SGS GROUP RESULTS FIRST HALF 2008 · Basic EPS 30.6449.53 61.7 % Diluted EPS ... Overview H1 2008 • Increased commodity prices due to supply/ demand imbalance, ... expected to contribute

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


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



(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


19.75% CAGR

Operating Income(1)

80

160

240

320

400

CHF Million


177 235 281 324 370

20.24% CAGR

Net Profit(1)

100

150

200

250

300

CHF Million


124 174 200 234 265

20.89% CAGR



EBITDA Margin(1)

14.0%

16.0%

18.0%

20.0%

22.0%

CHF Million


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


12.7% 15.1% 15.2% 15.5% 16.1%



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%


REVENUE ANALYSIS


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%


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%


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


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%



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



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)


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


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%


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


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


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


June2007

Revenue 320.8 259.6 Change in % 23.6


Margin % 19.8 16.6


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


June2007


Operating Income before exceptionals 63.8 65.2 Change in % (2.1)

Margin % 14.0 15.0


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


June2007



Margin % 22.4 22.1


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)


June2007



Margin % 18.0 16.8


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


June2007



Margin % 14.1 15.7


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


June2007



Margin % 8.9 8.8


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


June2007



Margin % 16.8 13.5


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


June2007



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


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


June2007



Margin % 15.7 14.0


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.”


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SGS GROUP RESULTS FIRST HALF 2008 · Basic EPS 30.6449.53 61.7 % Diluted EPS ... Overview H1 2008 • Increased commodity prices due to supply/ demand imbalance, ... expected to contribute