SGS (SGSN) Investor Day 2024 Day 2(Q&A) summary

Financial guidance and margin improvement

• Targeting at least 150 basis points margin improvement by 2027, with CHF 150 million in operational savings expected to fully drop through to margins, barring forex impacts.

• Operational savings program is ahead of schedule, aiming for run-rate by end of 2025 and payback below one year for restructuring costs.

• Margin guidance is now given in reported terms, with forex volatility acknowledged as a key uncertainty.

• Operational leverage and business mix are expected to more than offset forex headwinds over time.

• If forex is less of a headwind, decisions will be made on whether to reinvest or further improve margins, depending on business needs.

Growth strategy and business development

• Accelerated bolt-on M&A strategy aims to add 1%-2% growth per annum, with a pipeline including potential mid-size and larger deals.

• Growth targets include CHF 600 million from sustainability, CHF 200 million from digital trust, and doubling North America sales by 2027.

• Organic and bolt-on growth for the remainder of the business is projected at 5%-7% CAGR through 2027.

• CapEx will remain at 4% of sales, focused on high-return projects and automation, with paybacks below three years.

• Nearshoring and supply chain shifts are seen as opportunities, not threats, with China remaining a key manufacturing hub.

Capital allocation and balance sheet

• Flexibility to use scrip or cash dividends remains, with a likely proposal for a scrip dividend at the next AGM to support growth.

• Capital allocation decisions for larger strategic moves will depend on timing, balance sheet strength, and deal size.

• Willingness to temporarily increase leverage for strategic opportunities, with a commitment to quickly restore a strong balance sheet and credit rating.

• Working capital is targeted below 3% of sales, reflecting best-in-class discipline, even as North America expansion brings mature market payment terms.