SGS Group 2013 Full Year Results Presentation. Get the financial highlights and an overview of our performance per business. You can access the Financial Report here: http://www.sgs.com/en/Our-Company/Investor-Relations/Financial-Reports.aspx
4. HIGHLIGHTS
Revenue growth of 6.5% to CHF 5.8 billion (constant currency)
4.7% (historical rates)
Organic revenue growth of 4.4% (constant currency)
Adjusted Operating income(1) up 6.9% (constant currency) to
CHF 977 million, resulting in a margin of 16.8%
Restructuring costs net of tax of CHF 23 million
Net Income for the year of CHF 600 million
Basic EPS of CHF 78.43 per share, up 9.7%
Free Cash Flow CHF 591 million, up 43.4%
Proposed dividend to shareholders of CHF 65 per share
Financial community – 21 January 2014
1)
Before amortisation of acquisition intangibles, restructuring, transaction and integration-related costs
4
5. FINANCIAL HIGHLIGHTS
CHF million
2013
December
Revenue
Change in %
2012
December
Pro-forma (2)
2012
December
Restated(3)
5,830
Adjusted Operating Income (1)
Change in %
Adjusted Operating Income Margin (1)
5,473
6.5 %
5,569
4.7 %
977
913
6.9 %
931
4.9 %
16.7 %
16.7 %
16.8 %
Operating Income (EBIT)
Change in %
912
816
11.8 %
834
9.4 %
Adjusted Net Income (1)
Change in %
652
606
7.6 %
617
5.7 %
Net Income
Change in %
600
533
12.6 %
545
10.1 %
79.51
69.95
81.06
71.52
Adjusted Basic EPS (1) (CHF)
Basic EPS (CHF)
Financial community – 21 January 2014
1)
2)
85.27
78.43
Before amortisation of acquisition intangibles, restructuring, transaction and integration-related costs
3) Restated for IAS 19 / IFRS 11
Constant currency and restated for IAS 19 / IFRS 11
5
6. SERVICE PORTFOLIO
REVENUE
GIS
AUTO 4.7%
5.2%
AGRI
6.5%
ENVI
5.6%
MIN
13.6%
ADJUSTED
OPERATING INCOME (1)
AUTO
6.7%
GIS
7.0%
AGRI
6.7%
MIN
12.6%
ENVI
3.5%
IND
11.0%
IND
16.5%
OGC
19.6%
OGC
15.8%
SSC
7.5%
SSC
6.9%
LIFE
2.8%
CTS
17.9%
LIFE
3.5%
CTS
26.4%
REVENUE REGION
ASIA PACIFIC
29.0%
EUROPE /
AFRICA /
MIDDLE EAST
46.2%
AMERICAS
24.8%
Financial community – 21 January 2014
1)
Before amortisation of acquisition intangibles, restructuring, transaction and integration-related costs
6
9. LOCAL CURRENCY GROWTH BY BUSINESS
AGRI
MIN
3.8%
(7.8)%
(5.2)%
2.6%
OGC
LIFE
9.4%
0.1%
2.2%
11.2%
SSC
3.9%
IND
2.1%
(0.3)%
0.2%
4.1%
8.3%
3.3%
3.0%
10.4%
GIS
1.0%
11.4%
11.1%
Acquisition
11.1%
2.1%
4.4%
Organic
Financial community – 21 January 2014
0.8% 12.0%
6.2%
AUTO
TOTAL
10.3%
0.9%
2.1%
CTS
ENVI
5.5%
1.7%
6.5%
Disposal
Prior year restated for IFRS 11
9
10. REVENUE GROWTH AND HEADCOUNT
CHANGE BY REGION
Δ in EOP headcount
Group Headcount
Europe / Africa &
Middle East
1.3%
1.7%
3.0%
Δ
2013
2012
December December
81,948
79,208
2,740
Organic Business Growth
1,542
Acquisitions
1,198
Disposals
6.0%
Americas
4.5%
-
10.5%
Increase in Group Headcount
Asia / Pacific
0.8%
8.2%
9.0%
By Region
2,740
Headcount Headcount Revenues
Δ
Δ%
Δ%
Europe / Africa / Middle East
Organic
Financial community – 21 January 2014
0.9 %
3.0 %
260
1.4 %
10.5 %
Asia / Pacific
2,188
7.8 %
9.0 %
TOTAL
2.1%
4.4%
292
Americas
TOTAL GROUP
2,740
3.5%
6.5%
6.5%
Acquisition
Disposal
Prior year restated for IFRS 11
10
12. ADJUSTED OPERATING INCOME(1) GROWTH
4.8%
2.1%
0.0%
(2.0)%
4.9%
20
(18)
44
Constant currency growth:
977
6.9%
931
Op. Income
2
December 12
Financial community – 21 January 2014
Organic
1)
2)
Acquisitions
Disposals
Currency
impact
Op. Income
December 13
Before amortisation of acquisition intangibles, restructuring, transaction and integration-related costs
Restated for IAS 19 / IFRS 11
12
13. HISTORICAL RESTATED MARGINS
Adjusted EBITDA MARGIN(1)
DEC 09
DEC 10
Adjusted OPERATING MARGIN(1)
DEC 11
DEC 12
DEC 13
DEC 09
25.0%
DEC 13
17.3%
17.6%
16.8%
16.7%
16.8%
10.0%
10.0%
DEC 12
15.0%
15.0%
DEC 11
20.0%
20.0%
DEC 10
5.0%
5.0%
21.8%
22.2%
Financial community – 21 January 2014
21.2%
21.2%
21.5%
1)
Before amortisation of acquisition intangibles, restructuring, transaction and integration-related costs
and prior years restated for IAS 19 / IFRS 11
13
14. ADJUSTED OPERATING MARGIN(1) BY BUSINESS
30.0%
1)
2)
24.8%
21.0%
GIS
22.0%
AUTO
ENV
10.6%
11.2%
IND
11.2%
18.3%
2
10.3%
18.3%
December 12
Financial community – 21 January 2014
SSC
24.8%
CTS
LIFE
8.5%
13.1%
OGC
18.7%
MIN
AGRI
5.0%
16.5%
10.0%
13.2%
13.5%
15.0%
15.6%
17.1%
20.0%
21.6%
24.8%
25.0%
December 13
Before amortisation of acquisition intangibles, restructuring, transaction and integration-related costs
Restated for IAS 19 / IFRS 11
14
15. RESTRUCTURING COSTS
RESTRUCTURING
BY BUSINESS
ENVI
7.0%
AUTO AGRI
0.6% 0.6%
RESTRUCTURING
2013 BY REGION
MIN
9.7%
OGC
2.7%
ASIA PACIFIC
10.9%
AMERICAS
4.8%
LIFE
18.7%
IND
47.1%
CTS
10.6%
SSC
3.0%
Financial community – 21 January 2014
EUROPE /
AFRICA /
MIDDLE EAST
84.3%
15
16. CASH FLOW
CHF million
PROFIT FOR THE PERIOD
Depreciation, amortisation and impairment
Share based payments
Tax
Other
Non-cash items
(Increase)/decrease in working capital
Taxes paid
OPERATING CASH FLOW
Net (purchase) / sale of fixed assets
Acquisition of businesses
Other from investing activities
CASH FLOW FROM INVESTING ACTIVITIES
Dividend paid to equity holders of SGS SA
Dividend paid to non-controlling interests
Net cash received/(paid) on treasury shares
Interest paid
Net flows on interest rate swaps
Increase/(decrease) in borrowings
CASH FLOW FROM FINANCING ACTIVITIES
Currency translations
(DECREASE) IN CASH AND CASH EQUIVALENTS
Financial community – 21 January 2014
Dec 13
Dec 121
638
579
298
5
236
13
552
(29)
(213)
948
(333)
(108)
16
(425)
(444)
(27)
4
(46)
2
(5)
(516)
(13)
(6)
280
14
214
(7)
501
(73)
(209)
798
(376)
(182)
1
(557)
(497)
(24)
76
(46)
37
(12)
(466)
(5)
(230)
1)
Restated for IAS 19 / IFRS 11
16
17. CAPITAL EXPENDITURE
CAPEX REGION
CAPEX
BUSINESS
AUTO
7.0%
ASIA PACIFIC
33.3%
GIS
6.4%
AGRI
4.2%
MIN
16.8%
ENVI
6.2%
EUROPE /
AFRICA /
MIDDLE EAST
46.0%
IND
9.0%
SSC
1.4%
OGC
19.0%
CTS
25.5%
AMERICAS
20.7%
LIFE
4.5%
ANNUAL CAPEX
CHF million
2008
2009
2010
2011
2012
2013
500
400
300
200
100
Capital Expenditure
Financial community – 21 January 2014
Depreciation & amortisation
17
26. AGRICULTURAL SERVICES (AGRI)
CHF million
Revenue
December December December
2013
2012
2012
2
Pro-forma Restated3
381.3
Adj. Operating Inc. (1)
Change in %
Margin %1
17.1
(1)
3.2
59.4
7.2
16.4
16.5
Before amortisation of acquisition intangibles, restructuring, transaction
and integration- related costs
(2)
Restated figures on a constant currency basis
(3)
60.9
9.9
65.3
369.5
5.5
Change in %
361.3
Overview 2013
Restated figures due to IAS 19, IFRS 11
Organic growth of 3.8% despite difficult trading
conditions in the Black Sea and Danube Corridor in
H1 as well as in Asia Pacific in H2.
Additional growth from acquisitions closed in 2012:
Gravena (Brazil) and WareCare (Netherlands), both
performing ahead of expectations.
Seed and Crop and fumigation services continue to
deliver double digit growth.
Solid growth and margin improvement in North
America due to deregulation of the Canadian Wheat
Board and Canadian Grain Commission as well as
successful cost saving initiatives.
Outlook
Financial community – 21 January 2014
Positive H2 2013 trading trends in Eastern Europe
and North America to continue into H1 2014,
partially offset by challenging market conditions in
Asia Pacific.
Increased lab capabilities in Central & Eastern
Europe expected to come online in H2.
Solid growth in Seed and Crop to continue as
expansion efforts in South America and Africa gain
traction.
26
27. MINERALS SERVICES (MIN)
CHF million
Revenue
December December December
2013
2012
2012
2
Pro-forma Restated3
791.9
Adj. Operating Inc. (1)
Change in %
Margin %1
15.6
(1)
(8.8)
156.0
162.1
(20.9)
123.4
868.0
(5.2)
Change in %
835.1
(23.9)
18.7
Restated figures due to IAS 19, IFRS 11
18.7
Before amortisation of acquisition intangibles, restructuring, transaction
and integration- related costs
(2)
Restated figures on a constant currency basis
(3)
Overview 2013
Challenging market conditions throughout the year
resulted in a revenue decline and pressure on
margins.
Trade business delivered double-digit growth from
geographic expansion and increased market share.
Mining and exploration companies significantly
reduced their expenditure on exploration impacting
Geochem and Metallurgy.
Sample load into the Commercial Geochem network
declined significantly versus prior year.
Restructuring activity undertaken in order to align
the cost base.
Outlook
Financial community – 21 January 2014
Market conditions not expected to improve in 2014.
Trade inspections will continue to grow as producers
maximise output from existing operations.
Continued low volumes and price pressure in
commercial Geochem as competitors seek to fill
available capacity.
Benefits from restructuring will improve margin.
Additional revenues from 7 laboratories opened in
2013 and from 5 new laboratories starting in 2014.
27
28. OIL, GAS & CHEMICALS SERVICES (OGC)
CHF million
Revenue
December December December
2013
2012
2012
2
Pro-forma Restated3
1,139.9
Adj. Operating Inc. (1)
Change in %
Margin %1
13.5
(1)
9.0
135.6
137.1
13.6
154.0
1,046.0
10.3
Change in %
1,033.8
12.3
13.1
13.1
Before amortisation of acquisition intangibles, restructuring, transaction
and integration- related costs
(2)
Restated figures on a constant currency basis
(3)
Overview 2013
Upstream Services delivered outstanding growth
across whole portfolio (Australia and Middle East,
Asia, Eastern Europe).
Continued growth in Plant and Terminal Operations
specifically in the USA and Canada.
Growth in Oil Condition Monitoring from the Herguth
acquisition in the USA and expansion into new
geographies.
Slowdown in trade-related activities in Europe and
North America offsetting growth in other
geographies.
Restated figures due to IAS 19, IFRS 11
Outlook
Financial community – 21 January 2014
Upstream Services growth to remain strong
capitalising on new contracts and pre-qualifications
achieved as well as footprint expansion.
Strong pipeline of laboratory commissioning and
outsourcing projects.
Trade related activities to deliver moderate growth
despite reduced ethanol export volumes in Brazil.
Better efficiency due to implementation of integrated
execution platform and back office improvements.
28
29. LIFE SCIENCE SERVICES (LIFE)
CHF million
Revenue
December December December
2013
2012
2012
2
Pro-forma Restated3
205.0
Adj. Operating Inc. (1)
Change in %
Margin %1
13.2
(1)
16.9
59.4
8.5
Before amortisation of acquisition intangibles, restructuring, transaction
and integration- related costs
(2)
Restated figures on a constant currency basis
(3)
17.0
8.4
2.9
60.4
27.1
199.3
2.2
Change in %
200.6
Overview 2013
Adjusted for the winding-down of the Paris clinical
trial activities, revenue growth reached 11.1%.
Strong performance in laboratory services:
Europe supported by UK biologics capabilities.
North America supported by investments in capacity
expansion completed 2012 investments.
Asia supported by global key accounts.
Restated figures due to IAS 19, IFRS 11
Clinical Research delivered limited growth due to
market difficulties and continued price pressures.
Margin improvement due to winding-down of Paris
clinical activities and profitable double-digit growth in
laboratory activities.
Outlook
Financial community – 21 January 2014
Laboratory growth and margin to continue improving
thanks to investments in the network and global key
account management activities.
Biologics testing to remain a strong driver of top and
bottom line improvement with highest margins.
Execution excellence & higher quality service
delivery remain top priority areas.
Clinical Research to improve sales performance and
drive operational efficiency.
29
30. CONSUMER TESTING SERVICES (CTS)
CHF million
Revenue
December December December
2013
2012
2012
2
Pro-forma Restated3
1,041.9
Adj. Operating Inc. (1)
Change in %
Margin %1
24.8
11.3
231.7
232.4
11.5
258.3
936.2
12.0
Change in %
930.6
11.1
24.9
24.8
Overview 2013
(1)
Before amortisation of acquisition intangibles, restructuring, transaction
and integration- related costs
(2)
Restated figures on a constant currency basis
(3)
Double-digit organic revenue growth primarily driven
by Eastern Asia, South America, Eastern Europe
and Middle East across all business segments.
Achieved market share gains thanks to targeted
investments in E&E and Automotive parts testing
Secured new strategic accounts in Softlines and
Toys testing.
Pressure on the margins remains, resulting from
operational cost increases in Asia and the timing of
new investments in capacity expansion in Asia and
North America.
Restated figures due to IAS 19, IFRS 11
Outlook
Financial community – 21 January 2014
Asia and South America will continue generating
solid growth; Europe performance to improve.
Network expansion in key geographies and
increased capacity in high growth segments will
contribute to continued growth.
Further development of existing service portfolio into
new geographies.
Enhancement of IT systems to deliver more effective
supply chain solutions.
30
31. SYSTEMS & SERVICES CERTIFICATION (SSC)
CHF million
Revenue
December December December
2013
2012
2012
2
Pro-forma Restated3
401.6
Adj. Operating Inc. (1)
Change in %
Margin %1
18.3
(1)
1.7
70.1
1.5
18.2
18.3
Before amortisation of acquisition intangibles, restructuring, transaction
and integration- related costs
(2)
Restated figures on a constant currency basis
(3)
Restated figures due to IAS 19, IFRS 11
72.2
4.6
73.3
394.9
4.1
Change in %
385.7
Overview 2013
Revenue growth significantly impacted by the
difficult economic environment in Europe and Japan
throughout the year.
Cost saving programs implemented in Europe and
Japan, as well as operational efficiency initiatives
protected margins.
Hart Aviation acquisition expanded the service
offering to the aviation industry.
Strong demand for medical device certification and
food safety schemes.
Good performance of Training with SGS Academy
gradually implemented in all regions.
Outlook
Financial community – 21 January 2014
Margins expected to remain stable thanks to
restructuring and further efficiency gains.
Double-digit growth expected in Performance
Assessment and Training.
Food and Medical Devices will remain major growth
drivers in certification.
Further development of new services such as
Access Control Solution, Health and Safety
compliance and aviation safety certification.
31
32. INDUSTRIAL SERVICES (IND)
CHF million
Revenue
December December December
2013
2012
2012
2
Pro-forma Restated3
960.3
Adj. Operating Inc. (1)
Change in %
Margin %1
11.2
6.9
99.0
100.2
8.4
107.3
898.6
8.3
Change in %
886.5
11.2
7.1
11.2
Overview 2013
(1)
Before amortisation of acquisition intangibles, restructuring, transaction
and integration- related costs
(2)
Restated figures on a constant currency basis
(3)
Organic revenue growth and margins impacted by
soft market conditions in Europe.
Double-digit organic growth in most regions outside
Europe.
Continued restructuring and repositioning to meet
new market conditions across Europe and protect
margins.
Acquisition of four laboratories in line with the
strategy to increase testing activities in the portfolio:
Labmat in Brazil, MSi in USA, CQA in Australia and
MIS Testing in the UK.
Restated figures due to IAS 19, IFRS 11
Outlook
Financial community – 21 January 2014
Market conditions in Europe expected to stabilise.
Gradual margin improvement anticipated in Europe
following restructuring and repositioning plan.
Growth to remain strong in other geographies.
Increase focus on lab testing: green field
development and acquisitions.
Enhance key account management and sales
structure in key sectors.
Continue expansion in high growth markets.
32
33. ENVIRONMENTAL SERVICES (ENVI)
CHF million
Revenue
December December December
2013
2012
2012
2
Pro-forma Restated3
328.0
Adj. Operating Inc. (1)
Change in %
Margin %1
10.3
33.5
34.2
(1.2)
10.5
10.6
1.6
0.9
33.8
322.7
3.0
Change in %
318.5
Overview 2013
(1)
Before amortisation of acquisition intangibles, restructuring, transaction
and integration- related costs
(2)
Restated figures on a constant currency basis
(3)
Restated figures due to IAS 19, IFRS 11
Strong impact on performance from European
operations due to overall economic situation.
Results also affected by mining sector slow down in
the Americas, Africa and Australia, partly offset by
customer diversification and cost control plans.
Weakness of carbon price resulted in a strong
reduction of our CDM portfolio in China and India.
Continued geographical and service diversification
with market entry in some Asian and African
countries, where we experienced strong growth.
Expanded footprint in Germany and UK through
acquisition of RUK and MIS Environmental.
Outlook
Financial community – 21 January 2014
Continue diversification in Asia and the Americas to
reduce dependency on Europe.
Additional restructuring of European operations
completed in 2013 will lift overall margin.
Optimise European laboratory network through an
improved regional sample distribution model.
New revenues from global contracts signed in 2013
for Industrial Hygiene, Monitoring and Energy audits.
33
34. AUTOMOTIVE SERVICES (AUTO)
CHF million
Revenue
December December December
2013
2012
2012
2
Pro-forma Restated3
305.1
Adj. Operating Inc. (1)
Change in %
1
Margin %
21.6
(1)
10.0
60.8
60.9
8.2
65.8
277.4
11.4
Change in %
273.8
8.0
22.2
Restated figures due to IAS 19, IFRS 11
22.0
Before amortisation of acquisition intangibles, restructuring, transaction
and integration- related costs
(2)
Restated figures on a constant currency basis
(3)
Overview 2013
Statutory inspection business provided solid results
in Europe, Africa, North America and South
America.
New road safety services rolled out in Kenya.
New vehicle and boat tax collection contract being
implemented in Ivory Coast.
Contract for Identity Authentication Services as part
of the driver’s license program started in Ireland.
Commercial inspection volumes picking up in the
USA and remained stable in Europe.
Acquisitions concluded in France and China.
Outlook
Financial community – 21 January 2014
Concession for statutory vehicle inspections in the
city of Guayaquil, Ecuador and in Mauritius will start
generating revenues as of H2 2014.
New York statutory program ended in December
2013 and Santiago concession in Chile to end in
July 2014, negatively impacting organic growth.
Acquisition strategy will focus on enhancing
capabilities & footprint for engine & vehicle testing.
34
35. GOVERNMENTS AND INSTITUTIONS SERVICES (GIS)
CHF million
Revenue
December December December
2013
2012
2012
2
Pro-forma Restated3
274.7
Adj. Operating Inc. (1)
Change in %
Margin %1
24.8
(1)
7.3
50.3
53.7
35.6
68.2
256.0
11.1
Change in %
247.2
27.0
20.3
Restated figures due to IAS 19, IFRS 11
21.0
Before amortisation of acquisition intangibles, restructuring, transaction
and integration- related costs
(2)
Restated figures on a constant currency basis
(3)
Overview 2013
Good growth in Local Solutions with Product
Conformity Assessment (PCA) programs as main
driver.
Unexpected extension of the Destination Inspection
program in Nigeria until November 2013.
Strong performance for TradeNet in Ghana and
Madagascar as well as an excellent start in
Mozambique.
New full scale Telecom monitoring activities in
Tanzania started operating in H2.
PSI Angola and Bangladesh discontinued.
Outlook
Financial community – 21 January 2014
Continued growth from PCA programs with new
contracts.
New forestry program in Liberia.
Complete deployment of TradeNet in Mozambique.
Complete implementation of new mandate in Ghana
(Ghana Revenue Authority).
New contracts for Cargo Tracking and Telecoms
monitoring.
35