Q3 / First Nine Months 2020 Management Update - 22 October 2020 - Eurofins
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Q3 / First Nine Months 2020
Management Update
22 October 2020
www.eurofins.com
Disclaimer
The statements made during this presentation or as response to questions during the Question & Answers period that are
not historical facts are forward looking statements. Furthermore, estimates and judgements may be made based on market
and competitive information available at a certain time. Forward looking statements and estimates represent the judgement
of Eurofins Scientific’s management and involve risks and uncertainties including, but not limited to, risks associated with the
inherent uncertainty of research, product/service development and commercialisation, the impact of competitive products
and services, patents and other risk uncertainties, including those detailed from time to time in period reports, including
prospectus and annual reports filed by Eurofins Scientific with the Luxembourg Stock Exchange and regulatory authorities,
that can cause actual results to differ materially from those projected. Eurofins Scientific expressly disclaims any obligation
or intention to release publicly any updates or revisions to any forward looking statement or estimate.
Eurofins provides in the Income Statement certain alternative performance measures (non-IFRS information as “Adjusted
Results and Separately Disclosed Items”) that excludes certain items because of the nature of these items and the impact
they have on the analysis of underlying business performance and trends. (Please refer to description of these terms in the
Company’s Annual Report). The management believes that providing this information 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 objectives 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.
This presentation does not constitute or form part of, and should not be construed as, an offer or invitation to subscribe for or
purchase securities in Eurofins Scientific S.E. and neither this document nor anything contained or referred to in it shall form
the basis of, or be relied on in connection with, any offer or commitment whatsoever.
Analyst forecasts quoted are based on published analyst views. They are the responsibility of the investment banks which
publish those forecasts and should not be interpreted as representing the views or expectations of Eurofins Scientific or the
Eurofins Scientific management. In particular, they do not constitute a profit forecast or estimate or trading statement by
Eurofins Scientific S.E. Similarly, objectives presented are only objectives and may not be achieved in reality, potentially by a
wide margin, due to a variety of factors.
2
Agenda – Q3/NM 2020 Results Presentation
▪ Q3/NM Financial Highlights
▪ Business Review
▪ Outlook
▪ Q&A
▪ Appendix
3
Q3/NM 2020 Financial Highlights
Q3 2020 Reported Revenues €1,413m +21.0% yoy
+22.7% organic growth (OG)
+21.9% OG corrected for cyber-attack & fires
NM 2020 Reported Revenues €3,736m +12.0% yoy
+11.1% organic growth
+9.0% OG corrected for cyber-attack & fires
Successful refinancing of the Schuldschein loans maturing in July 2022. Average life of senior
debt instruments extended from 3.3 years to 4.1 years.
Ten-for-one stock split to improve trading liquidity and make stock ownership more accessible.
Proposal to EGM on 16 November 2020.
4
Q3/NM 2020 Business Highlights
Eurofins’ end markets proved to be very resilient once again
➢ In spite of continued COVID-19 pandemic related business disruptions, Eurofins core
business* returned to small positive organic growth in Q3 2020
➢ Many of Eurofins’ core businesses* across Food, Environment and BioPharma testing
achieved more than 5% organic growth in Q3 2020
➢ Food service, restaurants, hospitality, travel and activities requiring on-site sampling or
patient’s enrolment for clinical trials still see many restrictions in several countries and thus
continued to require less testing services than usual in Q3 2020. Clients relationships
remain strong and a resumption of these activities to normal is expected when the pandemic
is brought under control
Eurofins’ financial performance year-to-date is concrete evidence of its positioning in attractive
end markets as well as the results of years of investments to build a network of state-of-the-art
laboratories and leading R&D teams which enabled the Group to mobilise quickly and develop
solutions to support healthcare authorities and its clients fighting the pandemic
➢ A Eurofins company received a FDA EUA** for their At Home COVID-19 Nasal PCR test
which will help remove sampling bottlenecks to access gold standard PCR testing
* Core business excludes any COVID-19 clinical testing and reagents revenues
** U.S. Food and Drug Administration (FDA); Emergency Use Authorisation (EUA) 5
Agenda – Q3/NM 2020 Results Presentation
▪ Q3/NM Financial Highlights
▪ Business Review
▪ Outlook
▪ Q&A
▪ Appendix
6
COVID-19 related business developments (1/3)
Over 900 contracts signed since the launch of the programme on 29/05/2020,
another 1,100 agreements under negotiation including some very large global
contracts
Eurofins is a key provider of COVID-19 testing. Some examples
include:
• Testing for the Netherlands and Belgian governments
• Testing for all entry points into Bavaria, Germany (ie. airports,
train stations, highway toll booth)
• Testing for a number of players in the travel industry:
• Airports: Brussels Zaventem, Munich, Paris Charles de
Gaulle Airport
• Airlines: Emirates, Etihad, Air France
• Cruise lines: Royal Cruise Lines
7
COVID-19 related business developments (2/3)
Eurofins U.S. Clinical Diagnostics launched FDA EUA1-authorised At-
Home COVID-19 Nasal PCR test
• Self-collection kit gives consumers painless, convenient and quick
option to detect the virus from the comfort of their home
• Results provided via email within 24 hours of sample receipt
• Removes sampling bottlenecks to access gold standard PCR testing
Eurofins Diatherix launched Flu Plus
• New test to identify the most prevalent viruses associated with respiratory illnesses
• Identifies SARS-CoV-2, Influenza A, A(H1N1)pdm09, Influenza B, Respiratory
Syncytial Virus (A&B), and Human Rhinovirus/Enterovirus
1 Emergency Use Authorization (EUA)
8COVID-19 related business developments (3/3)
Eurofins scientists published robust method1 to analyse SARS-CoV-2 in wastewater samples
• Offered as part of Eurofins COVID-19 Sentinel™ programme, wastewater testing allows for early
detection of COVID-19 presence at a given site, before the virus spreads too broadly or as a way to
monitor the effectiveness of containment measures put in place
Studies2 published by Eurofins Ingenasa and NYU Grossman School
of Medicine & NYU Langone Health demonstrated strong correlation
between Eurofins’ antibody detection assays and seroneutralization
capability of the antibodies detected
• Detection of the presence of acquired immunity or monitoring
vaccine induced immunity in individuals will be an important task in
the fight against the pandemic
1 SentinelTM Wastewater test 2 Seroneutralization Studies
9Core business Q3 2020 developments
➢ Eurofins Discovery expanded its chemistry capacity to serve customer demand in the growing market of outsourced drug
discovery with a new building nearing completion at Eurofins Discovery’s flagship chemistry site at Eurofins Villapharma
in Murcia, Spain
➢ Eurofins Technologies announced world’s first AOAC Performance Tested MethodsSM status for a screening method to
detect aflatoxin M1 in milk commodities
➢ Eurofins’ Expertise Centre for Complex Carbohydrates & Chemistry (CCC) announced the development and availability
of a new method for the identification of fructans in infant formula and adult nutritionals matrices. CCC co-developed, in
close co-operation with Nestlé Research (Lausanne, Switzerland), this novel method and managed the necessary
collaborative study to fulfil the specific official standard method performance requirements
➢ As research programmes progress towards clinical trials, Eurofins Biopharmaceutical services companies are
increasingly active in supporting COVID-19 vaccines and pharmaceutical products developers
10Q3/NM 2020 M&A update
After achieving this position in Europe, Eurofins became the market leader in non-
invasive prenatal testing (NIPT) in Japan with the acquisition of GeneTech Inc.
• a leading player in genetic analysis in Japan with over €10m revenues in 2019
Eurofins became the market leader in environment testing in
Taiwan with the acquisition of the SunDream Group
• the second largest player in the market employing over 350 staff
These transactions reflect Eurofins’ increasing focus on expansion in the Asia-Pacific region
11Agenda – Q3/NM 2020 Results Presentation
▪ Q3/NM Financial Highlights
▪ Business Review
▪ Outlook
▪ Q&A
▪ Appendix
12Eurofins’ 5-year investment programme update
Eurofins has achieved leading market positions:
➢ Global leader in fast growing Environment, Food, BioPharma & Cosmetics Products Testing
➢ Leading start-up position in several promising niches
• Strong global position in Molecular & Genomics Clinical Testing
• Top 3 global player in Genomic Services
• #1 worldwide in Material Sciences Testing, Agroscience CRO services & BioPharma
Discovery services
• Fast growing diagnostics products business line
➢ 5-year investment programme to build unique state of the art fully digitalised hub & spoke
laboratory network will be completed soon
13Eurofins 2022 objectives (excluding any COVID-19 testing &
reagents revenues or successor multi pathogens clinical testing)
Based on leading market positions already achieved:
➢ Eurofins is setting new objectives for 2022 and beyond (at constant FX rates as of 30/09/2020):
• €5.7bn revenues with core business growing 5% organically per annum from 2019
• €1.35bn Adjusted EBITDA
• €800m of Free Cash Flow to the Firm
• Leverage below 2x and Investment Grade rated long term funding
• Above market standard governance ratings
➢ COVID-19 pandemic is likely to add to long term growth potential of Eurofins markets
➢ Continued >5% organic growth and margin & Free Cash Flow improvements beyond 2022
14New objective to achieve €5.7bn reported revenues in 2022
Illustration of Eurofins’ 2020-2022 revenues objectives
2020 and 2021 objectives are left unchanged for now due to uncertainty on COVID-19 pandemic evolution
and may be significantly exceeded
2022 objective assumes no COVID-19 clinical testing & reagents revenues
* Objectives include €150m from acquisitions in 2020 & 2021 and €200m in 2022 (€50m, €75m and €100m, revenues consolidated each year respectively). All objectives include IFRS 16 and for 2022 are
set at constant FX rates as of 30/09/2020. 2022 objectives assume the pandemic is brought under control and no COVID-19 related impact (neither positive nor negative) and catch-up of lockdown
related revenue losses occurring in 2020 & 2021.
** Pro-forma revenue.
*** Could be significantly higher due to COVID-19 testing & reagents revenues. 2020 & 2021 objectives were set at constant average 2019 FX rates.
**** Organic growth (OG) calculated on pro-forma Y-1 revenues of core business excluding COVID-19 impacts.
15Outlook
➢ Given the uncertainty on the net impact of the COVID-19 pandemic in 2020 & 2021, it was decided to leave objectives for those two years
unchanged for now (2020-21 objectives were set before onset of the COVID-19 pandemic at constant average 2019 FX rates)
➢ 2022 should hopefully be the first year without any COVID-19 related impact (neither positive nor negative impacts)
➢ As can be judged today, Eurofins management is confident that the Group should be able to achieve the following objectives*:
Management commentary
FY 2020 – unchanged: Actual results will be higher in 2020:
• Less M&A (€150m FY pro-forma vs. €200m)
▪ 5% organic growth • Core business growth 5%
▪ Further margin & Free Cash Flow improvements
* Objectives include €150m from acquisitions in 2020 & 2021 and €200m in 2022 (€50m, €75m and €100m, revenues consolidated each year respectively). All objectives include IFRS 16 and for 2022 are set at
constant FX rates as of 30/09/2020. 2020 & 2021 objectives were set at constant average 2019 FX rates. 2022 objectives assume the pandemic is brought under control and no COVID-19 related impact
(neither positive nor negative) and catch-up of lockdown related revenue losses occurring in 2020 & 2021.
** Free Cash Flow to the Firm objectives updated to reflect the classification used in the H1 2020 restated cash flow statement.
16Conclusion
Eurofins’ financial performance is concrete evidence of the Group’s positioning in attractive end markets,
agility and adaptability, as well as results of years of investments to build a network of state-of-the-art
laboratories and leading R&D teams:
➢ Exceeded 22% organic growth in Q3 2020 (over 11% in NM 2020)
➢ Mobilised quickly to develop solutions to support healthcare authorities and its clients fighting the
pandemic
➢ Eurofins core business (excluding any COVID-19 clinical testing and reagents revenues) returned to
small positive organic growth in Q3 2020
➢ A Eurofins company received a FDA EUA for their At Home COVID-19 Nasal PCR test which will help remove
sampling bottlenecks to access gold standard PCR testing
17Agenda – Q3/NM 2020 Results Presentation
Q&A
18Agenda – Q3/NM 2020 Results Presentation
▪ Q3/NM Financial Highlights
▪ Business Review
▪ Outlook
▪ Q&A
▪ Appendix
19Eurofins accounting practices are in line with its
more mature TICS peers and the Business
Services industry
Credit Suisse research – Accounting Scorecard Breakdown (Score 0-10, best score = 10)
9
8
7
6
5
4
3
2
1
0
Scorecard Auditor focus Pension deficit Debtor days Accrued/Deferred FCF to Equity Avg asset age Exceptionals Provisions
breakdown income and conversion from
Overall Score accruals EBIT
Eurofins TICS ex. ERF* Business Services
➢ Exceptionals/Separately Disclosed Items (SDIs) – should continue to decrease gradually as the Group
completes:
➢ 2015-2020 investment programme;
➢ network reorganisations linked to the significant acquisitions completed in 2017-2018; and
➢ start-ups of Programme 3 reach break-even.
➢ FCF conversion – as the aforementioned dilutive investments programmes are completed, Eurofins’
shareholders should begin to reap the benefits from increased profitability and cash flow generation
* TICS ex. ERF = Applus, Bureau Veritas, Intertek, SGS
20Revenues bridge 2019-2022, without COVID-19 impacts*
Objectives*
2020-2021 revenues will in reality be different:
• Higher due to COVID-19 testing & reagents revenues
(€bn) • Lower due to lockdowns and travel/eat-out restrictions
6.0
+
- €5.7bn*
5.5
30/09/2020 FX negative
impact of €0.12bn
5.0
4.5 €4.4bn
4.0
FY19 Reported M&A (not Cyber lost PF19 Adj. for 5% OG** M&A PF PF20 5% OG** M&A PF PF21 5% OG** M&A FY22 Reported
(at 30/09/2020 consolidated) revenues cyber (consolidated)
FX)
* Objectives include €150m from acquisitions in 2020 & 2021 and €200m in 2022 (€50m, €75m and €100m, revenues consolidated each year respectively). All objectives include IFRS 16 and for 2022 are set at constant FX rates
as of 30/09/2020. 2020 & 2021 objectives were set at constant average 2019 FX rates. 2022 objectives assume the pandemic is brought under control and no COVID-19 related impact (neither positive nor negative) and
catch-up of lockdown related revenue losses occurring in 2020 & 2021.
** Organic growth (OG) calculated on pro-forma Y-1 revenues excluding COVID-19 impacts.
21Free Cash Flow to the Firm (FCFF):
2020, 2021 and 2022 objectives*
Objectives*
(€m)
850
FY 2019 FY 2020*** FY 2021*** FY 2022
€800m
800
750
€700m**
700
650
€600m**
600
550
500
€478m**
450
400
350
FCFF CAPEX Δ NWC Cyber-attack Profit growth FCFF CAPEX Δ NWC Cyber-attack Profit growth FCFF CAPEX Δ NWC Profit growth FCFF
growth growth growth
* Objectives include €150m annual revenues from acquisitions in 2020 & 2021 and €200m annual revenues in 2022 (€50m, €75m and €100m, revenues consolidated each year respectively). All objectives include
IFRS 16 and for 2022 are set at constant FX rates as of 30/09/2020. 2022 objectives assume the pandemic is brought under control and no COVID-19 related impact (neither positive nor negative) and catch-up
of lockdown related revenue losses occurring in 2020 & 2021.
** 2019 reported figures and 2020 & 2021 objectives have been restated to take into account the cash flow statement reclassification performed in H1 2020. 2019 reported figure has been corrected for estimated
cyber-attack impacts (operating profit lost and NWC drag) and buildings purchase carried forward in 2019: €356.5 + €55m + €37m + €29m = €478m.
*** 2020 & 2021 objectives were set on 04 March 2020 at constant average 2019 FX rates.
22Definitions / Alternative Performance Measures
(APMs)
Eurofins is providing in the Income Statement certain alternative performance measures (non-IFRS information).
APMs used in the Consolidated Income Statement
Adjusted results – reflect the ongoing performance of the mature and recurring activities excluding “separately disclosed items”.
Separately disclosed items – include one-off costs from integration, reorganisation, discontinued operations 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 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, 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 – 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.
EBIT – EBITAS less Share-based payment charge and acquisition-related expenses.
These measures exclude certain items because of the nature of these items and the impact they have on the analysis of the underlying business performance and trends.
Eurofins shows EBITDA, EBITAS as defined in the notes to the Condensed Interim Income Statement with the objective to be 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.
APMs used in the Consolidated Cash flow Statement
Net capex – Purchase of intangible assets (incl. capitalisation) property, plant and equipment, less proceeds of same assets.
Free Cash Flow to the Firm – Net cash provided by operating activities, less Net capex.
APMs used in the Notes
Net debt – Borrowings, less Cash and cash equivalents (Note 4).
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 (Note 9).
Management believes that providing these APMs (Alternative Performance Measures) enhances investors' understanding of the Group’s core operating results and future prospects, consistent with how
management measures and forecasts the Group’s performance, especially when comparing such results to previous periods or objectives and to the performance of our competitors.
This enables Eurofins to demonstrate the underlying profitability of the business. In the interest of full transparency, Eurofins discloses both the adjusted results (i.e. without the separately disclosed items) and full
reported results (i.e. including the separately disclosed items). 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 Group consolidated financial statements 2019 in Notes 1.27 and 1.28.
23You can also read
