SGS GROUP RESULTSFIRST HALF 2008Presentation to the Financial Community
Geneva, 16 July 2008
2Financial community - 16 July 2008
HIGHLIGHTS
Constant currency revenue growth of 17% to CHF 2.3 billion
• 10.0% at historical rates
• 15.1% organic (constant rates)
EBITDA before exceptional up 13.2% to CHF 473 million
Operating income before exceptional up 14.2% to CHF 370 million
Net income before exceptional up 13.2% to CHF 265 million
Operating Cash Flow up 31.7% to CHF 303 million
GIS collection results in after tax gain of CHF 113 million
Nine acquisitions completed in 1st semester
3Financial community - 16 July 2008
FINANCIAL HIGHLIGHTS
CHF million 2008 2007 Δ%
Revenue - historical rates 2'298 2'089 10.0 % Revenue - constant rates 2'298 1'964 17.0 %
EBITDA(1) 473 418 13.2 % EBITDA Margin 20.6 % 20.0 %
Operating Income Group(1) 370 324 14.2 % Operating Income Margin 16.1 % 15.5 %
Net income(1) 265 234 13.2 %
Net income (after exceptionals) 378 234 61.5 %
Basic EPS 49.53 30.64 61.7 %
Diluted EPS 49.16 30.34 62.0 %
Basic EPS before exceptionals 34.70 30.64 13.3 %
Diluted EPS before exceptionals 34.44 30.34 13.5 %
Period end no. of employees (incl. acquisitions) 55'140 50'263 9.7 %
(1) Results are stated before exceptionals
4Financial community - 16 July 2008
FINANCIAL HIGHLIGHTS
(1) Before exceptionals
Revenue
1'300
1'600
1'900
2'200
2'500
CHF Million
1'390 1'557 1'845 2'089 2'298
JUN 04 JUN 05 JUN 06 JUN 07 JUN 08
13.39% CAGR
EBITDA(1)
100
200
300
400
500
CHF Million
230 301 363 418 473
JUN 04 JUN 05 JUN 06 JUN 07 JUN 08
19.75% CAGR
Operating Income(1)
80
160
240
320
400
CHF Million
JUN 04 JUN 05 JUN 06 JUN 07 JUN 08
177 235 281 324 370
20.24% CAGR
Net Profit(1)
100
150
200
250
300
CHF Million
JUN 04 JUN 05 JUN 06 JUN 07 JUN 08
124 174 200 234 265
20.89% CAGR
5Financial community - 16 July 2008
FINANCIAL HIGHLIGHTS
EBITDA Margin(1)
14.0%
16.0%
18.0%
20.0%
22.0%
CHF Million
JUN 04 JUN 05 JUN 06 JUN 07 JUN 08
16.5% 19.3% 19.7% 20.0% 20.6%
Operating Margin(1)
10.0%
12.0%
14.0%
16.0%
18.0%
CHF Million
JUN 04 JUN 05 JUN 06 JUN 07 JUN 08
12.7% 15.1% 15.2% 15.5% 16.1%
(1) Before exceptionals
6Financial community - 16 July 2008
SERVICE PORTFOLIO
REVENUES OPERATING INCOME(1)
LIFE4.3%
CTS14.9%
SSC7.6%
IND15.3%
ENVI6.2%
AUTO6.3%
GIS4.3%
AGRI7.3% MIN
14.0%
OGC19.8%
OGC17.2%
LIFE3.0%
SSC8.5%
IND13.4%
ENVI3.4%
AUTO6.6%
GIS4.2%
AGRI5.9%
MIN17.2%
CTS20.6%
(1) Before exceptionals
REVENUE ANALYSIS
8Financial community - 16 July 2008
REVENUE GROWTH COMPOSITION
RevenuesJune 07 Organic
FXExchange Acquisitions Disposals
RevenuesJune 08
2'089
294 (125)
49
(9)
2'298
15.1% (7.0)% 2.4% (0.5)% 10.0%
9Financial community - 16 July 2008
COMPARABLE REVENUE GROWTH BY BUSINESS
15.1%
9.6%
16.8%
8.2%
17.9%
10.8%
30.8%
6.0% 3.6%
10.0%
23.6%
6.6%
2.9%
2.4%
3.3%
1.6%
6.5%
1.4%
0.7%
(2.2)%
(0.5)%
(4.9)%
TOTAL
GIS
AUTO
ENVI
IND
SSC
CTS
LIFE
OGC
MIN
AGRI
Organic Acquisition Disposal
4.7%
31.5%
14.1%
4.4%
19.3%
8.2%
23.3%
11.2%
26.5%
10.0%
17.0%
10Financial community - 16 July 2008
REVENUE GROWTH AND HEADCOUNT CHANGE BY REGION
Δ in EOP headcount June2008
June2007
Δ
Group Headcount 55'140 50'263 4'877
Organic Business Growth 4'676
Acquisitions 362
Disposals (161)
Increase in Group Headcount 4'877
By Region Headcount Δ
Headcount Δ%
Revenues Δ%
Europe / Africa / Middle East 2'547 11.2% 13.7%
Americas 573 4.9% 21.2%
Asia / Pacific 1'756 11.1% 21.6%
TOTAL 4'877 9.7% 17.0%
15.1% 2.4%
6.3%
1.9%12.5%
15.4%
21.2% 0.4%
(0.5)%
(0.5)%
(0.7)%
TOTAL GROUP
Asia / Pacific
Americas
Europe / Africa &Middle East
Organic Acquisition Disposal
13.7%
21.2%
21.6%
17.0%
OPERATING INCOME ANALYSIS
12Financial community - 16 July 2008
OPERATING INCOME(1) GROWTH COMPOSITION
Op. IncomeJune 07 Organic
FXExchange Acquisitions Disposals
Op. IncomeJune 08
324
63 (24) 8
(0)
370
20.9% (9.0)% 2.4% (0.0)% 14.3%
(1) Before exceptionals
13Financial community - 16 July 2008
OPERATING MARGIN(1) BY BUSINESS11
.3%
16.6
%
15.0
%
11.2
%
22.1
%
16.8
%
15.7
%
8.8%
13.5
%
14.0
%
15.5
%
13.0
%
19.8
%
14.0
%
11.3
%
22.4
%
18.0
%
14.1
%
8.9%
16.8
%
15.7
%
16.1
%
5.0%
10.0%
15.0%
20.0%
25.0%
AG
RI
MIN
OG
C
LIFE
CTS
SS
C
IND
EN
V
AU
TO GIS
TOTA
L
June 07 June 08
(1) Before exceptionals
14Financial community - 16 July 2008
CASH FLOWCHF Million Jun 08 Jun 07
PROFIT FOR THE PERIOD 378 234 Adjustment for non cash items 94 171
Amortisation of Intangibles 3 2 Depreciation 100 92 Exceptional items (127) Share based payments 10 6 Other 108 71
Decrease/(Increase) in net working capital (96) (92) Taxes paid (73) (83)
Cash from operations 303 230 Net purchase of fixed assets (121) (121) Net cash paid for acquisitions/disposals (156) (11) Other from investing activities (4) (3)
Cash flow from investing activities (281) (135) Dividend paid to equity holders of SGS SA (267) (153) Dividend paid to Minority interests (3) (7) Movement on treasury shares (14) 19 Increase/(Decrease) in loans 119 16 Other from financing activities (6) (4)
Cash flow from financing activities (171) (129) Exchange differences on opening balances (14) 4 Translation differences on flows (17) 1
Increase/(decrease) in cash and cash equivalents (180) (29)
15Financial community - 16 July 2008
CAPITAL EXPENDITURE
54
34 3710
20
30
40
50
60
EUROPE / AFRICA /MIDDLE EAST
AMERICAS ASIA PACIFIC
CHF Mio
6
38
21 2313 10 6
33 2-
5
10
15
20
25
30
35
40
AGRI MIN OGC LIFE CTS SSC IND ENVI AUTO GIS
CHF Mio
16Financial community - 16 July 2008
FOREIGN CURRENCY REVENUES 2007
Major <<Other>> currencies:
Brazilian Real, Indian Rupee, Peruvian New Sol, South Korean Won, Taiwan Dollar
CAD3.8%
CNY5.9%
GBP3.6%
HKD2.5%
Others28.4%
USD15.4%
EUR35.9%
AUD4.5%
17Financial community - 16 July 2008
FOREIGN CURRENCY IMPACTS ON TRANSLATION
EURO 1.50 1.61 1.70
Revenues (58) 0 51Income (9) 0 8
USD 0.90 1.05 1.20
Revenues (51) 0 50Income (5) 0 5
BUSINESS OVERVIEW
19Financial community - 16 July 2008
AGRICULTURAL SERVICES (AGRI)Overview H1 2008• Increased commodity prices due to supply/ demand
imbalance, foreign exchange and competition from alternate fuels
• Food inflation resulted in export bans in Russia, Ukraine, Vietnam, India; exports interrupted by strikes/tariffs in Argentina
• Demand growth in Asia driven by changing dietary patterns
• South East Europe in short supply resulting from very poor 2007 harvest conditions
• Strong performance of Western Europe, Asia & South America
• Operating margin improvements from move inland and operational efficiency gains
Outlook• Markets bullish for a strong H2 based on promising
crop forecasts & high export volumes • Trade inspection driven by high commodity prices
prompting concerns about quality and transit losses • Possible limitations on logistics capacity particularly
in Eastern & South East Europe• Pressure to improve yields will continue; increased
demand will encourage technological improvements and drive our upstream Seed & Crop Services activity
CHF million June2008
June2007
Revenue 167.4 167.7 Change in % (0.2)
Operating Income before exceptionals 21.7 19.0 Change in % 14.2
Margin % 13.0 11.3
20Financial community - 16 July 2008
MINERALS SERVICES (MIN)Overview H1 2008• Strong organic growth in all regions, led by Eastern
Europe / Middle East, Africa and North America Increased market demand for all service offerings
• Margin improvement driven by increased up-stream activity in minerals processing, pilot plant activity in the Oil Sands and volume leverage
• Major lab re-builds in Perth and Belo Horizonte completed; Chita laboratory fully operational; 13 new laboratories built
• Technology deployment with robotic sample preparation and analytical systems and the establishment of an additional automated mineralogy facility in Vancouver
• Concluded the strategic acquisitions of CEMI, Geostats International and Wamtech/MMI
Outlook• Underlying supply and demand fundamentals for
major mining commodities remain strong• Global credit issues leading to cancellation or delays
in project financing of marginal properties looking to move to operational status
• Laboratory Excellence initiatives, including Lean Lab concept, will allow us to continue to focus on the needs of our clients and optimize our global network
• Strong pipeline of on-site prep and lab opportunities
CHF million June2008
June2007
Revenue 320.8 259.6 Change in % 23.6
Operating Income before exceptionals 63.5 43.2 Change in % 47.0
Margin % 19.8 16.6
21Financial community - 16 July 2008
OIL, GAS & CHEMICALS SERVICES (OGC)Overview H1 2008• Significant wins and long term contracts across the
globe: metering (Middle East), PTO (Canada), upstream testing (Malaysia, Congo, USA), alternative fuels (Bulgaria, USA)
• Oil price swings negatively impact certain trading markets (e.g. Singapore)
• Acquisition of Horizon Energy Partners (Reservoir & well site services) successfully completed; global product roll-out commenced
• New regional sales hubs in Houston and Singapore operational boosting international sales
Outlook• Sustainable long-term opportunities in the
exploration and production segment of the industry • Leverage Horizon Energy Partners knowledge and
capabilities to build-up the upstream segment• Fuel marking contracts in Americas and Asia in the
pipeline • Recently signed contracts for REACH services
expected to contribute in Q3 and Q4
CHF million June2008
June2007
Revenue 455.8 434.1 Change in % 5.0
Operating Income before exceptionals 63.8 65.2 Change in % (2.1)
Margin % 14.0 15.0
22Financial community - 16 July 2008
CONSUMER TESTING SERVICES (CTS)Overview H1 2008• Toys testing volume increased as a consequence of
tightened client requirements in most markets driving market shares gains in with US clients
• Continuous growth in soft lines and hard lines testing driven by share gains in restricted substances testing. Key markets: US, Germany, UK, Spain, China, India and Bangladesh
• Wireless devices testing volume has improved despite a soft market. Improved utilization of laboratory network has helped increase margin
• All SGS regions reported comparable revenue growth for the semester
Outlook• RSTS testing volume to remain steady with
improving margin due to expansion of testing scope (less reliance on RoHS)
• Soft lines growth improving with new clients coming on stream in H2
• Toy testing to remain strong in Q3 with comparative YOY growth slowing in Q4 due to peak volume in Q4 2007 generated by recalls in the US
• Sustainability related services being developed and deployed
CHF million June2008
June2007
Revenue 342.6 311.4 Change in % 10.0
Operating Income before exceptionals 76.7 68.7 Change in % 11.6
Margin % 22.4 22.1
23Financial community - 16 July 2008
SYSTEMS & SERVICES CERTIFICATION (SSC)Overview H1 2008• Opportunities in the new EU member States
generated substantial revenue growth• Strong growth in South America through new
business development• Focus on new strategic market segments brought
new customers and higher than market growth• Customer focused audit solutions continued to grow
as a proportion of revenue engaging multi national customers
• Service Certification expanded across a wide variety of industry segments and geographies ( South America, East Asia, Western and South East Europe)
Outlook• New customer oriented information technology
solutions deployed in test markets in Europe and Latin America for supply chain management
• Roll out of the productivity and efficiency improvement projects in H2, 2008 to reduce our cost of delivery
• Further growth expected in the Automotive and Food sectors as well as in the new market segments (Energy, Finance and Logistics)
CHF million June2008
June2007
Revenue 173.8 170.1 Change in % 2.2
Operating Income before exceptionals 31.3 28.5 Change in % 9.8
Margin % 18.0 16.8
24Financial community - 16 July 2008
INDUSTRIAL SERVICES (IND)Overview H1 2008• Solid organic growth of 16.9%• Ongoing investment / maintenance work in the oil &
gas/petrochemical industry is driving growth for NDT services in Europe and Middle East
• Supply chain services growing strongly in Asia and Latin America
• Key project wins for our new project finance service • Service expansion in Australia with the acquisition
of material testing capability (Western Geotechnics)• Investments being made in Asia in quality systems
and internal training to manage the rapid growth in the region
Outlook• Underlying growth expected to continue during rest
of 2008 in core industry segments• Recent investments in NDT, renewable energy and
the other network services will underpin the growth in H2
• Signals of a slow down in the Spanish infrastructure market becoming apparent; cost containment actions are underway
CHF million June2008
June2007
Revenue 352.4 298.4 Change in % 18.1
Operating Income before exceptionals 49.6 46.8 Change in % 6.0
Margin % 14.1 15.7
25Financial community - 16 July 2008
ENVIRONMENTAL SERVICES (ENVI)Overview H1 2008• Continued organic growth and market share gains
driven by good performances in Spain, Canada and emerging markets
• The Kölliken project is now operational• Contract wins in first half based on the high quality
work and the network reach of SGS• Demand for Climate Change Program continues to
be high with new developments in North America, Australia and Africa
• Lab refurbishment in Australia is now complete and the business is tracking back to historical performance levels
Outlook• Expectation of continued good growth as the focus
is on revenue streams tied to long term requirements ( mining, emissions)
• Encouraging developments in the emerging markets where our focus as the quality provider is paying dividends.
• Continued push into new services and international relationships that leverage our network
• Due to seasonality, higher margin is expected in H2
CHF million June2008
June2007
Revenue 143.0 133.4 Change in % 7.2
Operating Income before exceptionals 12.7 11.8 Change in % 7.6
Margin % 8.9 8.8
26Financial community - 16 July 2008
AUTOMOTIVE SERVICES (AUTO)Overview H1 2008• Expansion of the Ireland driver testing program has
been a success • New services for the automotive industry
implemented in Italy• Opening of the first stations in Morocco • Acquisition in Algeria (COTA) on plan• North American market has improved due to
increased commercial volumes and stabilization of statutory contracts
• Tariff increases secured in Argentina and Uruguay
Outlook• The growth in statutory inspection should continue
its positive trend in 2nd half of the year. New tenders in Eastern Europe and Africa in process
• Investments to begin for recently won tenders in North America
• Commercial automotive inspection market to be watched closely due to sector headwinds
CHF million June2008
June2007
Revenue 144.5 121.7 Change in % 18.7
Operating Income before exceptionals 24.3 16.4 Change in % 48.2
Margin % 16.8 13.5
27Financial community - 16 July 2008
LIFE SCIENCE SERVICES (LIFE)Overview H1 2008• Margin improvement driven from efficiency gains• Quality Control labs:
– Europe: double-digit growth; Biotech services lagging behind despite promising pipeline
– NAM: moderate growth due to capacity constraints but strong margin
– Asia: approaching break-even in consolidation; pipeline improving
• Clinical Research and data management in a difficult trading environment during the semester; cost alignment underway
CHF million June2008
June2007
Revenue 99.2 98.4 Change in % 0.8
Operating Income before exceptionals 11.2 11.0 Change in % 1.8
Margin % 11.3 11.2
Outlook• Late Phase services extended towards CEE• Improving demand Bio-Analysis will improve
capacity utilization in Europe• Europe to maintain growth in high 10% range with
Biotech sales contribution improving• North America to increase sales force on the back of
ongoing capacity expansion• Asia to convert pipeline into improved performance• Clinical research cost alignment project to be
completed
28Financial community - 16 July 2008
GOVERNMENT AND INSTITUTIONS SERVICES (GIS)Overview H1 2008• As announced, Ecuador PSI terminated in 02/2008;
demobilization complete• Volume improvement in Angola and Bangladesh
compensated Ecuador• Start up of forestry program in Liberia• Scanners successfully implemented in Kosovo and
in Uruguay• ValiTrade mandates were signed or renewed in
Ivory Coast, Madagascar, Russia and Guatemala• Successful wins Audit of NGOs
Outlook• In global solutions (PSI) market share gains of
existing contracts, productivity improvements and cost of delivery will remain the main focus
• In local solutions main concentration will be in:– Scanners solutions– Forestry– TradeNet– Customized solutions– NGO project verification
CHF million June2008
June2007
Revenue 98.2 94.0 Change in % 4.5
Operating Income before exceptionals 15.4 13.2 Change in % 16.7
Margin % 15.7 14.0
29Financial community - 16 July 2008
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.”
30Financial community - 16 July 2008
www.sgs.com