Eurofins Scientific SE · EURONEXT:ERF
Eurofins Scientific — Investor Presentation (2016)
64 slides from Eurofins Scientific's investor presentation, Aug 4, 2016
Slide 1: Eurofins Corporate Presentation
Eurofins A global leader in bioanalytical testing in the food, environment and pharmaceutical sectors Consistently delivering strong, sustainable, profitable growth Doubled revenues more than 3 times (every 3 years on average) since 2004 Sales & EBITDA Multiplied by more than 10 times since 2004 Cor
Slide 2: Disclaimer
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
Slide 3: Contents
Contents Introduction Market & Strategic Positioning Finance & Outlook Summary Appendix Title: Eurofins Corporate Presentation Document name: Eurofins Corporate Presentation.ppt EDR: 1-C-IR-PRE-01350337 Document owner: Pamela Antay 3
Slide 4: Eurofins' Mission is to contribute to global Health, Safety & Environment
Eurofins’ Mission is to contribute to global Health, Safety & Environment with the best in bioanalysis Eurofins provides testing Founded in 1987 services in four main areas that have a strong impact on IPO in 1997 in Paris at EUR 1.83 per share human health: Network of over 225 laboratories in
Slide 5: Leading global and local market positions
Leading global and local market positions N°1* N°1 to N°3* N°1* worldwide worldwide worldwide Start 1987 Start 2000-2005 Start 2000 Food & Feed Testing for Environment Testing Pharma/Biotech Testing *Total Market size ~ EUR 2.0bn ~ EUR 5bn ~ EUR 4bn estimate N° 1 in Europe N° 1 Worldwide in BioPharm
Slide 6: Eurofins Specialized Clinical Diagnostic Evolution
Eurofins Specialized Clinical Diagnostic Evolution “Genomics is one of the key technologies enabling personalized medicine…” Establishing platform to deploy genomics expertise for development of innovative clinical diagnostic tests to serve global healthcare commnunity One of the world’s leaders in
Slide 7: Eurofins Specialized Clinical Diagnostic Footprint
Eurofins Specialized Clinical Diagnostic Footprint Establishing leadership in targeted higher-growth niche areas of the clinical testing market Title: Eurofins Corporate Presentation Document name: Eurofins Corporate Presentation.ppt EDR: 1-C-IR-PRE-01350337 Document owner: Pamela Antay 7
Slide 8: Drivers for long-term market growth
Drivers for long-term market growth Secular Underlying Fundamentals General Market Drivers Laboratory Market Drivers Consumer Demand for safe Increasing wealth expectations for pharmaceuticals, quality food and quality of Life protection and clean environment Consolidation of the fragmented laborato
Slide 9: Eurofins is set to reinforce its global market leadership
Eurofins is set to reinforce its global market leadership Eurofins Growth Cycles * Company objectives Title: Eurofins Corporate Presentation Document name: Eurofins Corporate Presentation.ppt EDR: 1-C-IR-PRE-01350337 Document owner: Pamela Antay 9
Slide 10: Comparable organic growth to larger peers with lower cyclicality
In spite of its lower cyclicality, Eurofins generates comparable organic growth to its larger peers in each peak of the cycle, and higher growth when the economy slows TICS Organic Growth 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% '00-'04 '05-'12 2013 2014 2015* ERF TICS ex ERF Source: Eurofins, Company w
Slide 11: Group performance reflects strong underlying fundamentals
Group performance reflects strong underlying fundamentals Strong Growth Momentum Profit improvements alongside revenue growth acceleration 2015 / 2012: 10% 40% Adjusted EBITDA margin +160 bp 9% Reported EBITDA 35% 20% 50% margin +225 bp 8% 45% Total Revenue Growth (blue curve) Organic Growth (orange
Slide 12: 2 years earlier achievement of 2017 financial objectives
2 years earlier achievement of 2017 financial objectives Eurofins 5 year Report Card: 2010-2015 CAGR 2015: Strong growth & operating momentum Achievements in 2015 38% revenue growth in 2015 to EUR 1.95bn Close to 7.5% organic growth versus 5% objective Close to 7.5% organic growth in 2015 (of
Slide 13: Size of scope in restructuring is decreasing
Size of scope in restructuring is decreasing Proportion of revenue contribution from start-ups & Associated separately disclosed items (SDI*) relative businesses in significant restructuring to EBITDA of mature companies 16% 18% Group Adjusted 20% 14.7% EBITDA margin SDI relative to EBITDA of mature
Slide 14: Heaviest restructuring now behind
Heaviest restructuring now behind Evolution of the SDI components € 40m Restructuring/ re-organization projects € 30m A. Profitable start- A. IPL ups transferred to B. New start-ups Completed in 2015 mature perimeter (e.g. US, Turkey) Benelux B. IPL C. New markets A. Start-ups launched (e.g. Spain)
Slide 15: Heaviest restructuring now behind
Heaviest restructuring now behind Evolution of the SDI components within each year Clear, consistent progress in reducing losses from start-ups and getting them to profitability throughout the year € 20m € 15m € 10m € 5m €m -€ 5m H1 2012 H2 2012 H1 2013 H2 2013 H1 2014 H2 2014 H1 2015 H2 2015 -€ 10m
Slide 16: New midterm objective: To double revenues by 2020
New midterm objective: To double revenues by 2020 Illustration of Eurofins’ 2020 growth objectives assuming constant/linear acquisition volume and growth rate each year 5 year objectives • 5% organic growth • EUR 1bn additional revenues to be acquired over 5 years Title: Eurofins Corporate Presentat
Slide 17: Objective to double in size again by 2020
Eurofins’ objective is to double in size again by 2020, after doubling 3 times in the last 11 years since 2004 Strong historical growth achievement Title: Eurofins Corporate Presentation Document name: Eurofins Corporate Presentation.ppt EDR: 1-C-IR-PRE-01350337 Document owner: Pamela Antay 17
Slide 18: Midterm objective to reach 20% adjusted EBITDA margin
Midterm objective to reach 20% adjusted EBITDA margin, and strengthen cashflow generation Eurofins Cashflow Expansion Levers Objectives: • Reduce relative impact of start-ups and SDI • Bring capex back to 6% of revenues Start-ups & businesses in significant restructuring is Separately Disclosed Item
Slide 19: 21 Acquisitions performed in 2015
21 Acquisitions performed in 2015 Acquisitions in 2015 2015 Revenues Eurofins Investment spend (LCm, Actual) (LCm) 1 Boston Heart Diagnostics USD 110 USD 140 2 BDI 3 NUA 4 CEBAT 5 Testronic 6 Experchem CAD 10 7 QC Labs USD 20 8 Sắc Ký Hải Đăng, Vietnam 9 Trialcamp 10 Diatherix USD 30 11 Nihon Soken
Slide 20: Meaningful industry consolidation is underway
Meaningful industry consolidation is underway Selection of recent significant transactions in the testing industry Date Company Acquirer Geography Sales (€m) EV (€m) EV/Sales (x) EV/EBITDA (x) 2016 January WIL Research Charles River US 194 527 2.7x 13.0x 2015 December Element Materials Technology Br
Slide 21: Network Build-Out to Position for the Future
Network Build-Out to Position for the Future Faster site roll-out drives capex acceleration € 180m 55,000m2 of modern lab surface delivered in 2015, € 160m versus plan of 40,000m2 and following the 60,000m2 delivered in 2014 € 140m Strong progress in IT systems deployment € 120m First Generati
Slide 22: International network of standardised laboratories
An international network of world class, standardised laboratories is attractive for our customers 2015 revenue split : N. America 33.0% France 19.0% Others 13.8% Germany 12.8% Nordic Region 8.4% Benelux 8.1% Entry into high-growth UK & Ireland 4.9% markets with start ups & acquisitions 80% of the w
Slide 23: Geared towards strong economies and fast-growing markets
Geared towards strong economies and fast-growing markets Geographical breakdown of Eurofins’ revenues in 2015 Germany Benelux Germany USA Germany UK Total France Italy Spain TOTAL Austria Nordics + + Northern Europe & Excluding Portugal Switzerland (Northern Northern APAC USA Ireland France & Europe
Slide 24: Strategy aims at building long lasting competitive advantages
Eurofins’ strategy aims at building long lasting competitive advantages Leading technology Quality of customer service Competence Centres & R&D activities Extensive expertise in local regulations for all major markets, and one-stop contact for Proprietary technologies for proof of compliance i
Slide 25: Contents
Contents Introduction Market & Strategic Positioning Finance & Outlook Summary Appendix Title: Eurofins Corporate Presentation Document name: Eurofins Corporate Presentation.ppt EDR: 1-C-IR-PRE-01350337 Document owner: Pamela Antay 25
Slide 26: The Food testing market has robust growth drivers
The Food testing market has robust growth drivers Food scares and Globalisation: Raw Consumers’ Outsourcing of crises, widely materials sourced increasing awareness industry’s covered in the from countries and demand for safe internal or state- media with different QC and high quality food owned pra
Slide 27: Food & Feed testing offering is the most comprehensive
Eurofins’ Food & Feed testing offering is the most comprehensive in the market Agricultural production, product Production Retail & Distribution development Microbiology Sensorial Dioxins Veterinary drug Vitamins Quality Control residues Authenticity Pesticides Organic residues POPs Labelling GMO My
Slide 28: High profile food scares have expensive consequences
High profile food scares have expensive consequences for producers… Year Brand/ Contamination Impact Cost Country 2008 Sanlu/ Melamine in 50,000 infants ill, 6 deaths, global recall of Fronterra + dairy products dairy and related products, criminal Unquantified BBC News global brands charges in Chin
Slide 29: Eurofins is meeting the demands of global players
Eurofins is meeting the demands of global players The largest global food & beverage producers and retailers are clients of Eurofins 2014 Sales in 2014 Sales in Food and Beverage Retailers EUR billion EUR billion Nestlé Switzerland 75.4 Wal-Mart Stores USA 362.6 PepsiCo USA 50.1 Carrefour France 8
Slide 30: The Pharma testing market is both healthy and full of potential
The Pharma testing market is both healthy and full of potential Need for big pharma Rapid technological change & companies to expand increasing complexity in testing new drugs pipelines require ongoing investment in technology & expertise The increasing complexity of clinical trials leads to incre
Slide 31: Underlying trends are intact for continued growth
Underlying trends are intact for continued growth Global Drug R&D Spending (US$ bn) Large pharmas need to refill their product pipeline as the ‘blockbusters’ start to come off patent Drug development expenditures have increased substantially in recent years Total R&D is over USD 120bn and is e
Slide 32: Eurofins Pharma Services
Eurofins Pharma Services Spanning the entire drug development cycle Genomics Discovery Pre-clinical / Clinical Pharma Specialty Pharmacology Early (Central Products Clinical Development Laboratory) Testing / Diagnostics cGMP QC Sequencing High-throughput- Pharmacology Biomarkers Impurities Analysis
Slide 33: 9 of the top 10 pharma companies are clients
9 of the top 10 largest global pharmaceutical companies are clients of Eurofins Eurofins pharma locations Top 10 pharma companies Country Global CRO Market Market Pfizer USA CAGR* Breakdown Sanofi Aventis France GlaxoSmithKline UK USA 60% 12% Novartis Switzerland Europe 20% 9% AstraZeneca UK Merck &
Slide 34: The Environmental testing market continues to grow
The Environmental testing market continues to grow Rise in Progress in epidemiology contamination & & medicine has identified pollution issues more compounds as toxic Increasing demand by citizens for a clean environment EU expanding regulation (e.g. REACH) Increasingly long list of products i
Slide 35: Eurofins serves all the main environmental testing markets
Eurofins serves all the main environmental testing markets Eurofins is the No.1 environmental testing service provider in the world* Lancaster Environmental Consulting and Testing is the laboratory sampling companies of choice for Fortune 500 are natural partners companies in the USA WATER AIR SOIL
Slide 36: Global trends in regulation support the business
Global trends in regulation support the business Strong regulated markets (EU, USA) are still amending and adding regulations Eastern European rules catching up with EU Fast development of regulation in Asia Regulation used for support of trading blocks (e.g. EU, NAFTA, ASEAN) Major pieces o
Slide 37: EU regulations a key driver for the testing industry
EU regulations a key driver for the testing industry – e.g. REACH directive Objectives Examples of affected products or industries Listing and assessing the safety of 30,000 Metals, resins, acids, solvents, oils, fibres in textile, car chemical substances used by industries in components, toys, co
Slide 38: Outsourcing adds to market growth
Outsourcing adds to market growth Examples of laboratories outsourced to Eurofins Company Outsourced Activity Country Danish Hydrology Inst. Official water reference lab Scandinavia Suez/Sita Envirolab The Netherlands Danish farmers association Steins’ water/environment laboratory Denmark Southern W
Slide 39: Strategy builds high Barriers to Entry
Eurofins’ strategy builds high Barriers to Entry Offering a premium quality service … ... and leveraging internal efficiencies Portfolio: over 130,000 reliable methods – Industrialising the laboratory process: unique in the world and ahead of rationalisation of sites and personnel competition
Slide 40: Contents
Contents Introduction Market & Strategic Positioning Finance & Outlook Summary Appendix Title: Eurofins Corporate Presentation Document name: Eurofins Corporate Presentation.ppt EDR: 1-C-IR-PRE-01350337 Document owner: Pamela Antay 40
Slide 41: Laboratory Network Investments (1/2)
Laboratory Network Investments (1/2): 2014-2017 35 Greenfield projects in high-growth markets Country Market Operational achievements Hong Kong Food India Food, Agro Group: First wave of start-ups (17) became Asia Australia Env profitable as a whole in 2013 New Zealand Food, Agro Singapore Food Laun
Slide 42: Laboratory Network Investments (2/2)
Laboratory Network Investments (2/2): Expansion / Modernization of Laboratory Sites 115 new/expanded modern state-of-the-art sites to enable consolidation / closure of smaller or old sites Total of ca. 350,000 m2 added or brought to most modern standards between 2005-2015 (55,000 m2 in 2015 alon
Slide 43: Market Share: Eurofins is the leader in its industry
Market Share: Eurofins is the leader in its industry – and we continue to reach new market leadership positions New Markets 20012002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 X = Market Entry Denmark: Food and Env. X No 1 Brazil: Food Testing X No 1 France Environment Testing
Slide 44: Heavy investment in new markets and resources for future profits
Heavy investment in new markets and resources for future profits Building corporate resource Bringing recently acquired Under development perimeter for future size and growth labs to group standards Start-ups: 17 start ups Recruitment of top Deploy IT systems between 2006 and 2010 and 21 leade
Slide 45: Positive trends drive solid operating results
Positive trends drive solid operating results FY 2015 FY 2014 +/- % EUR m Adjusted Separately Statutory Adjusted Separately Statutory Adjusted Results disclosed Results Results disclosed Results Results items items Revenues 1,950.1 1950.1 1,410.2 1410.2 38.3% EBITDA 360.8 -15.8 345.0 260.4 -30.4 230
Slide 46: Investments for future growth have an impact on profits
Investments for future growth have an impact on profits Cost of financial flexibility – Month-end Cash on Balance Sheet 2013 2014 2015 Average Month-end Excess Cash EUR 68m EUR 183m EUR 585m Impact on Basic EPS EUR 0.12 EUR 0.25 EUR 1.43 Impact on EPS attributable to EUR 0.20 EUR 0.46 EUR 2.07 equit
Slide 47: Prioritizing Group tax optimum structuring
Prioritizing Group tax optimum structuring to align with scale and footprint Review of tax optimum structure, and use of NOLs carry forward Not capitalised tax losses carry forward (NOLs) of over EUR 470m as of 31.12.2015 Tax rate increase due to new clinical & US businesses acquired in 2014-201
Slide 48: Investments for future growth have had an impact on cash flows
Investments for future growth have had an impact on cash flows 175 Free Cash Flow invested for future 132 profits growth & flexibility to carry out future acquisitions 103 68 56 Free Cash Flow* Extra capex (above 6% of revenues), Start-ups & reorganization costs at EBITDA level, Net finance costs re
Slide 49: Growth and Profitability are critical objectives
Growth and Profitability are critical objectives Group Profitability Objectives++ 3-tiered margin support towards mid-term profitability objective 1. Start of profit contribution from start-ups 2. Exceptional costs and losses from start- ups and companies in restructuring (SDI) becoming smaller co
Slide 50: Tangible Commitment from Internal Stakeholders
Tangible Commitment from Internal Stakeholders Upside/Downside for warrant holders In July 2014, Eurofins issued 117,820 warrants exclusively to its leaders Exercise Price €281.58 Purchase Price €18.15 Break-even Price €299.73 (in the money starting at €300) The warrants are not listed but
Slide 51: Solid Balance Sheet
Solid Balance Sheet OBSAAR EUR 117.3m outstanding as of 31 December 2015 Dec’15 Dec’14 Maximum maturity: split evenly across June 2016 and 2017 Net Debt/ Adjusted EBITDA 2.54 x 1.90 x 3.5 x Schuldschein Net Debt/ pro-forma Adjusted EBITDA 2.27 x EUR 170m issued in July 2011 Net Debt (EUR
Slide 52: High Degree of Financial Flexibility
High Degree of Financial Flexibility Strong Balance Sheet Leverage ratio well below covenant limit despite EUR 835m* cash invested in the business in 2015 Net Debt/ Adjusted EBITDA: max 3.5x 3.50 x • Largely capex and acquisitions which did not fully contribute yet • Acquisition payments in H2 201
Slide 53: Outlook: becoming the world leader in bioanalytical testing
Outlook: becoming the world leader in the bioanalytical testing market Sustainable Market Growth Drivers + Key Success Factors = Solid Outlook Food safety & contamination Unique technological portfolio of 2016 Objectives issues over 130,000 methods >EUR 2.5bn of revenues New regulations (e.g.
Slide 54: Contents
Contents Introduction Market & Strategic Positioning Finance & Outlook Summary Appendix Title: Eurofins Corporate Presentation Document name: Eurofins Corporate Presentation.ppt EDR: 1-C-IR-PRE-01350337 Document owner: Pamela Antay 54
Slide 55: Conclusion: our sustainable competitive advantage
Conclusion: our sustainable competitive advantage Best in class technology and quality give best brand High-growth, non-cyclical markets driven by secular protection mega-trends No. 1 or 2 worldwide in most business lines Advancing globalisation but with very few global Strong international presence
Slide 56: Appendix / Back up slides
Appendix / Back up slides Title: Eurofins Corporate Presentation Document name: Eurofins Corporate Presentation.ppt EDR: 1-C-IR-PRE-01350337 Document owner: Pamela Antay 56
Slide 57: Consolidated Income Statement
Consolidated Income Statement 2015 2014 Separately Separately Adjusted Reported Adjusted Reported EUR Thousands disclosed disclosed results results results results items items Revenues 1,950,074 - 1,950,074 1,410,227 - 1,410,227 Operating costs, net -1,589,272 -15,768 -1,605,040 -1,149,797 -30,420 -
Slide 58: Consolidated Balance Sheet
Consolidated Balance Sheet EUR Thousands 2015 2014 Property, plant and equipment 427,541 323,747 Goodwill 1,411,896 679,030 Other intangible assets 351,469 193,534 Investments in associates 14,926 2,887 Financial assets and other receivables 32,074 23,264 Deferred tax assets 36,020 26,333 Total non-
Slide 59: Consolidated Cashflow Statement
Consolidated Cashflow Statement EUR Thousands 2015 2014 Cash flows from operating activities Result before income taxes 132,358 101,332 Adjustments for: Depreciation and amortisation 111,031 81,283 Non-cash stock option charge and acquisition-related expenses, net 35,873 16,889 Other non-cash effect
Slide 60: Shareholder Returns: TICS & Clinical Diagnostics Companies
Shareholder Returns: TICS & Clinical Diagnostics Companies Based on Eurofins share price of EUR 321.85 at 31.12.2015 Table 1 Shareholder Returns Based on share prices Total Shareholder Returns (RI) 31-Dec-10 31-Dec-11 31-Dec-12 31-Dec-13 31-Dec-14 31-Dec-15 31-Dec-10 31-Dec-11 31-Dec-12 31-Dec-13 31
Slide 61: Shareholder Returns: TICS & Clinical Diagnostics Companies
Shareholder Returns: TICS & Clinical Diagnostics Companies Based on Eurofins share price of EUR 321.85 at 31.12.2015 – Last 5 Years Table 2 HISTORICAL SHARE PRICE DEVELOPMENT Annual Growth - Compounded* 5 Yr From Dec 31 Y-1 to Dec 31 Y Historical 1 Year Performance* Growth 2 years 3 Years 4 Years 5
Slide 62: Outperformed the market since its IPO and equity offerings
Eurofins has vastly outperformed the market since its IPO and each of its 3 equity offerings (based on share price of EUR 321.85 as of 31 December 2015) Total equity raised in 4 offerings: only EUR 56m Since IPO Eurofins: +17,482% (33% CAGR) CAC 40: +67% (3% CAGR) SBF 120: +94% (4% CAGR) S&P 500: +1
Slide 63: We have built a hard-to-replicate world-class infrastructure
We have built a hard-to-replicate world-class infrastructure Eurofins has been consistently investing more than its peers 10% 120% 9% 100% 8% 7% 80% Excess Investment 6% Capex to Sales 5% 60% 4% 40% 3% 2% 20% 1% 0% 0% 00-'04 05-'08 09-'10 '05-'12 2010 2011 2012 2013 2014 2015* ERF TICS ex ERF Excess
Slide 64: Post acquisition and integration, sales and profits increase significantly
Post acquisition and integration into Eurofins, both sales and profits increase significantly Illustration Growth drivers post acquisition: 1) Sales increase through cross selling of Actual example of an acquired lab: Eurofins lab specialities internationally 2) Cost reduction – focus on most freque