January 23, 2018 / 7:35 AM / a month ago

UPDATE 1-SGS expects solid sales growth in 2018; dividend beats poll

(Adds detail, background, analyst comment)

ZURICH, Jan 23 (Reuters) - Testing and inspection company SGS said it expected to deliver solid organic revenue growth and a higher operating margin in 2018 after net profit rose 14 percent last year, helped by fewer restructuring expenses and the U.S. tax reform.

SGS and peers like France’s Bureau Veritas and Britain’s Intertek are benefiting from expanding regulations, notably for food safety and ecommerce, and have recently seen their oil and minerals businesses recover.

“The group expects to deliver solid organic revenue growth and higher adjusted operating income margin on a constant currency basis (in 2018),” SGS that tests everything from toy safety to hotel hospitality said in a statement on Tuesday.

Net profit attributable to shareholders rose 14.4 percent to 621 million Swiss francs ($646 million) in 2017, driven by improved performance, fewer restructuring expenses and a one-time tax rate decrease linked to the U.S. tax reform.

Analysts on average had forecast 633 million francs, a Reuters poll shows.

Sales rose 6.1 percent to 6.349 billion francs, ahead of the 6.307 billion forecast in the poll, helped by a strong progression in the group’s transportation business and in its consumer and retail unit, the Geneva-based group said.

Describing the annual results as a “mixed picture in the different divisions, but overall a robust set”, Vontobel analyst Jean-Philippe Bertschy said that 2018 would offer “much upside for SGS, especially in terms of profitability improvement”.

SGS said it intended to pay out a dividend of 75 francs per share for 2017, up from 70 francs last year and ahead of a 71.9 franc estimate in the poll.

The company confirmed its 2020 objectives that include average mid single-digit organic sales growth and adding 1 billion francs in revenue from acquisitions.

It said in October it was targeting annual savings of 20-25 million Swiss francs and would keep making bolt-on acquisitions. The company acquired more than 750 million francs in additional revenue between 2012 and 2017. ($1 = 0.9613 Swiss francs) (Reporting by Silke Koltrowitz, editing by John Revill and Himani Sarkar)

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