SGS First Quarter 2024 Sales Update

Strong start to the year
Strategy 27 on track

• Organic^* sales growth of 7.1%, at the top end of guidance
• New CEO and streamlined Executive Committee appointed
• Management incentives implemented, fully aligned with Group targets
• Restructuring plan launched
• Pipeline of bolt-on acquisitions expanding
• Successful scrip dividend
• Outlook 2024 confirmed

Géraldine Picaud, CEO, commented:

“Today, we are delighted to report our quarterly sales for the first time. The strength of our organic growth reflects the soundness and diversity of our portfolio of activities. We have started to execute Strategy 27 to firm up this growth momentum, streamline the organization and generate a strong financial performance. I am confident that with the energy and passion of our experienced teams across the globe, we will deliver on our promises.”

First quarter 2024 sales review

Sales reached CHF 1 577 million in the first quarter of 2024. Strong organic^* growth of 7.1% offset most of the negative currency effect of 8.6%. In reported terms, sales were down 2.1% compared to prior year.

Sustainability, digital trust, supply chain services and increased regulations supported the strong organic growth, in line with industry megatrends. All divisions and regions contributed to this positive performance.

Strategy 27: Accelerating growth, building trust

Strategy 27 – ‘Accelerating growth, building trust’ was announced on 26 January 2024 and execution is on track.

Géraldine Picaud was appointed CEO on 26 March 2024 and announced a streamlined Executive Committee on the same day. Management incentives fully aligned with Group targets were implemented to promote a culture of accountability and performance across the network. The CHF 100 million restructuring plan was launched and execution is underway to reach the new run rate at the end of 2025. M&A was relaunched as a key growth lever and the Group is expanding its pipeline of bolt-on targets, with a view to accelerate acquisitions in leading-edge activities across the network. The scrip dividend was successful, unlocking additional firepower to drive shareholder returns through accelerated, sustainable growth.

M&A relaunched

SGS has reached an agreement to acquire ArcLight Wireless Inc., a world-class leader in systems engineering, network services, technical outsourcing and field testing for the wireless industry, headquartered in North Carolina, United States. The company has 75 full-time employees.

This acquisition, which will be effective 1 May 2024, is positioned within the digital megatrend. It allows SGS to reinforce its presence in North America and to strengthen the Group’s leadership in the dynamic connectivity industry.

Successful scrip dividend

The company’s Annual General Meeting held on 26 March 2024 had offered its shareholders the possibility to receive the 2023 dividend in cash or in new SGS shares.

As announced on 22 April 2024, 64.87% of the dividend for the financial year 2023 was elected to be paid in the form of new SGS shares, with the remaining 35.13% to be paid out in cash. The delivery of the new shares and the payment of the total CHF 207.3 million cash dividend took place on 25 April 2024.

This represents a clear endorsement of Strategy 27 and allows SGS to reward the loyalty of its shareholders while redirecting close to CHF 400 million of cash towards attractive growth opportunities.

Outlook 2024

The Group confirms its targets for 2024:

• Mid to high single-digit organic^* growth
• M&A relaunched
• Improvement in adjusted operating income^* margin on sales
• Strong free cash flow^* generation

Mid-term 27 objectives

Strategy 27 will shift gears towards growth of the top and bottom line. The Group confirms the following objectives over the next four years:

• Organic^* sales growth of 5% to 7% annually
• Significant improvement of at least 1.5 percentage points in adjusted operating income^* margin on sales by 2027
• Cash conversion^* to exceed 50% by 2027