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SGS GROUP RESULTSFIRST HALF 2010Presentation to the Financial Community
Geneva, 15 July 2010
2Financial community – 15 July 2010
BU
SIN
ESS
OVE
RVI
EWCONTENT
FINANCIAL HIGHLIGHTS2010 Highlights
Revenue Analysis
Operating Income Analysis
Cash Flows
Currency Analysis
BUSINESS OVERVIEW
FIN
AN
CIA
L H
IGH
LIG
HTS
3Financial community – 15 July 2010
4Financial community – 15 July 2010
HIGHLIGHTS
1st semester 2010 results• Constant currency revenue growth of 1.7% to CHF 2.4 billion
– 1.0% at historical rates• Adjusted EBITDA(1) margin at 21.2% (+ 30 bps)
– Adjusted EBITDA(1) up 2.7% to CHF 499 million• Adjusted Operating income(1) margin at 16.5% (+ 20 bps)
– Adjusted Operating income(1) up 2.0% to CHF 388 million• Net Profit for the period of CHF 270 million• Basic EPS CHF 35.67 per share
Outlook 2010• SGS maintains its full year forecast of a solid year 2010 with
both revenues and earnings above 2009 levels
(1) Before amortisation of acquisition intangibles, restructuring and transaction-related costs
5Financial community – 15 July 2010
FINANCIAL HIGHLIGHTS
(1) Before amortisation of acquisition intangibles, restructuring and transaction-related costs
CHF million 2010June
2009June
Δ%
Revenue - historical rates 2,352 2,327 1.0 % Revenue - constant rates 2,352 2,314 1.7 %
Adjusted EBITDA(1) 499 486 2.7 % Adjusted EBITDA Margin 21.2 % 20.9 %
Adjusted Operating Income(1) 388 380 2.0 % Adjusted Operating Income Margin 16.5 % 16.3 %
Operating Income (EBIT) 383 361 6.1 % Operating Income Margin 16.3 % 15.5 %
Net income 270 255 5.9 %
Basic EPS 35.67 33.98 5.0 % Diluted EPS 35.51 33.89 4.8 % Period end no. of employees (incl. acquisitions) 59,837 56,674 5.6 %
6Financial community – 15 July 2010
FINANCIAL HIGHLIGHTS
(1) Before amortisation of acquisition intangibles, restructuring and transaction-related costs
REVENUE
1,300
1,600
1,900
2,200
2,500
CHF million
1,845 2,089 2,298 2,327 2,352
JUN 06 JUN 07 JUN 08 JUN 09 JUN 10
6.26% CAGR
Adjusted OPERATING INCOME(1)
160
220
280
340
400
CHF million
JUN 06 JUN 07 JUN 08 JUN 09 JUN 10
283 326 373 380 388
8.19% CAGR
Adjusted EBITDA(1)
250
320
390
460
530
CHF million
363 418 473 486 499
JUN 06 JUN 07 JUN 08 JUN 09 JUN 10
8.26% CAGR
NET PROFIT
265
100
170
240
310
380
CHF million
JUN 06 JUN 07 JUN 08 JUN 09 JUN 10
215 234 378 255 270
5.86% CAGR
7Financial community – 15 July 2010
FINANCIAL HIGHLIGHTS
(1) Before amortisation of acquisition intangibles, restructuring and transaction-related costs
Adjusted EBITDA MARGIN(1)
14.0%
16.0%
18.0%
20.0%
22.0% JUN 06 JUN 07 JUN 08 JUN 09 JUN 10
19.7% 20.0% 20.6% 20.9% 21.2%
Adjusted OPERATING INCOME MARGIN(1)
10.0%
12.0%
14.0%
16.0%
18.0%JUN 06 JUN 07 JUN 08 JUN 09 JUN 10
15.4% 15.6% 16.2% 16.3% 16.5%
8Financial community – 15 July 2010
SERVICE PORTFOLIO
(1) Before amortisation of acquisition intangibles, restructuring and transaction-related costs
9
10Financial community – 15 July 2010
REVENUE GROWTH COMPOSITION
RevenuesJune 09 Organic Acquisitions Disposals
Currencyimpact
RevenuesJune 10
2,327
22 16
(13)
2,352
1.0% 0.7% 0.0% (0.7)% 1.0%
Constant currency growth: 1.7%
11Financial community – 15 July 2010
LOCAL CURRENCY GROWTH BY BUSINESS
(3.3)%
7.8%
5.6%
(3.1)%
1.0%
1.2%
(25.0)%
10.6%
5.6%
3.8%
(4.4)%
0.4%
2.9%
2.7%
0.7%TOTAL
GIS
AUTO
ENVI
IND
SSC
CTS
LIFE
OGC
MIN
AGRI
Organic Acquisition Disposal
(3.1)%
6.0%
3.8%
1.2%
5.6%
7.8%
(0.4)%
(1.7)%
(25.0)%
10.6%
1.7%
12Financial community – 15 July 2010
REVENUE GROWTH AND HEADCOUNT CHANGE BY REGION
Δ in EOP headcount 2010June
2009June
Δ
Group Headcount 59,837 56,674 3,163
Organic Business Growth 2,873
Acquisitions 290
Disposals -
Increase in Group Headcount 3,163
By Region Headcount Δ
Headcount Δ%
Revenues Δ%
Europe / Africa / Middle Eas 835 3.3 % 1.1 %
Americas 53 0.4 % (4.1)%
Asia / Pacific 2,275 12.0 % 7.6 %
TOTAL 3,163 5.6% 1.7%
1.0%
7.2%
(4.3)%
0.1%
0.7%
0.2%
1.0%
0.4%
TOTAL GROUP
Asia / Pacific
Americas
Europe / Africa &Middle East
Organic Acquisition Disposal
1.1%
(4.1)%
7.6%
1.7%
13Financial community – 15 July 2010
14Financial community – 15 July 2010
ADJUSTED OPERATING INCOME(1) GROWTH
(1) Before amortisation of acquisition intangibles, restructuring and transaction-related costs
Op. IncomeJune 09 Organic Acquisitions Disposals
Currencyimpact
Op. IncomeJune 10
380
9 2
(3)
388
2.4% 0.6% 0.0% (1.0)% 2.0%
Constant currency growth: 3.0%
15Financial community – 15 July 2010
ADJUSTED OPERATING MARGIN(1) BY BUSINESS
(1) Before amortisation of acquisition intangibles, restructuring and transaction-related costs
15.7
%
14.4
%
14.6
%
11.1
%
25.5
%
19.1
%
13.4
%
9.6%
14.9
%
17.3
%
13.3
%
17.7
%
13.6
%
13.0
%
25.1
%
19.3
%
12.6
%
9.2%
19.1
%
17.4
%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
AGRI
MIN
OG
C
LIFE
CTS
SSC
IND
ENV
AUTO GIS
June 09 June 10
16Financial community – 15 July 2010
ANALYSIS OF OPERATING INCOME
CHF million 2010June
2009June
Δ%
Adjusted Operating Income(1) 388 380 2.0 % Adjusted Operating Income Margin 16.5 % 16.3 %
Amortisation of acquisition intangibles (4) (4) Restructuring costs (15) Transaction-related costs (1)
Operating Income (EBIT) 383 361 6.1 % Operating Income Margin 16.3 % 15.5 %
(1) Before amortisation of acquisition intangibles, restructuring and transaction-related costs
17Financial community – 15 July 2010
CASH FLOWSCHF million Jun 10 Jun 09
PROFIT FOR THE PERIOD 282 267 Non-cash items 214 206
Depreciation, amortisation and impairment 115 113 Share based payments 10 8 Tax 99 91 Other (10) (6)
(Increase) in net working capital (109) (53) Taxes paid (127) (134)
CORE CASH FLOW 260 286 Cash flows from exceptional items 2008 - (14)
OPERATING CASH FLOW 260 272 Net (purchase)/sale of fixed assets (114) (97) Acquisition and divestments of businesses (31) 7 Proceeds from sale of investments - 2 Other from investing activities 1 6
CASH FLOW FROM INVESTING ACTIVITIES (144) (82) Dividend paid to equity holders of SGS SA (455) (375) Dividend paid to non-controlling interests (12) (11) Increase/(decrease) in non-controlling interests (4) - Cash received/(paid) on treasury shares 85 25 Interest paid (7) (9) (Decrease)/increase in borrowings (254) (136)
CASH FLOW FROM FINANCING ACTIVITIES (647) (506) Currency translations 5 (7)
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (526) (323)
18Financial community – 15 July 2010
CAPITAL EXPENDITURE
19Financial community – 15 July 2010
FOREIGN CURRENCY REVENUES H1 2010
2010 2009 ChangeEUR 1.4383 1.5065 (4.5%) USD 1.0829 1.1290 (4.1%) CNY 0.1586 0.1651 (3.9%) AUD 0.9671 0.8020 20.6% CAD 1.0473 0.9366 11.8% TWD 0.0340 0.0337 0.9% GBP 1.6507 1.6816 (1.8%)
AVERAGE RATES
20Financial community – 15 July 2010
FOREIGN CURRENCY SENSITIVITY ANALYSIS
EURO 1.35 1.44 1.45
Revenues (48) 0 6Income (9) 0 1
USD 1.00 1.08 1.15
Revenues (26) 0 21Income (3) 0 2
21Financial community – 15 July 2010
ADJUSTED OPERATING INCOME MARGIN BY BUSINESS
(1) Before amortisation of acquisition intangibles, restructuring and transaction-related costs
CHF million 2010June
2009June
2008June
2009December
2008December
AGRI 13.3% 15.7% 13.0% 16.0% 15.6%
MIN 17.7% 14.4% 19.4% 16.3% 18.4%OGC 13.6% 14.6% 14.7% 15.7% 15.5%LIFE 13.0% 11.1% 11.8% 14.5% 14.0%CTS 25.1% 25.5% 22.5% 25.4% 23.3%
SSC 19.3% 19.1% 18.0% 21.1% 19.2%
IND 12.6% 13.4% 14.1% 14.0% 14.4%
ENVI 9.2% 9.6% 8.9% 11.7% 10.6%
AUTO 19.1% 14.9% 17.2% 16.3% 16.7%
GIS 17.4% 17.3% 15.7% 18.4% 16.9%
TOTAL GROUP 16.5% 16.3% 16.3% 17.4% 17.0%
22Financial community – 15 July 2010
BUSINESS OVERVIEW
23Financial community – 15 July 2010
AGRICULTURAL SERVICES (AGRI)
OVERVIEW H1 2010• Lower grain trade volumes in H1 versus strong PY
partially offset by sugar and soft commodities. • Buyers stay out of the market pending price
normalisation due to over supply of grain.• Excellent growth in inland services particularly Soil
Testing and Field Trial activities both in North America and Europe.
• Crop services and seed testing gaining traction in Asia, especially China and India.
• Market Research and Information Services products developed during the period and brought to market.
OUTLOOK 2010• Trade Services will improve during H2, driven by
new harvest volumes.• Availability of trade finance will have positive impact
on trade and stimulate Collateral Management activity.
• Growth of inland activities inline with H1. Both the service portfolio and geographical coverage expected to expand rapidly.
• Introduction of Forestry service offering will start to generate revenue with excellent growth potential.
CHF million June2010
June2009
Revenue 170.2 176.3 Change % (3.5)
Change due toVolume & Prices % (3.1)Acquisitions/(Disposals) % - Currency Translation % (0.4)
Adjusted Operating Inc.(1) 22.6 27.7 Change % (18.4)
Margin % 13.3 15.7 (1) Before amortisation of acquisition intangibles, restructuring and transaction-related costs
24Financial community – 15 July 2010
MINERALS SERVICES (MIN)
OVERVIEW H1 2010• Minerals delivered 5.6% organic growth with
stronger than expected Q2 revenue. • Margin improved by 330 basis points based on
increased revenue and the restructuring undertaken in 2009.
• Good performance in traditional trade inspection business as trade volumes increase for all major bulk commodities.
• Recovery in metallurgical and geochem businesses in North America and Australia. Added 5 new mine site laboratories in H1.
• Completed the acquisition of Verilab in Chile and Assayers Canada in Vancouver to deliver geochem services to these two key markets.
OUTLOOK 2010• Solid project pipeline for all business sectors.• Additional 6 mine site labs expected in H2.• Strong demand for commodities in China, India,
Indonesia will be partially offset by continued weakness in European markets.
• Recovery in the mining and associated service sectors has already produced a very competitive and challenging HR environment.
CHF million June2010
June2009
Revenue 291.1 261.5 Change % 11.3
Change due toVolume & Prices % 5.6 Acquisitions/(Disposals) % 0.4 Currency Translation % 5.3
Adjusted Operating Inc.(1) 51.4 37.6 Change % 36.7
Margin % 17.7 14.4 (1) Before amortisation of acquisition intangibles, restructuring and transaction-related costs
25Financial community – 15 July 2010
OIL, GAS & CHEMICALS SERVICES (OGC)
OVERVIEW H1 2010• Crude Oil prices remain steady due to balanced
supply and demand pattern resulting in growth of traded volumes.
• Recovery seen in market with pick up in chemicals sector and reduced arbitrage in petroleum products.
• Client personnel growth restrictions led to outsourcing opportunities in Port and Terminal Operations especially in North America.
• Heavy flooding negatively impacted upstream activities in Australia – full deployment only started in June.
OUTLOOK 2010• Largest oil consumers indicate higher growth than
originally expected – positive outlook to year end.• New SGS Well Test packages to be deployed in
July expanding SGS’ footprint in the upstream arena.
• Lube Condition Monitoring to grow significantly due to start-ups in South America and Turkey.
• Demand for Laboratory Outsourcing and Port and Terminal Operation activities remain strong.
CHF million June2010
June2009
Revenue 480.2 468.6 Change % 2.5
Change due toVolume & Prices % 3.8 Acquisitions/(Disposals) % - Currency Translation % (1.3)
Adjusted Operating Inc.(1) 65.1 68.5 Change % (5.0)
Margin % 13.6 14.6 (1) Before amortisation of acquisition intangibles, restructuring and transaction-related costs
26Financial community – 15 July 2010
LIFE SCIENCE SERVICES (LIFE)
OVERVIEW H1 2010• Positive growth over prior year.• Strong interest from key accounts in R&D/QC lab
network, biotech and Asia labs capabilities.• Clinical Research profit stable despite decreasing
revenue and increased cancellation rate.• R&D / QC laboratories:
– Europe: moderate growth but profit improved.– North America: due capacity expansions over-
performed prior year.– Asia: lower profit impacted by change in
service portfolio mix.
OUTLOOK 2010• Sales reorganisation towards efficiency, cross-
selling initiatives implemented to improve backlog.• Leverage expanded capacity in North America. GMP
labs in Asia catching up.• Bioanalysis growth driven by high demand for value-
added services (immuno-analysis) and mass spectrometry.
• Biopharmaceutical testing key factor of future growth with investments planned.
• Long-term preferred partnership with Global Key Accounts.
CHF million June2010
June2009
Revenue 98.0 100.3 Change % (2.3)
Change due toVolume & Prices % 1.2 Acquisitions/(Disposals) % - Currency Translation % (3.5)
Adjusted Operating Inc.(1) 12.7 11.1 Change % 14.4
Margin % 13.0 11.1 (1) Before amortisation of acquisition intangibles, restructuring and transaction-related costs
27Financial community – 15 July 2010
CONSUMER TESTING SERVICES (CTS)
OVERVIEW H1 2010• Good growth over prior year despite slowdown in
CPSIA related testing. Softlines, Food and Automotive key drivers.
• Asian affiliates, particularly China, India and Bangladesh as well as Turkey continue to be strong performers.
• New initiatives related to Sustainability Services and Reach performing according to plan.
• Volumes in Western Europe and USA impacted by adverse economic conditions.
OUTLOOK 2010• Overall expectation for a solid year despite difficult
market conditions in Western Europe and USA.• Good backlog heading into H2.• Regulatory requirements will continue to be a
positive driver, particularly in restricted substances testing and services.
• Service expansion in key affiliates will create additional growth momentum.
• Programs for laboratory efficiency improvement will be further introduced during H2.
CHF million June2010
June2009
Revenue 407.3 391.9 Change % 3.9
Change due toVolume & Prices % 5.6 Acquisitions/(Disposals) % - Currency Translation % (1.7)
Adjusted Operating Inc.(1) 102.3 99.8 Change % 2.5
Margin % 25.1 25.5 (1) Before amortisation of acquisition intangibles, restructuring and transaction-related costs
28Financial community – 15 July 2010
SYSTEMS & SERVICES CERTIFICATION (SSC)
OVERVIEW H1 2010• Revenue growth led by market share gains in
Eastern Europe, Middle East, China / Hong Kong and the Americas.
• Sustainability related audit services and second party audit services delivering higher than average growth rates.
• Demand for global certification contracts remains strong in spite of the current economic climate.
• New IT initiatives rolled out to further increase efficiency and productivity in service delivery.
OUTLOOK 2010• Focus remains on market share gains in key
geographies and new service segments.• Continued investment in new services to obtain
growth in chosen markets.• Stronger competitive landscape and continued price
pressure will be offset by improved efficiency.• Expanding key account management structure to
meet demand from multinational customers.
CHF million June2010
June2009
Revenue 188.5 175.7 Change % 7.3
Change due toVolume & Prices % 7.8 Acquisitions/(Disposals) % - Currency Translation % (0.5)
Adjusted Operating Inc.(1) 36.3 33.6 Change % 8.0
Margin % 19.3 19.1 (1) Before amortisation of acquisition intangibles, restructuring and transaction-related costs
29Financial community – 15 July 2010
INDUSTRIAL SERVICES (IND)
OVERVIEW H1 2010• Challenging first semester as economic conditions in
Western Europe, USA and Middle East slowed organic growth.
• Statutory inspection market conditions remain tight and competitive in Europe.
• The three material testing acquisitions in H1 are performing well, with the acquired higher value services being rolled out in Europe.
• Growing demand for NDT in-service work and large project wins in Africa and Eastern Europe.
• Continuing development of automated inspection tools to further standardise processes and extract efficiencies.
OUTLOOK 2010• Volume decline expected to reverse in H2.• Government infrastructure investment in power and
transport will drive growth in Eastern Europe.• Large client capex budget spend still slow in USA
and Middle East. Large projects now committed in South America and Asia for H2.
• Renewable energy sector growing offshore in Europe and onshore in China.
• China wind turbine blade testing centre will open in Q4.
CHF million June2010
June2009
Revenue 368.2 371.3 Change % (0.8)
Change due toVolume & Prices % (3.3)Acquisitions/(Disposals) % 2.9 Currency Translation % (0.4)
Adjusted Operating Inc.(1) 46.3 49.9 Change % (7.2)
Margin % 12.6 13.4 (1) Before amortisation of acquisition intangibles, restructuring and transaction-related costs
30Financial community – 15 July 2010
ENVIRONMENTAL SERVICES (ENVI)
OVERVIEW H1 2010• Extreme weather in first quarter impacted revenues
in Northern Hemisphere.• Good growth in developing markets from mix of new
services (e.g. Green Building) and new locations (Madagascar, Mozambique, Colombia, Laos).
• Economic situation creating challenging market in Spain (lower volumes from public authorities) and Germany (low pricing on public tenders).
• Positive impact of EKO-Projekt acquisition in Poland.
OUTLOOK 2010• Second half expected to see recovery in established
markets, with good level of current bid activity. • H2 traditionally better due to seasonality.• Carbon market developing with strong interest in
Carbon foot-printing and Green Buildings.• Cost and sales initiatives combine to deliver stronger
H2. • Continued push to extend geography to developing
markets.
CHF million June2010
June2009
Revenue 136.5 140.2 Change % (2.6)
Change due toVolume & Prices % (4.4)Acquisitions/(Disposals) % 2.7 Currency Translation % (0.9)
Adjusted Operating Inc.(1) 12.5 13.5 Change % (7.4)
Margin % 9.2 9.6 (1) Before amortisation of acquisition intangibles, restructuring and transaction-related costs
31Financial community – 15 July 2010
AUTOMOTIVE SERVICES (AUTO)
OVERVIEW H1 2010• Ireland concession handover impacted revenues,
with only taxi testing remaining.• New program for testing speed camera implemented
in France.• Higher margin following successful restructure in
North America, gains in efficiency in Europe and higher fees in Latin America.
• All statutory vehicle inspection programs are performing as expected, in particular:
– California contract improved performance– Capacity expansions for African contracts
• Growth in remarketing inspection services but slow recovery in new cars in Europe.
OUTLOOK 2010• Statutory business continues to provide solid results
with newly awarded contracts progressively coming on line.
• Remarketing inspection services developing through new clients across geographies.
• Several greenfield and privatisation opportunities being pursued in the statutory field in many geographies.
• New car business expected to continue to be slow.
CHF million June2010
June2009
Revenue 99.9 138.5 Change % (27.9)
Change due toVolume & Prices % (25.0)Acquisitions/(Disposals) % - Currency Translation % (2.9)
Adjusted Operating Inc.(1) 19.1 20.6 Change % (7.3)
Margin % 19.1 14.9 (1) Before amortisation of acquisition intangibles, restructuring and transaction-related costs
32Financial community – 15 July 2010
GOVERNMENTS AND INSTITUTIONS SERVICES (GIS)
OVERVIEW H1 2010• Product Conformity Assessment (PCA) leading the
growth of Local Solutions with excellent start to the year.
• New PCA program signed in Syria • Global solutions seeing declining volumes of imports
due economic slowdown• Strong performance for TradeNet in Ghana and
Madagascar. • Ivory Coast has started full service delivery.• Mozambique new program under implementation.• Scanners: Contract renewed in Uruguay and new
contract signed in Capo Verde.
OUTLOOK 2010• PSI volume recovery expected in H2• New PCA mandates expected to be signed in H2• Deployment of TradeNet applications and scanning
solutions to remain the focus in H2 • Continued implementation and roll-out of new
mandates in DRC and Cameroon (Forestry), Ghana (IRS)
• Successful leverage of Liberian contract as best practice reference for Forestry
• New scanning opportunities in Asia and Europe
CHF million June2010
June2009
Revenue 111.9 103.1 Change % 8.5
Change due toVolume & Prices % 10.6 Acquisitions/(Disposals) % - Currency Translation % (2.1)
Adjusted Operating Inc.(1) 19.5 17.8 Change % 9.6
Margin % 17.4 17.3 (1) Before amortisation of acquisition intangibles, restructuring and transaction-related costs
33© SGS SA 2010. ALL RIGHTS RESERVED.
WWW.SGS.COM
©SG
S SA
2009
. ALL
RIG
HTS
RESE
RVED
.
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