Regulatory News:
Eurofins Scientific SE (Paris:ERF):
Financial highlights
Eurofins continued to demonstrate robust Core Business organic
growth in H1 2023:
- Total revenues of €3,209m declined year-on-year by -5.9%,
restrained by the sharp year-on-year decrease in revenues from
COVID-19 testing and reagents (less than €20m in H1 2023 vs over
€470m in H1 2022) and FX headwinds (-0.5%).
- Revenues in the Core Business (excluding COVID-19 testing and
reagent revenues) increased organically13 by +7.0% in H1 2023 vs H1
2022, driven by a strong development in North America. By quarter
and adjusted for public working days, organic growth accelerated to
7.5% in Q2 2023 vs 6.6% in Q1 2023.
- Adjusted1 EBITDA3 of €640m (19.9% of revenues) declined vs
€829m (24.3% of revenues) in H1 2022, mostly impacted by the sharp
decrease in revenues from COVID-19 testing and reagents and
inflationary headwinds.
- Eurofins generated Free Cash Flow before investment in owned
sites16 of €125m vs €306m in H1 2022, primarily due to lower EBITDA
and continued net capital expenditures geared towards capacity
expansion, start-ups and the development of bespoke IT
solutions.
- Net Profit7 amounted to €151m.
- Eurofins’ balance sheet remains very solid at the end of June
2023:
- Financial leverage (net debt11 to last 12 months adjusted
pro-forma EBITDA) was 1.9x, flat vs the end of 2022 and well within
its targeted range of 1.5-2.5x.
- Eurofins has no major financing requirements until the
outstanding €448m senior Eurobonds become due on 25 July 2024 and,
in addition to a cash position of €682m, has access to over €1bn of
committed mid-term (3-5 years) bilateral bank credit lines.
Strategic highlights
Eurofins companies continue to advance on a large number of
long-term growth and innovation initiatives:
- The focus has been on reasonably valued smaller bolt-on
acquisitions:
- In H1 2023, Eurofins closed 18 business combinations that
generated revenues of about €64m in 2022 at a cost of €83m,
reflecting a sales multiple of 1.3x.
- Eurofins added 31,000 m2 of net surface area to expand its
network in the first six months of 2023. Through a combination of
building projects and building purchases, a decrease in leased
surfaces and bolt-on acquisitions, Eurofins was able to increase
its ownership proportion of the total net floor area of its sites
to 31% at the end of June 2023 vs 30% at the end of 2022.
- Eurofins continues its strong pace of start-up activity,
launching 20 new start-up laboratories and 29 new blood collection
points (BCPs) in the first six months of 2023. The 271 start-ups
and 47 BCPs launched since 2000 have made material contributions to
the overall organic growth of the Group, accounting for 0.9% out of
the 7.0% organic growth achieved in H1 2023.
- The roll-out of automation technologies is accelerating as
Eurofins companies begin implementing bespoke modular automation
platforms. Based on standardised and proprietary building blocks,
each flexible platform can fit numerous applications. Though these
automation systems require significant operational expenditures to
develop and capital expenditures to deploy, they should be an
important contributor to quality, productivity and financial
returns in the coming years. In its initial automation wave, for
example, the Company targets to automate a sizable proportion of
analytical preparation for contaminants testing in its Food and
Environment Testing businesses in Europe by the end of 2024.
- Eurofins continues to make meaningful contributions to Testing
for Life:
- Leveraging artificial intelligence and its rich databases of
reference samples, Eurofins Alimentaire France SAS recently
launched a rapid test to guarantee the authenticity of organic food
products.
- Further expansion of its PFAS testing activities in Environment
Testing and Food Testing as well as Clinical Diagnostics, where
Eurofins is conducting blood testing on up to 75,000 residents
living near a chemical production site in Belgium for the presence
of PFAS.
- Eurofins Discovery, an industry-leading provider of products
and services for drug discovery research, contributed human in
vitro data from its innovative BioMAP® Platform to advance clinical
progression of IOA-289, a novel oral therapy for cancer and
fibrotic disease.
Revenue by activity
Following requests by investors for information supplementing
already published disclosures on its three reportable segments
(Europe, North America and Rest of the World), Eurofins is
providing its revenues by activity.
€m
H1 2023
As % of total
Life
€1,257m
39.2%
BioPharma
€976m
30.4%
Diagnostic Services & Products
€652m
20.3%
Consumer & Technology Products
Testing
€325m
10.1%
Activities are defined as follows:
- Life, consisting of Food and Feed Testing, Agro Testing and
Environment Testing
- BioPharma, consisting of BioPharma Services, Agrosciences,
Genomics and Forensic Services
- Diagnostic Services & Products, consisting of Clinical
Diagnostics Testing and In Vitro Diagnostics (IVD) Solutions
- Consumer & Technology Products Testing, consisting of
Consumer Product Testing and Advanced Material Sciences
2023 to 2027 Objectives
- Eurofins has updated its objectives for FY 2023 which had been
announced at the FY 2022 results presentation on 1 March 2023 to
reflect the latest FX rates evolution and the current M&A
activity. The objectives for FY 2027 have not been updated.
€m
FY 2023 (updated)
FY 2027
Revenues
€6.45bn – €6.55bn
Approaching €10bn
Adjusted EBITDA
€1.32bn – €1.37bn
Margin: 24%
FCFF before investment in owned
sites16
€670m - €720m
Approaching €1.5bn
- The updated FY 2023 objective assumes exchange rates prevailing
for H1 2023 are constant for the remainder of the year, implying a
year-on-year headwind from foreign currency translation of ca.
€115m. It also assumes reduced M&A activity in FY 2023 that
would contribute revenues of ca. €90m on a consolidated basis and
ca. €200m on a full year proforma basis (instead of €125m and
€250m, respectively).
- The aforementioned factors reducing the FY 2023 objective by
€150m in consolidated revenues translates to a €30m decrease of the
FY 2023 adjusted EBITDA and FCFF before investment in owned sites
objective.
- The FY 2027 objective assumes exchange rates are stable vs 2022
average and zero contribution from COVID-19 testing and reagents.
To 2027, Eurofins targets average organic growth of 6.5% p.a. and
potential average revenues from acquisitions of €250m p.a. over the
period.
- Continued growth investments in the ownership of large
strategic sites, transfer of activities therein, start-ups and
bespoke proprietary IT solutions are expected to drive increased
profitability and cash generation over the mid-term horizon.
- With the aim of launching 30 new start-up laboratories (50 in
FY 2022, 20 in H1 2023) and several new BCPs (18 in FY 2022, 29 in
H1 2023) in FY 2023, Eurofins expects Separately Disclosed Items2
(SDI) at the EBITDA level to be about €100m in FY 2023 and decline
thereafter towards less than 0.5% of revenues.
- Capital allocation priorities in FY 2023 and in the mid-term
will continue to include site ownership of high-throughput campuses
to complete Eurofins’ global hub and spoke network, start-ups in
high growth areas, development and deployment of sector-leading
proprietary IT solutions, and acquisitions. Investments in these
areas are key to our long-term value creation strategy. From FY
2023, investment in owned sites is assumed to be around €200m p.a.,
while net operating capex is expected to be ca. €400m p.a. (total
net capex9 of €600m p.a.).
- Eurofins targets to maintain a financial leverage of 1.5-2.5x
throughout the period and less than 1.5x by FY 2027.
- The speed of improvement towards the 2027 adjusted EBITDA
margin objective will depend on the timing of the bottoming out of
the food and consumer product end markets and how fast pricing can
be aligned to cost inflation as well as the speed of execution of
innovation, productivity improvement measures, digitalisation and
automation initiatives.
Comments from the CEO, Dr Gilles Martin:
“Though the global economic outlook remains uncertain due to
lingering inflationary pressures, higher interest rates and the
ongoing war in Ukraine, Eurofins continued to demonstrate robust
organic growth above its objective in its Core Business activities
in the first half of 2023. Growth was particularly strong in North
America, where demand trends in our Food Testing, Environment
Testing and BioPharma Product Testing activities more than
compensated for the substantial year-on-year decline in revenues
from COVID-19 testing and reagents in the region. Europe and Rest
of the World also demonstrated healthy growth despite challenges in
the current economic climate. Pricing initiatives in all regions
are starting to be a driver of these results. Overall, we continue
to execute well on our long-term value creation strategy while
maintaining a sound capital structure.
“In the second quarter of 2023, Eurofins has almost fully
compensated the temporary revenues from COVID-19 testing and
reagents it achieved between 2020 and 2022 and expects to fully do
so on a full year basis as soon as 2024.
“Supported by higher volumes, contributions from start-ups and
market share gains, and further pricing adaptations, we anticipate
sustaining our strong organic growth momentum through the second
half of 2023. We will also keep accelerating our efforts in
technological innovation, in particular the roll-out of automation
systems and further digitalisation of processes in the coming
quarters, so we can further improve on our industry-leading service
quality to clients. Increasing automation also complements other
cost efficiency efforts that are underway to improve our
competitiveness.
“Despite the current challenges, I remain very confident in the
entrepreneurial and innovative spirit of Eurofins teams to continue
delivering outstanding, high-quality service to clients,
above-market growth and value creation as we progress towards our
FY 2023 and FY 2027 objectives.”
Conference Call
Eurofins will hold a conference call with analysts and investors
today at 14:00 CEST to discuss the results and the performance of
Eurofins, as well as its outlook, and will be followed by a
questions and answers (Q&A) session.
Click here to Join Call >> No need to dial in. From
any device, click the link above to join the conference call.
Alternatively, you may dial-in to the conference call via telephone
using one of the numbers below:
UK: + 44 330 165 4027 US: + 1 323 794 2551 FR: + 33 176 772 274
BE: + 32 240 406 59 DE: + 49 6966 102 480
Confirmation Code: 1715178
Business Review
The following figures are extracts from the Condensed Interim
Consolidated Financial Statements and should be read in conjunction
with the Condensed Interim Consolidated Financial Statements and
Notes for the period ended 30 June 2023. The Half Year Report 2023
can be found on Eurofins’ website at the following link:
https://www.eurofins.com/investors/reports-and-presentations/
Table 1: Half Year 2023 Results Summary
H1 2023
H1 2022
+/- % Adjusted results
+/- % Reported results
In €m except otherwise stated
Adjusted1 results
Separately disclosed items2
Reported results
Adjusted1 results
Separately disclosed items2
Reported results
Revenues
3,209
-
3,209
3,412
-
3,412
-5.9%
-5.9%
EBITDA3
640
-51
589
829
-29
800
-23%
-26%
EBITDA margin (%)
19.9%
-
18.3%
24.3%
-
23.4%
-440 bp
-510 bp
EBITAS4
397
-69
327
602
-42
560
-34%
-42%
Net profit7
261
-110
151
396
-88
308
-34%
-51%
Basic EPS8 (€)
1.36
-0.57
0.79
2.07
-0.46
1.61
-34%
-51%
Net cash provided by operating
activities
333
498
-33%
Net capex9
259
278
-7%
Net operating capex
208
192
+8%
Net capex for purchase and development of
owned sites
51
86
-41%
Free Cash Flow to the Firm before
investment in owned sites16
125
306
-59%
M&A spend
83
197
-58%
Net debt11
2,588
2,627
-1%
Leverage ratio (net debt/pro-forma
adjusted EBITDA)
1.9x
1.5x
+0.4x
Note: Definitions of the alternative
performance measures used can be found at the end of this press
release
Revenues of €3,209m declined year-on-year by 5.9%, restrained by
the sharp year-on-year decrease in revenues from COVID-19 testing
and reagents (less than €20m in H1 2023 vs over €470m in H1 2022)
and FX headwinds (-0.5%). The decline was partially compensated by
strong organic growth in the Core Business (excluding COVID-19
related clinical testing and reagents revenues) of 7.0%.
Table 2: Organic Growth Calculation and Revenue
Reconciliation
In €m except otherwise stated
H1 2022 reported revenues
3,412
+ H1 2022 acquisitions - revenue part not
consolidated in H1 2022 at H1 2022 FX rates
93
- H1 2022 revenues of discontinued
activities / disposals15
-45
= H1 2022 pro-forma revenues (at H1 2022
FX rates)
3,460
+ H1 2023 FX impact on H1 2022 pro-forma
revenues
-16
= H1 2022 pro-forma revenues (at H1
2023 FX rates) (a)
3,444
H1 2023 organic scope* revenues (at H1
2023 FX rates) (b)
3,192
H1 2023 organic growth rate
(b/a-1)
-7.3%
H1 2023 acquisitions - revenue part
consolidated in H1 2023 at H1 2023 FX rates
16
H1 2023 revenues of discontinued
activities / disposals15
2
H1 2023 reported revenues
3,209
* Organic scope consists of all companies
that were part of the Group as at 01/01/2023. This corresponds to
2022 pro-forma scope.
Table 3: Breakdown of Revenue by Operating Segment
€m
H1 2023
As % of total
H1 2022
As % of total
Y-o-Y variation %
Organic growth in the Core
Business**
Europe
1,622
51%
1,855
54%
-12.5%*
+5.4%
North America
1,243
39%
1,206
35%
+3.1%
+9.6%
Rest of the World
344
11%
351
10%
-1.9%*
+5.8%
Total
3,209
100%
3,412
100%
-5.9%
+7.0%
* Segments most impacted by the sharp
decline in revenues from COVID-19 testing and reagents
** Excluding COVID-19 related clinical
testing and reagent revenues
Europe
- Reported revenues decreased vs H1 2022 by €233m, primarily due
to the year-on-year decline in COVID-19 testing and reagents
revenues. Excluding this impact, Core Business revenues were up
year-on-year by 5.4%, with almost all areas of activities
demonstrating positive growth.
- Despite the elevated comparable base of H1 2022 from projects
supporting COVID-19 vaccines, Eurofins’ BioPharma Services business
in Europe recorded sound growth in H1 2023. Large clients from the
pharmaceutical industry continue to sustain a high level of
development activity for future biologics products as well as cell
and gene therapies. Pricing attainment to compensate for the
inflationary environment also supported growth. On the other hand,
a limited number of Eurofins activities have experienced volume
development challenges. For example, a decline in the market for
early-stage research and development activities, most notably from
smaller biotech clients, has resulted in softer demand for services
from Eurofins Discovery.
- The business environment for Eurofins’ Food and Feed Testing
business in Europe remained challenging in H1 2023. Persisting high
inflation in consumer food prices and efforts by food producers and
retailers to control costs continue to restrain testing volume
growth. Eurofins has responded to the situation with solid gains in
pricing as well as cost adaptations. In addition, the Company
continues to make investments to improve productivity in its
laboratories and in customer service, most notably in
digitalisation, automation and artificial intelligence.
- Growth in the Environment Testing business in Europe was driven
by healthy demand for asbestos and pesticide testing related to new
regulations concerning these substances. New regulations are also a
driver of increasing momentum in the PFAS testing business, an area
in which Eurofins companies are market leaders in terms of both
methods and capacity. Further growth has been achieved through the
launch of new direct-to-consumer businesses in Germany offering
sampling kits for the identification of PFAS in matrices such as
water, construction materials, soil and asbestos.
- With the impacts of COVID-19 related disruptions having
subsided throughout the course of 2022, the Clinical Diagnostics
business in Europe experienced a strong year-on-year recovery in
volumes in H1 2023. Sales growth was also supported by network
expansions, including the opening of 29 blood collection points,
the awarding of a new outsourcing contract in the Netherlands, and
new clinical genetics services, most notably in the prenatal and In
Vitro Fertilisation (IVF) segments. Growth was also supported by
Eurofins Belgium NV’s biomonitoring project for PFAS in blood in
Antwerp, the biggest such project in Europe. Recently Eurofins also
started offering testing for PFAS in blood in Spain. On the other
hand, reductions in reimbursements for routine diagnostics in
France that became effective in H1 2023 restrained the sales
development.
North America
- Reported revenues increased year-on-year by €37m, supported by
strong organic growth across almost all areas of activities. Core
Business revenues were up +9.6% year-on-year.
- Growth in Eurofins BioPharma Services in North America was
resilient in the first half of 2023. By area, BioPharma Product
Testing (BPT) recorded a strong development, sustained by robust
demand for mid-to-late phase biologics development by the
larger-sized and medium-sized sponsors that make up the predominant
share of this business activity. The deployment of Eurofins’
proprietary eLIMS-BPT and LabAccess IT solutions also further
progressed, with a high percentage of customers now utilising the
platform’s industry leading portal to manage the full life cycle of
their testing needs from online ordering to complete data
deliverables. Demand growth has also been solid for mid-to-late
phase clinical trials served by Eurofins Central and Bioanalytical
Laboratories. Additionally, Professional Scientific Services® (PSS)
continued expanding to meet increased client demand for flexible
outsourcing solutions for their laboratory and scientific support
operations. On the other hand, Eurofins Discovery has been
experiencing more challenging market conditions. In response, it
has made adaptations to its organisation and has also increased
investments in innovation, such as the deployment of artificial
intelligence utilising Eurofins’ own curated data set for
bioinformatics-driven applications for drug discovery.
- The Food and Feed Testing business in North America set new
monthly sales records in H1 2023. In addition to volume growth and
pricing attainment in its existing business areas, Eurofins also
started numerous new initiatives to enhance its market presence.
Examples include new start-up laboratories in California, Arizona
and Idaho to address the stringent turnaround time requirements of
produce customers as well as capacities to tap into the growing
interest in testing for PFAS in food and food packaging.
Furthermore, Eurofins Food and Feed Testing also introduced
significant operational innovations in the period. For example, in
Iowa, a new automation line for weighing samples has been able to
reduce labour intensity by nearly 50%. Eurofins has also deployed
new modular laboratories, fully-equipped and operational facilities
to perform all microbiology testing on site that also can be
quickly and easily relocated depending on market and customer
requirements. With these modular laboratories, Eurofins can provide
fast turnaround times to clients that are producing perishable
products and/or are in remote areas away from major cities and
logistics routes.
- The Environment Testing business in North America continued
outstripping market growth, underpinned by geographical footprint
expansion, the broadening of its technical capabilities,
sector-leading service performance and pricing initiatives.
Upgrades/expansions in Environment Testing facilities in
California, Ohio, Colorado, Florida and Texas have supported
processed volume increases. PFAS testing remains a significant
growth driver, expanding at approximately twice the growth rate of
the overall Environment Testing business. Eurofins operates both a
hub and spoke and distributed model for PFAS testing with
comprehensive services offered from 8 locations, supported by East
and West Coast hubs, with additional expansions in the planning and
commissioning phases. Operationally, carbon footprint reduction,
productivity and health and safety are being supported by sample
miniaturisation and reduction programmes made possible through
investment in advanced detection techniques. Digital technologies
have also been rolled out, including eCOC (electronic chain of
custody) for field samplers and AI tools to assist data integrity
checks and chromatographic integrations.
- In Clinical Diagnostics, Eurofins CellTx, a startup laboratory
in Arizona, began operations supporting critical testing for living
donor derived human tissue, including stem cells, bone marrow, cord
blood, birth tissues, oocytes, and sperm donations. At Eurofins
Viracor, two new notable tests were launched. ExPeCT™ CAR T a
multiplexed, real-time qPCR assay that provides a powerful
diagnostic tool to monitor and optimise CAR-T therapy involving
patients with pre-B cell acute lymphoblastic leukemia and B cell
lymphomas. Eurofins Viracor also introduced a new real-time PCR
panel for the rapid identification/detection of Candida species
including Candida auris, an emerging species of pathogenic
fungus/yeast that has caused outbreaks in healthcare settings in
the United States and which are often resistant to most common
antifungal drugs. Conversely at Eurofins Transplant Genomics,
volumes for kidney transplant biomarker testing have been
significantly impacted by a billing article concerning Medicare
reimbursement for such tests which became effective on 31 March
2023. Consequently, Eurofins has adapted the cost structure of this
business to compensate for the decrease in demand.
Rest of the World
- Core Business revenues were up +5.8% year-on-year due to strong
organic growth across most countries in the region.
- Numerous countries contributed to the healthy growth recorded
in Asia-Pacific in H1 2023. In China, the low comparable base
related to lockdowns in H1 2022 allowed Eurofins to record sizable
year-on-year growth in H1 2023, most notably in the Consumer
Product Testing business. Additionally, demand for Food Testing and
Biopharma Services in China were also robust as Eurofins reaps the
benefits of investments to strengthen its local laboratory network
through start-ups. In India, an important location for global
pharmaceutical R&D value chains, Eurofins’ Biopharma Services
business has continued expanding its revenues as well as its market
presence, including the addition of a fully equipped,
state-of-the-art laboratory campus in Genome Valley, Hyderabad. In
Japan, growth in the Environment Testing business was driven by
tightening regulations for asbestos testing as well as emerging
demand for PFAS testing. In Australia and New Zealand, the addition
of new laboratories as well as improvements in capabilities,
customer service and logistics support helped Eurofins companies
grow faster than the underlying local markets. To further augment
Eurofins’ regional footprint and service portfolio, numerous
acquisitions in Environment Testing were closed in these
countries.
- Eurofins also further developed its network outside Asia. In
Latin America, Eurofins has been expanding its footprint into new
geographies, establishing activities in the Dominican Republic for
Clinical Diagnostics. In the Middle East, new laboratories have
been established in Bahrain to serve the growing local Clinical
Diagnostics market. Additionally, Ajal for Laboratories in Saudi
Arabia has expanded its service offering beyond Food Testing to
include Environment Testing and animal health.
Infrastructure Programme
As part of its strategy to lease less and own more of its sites,
Eurofins has added, in the first six months of 2023, a total of
22,000 m² of laboratory, office, and storage space through the
delivery of building projects as well as building purchases, while
decreasing its leased surfaces by 22,000 m². Through acquisitions
in the M&A scope, Eurofins has added an additional surface of
31,000 m². Overall, this has resulted in a net surface increase of
31,000 m² leading to a total net floor area of 1,689,000 m².
In the first half of 2023, Eurofins maintained its focus on
expanding its presence in Asia. Significant developments included
the completion of a new 3,000 m² facility in Hamamatsu, Japan. With
this expansion, Eurofins aims to tap into the rapidly growing
asbestos testing market in Japan by materially increasing its
capacity. This will enable the Company to improve its market
position and contribute to the growth of the industry.
Eurofins also completed the internal fitout of its new facility
in Shenzhen, China, which is part of the expansion plan for
Cosmetics clinical testing in South China. Additionally, Eurofins
is nearing completion of the internal fitout of a new, 2,500 m²
facility in Xiamen, China, which will cater to the local food
industry's needs for microbiology, chemistry and residue testing.
In Phnom Penh, Cambodia, the internal fitout of a new facility for
Eurofins MTS Consumer Product Testing is expected to be completed
later this year.
In Spain, Eurofins Environment Testing successfully completed
the construction of a 5,000 m² laboratory campus in Castellon de la
Plana. This facility houses the reference laboratory for drinking
water in Spain, a Competence Centre for PFAS and a new laboratory
focussed on analysing contaminated soils and associated waters. The
laboratory employs state-of-the-art lean design and accommodates
the use of robots to transport samples and replenish deliverables.
Additionally, the facility is equipped with almost 1,000 m² of
solar panels, as well as air recirculation and thermal insulation
systems to minimise carbon footprint. The site also includes vacant
land for potential future expansion.
In Lentilly, France, Eurofins completed construction of a new
2,000 m² facility. This facility serves as the third differentiated
Biopharma Product Testing campus in France, specialising in
biopharmaceutical large molecule testing such as biochemistry,
biology, microbiology, and virology. The site allows for potential
future expansion.
Eurofins Hydrologie Centre Est (EHCE) and Eurofins Laboratoire
de Microbiologie Rhône-Alpes (ELMRA) are set to consolidate their
operations in Lyon, France. A 1,300 m² building was purchased at
the end of June 2022, and the outfitting of the new location is
expected to be completed in the current year.
For the remainder of 2023 and for 2024, Eurofins is planning to
add 90,000 m² of laboratory and operational space through building
projects, acquisitions, new leases and consolidation of sites, as
well as completing the renovation of 25,000 m² of its current sites
to bring them to the highest standard.
Financial Review
Adjusted EBITDA was €640m in H1 2023, representing an adjusted
EBITDA margin of 19.9%, a decrease of €190m vs H1 2022 due
primarily to the sizable decrease in revenues from COVID-19 testing
and reagents. Inflationary headwinds for personnel expenses,
energy, logistics and consumables also impacted profitability,
though they began to be partially compensated through pricing
adaptations and cost efficiency initiatives.
Table 4: Separately Disclosed Items2
In €m except otherwise stated
H1 2023
H1 2022
One-off costs from integrations,
reorganisations and discontinued operations, and other
non-recurring income and costs
-12
-6
Temporary losses and other costs related
to network expansion, start-ups and new acquisitions in significant
restructuring
-39
-23
EBITDA impact
-51
-29
Separately Disclosed Items (SDI) at the EBITDA level increased
year-on-year to €51m and comprised:
- One-off costs from integrations, reorganisations and
discontinued operations, and other non-recurring income and costs
of €12m linked to ongoing integrations and reorganisations
primarily in the U.S.
- Temporary losses and other costs related to network expansion,
start-ups and new acquisitions in significant restructuring
totalled €39m, following the strong increase in the number of
start-ups launches made in the past quarters and the need to expand
Eurofins Technologies’ product offering and distribution channels
in line with Eurofins’ growth initiative towards In Vitro
Diagnostic (IVD) and Asia.
Reported EBITDA decreased 26% year-on-year to €589m in H1 2023,
due to the strong decrease of COVID-19 related revenues in H1 2023
vs H1 2022 as well as inflationary headwinds and higher temporary
losses incurred by the strong increase in start-up launches.
Reported EBITDA as a proportion of revenues was 18.3%.
Table 5: Breakdown of Reported EBITDA by Operating
Segment
€m
H1 2023
Rep. EBITDA margin %
H1 2022
Rep. EBITDA margin %
Y-o-Y variation %
Europe
217
13.4%
432
23.3%
-50%
North America
313
25.2%
320
26.5%
-2%
Rest of the World
66
19.3%
79
22.4%
-16%
Other*
-8
-30
Total
589
18.3%
800
23.4%
-26%
*Other corresponds to Group Service
Centres
In Europe, EBITDA declined by €215m vs H1 2022 mainly due to
lower testing volumes for COVID-19. Inflation, in particular
related to personnel costs, also weighed on profitability. In
contrast, EBITDA in North America stayed resilient at €313m,
equivalent to 25.2% of its revenues over the period. The Rest of
the World posted an EBITDA of €66m, equivalent to 19.3% of its
revenues.
Depreciation and amortisation (D&A), including expenses
related to IFRS 16, increased by 9% year-on-year to €262m. As a
percentage of revenues, D&A stood at 8.2% of Group revenues in
H1 2023 vs 7.0% in H1 2022, an 120bps increase year-on-year. This
increase is due to higher levels of strategic investments including
the owning and modernising of strategic sites, opening of start-up
laboratories and the deployment of bespoke IT solutions.
Net finance costs amounted to €42m in H1 2023, a decline
compared to €71m in H1 2022. This improvement is primarily due to a
non-cash net foreign exchange gain of €11m in H1 2023, while H1
2022 recorded a net foreign exchange loss of €29m.
The income tax expense decreased to €69m in H1 2023 vs €116m in
H1 2022 (-41% year-on-year).
Reported net profit7 stood at €151m (5% of revenues and -51%
compared to €308m in H1 2022), resulting in a total reported basic
EPS of €0.79. Adjusted net profit stood at €262m compared to €397m
in H1 2022, resulting in total adjusted basic EPS of €1.36 in H1
2023.
Cash Flow &
Financing
Table 6: Cash Flows Reconciliation
€m
H1 2023 reported
H1 2022 reported
Y-o-Y variation
Y-o-Y variation %
Net Cash from Operations
333
498
-165
-33%
Net capex9 (i)
-259
-278
+19
-7%
Net operating capex (includes LHI)
-208
-192
-16
+8%
Net capex for purchase and development of
owned sites
-51
-86
+35
-41%
Free Cash Flow to the Firm before
investment in owned sites16
125
306
-181
-60%
Free Cash Flow to the Firm10
74
220
-146
-66%
Acquisitions spend and other investments
(ii)
-83
-197
+114
-58%
Proceeds from disposals of subsidiaries,
net (iii)
8
-
+8
Other (iv)
5
0
+5
Net Cash from Investing (i) + (ii) + (iii)
+ (iv)
-329
-475
+146
-31%
Net Cash from Financing
205
168
+37
+22%
Net increase / (decrease) in Cash and
cash equivalents and bank overdrafts
198
201
-3
-1%
Cash and cash equivalents at end of
period and bank overdrafts
682
716
-34
-5%
Net cash provided by operating activities declined in H1 2023 to
€333m vs €498m in H1 2022. Net working capital stood at 6.8% of the
Group’s revenues at the end of June 2023, an increase of 0.3% vs
6.5% at the end of June 2022 (calculated as a percentage of last
quarter revenues times four). The increase in the net working
capital percentage is mainly due to advanced customer receipts
related to COVID-19 testing activities in H1 2022.
The cash generation more than adequately financed net capex for
the period of €259m vs €278m in H1 2022. Net capex includes
investments as part of Eurofins’ programmes to own its laboratory
sites, which totalled €51m in H1 2023 vs €86m in H1 2022. Taking
this into account, the Free Cash Flow to the Firm before investment
in owned sites was €125m vs €306m in H1 2022.
During the first six months of 2023, the Group completed 18
business combinations including 9 acquisitions of entities and 9
acquisitions of assets. Net cash outflow on acquisitions completed
during the first six months of 2023 and in previous years (in case
of payment of deferred considerations) amounted to €83m.
During the period, Eurofins returned to its targeted capital
structure that includes an adequate level of hybrid capital of
€1bn. The first step towards this objective was made in January
2023, when Eurofins successfully raised €600m of hybrid capital.
This new series of hybrid capital has no specified maturity and is
accounted for as 100% equity according to international financial
reporting standards (IFRS) and 50% equity with the rating agencies
Moody’s and Fitch. It bears a fixed annual coupon of 6.75% for the
first 5.5 years (until 24 July 2028), upon which date Eurofins can
elect to repay. Later in the period, Eurofins repaid the
outstanding €183m of hybrid capital callable on 29 April 2023.
The combination of free cash flow to the firm as well as the
aforementioned acquisitions and refinancing resulted in a net debt
figure of €2,588m at the end of June 2023. The corresponding
leverage (net debt/last 12 months proforma adjusted EBITDA) was
1.9x, stable vs the end of December 2022, and within our 1.5x-2.5x
target range.
Start-up Programme
Start-ups or green-field laboratory projects are generally
undertaken in new markets and, in particular, in emerging markets,
where there are often limited viable acquisition opportunities or
in developed markets where Eurofins transfers technology developed
by its R&D and Competence Centres abroad or expands
geographically to complete its national hub and spoke laboratory
network in an increasing number of countries.
In the first half of 2023, the Group opened 20 new start-up
laboratories and 29 new start-up Blood Collection Points (BCPs). In
total, the 271 start-ups and 47 BCPs launched since 2000 have made
material contributions to the overall organic growth of the Group,
accounting for 0.9% of organic growth in the Core Business. Their
EBITDA margin continued to progress while remaining dilutive to the
Group.
Of the 271 start-ups and 47 BCPs the Group has launched since
2000, 53% are located in Europe, 17% in North America and 30% in
the Rest of the World with a significant number in high growth
regions in Asia. By area of activity, 29% are in Food and Feed
Testing, 18% are in BioPharma/Biotech/Agroscience services, 14% in
Environment Testing, and 25% in Clinical Diagnostics (including
BCPs).
Acquisitions
During the first six months of 2023, the Group completed 18
business combinations, made up of 9 acquisitions of legal entities
and 9 acquisitions of assets. These companies/activities have been
fully consolidated from the date the Group took control over these
entities. For the year ended 31 December 2022, these entities
generated revenues of about €64m.
Post-Closing Events
Since 1 July 2023, Eurofins has completed two small business
combinations via the acquisitions of assets, one is in North
America and one in Europe. The total annual revenues of these
acquisitions amounted to over €1.5m in 2022 for an aggregate
acquisition price of over €1m. These acquisitions employ more than
20 employees.
On 5 July 2023, a new stock option plan (764,576 options) and a
new Restricted Stock Unit (RSU) plan (60,117 RSUs) were granted,
representing ca. 0.4% of the number of shares issued as of 30 June
2023.
Summary financial statements:
Table 7: Summarised Income Statement
H1 2023
H1 2022
In €m except otherwise stated
Reported Results
Reported Results
Revenues
3,209
3,412
Operating costs, net
-2,621
-2,612
EBITDA
589
800
EBITDA Margin
18.3%
23.4%
Depreciation and amortisation
-262
-240
EBITAS
327
560
Share-based payment charge and
acquisition-related expenses, net5
-66
-65
Gain/(loss) on disposal
-
-1
EBIT6
262
495
Finance income
17
1
Finance costs
-59
-72
Share of profit of associates
0
1
Profit before income taxes
220
424
Income tax expense
-69
-116
Net profit for the year
151
308
Attributable to:
Owners of the Company and hybrid capital
investors
152
310
Non-controlling interests
-1
-2
Earnings per share (basic) in EUR
- Total
0.79
1.61
- Attributable to owners of the
Company
0.65
1.52
- Attributable to hybrid capital
investors
0.14
0.09
Earnings per share (diluted) in EUR
- Total
0.76
1.55
- Attributable to owners of the
Company
0.63
1.46
- Attributable to hybrid capital
investors
0.14
0.09
Basic weighted average shares outstanding
- in millions
192.9
192.3
Diluted weighted average shares
outstanding - in millions
198.2
200.0
Table 8: Summarised Balance Sheet
30 June 2023
31 December 2022
In €m except otherwise stated
Reported Results
Reported Results
Property, plant and equipment
2,207
2,168
Goodwill
4,520
4,524
Other intangible assets
853
919
Investments in associates
5
5
Non-current financial assets
75
78
Deferred tax assets
73
76
Total non-current assets
7,733
7,770
Inventories
150
146
Trade receivables
1,029
1,053
Contract assets
327
288
Prepaid expenses and other current
assets
238
198
Current income tax assets
148
136
Derivative financial instruments
assets
6
6
Cash and cash equivalents
686
487
Total current assets
2,585
2,313
Total assets
10,318
10,084
Share capital
2
2
Treasury shares
-48
-14
Hybrid capital
1,000
583
Other reserves
1,601
1,593
Retained earnings
2,260
2,333
Currency translation reserve
185
286
Total attributable to owners of the
Company
5,000
4,782
Non-controlling interests
68
69
Total shareholders' equity
5,068
4,851
Borrowings
3,129
3,112
Deferred tax liabilities
129
134
Amounts due for business acquisitions
114
136
Employee benefit obligations
61
60
Provisions
15
19
Total non-current liabilities
3,448
3,460
Borrowings
146
214
Interest due on borrowings and earnings
due on hybrid capital
78
38
Trade accounts payable
565
648
Contract liabilities
193
184
Current income tax liabilities
23
35
Amounts due for business acquisitions
37
48
Provisions
27
35
Other current liabilities
734
572
Total current liabilities
1,802
1,772
Total liabilities and shareholders'
equity
10,318
10,084
Table 9: Summarised Cash Flow Statement
H1 2023
H1 2022
In €m except otherwise stated
Reported
Reported
Cash flows from operating
activities
Profit before income taxes
220
424
Depreciation and amortisation
262
240
Share-based payment charge and
acquisition-related expenses, net
66
65
Gain/(loss) on disposal of subsidiaries,
net
-
1
Finance income and costs, net
43
72
Share of profit from associates
-
-1
Transactions costs and income related to
acquisitions
-3
-10
Changes in provisions and employee benefit
obligations
-11
-6
Other non-cash effects
1
-5
Change in net working capital
-154
-102
Cash generated from operations
422
678
Income taxes paid
-89
-179
Net cash provided by operating
activities
333
498
Cash flows from investing
activities
Purchase of property, plant and
equipment
-228
-250
Purchase, capitalisation of intangible
assets
-35
-41
Proceeds from sale of property, plant and
equipment
4
13
Net capex
-259
-278
Free cash Flow to the Firm10
74
221
Acquisitions of subsidiaries, net
-83
-197
Proceeds from disposals of
subsidiaries
8
-
Acquisitions of investments, financial
assets and derivative financial instruments, net
0
-1
Interest received
5
1
Net cash used in investing
activities
-329
-475
Cash flows from financing
activities
Proceeds from issuance of share
capital
8
8
Purchase of treasury shares, net of
gains
-37
-8
Proceeds from issuance of hybrid
capital
594
-
Repayment of hybrid capital
-183
-308
Proceeds from borrowings
17
605
Repayment of borrowings
-81
-16
Repayment of lease liabilities
-85
-78
Dividends paid to shareholders and
non-controlling interests
-1
-
Earnings paid to hybrid capital
investors
-9
-20
Interests and premium paid
-19
-15
Net cash provided by financing
activities
205
168
Net effect of currency translation on cash
and cash equivalents and bank overdrafts
-11
10
Net increase in cash and cash
equivalents and bank overdrafts
198
201
Cash and cash equivalents and bank
overdrafts at beginning of period
483
515
Cash and cash equivalents and bank
overdrafts at end of period
682
716
1
Adjusted results – reflect the ongoing
performance of the mature14 and recurring activities excluding
“separately disclosed items”.
2
Separately disclosed items – include
one-off costs from integration and reorganisation, discontinued
operations, other non-recurring income and costs, temporary losses
and other costs related to network expansion, start-ups and new
acquisitions undergoing significant restructuring, share-based
payment charge, acquisition-related expenses, net5, net finance
costs related to borrowing and investing excess cash and one-off
financial effects (net of finance income), net finance costs
related to hybrid capital and the related tax effects.
3
EBITDA – Earnings before interest, taxes,
depreciation and amortisation, share-based payment charge,
acquisition-related expenses, net and gain and loss on disposal of
subsidiaries, net.
4
EBITAS – EBITDA less depreciation and
amortisation.
5
Acquisition-related expenses, net –
Impairment of goodwill, amortisation/impairment of acquired
intangible assets, negative goodwill, and transaction costs related
to acquisitions as well as income from reversal of such costs and
from unused amounts due for business acquisitions.
6
EBIT – EBITAS less Share-based payment
charge, acquisition-related expenses, net and gain and loss on
disposal of subsidiaries, net.
7
Net Profit – Net profit for owners of the
Company and hybrid capital investors before non-controlling
interests.
8
Basic EPS – basic earnings per share
attributable to owners of the Company and hybrid capital
investors.
9
Net capex – Purchase of intangible assets,
property, plant and equipment, less proceeds from the disposal of
such assets and less capex trade payables change of the period.
10
Free Cash Flow to the Firm – Net cash
provided by operating activities, less Net capex.
11
Net debt – Current and non-current
borrowings, less cash and cash equivalents.
12
Net working capital – Inventories, trade
receivables and contract assets, prepaid expenses and other current
assets less trade accounts payable, contract liabilities and other
current liabilities excluding accrued interest receivable and
payable.
13
Organic growth for a given period (Q1, Q2,
Q3, Half Year, Nine Months or Full Year) – non-IFRS measure
calculating the growth in revenues during that period between 2
successive years for the same scope of businesses using the same
exchange rates (of year Y) but excluding discontinued
operations.
For the purpose of organic growth
calculation for year Y, the relevant scope used is the scope of
businesses that have been consolidated in the Group's income
statement of the previous financial year (Y-1). Revenue
contribution from companies acquired in the course of Y-1 but not
consolidated for the full year are adjusted as if they had been
consolidated as of 1st January Y-1. All revenues from businesses
acquired since 1st January Y are excluded from the calculation.
14
Mature scope: excludes start-ups and
acquisitions in significant restructuring. A business will
generally be considered mature when: i) The Group’s systems,
structure and processes have been deployed; ii) It has been
audited, accredited and qualified and used by the relevant
regulatory bodies and the targeted client base; iii) It no longer
requires above-average annual capital expenditures, exceptional
restructuring or abnormally large costs with respect to current
revenues for deploying new Group IT systems. The list of entities
classified as mature is reviewed at the beginning of each year and
is relevant for the whole year.
15
Discontinued activities / divestments:
discontinued operations are a component of the Group’s Core
Business or product lines that have been disposed of, or
liquidated; or a specific business unit or a branch of a business
unit that has been shut down or terminated, and is reported
separately from continued operations. For more information, please
refer to Note 2.26 of the Consolidated Financial Statements for the
year ended 31 December 2022 and to Note 2.6 of the Interim
Condensed Consolidated Financial Statements for the period ended 30
June 2023.
16
FCFF before investment in owned sites:
FCFF less Net capex spent on purchase of land, buildings and
investments to purchase, build or modernise owned sites/buildings
(excludes laboratory equipment and IT).
For more information, please visit
www.eurofins.com.
About Eurofins – the global leader in bio-analysis
Eurofins is Testing for Life. The Eurofins network of companies
believes that it is the global leader in food, environment,
pharmaceutical and cosmetic product testing and in discovery
pharmacology, forensics, advanced material sciences and agroscience
contract research services. It is also one of the market leaders in
certain testing and laboratory services for genomics, and in the
support of clinical studies, as well as in biopharma contract
development and manufacturing. It also has a rapidly developing
presence in highly specialised and molecular clinical diagnostic
testing and in-vitro diagnostic products.
With over 62,000 staff across a decentralised and
entrepreneurial network of ca. 900 laboratories in 61 countries,
Eurofins offers a portfolio of over 200,000 analytical methods to
evaluate the safety, identity, composition, authenticity, origin,
traceability and purity of a wide range of products, as well as
providing innovative clinical diagnostic testing services and
in-vitro diagnostic products.
Eurofins companies’ broad range of services are important for
the health and safety of people and our planet. The ongoing
investment to become fully digital and maintain the best network of
state-of-the-art laboratories and equipment supports our objective
to provide our customers with high-quality services, innovative
solutions and accurate results in the best possible turnaround time
(TAT). Eurofins companies are well positioned to support clients’
increasingly stringent quality and safety standards and the
increasing demands of regulatory authorities as well as the
evolving requirements of healthcare practitioners around the
world.
Eurofins has grown very strongly since its inception and its
strategy is to continue expanding its technology portfolio and its
geographic reach. Through R&D and acquisitions, the Group draws
on the latest developments in the field of biotechnology and
analytical chemistry to offer its clients unique analytical
solutions.
Shares in Eurofins Scientific are listed on the Euronext Paris
Stock Exchange (ISIN FR0014000MR3, Reuters EUFI.PA, Bloomberg ERF
FP).
Until it has been lawfully made public widely by Eurofins
through approved distribution channels, this document contains
inside information for the purpose of Regulation (EU) 596/2014 of
the European Parliament and of the Council of 16 April 2014 on
market abuse, as amended.
Important disclaimer:
This press release contains forward-looking statements and
estimates that involve risks and uncertainties. The forward-looking
statements and estimates contained herein represent the judgment of
Eurofins Scientific’s management as of the date of this release.
These forward-looking statements are not guarantees for future
performance, and the forward-looking events discussed in this
release may not occur. Eurofins Scientific disclaims any intent or
obligation to update any of these forward-looking statements and
estimates. All statements and estimates are made based on the
information available to the Company’s management as of the date of
publication, but no guarantees can be made as to their completeness
or validity.
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Investor Relations Eurofins Scientific SE +32 2 766 1620
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