Regulatory News:
Eurofins (Paris:ERF):
- At the onset of the COVID-19 pandemic, Eurofins’ priorities
were (i) to protect its staff, (ii) to ensure continued service to
its clients, (iii) to protect cash and reduce leverage, and (iv) to
mobilise to develop solutions to support healthcare authorities
fighting the pandemic.
- The large majority of Eurofins companies are considered
essential businesses necessary for the safe supply of the
population and could continue to operate. The COVID-19 lockdown
measures nonetheless had a negative impact on revenues of some of
Eurofins businesses in H1 2020, especially in April and May.
However, cost containment measures were swiftly implemented and
most of them enjoyed a strong recovery in June. In addition, since
early March Eurofins companies were successful in developing a
comprehensive suite of COVID-19 testing solutions
(https://www.eurofins.com/covid-19-response) at exceptional speed.
As a result, organic growth picked up promptly in the later part of
Q2 and the negative impact of the pandemic on Eurofins results has
been very largely mitigated.
- Revenues increased 7.2% year-on-year to EUR 2,323m in H1 2020
vs. EUR 2,168m in H1 2019.
- Organic growth10 stood at 5.1% in H1 2020 and 6.1% in Q2
2020.
- Free cash flow to the firm9 increased 184.5% to EUR 315m.
- In spite of missing revenues at some laboratories due to
lockdowns, adjusted1 EBITDA3 increased 18.9% year-on-year in H1
2020 to EUR 493m resulting in an industry-leading 21.2% margin.
This represents a 210bps increase despite some remaining dilution
by 2017 to 2019 acquisitions. The adjusted EBITDA margin of the
companies which were already part of the Group before 01 January
2017 increased by 350bps from 18.5% to 22.0%.
- Reported EBITDA increased 23.6% year-on-year in H1 2020, the
traditionally less profitable part of the year, to EUR 459m
resulting in a 19.7% reported EBITDA margin, a 260bps increase
year-on-year.
- Separately disclosed items2 decreased by more than 20%
year-on-year on EBITDA level, from EUR 44m in H1 2019 to EUR 35m in
H1 2020 and from 10.6% of Adjusted EBITDA in H1 2019 to 7.1% of
Adjusted EBITDA in H1 2020.
- Start-ups and businesses in significant restructuring now only
represent 5.3% of revenues (6.8% in H1 2019).
- Net profit6 increased 60.9% year-on-year to EUR 95m. Adjusted
net profit increased 19.2% year-on-year to EUR 187m.
- Reported basic earnings per share (EPS)7 increased 57.4% to EUR
5.21 and Adjusted basic EPS by 16.6% in H1 2020 to EUR 10.30.
- As planned, M&A spend has decreased (EUR 76m in H1 2020 vs.
EUR 115m in H1 2019) as Eurofins acquired only seven companies in
H1 2020, most of them in Q1 as part of discussions initiated prior
to the pandemic spreading to Europe and North America.
- Net debt14 at the end of June 2020 decreased significantly to
EUR 2,584m from EUR 3,245m at the end of December 2019 as a result
of the strong cash flow generation in H1 2020 and the successful
equity issuance completed in May 2020 which generated gross
proceeds of EUR 535m.
- Leverage decreased significantly (net debt to adjusted last
twelve months EBITDA16) to 2.53x at the end of June 2020 vs. 3.24x
at the end of December 2019, a reduction of 0.7x, in spite of the
missing revenues and profits at several laboratories due to the
lockdowns.
- On 24 July 2020, Moody’s assigned an investment grade credit
rating of Baa3 with a stable outlook to Eurofins. This
investment grade credit rating acknowledges Eurofins’ successful
growth strategy, its leadership positions in most of its
activities, its planned reduced leverage below 2.5x and its
underlying resilient end-markets.
- In H1 2020, the Group continued to make significant
improvements in terms of corporate governance with the appointment
of Mr. Pascal Rakovsky as a fourth independent director with strong
audit and financial experience to the Board increasing its size to
seven members.
- Based on the latest information disclosed in Eurofins 2019
annual report, ISS (Institutional Shareholder Services) proxy
advisor and ESG rating agency upgraded the Governance
”QualityScore” of Eurofins from 5 to 3 in line with best industry
peers.
- Eurofins continued to invest to reduce and compensate its
carbon footprint with the objective to be carbon neutral by
2025.
- While there remains significant economic and pandemic
development uncertainty, as can be judged today, Eurofins
management is confident that the Group should be able to achieve
its objectives for the full year 2020, reaching 5% organic growth,
EUR 5bn in revenues, EUR 1.1bn in Adjusted EBITDA and EUR 500m of
Free Cash Flow to the Firm. Only the acquisition component that
those objectives included (EUR 200m revenues acquired at mid-year)
will probably not fully occur as M&A activities have been
slowed down due to the uncertainty caused by the pandemic.
- Following the equity raise completed in May 2020, and strong
cash flow generation in H1 2020, Eurofins is also moving forward
its objective to bring its leverage (net debt / adjusted EBITDA) to
ca. 2.5x by one year from 2021 to 2020 as this is almost already
achieved at June 30th. Beyond this, Eurofins plans to continue to
focus on further deleveraging towards the mid-point of its
historical 1.5-2.5x net debt to adjusted EBITDA range.
- Demand for Eurofins SAFER@WORKTM programmes and especially
COVID-19 RT-PCR testing has picked up strongly in the last two
weeks and it seems that this growth momentum could continue well
into H2.
- Eurofins Research & Development teams are working on
several additional testing and other products & solutions to
fight COVID-19 that they expect to launch in the next few weeks and
months.
Comments from the CEO, Dr. Gilles Martin:
“Had the COVID-19 pandemic not
occurred, Eurofins H1 results would of course have been better.
However, the talent, energy, speed of action and commitment of
Eurofins teams enabled a significant mitigation of the financial
impact of this crisis. As a result, in spite of the massive
disruptions caused by the COVID-19 pandemic, I am very pleased to
report another strong set of results for Eurofins in H1
2020.
Once again, Eurofins’
end-markets, which are part of essential supply chains, proved to
be more resilient than many other segments. In addition, I am proud
to lead one of the few organisations worldwide whose teams were
able to develop in record time such a comprehensive suite of
testing services and scientific solutions to support the efforts of
governments, healthcare authorities and companies around the globe
in their fight against COVID-19. Indeed, Eurofins employees and
scientists have now developed testing services, solutions and
products that can contribute to supporting over 20 million patients
per month.
Our mission at Eurofins is Testing for Life. As a world-leading
provider of clinical diagnostics, forensic, pharmaceutical, food
and environmental laboratory testing services, in record time
Eurofins has been able to draw on its scientific experience to
develop a comprehensive suite of SARS-CoV-2 tests in response to
the coronavirus pandemic. As an example, Eurofins has developed its
SAFER@WORK™ programme to help clients detect and contain COVID-19
occurrences at their sites including:
- Tests for the presence of the virus
- Tests for the presence of antibodies to the virus
- Environmental surface testing and wastewater testing as part of
the Eurofins SentinelTM offering for early detection of epidemic
clusters reoccurrences
- PPE (personal protective equipment) testing, certification and
inspection
Eurofins SAFER@WORK™
programmes can also make use of big data and AI technologies as
well as specific algorithms applied in real time to public data and
Eurofins anonymised testing result databases to assist in targeting
and informing testing locations and setting frequency of human
testing and associated risk management measures. Since launch in
June 2020, Eurofins teams have already signed over 500 SAFER@WORKTM
contracts and are currently negotiating 700 additional agreements
including some very large global contracts.
As research programmes
progress towards clinical trials, Eurofins Biopharmaceutical
services companies are also increasingly active in supporting
vaccines and pharmaceuticals products developers in their race to
develop novel tools to fight the virus.
Overall most of the Group’s
companies had a solid first half of the year despite the
significant disruptions caused by the COVID-19 pandemic,
demonstrating the very resilient and non-cyclical nature of most of
the markets we are exposed to. Nonetheless, the Group rapidly
responded to the economic uncertainty by taking significant actions
to conserve cash and mitigate the potential impact of a prolonged
economic downturn on our profitability and cash
generation.
Given the fast recovery in the
month of June 2020 of those of our core business activities that
were affected by the lockdowns, and the growing contribution of
COVID-19 testing and solutions to our revenues and results, we
remain confident that Eurofins should achieve its 2020 objectives.
While there remains considerable economic and pandemic
uncertainties, which make predictions about the future harder than
ever, for most of Eurofins’ companies the outlook for the remainder
of 2020 appears positive. Most of those affected by lockdowns in H1
2020 appear to have recovered to close to or above pre-pandemic
levels, at least on the profitability side where cost had to be
adjusted to lower revenues. As a result, while no certainty can
exist in such volatile environment, as can be judged today, the
outlook for H2 for Eurofins as a whole seems to be very
positive.
Following the recent equity
raise, bonds refinancing, and investment grade rating, Eurofins has
also a very solid and healthy financial structure and strengthened
access to broader and lower cost funding, which can only be an
asset for the Group to continue its innovation-fuelled organic
growth in uncertain times.
Longer term we are very
optimistic for the prospects of Eurofins markets. It seems probable
that the pandemic will further highlight the benefits of testing
for protecting the health of all, which may lead to further
legislation and public investments in these fields, including food
and environment testing. The need to develop diagnostics, vaccines
and biopharmaceutical products to combat a growing range of
pathogens should also continue to fuel investment in those areas
and growth at Eurofins Biopharmaceutical services and diagnostic
businesses.
Eurofins teams have shown
tremendous commitment, resourcefulness, and courage over the last
few months to continue providing essential services while
implementing social distancing and other safety measures at our
sites. I am very grateful for the dedication of the employees and
leaders of Eurofins companies in the face of often large new
difficulties at work and at home. The strong performance of
Eurofins in H1 2020 is testimony to the exceptional work ethics of
our teams and to their enthusiasm for their mission of Testing for
Life. I strongly believe that this flexibility, commitment and
speed of action is also a result of the decentral nature of
Eurofins which is made up of over 900 independent and agile
entrepreneurial companies.”
Table 1: Half Year 2020 Organic Growth
Calculation and Revenue Reconciliation
EURm (unless otherwise
stated)
H1 2019 reported revenues
2,168
+ H1 2019 acquisitions - revenue part not
consolidated in H1 2019 at H1 2019 FX rates
36
- H1 2019 revenues of discontinued
activities / disposals12
-13
= H1 2019 pro-forma revenues (at H1 2019
FX rates)
2,191
+ H1 2020 FX impact on H1 2019 pro-forma
revenues
12
= H1 2019 pro-forma revenues (at H1
2020 FX rates) (a)
2,203
H1 2020 organic scope* revenues (at H1
2020 FX rates) (b)
2,315
H1 2020 organic growth rate
(b/a-1)
5.1%
H1 2020 acquisitions - revenue part
consolidated in H1 2020 at H1 2020 FX rates
4
H1 2020 revenues of discontinued
activities / disposals12
4
H1 2020 reported revenues
2,323
* Organic scope consists of all companies
that were part of the Group as at 01/01/2020. This corresponds to
the 2019 pro-forma scope.
COVID-19 Update
As a world leader in the provision of clinical diagnostics,
forensic, pharmaceutical, food and environmental laboratory testing
services, Eurofins has been able to draw on the scientific
experience of its large number of subject matter experts to develop
a comprehensive suite of SARS-CoV-2 tests in response to the
coronavirus pandemic including:
- Real-time PCR and serology-based antibody tests
- Genomics & BioPharma services to help find and register new
drugs and vaccines
- Test kits, probes, primers and DNA controls
- Tests for environmental surfaces, PPE (personal protective
equipment) and medical devices
- Risk based testing programmes to help employees returning
safely to work
Eurofins was able to build up large capacity both in terms of in
vitro diagnostic (IVD) products development capabilities and
testing laboratories, as follows:
- PCR tests: up to 2 million tests per month
- Serologic tests: up to 2 million tests per month
- Serology testing kits: up to 10 million per month
- Cost effective RT-PCR test for mass screening of populations
with low virus prevalence
- Production of probes, primers & positive controls for
millions of RT-PCR kits
- Reagents for reliable RNA extraction prior to high sensitivity
PCR testing
- Overall, solutions and components enabling over 20 million
patient tests per month
In late May, Eurofins launched Eurofins SAFER@WORK™, a suite of
integrated risk-based solutions for businesses to keep staff and
customers safer during the COVID-19 pandemic designed to detect
SARS-CoV-2 in the workplace as early as possible often before
anyone is aware of being COVID-19 positive, and reduce
contamination risk of staff and customers in a practicable and cost
effective manner.
Eurofins SAFER@WORK™ includes testing for the presence of the
virus with RT-PCR tests, testing for the presence of antibodies to
the virus with serologic tests, Eurofins COVID-19 SentinelTM
environmental surface testing and waste water testing, medical
devices and personal protective equipment (masks, gloves, gowns,
drapes, respiratory protective devices and equipment) testing,
inspection and certification as well as additional consultative and
staff training services.
On 01 July 2020, Eurofins launched Eurofins COVID-19 SentinelTM
as part of its SAFER@WORK™ programme. Through a comprehensive range
of testing solutions, including waste water testing, work
environment surface and worn mask testing, Eurofins COVID-19
Sentinel™ provides an early warning of the presence of SARS-CoV-2
at a given site (e.g. a city, factories, education, government and
public service sites, nursing homes) before anyone may be aware of
COVID-19 presence on site and the virus spreads too broadly.
By combining environmental testing such as workplace surfaces
and wastewater testing, which form part of the Eurofins COVID-19
Sentinel™ portfolio of tests, together with risk-based clinical
testing, as well as relevant consultative, audit, training and
assurance services, Eurofins SAFER@WORK™ programmes allow for a
focus of human clinical testing where virus presence is likelier.
This approach reduces costs and supports health authorities to
allocate capacity constrained human COVID-19 testing where it is
most needed.
You may also visit
https://www.eurofins.com/covid-19-response/ and
https://www.eurofins.com/covid-19-response/safer-work/
for more information.
Eurofins expects to generate
very significant SAFER@WORKTM revenues in H2 2020 while helping
clients and governments prevent or control new infection
clusters.
Business Review
Table 2: Half Year 2020 Results Summary
*Not corrected for missing revenues and margin or insurance
payments related to the cyber-attack and fires at two sites
H1 2020
H1 2019
+/- % Adjusted Results
+/- % Reported Results
In EUR m except otherwise stated
Adjusted1 Results
*
Separately disclosed items2
Reported Results
Adjusted Results *
Separately disclosed items
Reported Results
Revenues
2,323
-
2,323
2,168
-
2,168
7.2%
7.2%
EBITDA3
493
-35
459
415
-44
371
18.9%
23.6%
EBITDA Margin (%)
21.2%
19.7%
19.1%
17.1%
+210bps
+260bps
EBITAS4
311
-52
259
251
-62
189
23.9%
37.2%
Net Profit6
187
-92
95
157
-98
59
19.2%
60.9%
Basic EPS7 (EUR)
10.30
-5.08
5.21
8.83
-5.52
3.31
16.6%
57.4%
Net Operating Cash Flow8
445
232
91.8%
Free Cash Flow to the Firm9
315
111
184.5%
Net capex13
130
121
7.1%
Net Debt14
2,584
3,241
-20.3%
Note: Definitions of the terms used can be found at the end of
this press release
Revenues
Revenues increased 7.2%
year-on-year to EUR 2,323m in H1 2020 vs. EUR 2,168m in H1 2019. H1
2020 organic growth10 stood at 5.1%.
Eurofins’ end-markets which
are part of essential supply chains proved to be more resilient
than many other business activities that were much more negatively
impacted by lockdown measures implemented in many countries. As a
result, demand for Eurofins testing services remained strong across
its main geographies, with Europe and North America posting revenue
growth above 7% and the Rest of the World above 4% in H1 2020. Even
though COVID-19 lockdown measures had a short-term negative impact
on revenues, especially in April, demand recovered fast in most
markets and combined with the comprehensive suite of COVID-19
testing activities and products developed by the Group, organic
growth picked up promptly especially in June.
Table 3: Geographical Revenue Breakdown
(EUR m)
H1 2020
As % of total
H1 2019
As % of total
Growth %
Europe
1,276
54.9%
1,189
54.9%
7.3%
North America
859
37.0%
798
36.8%
7.7%
Rest of the World
188
8.1%
181
8.3%
4.1%
Total
2,323
100.0%
2,168
100.0%
7.2%
It is unfortunately not
possible to break-up the estimated EUR 62m impact on revenues from
the 2019 cyber-attack between geographies and their respective
exchange and tax rates as this estimate was the average of several
methods, computed mostly at total Group level. The figures in the
above table and the below comments have therefore not been
corrected for any cyber-attack impact, nor for any COVID-19
impact.
Europe
Europe generated total revenues of EUR 1,276m in H1 2020,
representing 54.9% of total Group revenues, and an increase of 7.3%
vs. H1 2019.
Eurofins had a number of
innovations during the first half of 2020, including successes in
the increasingly important area of perfluorooctanesulfonic acid
(PFOS) and perfluorooctanoic acid (PFAS) testing, the development
of near-infrared spectroscopy (NIR) technology for soil testing and
the development of a polycyclic aromatic hydrocarbons (PAH) testing
method for meat and oil.
Also, in the global response
against the COVID-19 pandemic, Eurofins continues to be at the
forefront of innovation. Eurofins Biopharma Product Testing is
working in close cooperation with four different COVID-19 vaccine
developers and has invested heavily to add capacity to its
Nitrosamines testing platform to support the new European Medicinal
Agency requirements. As a result, Eurofins won several large
projects in this area.
Through the SAFER@WORK™
programme, Eurofins provided holistic customised advice to many of
its clients to help them minimise COVID-19 contamination risks
and/or to help them restart their activities.
By country, France generated revenues of EUR 403m in H1 2020, a
5.5% decrease vs. H1 2019. Food, Environment and Consumer Product
testing activities were severely impacted by lockdown early in Q1
and continuing in Q2 while BioPharma remained above Group average
with a strong start of the year in Q1. After being significantly
down as patients avoided doctors’ visits during the lockdown,
Clinical Diagnostics benefitted from a strong recovery in June and
COVID-19 revenues in Q2.
DACH countries (Germany,
Austria and Switzerland) generated revenues of EUR 259m in H1 2020,
a 6.2% increase vs. H1 2019, in line with Group average in H1 2020
thanks to a sharp recovery in Q2 and a double-digit revenue growth
in Environment testing services, Genomics, Clinical Diagnostics and
Eurofins Technologies activities driven by demand in COVID-19
testing services and IVD products. As an example, Formula 1 took
part in the SAFER@WORK™ programme, entrusting Eurofins to carry out
the necessary COVID-19 testing to prevent the potential spread of
the virus at their events and to allow a restart of their racing
season.
Other European countries generated revenues of EUR 613m in H1
2020, a 18.5% increase vs. H1 2019. With UK and Ireland posting a
strong double-digit revenue growth in H1 2020 despite a negative
performance in Food, Environment and Consumer Product testing
activities which was more than offset by an outstanding performance
of its BioPharma and Clinical Diagnostics activities in H1 2020
fuelled by a sharp surge of COVID-19 testing demand in Q2. Southern
Europe (Spain, Italy, Portugal) also posted a strong double-digit
revenue growth in H1 2020, mainly driven by a robust growth in its
BioPharma activities and a sharp surge of COVID-19 testing demand
in Q2, particularly in Spain.
North America
Eurofins’ business in North
America generated total revenues of EUR 859m in H1 2020,
representing 37.0% of total Group revenues, and an increase of 7.7%
vs. H1 2019. Revenue growth was particularly supported by BioPharma
testing activities in both Q1 and Q2 where demand for services
continues to be strong, and a significant surge of COVID-19 testing
demand accelerating in Q2. Performance in other segments was more
contrasted with Food testing activities posting revenue growth in
line with regional average and Environment testing posting a
negative growth in Q2 after a good start in Q1.
Eurofins Clinical Diagnostics
applied for and received three separate Emergency Use
Authorisations (EUA) from the U.S. Food and Drug Administration
(FDA) for the SARS-CoV-2 PCR tests offered by Eurofins Viracor,
Diatherix and Boston Heart Diagnostics. In order to make SARS-CoV-2
testing more broadly available, Eurofins Clinical Diagnostics in
the U.S. deployed several innovations including deployment of
multiplexed PCR SARS-CoV-2 testing with other viral pathogens,
including influenza A, B and H1N1, validation of multiple specimen
types (including nasopharyngeal swabs, oropharyngeal swabs, nasal
swabs, bronchoalveolar lavages, nasal washes and nasopharyngeal
washes), and the launch of SARS-CoV-2 IgG antibody testing for
provider-collected capillary blood as dried blood spot, eliminating
the need for traditional phlebotomy.
Eurofins Environment Testing
business line supported the Group’s COVID-19 offering via Eurofins
COVID-19 SentinelTM testing of environmental surfaces, food
surfaces, wastewater and Indoor Air Quality (IAQ).
Eurofins Technologies in the
U.S. (Gold Standard Diagnostics and Abraxis) contributed to the
COVID-19 offering via in-house production of RNA extraction kits
(for environmental swabs, wastewater and clinical COVID testing
applications), and launch of multiple antibody and immunoassays for
direct pathogen detection.
Eurofins Lancaster
Laboratories continues to be at the forefront of all major efforts
in drugs and vaccines for COVID-19, working closely with
pharmaceutical clients to help deliver effective anti-virals and
vaccines as fast as possible.
In April, Transplant Genomics
Inc. (TGI) announced TruGraf Long-term clinical Outcomes (TRULO),
which is a prospective, multicentre observational registry study,
designed to evaluate post-transplant clinical outcomes in
recipients of kidney transplants who are undergoing serial TruGraf
testing. TRULO will be the first study to provide long-term data,
beyond two years post-transplant, regarding the benefits of
non-invasive surveillance of stable kidney transplant recipients to
rule out silent subclinical rejection.
Rest of the World
Eurofins’ business in the Rest of the World generated revenues
of EUR 188m in H1 2020, a 4.1% increase vs. H1 2019, representing
8.1% of total Group revenues. Revenue growth in H1 2020 was driven
in India by a surge of demand in both its CDMO and Genomics
services business lines with the production of probes and primers
for research laboratories developing vaccines and therapeutics
against COVID-19.
Eurofins was the supplier of
probes, primers and genes for the first Indian COVID-19 RT-PCR test
kit that was approved. The Consumer Product Testing business
developed capabilities in-house to initiate testing of sanitisers,
masks and coveralls, with India emerging as a large source of
supplies for PPE kits globally. In Japan, demand is surging for
primers and probes to detect SARS-CoV-2 to be widely used for the
qPCR tests nationwide. The
United Arab Emirates (UAE) government appointed Eurofins to provide
COVID-19 passenger pre-screening testing prior to travelling to the
UAE to ensure residents and travellers are kept as safe as possible
during this pandemic.
Profitability
In spite of the negative
impact of lockdowns on revenues and profits of several laboratories
in H1 2020, EBITDA increased 23.6% year-on-year to EUR 459m
resulting in a 19.7% EBITDA margin, a 260bps increase year-on-year,
showing a continued margin improvement driven by (i) resilient
demand for testing services addressing essential supply chains,
(ii) the benefit of investments made in the 2015-2020
infrastructure programme to build an efficient hub and spoke
laboratories network, (iii) the growing demand for COVID-19 testing
capacity built up by Eurofins and (iv) prudent financial measures
put in place to control costs and protect cash at the onset of the
pandemic.
Separately disclosed items
(SDI) decreased from EUR 44m in H1 2019 to EUR 35m in H1 2020 and
as a proportion of Adjusted EBITDA from 10.6% in H1 2019 to 7.1% in
H1 2020, in line with our 2020 objectives:
- Operating losses in start-up laboratories and companies
decreased 15% from EUR 28m in H1 2019 to EUR 24m in H1 2020 in
spite of significant R&D and sales cost ramp up at TGI to
launch TRAC and TruGraf transplant rejection detection tests;
- One-off costs from integration and reorganisation of recently
acquired companies decreased 30% from EUR 16m in H1 2019 to EUR 11m
in H1 2020, reflecting as planned both a more limited M&A
activity and the good progress made on the integration and
reorganisation of large acquisitions completed in the last two or
three years.
Adjusted EBITDA increased
18.9% year-on-year to EUR 493m resulting in a 21.2% Adjusted EBITDA
margin, a 210bps increase year-on-year.
The mature scope11 of Eurofins
laboratories generated revenues of EUR 2,200m representing 94.7% of
Group revenues in H1 2020 (vs 93.2% in H1 2019) with an Adjusted
EBITDA margin of 22.4% vs. 20.5% in H1 2019, a 190bps increase
year-on-year. Non-mature laboratories therefore represent an
increasingly negligible portion of Group revenues.
Table 4: Breakdown of Reported EBITDA by Operating
Segment
(EURm)
H1 2020
% of segment revenues
H1 2019
% of segment revenues
Growth %
Europe
244
19.1%
192
16.1%
27.2%
North America
227
26.4%
176
22.0%
29.3%
Rest of the World
35
18.8%
30
16.8%
16.1%
Other1
-48
-
-27
-
Total
459
19.7%
371
17.1%
23.6%
(1) Other corresponds to Group Service
Centres
Reported EBITDA for H1 2020 by operating segment is hard to
compare year-on-year due to the impacts of the cyber-attack in 2019
and fires at two laboratories in 2020. Nevertheless, even if
correcting for these impacts at Group level, Eurofins margin would
have increased. As reported, all regions recorded a significant
improvement in both value and margin year-on-year with Europe
EBITDA increasing 27.2% and 300bps year-on-year, North America
EBITDA increasing 29.3% and 440bps year-on-year and ROW EBITDA
increasing by 16.1% and 200bps, while the increase in cost of Group
Service Centres was mostly due to IT spend.
Depreciation and amortisation increased to 8.6% of revenues in
H1 2020 vs. 8.4% in H1 2019 mainly due to significant investments
in its laboratory and IT infrastructure completed in the 2017-2019
period.
Finance costs amounted to EUR 51m, representing 2.2% of revenues
flat vs. H1 2019.
The income tax expense increased to EUR 56m in H1 2020 vs EUR
30m in H1 2019, due to the much higher taxable income recorded in
H1 2020 and a slightly higher average tax rate for the period.
However, income tax paid was significantly lower in H1 2020 at EUR
18m thanks to temporary support measures put in place by some
governments. Most of the short-term positive effect of these cash
deferral measures in H1 should unwind in H2 2020.
Reported net profit6 increased 60.9% to EUR 95m in H1 2020 vs.
EUR 59m in H1 2019. Reported basic earnings per share (EPS)7
increased 57.4% to EUR 5.21 vs. EUR 3.31 in H1 2019 and Adjusted
basic EPS by 16.6% in H1 2020 to EUR 10.30 vs. EUR 8.83 in H1
2019.
Cash Flow & Financing
Table 5: Cash Flows Reconciliation
(EURm)
H1 2020 reported
H1 2019 reported
Y-o-Y variation
Net Cash from Operations
445
232
+91.8%
Net Cash from Investing
-205
-187
+9.8%
Free Cash Flow to the Firm
315
111
+184.5%
Net Cash from Financing
85
-262
n/a
Net increase (decrease) in Cash and
cash equivalents
319
-212
n/a
Net working capital15 stood at
5.3% of revenues at the end of June 2020. Net operating cash flow8
increased by 91.8% in H1 2020, thanks to the strong growth of
profits and a very favourable variation of net working capital
(NWC) which is positively impacted by government deferrals of
social contributions and taxes, negatively impacted by stocks of
reagents to secure COVID testing supply as well as a very negative
NWC variation in H1 2019 due to the cyber-attack.
Free cash flow to the firm9
increased +184.5% to EUR 315m including a fairly stable spend in
capital expenditures (EUR 130m in H1 2020 vs. EUR 121m in H1 2019)
as COVID solutions investments compensated for CAPEX reductions
implemented in businesses affected by the lockdowns and working
capital improved from 6.4% of sales as at end of June 2019 to 5.3%
of sales as at end of June 2020 although stock creation to secure
COVID-19 testing supplies used up a significant part of the cash
generated by tax and social charges deferrals by
governments.
Early May, Eurofins successfully issued a EUR 600m senior
unsecured Euro bond (the “New Bond”). The New Bond has a 6.2 years
maturity (due on 17 July 2026) and bears an annual fixed rate of
3.75%. The transaction was well received and more than two times
over-subscribed.
The purpose of this refinancing exercise was to increase the
average maturity of Eurofins’ debt instruments and to proactively
manage the refinancing of its EUR 500m Bonds (ISIN: XS1174211471)
due 27 January 2022 and its EUR 500M Bonds (ISIN: XS1268496640) due
30 January 2023, the “Existing Bonds”. As at the expiration
deadline of the tender offer on the Existing Bonds, Eurofins had
received valid tenders of EUR 332m in aggregate principal amount of
the Existing Bonds. As a result of this transaction, the nominal
amount of Existing Bonds currently outstanding is respectively EUR
314m for the 2022 Bonds and EUR 354m for the 2023 Bonds.
Net debt at the end of June
2020 decreased significantly to EUR 2,584m from EUR 3,245m at the
end of December 2019 as a result of a strong cash flow generation
in H1 2020 and the equity issuance successfully completed in May
2020 (gross proceeds of EUR 535m) which enabled short term
borrowings (including IFRS16) to decrease to EUR 267m including EUR
135m of commercial paper at the end of June 2020, vs. EUR 455m and
EUR 317m respectively at the end of December 2019.
As a result, leverage (net debt to adjusted L12M EBITDA)
decreased significantly to 2.53x at the end of June 2020 vs. 3.24x
at the end of December 2019, a reduction of 0.7x. Cash and
equivalents amounted to EUR 615m at the end of June 2020 vs. EUR
297m at the end of December 2019.
As of 30 June 2020, Eurofins had access to over EUR 1bn
committed mid-term (ca. 3.2 years average life) bilateral bank
credit lines in addition to those used to back commercial paper
drawings. None of the bilateral credit lines is maturing in 2020
nor in 2021.
On 24 July 2020, Moody’s assigned an investment grade credit
rating of Baa3 with a stable outlook to Eurofins. Eurofins
has been active in the debt capital markets for many years as one
of the major unrated issuers in Europe with a solid track record.
With this initial public credit rating, Eurofins should have access
to a broader investor base and better conditions from debt capital
markets. The rating has already had a significant positive effect
on the credit spreads of most Eurofins senior unsecured Euro bonds
and hybrid instruments traded on the secondary market.
Acquisitions and disposals
During the first six months of 2020, the Group completed seven
acquisitions which generated total revenues of EUR 20m in 2019 with
approximately 200 employees.
As announced in its Q1 trading update on last 28 April, the
M&A activity was considerably slowed down as a matter of
caution and as the Group’s management team has been focusing its
time and resources on its existing laboratory network and its
contribution to the global response to the COVID-19 pandemic.
In February 2020, TestAmerica Air Emission Corporation divested
its Stack Emission testing Metco business (annual sales of EUR 5m
in 2019).
Governance
The Group continued to make
progress in the area of Environmental, Social and Governance (ESG)
practices in H1 2020.
With the objective to further
strengthen Eurofins’ Board of directors, Mr. Pascal Rakovsky was
appointed by the AGM held on 26 June 2020 as a fourth independent
director to the Board increasing its size to seven members.
Considering his background as a former lead audit partner of
PricewaterhouseCoopers Audit for more than 20 years, Mr. Rakovsky
will be chairing the audit committee.
ESG rating
ISS’ (Institutional
Shareholder Services) is a proxy advisor and ESG rating agency
whose “QualityScore” is used by institutional investors to identify
and measure corporate governance and Environmental & Social risk in their
current and potential portfolio of investments. The scores indicate
decile rank relative to index or region. A decile score of 1
indicates low governance/environment/social risk, while a decile
score of 10 indicates high governance/environment/social risk
(hence the lower the number, the better the score).
Based on the latest
information disclosed in Eurofins 2019 annual report, ISS
(Institutional Shareholder Services) proxy advisor and ESG rating
agency upgraded the Governance ”QualityScore” of Eurofins from 5 to
3, while the Environment and Social “QualityScore” remained
unchanged at 2.
Carbon footprint reduction programmes
As part of its initiatives to
further reduce its net carbon footprint, beyond multiple emission
reductions initiatives at its laboratories, Eurofins has started
funding its investment in the Livelihoods Carbon Fund II in H1 2020
aimed at generating 671ktons of carbon credits for Eurofins by
2041.
Infrastructure Programme
In the first six months of 2020, Eurofins has added more than
10,000m2 of laboratory, office and storage space through delivery
of building projects, new acquisitions, but also through
consolidation of sites into new state-of-the-art laboratories.
The construction of the new flagship food and dietary
supplements testing laboratory in Madison, Wisconsin, U.S.A. with a
size of over 10,000m2 is progressing well with a confirmed schedule
to conclude in December of 2020, and with occupancy slated for
January 2021, six weeks ahead of schedule. The U.S. Environment
business commissioned and opened a specialist fast turnaround time
laboratory in Rhode Island to enhance penetration of the New
England market.
The Group has also continued to secure its existing sites for
the long-term, purchasing the 11,500m2 building in Vimodrome, Italy
used by Biopharma Product Testing, and the 840m2 building used by
Environment Testing US in Pasadena by the Eurofins J3 Resources,
Inc acquired in 2019.
Eurofins is well on track to deliver its 2020 and 2021 plans for
expansion and modernisation of 100,000m2 laboratories surfaces.
COVID-19 testing & reagents, and 02 June 2019
Cyber-attack impacts on revenues
- Even when correcting 2019 revenues for the estimated impact of
the criminal cyber-attack that hit the Group on 02 June 2019 and
after an organic revenue growth of 4.1% in Q1 2020 in spite of the
effects of lockdowns, Eurofins still generated significant positive
organic growth in H1 and Q2 2020.
- Indeed, when correcting 2019 and 2020 revenues for EUR 62
million estimated lost revenues in June 2019 and EUR 69m in total
in 2019 following the 02 June 2019 cyber-attack and the impact of
fires in two laboratories in the UK and the Netherlands, corrected
organic growth for the full year 2019 would be 5.5% (6.3% excluding
Boston Heart Diagnostics) and corrected organic growth would still
stand at 2.5% in H1 2020.
- COVID-19 testing services and products revenues have been
growing significantly since March 2020. As initially mostly
government laboratories were carrying out these tests in several
European countries and the first pandemic peaks and associated
testing demand subsided in June in most countries, the large
COVID-19 testing and reagent capacity created by Eurofins by June
was only moderately utilised in Q2. As a result, these additional
revenues did not fully compensate the lost organic growth due to
the lockdowns in Q2. However, since then, as the pandemic continues
to expand in many countries and more Eurofins laboratories become
approved by local governments to carry out such tests, demand is
starting to increase strongly. As a result, COVID-19 and reagents
revenues exceeded EUR 55m in the month of July 2020 only and the
number of samples tested is currently increasing significantly week
on week.
- As unfortunately the COVID pandemic appears to further expand,
it continues to seem likely that during H2 2020, the associated
testing revenues will more than compensate for the missing
cyber-attack corrected organic growth in H1 (about EUR 50m to reach
5%). As a result, over the whole year 2020, even when correcting
for the cyber-attack and fire impacts, it continues to appear
probable (as mentioned at the time of Q1 results publication) that
Eurofins may reach or exceed its 5% organic growth objective.
- Eurofins core business appears to be very resilient and agile
due to its choice of end markets and decentral entrepreneurial
model. In spite of the negative impact of lockdowns on a number of
Eurofins companies even when (i) excluding COVID-19 testing and
reagent revenues and (ii) correcting for these cyber-attack and
fire impacts, it also seems likely that over the whole year 2020,
Eurofins will generate significant positive organic growth as it
did at the height of the great recession in 2009.
- Eurofins has received ca. EUR 10 million proceeds from its
insurances in May 2020 to compensate for lost gross margin
resulting from the 02 June 2019 cyber-attack and continues to
expect to receive significant additional refunds in H2 2020.
Post-Closing Events
Change of scope:
Since 01 July 2020, Eurofins has completed the acquisition of
six companies, of which two environmental laboratories in the
United States and Australia, one clinical diagnostic laboratory in
France and three other laboratories in the United Kingdom, China
and Finland.
The total annual revenues of these acquisitions were close to
EUR 23m in 2019 for an acquisition price paid of ca. EUR 25m.
- Adjusted - reflects the ongoing performance of the mature11 and
recurring activities excluding “separately disclosed items2”.
- Separately disclosed items - includes one-off costs from
integration, reorganisation, discontinued operations12 and 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 charge5,
impairment of goodwill, amortisation of acquired intangible assets,
negative goodwill, loss/gain on disposal and transaction costs
related to acquisitions as well as income from reversal of such
costs and from unused amounts due for business acquisitions, net
finance costs related to borrowing and investing excess cash and
one-off financial effects (net of finance income) and the related
tax effects.
- EBITDA – Earnings before interest, taxes, depreciation and
amortisation, share-based payment charge, impairment of goodwill,
amortisation of acquired intangible assets, negative goodwill,
loss/gain on disposal and transaction costs related to acquisitions
as well as income from reversal of such costs and from unused
amounts due for business acquisitions.
- EBITAS – EBITDA less depreciation and amortisation.
- Share-based payment charge and acquisition-related expenses,
net – Share-based payment charge, impairment of goodwill,
amortisation of acquired intangible assets, loss/gain on disposal,
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.
- Net Profit - Net profit for equity holders after
non-controlling interests but before payment to Hybrid capital
holders.
- Basic EPS – earnings per share (basic) total (to equity holders
before payment of dividends to Hybrid capital holders).
- Net Operating Cash Flow – Net cash provided by operating
activities.
- Free Cash Flow to the Firm - Net cash provided by operating
activities, less Net capex.
- 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 from 01 January Y-1. All revenues from businesses
acquired since 01 January Y are excluded from the calculation.
- 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.
- Discontinued activities / disposals: 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.
Disposals correspond to the sale by Eurofins of business assets to
a third party. For more information, please refer to Note 3.18 of
the Consolidated Financial Statements for the year ended 31
December 2019.
- Net capex – Purchase of intangible assets (incl.
capitalisation) property, plant and equipment, less proceeds on
sale of same assets.
- Net debt – Borrowings, less cash and cash equivalents.
- 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.
- Adjusted last twelve months EBITDA – corrected for the
estimated impact of the 2019 cyber-attack for both periods
Conference Call
Eurofins will hold a conference call with analysts and investors
today at 15:00 pm CET 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.
No need to dial in. Join the conference call from any
device: https://eurofins.eventcdn.net/202008h1/register/
Alternatively, you may dial-in to the conference call via
telephone using one of the numbers below (no pin code is
required):
UK +44 3333 00 90 32 U.S. +1 833 526 8380 France +33 1707 50 775
Germany +49 6922 22 20 377
About Eurofins – the global leader in bio-analysis
Eurofins Scientific, through its subsidiaries (hereinafter
“Eurofins” or “the Group”), believes it is the global leader in
food, environmental, pharmaceutical and cosmetics products testing
and in agroscience CRO services. It is also one of the global
independent market leaders in certain testing and laboratory
services for genomics, discovery pharmacology, forensics, CDMO,
advanced material sciences and in the support of clinical studies.
In addition, Eurofins is one of the leading global emerging players
in esoteric and molecular clinical diagnostic testing. With over
48,000 staff across a network of more than 900 independent
companies in over 50 countries generally specialised by end
client markets and operating more than 800 laboratories,
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. The Group’s objective is to provide customers
with high-quality and innovative services, accurate results on time
and, when requested, expert advice by its highly-qualified
staff.
Eurofins is committed to pursuing its dynamic growth strategy by
expanding both 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 and a very large
range of testing methods.
As one of the most innovative and quality-oriented international
groups in its industry, Eurofins is ideally positioned to support
its clients’ increasingly stringent quality and safety standards
and the increasing demands of regulatory authorities and healthcare
practitioners around the world.
Shares in Eurofins Scientific are listed on the Euronext Paris
Stock Exchange (ISIN FR0000038259, 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.
Eurofins provides in the Income Statement certain alternative
performance measures (non-IFRS information such as “Adjusted
Results2 and Separately Disclosed Items3”) that exclude certain
items because of the nature of these items and the impact they have
on the analysis of underlying business performance and trends.
In addition, Eurofins shows the following measures: “EBITDA3,
EBITAS4 in the Income Statement and Organic growth10” with the
objective to be close and consistent with the information used in
internal Group reporting to measure the performance of Group
companies and information published by other companies in the
sector.
Management believes that providing these APMs (Alternative
Performance Measures) enhances investors' understanding of the
company’s core operating results and future prospects, consistent
with how management measures and forecasts the company’s
performance, especially when comparing such results to previous
periods or forecasts and to the performance of our competitors.
This information should be considered in addition to, but not in
lieu of, information prepared in accordance with IFRS. These APMs
are described in more detail in the Condensed Interim Consolidated
Financial Statements for the period ended 30 June 2020 in Note 1
and in the Consolidated Financial Statements 2019 in Notes 1.27 and
1.28.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200805006126/en/
For more information, please visit www.eurofins.com or
contact: Investor Relations Eurofins Scientific SE Phone: +32 2
766 1620 E-mail: ir@eurofins.com
Eurofins Scientific (EU:ERF)
Graphique Historique de l'Action
De Fév 2024 à Mar 2024
Eurofins Scientific (EU:ERF)
Graphique Historique de l'Action
De Mar 2023 à Mar 2024