Eurofins Significantly Exceeds Its Objectives in 2021 and Increases Its Objectives for 2022 and 2023
LUXEMBOURG–(BUSINESS WIRE)–Regulatory News:
Eurofins Scientific (Paris:ERF):
Financial Highlights
- Eurofins delivered a very strong performance in FY 2021, exceeding all financial objectives:
- Record Revenues of €6,718m, +24% vs. FY 2020 (vs. €6,350m objective)
- FY 2021 revenue organic growth13 of +21.7% (vs. FY 2020)
- Record Adjusted1 EBITDA3 at €1,902m +35% vs. FY 2020 (vs. €1,700m objective)
- Record Adjusted EBITDA margin of 28.3%, +230bps vs. FY 2020 (vs. 26.8% objective)
- Net operating cash flow at €1,510m, +23% yoy and +€286m vs. FY 2020, enabling a reduction in gross indebtedness of €401m
- Record FCF-Firm10 at €1,015m, +16% vs. FY 2020 (vs. €700m objective)
- Net Profit7 amounted to €783m, +45% yoy
- Reported Basic EPS8 stood at €3.91, +44% yoy, and diluted EPS stood at €3.73, +45% yoy
- The Core Business (excluding COVID-19 related clinical testing and reagent revenues) exceeded once again the 5% long run organic growth objective:
- Core Business revenues of €5,292m (vs. €5,150 objective)
- FY 2021 revenue organic growth, of +12.3% (vs. FY 2020) and +11.9% (vs. FY 2019 adjusted for cyber-attack)
- Q4 organic revenue growth, of +7.5% (vs. FY 2020) and +12.6% (vs. FY 2019 adjusted for cyber-attack)
- Further margin progression driven by network, scale and efficiency gains
- The Core Business delivered 6.5% average organic growth between 2011 and 2021 and by 2021 had fully recovered the negative impact of both the 2019 cyber-attack and the 2020 COVID-19 lockdowns. Over the last 11 years on average Eurofins exceeded by 30% each year its organic growth objective
- Strong progress made in 2020 and 2021 to increase Eurofins presence in BioPharma, Genomics, In Vitro Diagnostics (IVD), Life Sciences, and technology driven areas, and in Asia, a key focus for this decade
- Due to this evolution and a strong outlook for future years in all of Eurofins activities, the annual organic growth long run objective is raised by 30% from 5% to 6.5%
Impact of the pandemic on Eurofins future direction
- COVID-19 related activities remained robust in 2021 at about €1,425m, with the Eurofins network continuing to support government and health authorities with innovative tests and solutions to help fight the pandemic
- Over 40 million COVID-19 PCR tests now completed in Eurofins laboratories
- Further innovation with the rapid roll-out of new test formats for the detection of emerging Variants of Concern
- On the same day as the World Health Organisation (WHO) designated Omicron as a Variant of Concern, Eurofins launched a kit for the rapid detection of this variant
- Decision to maintain testing capacity, despite lower volumes in Q3, justified with strong revenues in Q4
- Eurofins is coming out of the pandemic considerably strengthened. Its Core Business is consistently exceeding growth expectations and is facing further increasing growth opportunities. Leverage has been significantly reduced and Core Business profitability is increasing markedly. As a result, Eurofins is intending to:
- Increase its organic and inorganic investments to expand its network particularly towards Asia, BioPharma, In Vitro Diagnostics (IVD), Life Sciences and technology driven activities
- Increase its cash flow allocation towards owning a larger proportion of its state-of-the-art sites
- Increase investments in digitalisation, automation, cyber security, leadership and staff development, and R&D
Other financial highlights
- Net capex9 spend accelerated in H2 and increased overall to €495m, +41% vs. FY 2020, with around two thirds invested in new laboratories and laboratory equipment to meet future demand, especially in Biopharma and Asia, alongside further investment in LIMS systems and cyber-resilience
- Rate of acquisitions accelerated in H2 and Eurofins closed 38 acquisitions in 2021, amounting to a total spend of €533m, fully funded from free cash flows (vs. €177m FY 2020) and representing full-year equivalent pro-forma revenues of €252m
- The integration of the large 2017-2018 acquisitions has been successfully completed, achieving at least our 12% Return on Capital Employed target
- BioPharma, Genomics, IVD and related activities are now at 85% of the combined size of Eurofins’ Food & Environment testing businesses
- In China the Group increased its laboratory footprint by 87% in 2021 vs. 2020
- China revenues as a proportion of total Group revenues should increase by over 60% between 2018 and 2022
- The Group has a robust M&A pipeline and is looking to expand its reach into consumer genetics and direct to consumer markets and expand geographically especially, in Asia
- Net debt11 remained stable at €2,239m, with net debt to pro-forma adjusted EBITDA of 1.2x (vs. 1.6x in Dec 2020), well below the Group’s 1.5-2.5x target range providing flexibility to pursue growth opportunities should they arise
- Eurofins’ management intends to propose, at the upcoming Annual General Meeting (AGM) on 26 April 2022, to increase by 47% the annual dividend to €1.00 per share, corresponding to 26% of FY 2021 reported Basic EPS
Further progress on ESG
- Significantly increased scope of carbon footprint data collection (77% FTEs/55% sites vs. 20% FTEs/10% sites in FY 2020) and achieved a 3.8% reduction in carbon footprint (tCO2e/FTE) compared to baseline year (2019). Confirmation of CO2 neutrality goal by 2025
- Increasingly strong female representation in leadership roles (49% female leaders at all leadership levels, 30% National Business Line leaders/Business Unit Managers, 21% Senior Leadership/Regional Business Line leaders and gender parity at Board level)
- Upgrades received from eight ESG rating agencies during 2021
- Establishment of a Sustainability and Corporate Governance Committee at Board level and an Executive Sustainability Committee at operational management level
Outlook and financial objectives
- Given the very strong set of 2021 results, the positive market outlook, Eurofins increased Life Sciences and Asia focus and new investment initiatives outlined above, Eurofins is updating its objectives for 2022 and 2023 and setting new objectives for 2024 (all at average 2021 currency exchange rates), assuming 6.5% organic growth per year and including potential revenues from acquisitions of €250m in each of 2022, 2023 and 2024 consolidated at mid-year, as follows:
New vs. previous objectives (including M&A)
| €m | New | Previous | New | Previous | New |
| Revenues | 6,225 | 5,700 | 6,550 | 6,175 | 7,250 |
| Adjusted EBITDA | 1,500 | – | 1,575 | – | 1,725 |
| FCFF before investment in owned sites16 | 850 | – | 900 | – | 950 |
If no M&A at all were to be carried out which is not the plan, the objectives would be as follows:
New vs. previous objectives (excluding M&A)
| €m | New | Previous | New | Previous | New |
| Revenues | 6,100 | 5,450 | 6,175 | 5,725 | 6,575 |
| Adjusted EBITDA | 1,475 | 1,300 | 1,485 | 1,375 | 1,580 |
| FCFF before investment in owned sites* | 825 | – | 845 | – | 875 |
| *The cash flow objectives are after significantly increased capex to accelerate future growth | |||||
- For FY 2022 the Adjusted EBITDA margin target of the COVID-19 related activities has been conservatively set at the Core Business margin target level, given lower utilisation and ramp down costs. Margin dilution from M&A and mature start-ups integration to Core Business is assumed to be compensated by margin increases in the Core Business
- We have assumed, for the purposes of the financial objectives, no contribution from COVID-19 related activities in FY 2023 and FY 2024 and only €300m in 2021
- Continued significant COVID-19 testing beyond Q1 2022 would be an upside risk to objectives
- Higher rates of inflation for a prolonged period, may drive further price rises for our services and consequently would also lead to higher growth
- An objective for FCFF before investment in owned sites objective is introduced for the coming years to properly highlight this capital allocation, which like M&A is discretionary and reversible. It will also help reduce future rental costs, while reducing the Group’s dependency on third party landlords and increasing mid-term cash flows. Eurofins’ owned buildings surface area grew by 43% between 2019 and 2021 and now represent 387,000 m2
- Due to the many growth opportunities highlighted, Eurofins is targeting capex excluding cash allocation to purchase owned sites at around 6.5% of revenues. Purchase or construction of owned sites is harder to plan as it depends on opportunities and speed of permitting and building. It could represent around €100m per year
- Now that integration of large 2017/2018 large acquisitions is substantially completed, SDI should mainly depend on the number and speed of ramp up of start-ups. As can be judged today, it should be in the range of €30m-€60m per annum
Eurofins resilience to potential crises
- Eurofins core business very strong performance with continued organic growth through the 2007-2009 global recession and the 2020, 2021 COVID crisis showed the strong resilience of Eurofins activities, also in times of crisis
- In addition, all of Eurofins M&A spend is discretionary and maintenance capex represents only 2% or 3% of revenues or potentially less as our network has been very well invested over the last 10 years. Significant cash flow could in such case be redirected to further debt reduction
- Beyond its strong balance sheets, low leverage and significant undrawn credit lines, Eurofins also owns 387,000 m2 of laboratories and offices that could be sold and leased back if needed and ancillary or new venture activities that could be monetised if required
Comments from the CEO, Dr Gilles Martin:
“I am delighted to see Eurofins deliver such strong financial results in 2021 alongside many operational and entrepreneurial achievements and continued positive contribution to society. Last year again we continued to innovate to support public health authorities and healthcare professionals in fighting the COVID-19 pandemic. Our Core Business has produced strong organic growth across almost all business lines and geographies, driving margin expansion and cash conversion. Business confidence across our network is high, and therefore we continue to make significant investments to accelerate long-term growth through innovation and digitalisation, new start-up laboratories, the expansion of our laboratory network and strategic acquisitions.
“Looking back over the last 11 years Eurofins’ Core Business has exceeded by 30% on average its annual organic growth objective of 5%. In view of the many opportunities that the Group’s increased orientation towards BioPharma, Genomics, IVD and other Life Science activities as well as faster growing economies in Asia combined with the impact of recent genomic and other scientific breakthroughs are creating, we are pleased to upgrade our mid-term annual organic growth objective by 30% to 6.5%.
“Should Eurofins achieve its new objectives, our profitability and free cash flows now appear sufficient to sustainably self-finance M&A to complement organic growth to exceed 10% overall annual growth of our Core Business, whilst maintaining low leverage, funding significant R&D, digitalisation, network expansion, more ownership of our laboratories and delivering about 1% dividend return to our shareholders.”
Conference Call
Eurofins will hold a conference call with analysts and investors today at 15:00 CET to discuss the results and the performance of Eurofins, as well as its outlook, and will be followed by a questions and answers (Q&A) session.
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Business Review
The following figures are extracts from the Consolidated Financial Statements and should be read in conjunction with the Consolidated Financial Statements and Notes for the year ended 31 December 2021. The Full Year Report 2021 can be found on Eurofins’ website at the following link: https://www.eurofins.com/investors/reports-and-presentations/
Table 1: Full Year 2021 Results Summary
|
| FY 2021 | FY 2020 | +/- % | +/- % | ||||
| In €m except | Adjusted1 | Separately | Reported | Adjusted1 | Separately | Reported | ||
| Revenues | 6,718 | – | 6,718 | 5,439 | – | 5,439 | +24% | +24% |
| EBITDA3 | 1,902 | -62 | 1,840 | 1,413 | -62 | 1,351 | +35% | +36% |
| EBITDA margin (%) | 28.3% | – | 27.4% | 26.0% | – | 24.8% | +230bps | +260bps |
| EBITAS4 | 1,473 | -84 | 1,389 | 1024 | -99 | 925 | +44% | +50% |
| Net profit7 | 1,043 | -260 | 783 | 706 | -167 | 539 | +48% | +45% |
| Basic EPS8 (€) | 5.29 | -1.38 | 3.91 | 3.63 | -0.91 | 2.71 | +46% | +44% |
| Net cash provided by operating activities |
|
| 1,510 |
|
| 1,224 |
| +23% |
| Free Cash Flow to the Firm10 |
|
| 1,015 |
|
| 873 |
| +16% |
| Net capex9 |
|
| 495 |
|
| 350 |
| +41% |
| Net operating capex |
|
| 383 |
|
| 267 |
| +43% |
| Net capex for purchase and development of owned sites |
|
| 112 |
|
| 83 |
| +34% |
| M&A spend |
|
| 533 |
|
| 177 |
| +201% |
| Net debt11 |
|
| 2,239 |
|
| 2,242 |
|
|
| Leverage ratio (net debt/pro-forma adjusted EBITDA) | 1.2x |
|
| 1.6x |
| -0.4x | ||
| Note: Definitions of the alternative performance measures used can be found at the end of this press release | ||||||||
Revenues increased 24% year-on-year to €6,718m in FY 2021 from €5,439m in FY 2020, significantly above both the Group’s FY 2021 revenue objective of €5,450m which was set on 4 March 2020 and raised to €6,350m on 21 October 2021 to reflect the Group’s very strong performance in the first 9 months of the year. The strong trading performance was driven by the growth and resilience of our Core Business (excluding COVID-19 clinical reagents and testing revenues) and ongoing COVID-19 testing.
The Core Business saw very robust levels of demand across almost all business lines and geographies, resulting in strong organic growth of 12.3% vs. FY 2020 and 11.9% vs. FY 2019 (adjusted for the impacts of the cyber-attack of 2 June 2019). In Q4 2021, the Core Business delivered robust organic growth of 7.5% vs. Q4 2020 and 12.6% vs. Q4 2019 (adjusted for cyber-attack).
Eurofins recorded total organic growth including COVID-19 testing and reagents of 21.7% vs. FY 2020. The Group continued to maintain high volumes of COVID-related testing, contributing revenues of about €1,425m in FY 2021 (vs. over €800m in FY 2020). Eurofins’ network continued to support healthcare authorities and practitioners with testing solutions to help fight the pandemic and to identify and track Variants of Concern. The Group’s decision to maintain significant COVID-19 testing capacity in H2 2021, despite lower testing volumes in Q3 2021, was justified, delivering over €350m revenues in Q4 2021.
Table 2: Organic Growth Calculation and Revenue Reconciliation
|
| In €m except |
| 2020 reported revenues | 5,439 |
| + 2020 acquisitions – revenue part not consolidated in 2020 at 2020 FX | 62 |
| – 2020 revenues of discontinued activities / disposals15 | -7 |
| = 2020 pro-forma revenues (at 2020 FX rates) | 5,494 |
| – 2021 FX impact on 2020 pro-forma revenues | -53 |
| = 2020 pro-forma revenues (at 2021 FX rates) (a) | 5,441 |
| 2021 organic scope* revenues (at 2021 FX rates) (b) | 6,619 |
| 2021 organic growth rate (b/a-1) | 21.7% |
| 2021 acquisitions – revenue part consolidated in 2021 at 2021 FX | 98 |
| 2021 revenues of discontinued activities / disposals15 | 0 |
| 2021 reported revenues | 6,718 |
* Organic scope consists of all companies that were part of the group as at 01/01/2021. This corresponds to 2020 pro-forma scope.
Table 3: Breakdown of Revenue by Operating Segment
| €m | FY 2021 | As % | FY 2020 | As % | Growth % |
| Europe | 3,999 | 60% | 3,146 | 58% | 27% |
| North America | 2,147 | 32% | 1,887 | 35% | 14% |
| Rest of the World | 572 | 9% | 406 | 7% | 41% |
| Total | 6,718 | 100% | 5,439 | 100% | 24% |
Europe
In Europe, revenues increased 27% to €3,999m compared to €3,146m in FY 2020. Europe accounted for 60% of Group revenues in FY 2021 (58% in FY 2020). Eurofins generated proportionally more COVID-19 revenues in Europe.
In the context of COVID-19, the Group continues to develop additional solutions and deploy additional services to support public health authorities. On the same day as the World Health Organisation (WHO) designated Omicron as a Variant of Concern, Eurofins launched a kit for the rapid detection (in one hour) of this variant. Eurofins also launched new CE-marked multiplex kits to detect and differentiate three viral infections in the same PCR run (SARS-CoV-2, Influenza virus and RSV).
Among many other developments in our BioPharma services laboratories, the completion of a new building for Eurofins Villapharma BioPharma laboratory in Murcia (Spain) significantly increased our BioPharma discovery capacity to serve growing customer demand. Eurofins BioPharma’s testing portfolio and service offering in Europe expanded for its chemistry clients with the addition of Absorption, Degradation, Metabolism and Excretion (ADME) characteristics testing for compounds developed and synthesised, available at the Eurofins Villapharma site. Eurofins also introduced high throughput experimentation capabilities at Villapharma to develop and synthesise chemicals at much faster turnaround times. As a result, Eurofins can provide faster testing for its clients’ compounds helping them to determine in a timely manner whether they should proceed with further testing and progress the molecule to the next phase of drug discovery.
Food and Feed testing activities in Europe remained resilient in the second half of the year following their strong performance in H1 2021. More stringent regulations across many geographies and new testing methods developed and launched by Eurofins led to strong demand for the Group’s Food testing services. Environment testing activities experienced very strong volumes across most geographies in Europe, with continued market share gains. More stringent regulations are increasing demand for Environment testing services, for example around per- and polyfluoroalkyl substances (PFAS), soil protection and asbestos remediation. Eurofins significantly ramped up its capacity for wastewater pandemic monitoring in Europe, including detection capabilities to differentiate COVID-19 Variants of Concern.
North America
In North America, which accounts for 32% of Group sales (35% in FY 2020), revenues increased 14% to €2,147m in FY 2021.
The BioPharma services business continued to experience strong growth across all activities. Eurofins Discovery launched a new biotherapeutics start-up to serve the large molecule drug discovery market. Eurofins Contract Development and Manufacturing Organization (CDMO) finalised the construction of a new spray dryer operation for its drug product business unit that will support phase I/II development and niche commercial products. Eurofins CDMO is also planning to construct a new high potency Active Pharmaceutical Ingredient (API) facility, which is expected to be completed in April 2022, as well as a new large scale API plant in 2023 to accommodate increasing demand.
Eurofins’ Clinical Diagnostics business continues to innovate developing new testing methods to expand its services for transplant patients. Eurofins Viracor continued to invest in research studies to demonstrate the utility of their innovative assays, including a liver-specific Viracor TRAC study and a study researching the benefits of combining the use of Viracor TRAC and TruGraf testing. The first study was published in the American Journal of TransplantationA and the second study was published in the Clinical Journal of the American Society of NephrologyB. Eurofins Transplant Genomics’ TruGraf test saw very strong year-on-year growth in sample volumes (+322% in FY 2021 vs. FY 2020). Humana, a leading health care company that offers a wide range of insurance products and health and wellness services, began to offer nationwide in-network coverage for the TruGraf blood gene expression test to its Medicare kidney transplant patients. EmpowerDX launched over 20 new at-home collection diagnostic test kits for cardiovascular, hormone, and mental health, among others.
The Environment testing business in North America was impacted by restrictions around sample collection and adverse weather conditions in the first half of 2021. Nonetheless, legislative and regulatory drivers are supporting growth in Environment testing, including litigation related to specialty testing services such as PFAS and 1-4 dioxane, as well as an ever-increasing societal focus on ESG. Eurofins reinforced its leadership position in Environment testing with the addition of differentiated services and technologies, specifically PFAS in blood, serum, soil vapor and stack emissions as well as non-target PFAS forensic testing, emerging pollutants (e.g. 6-PPD Quinone) testing and dioxin testing. EmpowerDX collaborated with Eurofins Environment testing to launch the first direct to consumer test for PFAS identification in a blood sample. PFAS are environmental chemicals that have been linked to liver damage, thyroid disease, and cancer.
The Food testing business in North America continued to develop and launch new testing methods. Eurofins DQCI was selected by the American Dairy Products Institute and the Dairy Foods magazine as an honouree in the 2021 Breakthrough Award for Dairy Ingredient Innovation program for vitamins A1/A2 testing. Eurofins Food Integrity and Innovation initiated the development of a method for the analysis of selected mycotoxins (aflatoxins and ochratoxin A) in hemp plants and products. The method workflow employs immunoaffinity clean-up columns from Eurofins Technologies and will be submitted for AOAC International Official Method of Analysis consideration. Eurofins’ Good Manufacturing Practice (GMP) microbiology laboratory in Horsham, Pennsylvania, received dual ISO-17025 and cGMP certification for their robust Quality Management System (QMS) from the American Association for Laboratory Accreditation (A2LA). This is the first Eurofins laboratory in North America to accomplish dual accreditation, and it will enable Eurofins to facilitate expanded and more rigorous infant formula testing methods.
____________________________
A https://www.prnewswire.com/news-releases/american-journal-of-transplantation-article-validates-clinical-utility-of-donor-derived-cell-free-dna-in-detecting-liver-rejection-301417295.html
B https://cjasn.asnjournals.org/content/16/10/1539
Rest of the World
In the Rest of the World, revenues increased by 41% to €572m, compared to €406m in FY 2020.
In 2021, Eurofins expanded its total laboratory footprint in China by 87%.
In BioPharma services, there was a significant increase in demand for CDMO services from India. Eurofins Central Laboratory in China moved to a much larger new state-of-the-art building in Shanghai to accommodate increasing demand for specialty testing to support clinical research in China.
Eurofins’ Food and Feed testing laboratory footprint was strengthened in Southeast Asia with new start-up laboratories commissioned at Penang (Microbiology and Chemistry) and the addition of a food and dairy microbiology laboratory in Singapore. In China, Eurofins established new accredited pesticide residue methods to meet the novel Chinese pharmacopoeia Maximum Residue Limit (MRL) regulations.
Contacts
For more information, please visit www.eurofins.com or contact:
Investor Relations
Eurofins Scientific SE
Phone: +32 2 766 1620
E-mail: [email protected]
