Eurofins Scientific Se · EURONEXT:ERF
Eurofins Scientific — FY2017 Earnings Presentation
71 slides from Eurofins Scientific's earnings presentation, 2018
Slide 1: Eurofins Corporate Presentation Full Year 2017 Results
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) since 2005 Sales & EBITDA multiplied by more than
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 507.60 at Eurofins provides testing 29/12/2017) services in four main areas Over 35,000 employees accross more than 400 labo
Slide 5: 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… 2017 4 … to more than 400 laboratories around the world in 2017! > 35,000 employees employees … now present in 44 countries ! Eurofins’ site map as of February 2018 5
Slide 6: EUR 4bn objective brought forward by 1 year
Mid-term plan is now to double revenues in only 4 years (between 2015 and 2019) Illustration of Eurofins’ 2019 growth objectives assuming constant/linear acquisition volume and growth rate each year EUR 4bn objective brought forward by 1 year * Objective 6
Slide 7: 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 507.60 as of 29 December 2017) Total equity raised in 7 offerings: only EUR 852m, EUR 57m 1997-2000, EUR 496m in 2016 and EUR 299m in 2017 June 2016 Oct 2017 Since IPO Private pl
Slide 8: Continued operating and financial growth momentum in 2017
Continued operating and financial growth momentum in 2017 Eurofins 5 year Report Card: 2012-2017 CAGR 2017: Strong growth & operating momentum 17.1% revenue growth to EUR 2.97bn (EUR 3.44bn pro- forma) 26% Close to 6% organic growth* versus 5% annual objective 25% About 60 acquisitions closed
Slide 9: In 2017, Eurofins became the 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 10: 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 11: 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 12: Expanding global offering in non-invasive prenatal testing (NIPT)
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 13: Leadership in biopharmaceutical 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 14: Expansion in North America with acquisition of EAG Laboratories
Eurofins expands 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 diverse and
Slide 15: 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 16: About 60 acquisitions signed and/or closed in 2017
About 60 acquisitions signed and/or closed in 2017 Acquisitions signed and/or closed up to 31/12/2017 Ahma (FI) Amatsi (FR) Total Annualised Revenues Ramboll environmental laboratories (FI) Genoma (IT) Nab Labs (FI) Advinus (IN) Gözlem (TR) LifeCodexx (DE) VBM (DK) EAG Laboratories (US) Villapharma
Slide 17: 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) 2017 September Chiltern International Labcorp US 133 990 7.4x N/A June EUROIMMUN PerkinElmer DE 166 1,139 6
Slide 18: Start-ups an increasingly attractive investment
Start-ups an increasingly attractive investment as we leverage our scale and experience 132 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 19: 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 20: 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 21: 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 22: Leading global and local market positions (1/2)
Leading global and local market positions* (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 worldwide worldwide worldwide Start 2014 Start 1987 Start 2000-2005 Start 2000 *Total market ~ EUR 2-3bn ~ EUR 5bn ~ E
Slide 23: Leading global and local market positions (2/2)
Leading global and local market positions* (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 worldwide worldwide worldwide Start 2014 Start 1987 Start 2000-2005 Start 2000 *Total market ~ EUR 2-3bn ~ EUR 5bn ~ EU
Slide 24: 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 25: 80% of the world's population still has limited access to testing laboratories
An international network of world class, standardised laboratories is attractive for our customers 2017 revenue split : N. America 30.4% France 22.8% Germany 11.5% Benelux 7.2% Nordic Region 7.1% Entry into high-growth UK & Ireland 5.4% markets with start ups Others 15.6% & acquisitions 80% of the w
Slide 26: Geared towards strong economies and fast-growing markets
Geared towards strong economies and fast-growing markets Geographical breakdown of Eurofins’ revenues in 2017 Germany Benelux Germany North APAC & Germany UK Total France Italy TOTAL Austria Nordics + America Emerging Northern & Excluding Spain Switzerland (Northern Northern markets Europe Ireland F
Slide 27: 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 28: Contents
Contents Introduction Market & Strategic Positioning Finance & Outlook Summary Appendix 28
Slide 29: 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 30: Food & Feed testing offering is the most comprehensive in the market
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 31: 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 32: 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 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 USA 63.5 CostCo USA 129.0 U
Slide 33: 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 34: 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 35: 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 36: 9 of the top 10 largest pharmaceutical companies are clients
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 37: 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 38: Eurofins 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 38
Slide 39: 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 40: 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 41: 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 42: 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 43: 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 44: Strategy builds high Barriers to Entry
Eurofins’ strategy builds high Barriers to Entry 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 personnel competition
Slide 45: Contents
Contents Introduction Market & Strategic Positioning Finance & Outlook Summary Appendix 45
Slide 46: 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 Source: Eurofins, Company websites TICS ex ERF = SGS, Intertek, Bureau Veritas *2017 actuals for SGS and Bureau Veritas, Bloomberg 2017 consensus estimate for net capex and sales
Slide 47: Midterm objective to reach 20% adjusted EBITDA margin
Midterm objective to reach 20% adjusted EBITDA margin, and strengthen cashflow generation Separately Disclosed Items (SDI) costs Eurofins Cashflow Expansion Levers increased as % of EBITDA mainly due to Objectives: reorganizations in recent acquisitions and • Reduce relative impact of start-ups and
Slide 48: Investments for future growth have had an impact on cash flows
Investments for future growth have had an impact on cash flows 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 - Operating Cash Flow, less inter
Slide 49: 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 50: 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 51: Market Share: Eurofins is the leader in its industry
Market Share: Eurofins is the leader in its industry – and continues to reach new market leadership positions* New Markets 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Denmark: Food & Env. X No 1 X = Market Entry France: Environment Testing X No 1 Brazil: Food
Slide 52: Eurofins is already present in countries generating over 83% of world GDP
Eurofins is already present in countries generating over 83% of the world’s GDP… 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 testing services Diagnostics USA 20.2
Slide 53: Heavy investment in high-growth markets and resources for future profits
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 54: Positive trends drive solid operating results
Positive trends drive solid operating results 2017 2016 Year on year evolution of EUR m Adjusted Separately Reported Adjusted Separately Reported Adjusted Results disclosed results Results disclosed results Results (%) items items Revenues 2,971.4 2,971.4 2,536.6 2,536.6 +17.1% EBITDA 556.7 -43.5 51
Slide 55: 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 H1 2014 FY 2014 H1 2015 FY 2015 H1 2016 FY 2016 H1 2017 FY 2017 Average Month End Excess Cash (EUR) EUR 205m EUR 183m EUR 473m EUR 585m EUR 579m EUR 600m EUR 529m EUR 697m Interest
Slide 56: Growth, Profitability and ROCE are critical objectives
Growth, Profitability and ROCE are critical objectives Group Profitability Objectives 4,500 4,000 20.0% Operating margin developing towards mid- 3,500 term profitability objective 3,000 15.0% 1. Start of profit contribution from start-ups Group Adjusted EBITDA margin (%) Group Revenues (EURm) 2,50
Slide 57: Solid Balance Sheet
Solid Balance Sheet Hybrid Dec 2017 Dec 2016 EUR 300m hybrid issued in Jan 2013/Jul 2014, callable at par by Eurofins in Jan 2020. Bears a fixed coupon of 7.00% until first call, Euribor 3m + 818 bp thereafter if not called Net Debt/ LTM Adjusted EBITDA 2.51 x 1.16 x EUR 300m hybrid issued in
Slide 58: High Degree of Financial Flexibility
High Degree of Financial Flexibility Strong Balance Sheet as of 31/12/2017 Leverage ratio remains well below the Group’s Net Debt/ Adjusted EBITDA: max 3.5x covenant of 3.5x Large financial flexibility with fairly long financing maturity • EUR 300m Eurobond issued in 2013; maturing 2018 • Hybrid
Slide 59: Outlook: becoming the world leader in the bioanalytical testing market
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 EUR 3.7bn of revenues EUR 700m of Adjusted
Slide 60: Contents
Contents Introduction Market & Strategic Positioning Finance & Outlook Summary Appendix 60
Slide 61: 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 Strong international presence
Slide 62: Appendix / Back up slides
e% eurofins Appendix / Back up slides 62
Slide 63: Consolidated Income Statement
Consolidated Income Statement 2017 2016 Adjusted Separately Reported Adjusted Separately Reported EUR Thousands results disclosed items Results results disclosed items Results Revenues 2,971,417 - 2,971,417 2,536,608 - 2,536,608 Operating costs, net -2,414,694 -43,481 -2,458,174 -2,056,984 -18,547 -
Slide 64: Consolidated Balance Sheet
Consolidated Balance Sheet December 31, December 31, EUR Thousands 2017 2016 Property, plant and equipment 685,998 506,818 Goodwill 2,505,337 1,584,644 Other intangible assets 735,120 383,209 Investments in associates 5,642 3,373 Financial assets and other receivables 43,942 34,154 Deferred tax asse
Slide 65: Consolidated Cashflow Statement
Consolidated Cashflow Statement EUR Thousands 2017 2016 Cash flows from operating activities Profit before income taxes 250,105 242,607 Adjustments for: Depreciation and amortisation 175,718 141,696 Share-based payment charge and acquisition-related expenses, net 40,718 37,433 Other non-cash effects
Slide 66: 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 67: Post acquisition, both 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 68: 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 69: 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 70: Valuation multiples overview
Valuation multiples overview EV/EBITDA 2018 and Consensus Earnings Growth Estimates Source: Bloomberg 70
Slide 71: Strong financial discipline at all times
Strong financial discipline at all times Average net debt/LTM 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 st