SGS Full Year Results 2012


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The SGS Group achieved solid results in 2012, delivering revenue growth of 16.3% (14.5% on a constant currency basis) to CHF 5.6 billion with Oil, Gas & Chemicals Services becoming the first business sector to exceed one billion in revenues. Overall, a strong organic growth of 10.2% was complemented by a 4.3% contribution from recently acquired companies.

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SGS Full Year Results 2012

  1. 1. DECEMBER 2012ver 8full year REsults
  2. 2. 3The SGS Group achieved solid results in 2012, deliveringrevenue growth of 16.3% (14.5% on a constant currencybasis) to CHF 5.6 billion with Oil, Gas & Chemicals Servicesbecoming the first business sector to exceed one billion inrevenues. Overall, a strong organic growth of 10.2% wascomplemented by a 4.3% contribution from recently acquiredcompanies.Adjusted operating income increased 12.9% over prior yearon a constant currency basis, reaching CHF 941 million andresulting in a margin of 16.9%. This is slightly down from17.1% in prior year, reflecting investments made in line withthe 2014 Plan, a few initially margin-dilutive acquisitions andweaker results in some businesses.During the year, the Group undertook a number of restructuringplans to align its operations to current market conditions,resulting in one-off expenses totalling CHF 47 million (net oftax). These initiatives focused mainly on European operations.Net profit for the year, including these restructuring costs,increased 1.5% compared to prior year (constant currencybasis) to CHF 556 million, while Adjusted Net Profit increasedby 10.5%.Operating cash flows remained strong at CHF 800 million,an increase of 15.9% over prior year, enabling the Group tocomfortably fund capital investments of CHF 377 million andcomplete eighteen acquisitions for a total cash outflow of CHF176 million.The Board of Directors will propose a dividend of CHF 58 pershare, CHF 30 representing an ordinary distribution of 41% ofnet profit and an additional CHF 28 reflecting the healthy cashgeneration capabilities of the Group.sgs FULL year results
  3. 3. 4Financial Highlights(CHF million)2012Results2011pro-forma 22011publishedRevenueChange in %5 578 4 87414.54 79716.3adjusted EBITDA 1Change in %1 191 1 04713.81 02416.3adjusted Operating income 1Change in %941 83312.981515.4adjusted Operating margin in % 116.9 17.1 17.0Operating income (EBIT)Change in %843 8084.37906.7Profit Attributable to equity holders of SGS SAChange in %556 5481.55344.1adjusted Profit Attributable to equity holders of SGS SA 1Change in %630 57010.555713.1Adjusted basic eps (chf) 82.65 73.53 75.24Basic EPS (CHF) 72.97 72.23 70.52Diluted EPS (CHF) 72.51 71.86 70.16Cash flow from operating activities 800 690(Net debt)/Net cash (335) (95)weighted Average number of shares (‘000) 7 622 7 578average number of employees 77 020 67 6331. Before amortisation of acquisition intangibles, restructuring, transaction and integration-related costs2. Constant currency basis
  4. 4. 5OverviewThe SGS Group achieved solid resultsin 2012, with revenue up 14.5% overprior year (constant currency basis) toCHF 5.6 billion, supported by strongorganic growth of 10.2% and recentlyacquired companies which contributedan additional 4.3% to the top line. Ona reported basis, revenue for the yearincreased 16.3% in comparison withthe published figures 2011, benefitingfrom a favourable foreign exchangetranslation effect of 1.8%.Double-digit organic revenue growthwas achieved in five business linesand in all geographies other thanEurope. Minerals Services, despite highcomparative figures in prior year andsomewhat weaker market conditionsduring the second semester, maintaineda healthy full-year organic growthrate of 13.8%. Other businesseswith double-digit growth, includingAgricultural, Oil, Gas & Chemicals andConsumer Testing Services, maintainedtheir positive momentum from thefirst semester. Industrial Servicesaccelerated its top line expansion in thesecond half of the year, achieving 9.5%organic growth despite the ongoingnegative macroeconomic environmentin Southern Europe. Recent acquisitionsadded 4.3% to Group revenues in 2012,benefiting most regions and businesslines, with the majority in Southand North America which reportedacquisitive growth of 36.2% and 5.3%respectively.Adjusted operating income increased12.9% over prior year on a constantcurrency basis, reaching CHF 941million and resulting in a marginof 16.9%. This is slightly downfrom 17.1% in prior year reflectingthe impact of some initially margindilutive acquisitions, weaker resultsin Life Science Services and ongoinginvestments in growth initiatives, partlyoffset by a positive foreign exchangetranslation effect.During the year, the Group undertooka number of restructuring initiatives toalign its operations to current marketconditions. This resulted in one-offexpenses totalling CHF 47 million (netof tax), the majority of which relatedto European operations, including theintended closure of the Life Scienceclinical trial activities in France.Net financial expense for the yearincreased to CHF 35 million followingthe issuance of corporate bondspartway through 2010 and 2011 fora total of CHF 1,275 million. Theoverall effective tax rate for the yearwas 27.0%, consistent with Groupexpectations.Profit attributable to Equity Holders,after restructuring costs, reached CHF556 million, ahead of the reported CHF534 million in 2011, while the AdjustedProfit attributable to Equity Holdersincreased 10.5% over prior year on aconstant currency basis.Operating cash flows remained strong atCHF 800 million, enabling the Group tocomfortably fund capital investments ofCHF 377 million, an increase of 11.9%versus prior year, and to completeeighteen acquisitions for a total cashoutflow of CHF 176 million. During theyear, the Group also paid a dividendof CHF 497 million and reported a netinflow on treasury shares of CHF 76million, leading to a Group net debtposition at 31 December 2012 of CHF335 million (2011: CHF 95 million), inline with expectations.AcquisitionsDuring the year, the Group completedeighteen acquisitions that generate anestimated CHF 212 million in revenuesand CHF 29 million in Operating Incomeon an annualised basis.These acquisitions are well distributedthroughout the Group, with sixacquisitions in Europe, four in NorthAmerica, four in South America, twoin Africa and two in Asia, involvingseven different business lines. Thesetransactions allow the Group to rapidlyaccess new markets, enhance ourservice portfolio and expand our pool ofqualified and talented individuals.Distribution to shareholdersThe SGS Board of Directors willrecommend to the Annual GeneralMeeting, to be held on 19 March, theapproval of a dividend of CHF 58 pershare, CHF 30 representing an ordinarydistribution of 41% of net profit andan additional CHF 28 reflecting thehealthy cash generation capabilities ofthe Group.ManagementDuring the autumn, Duilio Giacomelli,formerly Chief Operating Officer (COO)of the South East Europe region, tooka well deserved retirement after 35years in the SGS Group and we wouldlike to thank him for his invaluablecontribution and dedication during allthese years. Ladislav Papik, currentlyManaging Director of Hungary, hasbeen appointed as his successor.Significant shareholdersAs of 31 December 2012, Exor held15.00% (2011: 15.00%), Mr. Augustvon Finck and members of his familyacting in concert held 14.97% (2011:14.97%), the Bank of New York MellonCorporation held 3.26% (2011: 3.30%)of the share capital and voting rights ofthe Company.At the same date, SGS Group held2.43% of the share capital of theCompany (2011: 3.31%).OutlookSGS expects to deliver solid topand bottom line growth in 2013,notwithstanding continuing weaktrading conditions in Europe.17 January 2013Sergio MarchionneChairman of the BoardChristopher KirkChief Executive Officer
  5. 5. 6Agricultural Services delivered strongdouble-digit comparable revenuegrowth of 12.3% (of which 11.0%organic) to CHF 369 million for theyear, with the positive momentumexperienced in the first half carryingthrough into the second semester inmost regions.Revenues from trade-related servicesremained strong, sustained by highexport volumes in the Black Sea, aswell as favourable market conditionsin Eastern Europe, India and LatinAmerica for grain and in Vietnamfor rice. Pest control and fumigationactivities benefited from the hightrade volumes in Europe and inNorth America. Inland activities alsoperformed well with seed & cropservices growing almost 30% for theyear. These activities, which wereintroduced via acquisitions in NorthAmerica, have now been successfullyreplicated in several locations inEurope and South America, while inAfrica soil and leaf testing volumesalso increased in the second semester.The adjusted operating income marginfor the year increased to 16.6%from 15.7% in prior year (constantcurrency basis) supported by the highvolumes and favourable geographicalpatterns in trade services as wellas a stronger peak season for fieldtrials. Restructuring plans executedearly in the year also supportedthe overall margin by addressingunderperformance issues in legacyoperations.During the year, the Group acquiredGravena, an established contractresearch provider in Brazil withover 120 specialists in field trials,to strengthen and accelerate thegrowth of seed & crop servicesin South America. In addition, theGroup acquired WareCare, a pestmanagement company based in theNetherlands. Investments in growthinitiatives to sustain organic revenuegrowth also continued and the Groupsuccessfully commissioned a flagshipFood Safety and Cold Chain facilityin India, for which client up-take andmarket feedback is very positive.Minerals Services delivered excellentcomparable revenue growth of 24.2%(of which 13.8% organic) to CHF 868millon for the year. This growth camefrom all activities in the service valuechain and sustained growth in Africa,Asia and the Americas.Despite high comparative figuresin prior year and weaker marketconditions in the second semester,the only segments that experienceda slowdown were energy minerals inAustralia and North America and, toa lesser extent, the iron ore sector.Demand for geochemistry remainedstrong overall, driven by high samplevolumes in Africa and South America,while the number of metallurgyprojects also remained high with onlya few postponements in Australia.In January 2012, the Groupacquired CIMM T&S, the leadingprovider of technical servicesto the mining industry in Chile,through a privatisation process.Since acquisition, the CIMM andSGS operations have been merged,combining locations, workforce andcapabilities throughout the countrythereby successfully extracting theanticipated synergies. Effective 31December 2012, the Group alsoacquired E&S Engineering Solutionsbased in the USA, specialising in thedevelopment of mineral processingfacilities for the mining industrythroughout the world.Adjusted operating income marginfor the year decreased from 19.4%in prior year to 18.8% (constantcurrency basis). The CIMMacquisition, while significantly aheadof valuation assumptions, remainsdilutive to the overall margin but thisimpact has been partly offset bystrong incremental margins acrossthe network thanks to high capacityutilisation and a favourable productmix.During the year, the Group continuedto invest in expanding networkcapacity, with total investmentsreaching CHF 90 million. Theseinvestments include nine new on-sitelaboratories and three commerciallaboratories which will commenceoperations in 2013.1. Before amortisation of acquisition intangibles, restructuring, transaction and integration-related costs2. Constant currency basis(CHF million)2012Results2011pro-forma 22011publishedRevenue 369.5 329.0 327.1Change in % 12.3 13.0adjusted Operating income 161.3 51.8 51.2Change in % 18.3 19.7Margin % 116.6 15.7 15.71. Before amortisation of acquisition intangibles, restructuring, transaction and integration-related costs2. Constant currency basis(CHF million)2012Results2011pro-forma 22011publishedRevenue 868.0 698.7 677.7Change in % 24.2 28.1adjusted Operating income 1163.3 135.5 131.2Change in % 20.5 24.5Margin % 118.8 19.4 19.4Agricultural servicesminerals services
  6. 6. 7Oil, Gas & Chemicals Services deliveredstrong double-digit comparable revenuegrowth of 12.2% (of which 11.6%organic) to CHF 1 046 million for theyear, becoming the first business toexceed one billion in annual turnover.All regions contributed to this increasedtop line, with North America, Africa andAustralasia maintaining a consistentlyhigh growth rate throughout the year.Trade inspection and laboratory testingservices sustained solid revenuegrowth, with increased volumes in oil& gas trade and market share gains inNorth America, Asia, Eastern Europeand the Middle East, while chemicaltesting volumes also increased, mainlyin the USA. Double-digit growth wasachieved primarily in non-trade relatedactivities. Upstream services deliveredrevenues up 35% over prior year, withkey onshore contract wins in Australia,Papua New Guinea and the MiddleEast as well as increased subsurfaceconsultancy and reserve validationwork. Strong growth was also achievedin Plant & Terminal Operations andCargo Treatment services, especiallyin North America, offsetting reducedvolumes in Europe and the Caribbean.The adjusted operating income marginfor the year declined slightly from13.5% in prior year (constant currencybasis) to 13.3%, impacted by lowervolumes in Europe following the closureof terminals and refineries as well asstart-up costs related to new upstreamcontracts in the Middle East.During the year, the business madecapital investments amountingto CHF 76 million to support itsorganic growth, focusing primarilyon equipment for well-side services,laboratory capacity expansions andmechanical sampling facilities. TheGroup also acquired three companies:Roplex, a company specialised insupport and testing of vapour recoverysystems, and EMICS, a leadingindependent UKAS (United KingdomAccreditation Service) calibrationlaboratory, both in the UK; and on31 December, the Group closed theacquisition of Herguth, a state-of-the-art petroleum and lubricant testinglaboratory in California, USA.1. Before amortisation of acquisition intangibles, restructuring, transaction and integration-related costs2. Constant currency basisLife Science Services experienceda difficult year, reporting revenuesof CHF 199 million, 3.7% aboveprior year on a constant currencybasis (of which 0.9% organic) as thedecline in clinical research volumeslargely offset the double-digit growthdelivered by laboratory services.Laboratory operations delivered strongorganic revenue growth of 15.5%and now account for over half of therevenues and profits of the division.This growth was driven by biologics-related activities in Europe, includingthe M-Scan operations acquired in2010, the upgrade of all three NorthAmerican quality control laboratoriesand the opening of a new state-of-the-art facility in Mumbai. Thesedevelopments offset a slower thanexpected recovery in bioanalysis andmass spectrometry services in France.Revenues from clinical researchactivities declined further incomparison with 2011, itself a veryweak year, hampered by the smallnumber of molecules reaching earlyphase trial stage and clear over-capacity amongst Clinical ResearchOrganisations. This decline in activitylevels particularly impacted theParis clinic due to its fixed cost baseand independent infrastructure. Asthe early phase clinical trial marketconditions are expected to remainweak, an initial consultation phasein view of closing the Paris clinichas been launched and as a result,restructuring costs of CHF 21 million(net of tax) were provisioned in 2012.Overall, the adjusted operating incomemargin declined from 10.8% in prioryear to 8.7% (constant currencybasis), impacted by the deterioratingmargins in clinical research.During the year, the Group acquiredVitrology, a biopharmaceuticalcontract testing organisation, veryactive in biosafety testing, basedin Glasgow, UK. This acquisitioncompletes the biologics serviceoffering, adding biosafety andsynergies with M-Scan. In addition,the Group acquired Exprimo, a lifescience consultancy company basedin Belgium.1. Before amortisation of acquisition intangibles, restructuring, transaction and integration-related costs2. Constant currency basis(CHF million)2012Results2011pro-forma 22011publishedRevenue 1 046.0 932.0 911.7Change in % 12.2 14.7adjusted Operating income 1139.2 126.0 123.3Change in % 10.5 12.9Margin % 113.3 13.5 13.5(CHF million)2012Results2011pro-forma 22011publishedRevenue 199.3 192.1 192.0Change in % 3.7 3.8adjusted Operating income 117.3 20.8 20.7Change in % (16.8) (16.4)Margin % 18.7 10.8 10.8oil, gas & chemicals serviceslife science services
  7. 7. 8Consumer Testing Services deliveredstrong double-digit comparablerevenue growth of 12.9% (of which10.8% organic) to CHF 936 million forthe year, with all regions contributingto the top line increase.Organic revenue growth wassustained by all activities. Traditionalsegments such as food testingcontinued their positive momentumdelivering double-digit growthwith particularly strong marketshare in South America and Asiaand benefiting from an extensivegeographical footprint followinginvestments made by the Group inthe laboratory network. Softlinetesting also remained solid, withnew laboratory capacity now inoperation, supported by focusedglobal key account management.Newer segments, such as automotiveparts testing, delivered revenuessignificantly ahead of prior year withthe new laboratory in Tianjin, China,further reinforcing our position as themarket leader.The adjusted operating incomemargin for the year decreased slightlyfrom 25.7% in prior year (constantcurrency basis) to 24.9%, reflectingsome increases in operating costs inChina. These costs were only partiallyoffset by operational efficiency gainsand investments in new facilities inthe network yet to reach full capacity.In addition, some of the recentacquisitions, while adding valuablenew activities to the national serviceportfolios, currently remain dilutive tothe overall margins.During the year, the Group acquiredthe Sercovam Group headquartered inCestas, France. Sercovam is a leadinglaboratory testing group with state ofthe art facilities in Etupes and Cestasin France and sales offices in Spainand Italy. It serves the automotive,aeronautic and rail industry as wellas the packaging industry in France,Germany, Spain and Italy. Founded in1987, Sercovam employs 85 highlyqualified experts.Systems & Services Certificationdelivered organic revenue growthof 6.2% over prior year to CHF 395million, with strong profitable growthin most regions being partly offset bydifficult market conditions in Spainand Italy.Despite the uncertain economicenvironment, statutory certificationdelivered solid organic revenuegrowth overall. All regionscontributed to this increased top line,with double-digit growth in China,South America, Eastern Europe andAfrica compensating for a weakerperformance in Southern Europe andNorth America. Other activities alsoperformed well, in particular second-party audit programmes which gainedmomentum in the second semester,supported by investments made inprevious years to both enhance theGroup’s international sales and keyaccount management structure andintroduce new programmes such assustainability-related supplier audits.Training activities, while achievingdouble-digit growth in Asia andNorth America, did not progressas intended, hampered by a weakperformance in Australia followingthe loss of an important contractwith the mining industry.The adjusted operating incomemargin for the year declined slightlyfrom 18.9% in prior year (constantcurrency basis) to 18.7%, reflectingthe impact of difficult marketconditions in Southern Europe.Restructuring activities have beenundertaken throughout the yearto align the organisation to thesechanging markets. Also reflected inthe margin are investments madein line with the growth strategyto develop new industry bespokeservices as well as expand the foodsafety certification and trainingactivities into several key countriesacross Asia and South America.During the year, new servicedevelopment programmes wereinitiated, focusing on specific needsof the healthcare and automotivesectors as well as supply chainactivities around environment, healthand safety.1. Before amortisation of acquisition intangibles, restructuring, transaction and integration-related costs2. Constant currency basis1. Before amortisation of acquisition intangibles, restructuring, transaction and integration-related costs2. Constant currency basis(CHF million)2012Results2011pro-forma 22011publishedRevenue 936.2 829.1 802.0Change in % 12.9 16.7adjusted Operating income 1233.0 213.3 202.7Change in % 9.2 14.9Margin % 124.9 25.7 25.3(CHF million)2012Results2011pro-forma 22011publishedRevenue 394.9 372.0 364.0Change in % 6.2 8.5adjusted Operating income 173.7 70.3 68.2Change in % 4.8 8.1Margin % 118.7 18.9 18.7consumer testing servicessystems & services certification
  8. 8. 9Industrial Services delivered solidcomparable revenue growth of 20.2%(of which 9.5% organic) to CHF 899million, supported by five acquisitionsin the year.Market conditions in Europe remainvery challenging with projects beingdelayed and austerity measuresimpacting public spending. Despitethis, strong organic revenue growthwas achieved thanks primarilyto positive momentum in Asia,Australia and Africa, as well asa recovery in the Middle East.Materials Testing, Non DestructiveTesting (NDT), Project Monitoringand Supply Chain services were themain growth drivers, supported byrecent acquisitions which expandedthese capabilities into a much widergeography and capital investmentsmade in the laboratory network.Statutory inspection activities alsodelivered growth in the year andremain an important segment despitethe volume decline in Spain.The adjusted operating income marginfor the year increased to 11.2% from10.7% in prior year (constant currencybasis). Accretive margins fromacquisitions and higher profitability inAsia, North America and the MiddleEast offset difficult market conditionsin Europe, which required significantrestructuring to be undertaken,particularly in Spain and Italy.During the second semester, thebusiness completed three additionalacquisitions, enhancing its globalfootprint. In Canada, the Groupacquired Ludwig, a leading materialand metallurgical testing laboratorybased in Calgary and Edmonton.In Australia, the Group acquiredGladstone, a well establishedconstruction material testing businessin Queensland, focused on roadconstruction and the commercial andresidential building sectors. The Groupalso acquired Sentinel, a companybased in Johannesburg, South Africa,providing NDT services and consultingto the power, oil, railway, mining andmanufacturing industries.1. Before amortisation of acquisition intangibles, restructuring, transaction and integration-related costs2. Constant currency basisEnvironmental Services deliveredcomparable revenue growth of 13.2%(of which 6.6% organic) to CHF 323million for the year, sustained bysolid growth in emerging markets andseven acquisitions over the last twoyears.South America, Africa as well asChina and Australasia continuedto drive organic revenue growth,leveraging the Group’s client base inthe natural resources sector wherelegislation surrounding mineralsand oil & gas extraction continuesto tighten. This was sufficient tooffset the impact of challengingmarket conditions in Europe andNorth America where restructuringplans have been initiated to movethe organisation away from decliningsegments of the industry and addressprofitability issues. This appliedparticularly to France, Spain and Italy,while Germany, Belgium and the UKsucceeded in maintaining profitablegrowth through the deployment ofintegrated services combining field,laboratory and data interpretation.The adjusted operating income marginfor the year increased to 10.6% from9.4% in prior year (constant currencybasis), driven by operational efficiencygains in Australia and North Americaas well as significant growth innewly established activities in SouthAmerica and Africa, capitalisingon investments made in manpowerand laboratory infrastructure.Combined with accretive marginsfrom acquisitions, this was sufficientto offset a weak performance inSouthern Europe.During the year the businessacquired three companies. In theUSA, the Group acquired AnalyticalPerspectives in North Carolina,specialised in ultra-trace analysis ofvarious persistent organic pollutants.In Brazil, the Group acquired Environ,the leading occupational health andindustrial hygiene laboratory in thecountry. In Australia, the Groupacquired Australian Radiation Services(ARS) in Melbourne, an internationalprovider of radiation calibration,monitoring, testing and consultingservices.1. Before amortisation of acquisition intangibles, restructuring, transaction and integration-related costs2. Constant currency basis(CHF million)2012Results2011pro-forma 22011publishedRevenue 322.7 285.0 283.8Change in % 13.2 13.7adjusted Operating income 134.3 26.9 26.8Change in % 27.5 28.0Margin % 110.6 9.4 9.4(CHF million)2012Results2011pro-forma 22011publishedRevenue 898.6 747.8 747.0Change in % 20.2 20.3adjusted Operating income 1100.3 80.1 80.0Change in % 25.2 25.4Margin % 111.2 10.7 10.7industrial servicesenvironmental services
  9. 9. 10Governments & Institutions Servicesdelivered excellent organic revenuegrowth for the year of 17.3% toCHF 256 million, driven primarily byincreasing volumes on Local Solutioncontracts, the introduction of newservices and stable trade volumesin the pre-shipment inspection (PSI)programmes.Local Solution services, nowrepresenting 69% of total revenuesfor the division, delivered organicrevenue growth of 24.0% over prioryear. This was achieved throughthe continued expansion of ProductConformity Assessment (PCA)programmes with new contractssigned in Tanzania, Uganda, Kuwaitand Northern Iraq as well as therenewal of the Kenya programme.TradeNet services also performed wellas a result of high trade volumes inGhana and Madagascar and the start-up of operations in Mozambique.Revenues from Global Solutionactivities remained solid throughoutthe year, with volumes on the long-established PSI programmes inCameroon and Haiti remaining stable.Overall, the adjusted operatingmargin for the year was strong at21.5% supported by an establishednetwork for the execution of PCA-related inspections and the growthof new services. The margin wasslightly behind prior year which hadbenefitted from higher volumes on allPSI contracts.During the year, the Group continuedto invest in the deployment of newcontracts, including the completionof the TradeNet platform forMozambique, the finalisation ofthe e-Government platform forthe Ghana Revenue Authority andscanning equipment for Madagascar.The Group also implemented thefirst Forestry monitoring programinvolving scanners in the DemocraticRepublic of Congo (DRC) and hasrun successful telecommunicationsmonitoring programmes in Haiti,Rwanda and Uganda.Automotive Services deliveredcomparable revenue growth of 6.4%(of which 4.6% organic) to CHF 287million for the year, supported bysolid statutory inspection results in allregions and the prior year acquisitionof ETC, an engine and vehicle testingbusiness in the USA, now fullyintegrated within the Group.Revenues from statutory inspectionactivities remained solid throughoutthe year, with European operations inFrance, Spain and the UK benefitingfrom higher vehicle inspectionvolumes while in Africa, revenues inIvory Coast increased following theopening of a new station and thenetwork in Morocco expanded as aresult of stricter enforcement andhigher compliance rates. In SouthAmerica, revenues from the firsttesting centre in Peru, which openedin 2011, increased progressivelythroughout the year while volumes inChile remained stable.The adjusted operating margin for theyear increased to 22.1% from 21.7%in prior year (constant currency basis),benefiting from the strong statutoryinspection results in Europe, the USAand Africa as well as inspection feeincreases in Argentina and Uruguaygranted by government in view ofhigh inflation in both countries. Thiswas sufficient to offset weakerresults in North America where,as anticipated, significantly lowervolumes impacted the profitabilityof commercial activities despiteproactive restructuring measures.During the year, the Group continuedto invest in vehicle inspection centresin France, Ivory Coast and Argentina,as well as maintaining and upgradingcentres in Spain which were acquiredin 2010 as part of the ITV network.1. Before amortisation of acquisition intangibles, restructuring, transaction and integration-related costs2. Constant currency basis1. Before amortisation of acquisition intangibles, restructuring, transaction and integration-related costs2. Constant currency basis(CHF million)2012Results2011pro-forma 22011publishedRevenue 286.9 269.7 270.2Change in % 6.4 6.2adjusted Operating income 163.4 58.5 59.3Change in % 8.4 6.9Margin % 122.1 21.7 21.9(CHF million)2012Results2011pro-forma 22011publishedRevenue 256.0 218.3 221.7Change in % 17.3 15.5adjusted Operating income 155.1 50.0 51.8Change in % 10.2 6.4Margin % 121.5 22.9 23.4automotive servicesgovernments & institutions services
  10. 10. 12(CHF million) notes 2012 2011Revenue 5 578 4 797Salaries, wages and subcontractors’ expenses (3 066) (2 635)Depreciation, amortisation and impairment (281) (225)Other operating expenses (1 388) (1 147)Operating income (EBIT) 843 790Analysis of operating incomeAdjusted operating income 941 815Restructuring costs (68) -Amortisation of acquisition intangibles (18) (16)Transaction and integration-related costs (12) (9)Operating income 843 790Net financial expenses (35) (26)Profit before taxes 808 764Taxes (218) (203)Profit for the period 590 561Profit attributable to:Equity holders of SGS SA 556 534Non-controlling interests 34 27Basic earnings per share (in chf) 4 72.97 70.52Diluted earnings per share (in chf) 4 72.51 70.16Condensed consolidated income statementcondensed financial statementsfor the period ended 31 december 2012
  11. 11. 13Condensed consolidated balance sheet(CHF million) 2012 2011Non-current assetsLand, buildings and equipment 1 018 888Goodwill and other intangible assets 1 181 1 044Other non-current assets 272 248Total non-current assets 2 471 2 180Current assetsTrade accounts and notes receivable 977 868Other current assets 557 501Cash and marketable securities 989 1 211Total current assets 2 523 2 580Total assets 4 994 4 760Total equity 2 118 2 045non-current LiabilitiesLoans and obligations under financial leases 1 306 1 299Provisions and other non-current liabilities 345 333Total non-current liabilities 1 651 1 632Current liabilitiesTrade and other payables 493 447Other liabilities 732 636Total current liabilities 1 225 1 083Total equity and liabilities 4 994 4 760Condensed consolidated statement of Comprehensive income(CHF million) 2012 2011Actuarial gains/(losses) on defined benefit plans (53) (46)Income tax on actuarial gains/(losses) taken directly to equity 15 14Exchange differences and other (48) (44)Other comprehensive income for the period (86) (76)Profit for the period 590 561Total comprehensive income for the period 504 485Attributable to:Equity holders of SGS SA 472 458Non-controlling interests 32 27
  12. 12. 14Condensed consolidated cash flow statementCondensed statement of Changes in Consolidated Equity(CHF million) 2012 2011Profit for the Period 590 561Non-cash items 493 433(Increase) in working capital (73) (84)Taxes paid (210) (220)cash flow from Operating activities 800 690Net (purchase)/sale of fixed assets (377) (337)Acquisition of businesses (182) (112)Other from investing activities - 6Cash flow from investing activities (559) (443)Dividend paid to equity holders of SGS SA (497) (494)Dividend paid to non-controlling interests (24) (16)Acquisition of non-controlling interests - (2)Net cash received/(paid) on treasury shares 76 (50)Proceeds of corporate bonds - 714Interest paid (46) (21)Net flows on interest rate swaps 37 -(Decrease)/increase in borrowings (12) 2Cash flow from financing activities (466) 133Currency translation (5) 16(DEcrease)/INcrease in cash and cash equivalents (230) 396attributable to(CHF million)equity holdersof sgs sanon-controllinginterests total equityBalance as at 1 january 2011 2 069 39 2 108Total comprehensive income for the period 458 27 485Dividends paid (494) (16) (510)Share-based payments 15 - 15Movement in non-controlling interests (3) - (3)Movement on treasury shares (50) - (50)Balance as at 31 DECEMBER 2011 1 995 50 2 045Total comprehensive income for the period 472 32 504Dividends paid (497) (24) (521)Share-based payments 14 - 14Movement in non-controlling interests - - -Movement on treasury shares 76 - 76Balance as at 31 DECEMBER 2012 2 060 58 2 118
  13. 13. 151basis of preparationThese condensed consolidatedfinancial statements have beenprepared in accordance with themeasurement and recognitioncriteria of International FinancialReporting Standards (IFRS).2significantaccounting policiesThe condensed financial statementshave been prepared in accordancewith the accounting policies appliedby the Group in its consolidatedfinancial statements for the year ended31 December 2011, except for theGroup’s adoption of new amendmentseffective 1 January 2012.These new amendments have noimpact on the Group consolidatedfinancial statements.3acquisitionsIn 2012, the Group acquired 100%of CIMM T&S, the leading providerof technical services to the miningindustry in Chile, for a purchaseprice of CHF 37 million.The Group completed a furtherseventeen acquisitions with acombined purchase price of CHF166 million.Adjusted earnings per share:2012 2011Profit attributable to equity holders of SGS SA (CHF million) 556 534Amortisation of acquisition intangibles (CHF million) 18 16Restructuring costs net of tax (CHF million) 47 -Transaction and integration-related costs net of tax (CHF million) 9 7Adjusted profit attributable to equity holders of SGS SA (CHF million) 630 557Adjusted basic earnings per share (CHF) 82.65 73.53Adjusted Diluted earnings per share (CHF) 82.12 73.152012 2011Profit attributable to equity holders of SGS SA (CHF million) 556 534Weighted average number of shares (‘000) 7 622 7 578Basic earnings per share (CHF) 72.97 70.52Profit attributable to equity holders of SGS SA (CHF million) 556 534Diluted weighted average number of shares (‘000) 7 671 7 617Diluted earnings per share (CHF) 72.51 70.16notes to the condensed financial statements4earnings per share
  14. 14. 1616Balance sheetEnd of period RatesIncome StatementAverage Rates2012 2011 2012 2011Australia AUD 100 94.79 95.47 97.12 91.44Brazil BRL 100 44.65 50.40 48.19 53.06Canada CAD 100 91.74 92.16 93.84 89.68China CNY 100 14.64 14.93 14.87 13.72Eurozone EUR 100 120.90 121.68 120.55 123.34United Kingdom GBP 100 147.10 145.14 148.63 142.10Hong Kong HKD 100 11.77 12.10 12.09 11.39India INR 100 1.67 1.76 1.76 1.91Taiwan TWD 100 3.14 3.11 3.17 3.02USA USD 100 91.24 94.03 93.80 88.68The most significant currencies for the Group were translated at the following exchange rates into Swiss Francs.In 2011, IAS 19 revised on EmployeeBenefits was issued for adoptionby 1 January 2013. If this standardand the related consequentialamendments had been adopted bythe Group in 2011, it is estimatedthat profit before tax for the fullyear 2011 and 2012 would havebeen lower by approximately CHF14 million and CHF 15 millionrespectively, with no material impacton the equity or the balance sheet.The Directors anticipate a similarimpact for the future.As required by the standard, SGS willretrospectively adopt the standard on1 January 2013.6exchange rates5retirement benefit obligations
  15. 15. 17This PDF version is an exact copyof the document provided to SGSshareholders.Except where you are a shareholder,this material is provided for informationpurposes only and is not, in particular,intended to confer any legal rightson you.This document does not constitutean invitation to invest in SGS shares.Any decisions you make in relianceon this information are solely yourresponsibility.This document is given as of the datesspecified, is not updated and anyforward looking statements are madesubject to the following reservations:This document contains certainforward looking statements that areneither historical facts nor guaranteesof future performance. Becausethese statements involve risks anduncertainties that are beyond controlor estimation of SGS, there areimportant factors that could causeactual results to differ materiallyfrom those expressed or implied bythese forward looking statements.These statements speak only as ofthe date of this document. Exceptas required by any applicable law orregulation, SGS expressly disclaimsany obligation to release publicly anyupdates or revisions to any forwardlooking statements contained hereinto reflect any change in SGS group’sexpectations with regard thereto orany change in events or conditions onwhich any such statements are based.The English version is binding.SGS SA CORPORATE OFFICE1 place des AlpesP.O. Box 2152CH – 1211 Geneva 1t +41 (0)22 739 91 11f +41 (0)22 739 98 86e sgs.investor.relations@sgs.comwww.sgs.com2013 half Year resultsWednesday, 17 July 2013ANNUAL GENERAL MEETINGOF SHAREHOLDERSTuesday, 19 March 2013Geneva, SwitzerlandDIVIDEND PAYMENT DATETuesday, 26 March 2013INVESTOR DAYSThursday - Friday24-25 October 2013STOCK EXCHANGE LISTINGSIX Swiss Exchange, SGSNSTOCK EXCHANGE TRADINGSIX Swiss ExchangeCOMMON STOCK SYMBOLSBloomberg: Registered Share: SGSN.VXReuters: Registered Share: SGSN.VXTelekurs: Registered Share: SGSNISIN: Registered Share:CH0002497458Swiss security number: 249745CORPORATE development,COMMUNICATIONS & INVESTORRELATIONSJean-Luc de BumanSGS SA1 place des AlpesP.O. Box 2152CH – 1211 Geneva 1t +41 (0)22 739 93 31f +41 (0)22 739 92 00www.sgs.comshareholders information7disclaimer
  16. 16.©SGSGroupManagementSA–2013–Allrightsreserved-SGSisaregisteredtrademarkofSGSGroupManagementSA