SGS 2014 Half Year Results Presentation

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SGS 2014 Half Year Results Presentation

  1. 1. Not updated
  2. 2. 3 HIGHLIGHTS & OUTLOOK  1st semester 2014 results  Total revenue growth of 5.3% to CHF 2.8 billion (constant currency) • -1.8% (reported basis)  Organic revenue growth of 4.0% at constant currency  Operating income(1) margin in line with prior year at 15.0% (constant currency)  Restructuring expense net of tax CHF 8 million  Operating cash inflow of CHF 260 million  Outlook 2014 at constant currency  Solid revenue growth around 6%  Improvement in margin year-on-year 1)Before amortisation of acquisition intangibles, restructuring, transaction and integration-related costsFinancial community – 17 July 2014
  3. 3. 4Financial community – 17 January 2013
  4. 4. 5 FINANCIAL HIGHLIGHTS 1) Before amortisation of acquisition intangibles, restructuring, transaction and integration-related costs 2) Constant currency basis Financial community – 17 July 2014 CHF million 2014 June 2013 June 2013 June Pro-forma(2) Revenue 2,805 2,663 2,857 Change in % 5.3 % (1.8)% Adjusted Operating Income(1) 420 400 439 Change in % 4.9 % (4.2)% Adjusted Operating Income Margin (1) 15.0 % 15.0 % 15.4 % Operating Income (EBIT) 397 374 411 Change in % 6.1 % (3.4)% Adjusted Net Income(1) 275 261 288 Change in % 5.4 % (4.5)% Net Income 255 240 265 Change in % 6.3 % (3.8)% Adjusted Basic EPS(1) (CHF) 35.82 34.15 37.57 Basic EPS (CHF) 33.27 31.36 34.59
  5. 5. 6 SERVICE PORTFOLIO 1)Before amortisation of acquisition intangibles, restructuring, transaction and integration-related costsFinancial community – 17 July 2014 AGRI 6.4% MIN 11.4% OGC 16.0% LIFE 2.1% CTS 27.7% SSC 7.2% IND 12.1% ENVI 2.9% AUTO 7.2% GIS 7.0% ADJUSTED OPERATING INCOME(1)AGRI 6.4% MIN 12.2% OGC 20.6% LIFE 3.8% CTS 18.2% SSC 6.9% IND 16.8% ENVI 5.4% AUTO 5.3% GIS 4.4% REVENUE EUROPE / AFRICA / MIDDLE EAST 47.0% AMERICAS 24.0% ASIA PACIFIC 29.0% REVENUE REGION
  6. 6. 7 REVENUE ANALYSIS FINANCIALHIGHLIGHTS Financial community – 17 July 2014 Not updated
  7. 7. 8 REVENUE GROWTH COMPOSITION Financial community – 17 July 2014 Revenues June 13 Organic Acquisitions Disposals Currency impact Revenues June 14 2,857 105 37 (194) 2,805 4.0% 1.3% 0.0% (7.1)% (1.8)% Constant currency growth: 5.3%
  8. 8. 9 LOCAL CURRENCY GROWTH BY BUSINESS Financial community – 17 July 2014 4.0% 2.9% 4.5% (0.1)% 3.3% 4.4% 6.8% 7.9% 8.9% (7.6)% 8.1% 1.3% 0.8% 2.2% 5.0% 1.3% 0.5% 1.6% TOTAL GIS AUTO ENVI IND SSC CTS LIFE OGC MIN AGRI Organic Acquisition Disposal 8.1% (6.0)% 8.9% 7.9% 7.3% 5.7% 8.3% 2.1% 5.3% 2.9% 5.3%
  9. 9. 10 REVENUE GROWTH AND HEADCOUNT CHANGE BY REGION Financial community – 17 July 2014 4.0% 5.5% 5.2% 2.4% 1.3% 1.4% 2.0% 1.1% TOTAL GROUP Asia / Pacific Americas Europe / Africa & Middle East Organic Acquisition Disposal 3.5% 7.2% 6.9% 5.3% Δ in EOP headcount 2014 June 2013 June Δ Group Headcount 83,592 80,233 3,359 Organic Business Growth 3,023 Acquisitions 336 Disposals - Increase in Group Headcount 3,359 By Region Headcount Δ Headcount Δ% Revenues Δ% Europe / Africa / Middle East 1,209 3.7 % 3.5 % Americas 507 2.7 % 7.2 % Asia / Pacific 1,643 5.6 % 6.9 % TOTAL 3,359 4.2% 5.3%
  10. 10. 11 OPERATING INCOME ANALYSIS FINANCIALHIGHLIGHTS Financial community – 17 July 2014 Not updated
  11. 11. 12 ADJUSTED OPERATING INCOME(1) GROWTH 1)Before amortisation of acquisition intangibles, restructuring, transaction and integration-related costsFinancial community – 17 July 2014 Op. Income June 13 Organic Acquisitions Disposals Currency impact Op. Income June 14 439 14 6 (39) 420 3.5% 1.4% 0.0% (9.1)% (4.2)% Constant currency growth: 4.9%
  12. 12. 13 ADJUSTED OPERATING MARGIN(1) BY BUSINESS 1)Before amortisation of acquisition intangibles, restructuring, transaction and integration-related costsFinancial community – 17 July 2014 13.5% 15.3% 12.2% 14.4% 22.7% 16.5% 10.0% 8.1% 21.4% 23.0% 14.9% 14.1% 11.6% 8.4% 22.7% 15.7% 10.8% 8.0% 20.5% 23.8% 5.0% 10.0% 15.0% 20.0% 25.0% AGRI MIN OGC LIFE CTS SSC IND ENV AUTO GIS June 13 June 14
  13. 13. 14 CASH FLOW Financial community – 17 July 2014 CHF million Jun 14 Jun 13 PROFIT FOR THE PERIOD 273 285 Depreciation, amortisation and impairment 144 145 Share based payments 7 8 Tax 101 105 Other 12 20 Non-cash items 264 278 (Increase)/decrease in working capital (180) (139) Taxes paid (97) (108) OPERATING CASH FLOW 260 316 Purchase of land, building, equipment and other assets (130) (170) Sales of land, building, equipment an other intang. assets 7 7 Acquisition of businesses (17) (68) Other from investing activities 1 11 CASH FLOW FROM INVESTING ACTIVITIES (139) (220) Dividend paid to equity holders of SGS SA (499) (444) Dividend paid to non-controlling interests (2) (2) Net cash received/(paid) on treasury shares 31 25 Interest paid (28) (26) Net flows on interest rate swaps 5 5 Increase/(decrease) in borrowings 359 8 CASH FLOW FROM FINANCING ACTIVITIES (134) (434) Currency translations (5) 5 (DECREASE) IN CASH AND CASH EQUIVALENTS (18) (333)
  14. 14. 15 CAPITAL EXPENDITURE Financial community – 17 July 2014 AGRI 6.2% MIN 10.8% OGC 20.0% LIFE 4.6%CTS 32.3% SSC 1.5% IND 10.8% ENVI 6.9% AUTO 5.4% GIS 1.5% CAPEX BUSINESS EUROPE / AFRICA / MIDDLE EAST 42.3% AMERICAS 22.3% ASIA PACIFIC 35.4% CAPEX REGION 100 200 300 400 500 Capital Expenditure Depreciation & amortisation 2009 2010 2011 2012 2013 2014 ANNUAL CAPEX CHF million
  15. 15. 16 FOREIGN CURRENCY REVENUES H1 2014 Financial community – 17 July 2014 EUR 28.7% USD 13.7% CNY 10.4% AUD 4.8% CAD 3.4% BRL 3.3% GBP 3.2% TWD 3.0% CLP 2.3% Other 27.2% 2014 2013 Change EUR 1.2214 1.2297 (0.7)% USD 0.8907 0.9366 (4.9)% CNY 0.1445 0.1513 (4.5)% AUD 0.8144 0.9511 (14.4)% CAD 0.8126 0.9225 (11.9)% BRL 0.3882 0.4614 (15.9)% GBP 1.4867 1.4469 2.8 % TWD 0.0295 0.0316 (6.6)% CLP 0.0016 0.0020 (17.7)% HKD 0.1148 0.1207 (4.9)% AVERAGE RATES
  16. 16. 17 FOREIGN CURRENCY SENSITIVITY ANALYSIS Financial community – 17 July 2014 EURO 1.20 1.22 1.25 Revenues (14) 0 19 Income (2) 0 2 USD 0.85 0.89 0.95 Revenues (18) 0 26 Income (1) 0 2 CNY 0.13 0.14 0.16 Revenues (29) 0 31 Income (8) 0 9
  17. 17. 18 BUSINESS OVERVIEW BUSINESSOVERVIEW Not updated Financial community – 17 July 2014
  18. 18. 19 AGRICULTURAL SERVICES (AGRI)  Overview H1 2014  Strong organic growth from Trade inspection and Laboratory activities due to favorable export programs for cereals and oilseeds.  North America continues to benefit from grain market deregulation and successful cost saving initiatives.  Slower start to the year for Seed and Crop in North America and Australia, while Brazil and Africa continue to deliver double digit growth.  2012 acquisitions Gravena and Warecare continue to perform well.  Outlook 2014  Seasonal market forecasts for 2014/15 show a slight decline in global grain exports. No material impact expected in H2.  Recent investments in lab capabilities in Central and Eastern Europe to come online in H2.  New services around precision farming and agronomy to ramp up in coming months.  Further expansion and diversification of our farm verification services. CHF million June 2014 June 2013 June 2013 Pro-forma2 Revenue 180.5 167.0 179.1 Change in % 8.1 0.8 Adj. Operating Inc.(1) 26.9 22.3 24.2 Change in % 20.6 11.2 Margin %1 14.9 13.4 13.5 (1) Before amortisation of acquisition intangibles, restructuring, transaction and integration- related costs (2) Constant currency basis Financial community – 17 July 2014
  19. 19. 20 MINERALS SERVICES (MIN)  Overview H1 2014  Revenues declined as challenging market conditions continued throughout the semester.  Geochem and Metallurgy sample volumes remained at low levels.  Additional restructuring undertaken to rationalise capacity and increase operational efficiency.  Increased market share for Outsourced laboratories and Trade inspections.  7 outsourced laboratories commenced in H1 2014.  Time Mining acquisition fully integrated with a healthy pipeline of projects.  Outlook 2014  Market expected to remain difficult due to low exploration spending.  Capacity and network adjustments undertaken in H1 to help address pressure on margins.  Stable growth in Coal and non-ferrous trade inspection volumes.  5 new onsite laboratories expected in H2 2014.  Continued focus on productivity, efficiency and cost control. CHF million June 2014 June 2013 June 2013 Pro-forma2 Revenue 341.1 362.9 410.0 Change in % (6.0) (16.8) Adj. Operating Inc.(1) 48.0 55.1 62.9 Change in % (12.9) (23.7) Margin %1 14.1 15.2 15.3 (1) Before amortisation of acquisition intangibles, restructuring, transaction and integration- related costs (2) Constant currency basis Financial community – 17 July 2014
  20. 20. 21 OIL, GAS & CHEMICALS SERVICES (OGC)  Overview H1 2014  Very strong growth in Upstream Services with new assets deployed in Australia and Middle East and contract wins in Middle East and Mexico.  Outstanding growth in Laboratory Outsourcing with projects executed in Spain, UK and India.  Trade related growth impacted by soft petroleum markets in Europe and constantly changing trading pattern, but successful offset by new contract wins.  Plant and Terminal Operations benefitted from changes in logistics infrastructure in the USA (crude transportation by rail).  Outlook 2014  Continued growth in Upstream Services from new assets deployed coming on line.  Completion of laboratory commissioning projects and new outsourcing contract wins.  Plant and Terminal Operations geographical expansion into China and additional opportunities from new terminals built in the USA and Canada.  Trade Related services delivering steady but modest growth. CHF million June 2014 June 2013 June 2013 Pro-forma2 Revenue 576.2 529.0 558.5 Change in % 8.9 3.2 Adj. Operating Inc.(1) 67.0 62.8 67.9 Change in % 6.7 (1.3) Margin %1 11.6 11.9 12.2 (1) Before amortisation of acquisition intangibles, restructuring, transaction and integration- related costs (2) Constant currency basis Financial community – 17 July 2014
  21. 21. 22 LIFE SCIENCE SERVICES (LIFE)  Overview H1 2014  Adjusted for the winding-down of the Paris clinical activities, organic revenue growth reached 10%.  Slow start in Laboratory services due to contract delays in Biologics.  Continued high growth in India and China.  Good start to the year in Clinical Research driven by the Antwerp clinical unit.  Margins negatively impacted by general pricing pressures in Clinical Research and project delays in Biologics.  Outlook 2014  Laboratory growth and margin to improve due to significant new business opportunities following investments made in 2013 and global key account management activities.  Operational excellence initiatives implemented to further drive margin improvement.  Clinical Research to continue delivering profitable growth in a very competitive environment. CHF million June 2014 June 2013 June 2013 Pro-forma2 Revenue 107.5 99.6 102.3 Change in % 7.9 5.1 Adj. Operating Inc.(1) 9.0 14.0 14.7 Change in % (35.7) (38.8) Margin %1 8.4 14.1 14.4 (1) Before amortisation of acquisition intangibles, restructuring, transaction and integration- related costs (2) Constant currency basis Financial community – 17 July 2014
  22. 22. 23 CONSUMER TESTING SERVICES (CTS)  Overview H1 2014  Overall resilient growth despite difficult market conditions.  Achieved high double digit growth in Wireless / Mobile Devices and Automotive Parts testing, especially in Asia and North America.  Lower growth with the retail sector as clients attempt to optimize their testing spend due to the prolonged challenging economic environment.  Good momentum in food testing driven by Asian domestic and export markets.  Completed two acquisitions in Electrical & Electronics to extend our global footprint.  Outlook 2014  Solid growth in Electrical & Electronics (E&E) and Automotive related activities.  Expect challenging market conditions to continue for Softlines and Toys & Juvenile Products.  Investments planned to enhance capabilities and expand geographical coverage in South East Asia to align with changing supply chain patterns. CHF million June 2014 June 2013 June 2013 Pro-forma2 Revenue 511.0 476.3 501.7 Change in % 7.3 1.9 Adj. Operating Inc.(1) 116.1 106.8 113.9 Change in % 8.7 1.9 Margin %1 22.7 22.4 22.7 (1) Before amortisation of acquisition intangibles, restructuring, transaction and integration- related costs (2) Constant currency basis Financial community – 17 July 2014
  23. 23. 24 SYSTEMS & SERVICES CERTIFICATION (SSC)  Overview H1 2014  Overall performance negatively impacted by Western Europe where business conditions remain difficult but compensated by strong double digit growth in Eastern Europe, Middle East, Africa and Asia Pacific regions.  Performance Assessment and training both showing double digit growth.  Successful roll out of web-based Learning Management System in eight countries.  Hart aviation services gradually rolled out in particular in South America.  Outlook 2014  Market conditions are expected to remain unchanged during H2 2014.  Growth in food to strengthen following the introduction of new services in areas such as allergens and food fraud prevention.  Large contracts gained during H1 with the Automotive and Hospitality industries to bring additional growth.  Learning System to be rolled out in more countries. CHF million June 2014 June 2013 June 2013 Pro-forma2 Revenue 193.6 183.1 194.1 Change in % 5.7 (0.3) Adj. Operating Inc.(1) 30.4 29.7 32.0 Change in % 2.4 (5.0) Margin %1 15.7 16.2 16.5 (1) Before amortisation of acquisition intangibles, restructuring, transaction and integration- related costs (2) Constant currency basis Financial community – 17 July 2014
  24. 24. 25 INDUSTRIAL SERVICES (IND)  Overview H1 2014  Organic revenue growth of 3.3% impacted by continued soft market conditions in Europe and revenue streams terminated as part of the 2013 restructuring.  Double-digit organic growth achieved outside Europe, especially in South America and Asia.  Good growth in the USA partly offset by timing of large projects in Mexico.  Margin improvement from restructuring in 2013 and strong performance in China and South America.  Acquisitions concluded in 2013 all performed in line with expectations.  Outlook 2014  Situation in Europe expected to remain difficult and the structure will be continuously adjusted to current market demand.  Continued growth expected from Oil & Gas segment mainly in North America and Asia Pacific.  Focus remains on developing testing activities either through green field development or acquisitions. CHF million June 2014 June 2013 June 2013 Pro-forma2 Revenue 472.3 436.0 462.8 Change in % 8.3 2.1 Adj. Operating Inc.(1) 50.9 42.7 46.2 Change in % 19.2 10.2 Margin %1 10.8 9.8 10.0 (1) Before amortisation of acquisition intangibles, restructuring, transaction and integration- related costs (2) Constant currency basis Financial community – 17 July 2014
  25. 25. 26 ENVIRONMENTAL SERVICES (ENVI)  Overview H1 2014  Overall growth impacted by mining sector slowdown especially in Australia, Africa and Canada.  Collapse of carbon market in China and India.  Strong growth and improved margins in Europe as a result of restructuring, laboratory network optimization and successful acquisition of MIS UK.  High performance in South America (air monitoring activities) and USA (shale gas and dioxin testing).  Global contract wins in Health & Safety and Sustainability secured thanks to unequalled geographical network.  Outlook 2014  Europe and South America expected to continue delivering at higher margins following recent restructuring and new global contracts.  Negative impact of mining sector expected to continue affecting growth.  Decision to withdraw from CDM market (carbon projects) expected to deliver margin improvement.  Continued global key account approach expected to accelerate growth with strong H2 execution. CHF million June 2014 June 2013 June 2013 Pro-forma2 Revenue 152.4 149.3 159.8 Change in % 2.1 (4.6) Adj. Operating Inc.(1) 12.2 11.3 12.9 Change in % 8.0 (5.4) Margin %1 8.0 7.6 8.1 (1) Before amortisation of acquisition intangibles, restructuring, transaction and integration- related costs (2) Constant currency basis Financial community – 17 July 2014
  26. 26. 27 AUTOMOTIVE SERVICES (AUTO)  Overview H1 2014  Statutory inspection business provided solid results in Europe, Africa, North America and South America.  New York statutory program ended in December 2013 negatively impacting organic growth and margin.  New statutory vehicle inspection operations established in Ecuador and Mauritius.  Expanded our laboratory testing capabilities through the acquisition of ATE and CAS in the USA.  Commercial inspection volumes remaining stable.  Outlook 2014  Overall statutory inspection activities will continue to provide solid results.  Statutory vehicle inspections margin expected to be impacted by the liberalisation in Canary Islands.  Chile statutory inspection program expected to end by December 2014.  Acquisition strategy will focus on enhancing capabilities & footprint for engine & vehicle testing. CHF million June 2014 June 2013 June 2013 Pro-forma2 Revenue 147.4 140.0 155.8 Change in % 5.3 (5.4) Adj. Operating Inc.(1) 30.2 30.5 33.3 Change in % (1.0) (9.3) Margin %1 20.5 21.8 21.4 (1) Before amortisation of acquisition intangibles, restructuring, transaction and integration- related costs (2) Constant currency basis Financial community – 17 July 2014
  27. 27. 28 GOVERNMENTS AND INSTITUTIONS SERVICES (GIS)  Overview H1 2014  Strong growth in Local Solutions however fully offset by the expected termination of two major contracts (PSI Angola and Scanning Nigeria).  Excellent TradeNet growth in Ghana, Mozambique.  2 new PCA (Burundi, Rwanda) and 2 new selective PCA in Indonesia (cosmetics & wheat flour).  Strong growth of TransitNet thanks to business recognition and new routes in the Balkans.  PSI Mauritania and Burundi discontinued Q1 2014 but Burundi replaced by a PCA contract.  SGS Omnis: New tracking service initiated in Ghana.  Outlook 2014  PSI likely to further decline (WCO/WTO guidance).  TradeNet: Increase in volume anticipated in Madagascar following return to political stability. Continued growth expected in Ghana, Mozambique.  PCA will remain a key driver of top line growth.  TransitNet: Additional routes expected to be opened in Eastern Europe in H2.  Strong pipeline of new mandates for Scanning, SGS Layer4 (Telecom) and SGS Omnis (Tracking). CHF million June 2014 June 2013 June 2013 Pro-forma2 Revenue 123.2 119.7 132.8 Change in % 2.9 (7.2) Adj. Operating Inc.(1) 29.3 25.1 30.6 Change in % 16.7 (4.2) Margin %1 23.8 21.0 23.0 (1) Before amortisation of acquisition intangibles, restructuring, transaction and integration- related costs (2) Constant currency basis Financial community – 17 July 2014
  28. 28. 29 WWW.SGS.COM ©SGSSA2012.ALLRIGHTSRESERVED.
  29. 29. 30 WWW.SGS.COM ©SGSSA2014.ALLRIGHTSRESERVED.

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