Azelis Group Nv

Good day, ladies and gentlemen, and welcome to Azaleas Group's Q1 2022 trading update. With us this morning are Dr. Jochen Muller, CEO, and Tejs Bakker, CFO. Jochen will start with the operational highlights of the period, followed by Tejs, who will give a financial update. Jochen will then wrap up with an outlook for the remainder of the year and will open the floor for Q&A. We remind everyone that this presentation may contain forward-looking statements that are subject to risk and uncertainty. All participants will be on listen-only mode until we start the Q&A. We will make the recording of this presentation available on our website later today. With that, I'll hand you over to Jochen.

Hello, everyone, and thank you for joining us on this update call. So let me kick start the short presentation now. As you might have seen in our press release this morning, we had an excellent start to the year. the group delivered record organic growth of almost 33%, with strong performances from all the regions. Demand in both the life sciences and industrial, chemicals and markets remained very strong, as we indicated already in March when we presented our full year 2021 results. In Q1, we also completed three acquisitions that further strengthened our electoral value chain. Mungo in South Africa, Adelaide in Thailand, and WITCAM and the UK. These three companies have combined annual revenues of over 160 million euro. The strong top line growth as well as the benefits from our growing scale efficient margin management drove a 95% increase. A 95% increase. Now adjusted EBITDA and an EBITDA margin expansion of 215 basis points compared to the prior year. Noteworthy that our pass-through and value-based pricing policy allowed this expansion despite the continued cost increase we are seeing for the materials we are sourcing from our products. We continue to generate cash, although our working capital was impacted both by the strong demand as well as the ongoing supply chain pressures. Once again, We reduced our leverage ratio to 2.6 at the end of March this year compared to a 5 at the end of March 2020. Operationally, we'll continue full steam with our initiatives that will drive and support our future growth. We're still focused on rolling out our digital platforms and building a strong network of laboratories that will keep us at the forefront of innovation. Innovation, a key driver for all we do. We continue to deliver award-winning, innovative formulations and solutions for both our principals and customers. So let's move on to the next slide. Let's have a look at our Q1 performance in more detail. At group level, organic growth was a record at 32.6%. The strong growth reflects continued strong demand in both the life science and industrial chemicals and markets, as well as some positive impact on higher prices. It should be noted that the impact from volume growth was still greater than the price impact during Q1. In industrial chemicals, we continue to see strong demand in case across all regions, supported by positive trends in the building and construction sectors. In life sciences, growth includes and health accelerated following the lifting of COVID restrictions in most countries. Additionally, the recovery in pharma and the continued positive trends in personal care have further reinforced demand in life sciences. In the first three months, we closed three agencies, two in EMEA and one in Asia Pacific. Omongo, which was announced already last year, but only closed in Jan, significantly strengthened our industrial chemicals footprints in Africa, especially in the lubricants and metalworking food sectors. Catalite, which we closed in February, reinforces our portfolio in the personal care and home care markets in Thailand. And in March then, we completed the acquisition of WITCAM, which complements our latter-day exchange very nicely in the industrial chemicals markets in the UK. These three acquisitions represent, as mentioned earlier, revenue of more than 160 million. Now, I'll hand the floor over to Tejs, who will talk about our performance during the quarter, starting with the next slide.

Thank you, Jochen. Good morning, everyone. Thank you for attending Learning School. I will provide you a brief summary of the group's financial performance in the first three months. As we noted in November last year, during our first trading update as a listed company, quarterly updates will provide a high-level financial review and also refer to our press release where there are some more details on this. We, of course, will publish more detailed financial figures for the half-year and full-year results. Now, let me start with the P&L overview that you can see here on this slide. As we already indicated in March, And as from Jochen's introduction, we're very happy to report that the strong growth trajectory from the fourth quarter in 2021 carried on to the start of 2022, resulting in revenue for the quarter of 975.3 million. That represents year-on-year growth of 59%. In constant currency, growth was 57%, a significant acceleration for our own quarter. The strong performance was on the back of a record organic growth of 32.6%, which was achieved across all of our regions. Revenue growth contribution from acquisitions was 24.1%. We also had 2.7 till wind effect in the first quarter from FX translation. Organic growth in the more resilient life science segment was strong on the back of customer gains and new mandate gains, which started to materialize and where we expect to ramp up in the coming quarters. As the outcome of this strong revenue performance and the positive development of our order book, also our working capital levels increased. I'll come back to this later on in the presentation. Our gross profit increased 71%, to 235.9 million, which implies a gross margin of 24.2%. The 167 basis points expansion in our gross margin was the outcome of positive mix effect, as well as disciplined margin management, possible price increases that may incur from our partners to our customers. But lastly, also putting strength from our innovation to formation work that's happening in our labs. Please note that this is already our seventh consecutive In the first quarter, adjusted EBIT increased by 95% or at a constant of X at 92.3% to €116 million. This translated to a strong margin expansion of 250 basis points versus prior year. Strong top-line growth, as well as the benefit of our growing scale, allowed us to deliver a strong margin uplift despite continued growth investments in digital as well as commercial initiatives. This result also reflects full bonus accruals to cater for the over-performance version of our budget. Now, all of this resulted in a significant improvement in our conversion margin from 43.3% to 49.2%. So let's move on the next slide to a quick overview of the growth breakdown of our revenue and our growth profit. So here on page nine, we have broken down the 59% revenue growth and the 71% reported growth profit growth between organic growth and growth from the first time inclusion of acquisitions. The firm performance for the first quarter was supported by M&A. We completed 12 transactions over the course of 2021, and three acquisitions were closed for the first time included in the first quarter of 2022, with a combined revenue effect of around 160 million, as Johan already mentioned. Please note that a significant portion of these acquisitions is still not part of our organic growth calculation. 24% of the revenue growth in Q1 coming from the first time inclusion of these acquisitions. But even more important, as you can see on this slide, the majority of our growth came from the key pillars of our growth strategy. That is organic growth. All of our regions delivering high double digit organic growth on the back of strong demand in the majority of the end markets in each region. And group level organic growth came in at 32.6%. In addition, these slides also demonstrate our focused ability to execute pass-through price inflation and the hard work in executing our margin management programs across all three of our regions. This is reflected in 43% organic growth in our gross profit buy. So let's have a look at the regional financial performance in the next slide and provide some color on the underlying results. So what you see on this slide, you see our three regions. that we have, and we also have a holding, but let's focus on the three operating regions here. Starting with EMEA, on the left, revenue increased by 51.6% to 451 million. This growth was driven by strong organic growth of 33.9% and Out of this growth, 19.5% came from the first-time inclusion of acquisitions, where in 2022 we closed Mungo in South Africa and Whitcam in late March. In addition, there was a 1.8% EVIX headwind. So this performance was very impressive. Dynamics in the resilient life science markets were positive, particularly in food and health, where the recovery, which started in the second half of last year, has continued strongly as well, and also demand in pharma was very strong. The rest of the life science markets, as well as the industrial chemicals activities in EMEA, as well as our order book, remained very strong. Based on the strong performance, our conversion margin ended at almost 54%, a year-on-year increase of 600 basis points. Now let's move over to the Americas. We continue to see very strong growth trends there. Revenue increased more than 50% to €367 million, driven by strong organic growth of 28%. The strong demand in both the life science and the industrial chemicals reflects the strong economic activities across these sectors and also growth of new customers and new mandates. The conversion margin improvement was very strong in America, going from 49% to almost 54% in Q1 2022. This is on the back of efficiency gains, but also a positive mixed effect from the inclusion of Feigen in our numbers. In Asia Pacific, we continue to see strong growth momentum, both organically as well on the execution of our M&A strategy. The total revenue growth of 123%, of which 44% was organic, and the rest from acquisitions. An excellent performance, considering also the newly impacted of the new lockdowns in China. Despite our ongoing investment in this growing region, we managed to deliver 145 basis points step-up in adjusted EBITDA margin for Q1 2021. Our Asia-Pacific operations also recorded 900 basis points improvement in conversion margin, 43.2%, as we gained scale and momentum in this fast-growing region. So I promise to move on. working capital performance, so let's move to our cash flow drivers on the next slide. Networking capital revenue normalized for acquisitions ended at 14.6% at the end of March 2022, compared to 15.3% at the end of December 2021, and 10.8% at the end of March 21. In absolute terms, this increase was driven mathematically by adapters, which are roughly at 45 days, And then there is also the inventory ramp up to support the strong growth during the quarter, as well as our strong order book for the second quarter. To give you a bit more color on this inventory increase. In absolute terms, around 196 million of the working capital for the period came from our recent acquisitions. These acquisitions are not yet at the Zeta standards. They are not yet on our platforms, all of them. As we are still in the process of integrating them and bringing them in line with group policies, we have a good record here out of this 196 million, 128 million related to inventory. Then there are supply chain disruptions. We experience a higher amount of goods in transit from our suppliers. This accounts for about 12% of our inventory value and has almost doubled compared to prior year. To be clear, we do not expect this to be structural. and we expect working capital ratios to gradually return to normalized levels over time, but we have to support our growth. Our leverage ratio reduced to 2.6 times at the end of March 2022, despite this elevated working capital leverage, compared to the five times in the previous year and 2.7 at the end of December 2021. Overall, we are very pleased with the group's financial performance in the first quarter of 2022 And we have a positive outlook based upon our order book development and the execution of our strategy around innovation to formulation. On that note, I will hand back the presentation to Jochem for a statement on the outlook for the rest of the year.