SGS: 2005 Year End Results

1/17/2006, 7:49 AM (Source: GlobeNewswire)

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Corporate news announcement processed and transmitted by Hugin ASA. The issuer is solely responsible for the content of this announcement. ---------------------------------------------------------------------- -------------- With revenue growth of 14.7% (13.2% constant currency basis) to CHF 3.3 billion, SGS achieved a fourth consecutive year of improved performance delivering a 27.7% increase in operating income to CHF 502 million at an operating margin of 15.2 %. Profit at CHF 371 million was up 33.5% (31.6% constant currency basis) from 2004. The Board of Directors will propose a distribution to shareholders of CHF 50 per share, CHF 19 through a reduction of the current CHF 20 nominal value and CHF 31 as a dividend.

Overview

Revenue for the group grew to CHF 3.3 billion, up 14.7% (13.2%
constant currency basis). This growth was achieved in generally good
trading conditions with commodity flows and outsourcing trends
driving demand. Organic growth for the year was 11.4%.

Consumer Testing Services, Minerals Services, Systems and Services
Certification Services and Life Sciences Services continued their
solid first semester performance by delivering comparable revenue
growth above 15% versus prior year. The Group's businesses in Asia
and Eastern Europe were significant contributors from a geographical
perspective, as returns from prior period investments in network
expansion were realised.

Operating income improved by CHF 109 million or 27.7% (25.8% constant
currency basis) to CHF 502 million. Operating margins in all business
(except Trade Assurance Services) expanded with significant upward
shifts being achieved by Consumer Testing Services, Environmental
Services, Life Science Services and Minerals Services.

Net financial income of CHF 5.4 million was level with last year as
liquid investment yields remained low. The tax rate of 23.5% is at
the low end of the range the Group expects for the medium term.

Profit attributable to Equity holders of SGS SA increased to CHF 371
million from CHF 278 million, an increase of 33.5% (31.6% constant
currency basis).

Cash flow from operations was CHF 411 million. This inflow of cash
was used to fund net investment in fixed assets of CHF 190 million,
the payment of the dividend of CHF 90 million, and acquisitions of
CHF 95 million. Group net cash decreased from CHF 439 million at the
end of 2004 to CHF 430 million.

Acquisitions and Disposals

The Group continued its growth strategy by making a number of small
to medium sized acquisitions this year. In the first six months, the
acquisitions of Aquatic Health Chile SA, X-Per-X Inc, and Auto Marine
Services Ltd. were finalised. These three companies, which operate in
Consumer Testing, Industrial and Automotive Services, respectively
all contributed positively to the Group's 2005 results.

In the second six months, the group acquired MinnovEX Technologies
Inc, Casco Australia Pty Ltd, Auto Sécurité Group, and Paradigm
Analytical Laboratories Inc. MinnovEx Technologies Inc. is the
recognised world market leader in the application of unique
metallurgical technologies to optimise plant and asset performance in
the mining sector while the addition of Casco has created a complete
laboratory and inspection network for the Group's coal sector clients
in Australia. The acquisition of the Auto Sécurité Group in late July
on top of the Securitest acquisition in 2004 clearly established SGS
as the leader in statutory vehicle inspection business in France and
a leading market player throughout Europe. Paradigm Analytical
Laboratories Inc. has an excellent reputation for innovation in the
competitive North American environmental testing market and will act
as a base for environmental testing skills transfer across the Group.

Two disposals were also concluded during the year as the Group sold
SGS Cortex NV, its small Life Science software business in Belgium,
and its oenology business in Beaune, France. The combined turnover of
these two disposals was less than CHF 11 million.

In the first week of January 2006, SGS became the European leader in
early stage clinical pharmacology trials with the acquisition of
Paris based aster.cephac. aster.cephac provides both early stage
clinical development services and bioanalytical testing services to
the global pharmaceutical and biotechnology industries. This
acquisition is a key element in the growth of the Group's Life
Science Services business and an important step towards its recently
announced strategic growth plan.

Distribution to shareholders

In recognition of and on the basis of the sound results of the Group
over the last 3 years, and in view of the three- year growth plans
which have targeted CHF 5 billion in revenue and CHF 80 EPS by 2008,
the Board of Directors has examined SGS' capital structure at
December 31, 2005.

The Board feels comfortable that the cash generation capabilities of
the Group can support the Group's growth strategy, aided if necessary
by access to the debt markets.

As a result, the Board will recommend a return of capital through a
CHF 19 reduction of the current nominal value of CHF 20 per share,
and a dividend of CHF 31 per share. The dividend is outside the
normal distribution range of 25-35% of consolidated net income, and
is expected to be restored for the year 2006.

Management

The Operations Council was joined by Robert Markus, COO, Africa
Region, Duilio Giacomelli, COO, South East Europe Region and Todd
Vanderven, SVP, Strategy & Continuous Improvement.

Significant shareholders

At 31 December 2005, Sequana Capital held 23.8% of the capital and
voting rights of the company; Mr. August von Finck and his family
held 23.7%.

Outlook

Having successfully achieved its goals for 2005, SGS has embarked on
a new strategic growth plan announced in the 4th quarter of last
year. The company will leverage its portfolio for accelerated growth
and focus on continuous improvement for competitive advantage,
targeting CHF 5 billion revenue and CHF 80 earnings per share in
2008.

The 2006 Group outlook continues to be strong and in line with our
three-year growth plan as commodity demand, trade flows, the
regulatory environment and outsourcing trends should sustain
favorably. Top line organic growth should parallel last year's and
operating margins are expected to continue to improve.



2006 HALF YEAR RESULTS
Tuesday, 18 July 2006

ANNUAL GENERAL MEETING OF SHAREHOLDERS
Monday, 20 March 2006


CORPORATE COMMUNICATIONS & INVESTOR RELATIONS
Jean-Luc de Buman
SGS SA
1 place des Alpes
P.O. Box 2152
CH - 1211 Geneva 1
t +41 (0)22 739 93 31
f +41 (0)22 739 98 61
www.sgs.com


The full report including tables can be downloaded from the following
link:
View document

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WKN: 870264; ISIN: CH0002497458; Index: SMCI, SMI, SMIEXP, SPI;
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