SGS S.A.

Ladies and gentlemen, welcome to the SJS 2024 half-year results call. My name is Ariel Bauer and I'm in charge of investor relations, communication and sustainability. I'm here with Géraldine Picot, our CEO, and Marta Vlachková, our CFO. Please note that this call is being recorded and will be available for replay on the SJS website. Throughout today's presentation, all participants will be in a listen-only mode. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star 1 on your keypad. I would now like to turn the conference over to Géraldine Picot, CEO of SGS.

Thank you, Ariel. Good morning, ladies and gentlemen, and welcome. It is a pleasure to share with you today our H1 achievements. We are very happy with the progress made with the execution of our strategy. During the second quarter, we further developed our service offering in digital trust and sustainability, which will be strong growth drivers in the coming years. We also reinforced our market position with the acquisition of great companies. Our restructuring plan is well on track with initial savings already documented, and I will come back to it in a minute. Additionally, we are proud to be ranked as the sixth most sustainable company in the world by Time magazine. On the financial results, we reported a strong organic growth of 8%, and we have been able to fully mitigate the negative impact of the Forex on our margin rate, mainly with the early savings realized from the restructuring plan. This is a great achievement, as well as a significant improvement in free cash flow. The strategy 2027 is well on track, and we clearly reconfirm our outlook for the full year. Let me now move to slide number four and give you some more color about what we have done on sustainability and digital services. We place sustainability as one of our main growth drivers for both testing and certification businesses. Over the past months, we have defined a number of priorities to have the right service offering for our customers. For instance, We are quadrupling PFAS testing capacity in North America, where we witnessed over 50% growth in H1 and see significant opportunities in the future. In natural resources, we are recognized as a leader in critical minerals and battery metals. We are also pioneers in the way we support environmentally responsible companies in their transition to sustainable energy. We are leading the way in sustainability report assurance in Asia, where we signed several contracts with top listed companies and expect significant revenue growth in this area, especially in other geographies. More generally, we remain a pioneer in ESG assurance and are preparing a global rollout of our portfolio of services to meet rising demand. In digital trust, where we have a leading edge we have continued to invest in cybersecurity, which is a key growth driver for us. Let's now look at M&A. As part of our strategy, we have reactivated bought-on acquisitions. We choose companies with a good strategic fit, which will strengthen our position or complement our geographical footprint. We also ensure that we will be in a position to execute a smooth integration and realize the identified synergies. In H1, we have signed the acquisition of Arclight and GoSummer, which reinforce our presence in North America and our leadership in connectivity. IEC strengthens our global leadership in cosmetics. while AQM and Cromenol are key players in pharmaceutical testing in Colombia. As with all of our investments, we apply strong financial discipline with criteria on growth potential, profitability, and payback. Let me now switch to another key item of our Strategy 2027. In order to streamline our organization, and improve agility, we have launched a cost savings plan with the ambition to reduce our cost by 100 million Swiss francs, fully effective before the end of 2025. This plan is very well on track, and the savings represent already 0.3 percentage points of margin in H1. As of now, corporate sanctions are fully reorganized, and discipline execution continues in countries and social centers. We see no limitation to reach the 100 million Swiss francs as planned in 2025. On slide seven, you see here the growth split across all business lines. And now I will go into the detail of each one of them. Let's start with industries and environment. Organic sales growth of 10.9% was driven by all regions and services. Our strong growth is more specifically driven by advisory, safety, and environment. Advisory was supported by sustainable construction projects in the renewable energy sector, for instance, in Latin America. In safety, we recorded strong growth in risk assessment and industrial hygiene services in Europe. And last but not least, in environment, like I just mentioned, we signed multi-year contracts for site remediation and PFAS testing. Finally, I would like to note that we are seeing increased activity related to CBAM regulation and carbon capture, where SJS has a strong expertise, and more generally, those related to the transition to renewable energies such as hydrogen. Natural resources benefited from the strong momentum of the energy transition and delivered strong organic sales growth of 8.6%. We have a large number of projects in metallurgy, notably in battery metals in North America. RGS has a recognized expertise in this field. We are at the forefront of supporting companies and national governments in their transition to sustainable energy with over 190 projects ongoing at the end of H1. Also high single digit organic growth in trade and inspection was driven by project wins across all commodities and regions, with particularly strong activity in minerals reported in Asia Pacific and North America. Let's now go to our connectivity and products, which continue to accelerate in H1. It generated solid organic sales growth of 6.9%. New opportunities in sustainability continued to fuel organic growth within soft-line sub-business segment. This was supported by rising consumer expectations and regulation. In hard-line, high single-digit organic growth was mainly driven by toy safety and lower inventory levels. Connectivity achieved another strong set of results, delivering high single digit growth and solid performance in product safety and cybersecurity in Asia-Pacific. Organic sales growth in health and nutrition was driven by cosmetic in Asia-Pacific and in food globally. High single digit organic growth in food was driven by project wins regulations, and network expansion. In cosmetics and hygiene, we benefited from double-digit organic growth in Asia-Pacific. Market conditions in health science remain challenging. Health science market is a bit soft and suffering, but remains strategic market for us where we have strong outsourcing capabilities. Let's now and with the business assurance, and business assurance delivered organic sales growth of 7.8%. Double-digit organic growth in certification was supported by strong activity in North America, Europe, and Asia-Pacific. Medical devices continued to be a strong driver, with over 100 new contracts signed in 2024. Strategic segments of digital trust and food assurance also continued to fuel growth. organic growth in sustainability accelerated further, thanks to strong performance in ESG assurance and sustainability audits, where our expertise is well recognized. In H1, we delivered over 16,000 supplier audits addressing social, ethical, and environmental risk, and we also launched a new digital platform for 3D compliance. In consulting, a high basis of comparison at main point weighted on the results. And with that, I will now hand over to Marta, who will present to you our financial performance.

Thank you, Geraldine, and a very good morning to everyone. I'm excited to share some more details on our strong first half performance. As a first overview, Net sales reached 3.3 billion Swiss francs, supported by 8% organic growth, which accelerated in the second quarter. The adjusted operating income of 471 million Swiss francs translated into 14.1% marginal sales, stable compared to last year. In addition, we generated a free cash flow of 155 million Swiss francs, which was 35% higher versus prior year. Let's now move on the next slide and see how the sales compared to last year. In the first half of the year, our sales reached 3,335 million Swiss francs, up by 1.6% compared to prior year. We can see that the strong organic growth of 8% was partially offset by the scope effect and the Forex. The negative scope of 0.6 points reflects the prior year disposals of the automotive assets assessment and the powertrain testing businesses, partly compensated by the acquisition of NutraSource in May 2023 and Arclight in May 2024. The negative forex translation effect of 5.8% was mainly driven by the Chinese yuan and the euro depreciation against the Swiss franc, compared to the same period of last year. Let's now drill down in our sales growth. Looking at the sales by division, both testing and inspection and business assurance divisions grew at a similar pace of around 8%. In testing and inspection, Europe, North America, and Latin America were fueled by industry and environment and natural resources business lines. Europe's sales grew organically by a steady 4.5%, with strong contribution from all major countries, despite the challenging environment in health science. North America sales increased by 5.8% organically, further expanding in environment, and more specifically in PFAS. LATAM expanded by close to 20% organically. We saw double-digit growth in all major countries and a strong pipeline of projects. APAC delivered 6.3% organic growth, with strong performance across all business lines, high single-digit growth in China and a double-digit growth in India. Eastern Europe, Middle East and Africa grew organically by 15.7%, supported by all business lines and a double-digit growth in trade and inspection for minerals, agricultural, oil and gas and chemicals commodities. Our business assurance global segment expanded organically by 7.8% with double digit growth in certification and management systems and a strong performance in ESG assurance and sustainability audits, partially offset by a high basis of comparison in consulting. Moving to the adjusted operating income where we delivered 11.5% of organic growth equivalent to 40 basis points of margin improvement. Around 30 basis points came from the first positive impact of the disciplined execution of our cost savings program. This allowed us to fully offset the negative Forex impact and deliver a stable 14.1% margin compared to prior year. Now we will look at the foreign exchange effects. In the first half of the year, the Swiss franc appreciated against all major currencies compared to the same period of last year. This led to a negative Forex translation impact of 5.8% on sales, translating into minus 40 basis points in the adjusted operating income margin. Let's now have a look at the full P&L. Starting with operating income of 415 million Swiss francs. It includes 34 million of restructuring costs related to the execution of the 100 million savings plan. The financial expenses as well as the effective tax rate are broadly stable. As a result, we achieved an EPS of 1.44 Swiss francs to compare to 1.47 in H1 2023. Before restructuring costs, the EPS reached 1.58 Swiss francs, a 3.3% improvement compared to prior year. Now, moving to the free cash flow. In the first half of the year, we generated 155 million Swiss francs of free cash flow, up by 40 million compared to prior year. The improvement was driven by lower networking capital and a disciplined cap expense focused on growth. And with that, I hand it back to you, Geraldine.