Eurofins Scientific Se · EURONEXT:ERF
Eurofins Scientific — Eurofins — Investor Presentation (October 2018)
77 slides from Eurofins Scientific's investor presentation, October 2018
Slide 1: Eurofins Corporate Presentation October 2018
Eurofins A global leader in bioanalytical testing in the food, environment, pharmaceutical, agrosciences and clinical sectors Consistently delivering strong, sustainable, profitable growth Doubled revenues more than 3 times (every 3 years on average) between 2005 and 2017 Sales & EBITDA multiplied b
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 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 Founded in 1987 IPO in 1997 in Paris at EUR 1.83 per share (vs EUR 476.40 at Eurofins provides testing 29/06/2018) services in four main areas Over 38,000 employees accross more than 400 labo
Slide 5: High barriers to entry reinforcing leadership
Building leadership positions in an industry with significant network effects and competitive advantage for the market leader High level of investment and innovation required to build and efficiently run a network of modern laboratories (buildings, equipment, IT High barriers infrastructure and solu
Slide 6: Building a unique platform for global leadership in attractive high growth markets
Building a unique platform for global leadership in our attractive high growth markets with large network effects High barriers to entry exist in Eurofins’ markets. Significant investments are required to build and efficiently run modern laboratories. Clients seldom change laboratory supplier. Con
Slide 7: 2020 growth plan half-way update: laboratory infrastructure platform
2020 growth plan half-way update: building a one of a kind laboratories infrastructure platform for global leadership in our markets – Large hub laboratories capture scale advantage Building large high throughput laboratory campuses (hubs of the hub and spoke structure) Added or brought to most mo
Slide 8: 1987 – 2017: In only 30 years we built a unique global network
1987 – 2017: In only 30 years we built a unique global network 1987 From 1 laboratory in Nantes (France) in 1987… 2018 4 … to more than 400 laboratories around the world in 2018! > 38,000 employees employees … now present in 44 countries ! Eurofins’ site map as of June 2018 8
Slide 9: Upwards revision of objectives to double revenues again
Upwards revision of objectives to once again double revenues in only 3 years (between 2015 and 2018) instead of 5, and reach €4.7bn in 2020 vs €4bn originally planned in 2015 for 2020 Illustration of Eurofins’ 2018-2020 growth objectives assuming constant/linear acquisition volume and growth rate ea
Slide 10: New warrants program highlights long-term commitment of key leaders
New warrants program highlights the long-term commitment of Eurofins’ key leaders and their trust in the growth potential of the Group Upside/Downside for warrant holders In June 2018, Eurofins issued 124,460 warrants exclusively to the Group’s top leaders Exercise Price €529.65 Purchase Price
Slide 11: Lower cyclicality and comparable organic growth versus peers
Eurofins has lower cyclicality, generates comparable organic growth to its peers that are less focused on testing for life in each peak of the cycle, and higher growth when the economy slows TICS Organic Revenue Growth (CAGR* if more than 1 year) Source: Eurofins, Company websites, TICS ex ERF = SGS
Slide 12: Eurofins has vastly outperformed the market since its IPO
Eurofins has vastly outperformed the market since its IPO and each of its 6 equity offerings (based on share price of EUR 476.40 as of 29 June 2018) Total equity raised in 7 offerings: only EUR 852m, EUR 57m 1997-2000, EUR 496m in 2016 and EUR 299m in 2017 Since IPO Eurofins: +25,941% (31% CAGR) Bes
Slide 13: Strong revenue, profitability and cash flow growth in H1 2018
Strong revenue, profitability and cash flow growth in H1 2018 Eurofins 3 year Report Card: H1 2015 – H1 2018 CAGR H1 2018: Strong growth & operating momentum 24.8% revenue growth to EUR 1,743m Over 5% organic growth* in Q2 2018 and close to 5% for H1 EBITDA grew 31.4% to EUR 288m resulting in
Slide 14: Acquisition of Covance Food Solutions
Eurofins expands its footprint in North America, the UK and Asia with the acquisition of Covance Food Solutions On August 1st 2018, Eurofins announced the successful closing of the transaction to acquire Covance Food Solutions (CFS) from LabCorp for USD 670m on a cash free debt free basis : CFS is
Slide 15: New number 1 leadership positions in the U.S. and Europe
In H1 2018, Eurofins reached new number 1 leadership positions in the U.S. and Europe thanks to organic growth, strategic acquisitions and start-up laboratories Eurofins has achieved new leadership positions in Food, Environment and Biopharma Product testing: U.S. – market leader in Food testing –
Slide 16: In 2017, Eurofins became global/European leader in 4 business lines
In 2017, Eurofins became the Global/European leader in 4 business lines Eurofins has achieved new leadership positions in four business lines, including: Global leader in Discovery Pharmacology – achieved through the acquisitions of Villapharma in Spain and DiscoverX which has operations in the US
Slide 17: Strengthening global leadership in Pharmaceutical Discovery Services
Eurofins is strengthening its global leadership in Pharmaceutical Discovery Services 3 historic acquisitions: Pharmaceutical Drug Cerep Discovery Industry Panlabs DDS-Millipore 2 recent acquisitions: Increasing focus on cost optimization Growing outsourcing trend Global pharmaceutical an
Slide 18: Global network of clinical genetics laboratories
Eurofins is setting up a global network of clinical genetics laboratories Nowadays, Clinical Genetics is a central element in healthcare and Clinical Diagnostics, contributing to every stage of patient care Throughout all three of Eurofins’ start-up programs, several large investments in global
Slide 19: Expanding offering in non-invasive prenatal testing
Eurofins is expanding its global offering in non-invasive prenatal testing (NIPT) In September 2017, Eurofins’ Genoma introduced GeneSafeTM, the first non-invasive prenatal test that screens for both de novo (non-inherited gene mutations) and inherited single-gene disorders. GeneSafeTM detects ove
Slide 20: Reinforced leadership in biopharma product testing and entry into CDMO
In 2017, Eurofins reinforced its leadership in bio- pharmaceutical product testing and enters the CDMO* industry On June 13th Eurofins acquired Alphora Research Inc.: a full service CDMO for complex and niche small molecule active pharmaceutical ingredients (APIs) Alphora is experiencing fast gr
Slide 21: Acquisition of EAG Laboratories
In 2017, Eurofins expanded its footprint in North America with the acquisition of EAG Laboratories On December 4th 2017, Eurofins announced the closing of the acquisition of EAG Laboratories: a leading global scientific services company providing analytical testing and consulting solutions to a di
Slide 22: EAG Platform Trajectory under Eurofins ownership
EAG Platform Trajectory under Eurofins ownership EV* paid in 780 <900 Attractive EBITDA US$m multiples for bolt-on acquisitions led by 75 ~313 EAG’s leadership 225 6% 238 (single digits) ~216 Revenues Solid organic growth in US$m mid-to-high single digit top-line and double- digit EBITDA Syner
Slide 23: European leader in Forensics Testing services
In 2017, Eurofins becomes the European leader in Forensics Testing services On October 12th 2017, Eurofins signed an agreement to acquire the Forensics and Security division of LGC (“LGC Forensics”): the largest player in the UK forensics market, a European pioneer in forensics and a significant f
Slide 24: Acquisitions signed and/or closed up to 30/06/2018
Acquisitions signed and/or closed up to 30/06/2018 Acquisitions signed and/or closed up to 30/06/2018 Tsing Hua (TW) Eichrom Laboratoires (FR) Total Annualised Revenues in 2017 Food Analytica (HU) Protec Bio-testing (FR) Labo Van Poucke (BE) Covance Food Solutions (US)* ELS and City Analysts (IE) PH
Slide 25: 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) 2018 September Genewiz Brooks Automation US 102 383 3.8x N/A July Halo Cambrex US 87 353 4.0x 15.7x March B
Slide 26: Start-ups an increasingly attractive investment
Start-ups an increasingly attractive investment as we leverage our scale and experience 130 laboratories start-ups between 2000 and 2017 Substantial acceleration offers tremendous growth potential 1) Acceleration in laboratories start-up programs 25 start-ups 2000-2009 (Program 1) Where we are bui
Slide 27: Start-ups expected to break-even on Year 3
Start-ups expected to break-even on Year 3 and typically reach Group’s profitability objectives shortly thereafter Illustration Start-ups development: 1) Large investments have short-term dilutive impact on Group’s margins and FCF Example of a typical Eurofins’ start-up: 2) Growth momentum allows st
Slide 28: What we are passionate about: Our company DNA
What we are passionate about: Our company DNA Testing for Life Entrepreneurship Everything we do has a positive We are a network of independent, impact on LIFE, HEALTH and the ENVIRONMENT. intrapreneur-led companies and a school for those who aspire to become Results entrepreneurs. Eurofins launches
Slide 29: Family-owned businesses outperform their peers
Credit Suisse report shows that family-owned businesses outperform their peers* …supported by superior growth and Profitability Revenue and EBITDA growth is stronger, EBITDA margins are higher and cash flow returns are better. Family-owned companies also appear to have a greater focus on innovation
Slide 30: Leading global and local market positions (1/2)
Leading global and local market positions in attractive high-growth markets* (1/2)… Food & Feed Testing for Environment Clinical Testing Pharma/Biotech/Agrosciences Testing Diagnostics N°1* N°1 to N°3* N°1* Start-Up Eurofins position worldwide worldwide worldwide Start 2014 Start 1987 Start 2000-200
Slide 31: Leading global and local market positions (2/2)
Leading global and local market positions in attractive high-growth markets* (2/2) Food & Feed Testing for Environment Clinical Testing Pharma/Biotech/Agrosciences Testing Diagnostics N°1* N°1 to N°3* N°1* Start-Up Eurofins position worldwide worldwide worldwide Start 2014 Start 1987 Start 2000-2005
Slide 32: Leader in most markets, building global and local leadership
Eurofins is the leader in most of its markets and continues to build global & local leadership positions* in markets where scale matters New Markets 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Denmark: Food and Environment Testing Sweden, Norway: Food an
Slide 33: Drivers for long-term above GDP market growth
Drivers for long-term above GDP high 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 frag
Slide 34: International network of standardised laboratories
An international network of world class, standardised laboratories is attractive for our customers H1 2018 revenue split : N. America 31.7% France 21.2% Germany 11.5% Benelux 6.9% UK & Ireland 6.4% Entry into high-growth Nordic Region 6.3% markets with start ups Others 16.0% & acquisitions 80% of th
Slide 35: Geared towards strong economies and fast-growing markets
Geared towards strong economies and fast-growing markets Geographical breakdown of Eurofins’ revenues in H1 2018 Germany Benelux Germany North APAC & Germany UK Total France Italy TOTAL Austria Nordics + America Emerging Northern & Excluding Spain Switzerland (Northern Northern markets Europe Irelan
Slide 36: Strategy aims at building long lasting competitive advantage
Eurofins’ strategy aims at building long lasting competitive advantage 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 (e.g. proof of compliance
Slide 37: Contents
Contents Introduction Market & Strategic Positioning Finance & Outlook Summary Appendix 37
Slide 38: The Food testing market enjoys robust growth drivers
The Food testing market enjoys 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
Slide 39: 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 40: 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 global brands charges in China BBC New
Slide 41: Meeting the demands of global players for high quality testing
Eurofins is meeting the demands of global players for high quality testing The largest global food & beverage producers and retailers are clients of Eurofins 2017 Sales in 2017 Sales in Food and Beverage Retailers EUR billion EUR billion Nestlé Switzerland 90.1 Wal-Mart Stores USA 485.9 PepsiCo US
Slide 42: The Pharma testing market is 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 43: Underlying trends are intact for continued growth
Underlying trends are intact for continued growth Global Drug R&D Spending (US$ bn) Pharmaceutical and biotechnology R&D spending is expected to rise to $161 bn in 2018 2017 was a record year in FDA novel drug approvals, the purest measure of biopharma pipeline productivity Drug approvals fuel
Slide 44: Eurofins Pharma Services
Eurofins Pharma Services Spanning the entire drug development cycle Genomics Discovery Pre-clinical/ Clinical Development BioPharma Pharmacology Early (Central & Products Development Laboratory/ Manufacturing Testing Bioanalytical) Sequencing Sequencing High-throughput- High-throughput- Pharmacology
Slide 45: 9 of top 10 pharma companies are clients of Eurofins
9 of the top 10 largest global pharmaceutical companies are clients of Eurofins Eurofins pharma locations Global CRO Market Outlook Top 10 pharma companies Pfizer (US) Sanofi Aventis (FR) GlaxoSmithKline (UK) Novartis (CH) AstraZeneca (UK) Merck & Co (US) Johnson & Johnson (US) Roche (CH) Eli Lilly
Slide 46: Specialized Clinical Diagnostic Network Evolution
Eurofins Specialized Clinical Diagnostic Network 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 community One of the world’s lead
Slide 47: Specialized Clinical Diagnostic Footprint
Eurofins Specialized Clinical Diagnostic Footprint Establishing leadership in targeted higher-growth niche areas of the clinical testing market Clinical Genetics Japan Clinical Genetics India 47
Slide 48: 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 49: 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 50: 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 51: 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 52: Outsourcing adds to market growth
Outsourcing adds to market growth Examples of laboratories outsourced to Eurofins Company Outsourced Activity Country Astellas Astellas Analytical Science Labs Japan Danish Hydrology Inst. Official water reference lab Scandinavia Suez/Sita Envirolab The Netherlands Danish farmers association Steins’
Slide 53: Developing high barriers to entry around its businesses
Eurofins is developing high Barriers to Entry around its businesses Offering a premium quality service … ... and leveraging internal efficiencies Portfolio: over 150,000 validated methods Industrialising the laboratory process: – unique in the world and ahead of rationalisation of sites and pers
Slide 54: Contents
Contents Introduction Market & Strategic Positioning Finance & Outlook Summary Appendix 54
Slide 55: 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 Source: Eurofins, Company websites TICS ex ERF = SGS, Intertek, Bureau Veritas 55
Slide 56: Midterm objective to reach 20% adjusted EBITDA margin
Midterm objective to reach 20% adjusted EBITDA margin, and strengthen cashflow generation In spite of 20 start-ups per year (average past 3 Eurofins Cashflow Expansion Levers years) Separately Disclosed Items (SDI) costs Objectives: reduced significantly as % of Adjusted EBITDA • Reduce relative imp
Slide 57: Allocating part of cash flow towards building global platform
Eurofins is allocating part of its cash flow towards building its leading global platform Cashflow expansion levers: cash investments impacting cashflows FCF invested €89m for the future €80m €75m €147m €81m €126m Reported FCF €57m to Equity €100m €19m €51m €46m €49m *Free Cash Flow to Equity - Oper
Slide 58: Network Build-Out to Position for the Future
Network Build-Out to Position for the Future Capex remains driven by network expansion investments Continuous investments in state-of-the-art IT solutions One IT (IT Solutions) First Generation OneIT deployed in ca. 85% of Food and Environment laboratories New Generation Genomics and Agroscience
Slide 59: Laboratory Network Investments
Laboratory Network Investments: Expansion / Modernization of Laboratory Sites Since 2005, 120 new/expanded large modern state-of-the-art sites to enable consolidation / closure of smaller or old sites Total of over 430,000 m2 added or brought to most modern standards between 2005-2017 (over 53,0
Slide 60: Present in countries generating over 83% of world GDP
Eurofins is already present in countries generating over 83% of the world’s GDP… but still has lots of room to grow International Monetary Fund Eurofins market presence (Estimates as of October 2017) % of world's Environment Biopharma Clinical Country GDP ($tn) Eurofins presence Food testing GDP tes
Slide 61: Heavy investment in high-growth markets and resources
Heavy investment in high-growth markets and resources for future profits Building corporate resource Bringing recently acquired Network Investments for future size and growth labs to group standards €1.05 bn total investments in Recruitment of top Deploy proprietary IT laboratory network over
Slide 62: Positive trends drive solid operating results
Positive trends drive solid operating results H1 2018 H1 2017 +/- % +/- % In EUR m except otherwise stated Adjusted1 Separately Statutory Adjusted Separately Statutory Adjusted Reported Results disclosed Results Results disclosed Results Results Results items2 items Revenues 1,743.3 - 1,743.3 1,396.
Slide 63: Growth, Profitability and ROCE are critical objectives
Growth, Profitability and ROCE are critical objectives Group Profitability Objectives * * Operating margin developing towards mid- * term profitability objective 1. Start of profit contribution from start-ups 2. Investments in large industrialized laboratories unlock operational leverage A targe
Slide 64: Solid Balance Sheet
Solid Balance Sheet Hybrid EUR 300m hybrid issued in Jan 2013/Jul 2014, callable at par by Jun 2018 Dec 2017 Eurofins in Jan 2020. Bears a fixed coupon of 7.00% until first call, Euribor 3m + 818 bp thereafter if not called EUR 300m hybrid issued in April 2015, callable at par by Eurofins Net
Slide 65: High Degree of Financial Flexibility
High Degree of Financial Flexibility Strong Balance Sheet as of 30/06/2018 Leverage ratio remains well below the Group’s Net Debt/L12M Pro-forma Adjusted EBITDA: max 3.5x covenant of 3.5x Large financial flexibility with fairly long financing maturity • EUR 300m Eurobond issued in 2013; maturing
Slide 66: 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 2018 Objectives* issues over 150,000 methods Over EUR 3.8bn of revenues EUR 4.0bn of pr
Slide 67: Contents
Contents Introduction Market & Strategic Positioning Finance & Outlook Summary Appendix 67
Slide 68: 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 N° 1 or 2 worldwide in most business lines Advancing globalisation but with very few global Network in 44 countries testin
Slide 69: Appendix / Back up slides
«= eurofins Appendix / Back up slides 69
Slide 70: Condensed Interim Consolidated Income Statement
Condensed Interim Consolidated Income Statement H1 2018 H1 2017 Adjusted Separately Reported Adjusted Separately Reported EUR Thousands results disclosed items Results results disclosed items Results Revenues 1,743,315 - 1,743,315 1,396,931 - 1,396,931 Operating costs, net -1,422,965 -32,549 -1,455,
Slide 71: Condensed Interim Consolidated Balance Sheet
Condensed Interim Consolidated Balance Sheet June 30, December 31, EUR Thousands 2018 2017 Property, plant and equipment 792,556 685,998 Goodwill 2,669,643 2,505,337 Other intangible assets 760,223 735,120 Investments in associates 4,579 5,642 Financial assets and other receivables 48,434 43,942 Def
Slide 72: Condensed Interim Consolidated Cash Flow Statement
Condensed Interim Consolidated Cash Flow Statement EUR Thousands H1 2018 H1 2017 Cash flows from operating activities Profit before income taxes 122,527 109,691 Adjustments for: Depreciation and amortisation 104,855 84,019 Share-based payment charge and acquisition-related expenses, net 40,834 14,31
Slide 73: EAG provides entry into Materials and Engineering Sciences markets
EAG provides Eurofins an entry into the dynamic and growing Materials and Engineering Sciences markets EAG believes that it holds the N°1 position in both Materials and Engineering Sciences markets, in the USA. Materials and Engineering Sciences represent over 50% of EAG’s total revenue. The Mater
Slide 74: Post acquisition, sales and profits often increase significantly
Post acquisition and integration into Eurofins, both sales and profits often 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
Slide 75: Shareholder Returns: TICS & Clinical Diagnostics Companies
Shareholder Returns: TICS & Clinical Diagnostics Companies Based on share prices as of close 29.12.2017 Shareholder Returns Based on share prices Total Shareholder Returns 31-Dec-11 31-Dec-12 31-Dec-13 31-Dec-14 31-Dec-15 31-Dec-16 31-Dec-17 31-Dec-11 31-Dec-12 31-Dec-13 31-Dec-14 31-Dec-15 31-Dec-1
Slide 76: Shareholder Returns: TICS & Clinical Diagnostics Companies
Shareholder Returns: TICS & Clinical Diagnostics Companies Historical Share Price Development (Y vs Y-1) Compounded Growth 2Y 3Y 4Y 5Y 5Y 31-Dec-13 31-Dec-14 31-Dec-15 31-Dec-16 31-Dec-17 Growth 2016-2017 2015-2017 2014-2017 2013-2017 Eurofins 60.4% 7.9% 51.8% 25.8% 25.3% 314.4% 26% 34% 27% 33% SGS
Slide 77: Strong financial discipline at all times
Strong financial discipline at all times Average net debt/L12M EBITDA 21 acquisitions with total annualized revenue About 60 acquisitions with total annualized contribution of over EUR 570m. revenue contribution of ca. EUR 700m. Entry into 3 new countries Entry into 5 new countries 10 start-ups 30 s