Press Release: SGS 2020 Full Year Results

A Strong Performance in 2020 Confirms the Group's Strategic Evolution

"I am proud of the dynamism and responsiveness demonstrated by our

employees in a challenging period. Their hard work, commitment and

entrepreneurialism in supporting our customers have resulted in a strong

operational performance for SGS in 2020, reinforcing our leadership

position in the TIC industry.

We have taken significant strategic steps forward in 2020, both through

the acquisition of SYNLAB Analytics & Services (A&S) and by launching

the next phase of our planning. The strong operational performance

combined with this important move confirms our strategic evolution which

further aligns SGS to the key TIC 'megatrends'", said Frankie Ng, Chief

Executive Officer of SGS.

A Strong Financial Performance

Total Revenue reached CHF 5.6 billion, down by 15.1% (a decline of 8.8%

at constant currency*), notably driven by the disposal of the Petroleum

Service Corporation (PSC) in 2019. Organic Revenue* declined by 6.5%

impacted by the pandemic. A gradual improvement throughout H2 2020 was

experienced with a return to growth in December.

Operating Income decreased from CHF 1 082 million in prior year to CHF

795 million in 2020, mainly driven by the exceptional gain of CHF 268

million on the disposal of the PSC business in 2019 and the impact of

the COVID-19 pandemic in 2020.

Adjusted Operating Income* decreased from CHF 1 063 million in prior

year to CHF 900 million in 2020, a decline of 15.3% (a decline of 8% at

constant currency*).

Adjusted Operating Income Margin* of 16.1% remained stable in 2020 at

historical rate but increased by 20 basis points at constant currency*.

This improvement was driven by the structural cost optimization program

implemented in H2 2019, strong cash collection (resulting in a lower

allowance for expected credit losses) and additional measures taken in

2020 due to the pandemic.

Profit Attributable to Equity Holders decreased from CHF 660 million in

2019 to CHF 480 million in 2020, a decrease of 27.3% over prior year.

Basic Earnings per Share decreased from CHF 87.45 in prior year to CHF

64.05, a decrease of 26.7%.

Free Cash Flow (FCF)* increased significantly by 12.6% from CHF 673

million in prior year to CHF 758 million in 2020 driven by strong

working capital management.

The Board of Directors is pleased to propose a Dividend to remain stable

at CHF 80 per share.

Significant Strategic Milestones Achieved In 2020

We have implemented the next stage of our strategic evolution with the

purpose of enabling a better, safer and more interconnected world for

employees, customers, shareholders and society. Our operational

structure has been simplified into six new focus areas, composed of four

divisions: Connectivity & Products, Health & Nutrition, Industries &

Environment and Natural Resources and two cross-divisional strategic

units: Knowledge and Digital & Innovation. This will improve our market

approach and increase cooperation and agility in our global network.

The acquisition of SYNLAB Analytics & Services (A&S)

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further aligns SGS to the Health, Nutrition and Environment TIC

megatrends and enhances our market position in Europe. It also adds a

range of complex services and accelerates the adoption of our hub and

spoke model, offering greater scope for automation and digitalization

and generating strong operating synergies.

Throughout 2020, SGS has successfully developed our Next Normal

solutions

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and leveraged our remote service delivery solutions to better serve our

customers and society with higher value-added services. To provide

improved supply chain visibility, we leveraged our market-leading

technical capabilities and adapted our delivery models using our digital

tools and sensor-based technology. Remote inspection, audit, consulting

and other digital delivery solutions all gained customer traction and

acceptance in 2020.

Additional innovation of our service portfolio included our global Life

Sciences network delivering Covid-19 vaccine testing and new innovative

therapeutics for several global clients. We continue to be TIC market

leader in PPE testing and inspection. In addition, we have seen strong

progress on contract signings across our TIC services on disinfection

and business recovery.

We have defined our 2030 sustainability ambition which encompasses a

holistic and global approach to sustainability both in terms of how we

behave as a company and the value we provide to our customers through

our services. We will launch our 2030 sustainability plan in Q2 2021.

Financial Discipline and Continued Investment in Strategic Priority

Areas

We have continued to invest in high growth potential markets, reinforced

our pricing initiatives, cost control and working capital management and

successfully refinanced part of our debt in a challenging year.

-- We successfully issued two bonds with a total value of CHF 500 million.

-- We achieved over CHF 90 million of structural cost savings, coupled with

strong cost management and EVA-driven performance management.

-- Supported by our focused capital allocation strategy, we have continued

to invest heavily in our strategic priority areas including wireless, 5G,

semiconductors, food testing and investment into IT systems to continue

to drive productivity increases.

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* Alternative Performance Measures (APM) -- refer to the 2020 Full Year

APM document

For further information, please contact:

Investors: Toby Reeks

SVP Corporate Communication, Sustainability & Investor Relations

t: +41 79 641 83 02

Media: Daniel Rufenacht

Group VP Corporate Communications

t: +41 78 656 94 59

www.sgs.com

ABOUT SGS

SGS is the world's leading inspection, verification, testing and

certification company. SGS is recognized as the global benchmark for

quality and integrity. With more than 89,000 employees, SGS operates a

network of over 2,600 offices and laboratories around the world.

Attachments

-- SGS 2020 Full Year Results Report Web

https://ml-eu.globenewswire.com/Resource/Download/d5d6a681-6cc7-4723-9daf-56f572a8621a

-- SGS 2020 Full Year Results Alternative Performance Measures Web

https://ml-eu.globenewswire.com/Resource/Download/cf585310-efe3-4ca0-9201-6f4d25ede442

(END) Dow Jones Newswires

January 28, 2021 00:39 ET (05:39 GMT)