sgs group results 2009sgs group results 2009 presentation to the financial community geneva, 15...

SGS GROUP RESULTS 2009

Presentation to the Financial Community

Geneva, 15 January 2010

2Financial community – 15 January 2010

BU

SIN

ES

S O

VE

RV

IEW

CONTENT

� FINANCIAL HIGHLIGHTS

2009 Highlights

Revenue Analysis

Operating Income Analysis

Cash Flows

Currency Analysis

Second half 2009

� BUSINESS OVERVIEW

FIN

AN

CIA

L H

IGH

LIG

HT

S

2009 HIGHLIGHTS

Financial community – 15 January 2010


2009 HIGHLIGHTS(1)

� Constant currency revenue growth of 2.5% to CHF 4.7 billion

• 8 of the group’s 10 business increased comparable revenues

� EBITDA margin before exceptionals at 22.0% (+ 70 bps)

� Operating margin at 17.3% (+ 50 bps)

� Net Profit before exceptionals of CHF 579 million

� Operating Cash Flow before exceptionals at CHF 780 million

� Proposed dividend to shareholders of CHF 60 per share:

• Ordinary dividend of CHF 30 per share

• Additional dividend of CHF 30 per share

(1) Before exceptionals


FINANCIAL HIGHLIGHTS


CHF million 2009

December

2008

December

∆%

Revenue - historical rates 4,712 4,818 (2.2)%

Revenue - constant rates 4,712 4,597 2.5 %

EBITDA(1) 1,037 1,024 1.3 %

EBITDA Margin 22.0 % 21.3 %

Operating Income Group(1) 814 810 0.5 %

Operating Income Margin 17.3 % 16.8 %

Net income(1) 579 579 -

Net income (after exceptionals) 566 692 (18.2)%

Basic EPS 75.48 91.08 (17.1)%

Diluted EPS 75.17 90.72 (17.1)%

Basic EPS before exceptionals 77.22 76.19 1.4 %

Diluted EPS before exceptionals 76.90 75.89 1.3 %

Period end no. of employees (incl. acquisitions) 58,818 57,301 2.6 %




REVENUE

1,800

2,600

3,400

4,200

5,000

CHF million

3,308 3,821 4,372 4,818 4,712

DEC 05 DEC 06 DEC 07 DEC 08 Dec 09

9.25% CAGR

OPERATING INCOME(1)

300

450

600

750

900

CHF million


502 605 711 810 814

12.84% CAGR

EBITDA(1)

450

600

750

900

1,050

CHF million

642 777 908 1,024 1,037


12.74% CAGR

NET PROFIT(1)

250

350

450

550

650

CHF million


371 431 515 579 579

11.77% CAGR




EBITDA MARGIN(1)

15.0%

17.0%

19.0%

21.0%

23.0%DEC 05 DEC 06 DEC 07 DEC 08 Dec 09

19.4% 20.3% 20.8% 21.3% 22.0%

OPERATING MARGIN(1)

12.0%

13.5%

15.0%

16.5%

18.0%DEC 05 DEC 06 DEC 07 DEC 08 Dec 09

15.2% 15.8% 16.3% 16.8% 17.3%


SERVICE PORTFOLIO

REVENUE ANALYSIS



REVENUE GROWTH COMPOSITION

Revenues

December 08 Organic

FX

Exchange Acquisitions Disposals

Revenues

December 09

4'818

60

(221) 56 (1)

4'712

1.3% (4.7)% 1.2% (0.0)% (2.2)%


LOCAL CURRENCY GROWTH BY BUSINESS

1.3%

2.2%

4.8%

9.4%

4.3%

1.1%

0.1%

(10.9)%

7.3%

(4.6)%

3.3%

0.3%

1.2%

0.8%

0.9%

4.2%

1.7%

0.5%

(0.3)%

(0.0)%TOTAL

GIS

AUTO

ENVI

IND

SSC

CTS

LIFE

OGC

MIN

AGRI

Organic Acquisition Disposal

4.6%

(10.4)%

0.9%

3.0%

11.1%

4.8%

6.4%

2.0%

(4.6)%

7.3%

2.5%


REVENUE GROWTH AND HEADCOUNT

CHANGE BY REGION

∆ in EOP headcount 2009

December

2008

December

∆

Group Headcount 58,818 57,301 1,516

Organic Business Growth 1,298

Acquisitions 218

Disposals -

Increase in Group Headcount 1,516

By Region Headcount

∆

Headcount

∆%

Revenues

∆%

Europe / Africa / Middle East 672 2.6 % 1.6 %

Americas (363) (2.8)% (0.6)%

Asia / Pacific 1,207 6.4 % 7.4 %

TOTAL 1,516 2.6% 2.5%

1.3% 1.2%

2.9%

0.7%

6.5%

(3.4)%

0.9%

0.9%

(0.1)%

(0.0)%TOTAL GROUP

Asia / Pacific

Americas

Europe / Africa &

Middle East


1.6%

(0.6)%

7.4%

2.5%

OPERATING INCOME

ANALYSIS



OPERATING INCOME(1) GROWTH COMPOSITION


Op. Income

December 08 Organic

FX

Exchange Acquisitions Disposals

Op. Income

December 09

810

43 (44) 5 0

814

5.6% (5.7)% 0.6% 0.0% 0.5%


OPERATING MARGIN(1) BY BUSINESS


15.6

%

18.3

%

15.2

%

13.5

%

23.2

%

19.2

%

14.3

%

10.6

%

16.3

%

16.9

%

16.0

%

16.1

%

15.4

%

13.9

%

25.3

%

21.1

%

13.9

%

11.7

%

15.9

% 18.4

%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

AG

RI

MIN

OG

C

LIF

E

CT

S

SS

C

IND

EN

V

AU

TO

GIS

December 08 December 09


CASH FLOWS

CHF million Dec 09 Dec 08

PROFIT FOR THE PERIOD 591 714

Adjustment for 2008 non-cash exceptional items - (127)

Adjustment for other non-cash items 393 410

Depreciation/Amortisation 228 214

Share based payments 13 17

Tax 200 219

Other (48) (40)

(Increase) in net working capital 13 (22)

Taxes paid (217) (195)

OPERATING CASH FLOW BEFORE EXCEPTIONALS 780 780

Cash flows on 2008 exceptional items 60 58

OPERATING CASH FLOW 840 838

Net (purchase)/sale of fixed assets (209) (278)

Acquisition and divestments of businesses - (184)

Proceeds from sale of investments 2 -

Other from investing activities 14 5

CASH FLOW FROM INVESTING ACTIVITIES (193) (457)

Dividend paid to equity holders of SGS SA (375) (267)

Dividend paid to non-controlling interests (16) (14)

Cash received/(paid) on treasury shares 15 (201)

Interest paid (16) (15)

(Decrease)/increase in borrowings (22) 295

CASH FLOW FROM FINANCING ACTIVITIES (414) (202)

Currency translations (24) (34)

INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 209 145


CAPITAL EXPENDITURE


EXCEPTIONAL ITEMS

CHF million December

2009

December

2008

Restructuring and termination (23) -

Settlement of pre-2002 receivables 3 147

Legal and financial fees - (20)

Tax thereon 7 (14)

Exceptional items after tax (13) 113


FOREIGN CURRENCY REVENUES 2009

2009 2008 Change

EUR 1.5106 1.5880 (4.9%)

USD 1.0857 1.0829 0.3%

CNY 0.1589 0.1559 1.9%

AUD 0.8545 0.9182 (6.9%)

CAD 0.9520 1.0193 (6.6%)

GBP 1.6949 2.0003 (15.3%)

TWD 0.0328 0.0343 (4.2%)

AVERAGE RATES


FOREIGN CURRENCY IMPACTS ON

TRANSLATION

EURO 1.45 1.51 1.55

Revenues (68) 0 44

Income (11) 0 7

USD 0.95 1.09 1.10

Revenues (90) 0 9

Income (9) 0 1

SECOND HALF 2009



CHF million 2009

H2

2008

H2∆%

Revenue - historical rates 2,385 2,520 (5.4)%

Revenue - constant rates 2,385 2,401 (0.7)%

EBITDA(1) 551 551

EBITDA Margin 23.1 % 21.9 %

Operating Income Group(1) 438 440 (0.5)%

Operating Income Margin 18.4 % 17.5 %

Net income(1) 315 314 0

Net income (after exceptionals) 311 314 (1.0)%

(1) Results are stated before exceptionals


LOCAL CURRENCY GROWTH BY BUSINESS (H2)

4.3%

6.8%

(0.4)%

(1.2)%

(1.0)%

(1.9)%

(1.6)%

(12.6)%

4.9%

(9.2)%

(0.7)%

0.2%

0.6%

0.3%

1.6%

1.8%

0.6%

0.1%

TOTAL

GIS

AUTO

ENVI

IND

SSC

CTS

LIFE

OGC

MIN

AGRI


(0.8)%

(12.5)%

(1.3)%

(0.7)%

7.4%

4.3%

1.4%

(0.3)%

(9.2)%

4.9%

(0.6)%

24

Fin

ancia

l com

munity –

15 J

anuary 2

010

OP

ER

AT

ING

MA

RG

IN B

Y B

US

INE

SS

17.9%

17.4%

15.9%

15.5%

23.9%

20.2%

14.5%

12.1%

15.8%

17.9%

16.4%

17.9%

16.4%

17.3%

25.3%

23.0%

14.5%

13.6%

17.5%

19.3%

5.0

%

10.0

%

15.0

%

20.0

%

25.0

%

30.0

%

AGRI

MIN

OGC

LIFE

CTS

SSC

IND

ENV

AUTO

GIS

H2 2

008

H2 2

009

BUSINESS OVERVIEW



AGRICULTURAL SERVICES (AGRI)

� Overview 2009• Margin growth of 40 basis points capitalising on

high volumes in H1 and higher margin laboratory & inland services.

• Reduced trade activity in H2 due to poor conditions in South America agricultural sector.

• Emergence of Black Sea region as key contributor to global grain trade. South East and Western Europe delivered strong growth.

• Market and crop research & soil testing business segment added to service offering portfolio.

• USA autumn soil testing program delayed until 2010 due to unprecedented bad weather.

� Outlook• Tough H1 volume comparisons in trade services

due to reduced European stock levels. South America expected to rebound from improved crop conditions.

• Food safety concerns, supply chain transparency & new regulatory requirements associated with pesticides, GMO and plant genetics will drive laboratory revenues.

• Inland Services activity growth in Europe & Asia.

• Forestry products create new revenue streams.


2009

December

2008

Revenue 356.3 358.3 Change in % (0.6)

Change due toVolume & Prices 14.5

Currency Translation (17.6)

Acquisitions/(Disposals) 1.1

Operating Income(1) 57.1 55.9 Change in % 2.1

Margin % 16.0 15.6

(1)Before exceptionals


MINERALS SERVICES (MIN)

� Overview 2009• Very difficult market conditions throughout the year

with a slight improvement in revenue in H2.

• Mining and exploration companies dramatically reduced spending on exploration and capital projects.

• Business mix was negatively impacted as utilisation of the lab and metallurgical test facilities declined vs. prior year.

• Cost containment measures, often in conjunction with productivity improvements delivered improved margins in H2.

• Capital expenditure was reduced vs. prior years (CHF 18 Mio in 2009 vs. CHF 80 Mio in 2008).

� Outlook• Market is expected to show sustained recovery

driven by government infrastructure spending in China, India and other large economies.

– Coal market demand to be determined by natural gas prices

• Exploration spending will stabilise from 2009 levels with high gold prices providing possible upside.

• Metallurgical spending will be focused on gold and uranium projects.

• Installed capacity sufficient to absorb a variety of different increased demand scenarios.


2009

December

2008


Change due toVolume & Prices (65.3)



Operating Income(1) 86.3 115.8 Change in % (25.5)

Margin % 16.1 18.3



OIL, GAS & CHEMICALS SERVICES (OGC)

� Overview 2009• Low organic revenue growth due to difficult market

situation in the chemicals and refining / fuel sectors due to decrease in industrial demand.

• Strong performance in cargo treatment services.

• Margin improvement from new productivity investments and favourable geographic mix.

• Newly acquired UPM in Czech Republic – fuel and engine testing – successfully integrated.

• Upstream service entry and expansion drove increased capex spend.

� Outlook• Oil and Gas industry is showing signs of

revitalisation with large budgets approved by NOCs and IOCs for exploration and production.

• Expect slow but sustained recovery in the chemicals and refining industries as demand follows increases in industrial consumption.

• Positive outlook for development of upstream services in production fluid testing, metering, reservoir description and well head engineering.

– Fluid Pro. PVT, etc.


2009

December

2008






Margin % 15.4 15.2



LIFE SCIENCE SERVICES (LIFE)

� Overview 2009• LSS’ organic growth of 3.3% reflects the difficult

market conditions in the CRO business.

– Weak performance in Late Phase was compensated by solid growth in Phase I clinical research.

– Bio-analysis services performed according to plan.

– Quality control services showed good growth.

• Operating margin improved by 40 bps driven by laboratory productivity gains and expanded capacity in Canada.

� Outlook• Continued outsourcing trend in the industry.

• Demand in CRO market to recover to 2008 levels.

• Quality control top line improvement in the US, EU and Asia from laboratory capacities added in 2009.

• High capacity utilisation in the phase I clinics leads to further improved profitability.

• New service offering in Bio-analysis by developing new immuno-analysis services (biomarkers, C14).

• European laboratory consolidation programs in development.


2009

December

2008




Acquisitions/(Disposals) (0.5)


Margin % 13.9 13.5



CONSUMER TESTING SERVICES (CTS)

� Overview 2009• Strong demand from chemical testing services

largely driven by CPSIA legislation.

• Revenue improvement in textiles, hard goods and food, driven by dynamic regulatory environment and market share gains.

• Margin improvement achieved through favourable product mix, good capacity utilisation rates, and excellent cost control in H2.

• Sustainability services affected by economic uncertainty and project delays by companies.

• Difficult European market in electronics testing partially offset by excellent performance in Korea.

� Outlook• Q1 revenue comparison difficult as CPSIA related

revenue stream has stabilised following the Q1 2009 deadline-related surge.

• REACH services are expected to increase from low 2009 levels.

• E&E to resume growth with improving conditions expected in wireless testing and safety services.

• Capacity and capability expansions in Asia, Europe and Americas to come on stream in H1.


2009

December

2008

Revenue 789.0 733.0 Change in % 7.6





Margin % 25.3 23.2



SYSTEMS & SERVICES CERTIFICATION (SSC)

� Overview 2009• Improved market share in the Americas, China,

Eastern Europe and the Middle East.

• Focused on our customers’ needs in environmental, social and economic sustainability.

• Delivered above market growth in key focus segments (food, auto, medical device, finance).

• Strengthened international sales and key account management structure to meet growing demand from multinational customers.

• Successful implementation of productivity initiatives resulting in strong operating margin.

� Outlook• Sustainability related solutions to generate above

market growth.

• Pursuing diversification of our portfolio to industry specific standards, customised audit solutions and training activities.

• Expanding our strategic sector focus with new segments being added.

• New productivity initiatives to be implemented in conjunction with roll out of new IT solutions.


2009

December

2008




Acquisitions/(Disposals) -


Margin % 21.1 19.2



INDUSTRIAL SERVICES (IND)

� Overview 2009• Difficult market conditions due to client capital

spending constraints and investment deferrals –particularly in oil and gas.

• Growth in the global NDT driven by increased in-service / shutdown work in Europe.

• Severe pressure on the statutory construction and infrastructure markets in Europe.

• Renewable energy business firmly established in Europe. Laboratory investments commenced in Asia in support of this initiative (Blade testing laboratory).

• Good performance from the 2008 electrical services acquisition in Brazil.

� Outlook• Growth expected from investments made in 2009 in

Eastern Europe, Middle East and Asia.

• Government infrastructure investment programs will support growth for material testing services primarily in Asia Pacific.

• Inspection volumes will increase as large oil and gas projects come back on stream.

• Difficult market conditions in the European construction and infrastructure markets to continue.


2009

December

2008






Margin % 13.9 14.3



ENVIRONMENTAL SERVICES (ENVI)

� Overview 2009• General conditions impacted by economic turmoil.

Most established markets shrank due to project work deferral.

• Emerging markets and new services generated most of the revenue growth with good profitability.

• Several large trans-national and international contracts successfully executed.

• Operating margin maintained in Europe despite difficult operating environment.

• Climate change services continued to gain traction.

� Outlook• Traditional seasonal weakness in basic

environmental testing activities in Q1.

• Revenue growth and margin will continue to be driven by emerging countries and new service segments.

• Acquisition of Eko-Projekt in Poland provides solid base to strengthen our position in Eastern Europe.

• Expectation of new trans-national opportunities on the back of 2009 successes.


2009

December

2008






Margin % 11.7 10.6



AUTOMOTIVE SERVICES (AUTO)

� Overview 2009• All statutory vehicle inspection programs performed

as expected.

• Testing programs in Ireland were not renewed due to in-sourcing resulting from economic conditions.

• New car business negatively affected by production curtailments in Europe and North America.

• Massachusetts and New Jersey testing program started implementation phases.

• Major right-sizing of new car activity in the USA resulted in a majority exit from new car service market.

� Outlook• Massachusetts and New Jersey statutory programs

to be fully implemented, partially off-setting the termination of Ireland.

• Start of 10 year concession contract in Albania.

• New fees negotiated in South America and good development in North and West Africa.

• Off-lease, fleet and auction services to progressively improve.

• Several greenfield and privatisation opportunities in negotiation.


2009

December

2008


Change due toVolume & Prices (12.7)




Margin % 15.9 16.3



GOVERNMENTS AND INSTITUTIONS SERVICES (GIS)

� Overview 2009• PSI volumes decreased due to reduced economic

activity in contracting countries.

• New wins in product conformity assessment (PCA) programs in (Algeria, Nigeria and Egypt).

• Scanners in Bahrain and Bangladesh were implemented according to plan.

• Liberia forestry program receiving additional support from donor community for scope expansion.

• Taxation contract signed in Ghana effectively creating a new service line.

� Outlook• No major contracts are due for termination in 2010.

• New PCA mandates expected to be signed in 2010 reinforcing global offering. Sales team augmented.

• Continued focus on promoting and deploying TradeNet applications and scanning solutions across geographies.

• Promising opportunities identified in forestry services.

• Two larger-scale project implementations in Ghana and Mozambique to start in Q1.


2009

December

2008






Margin % 18.4 16.9



DISCLAIMER

� “Certain matters discussed in this presentation may constitute forward-

looking statements. These statements are based on current expectations

and estimates of SGS SA, although SGS SA can give no assurance that

these expectations and estimates will be achieved. The actual results

may differ materially in the future from the forward-looking statements

included in this presentation due to various factors. Furthermore, SGS

SA has no obligation to update the statements contained in this

presentation.”


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sgs group results 2009sgs group results 2009 presentation to the financial community geneva, 15...

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