The SGS Group announces first half results for the year 2014. SGS delivered a first semester revenue growth of 5.3% (constant currency basis) to CHF 2.8 billion, with an organic revenue growth of 4.0% and an additional 1.3% contributed by recently acquired companies. However, due to the significant appreciation of the Swiss Franc against the majority of currencies SGS operates in around the world, Group revenues for the period declined 1.8% in comparison with published figures for June 2013 (historical basis).
Resilient organic growth for the period was achieved despite market conditions continuing to worsen throughout the semester for Minerals Services. This was offset by Oil, Gas & Chemicals Services delivering high single digit growth supported by Upstream activities, and Agricultural Services also achieving strong results as trade flows regained momentum.
In Europe, economic headwinds continued to affect top-line growth for Industrial Services and Systems & Services Certification, and intense commercial pressure on retailers has progressively impacted volumes for Consumer Testing Services.
Excluding the Minerals business, which experienced an organic revenue decline of 7.6%, the remaining businesses delivered organic growth of 5.8%. The Group reported an adjusted EBITDA of CHF 554 million, up 5.3% (constant currency basis) over prior year and an adjusted operating income of CHF 420 million, resulting in a margin of 15.0% in line with prior year at constant currency.
On a reported basis however this margin dropped from 15.4% to 15.0%, impacted by the strength of the Swiss Franc. While restructuring measures taken in 2013 improved the profitability of our Industrial and Environmental Services in Europe, the measures taken for Minerals Services were offset by declining revenues and competitive pressures. In view of market expectations regarding a limited recovery in exploration spend in 2015, additional measures to adjust capacity and concentrate sample flows have been taken for Minerals Services resulting in an after tax expense of CHF 8 million.
Net financial expenses for the period increased slightly to CHF 23 million following the issuance of new corporate bonds for a total of CHF 362 million and the overall effective tax rate for the period remained 27%, consistent with the Group’s full year expectation.
Profit Attributable to Equity Holders reached CHF 255 million for the period, up 6.3% over prior year on a constant currency basis, but down 3.8% compared with the CHF 265 million reported in June 2013 due to the strength of the Swiss Franc.
Operating cash flows amounted to CHF 260 million for the semester, in line with expectations and corresponding to 9.3% of Group revenues versus 11.1% in prior year. This inflow was used primarily to fund net investments in fixed assets of CHF 123 million, resulting in an operating free cashflow of CHF 130 million.