SGS SA (SGSN) Earnings Call Transcript & Summary

Ladies and gentlemen, dear shareholders, on behalf of the Board of Directors, I'm pleased to welcome you to the SGS 2024 AGM. This year, for the first time, the meeting is broadcasted via the live webcast, allowing shareholders who could not join us here in Geneva to follow the deliberation online. My welcome is extended to those who are joining us via the Internet. During the first part of the meeting, we will share with you information about our company, our performance during the past year and more importantly, our strategy going forward. In the second part, we will conduct the formal part of the meeting, answering your questions and deliberate on all items on the agenda. So it is my pleasure again to stand in front of you during this AGM. I would like to take this opportunity to thank you for your continued support and interest in our company. For you all here and also on the webcast, I would like to introduce my colleagues on stage, which is -- on the very right side, Frankie Ng, our departing CEO; then we have Olivier Merkt. He is the Head of Group and Legal and Compliance and most excitingly now and for Gerald Picaud, who is our new CEO as of today. I will introduce my colleagues on the Board of Directors during the election part. SGS has always been a point of reference when you need to be sure, whether it's service related to consumer electronics, the environment safety testing, health science, critical minerals that support the energy transition, cosmetics or medical devices, our unparalleled knowledge, expertise and professionalism continue to position us as a global leader in highly attractive testing, inspection and certification industries. Today, I'm pleased to report to you that despite the challenges we had in 2023, SGS delivered strong organic growth of 8.1% and a significant increase in free cash flow. This performance has enabled SGS to maintain its highly competitive position within a growing market and it would not have been possible without the contribution of our entire network of highly talented and passionate experts. As mentioned, 2023 has not been without big challenges. Our ability to trade has been impacted by a strong Swiss franc and slow growth in several markets. I'm proud to report that we have responded with agility, creativity and resilience. Our network has worked tirelessly to find and capture opportunities to drive growth across the group. Last year was the completion of our 2020 to 2023 strategic cycle. We've achieved considerable success consolidating our leadership position in connectivity and products, business assurance, natural resources and achieving strong growth in industries and environment. We continued to lead the way in bringing highly innovative solutions to our customers. For example, a step change to biodiversity surveys with environmental DNA, sampling and analysis. If you're wondering, eDNA, as we call it, is an innovative cost and time-efficient way to detect raw, rare and adhesive genetic materials released in the environment. We have also exceeded our goal of moving 30% of sales to our new digital laboratory information management system. A fundamental must do necessary to maintain strong leadership within every more technology-driven economic environments. Finally, each business line has created a holistic portfolio of sustainability services, sorry, to support our customers. These major successes for the group, but at the end of the day, this is a business built on people. I would, therefore, like to thank all our employees for their continued efforts and the passion they put into work they do every day. It is their spirit and their strengths, which means we can look to the future with great positivity. I would like to highlight one topic that is particularly meaningful to me, sustainability. Last year, we became the first TIC company to publish a fully integrated annual report, providing meaningful information on financial and nonfinancial information. The format of the 2023 report was further updated and improved to help stakeholders better understand the company's strategy, performance, governance and impact for our planet. This is a clear sign we intend to do things differently. Already our achievements in the area of sustainability are impressive, and everyone in SGS should be proud. We were the first TIC company to receive approval for the 1.5 and net 0 targets of the scientific-based targets initiative, and we reaffirmed our position as leaders in sustainability by securing once again a top spot in the prestigious Dow Jones Sustainability Indices, both for the world and for Europe. These accomplishments show sustainability is truly embedded in our culture and work we do. But let me be clear, our sustainability journey is far from being completed. For 2027, we have set ourselves even more ambitious targets because we know we must do more for the planet and for our business. This is why we are focusing our efforts on developing external solutions that will support our customers and their own sustainability journey. These solutions are organized along 4 key areas: carbon, biodiversity, plastics and ESG assurance. We have also updated our overall strategy, showing the guideline to lead us successfully to 2027. Accelerating growth with trust, this will be our foundation on which to achieve our goals of driving profitable growth, streamlining the organization and delivering attractive returns for our investors. Geraldine will present the Strategy 2027 to you in more detail. Considering all these positive developments, the Board has decided to leave our dividend unchanged. But has also taken the opportunity to propose an optional scrip dividend of CHF 3.20 per share, which is effectively a vote of trust in the new management and Strategy 2027. With our unrivaled global network and world-class professional expertise, we are in a unique position, able to respond proactively to the changing demands of our customers while all the time staying true to our promise when you need to be sure. Finally, please allow me to say a few words on governance. As I'm sure you know, 2024 is a time of change at SGS, at this AGM, we extend a warm farewell to our outgoing CEO, Frankie Ng, and welcoming our new CEO, Geraldine Picaud, with great pleasure. I'd like to take this opportunity to share with you a few moments of our collaboration -- of my collaboration with Frankie. When I first joined SGS as Chairman, it was during COVID. which made visiting our different sites impossible. It was through Frankie and his excellent knowledge of business that I was able to gain very quickly a solid understanding of the company and its operations. And during our initial meetings, I asked him directly, would I need to find a new CEO? He immediately answered, yes. It is this honesty, this straightforward approach to business that has not only made working with Frankie a pleasure, but also has enhanced the way SGS operates. Trust and honesty are central to the way SGS operates. Trust and honesty are central to our SGS culture and work ethics, and they have been demonstrated in Frankie's leadership. Therefore, this transition has been long in the planning. I knew from the very early on that part of my mission as Chairman was to find a new CEO. I also knew whoever we choose had to be an inspiring leader with a perfect blend of strategic vision and operational execution skills. In Geraldine, we have found that person. She is an exceptional leader with a considerable experience and an impressive track record, and she is ideally in place to lead SGS into the future. As such, she has the Board's full confidence in driving our upcoming phase and growth of profitability. Speaking on behalf of the Board, I would like to formally thank Frankie for his services and welcoming Geraldine as the new CEO of SGS. I look forward to working closely with you as we take SGS forward into a bright future. We must also take this opportunity to say goodbye to Shelby du Pasquier after 18 years of excellent service. I know you're here, yes. I would like to sincerely thank you for this relentless support, dedication and contribution over these many years. We wish you all the best and a lot of success in the future. I'm pleased to say a lot of Board members will stand for reelection as we continue to ensure the Board has the necessary competencies to support the SGS future direction. This is a time of change, but we should not see it as a break with the past rather by bringing Geraldine's experience and talent to the business and setting ambitious targets for the Strategy 2027, we are committed to provide solid returns through accelerating growth and enhancing efficiency. I would like, therefore, to take these opportunities to thank the Board and every single SGS employee for their continuous hard work, dedication and passion. 2023 results would not have been possible without you. I would like to say a special thank you to you, our shareholders, who continue to support us as we strive to build trust and accelerate growth. I will now end my speech as I began. SGS is the global benchmark for quality and integrity in the TIC industry. When our clients need to be sure, they know they can trust us now and into the future. I would like to now pass the floor on to Frankie, who will review last year's results and share with you some concluding remarks. Thank you.

[Interpreted] Thank you for your kind words, Mr. Chairman. Ladies and gentlemen, dear shareholders, allow me to extend a warm welcome to you to this Annual General Shareholders Meeting. 2023 marked the end of the current strategic cycle. And I'm proud to announce and thanks to the efforts of all our colleagues, we managed to achieve our main objectives. Let me touch first of all, touch briefly on the financial performance of 2023. The group delivered strong organic growth at 8.1%, and we delivered sales of CHF 6.6 billion. Adjusted ex operating results amounted CHF 971 million, which is 6.2% growth at constant exchange rates. All regions contributed to this robust growth and it represents a robust platform on which we can build the future. If you look at sales by region, you'll find that Asia and North America achieved organic growth between 8% and 10%, and that in smaller markets such as Latin America and the Middle East, the growth rate exceeded 12%. All the divisions also contributed to this strong growth. Industries and environment, so its growth accelerate, thanks to sustainable development, in particular, in areas such as waste management, renewable energies and verification of greenhouse gas emissions and PFAS. Here, we have the advantage of being a pioneer and having unparalleled expertise. Services linked to sustainable development will become increasingly important in the future of the SGS and as part of our portfolio. Natural Resources reinforced their leadership position in the field of minerals and benefited from strong growth in the field of technical advisory services, in particular, in the field of energy transition and 0 carbon emission supply chains. Connectivity & Products also confirmed their leadership position on the growing market of cybersecurity, thanks to the unique offer provided by Brightsight when it comes to security evaluation and complicated technical tests on electronic chips. Health & Nutrition continued to gain market share in the food sector, which contributed to growth in this division. And lastly, the record performance of Business Assurance was mainly achieved, thanks to the management system certification services that we provide and also our activities in the field of ESG, environment, social and government such as reporting assurance, personalized audits and advisory, which is becoming a new major growth segment for us. This division used to be known as knowledge. It's now been remained business and assurance to more adequately reflect what it actually can deliver. In 2023, we also consolidated our leadership position in the TIC sector. We have the first position in activity sectors linked to natural resources, connectivity, products and business assurance. Our digital transformation continued throughout 2023, and we've continued to develop our growth platform, in particular, with digitization of more than 350 laboratories, which enabled us to go beyond the aim we had set ourselves to transfer 30% of sales towards new information management systems. This -- with this activity, we have now developed it in all regions in more than 60 countries and 300 countries. Our journey towards digital transformation will continue over the next few years, and we'll continue to strengthen our commitment in favor of innovation and collaboration. There was a slowdown in mergers and acquisitions in 2023. Nonetheless, we did make 2 acquisitions, Nutrasource in Canada and the United States and seafood testing in Spain. And we also acquired the remaining minority shareholdings in Leansis and Maine Pointe. Mergers and acquisitions remain and always will be a high priority and our approach to capital allocation. And we expect to see more activity in this area in 2024 and Geraldine will be telling you more about this in a few moments. As the Chairman said, I'm also going to address a matter which is of great importance to us, which is sustainable development and the way in which -- or the way -- the track record our company has in this field. In all our divisions, we're developing new sustainability solutions in areas linked to carbon, plastics, biodiversity and ESG advisory services because we want to help our clients respond to the growing wave of new regulations coming towards them. These new solutions will contribute to our growth. And when regulations compel various -- the companies to change their behavior, that is a great opportunity for us, for the industry and for SGS. Sustainable development is one of our 6 principles of conduct. It's actually rooted in our company's culture and the way we work. From the Board of Directors to our affiliates, we have a culture, a strong culture, governance that ensures that this remains -- always is at the core of activities. And the culture we have encourages our employees to act and to give priority to sustainable development, both in their professional and in their private lives. Thanks to these values and the commitment of all our colleagues across the world, we have achieved our sustainability objectives in 2023, a decade -- more than a decade of leadership taking up top position in the Dow Jones Sustainability Index. We've also taken up the leadership positions in other key ESG indices. And you can see some of them up on this slide. As we embark upon our new strategic cycle, I am convinced that we are ideally positioned to continue to strengthen our position in all key strategic areas. Structural growth drivers in our sector are strong, and Geraldine will tell you more about the new strategy that we're going to be rolling out in the next few years. I'd like to conclude by saying a few words of thanks. And by telling you how proud I am of this terrific business, this company. I've had the privilege of being part of it for 30 years now and had a truly amazing professional journey in those 30 years. I'd like to thank our 99,600 employees for their commitment, for their capabilities, their ability to rise to the challenges while always ensuring excellent services, delivering what our clients expect of us. You are the beating heart of this company. Thanks to your resiliency and your dynamism over these 30 years. Our group has transformed into a leadership position, the leader it is today, and I'm convinced that one of the main reasons for this achievement and this result is a solidarity that draws us together. And thanks to this strength and this solidarity, we become a bigger and greater team all the time. I would also like to thank all the extraordinary people who might have had the privilege and honor of working with throughout my career, both at the level of the executive committee and right across our whole network. I'd like to thank you from the bottom of my heart for having supported my career with passion, integrity and dedication. I could never -- we could never achieve what we have achieved without your expertise and your human qualities. I'd also like to thank the members of the Board of Directors for their support during these challenging years. Their advice on market developments enabled us to improve our strategic approach and to reinforce our vision, especially in the digital field. In conclusion, I would now like to hand over to Geraldine Picaud, whose energy and passion, without any doubt, will lead the SGS to new heights. With her management team and with Calvin and the Board of Directors, I think I can say with confidence that I'm leaving the SGS in very good hands, indeed. Ladies and gentlemen, dear shareholders, thank you very much, not only for the consideration I've enjoyed from you over the years, but also for the support which you continue to give to the SGS Group. Thank you all very much.

[Interpreted] Mr. Chairman of the Board of Directors, distinguished Directors, ladies and gentlemen, there were 2 feelings upmost in my mind as I stand before you here for the first time. First of all, a feeling of honor, the honor that you, the Board of Directors, has placed its confidence in me and asked me to be a helm of the flagship that is the SGS. I read this trust as a recognition of my past achievements, especially with Essilor and Holcim. Today, I commit myself with strength, determination and an open ear and an open mind to be in charge of our business of a company, whatever its size entails taking on and shouldering responsibilities, economic, financial responsibility, obviously, but also ethical, environmental, human and social responsibilities. By committing to these values as I take up my position, I'm also taking over the baton from Frankie. And allow me at this point to pay tribute to the fantastic work he has accomplished over the past 9 years at the head of the SGS. The second feeling I have is one of enthusiasm. Strong enthusiasm that carries me, enthusiastic as I am to write a few more pages of the history of the SGS, which began in 1878. At that time [indiscernible] put in place a system for checking cereals as they arrived in the ports in order to ensure that the exporters were given just and proper remuneration. That was the birth of the SGS, a mission to inspect and to certify to provide certainty where needed. This is a mission that has led over the years to the company we have and the many operational structures that have been put in place. I'm referring to our network of labs -- laboratories in many, many countries. Today, more than ever before, goods, persons, information, knowledge and ideas circulate more and more and faster and faster. More today than ever before, raw material transport, transport of agriculture products and of manufactured products need to be certified and inspected. There are vital matters at stake, such as food safety, health, technological matters, digital concerns, cybersecurity, they're all vital concerns at all levels. And our role, our main role is to be on top of all these vital, crucial values and concerns and to control them. What assets do we have to achieve this? And first of all, our main asset, those are the men and women who work for SGS, who constitute a wealth of know-how as well as our network of laboratories. In these laboratories, we have top rate scientists who are fully dedicated to their mission, namely that of providing trust and confidence to our clients. We help our clients to be sure. These men, these women are obviously at the very core of our business. The second asset I would argue that we have is the leadership position in process certification. We hold a record number of accreditations and these assets are all at the very core of our Strategy 2027, which I shall be presenting to you shortly. Ladies and gentlemen, thank you for your attention and thank you for joining in this pact of trust and confidence through your investment. Thank you. [Presentation]

Okay. So let me now go into the Strategy 2027 with you and share some views on the company and on the industry. From there, I will give you an overview of the strategy in more detail, which is basically our road map for the next 4 years. At this stage, I will mainly provide you with key principles. We will be able to share more details at our Capital Market Day in November. So let's start with the market. We operate in a healthy and growing industry driven by 4 megatrends. Firstly, there is a strong demand for sustainability. As you know, our clients must comply with several new regulations, but beyond the law, they are pushed to adopt even more sustainable practices by their own customers and stakeholders. The second megatrend is the continuous growth of digital technology, which creates a strong demand for the TIC industry in data integrity and digital trust. Thirdly, people always demand more manufactured products. This is true in emerging markets where the middle class is strongly growing, but also in mature geographies where we see the development of local production. Finally, companies are more and more subject to various regulations, which are typically set by local authorities. So our market benefits from the megatrends are just listed, but it's commonly assessed that the TIC, testing, inspection and certification industry, grows about 2 percentage points above GDP. So over the next 4 years, we see the market growing overall from 4% to 5% to reach the size of $190 billion in 2027. This 4% to 5% annual growth rate that you see here is a combination of regional and verticals or end markets, which we will detail now. So as you can see here, APAC, Asia Pacific, accounts for 1/3 of the total market. In this region, growth has been historically driven by consumer products. Consumer products will remain a strong engine in the coming years, supported by demographic trends, especially the urbanization and the development of upper middle class. Asia Pac also contains all the significant end markets such as environmental, and we expect the region to be a major contributor to digital services. Europe is the second largest market. It was and it is regulated with authorities requiring quick adoption of fairly complex rules. About North America, we believe that the reindustrialization of the U.S. has just started. And these trends benefits from federal and state incentives. Latin America and Middle East and Africa are smaller markets. They remain smaller, but there's a lot of growth opportunities there, for instance, minerals. Let's move now to how SGS is positioned to capture the huge opportunities. As you know, we are the global market leader with well-established positions in all geographies. We have a strong network, especially in Asia, which positions us ideally to respond to the domestic market demand. More generally, our implementation allows us to follow any change in the supply chain of our clients. We have the largest number of accreditations as well to support compliance requirements. In particular, we have and keep developing the adequate offer to address sustainability needs of our clients. We are also the leader in the solutions, which guarantee data integrity, and we will detail this as well in a few minutes. So as I said, we have great strength, and we operate in a market with fantastic opportunities. We have defined 3 levels on which we will build our near future. Firstly, we will capture the growth coming from the market megatrends, sustainability, digital supply chain, all this on the back of a heavily regulated environment. These are definitely fast-growing areas where we have everything to succeed. Secondly, we are fundamentally a people business. We work through a unique network of highly qualified professionals. It is key that the group puts its people in the best mindset and in the right organization to allow them to succeed. We will promote performance and accountability across the group. Last but not least, we will define a strong financial profile with clear targets and disciplined cash allocation. So first, I would like to discuss our growth lever. In sustainability, we focus on 4 major pillars where we have proven expertise, carbon, biodiversity, plastics and ESG, what we call ESG assurance. In digital, we are seeing rapid growth with swift technological advancements and widespread adoption of new technology across all industries. We are already a leader in cybersecurity evaluations and microchip testing. In new technologies like artificial intelligence, we focus on building trust through rigorous digital trust and data integrity services. In terms of geographies, we have a presence almost everywhere in the world, which gives us the capacity to adapt to our clients and serve them with the same quality wherever they need. We are proud of our position in Asia, and we will continue to focus on attractive opportunities locally there. We also have a strong ambition to grow our share in -- of the group sales in 2027 in North America, which is a fantastic fast-growing market. This will, of course, require investment, and I will come back to this later. After the growth opportunities, I want to focus on performance and agility. Accountability is key. We will implement a high performance and cash culture across the group and have already introduced new incentives based on group performance targets. We have also decided to eliminate some functions, which currently participate to the duplication of responsibilities. We are talking here about support functions, not about experts. Together with the continuous effort of process optimization, we expect to realize CHF 100 million of cost savings at current scope. The restructuring will be achieved before the end of 2025. So here is the new Executive Committee. The first element of this simplification is -- has to start with the top. So it's the appointment of a new executive committee. It was announced this morning. The team comprises 12 members. 6 members are driving commercial and operational activities and are responsible for their results. Due to the local nature of testing and inspection, it will be managed through 5 regions, while certification will be managed as one global activity, business assurance. Two members are in charge of global business development, and we have 3 members responsible for global functions. I'm taking this opportunity to extend a warm welcome to the 3 very experienced leaders who are joining our group, Rafael Navazo, new Head of Latin America; Marta Vlatchkova, new Chief Financial Officer; and Martin Oesch, new Group General Counsel from May 2024. I take this opportunity to extend to Olivier Merkt, who will retire at the end of April. Our gratitude for his invaluable contribution to SGS over the last 23 years. And on a more personal note, Olivier, my heartfelt thanks for all your support over the last few months. This slide summarizes where the strategic priorities lead us. In terms of growth, we believe we will overperform the market, thanks to the strengths I just went through. We are targeting to deliver an organic growth of 5% to 7%, which we expect to combine with M&A growth. We will not take any quantified commitment on this, obviously now the priority is to execute the right targets at the right time and at the right price. On the margin, we believe it's not at the right level yet, and we are ready to target at least an additional 1.5 percentage points in 2027. However, the review of the operation is ongoing, and we should be able to provide further information in November at our Capital Markets Day. Finally, the cash, cash generation, which we measure here as free cash flow after lease divided by EBITDA after lease will exceed 50% each year. Our growth ambitions, especially on the portfolio with the relaunch of our M&A program will need some financing. We can count on solid cash flows in the coming years and the key priority will be to remain a strong credit rating to ensure that the group keeps all necessary latitude in the future. But to start our investment program, we want to have all possible flexibility. Therefore, we are proposing a scrip dividend, which is a very important element of Strategy 2027. We believe it is an attractive opportunity for you. It will give us the firepower we need to drive shareholders' return through accelerated sustainable growth as we execute Strategy 2027. We also have ambitious 2027 corporate ESG targets, which reflect what SGS is about. For example, let's take the environment. We are an environmental leader because we are fundamentally a nonpolluting business. Starting from the fact that we are already successfully addressing our Scope 1 and 2 emissions, the natural movement for us is to work on a material improvement in our Scope 3 emissions. All these goals are just not about numbers. They represent our commitment to creating a sustainable, inclusive and responsible future. Finally, I would like to express my utmost gratitude to you, shareholders of SGS for your continued support. It is truly an honor for me to stand here today as your new CEO. You have my full commitment, and I have no doubt that together we will drive SGS into a new phase of growth and profitability. Thank you very much for your attention.

Thank you very much, Geraldine. And we are looking forward in developing the group or continue to develop the group in a successful way. Now I will come to the formal part of the meeting and we will deal with the matters of our agenda. Mr. Olivier Merkt, as you heard, is still our counsel -- General Counsel of the company. He will act as the Secretary of the meeting. So I would like to invite him to inform us about the formalities of this meeting.

[Interpreted] Let me begin by noting that this AGM was called as provided for in the Articles of Association, namely by letter to shareholders. So it's validly constituted and has the authority to deliberate on all items on the agenda. [indiscernible] notary has been entrusted with the task of authenticating the decisions taken by this AGM, which relate to agenda items that imply an amendment to the Articles of Association. Let me also welcome our statutory auditors, PricewaterhouseCoopers, represented today by Mr. [ Guillen Neyer], Senior Partner of PricewaterhouseCoopers. And also, I'd like to welcome [indiscernible] Notary. He has been appointed Independent Proxy. In other words, he represents the votes of shareholders who are not able to attend the AGM and who are being represented by him. Now the list of attendance or the numbers should shortly be displayed on the screen. Before we move on to the matters on the agenda, let me give you some practical information. Shareholders who wish to take the floor during discussions are requested to come up to the rostrum on my left here, please write your name and title or position on the sheet of paper, which will be handed to you. Once you have major statement, it will only be included in the minutes if you make a specific request to that end. The Chairman reserves the right to limit speaking time by potential speakers to group questions together and also to close the debate so as to avoid any unnecessary prolonged discussions. Should you wish to leave the room during the discussions, the shares that are recorded on your televoter will be taken down and discounted from the vote. That way, it will be possible to determine exactly what sort of majority is required for each of the items that is put to the vote. Votes by shareholders who are not in the room during the vote will not be taken into consideration for that particular ballot. As we have in previous years, this year, again, we'll be using an electronic voting system. You will probably -- you have been given a voting card when you entered this hall. We will only use them in the unlikely event that the electronic voting system fails. So you have a voting card, but you also have a remote voting device. This televoter has already got the number of votes you represent recorded. I'm going to show it to you. Green button stands for yes, the orange one is abstention and the red one is a vote against. You will have 5 seconds during a ballot to cast your vote. If you don't press any of the 3 keys, no vote will be registered in your name. During those 5 seconds, you can change your vote by correcting a mistake. But once the 5 seconds are up, and they will be displayed on the screen, you can no longer correct the way in which you have voted. Whatever votes you have cost then will be recorded once and for all. Those of you who represent several shareholders and who have been given divergent voting instructions by the persons you represent, make sure that these instructions have been registered in the share register and that, that was done when you entered this fall because you want to make sure that your voting faithfully reflects the voting instructions you received. If you haven't done it, you still have the possibility of registering those votes.

[indiscernible] that was communicated with the meeting invitation and which is displayed on the screen. I will not go through the details, but do you have any questions to the agenda? There is no objection and therefore, considered agenda as adopted. In the interest of efficiency, I suggest that we group all questions and deliberations on several points of the agenda and that we will first address any questions regarding item #1 and #2 of the agenda relating to the approval of the financial statement, the report of nonfinancial matters, the remuneration report and the release of the Board of Directors. After having addressed questions and remarks regarding these topics, we will move directly to the votes of the proposed resolutions related to these agenda points. I opened the deliberation on the financial statement report, on nonfinancial matters, the remuneration report and the discharge of the Board of Directors. Are there any questions? I don't see any questions. So I hand back to you.

[Interpreted] Thank you, Chairman. You will have had an opportunity to read the annual report financial statements of SGS SA and the consolidated financial statements of the group. You find them all in the management report. And if you wish to consult this, you will also find them on the company's Internet site. You will also have an opportunity to read the report from our Statutory Auditors, namely PricewaterhouseCoopers, on the financial statement of SGS SA as well as the consolidated accounts for the group for the 2023 fiscal year. These reports are also all contained in the management report and you can consult them online. Would the representative of PricewaterhouseCoopers like to add anything to the written report?

No.

[Interpreted] Thank you very much Mr. [ Neyer ]. We're going to vote on all the items under this agenda item in one ballot. I will ask you now to please wait to hear the instructions before you use the televoter. The proposal is as follows: the Board of Directors proposes at this AGM approved the annual report, the financial statements of SGS SA and the consolidated financial statements of the SGS Group. May I now ask you to cast your vote, you have 5 seconds to think about it and then you may cast your vote. [Voting]

[Interpreted] The ballot is closed, and the results will appear on the screen. There you are. Very sound approval of the proposal from the Board on agenda item 1.1. The second item is the annual report on nonfinancial matters for 2023. Since 2008, SGS has been publishing a report on sustainability. And since 2018, we put out an integrated report with information on both financial and nonfinancial matters relating to the group. The information and data in the integrated annual report cover much more than what is actually required by Swiss law, and you have a table which tells you which parts of the report cover the areas which are actually required by Swiss law. I would also like to add that our report on nonfinancial matters was audited by the external auditors by PwC in order to have an independent view on the nonfinancial aspects of the report. The Board of Directors' proposal is that the assembly approved the report on nonfinancial matters for 2023. You now have a chance to cast your vote and have 5 seconds in which to consider how you wish to vote. [Voting]

[Interpreted] The ballot is closed, and the result will appear shortly. There it is. Approval. The resolution, the proposal is approved. We are now going to move on to the advisory vote on the 2023 remuneration report. You will have had an opportunity to read the company's remuneration report. It's appended to the SGS Group management report. It has been audited by our Statutory Auditors and their conclusions are also to be found in the annual group report. This is actually an advisory vote on the part of the AGM, gives you an opportunity to state your views on the SGS Group's policy in matters of remuneration as set out in the report. The proposal from the Board of Directors is that you accept the 2023 remuneration report. You now have the possibility of casting your vote. [Voting]

[Interpreted] The ballot is closed. And I note that the proposal from the Board and the report have been approved. Let us now move to agenda item 2, which relates to release of the Board of Directors and the management from liability. This vote on the release applies to members of the Board of Directors and the Executive Committee who are involved in management during all or part of the 2023 fiscal year. According to statutory provisions, these persons are not entitled to take part in the vote, and that applies to all the shares which they hold or represent. And members of the Board of Directors and people who are close to them are not entitled to take part in the vote on release of the Board of Directors and the management either. Unless there are objections on your part, we're going to vote in one ballot to release from liability all members of the Board of Directors and the senior management. The proposal from the Board of Directors is to vote release of the members of Board of Directors and of the management. Please would you now cast your vote in the 5 seconds you have for this purpose. [Voting]

[Interpreted] The ballot is closed, and the result will be there. In fact, it is here. The proposal has been approved. Mr. Chairman, that concludes this first part. And I'll give you the floor.

[indiscernible] with agenda items, which are related to the appropriation of profits and distribution of dividends. This year, the Board of Directors proposes to allow shareholders to choose between payment of their dividend in cash and in the form of distribution of shares. For this reason, we will be asked to approve simultaneously the appropriation of profits, a share capital increase, allowing the company to distribute shares to shareholders to opt to receive shares. We will also ask the shareholders to approve the cancellation of treasury shares, which are acquired by the company during the past share buyback programs. We will now address any questions regarding items 3.1 to 3.3 of the agenda dealing with the distribution of dividends and share capital increase and share capital reduction. I now open the deliberation on these topics. Are there any questions? There seems not to be the case. I would now like to hand over to Ariel Bauer, Group Vice President of Investor Relations, Communications...

[ Sustainability ]

[ Sustainability ]

[Interpreted] This is not necessary. If there are no questions on the scrip dividend, I think we can move on directly to the proposed resolutions. The first resolution 3.1 has to do with the appropriation of profit resulting from the balance sheet and distribution of the share or cash dividend. The amount available to the AGM on the basis of the 2023 accounts is displayed on the screen. I won't read it out to you. You can see it there on the screen. The Board of Directors proposes to the AGM to declare a dividend of CHF 3.20 per share. And as was explained in the invitation to this AGM, declared dividends will be distributed to eligible shareholders according to their preference, either in cash or in the form of shares, which will be created and issued -- were issued and circulated for that purpose. For this reason, the general AGM is asked to authorize a share capital increase in order to be able to distribute the dividend. The decision on distribution of dividends, therefore, is subject to your approval of an increase in the share capital. The balance available after the distribution of the balance will be carried forward. No dividend will be paid on shares held by SGS SA or by any companies under SGS SA's direct or indirect control. May I remind you of the following. If the proposal is accepted, a gross dividend of CHF 3.20 per share will be paid on the 25th of April next and depending on what shareholders prefer, it will be paid out either in cash without any fees, but there will be the 35% withholding tax deducted or else it will be paid out in the form of scrip shares for an amount which corresponds to the value on the stock market for the determining period with a discount of 6%. The Board of Directors proposes to this AGM approval of the following resolution concerning the appropriation of profit. And I'm going to put this matter to the vote. Would you please cast your vote in the next 5 seconds. [Voting]

[Interpreted] The ballot is closed, and the results will appear on the screen. Here it is. Appropriation of profit resulting from the balance sheet and the option of a distribution of a scrip dividend is massively approved. Let us now move on to item 3.2 on the agenda, the share capital increase. Board of Directors proposed to increase the share capital of the company in the form of an ordinary increase of the share capital for a maximum amount of CHF 360,000 by the issuing of a maximum number of 9 million ordinary registered shares of the company with a per value of CHF 0.04 piece. The shares thus created will be used exclusively for the payout of a dividend to eligible shareholders who would have opted for this form of dividend. The shares will be issued at their per value, preferential subscription rights will be excluded. This will allow the company to use this for the distribution in the form of dividend to shareholders who are eligible and who would have chosen this form of getting their dividend paid out. The Board of Directors proposes that the AGM approve the proposal from the Board, namely to agree to the increase in share capital. You have 5 seconds now which to cast your vote on this matter. [Voting]

[Interpreted] The ballot is closed. Here to overwhelming approval and that marks approval of the payout of the dividend because the proposed payout of the dividend was dependent or contingent upon your approval of this increase in share capital. Let me now move on to 3.3, which is share capital reduction. The Board of Directors asked the Annual General Meeting to approve a reduction in share capital by cancellation of shares, which were bought in the -- as part of past share buyback plans. They can no longer be circulated or used for the payment of a dividend without this having unfavorable tax consequences. So the Board of Directors, therefore, thought it would be appropriate to request approval from the AGM to reduce the share capital in order to -- and to do this by cancellation of these bought back shares. The AGM has, therefore, requested to approve the proposal from the Board of Directors on the matter of reduction of share capital. Please cast your vote in the next 5 seconds. [Voting]

[Interpreted] Ballot is closed. I note that the request for a reduction in share capital has been approved.

We will now address all questions and deliberations regarding the elections of the Board of Directors, the Chairman, the members of the Remuneration Committee, the Statutory Auditors and the independent proxy. We will now address all the questions regarding these items, and I would like to ask you if there are any questions to these topics.

[Interpreted] Mr. Chairman, Madam, ladies and gentlemen, my name is [ Frederic Reber]. I'm a former member of -- I'm a former employee or director of the Lombard [indiscernible]. I would like to speak to the need for SGS to maintain its good reputation, namely the reputation of the SGS in terms of safety and security. And I also like to refer to agenda item 5 on remuneration. And the Swiss law controlled by shareholders of Remuneration considered excessive for executive committee members or Boards of Directors. Well, these regulations -- these remunerations have grown so high that some directors and managing directors have been pushed to take far too risky decisions in order to be able to pay these excessive fees. And I think that's one of the reasons for the failure of Credit Suisse. That is why I will often be voting abstention and sometimes no to these proposals. May I ask what your planning to do to improve this reputational matter and security? And secondly, I wanted to say something about the membership of the Board of Directors. There was a tendency to recruit a Swiss member, maybe have a Swiss National as Chairman or Managing Director. That used to be a tradition.

Thank you very much. I would like to take this into account and to put my comment into the minutes of the -- this Annual General Shareholders Assembly. On the issue of remuneration, we've explained quite extensively and quite specifically, the principles that govern remuneration in our company. We proceed to a certain number of votes so that we get your approval, you approved the report on remuneration. It's an advisory vote, but it gives you the opportunity to express yourself on this issue. You can approve separately the remuneration of the Board of Directors from -- if -- I my memory serves me well, it hasn't changed in the past 5 years. You approved the fixed remuneration that goes to senior management. You retrospectively approve the variable remuneration going to senior management so that happens retrospectively. You approve long-term incentive plans, that are issued. And if you were to compare with other companies, the amounts that are put to your vote, but of course, you may judge differently, are fairly low in the bracket applied by other Swiss companies. You will have the opportunity to take the floor when we'll deal with these items on our agenda. I think SGS is fully playing its role as a responsible company. When it comes to the remuneration of it's management, none of the remuneration mechanisms are in position to -- or would lead us to take unreasonable risks. So that's for the first part of your question. Now to come to the second part of your question, the membership of the Board of Directors and the issue of Swiss nationals, we're a multinational company. We're present in more than 140 countries. It is useful both for the company and for its shareholders to have 2 things. On the one hand, to be very present in Switzerland. It is our country, and we do have a Chairman and members of the Board who play this role. We have members of senior management who are Swiss nationals, too. But it is also very important, it may be even more so to reflect the diversity of our network, of our customer base and our global footprints are all our employees around the world -- our 99 million employees around the world. And so what I want to say is that SGS does manage to achieve this balance between presence in Switzerland and diverse representation within our management bodies. Mr. Chairman, would you like to say something?

I think it's an important question. And I can say, [Foreign Language]. So I'm a true Swiss, if you may say so. And I think our heart beats also as Swiss enterprise. Of course, we have an international role, so we have to deal with the international environment. And that's why we also have expertise on our board, which are internationally orientated. But I mean, in our hearts, we are a Swiss enterprise. And by the way, shows also, and we had that discussion by that we pay dividends in hard Swiss currencies. And I tell you this is quite a challenge. And this means for us also that we have to make sure we don't take these risks, as you say, that we earn our money, and we are very strict also in the remuneration committee, and we have these discussions with the Remuneration Committee that we are very clear on the targets. And we are very clear that the risk is well presented also in these remuneration targets. So if we compare with other companies, as you mentioned, I don't really like too much to be compared with banks. I think it's a very different business we are in. But I can also assure you that this is in our fundamental heart to really make sure that we don't take these risks, and we are a very solid company. I mean, if you look at our company as it has evolved, I think we are almost sometimes compared as an option. And I think we should maybe take a little bit more action, grow the company, again, not to take risks, but to make sure we are within the markets, and we obtain a good market share. So I hope you can approve our answers. Thank you very much for your questions. Are there any other questions? Thank you very much, and we really appreciate your involvement. So I would like to hand over back to you, Olivier, for these topics.

[Interpreted] Thank you, Mr. Chairman. I'm now going to move on to agenda item 4.1, which relates to elections to the Board of Directors. I'm now going to ask you, shareholders to elect each of the members of the Board of Directors for a term, which runs until completion of the 2025 AGM. In accordance with the Articles of Association, elections to the Board of Directors is a 2-stage procedure. First of all, we will elect each of the members by an individual vote for each of the candidates. But then the outcome of the elections will be announced at the same time after the very last vote. Then the second stage consists of the AGM designating from amongst the elected board members, the Chairman of the Board of Directors and the members of the Remuneration Committee. The Board of Directors has been informed of the fact that Mr. Shelby du Pasquier has chosen not to run for reelection. The Board of Directors would like to thank him, and I too would like to thank him warmly for his contribution to the development of our company and the many 18 years that we have had the privilege of working together with you. The Board of Directors proposes that you reelect the 8 directors who are available for reelection for a further term of 1 year, which runs until the completion of the 2025 AGM. The first resolution relates to reelection of Mr. Calvin Grieder. Would you please cast your vote in 5 seconds at your disposal? [Voting]

[Interpreted] The ballot is closed. And as I said before, the results for each of the individual elections will be shown at the end. I now put to the vote the reelection of Mr. Sami Atiya, please cast your vote before the time is up, another 2 seconds. [Voting]

[Interpreted] Thank you. The ballot is closed. I'm now going to ask you to cast your vote in favor of reelecting Madam Phyllis Cheung. You have 5 seconds to cast your vote. [Voting]

[Interpreted] The ballot is closed. I'm now going to put to vote the reelection to the Board of Directors of Mr. Ian Gallienne. The resolution is before you. Would you please cast your vote in the next 5 seconds? [Voting]

[Interpreted] The ballot is closed. I now put before you the proposal to vote to reelect Mr. Tobias Hartmann as a member of the Board of Directors. Please cast your vote in the next 5 seconds. [Voting]

[Interpreted] The ballot is closed. Moving on now to the reelection of Mr. Jens Riedl as a member of the Board of Directors. Please cast your vote. The proposal is before, you have 5 seconds. [Voting]

[Interpreted] Ballot is closed. The next proposal is to reelect Ms. Kory Sorenson as a member of the Board of Directors. The proposal is before you, and you have 5 seconds in which to cast your vote. [Voting]

[Interpreted] And now lastly, you have for you the proposal to reelect Ms. Janet Vergis as a member of the Board of Directors. You have the resolution up on the screen, the proposal on the screen. You have 5 seconds to cast your vote. [Voting]

[Interpreted] Ballot is closed. And all the results for the 8 candidates will come up on the screen shortly. There it is. And I note, and you can see it behind me on the screen. All the members of the Board of Directors have been reelected for a further 1-year term. The next item on the agenda is election of the Chairman of Board of Directors. The proposal from the Board is to reelect Mr. Calvin Grieder for a term of 1 year as Chairman of the Board of Directors. Would you please now cast your vote as to this proposal in the next 5 seconds? [Voting]

[Interpreted] Ballot is closed. I see that Mr. Grieder has been reelected for a further term of 1 year. Moving on to Item 4.3 on the agenda now, that's the election of the members of the Remuneration Committee, which is to say Mr. Sami Atiya, Mr Ian Gallienne and Madam Kory Sorenson, proposed for election as members of the Remuneration Committee. Here too, we will ask you to vote individually for each of the candidates, but the result will be published for all 3 at the same time. So the first proposal before you is the reelection to the Remuneration Committee of Mr. Sami Atiya. Please cast your vote in the next 5 seconds. [Voting]

[Interpreted] The ballot is closed. And we can move on to the proposal to reelect Mr. Ian Gallienne. The proposal is before you. Please cast your vote in the next 5 seconds. [Voting]

[Interpreted] The next proposal relates to the reelection as a member of the Remuneration Committee of Madam Kory Sorenson. It's now before you. Please cast your vote on this proposal. You have 5 seconds. [Voting]

[Interpreted] Ballot is closed. The outcome of this election will appear on the screen. There you are. And I note that all 3 candidates for reelection have been elected for a further 1-year term. I'm now going to move on to agenda item 4, election of Statutory Auditors. The proposal is to elect PricewaterhouseCoopers SA Geneva for a further term as auditors of SGS SA and group auditors for the SGS Group. The representatives of PwC have confirmed that they are prepared to accept a further 1-year term as Statutory Auditors if that were the wish of the AGM. I'm now going to put this proposal to the vote, the proposal to reappoint PricewaterhouseCoopers as Statutory Auditors. You have 5 seconds to cast your vote. [Voting]

[Interpreted] The vote is over, Mr. [ Neyer ]. PricewaterhouseCoopers was reelected [ comfortably ]. We will close [ these round of ] votes for the election for the Independent Proxy. The Board of Directors proposes to reelect [indiscernible] as Independent Proxy for 1-year term that will end at next year's AGM. [indiscernible] confirmed that they would accept this 1-year term if the AGM want to choose. I kindly ask you to vote for this resolution, and you have 5 seconds to do so. [Voting]

[Interpreted] Time is up. As usual, it is the Independent Proxy who gets the highest score.

Well, congratulations. We will now immediately address the next topics, which are the questions and deliberation regarding the remuneration of the Board of Directors and senior management of the company. We will, therefore, address first any questions and remarks regarding the items 5.1 to 5.5 of the agenda. We will then submit all relevant resolutions to the vote of the meeting. Are there any questions to this agenda points? Doesn't look like, then I hand over directly back to you.

[Interpreted] Thank you, Mr. Chairman. Let's start with item 5.1 on our agenda, this has to do with the remuneration of the Board of Directors. As I said, we go in my answer to Mr. [indiscernible]. We will be taking different votes on these issues. You will, therefore, have the opportunity to express yourself on each and every single one of the elements of remuneration to management -- to company's management. First of all, we will ask you to decide on remuneration of the Board of Directors. As stated in the remuneration report, members of the Board of Directors receive a fixed remuneration element and an additional fee if members of the Board of Directors are also part of one of the Board's committees. The Board of Directors, therefore, ask you to approve the amount of CHF 2.7 million. That is for the remuneration of the members of the Board of Directors for the period starting today and that will end at the 2025 Annual General Meeting. This amount is a gross amount. It does not take into consideration mandatory social contributions that are partly paid by the company and partly made by the directors. In accordance with its Articles of Association, the company may pay part of its remuneration to its directors by way of registered shares, an amount corresponding to 25% of the remuneration of basic remuneration of members of the Board shall be paid out as shares who serve as restricted for a 3-year period and the same conditions of shares granted to members of the company's management. The Board asks you to approve the proposal on remuneration of the Board of Directors for the coming year. We kindly ask you to vote on this proposal in the 5 seconds allotted to this ballot. [Voting]

[Interpreted] Time is up. Resolution was adopted. Let's move on to item 5.2 on our agenda. It has to do with fixed remuneration of senior management. In accordance with our Articles of Association, we will ask you to vote on fixed remuneration to senior management for fiscal year 2025. The Board of Administration proposes to set a maximum aggregate amount to the tune of CHF 10.5 million, which corresponds to the fixed remuneration elements that would go to members of the senior management for the year 2025. This includes the gross base salary as well as all other cash allowances, including employer contributions to provident schemes or other allowances to members of senior management. The amount suggested is a maximum amount at the disposal of the Board of Directors for the calendar year 2025, but it is not necessarily the amount that will be used effectively. This amount shall be indicated to you retrospectively in the company's remuneration report. So I kindly ask you to approve the resolution that appears on screen, which is about the maximum aggregate amount of remuneration -- fixed remuneration for members of senior management, including the CEO for 2025. You have 5 seconds. [Voting]

[Interpreted] The vote is closed. Now the fixed remuneration has been approved. Let's move on to item 5.3 of the agenda. It has to do with the annual variable remuneration of senior management for fiscal year 2023. This is an approval that is done in retrospect. The Board of Directors proposes to approve the aggregate amount representing the annual variable remuneration linked to the performances in 2023. The remuneration report describes the principle that govern variable remuneration to senior management as well as the criteria used by the Board to measure the performance of senior management members. On the basis of these principles and the financial results of the group in 2023, the aggregate amount of variable remuneration to the Operations Council in 2023 amounts to a little less than 5 million. This amount is -- can be paid partly in cash and partly by granting restricted shares. Following these explanations, I kindly ask you to approve the resolution that appears on the screen behind me. Let's vote. I kindly ask you to cast your vote in the coming 5 seconds. [Voting]

[Interpreted] The ballot is closed. The results should be appearing shortly on the screen. The resolution was approved. And we [indiscernible] 2 votes that have to do with the long-term incentive plans. The first one is to be issued in 2024. It's now to you to approve the issuance of a long-term incentive plan for members of senior management in 2024 for a total amount of CHF 12 million. The Board of Directors kindly asks you to authorize the issuance of such a long-term incentive plan by granting share units to members of the senior management, whose vesting will be contingent on the group's ability to reach long-term financial and nonfinancial objectives as defined by the Board of Directors and listed in the remuneration report. You have the resolution put to your vote appearing on the screen behind me, and I kindly ask you to cast your vote in the coming 5 seconds. [Voting]

[Interpreted] The ballot is closed. We now move on to item 5.5 -- sorry, I forgot the results. You have confirmed that you approve this resolution. We now move on to item 5.5 of our agenda, which has to do with the long-term incentive plan to be issued in 2025. The Board of Directors ask you to decide on a change of the period for which the AGM approves long-term incentive plans. It's a proposal to amend the article -- there's a proposal to amend the Articles of Association under item 6.2 of the agenda. Articles of Incorporation provide for the approval to be granted in advance. With the new system, this approval would be requested a year ahead of time for long-term incentive plans to be issued during the calendar year following the AGM. Because of this change and during a transitory period, the Board of Directors exceptionally asks you to approve the issuance of 2 long-term incentive plans in a row, one for the current year, the second one for the year to come, i.e., 2025. The company's Articles of Incorporation allow the AGM to approve remuneration elements for different periods of time. And because of this, the Board of Directors kindly asks you to authorize the issuance of the long-term incentive plan to be issued in 2025. The Board of Directors, therefore, asks you to approve such a plan, which would grant share units to senior management, who's vesting would depend on the ability of the group to reach financial and nonfinancial objectives -- long-term financial and nonfinancial objectives that are set by the Board of Directors and listed in the remuneration report. Please cast your votes on this proposal. It has to do with the issuance of a long-term incentive plan in 2025, and you have 5 seconds to do so. [Voting]

[Interpreted] That's time up, and the result is now up on the screen.

Now we are addressing the last point. These are the questions and the remarks regarding the proposed revision of the company's Articles of Association as per item 6.1 and 6.2 of the agenda. We will then submit all relevant resolutions to the vote of the meeting. Are there any questions on that topic? Doesn't look like. So let's go to the last point, back to you, Olivier.

[Interpreted] First of all, item 6.1 on the agenda relates to amendment to the rules of remuneration for the governing bodies of the company, that is to say concerning articles 28 to 31 of the Articles of Association. Board of Directors proposes to the AGM that the provisions in the Articles of Association, which concern remuneration for senior management be reviewed. You've seen the revised version and the changes -- the proposed changes have been marked up. The revised version was at the disposal of shareholders. It was sent out as an appendix to the invitation. The amendments suggested are intended to clarify the concept of fixed remuneration for senior management and also to give a generic description of the mode of payment of the remuneration, different elements of remuneration for the senior management. And I think it's good to have this greater accuracy because the company asks for a separate approval for set fixed remuneration, annual variable remuneration and long-term incentive plans. There is a separate approval requested for each element of remuneration. At the same time, the Board of Directors is asking for a change in the period for which incentive plans are approved. Henceforth, if these amendments to the Articles of Association are approved, you will be asked to authorize the [ omission ] of such incentive plans for the following calendar year. Thus, the company will be able to issue these incentive plans at the beginning of the period and not wait for the next annual general assembly to do so. It will bring our company into line with the practice in other companies. And therefore, the Board of Directors proposes that the AGM approve amendment to Articles 28 and 31 of the Articles of Association to the ones which relate to remuneration for the Board of Directors and Executive Committee of our company. Voting is open. [Voting]

[Interpreted] Time is up. There you are. Here is our notary comes into play. Would you please authenticate and take note of this amendment to the Articles of Association? Now I'm going to move on to item 6.2, where the Articles of Association of our company need to be revised on a number of administrative points, their provisions which deal with administrative matters. And for expediency, I suggest that we take a general vote on this. It's Articles 5ter, 10, 11, 12, 13 and 39 of the Articles of Association are the articles, which would be affected by this amendment. I'm now going to ask you to cast your vote in the following 5 seconds. [Voting]

[Interpreted] That closes the vote, and the results are up on the screen. This proposal has been accepted by the shareholders. Thank you, Mr. Chairman. Thank you for the effective and efficient manner in which this formal part of the assembly has been conducted. It now is concluded.

[indiscernible] for guiding us through all the items. And we have dealt now with the official part of our assembly. Before closing the meeting, I would like to inform you that our next ordinary general meeting will take place on the 26th of March of next year 2025. [Interpreted] Before you leave the room, I kindly ask you to hand back your televoters as well as your headsets upon exiting the room. [indiscernible] a little cocktails which will be served for all the ones that are here, sorry, not when you are on the webcast. And here in the restaurant, [indiscernible] of this hotel, the hotel Grand Fermont here in Geneva. So ladies and gentlemen, dear shareholders, thank you once again for your attendance. And with this, I declare this meeting as ended. Thank you very much.