SGS : 2021 Full Year Results Alternative Performance Measures Report PDF / 502.42 KB

2021 Full Year

Alternative

Performance

Measures

2 Appendix to the 2021 Full Year Results

SGS | 2021 Full Year Alternative Performance Measures

Appendix to the 2021	3
Full Year Results

Appendix to the 2021 Full Year Results

For the period ended 31 December 2021

The following document presents and defines the Group's alternative performance measures (APMs), not defined by IFRS which are used to evaluate financial and operational performance. Where relevant, a reconciliation to the information included in our IFRS consolidated financial statements is presented. Management deems these performance measures as a useful source of information when taking strategic decisions and managing the operations. These APMs are disclosed in the annual report, the half year report and other external communications to investors, as well as available under:

www.sgs.com/en/our-company/investor-relations/reports-and-presentations

Constant currency (CCY)

Prior period comparatives are presented at historical and constant currency, in order to assess the period over period evolution of financial indicators without the currency impact. SGS applies current period average exchange rates to prior period numbers, to present comparable figures.

Organic revenue growth (Organic)

Organic revenue growth is used by management to evaluate the evolution of existing operations, excluding the impact of business acquisitions, divestments and currency fluctuations. This provides a 'like-for-like' comparison with the previous period in constant scope and constant currency, enabling deeper understanding of the business dynamics which contributed to the evolution of revenue and adjusted operating income from one period to another.

For the purpose of calculating the organic revenue: the results from acquisitions are excluded for the 12 months following the date of a business combination, while results generated by a divested unit are excluded for the 12 months prior to the divestiture; the effect of changes in foreign exchange rates is calculated as the current year revenue converted at the current year's average exchange rates, less the prior period revenue converted at the current year's exchange rates; organic revenue is then divided by the prior period revenue at constant currency in order to derive the percentage growth.

A numerical reconciliation of this APM is included below:

(CHF million)

Revenue December 2020	5 604
Currency impact	3
Revenue December 2020 CCY1	5 607
Growth in value and in % at CCY1
Organic	498	8.9%
Acquisitions	302	5.3%
Disposals	(2)	0.0%
Revenue December 2021	6 405	14.2%

1. Constant currency (CCY).

Adjusted operating income (AOI)

The adjusted operating income that is disclosed in our financial highlights and our segment disclosures in Note 4 of our condensed consolidated financial statements is provided to assess the underlying financial and operational performance of the Group by business line excluding the influence of items not directly attributable to operational performance. Adjusted operating income represents the income from operations excluding:

• Amortization and impairment expenses on intangibles arising as a result of acquisitions
• Impairment expenses on goodwill
• Restructuring costs including impairment charges arising from the execution of restructuring plans
• Gains and losses from sale of businesses
• Acquisition and divestment-related expenses including integration costs
• Other non-recurring items which may include non-operational items such as certain regulatory, compliance and legal costs and certain asset write-downs/impairments.

SGS | 2021 Full Year Alternative Performance Measures

4	Appendix to the 2021
	Full Year Results
(CHF million)		December 2021	December 2020
Operating income	977	795
Amortization and impairment of acquired intangibles	39	31
Restructuring costs	15	84
Goodwill impairment	-	37
Gain on business disposals	-	(63)
Transaction and integration costs	24	16
Adjusted operating income	1 055	900

Adjusted operating income margin (AOI margin)

The adjusted operating income margin is the adjusted operating income as a percentage of revenue.

(CHF million)	December 2021	December 2020	December 2020 CCY
Adjusted operating income	1 055	900	903
Revenue	6 405	5 604	5 607
Adjusted operating income margin	16.5%	16.1%	16.1%

Earnings before interest, tax, depreciation and amortization (EBITDA)

EBITDA is an important performance measure as it depicts the underlying performance of the Group before tax and excluding non-cash charges of depreciation and amortization. It is a measure commonly used by the investment community.

EBITDA is defined as operating income before depreciation, amortization and impairment.

(CHF million)	December 2021	December 2020	December 2020 CCY
Operating income	977	795	799
Depreciation, amortization and impairment	499	517	519
EBITDA	1 476	1 312	1 318

Adjusted earnings before interest, tax, depreciation and amortization (adjusted EBITDA)

Adjusted EBITDA is the EBITDA adjusted for non-recurring items and those adjustments made for adjusted operating income as defined above.

(CHF million)	December 2021	December 2020	December 2020 CCY1
Operating income	977	795	799
Depreciation, amortization and impairment	499	517	519
EBITDA	1 476	1 312	1 318
Restructuring costs1	15	59	59
Gain on business disposals	-	(63)	(63)
Transaction and integration costs	24	16	15
Adjusted EBITDA	1 515	1 324	1 329

1. Restructuring costs excluding impairment of fixed and intangible assets.

SGS | 2021 Full Year Alternative Performance Measures

Appendix to the 2021	5
Full Year Results

Adjusted profit attributable to shareholders

Adjusted profit attributable to equity holders of SGS SA is the profit attributable to equity holders excluding:

• Amortization and impairment expenses on intangibles arising as a result of acquisitions
• Impairment expenses on goodwill
• Restructuring costs which consist of restructuring costs including impairment charges arising from the implementation of restructuring plans
• Gains and losses from sale of businesses
• Acquisition and divestment-related expenses including integration costs
• Other non-recurring items may include non-operational items such as certain regulatory, compliance and legal costs, certain asset write-downs/impairments
• The tax effect of all the elements mentioned above
• The non-controlling interests' effect of all the elements mentioned above except for the impairment of goodwill

(CHF million)	December 2021	December 2020
Profit attributable to equity holder of SGS SA	613	480
Amortization and impairment of acquired intangibles	39	31
Restructuring costs	15	84
Goodwill impairment	-	37
Gain on business disposals	-	(63)
Transaction and integration costs	24	16
Tax impact	(17)	(4)
Portion attributable to non-controlling interests	(4)	(16)
Adjusted profit attributable to equity holders of SGS SA	670	565

Adjusted basic earnings per share (adjusted basic EPS)

While basic EPS reflects the earnings from operations for each share of SGS SA, adjusted basic EPS is the 'adjusted profit attributable to equity holders' (see above) divided by the average number of shares outstanding during the reporting period.

(CHF million)	December 2021	December 2020
Adjusted profit attributable to equity holders of SGS SA	670	565
Weighted average number of shares ('000)	7 488	7 489
Adjusted basic earnings per share (CHF)	89.46	75.44

Adjusted diluted earnings per share (adjusted diluted EPS)

While basic EPS reflects the earnings from operations for each share of SGS SA, adjusted diluted EPS is the 'adjusted profit attributable to equity holders' (see above) divided by the diluted weighted average number of shares outstanding during the reporting period.

(CHF million)	December 2021	December 2020
Adjusted profit attributable to equity holders of SGS SA	670	565
Weighted average number of shares ('000)	7 488	7 489
Number of dilutive shares ('000)	12	27
Adjusted dilutive earnings per share (CHF)	89.32	75.17

SGS | 2021 Full Year Alternative Performance Measures