Santé humaineDiagnostics
Communiqué de presse
Eurofins delivered very strong revenues, margin and cash flow in FY 2020, ahead of its objectives, thanks to a fast-paced response to COVID-19 and the resilience of its core businesses
1 March 2021
- Total revenues grew 19.2% from EUR 4,563m to EUR 5,439m for the full financial year 2020 (FY 2020), slightly above the Group’s recently upgraded EUR 5,400m revenue objective for FY 2020 and 8.8% higher than the EUR 5,000m objective set in October 2018 16, and already upgraded from the original EUR 4,000m objective set in October 2015.
- Organic growth10 was strong at 19.3% in FY 2020 with 5.1% in H1 2020, 32.7% in H2 2020 and a record 42.4% in Q4 2020.
- Results demonstrate the resilience of the Group’s core business (excluding COVID-19 clinical testing and reagents revenues), with positive organic growth in FY 2020 and organic growth returning to 5% in Q4 2020 despite continued lockdowns in many countries.
- The Group has risen to the challenges of COVID-19, quickly developing a very broad range of products and services critical to the management of COVID-19. It set up, at pace, significant scale testing capacity and remained at the forefront of both scientific and product innovation. The Group supported the development of vaccines by most leading providers. It also innovated to produce new critical tests and testing formats for the individual and the workplace and recently the Novatype RT-PCR for fast variant identification.
- The Group estimates that COVID-19 testing and reagents delivered in excess of EUR 800m revenues in FY 2020. While they required some additional Net capex and inventory building, these activities were accretive to EBITDA3 margins and cash flow.
- The Group continued to execute on its strategy to reinforce its position as the global leader in “Testing for Life” and entered the final stage of its significant 2015-2020 investment programme to create a network of large state-of-the-art laboratories enabling scale effects, with the most innovative equipment and fully digital with advanced IT solutions.
- Adjusted1 EBITDA increased by 52% year-on-year to EUR 1,413m in FY 2020 from EUR 931m in FY 2019, representing a 26.0% adjusted EBITDA margin (+560bps year-on-year) exceeding the Group’s latest EUR 1,300m adjusted EBITDA objective set in December 2020 and the EUR 1,000m adjusted EBITDA objective first set in October 2018 and restated to EUR 1,100m in March 2020 to reflect the impact of IFRS1617 .
- Adjusted basic earnings per share7 (EPS) increased by 107% to EUR 3.63 in FY 2020 compared to EUR 1.75 in FY 2019, largely driven by the increase in profitability and lower tax compared to last year. • Net Operating Cash Flow8 significantly increased in FY2020, up 81% to EUR 1,224m in FY2020 vs EUR 678m in FY 2019. Net working capital stood at 4.5% of Group’s revenues in FY 2020 vs 5.3% in FY2019 (-80bps year-on-year). • Free Cash Flow to the Firm9 was EUR 873m, a significant increase of 143.5% compared to EUR 359m in FY 2019 and well above our most recent objective of EUR 700m set in December 2020 and the original Eurofins Scientific 2/20 March 2021 EUR 500m objective first set in March 202018, restated to EUR 600m in October 2020 to reflect IFRS 16 reclassification.
- Year-end net debt14 decreased to EUR 2,242m from EUR 3,245m in FY 2019 thanks to the strong cash flow generation and a successful equity issuance (EUR 535m total gross proceeds) in May 2020. As a result, the leverage ratio (net debt divided by proforma adjusted EBITDA19) decreased to 1.6x at the end of December 2020, from 2.5x at the end of June 2020 and 3.2x at the end of December 2019 returning below 2.0x, 2 years ahead of the 2022 target.
- Eurofins closed 26 acquisitions during the year 2020, representing full-year equivalent proforma revenues of EUR 103m in FY 2020 and a total investment of EUR 177m, slightly above the EUR 171m investment in FY 2019 and still considerably lower than 2017 and 2018, reflecting the Group’s reduced focus on M&A.
- Eurofins intends to propose, at its upcoming Annual General Meeting (AGM), to distribute a dividend of EUR 0.68 per share, corresponding to 25% of FY 2020 basic reported EPS attributable to equity holders.
- In FY 2020, the Group continued to embed best practices in business operations and make further progress on all three dimensions of ESG, including disclosure, notably with the introduction of specific ESG targets focused on gender diversity, safety, environment and compliance, applicable for all Business units and more senior leaders from 2021 onwards, the appointment of a fourth independent director with over 40 years of experience in audit and accounting to the Board of Directors in 2020 and the proposal to bring the Board of Directors to eight members comprised of four women and five independent directors at the April 2021 AGM.
- Outlook: following a very strong set of 2020 results, Eurofins is confirming its 2021 financial objectives, updating its objectives for 2022 and setting new objectives for 2023, all at average 2020 currency exchange rates, as follows:
o The COVID-19 pandemic evolution and its impact over the coming months and years remains very much uncertain, especially considering the unknown efficacy of vaccines on new Variants of Concern, leading to a wide range of potential financial outcomes.
o Consequently, keeping our previous revenues objective for FY2021 of EUR 5.45bn first set on 4 March 2020, before the pandemic significantly hit Europe and North America, appears the best estimate that can be made for now. This objective was initially made at 2019 average exchange rates and assumed EUR 200m from M&A consolidated at mid-year in 2020 (revised down to EUR 150m on 22 October 2020), while there was actually a negative FX effect of EUR 60m in 2020 and only EUR 103m of full year revenues from M&A in 2020. These objectives also assume EUR 150m revenues from M&A in 2021 consolidated at mid-year.
o The Group also maintains its FY2021 objectives of EUR 1.25bn adjusted EBITDA and EUR 700m Free Cash Flow to the Firm. This includes an objective of EUR 350m for Net capex and EUR 30m for SDI at the EBITDA level.
o 2021 results could well be materially higher than these objectives should COVID-19 testing continue at current levels through 2021. o The objectives outlined below for 2022 and 2023 are set excluding any revenues from COVID19 testing and reagents and any M&A beyond 31/12/2020 (i.e. organic core business ex. COVID19 objectives). They also assume a full return to normal of the economies and markets to a pre pandemic situation by 01/01/2022.
o In 2020, the Group generated over EUR 800m of revenues from COVID-19 testing and reagents. It remains very difficult to estimate the lost growth in 2020 due to the impact of COVID-19 lockdowns, social distancing & travel restrictions on our clients and our activities. Nevertheless, given the strong performance of our core business in Q1 and Q4 of 2020, we estimate this impact to be of ca. EUR 250m in 2020, implying a net positive COVID-19 impact of about EUR 550m on FY2020 revenues. If the pandemic is fully resolved by the end of 2021, we believe that the EUR 250m lost growth on our core business in 2020 could be caught up in 2022 (in addition to the 5% organic growth of that year), as those missing sales are mainly due to the reduction of testing for activities impacted at our clients (restaurants, events and travel industry, clinical trials, etc.) and environment testing that requires on site sampling. For 2022 and 2023, we believe that setting a 5% annual organic growth objective for our core business (excluding COVID-19 testing and reagents revenues) is an achievable target. o Based on those objectives and hypotheses Eurofins organic ex. COVID-19 revenues should therefore reach EUR 5.45bn in 2022. This would lead to ex. COVID-19 objectives of EUR 1.30bn adjusted EBITDA and EUR 750m Free Cash Flow to the Firm. o For 2023, based on 5% organic growth, the organic ex. COVID-19 revenues objective is set at EUR 5.725bn, and thanks to expected continued progress on profitability and cash flow generation, Eurofins sets objectives of EUR 1.375bn adjusted EBITDA and EUR 800m Free Cash Flow to the Firm. o Should the above Free Cash Flow objectives be achieved throughout 2021-2023, without any M&A spend in the period, the leverage (net debt to adjusted EBITDA), should fall below 1.0x by the end of 2023. These organic objectives reflect both the significant opportunities available to the Group as well as the poor visibility of future COVID-19 contributions. Should vaccination programs not achieve sufficient population immunity in many countries by this summer or Variants of Concern significantly reduce Vaccine effectiveness, a level of COVID-19 testing and reagents revenues could well continue in 2022 and beyond as well as some market disruptions. At this time, Eurofins continues to carry out significant volumes of COVID-19 testing and anticipate this activity to continue at some level at least during 2021. In addition to these organic objectives, whilst M&A is not currently a priority, Eurofins considers a likely scenario that it may add EUR 150m proforma revenues from acquisitions in 2021 and EUR 200m in each of 2022 and 2023. Including these M&A activities, the Group revenues would reach EUR 5.70bn in 2022 and EUR 6.175bn in 2023 if it achieves its organic objectives.
