SGS Reports Modest H1 Earnings Decline, Upholds FY24 and FY27 Growth Outlook

In its first half, SGS Group saw a slight decrease in profit to CHF 267 million despite a 1.9% rise in adjusted operating income, which remained at a 14.1% margin. Sales increased by 1.6% to CHF 3.34 billion, with an 8% growth in organic sales. The company forecasts mid to high single-digit organic growth for FY24 and a 5-7% annual increase in organic sales through FY27. SGS also aims to improve its adjusted operating income margin and expects a cash conversion of over 50% by 2027.

SGS Group, a leading inspection, verification, testing, and certification services provider, reported a slight decrease in profit to CHF 267 million in the first half of 2024, despite a 1.9% rise in adjusted operating income that maintained a 14.1% margin [1]. The company's sales increased by 1.6% to CHF 3.34 billion, with an impressive 8% growth in organic sales.

These positive results demonstrate the company's strong performance in the face of industry megatrends such as sustainability, digital trust, supply chain services, and increased regulations [1]. SGS's growth trajectory is supported by its strategic initiatives, including the recently announced Strategy 2027, which aims to accelerate growth, build trust, and streamline operations.

The company's first-quarter sales review revealed strong organic growth of 7.1%, which offset most of the negative currency effect [1]. All divisions and regions contributed to this positive performance, with each reporting growth in their respective areas.

SGS's restructuring plan, launched in response to Strategy 2027, includes a CHF 100 million investment to reach a new run rate at the end of 2025 [1]. The company has also relaunched M&A as a key growth lever and is expanding its pipeline of bolt-on targets to accelerate acquisitions in leading-edge activities across its network.

One notable acquisition for SGS is its agreement to acquire ArcLight Wireless Inc., a world-class leader in systems engineering, network services, technical outsourcing, and field testing for the wireless industry [1]. The acquisition underscores SGS's commitment to growth and its expertise in the technology sector.

Looking ahead, SGS forecasts mid to high single-digit organic growth for FY24 and a 5-7% annual increase in organic sales through FY27 [1]. The company also aims to improve its adjusted operating income margin and expects a cash conversion of over 50% by 2027.

References:

[1] SGS Group. (2024, April 27). SGS first quarter 2024 sales update. Retrieved from https://www.sgs.com/en-in/news/2024/04/sgs-first-quarter-2024-sales-update