resulted in a one-off expense of CHF 26 million. Net Profit for the period reached CHF 245 million, slightly above prior year (2011: CHF 241 million on a constant currency basis). During the semester, net capital investments amounted to CHF 176 million and the Group completed seven acquisitions for a total cash outflow of CHF 100 million. The Group confirms solid top line growth and improved operating results for the full year on a constant currency basis. 3
  • 3. FinancialHighlights june 2011 june 2011(CHF million) june 2012 pro-forma 2 publishedRevenue 2 651 2 303 2 345Change in % 15.1 13.1adjusted EBITDA 1 531 472 479Change in % 12.5 10.9adjusted Operating income 1 413 368 374Change in % 12.2 10.4adjusted Operating margin in % 1 15.6 16.0 16.0Operating income (EBIT) 373 357 363Change in % 4.5 2.8Profit Attributable to equity holders of SGS SA 245 241 246Change in % 1.7 (0.4)Adjusted basic eps (chf) 36.26 33.08 33.71Basic EPS (CHF) 32.16 31.72 32.30Diluted EPS (CHF) 32.00 31.56 32.14Cash flow from operating activities 244 228(Net debt)/Net cash (585) (233)weighted Average number of shares (‘000) 7 617 7 589average number of employees 74 965 65 3471. Before amortisation of acquisition intangibles, restructuring, transaction and integration-related costs2. Constant currency basis 4
  • 4. Overview basis). The restructuring phase is Management expected to yield benefits from 2013During the semester, the Group Francois Marti was appointed to the role onwards.generated CHF 2.7 billion in revenues, of EVP Systems & Services Certificationrepresenting an increase of 15.1% Net financial expense for the period and Strategic Transformation.(constant currency basis) over prior year. increased to CHF 18 million (2011:This was achieved through solid organic CHF 11 million) reflecting the issuance Significant shareholdersrevenue growth of 11.1% and through of corporate bonds part way through As at 30 June 2012, Exor held 15.00%,additional revenues from acquired 2011 for a total of CHF 725 million. The Mr. August von Finck and memberscompanies of 4.0%. On a historical overall effective tax rate for the period of his family acting in concert heldreported basis, despite the continued was 27.0% consistent with the Group’s 14.96%, the Bank of New York Mellonstrengthening of the Swiss Franc against full year expectations. Corporation held 3.23% and the Capitalmost currencies, Group revenues Profit attributable to equity holders Group Companies held 3.03% of theincreased by 13.1% for the period. reached CHF 245 million for the period, share capital and voting rights of theThe double digit organic revenue slightly above prior year on a constant Company.growth for the period was achieved in currency basis, and in line with the At the same date, SGS Group heldfive business lines. Minerals Services reported CHF 246 million in 2011. 2.43% of the share capital of themaintained its strong momentum Operating cash flows remained strong Company.throughout the period generating top at CHF 244 million for the semester,line organic growth of 20.6%, the key up 7.0% from CHF 228 million in priordrivers continuing to be exploration and Outlook year, and corresponding to 9.2% ofmetallurgical projects. Other business Group revenues versus 9.7% in prior Current trading conditions presentlines with double digit organic growth year. This inflow was used primarily to significant challenges, especially as theyinclude Government & Institutions, fund acquisitions for a total of CHF 100 relate to economies in or connected toAgricultural, Oil Gas & Chemicals and million and net investments in fixed the Eurozone. The Group continues toConsumer Testing Services, supported assets of CHF 176 million compared be proactive in reshaping its operationsby high activity levels across most with CHF 134 million in prior year. in view of changes in demand, andgeographies. Acquisitive growth for During the period the Group also paid a has undertaken a number of initiativesthe period primarily benefited South dividend of CHF 497 million. designed to right-size its infrastructure,America with three acquisitions adding for which most costs have already been At June 30, the Group’s net debt33.2% to its revenues, as well as North reflected in the first semester of 2012. position amounted to CHF 585 millionAmerica with six acquisitions accounting (June 2011: net debt of CHF 233 million) Notwithstanding these challenges andfor 6.2% of its growth. from a net debt position of CHF 95 the continuing investment in growthThe Group reported an adjusted EBITDA million at 31 December 2011, in line with initiatives mainly in non-Eurozoneof CHF 531 million, up 12.5% (constant expectations. markets to meet the Group’s mediumcurrency basis) over prior year and an term targets, SGS maintains itsadjusted operating income of CHF 413 expectations to deliver strong revenuemillion, resulting in a margin of 15.6% Acquisitions growth and an adjusted operatingslightly down from 16.0% in prior year The Group completed seven acquisitions income in excess of prior year the Group continues its investment during the semester, extending ourprogramme towards the 2014 target. service portfolio particularly in SouthRestructuring activities during the 17 July 2012 America with the CIMM T&S mineralssemester addressing underperformance acquisition in Chile, the ETSA industrialin some legacy operations and creating acquisition in Colombia and the Environpermanent headcount reductions, environmental acquisition in Brazil.resulted in a one-off expense of CHF 26 Combined, these seven acquisitionsmillion. Despite this charge, EBIT for the generate revenues of approximatelysemester reached CHF 373 million, up CHF 146 million on an annualised basis.4.5% over prior year (constant currencySergio Marchionne Christopher KirkChairman of the Board Chief Executive Officer 5
  • 5. Agricultural servicesAgricultural Services delivered strong laboratory in Canada and weaker results to improve service delivery throughcomparable revenue growth of 14.0% in Thailand following extensive floods enhanced IT capabilities.(of which 13.3% organic) to CHF 173 early in the year. In line with its strategy to developmillion for the period, sustained by During the period, the business a global Seed and Crop servicepositive trends across most regions. continued to invest in the development footprint, the Group acquired Gravena,Revenues from trade related services of new services focusing on process a contract research services providerincreased markedly, benefiting in part plant monitoring and supply chain headquartered in Jaboticabal, Brazil, infrom good export volumes out of services. It also participated in the early July. Founded in 1993, Gravenathe Black Sea region and from solid restructuring programme aimed at employs more than 120 specialists anddemand for agricultural commodities. resolving operational underperformance will provide a strong base for furtherSeed and Crop services also performed in legacy operations, primarily in development in South America.well delivering growth in excess of the Americas, as well as initiatives40%. This was achieved through thedevelopment of field trial capabilitiesin new geographies such as Western june 2011 june 2011 (CHF million) June 2012 pro-forma 2 publishedEurope and through the successfulintegration and geographical leverage of Revenue 173.1 151.8 155.8acquisitions made in North America and Change in % 14.0 11.1Africa over the past few years. adjusted Operating income 1 24.9 20.8 21.4The adjusted operating margin for theperiod increased to 14.4% from 13.7% Change in % 19.7 16.4in prior year (constant currency basis), Margin % 1 14.4 13.7 13.7with profitable volume growth offsettingstart-up costs for a new food safety 1. Before amortisation of acquisition intangibles, restructuring, transaction and integration-related costs 2. Constant currency basisMinerals servicesMinerals Services delivered excellent privatisation process. CIMM T&S and capacity utilisation across the networkcomparable revenue growth of 31.5% SGS operations are being merged, and a favourable product mix.(of which 20.6% organic) to CHF 422 combining locations, workforce and During the period, the Group continuedmillion for the period with all regions and capabilities throughout the country to to invest in capacity expansion, focusingservices in the portfolio contributing to further strengthen our leading market on its commercial laboratory network.the increased top line. position. While the process has yet to be New facilities in Mackay and BrisbaneDespite ongoing concerns surrounding completed, synergies are already being are operational, serving coal exportthe global macroeconomic environment, realised and operating margins are rising flows out of Australia, particularlydemand was strong throughout the rapidly towards Group standards. for a large contract win with a majorperiod and the key growth drivers The adjusted operating margin for the Australian coal exporter. Commercialremain record high exploration spend period remained stable at 18.4% versus geochemistry laboratories have beenand metallurgical projects. Investments prior year (constant currency basis), with established in Turkey and Liberia,made in prior years have enabled the the currently dilutive effect of the CIMM enabling the Group to address importantbusiness to rapidly respond to client acquisition being compensated by high new markets.requests, in particular in high growthgeographies such as West Africa, Asia june 2011 june 2011and South America. In countries with (CHF million) June 2012 pro-forma 2 publishedmature mining industries, laboratorycapacity expansions completed in Revenue 421.7 320.7 323.22011 have allowed the Group to Change in % 31.5 30.5handle increased volumes especially adjusted Operating income  1 77.6 58.8 59.4in Australia, Canada, Chile and South Change in % 32.0 30.6Africa. Margin % 1 18.4 18.3 18.4In January 2012 the Group finalised theacquisition of CIMM T&S, the leading 1. Before amortisation of acquisition intangibles, restructuring, transaction and integration-related costsprovider of technical services to the 2. Constant currency basismining industry in Chile, through a 6
  • 6. Oil, Gas & Chemicals servicesOil, Gas and Chemicals Services Services based on technological refinery closures in the Caribbean anddelivered comparable revenue growth of innovation continue to be deployed. Europe as well as continued investment11.8% (of which 11.2% organic) to CHF These include the launch of new in development and expansion of non-499 million for the period with growth services based on our new proprietary trade services.coming mainly from the expansion of technologies. These technologies have During the period, the Group acquirednon-trade related services. been developed by the newly formed Roplex in the UK, a company specialisedStrong trade volumes throughout the SGS Applied Technology & Innovation in support and testing of vapour recoveryperiod drove trade inspection revenues Centre. systems, complementing an alreadyacross most geographies, however, the The adjusted operating margin for the extensive service offering.double digit organic revenue growth was period declined slightly to 12.2% frommainly driven by non-trade services. 12.9% in prior year (constant currencyNon-trade related services, a key to basis), reflecting the one-off impact ofour growth strategy, include Upstreamservices with contract wins in Australia,Middle East and Europe; Oil Condition june 2011 june 2011 (CHF million) June 2012 pro-forma 2 publishedMonitoring in South America and Asia;Cargo Treatment services mainly in the Revenue 498.9 446.2 451.0USA and South East Asia and ongoing Change in % 11.8 10.6growth in Plant & Terminal Operations(PTO) in the USA and Europe. adjusted Operating income 1 60.9 57.7 58.8Growth in non-trade related services is Change in % 5.5 3.6expected to continue, leveraging existing Margin % 1 12.2 12.9 13.0facilities and assets and will requireminor ongoing investments to expand 1. Before amortisation of acquisition intangibles, restructuring, transaction and integration-related costsour geographical footprint to capture new 2. Constant currency basisopportunities.Life Science ServicesLife Science Services experienced a capacity amongst Clinical Research During the period, the Group acquireddifficult semester with comparable Organisations with an immediate impact Vitrology, a biopharmaceutical testingrevenues down 1.6% versus prior on volumes and operating income. organisation based in the UK andyear to CHF 95 million as double digit Activities in late phase clinical trials also very active in biosafety testing. Thisrevenue growth in laboratory services experienced a decline in volumes but acquisition is an important step inwas not sufficient to offset poor results with a lesser impact on margins. developing the Group’s capabilities inin clinical research. Overall, the adjusted operating margin the biologics arena, creating a platformLaboratory operations delivered strong for the period declined from 10.4% in for further development in virology andorganic revenue growth of 13.8% prior year to 7.9% (constant currency molecular biology in combination withsupported by excellent results from the basis), with the strong performance SGS M-Scan and leveraging the globalM-Scan activities, a group specialised in laboratory services unable to offset advanced chemical and biochemical the impact of the low clinical researchtesting acquired in 2010, and sustained the expansion of the laboratorynetwork in Europe, North America,India and China. This network provides june 2011 june 2011laboratory services for both small (CHF million) June 2012 pro-forma 2 publishedand large molecules, but with a clearintent to invest primarily in expanding Revenue 94.8 96.3 99.5biologics-related expertise that already Change in % (1.6) (4.7)accounts for an important part of this adjusted Operating income  1 7.5 10.0 10.3revenue stream. Change in % (25.0) (27.2)Revenues from clinical research Margin % 1 7.9 10.4 10.4activities declined 14.9% versus prioryear, hampered by a significant drop 1. Before amortisation of acquisition intangibles, restructuring, transaction and integration-related costsin the number of molecules reaching 2. Constant currency basisearly phase trial stage and market over 7
  • 7. Consumer Testing ServicesConsumer Testing Services delivered activities. In addition, the acquisitions portion of these investments, whilestrong comparable revenue growth of in December of four food laboratories other geographies also benefited from13.0% (of which 11.5% organic) to CHF in Turkey and Baseefa in the UK, while new laboratory capabilities in softlines438 million for the period, sustained by adding valuable new activities to the and food testing. In addition to theseprofitable growth in both traditional and service portfolio, currently remain investments, the business initiatednew services. dilutive to the overall business margin several restructuring programmes,Organic revenue growth was achieved due primarily to seasonality. closing inefficient operations in smalleracross all regions, with resilient demand During the period, capital investments markets and reorganising somefrom Western Europe, continued amounted to CHF 37 million, enabling operations in Asia to improve overallgrowth in Asia on the back of ongoing the Group to address constantly, as well as solid growth evolving client needs. Asia, Europe andin South America, particularly in Brazil, North America attracted a significantChile and Peru. In traditional services,Softlines continued to lead the increasein top line, supported by efficient june 2011 june 2011 (CHF million) June 2012 pro-forma 2 publishedkey account management structuresand expanded laboratory capacity in Revenue 437.8 387.4 387.5several geographies. New services Change in % 13.0 13.0also continued to gain traction duringthe period, with volumes in automotive adjusted Operating income 1 98.7 92.7 91.4parts testing ramping up rapidly. Change in % 6.5 8.0The adjusted operating margin for the Margin % 1 22.5 23.9 23.6period declined from 23.9% in prioryear to 22.5% (constant currency 1. Before amortisation of acquisition intangibles, restructuring, transaction and integration-related costsbasis), reflecting a transition period in 2. Constant currency basisproduct mix with stable volumes inmature services and investments in newSystems & Services CertificationSystems and Services Certification for sustainability-related audit schemes. as well as continued investments in thedelivered organic revenue growth for In addition, through its global network, development of new industry bespokethe period of 6.0% to CHF 186 million, the Group is strongly positioned to services.with strong profitable growth in most assist clients in ensuring compliance Cost optimisation measures haveregions being partly offset by difficult of their supply chain with applicable been undertaken in key affiliatesmarket conditions in Spain and Italy. environmental, health and safety, and during the period to compensate forExcellent market share gains enabled social standards. pressure on margins, with restructuringAsia, Eastern Europe, South America The adjusted operating margin for the programmes where needed andand Africa to deliver double digit period declined from 17.4% in prior IT platform developments that willrevenue growth over prior year, with year to 16.9% (constant currency enhance productivity and serviceparticularly robust business evolution basis), reflecting the increasingly delivery on global Taiwan, Indonesia, China, Russia, competitive environment in matureTurkey, Brazil and South Africa. This European and North American marketswas reinforced by a strong recoveryin Japan following the natural disasterin prior year. In Western Europe, june 2011 june 2011 (CHF million) June 2012 pro-forma 2 publishedall countries except Spain and Italysucceeded in delivering some Revenue 186.0 175.5 177.4profitable revenue growth through Change in % 6.0 4.8the introduction of new services andstrategic key account management adjusted Operating income  1 31.4 30.6 30.8structures. Change in % 2.6 1.9While statutory certification remains Margin % 1 16.9 17.4 17.4an important revenue stream, top linegrowth during the semester came 1. Before amortisation of acquisition intangibles, restructuring, transaction and integration-related costsmostly from the roll-out of second 2. Constant currency basisparty audit programmes and demand 8
  • 8. INDustrial servicesIndustrial Services delivered solid investment projects are being delayed country, while in Colombia, the Groupcomparable revenue growth of 18.4% and public spend is decreasing. During acquired ETSA, a leading engineering(of which 9.0% organic) to CHF 422 the period, several restructuring plans project supervision and managementmillion for the period, supported by have been initiated in response to company. While being an importantsix acquisitions within the past twelve changes in market conditions particularly addition to the Industrial divisionmonths. in Spain where both commercial footprint in South America, ETSA wasDouble digit organic revenue growth for services and statutory inspections dilutive to the overall business marginthe semester was achieved primarily in remain very weak. in the first semester due to strongAsia, Australasia and the Middle East. During the period, two acquisitions were seasonality.Demand for construction materials completed in this sector. In South Africa,testing remained strong in Taiwan the Group acquired Metlab, the mainand Korea, while in China the growth metallurgical testing laboratory in thealso included increasing supply chainservices. Other growth drivers includedIndia with large monitoring projects, june 2011 june 2011 (CHF million) June 2012 pro-forma 2 publishedstatutory inspections in Malaysia andnon-destructive testing services in Revenue 422.1 356.4 368.7New Zealand. Acquisitions completed Change in % 18.4 14.5in 2011 also delivered profitable growthwith particularly strong results from the adjusted Operating income 1 40.3 38.1 39.8PfiNDE pipeline testing activities in the Change in % 5.8 1.3USA. Margin % 1 9.5 10.7 10.8The adjusted operating margin for theperiod declined from 10.7% in prior year 1. Before amortisation of acquisition intangibles, restructuring, transaction and integration-related coststo 9.5% (constant currency basis) with 2. Constant currency basismargins under pressure in Europe, NorthAmerica and Africa as many customerENVIronmental servicesEnvironmental Services delivered of field and data interpretation services and Guinea as well as a strengthenedcomparable revenue growth of 11.6% and the weak results in Western Europe. regional commercial team in Africa.(of which 5.5% organic) to CHF 151 The four acquisitions completed in 2011 During the period the Group acquiredmillion for the period, sustained by contributed very positively to the results Analytical Perspectives in Northsolid growth in emerging markets and of the semester with CHF 5.4 million in Carolina, USA, specialised in ultra-six acquisitions during the past twelve revenues and accretive margins. trace analysis of various persistentmonths. In the first semester, the Group invested organic pollutants complementing theStrong organic revenue growth was in several emerging markets where existing service portfolio. The Groupachieved primarily in emerging markets, demand for environmental services also acquired Environ, the leadingwith investments made in prior years is growing, especially from mining occupational health and industrialenabling the Group to capture many new customers requiring on-site monitoring hygiene laboratory in Brazil, to enter thisopportunities in Africa, South America of soil, water and air. These investments fast growing market.and Asia. In Europe and Canada, thanks include new laboratories in Congoto a diversified portfolio of services,operations maintained an overall highlevel of activity despite difficult market june 2011 june 2011 (CHF million) June 2012 pro-forma 2 publishedconditions. Within Europe however,good results in Germany and Belgium Revenue 151.4 135.7 140.2were unable to offset underperformance Change in % 11.6 8.0in France and Italy where operationalissues are currently being addressed adjusted Operating income  1 12.1 11.6 12.0through restructuring plans. Change in % 4.3 0.8The adjusted operating margin for the Margin % 1 8.0 8.5 8.6period declined slightly from 8.5% inprior year to 8.0% (constant currency 1. Before amortisation of acquisition intangibles, restructuring, transaction and integration-related costsbasis), reflecting ongoing investments 2. Constant currency basisaimed at accelerating the development 9
  • 9. AUTOmotive servicesAutomotive Services delivered The adjusted operating margin for the During the period, the Group wascomparable revenue growth of 8.4% period increased to 21.8% from 20.7% awarded a contract for the delivery of(of which 5.3% organic) to CHF 143 in prior year (constant currency basis), a solution for the control, monitoringmillion for the period, sustained by supported by the above-mentioned and enforcement of commercialsolid statutory inspection results and strong performance in statutory vehicle inspections by the Irish Roadthe acquisition of ETC, an engine and inspections. These fully offset the Safety Authority. This is an importantvehicle testing business in the USA, in impact of weaker results in the USA achievement in line with the Group’sAugust 2011. where non-statutory activities continue ambition of expanding into road safetyOrganic revenue growth was achieved to suffer from low volumes, especially in services.across all statutory inspection off-lease inspections, with no prospectoperations during the semester. of an improvement until next year.In Europe, the long establishednetworks in France performed welland the Spanish ITV operations theGroup acquired in December 2010 june 2011 june 2011 (CHF million) June 2012 pro-forma 2 publishedmaintained good results in line withexpectations, despite the worsening Revenue 143.1 132.0 136.6economic environment. In Africa, the Change in % 8.4 4.8new centres in Morocco are now fullyoperational with volumes increasing in adjusted Operating income 1 31.2 27.3 28.8excess of 20% and pushing margins up Change in % 14.3 8.3as capacity utilisation levels improve. Margin % 1 21.8 20.7 21.1In Ivory Coast and South Africa, newcentres were opened during the period 1. Before amortisation of acquisition intangibles, restructuring, transaction and integration-related costsleading to an uplift in the top line. 2. Constant currency basisGOVErnments & Institutions ServicesGovernments & Institutions Services The adjusted operating margin for the Forestry services, after several pilotdelivered an excellent organic revenue period increased to 22.8% from 19.9% phases, are now fully operational ingrowth for the period of 20.5% to (constant currency basis), supported Cameroon, Liberia, Papua New GuineaCHF 122 million, supported by the by the higher overall PCA volumes for and the Democratic Republic of Congo.expansion of Local Solution services and which incremental execution costs Vehicle tracking services are alsostable volumes on the Pre-Shipment across the network are limited. This was expanding with operations ongoing inInspection (PSI) programmes. achieved despite losing the Iraq PCA Ghana and roll-outs in East Africa, whileLocal Solution services, now programme early in the year. services surrounding government dutiesrepresenting around 70% of total In line with its strategy of diversifying on mobile phone communications are inrevenues for the division, delivered away from pre-shipment inspections, operation in revenue growth of 31.0% over the division has successfully developedprior year. This was achieved mainly new activities that now form athrough the steady expansion of existing significant part of the service portfolio.Product Conformity Assessment (PCA)programmes in Kenya and Saudi Arabia,as well as additional revenues from june 2011 june 2011 (CHF million) June 2012 pro-forma 2 publishednew PCA programmes in Kurdistan,Tanzania and Kuwait. TradeNet solutions Revenue 122.3 101.5 104.7also performed well during the period Change in % 20.5 16.8in Ghana and Madagascar and a newTradeNet is being implemented in adjusted Operating income  1 27.9 20.2 21.7Mozambique. Change in % 38.1 28.6Revenues from Global Solution Margin % 1 22.8 19.9 20.7activities remained solid throughoutthe period, with volumes on PSI 1. Before amortisation of acquisition intangibles, restructuring, transaction and integration-related costsprogrammes in Cameroon, Angola and 2. Constant currency basisHaiti remaining stable. 10
  • 10. CondenseD interimfinancial statementsfor the period ended 30 june 2012Condensed consolidated income statement(CHF million) notes june 2012 june 2011Revenue 2 651 2 345Salaries, wages and subcontractors’ expenses (1 483) (1 309)Depreciation, amortisation and impairment (130) (113)Other operating expenses (665) (560)Operating income (EBIT) 3 373 363Analysis of Operating income Adjusted operating income 413 374 Amortisation of acquisition intangibles (9) (8) Restructuring costs 3 (26) - Transaction and integration-related costs 3 (5) (3) Operating income 373 363Net financial expenses (18) (11)Profit before taxes 355 352Taxes (96) (93)Profit for the period 259 259Profit attributable to: Equity holders of SGS SA 245 246 Non-controlling interests 14 13Basic earnings per share (in chf) 4 32.16 32.30Diluted earnings per share (in chf) 4 32.00 32.14 12
  • 11. Condensed consolidated statementof Comprehensive income(CHF million) june 2012 june 2011Actuarial gains/(losses) on defined benefit plans (31) (14)Income tax on actuarial gains/(losses) taken directly to equity 8 4Exchange differences and other (1) (168)Other comprehensive income for the period (24) (178)Profit for the period 259 259Total comprehensive income for the period 235 81Attributable to: Equity holders of SGS SA 225 74 Non-controlling interests 10 7Condensed consolidated balance sheet(CHF million) june 2012 december 2011Non-current assetsLand, buildings and equipment 962 888Goodwill and other intangible assets 1 135 1 044Other non-current assets 287 248Total non-current assets 2 384 2 180Current assetsTrade accounts and notes receivable 948 868Other current assets 651 501Cash and marketable securities 728 1 211Total current assets 2 327 2 580Total assets 4 711 4 760Total equity 1 863 2 045non-current LiabilitiesLoans and obligations under financial leases 1 302 1 299Provisions and other non-current liabilities 370 333Total non-current liabilities 1 672 1 632Current liabilitiesTrade and other payables 486 447Other liabilities 690 636Total current liabilities 1 176 1 083Total equity and liabilities 4 711 4 760 13
  • 12. Condensed consolidated cash flow statement(CHF million) june 2012 june 2011Profit for the Period 259 259Non-cash items 251 208(Increase) / decrease in working capital (155) (130)Taxes paid (111) (109)cash flow from Operating activities 244 228Net (purchase) of fixed assets (176) (134)Cash (paid) for acquisitions (103) (27)Other from investing activities 4 (5)Cash flow from investing activities (275) (166)Dividend paid to equity holders of SGS SA (497) (494)Dividend paid to non-controlling interests (5) (4)Acquisition of non-controlling interests - -Net cash (paid)/received on treasury shares 76 (30)Proceeds of corporate bonds - 714Interest paid (26) (14)Net flows on interest rate swaps 7 -Increase/(decrease) in borrowings (15) 8Cash flow from financing activities (460) 180Currency translation 7 (10)Increase/(decrease) in cash and cash equivalents (484) 232Condensed statement of Changes in Consolidated Equity attributable to equity holders non-controlling(CHF million) of sgs sa interests total equityBalance as at 1 january 2011 2 069 39 2 108Total comprehensive income for the period 74 7 81Dividends paid (494) (4) (498)Share-based payments 9 - 9Movement in non-controlling interests - - -Movement on treasury shares (30) - (30)Balance as at 30 June 2011 1 628 42 1 670Balance as at 01 january 2012 1 995 50 2 045Total comprehensive income for the period 225 10 235Dividends paid (497) (5) (502)Share-based payments 9 - 9Movement in non-controlling interests - - -Movement on treasury shares 76 - 76Balance as at 30 JUNE 2012 1 808 55 1 863 14
  • 13. Notes to thecondensed interimfinancial statements1. Basis of Preparation 2. Significant accounting Several new amendments were policies adopted effective 1 January 2012These unaudited condensed but have no impact on the Groupconsolidated interim financial statements The condensed financial statements consolidated financial statements.have been prepared in accordance have been prepared in accordancewith International Financial Reporting with the accounting policies applied byStandards (IFRS) IAS 34 and should be the Group in its consolidated financialread in conjunction with the consolidated statements for the year ended 31financial statements of the Group for the December 2011.year ended 31 December 2011.3. Segment InformationJune 2012 amortisation adjusted of acquisition operating income by(CHF million) revenue operating income intangibles businessAgricultural Services 173 25 ‐ 25Minerals Services 422 78 (1) 77Oil, Gas & Chemicals Services 499 61 (1) 60Life Science Services 95 8 (1) 7Consumer Testing Services 438 99 ‐ 99Systems & Services Certification 186 31 ‐ 31Industrial Services 422 40 (2) 38Environmental Services 151 12 ‐ 12Automotive Services 143 31 (4) 27Governments & Institutions Services 122 28 ‐ 28Total 2 651 413 (9) 404 Unallocated costs (31) group operating income 373June 2011 amortisation adjusted of acquisition operating income by(CHF million) revenue operating income intangibles businessAgricultural Services 156 21 ‐ 21Minerals Services 323 59 (1) 58Oil, Gas & Chemicals Services 451 59 (1) 58Life Science Services 100 10 (1) 9Consumer Testing Services 387 91 ‐ 91Systems & Services Certification 177 31 ‐ 31Industrial Services 369 40 (1) 39Environmental Services 140 12 ‐ 12Automotive Services 137 29 (4) 25Governments & Institutions Services 105 22 ‐ 22Total 2 345 374 (8) 366 Unallocated costs (3) group operating income 363 15
  • 14. All segment revenues reported above Unallocated costs 2012 integration and transaction-related costsare from external customers. that have been expensed in accordance During the first semester 2012,The adjusted operating income represents with IFRS 3 (revised). the Group incurred a pre-taxthe profit earned by each segment. This restructuring charge of CHF 26 Unallocated costs 2011is the main measure reported to the chief million largely as a result of personnel During the first semester 2011,operating decision maker for the purposes reorganisation due to the decline in the Group incurred CHF 3 million ofof resource allocation and assessment of market conditions in certain businesses integration-related costs and transaction-segment performance. and geographies (CHF 20 million) as related costs that have been expensed inThere have been no material changes to well as fixed asset impairment and other accordance with IFRS 3 (revised).the total assets by segment as disclosed charges (CHF 6 million). At the samein the last annual financial statements. time, the Group incurred CHF 5 million of4. Earnings Per Share June 2012 June 2011Profit attributable to equity holders of SGS SA (CHF million) 245 246Weighted average number of shares (‘000) 7 617 7 589Basic earnings per share (CHF) 32.16 32.30Profit attributable to equity holders of SGS SA (CHF million) 245 246Diluted weighted average number of shares (‘000) 7 654 7 629Diluted earnings per share (CHF) 32.00 32.14Adjusted earnings per share: june 2012 june 2011Profit attributable to equity holders of SGS SA (CHF million) 245 246Amortisation of acquisition intangibles (CHF million) 9 8Restructuring costs net of tax (CHF million) 19 -Transaction and integration-related costs net of tax (CHF million) 3 2Adjusted profit attributable to equity holders of SGS SA (CHF million) 276 256Adjusted basic earnings per share (CHF) 36.26 33.71Adjusted Diluted earnings per share (CHF) 36.08 33.535. Business combinations and other • 100% of Metlab (Pty) Ltd., effective Totalsignificant transactions 1 April 2012 – an independent These companies were acquired for metallurgical testing laboratory in an equivalent of CHF 118 million andAcquisitions Boksburg, South Africa. the total goodwill generated on these • 100% of Environ Cientifica Ltda, transactions amounted to CHF 78During the period, the Group completedseven acquisitions. effective 1 April 2012 - a leading million. All the above transactions Occupational Health and Industrial contributed in total CHF 55 million in• 100% of CIMM Tecnologías y Servicios Hygiene (OIH) laboratory based in Sao revenues and CHF 4 million in operating S.A. (CIMM T&S), effective 6 January Paulo, Brazil. income. Had all acquisitions been 2012 – a leading provider of technical • 100% of Analytical Perspectives effective 1 January 2012, the revenues services to the mining industry in Chile. of North Carolina, LLC, effective 1 for the period would have been• 100% of Roplex Engineering Ltd, increased by CHF 17 million and the April 2012 – a laboratory specialised effective 1 February 2012 – a Group operating income for the period in the ultra-trace analysis of various UK-based company specialising in would have been increased by CHF 2 persistent organic pollutants (POPs) engineering support and test services million. based in Wilmington, USA. for vapour recovery systems. • 100% of Vitrology Limited, effective None of the goodwill arising from these• 100% of Estudios Técnicos SA, transactions is expected to be tax 18 May 2012 – an organisation (ETSA), effective 15 March 2012 deductible. specialising in biosafety testing for – a leading engineering project the pharmaceutical industry, based in supervision and management Glasgow, UK. company based in Bogota, Colombia. 16
  • 15. Total assets and liabilities arising from the acquisitions for the period CIMM OTHER Fair value Fair value on Fair value Fair value on(CHF million) Book Value adjustments acquisition Book Value adjustments acquisitionTangible and other long-term assets 22 - 22 3 - 3Intangible assets 1 6 7 - 14 14Trade accounts and notes receivable 15 - 15 14 - 14Cash and cash equivalents 8 - 8 4 - 4Other current assets 5 - 5 13 - 13Current liabilities (29) - (29) (20) - (20)Non-current liabilities (10) (1) (11) - (5) (5)NET ASSETS ACQUIRED 12 5 17 14 9 23Goodwill 19 59TOTAL PURCHASE PRICE 36 82Acquired cash and cash equivalents (8) (4)Consideration payable - (6)NET CASH OUTFLOW ON ACQUISITIONS 28 72 TOTAL fair value FAIR VALUE ON(CHF million) BOOK value adjustments ACQUISITIONTangible and other long-term assets 25 - 25Intangible Assets 1 20 21Trade accounts and notes receivable 29 - 29Cash and cash equivalents 12 - 12Other current assets 18 - 18Current liabilities (49) - (49)Non-current liabilities (10) (6) (16)net assets acquired 26 14 40Goodwill 78total purchase price 118Acquired cash and cash equivalents (12)Considerations payable (6)net cash outflow on acquisitions 100Due to their timing, the initial accounting Within transaction and integration-related income statement.for all seven acquisitions has only been costs the Group incurred CHF 2 million Considerations payable relate mainlyprovisionally determined at the balance related to external legal fees and due to environmental and commercialsheet date. diligence expenses. These expenses warranty clauses. are reported within Other Operating Expenses in the condensed consolidated 17
  • 16. 6. GOODWILL(CHF million) 2012 2011costAt 1 January 830 772Current period acquisitions 78 14Consideration on prior years’ acquisition - -Exchange differences - (46)AT 30 June 908 740The goodwill arising on acquisitions relates to the value of expected synergies and the value of the qualified workforce that do notmeet the criteria for recognition as separable intangible assets.7. Retirement Benefit Obligations the full year 2011 would have been Effective 1 July 2012, the GroupDuring the period, an interim assessment lower by approximately CHF 14 Mio acquired:of employee benefit obligations and with no material impact on the equity or • 75% of Gravena Pesquisa, Consultoriaactual return on plan assets has been the balance sheet. As required by the e Treinamento Agrícola Ltda.performed for the major defined benefit standard, SGS will retrospectively adopt (Gravena), a leading field trial contractpension plans. A resulting increase in net the standard on January 1, 2013. research service provider in Brazil.pension liabilities of CHF 19 million has 8. AppROVal of interim • 100% of Exprimo NV, a Belgium-been recorded. financial statements and based life science consultancyIn 2011, IAS 19 revised on Employee subsequent events company with strong focus and skillsBenefits was issued for adoption by in the application of quantitative, These condensed interim financialJanuary 1, 2013. If this standard had model-based simulations during statements were authorised for issue bybeen adopted by SGS in 2011, it is all stages of pharmaceutical the Board of Directors on 16 July 2012.estimated that operating income for development.9. eXCHANGE RATESThe most significant currencies for the Group were translated at the following exchange rates into Swiss Francs. Balance sheet Income Statement End of period Rates Average Rates june 2012 december 2011 june 2012 june 2011Australia AUD 100 97.14 95.47 95.84 93.66Brazil BRL 100 45.96 50.40 50.02 55.55Canada CAD 100 93.16 92.16 92.34 92.87China CNY 100 15.02 14.93 14.69 13.87Eurozone EUR 100 120.12 121.68 120.52 127.13United Kingdom GBP 100 149.29 145.14 146.43 146.50Hong Kong HKD 100 12.31 12.10 11.97 11.66India INR 100 1.69 1.76 1.78 2.02Taiwan TWD 100 3.20 3.11 3.13 3.12USA USD 100 95.45 94.03 92.87 90.72 18
  • 17. Disclaimer This document is given as of the dates or implied by these forward looking specified, is not updated and any statements. These statements speakThis PDF version is an exact copy forward looking statements are made only as of the date of this document.of the document provided to SGS subject to the following reservations: Except as required by any applicable lawshareholders. This document contains certain or regulation, SGS expressly disclaimsExcept where you are a shareholder, any obligation to release publicly any forward looking statements that arethis material is provided for information updates or revisions to any forward neither historical facts nor guaranteespurposes only and is not, in particular, looking statements contained herein of future performance. Becauseintended to confer any legal rights to reflect any change in SGS group’s these statements involve risks andon you. expectations with regard thereto or any uncertainties that are beyond control orThis document does not constitute an estimation of SGS, there are important change in events or conditions on whichinvitation to invest in SGS shares. Any factors that could cause actual results to any such statements are based.decisions you make in reliance on this differ materially from those expressed The English version is binding.information are solely your responsibility. Shareholder Information SGS SA CORPORATE OFFICE STOCK EXCHANGE TRADING 1 place des Alpes SIX Swiss Exchange P.O. Box 2152 CH – 1211 Geneva 1 COMMON STOCK SYMBOLS t +41 (0)22 739 91 11 Bloomberg: Registered Share: SGSN.VX f +41 (0)22 739 98 86 e Reuters: Registered Share: SGSN.VX Telekurs: Registered Share: SGSN ISIN: Registered Share: CH0002497458 2012 full Year results Swiss security number: 249745 Wednesday, 16 January 2013 CORPORATE development, ANNUAL GENERAL MEETING COMMUNICATIONS & INVESTOR OF SHAREHOLDERS RELATIONS Tuesday, 19 March 2013 Jean-Luc de Buman Geneva, Switzerland SGS SA 1 place des Alpes INvestor days P.O. Box 2152 CH – 1211 Geneva 1 South Africa t +41 (0)22 739 93 31 Thursday - Friday f +41 (0)22 739 92 00 25-26 October 2012 STOCK EXCHANGE LISTING SIX Swiss Exchange, SGSN 19
  • 18. © sgs sa 2012. All rights reserved.