Eurofins Scientific Sa

Ladies and gentlemen, welcome and thank you for joining Eurofin's half-year 2024 results call. Please note that this call is being recorded and will later be available for replay on the Eurofin's investor relations website. Throughout today's presentation, all participants will be in a listen-only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may press star, followed by one on your touchtone telephone to register for questions. For operator assistance, please press the star key, followed by zero. During this call, Eurofin's management may make forward-looking statements, including, but not limited to, statements with respect to outlook and the related assumptions. Management will also discuss alternative performance measures, such as organic growth and EBITDA, which are defined in the footnotes of our press releases. Actual results may differ materially from objectives discussed. Risks and uncertainties that may affect Eurofin's future results include, but are not limited to, those described in the risk factor section of the most recent Eurofins annual and half-year reports. Please also read the disclaimer on page two of this presentation, subject to which this call and the Q&A session are made. I would now like to turn the conference call over to Dr. Giamatta, Eurofin CEO. Please go ahead.

Hello, everybody, and thank you for joining our half-year conference call. We have a small slideshow that is online and you can access. And I'm going to start on page five. So we have had a quite strong set of results for the first half of the year. We are very pleased with the results. As those of you who have been following Eurofins for a long time know, the first half of the year is by far the weakest part of the year. That's due to seasonality, mostly in the northern hemisphere and clients finishing their budgets in the fourth quarter. Typically the fourth quarter is usually our strongest quarter. So considering that, the results of the first half are very good. And they are good on many aspects. Operationally, we're achieving a lot. We're making very strong progress in our digitalization initiatives and developing the tools, the bespoke IT solutions to run our labs most efficiently and in a standardized way. The more we look, the more we find the vast diversity of IT solutions everywhere. And we now have a clear path after successful pilots to rationalize a lot of this variety and, of course, achieve better service to clients in many areas. So that's one of our main objectives to be the most digital company in our world, which, of course, brings a lot of other benefits because once we're very digital, we can use AI much more with the large amount of data we have. And we can use robotization in our labs, streamline things very efficiently. So that's very encouraging. And the results are especially encouraging because we are carrying a lot of cost. We are carrying a lot of cost that will not go on forever. First, we're rebuilding our IT infrastructure in independent zones with the latest security tooling and the most resilient structure we can find. deploying a lot of standardized applications also in the finance, treasury, et cetera. And so after things we've already completed long ago, like standardizing purchasing. So a lot of investments. And in spite of all the spend we have in those investments, in spite of all the money we spend on startups, in spite of all the money we spend on building new labs, moving our labs into those large hubs, and building many more spokes to be close to customers for the time critical essays, in spite of a large span of M&A, in spite of significant share buybacks that we have been accelerating already in the first half, we still managed overall to reduce our leverage, and that's quite encouraging, and I see that continuing. So that's in a nutshell a quick summary Of the first half, of course, we can come back to specific aspects during the question and answer session. Laurent will talk more about financial aspects. On slide six, you see the margin improvement. We already had a 120 BP improvement in the second half of 23. This is accelerating. Now we've got a 220 BP margin improvement. Again, in spite of all the costs we have in IT and et cetera, are not capex and they are really spend that we do to reorganize our IT and a lot of development cost and all the engineers deploying the software, designing the software, et cetera. So quite encouraging. For those of you who wanted more details, I think we are probably on that level one of the most transparent companies in the world because we give you not only a full segment reporting by geography, and we still feel that geography is the best way to give granularity to our results, because there are true differences across continents between the performance in America, where the economy is still quite dynamic, and Europe, where it's also sharing with you the organic growth, the revenues and organic growth performance by type of activity. And so we give you two dimensions in that sense. And what you see there is, We're doing quite well overall. You probably, those of you who track other companies like Thermo, Danaher, in other sectors, or for example, Charles River, will know that the pharma industry is a bit soft, has been for a number of quarters. And actually we continue to grow, so we're positive. So we are fortunate to be in some of the more resilient areas of service to the pharma industry. It has been a bit softer, especially in Q2, and the pharma industry is well-founded. There's a bit of hesitancy on project starts and so on. We think this is temporary, and we'll pick up exactly when it's hard to say, whether it's Q3, Q4, Q1 of next year, but we see overall we're still very bullish on that activity. It has been a little bit softer, especially the second quarter. Otherwise, you see the usual higher growth in life, so food and environment testing, and consumer products has started, and technology has picked up again. And the clinical is always low single digits, low to mid single digits, so it's actually clinical did relatively well in the first half at 4.5% organic growth. And we have more details in the press release. On page 8, we share what we do on buildings. We continue to do that. We continue to build new buildings. We've had discussions with many of you regarding the buildings that my personal holding owns, and we are getting them all evaluated by third parties, and we'll give Eurofins the opportunity to buy them should the The non-related shareholders will decide. It doesn't have to be all in one go. We don't want to stretch the balance sheet. We can replace some of the things we wanted to do externally by those buildings if our shareholders want that. Anyway, we'll all do that in a very transparent way when all of that is ready. On page nine, we talk a bit about startups. So we continue to do many startups. We still feel acquisitions are expensive. But when Eurofins is trading at 8 times or 8.3 times EBITDA, obviously looking at external acquisitions that go for 10 or 12 or for the good ones, 15 seems a bit, that's not the top priority. So we'd rather buy back our shares in those circumstances until the discount is basically what we feel is certainly not justified is gone. We should rather buy back our shares. by the way we are doing that we announced it and we're doing it but we don't have to to give you every details of what we do and with conditions um and then acquisitions we continue to do acquisitions we uh we have headroom we'll have even more headroom as our profits continue to increase and we're confident that they will continue to increase as per our plans and so we have we have a pipeline we still find the acceptably priced acquisition mostly small, and if they fit well, if they have the right management, we still can find smaller companies that we can buy from five to eight times EBITDA, or sometimes slightly more, and so we continue to do that. So I think in this quarter, apart from the slight softness in biopharma, which we find is very temporary, Everything's on green or very green, and the outlook is quite good. And Laurent will give you a bit more details, a little bit more color on the financial aspect.

Thank you, Gilles, and good afternoon. It's my pleasure to present you with a very good set of results for the first half. As you can see on slide 12, we had clear improvement on all fronts in the first half, with a revenue growth of 6.5%, a good increase of our EBITDA by 21% year-on-year, reaching 714 million euros, A very good increase of our adjusted EBITDA margin, also a 220 BIPs improvement year-on-year, reaching 22.1%, ahead of our full-year objective, and a decreased SDI to only 6% of EBITDA. So all this translated in very strong increase of net profits by 46% year-on-year at €151 million. Moving to slide 13, you can see that our revenue growth of 6.5% in the first half was mostly relying on a good organic growth, of 5.6% and we had a slight negative effects impact of 0.5% and a good contribution from M&A by 1.1% of revenues. On slide 14, our performance by segment shows a very strong improvement of margins in all regions and especially in Europe. with a plus 330 bps increase year-on-year, thanks to volume, price, and cost control measures. This was particularly strong in the dark region, and while France remained accretive to the profitability of the region. In North America, despite a slightly more moderate growth of revenue, the margin showed an improvement also of 190 bps year-on-year, thanks to cost discipline. And in the rest of the world, we had overall a good growth and a good margin progress. Moving to slide 15, you can see that we had a very strong cash flow. Our free cash flow was almost multiplied by four in the first half. It increased by 205 million to 279 million euros. We had a very good cash conversion at 39% of EBITDA and more than 100% of our net profit. And going forward, we aim at self-financing all our needs, whether they are M&A, share buyback, CapEx, or startups. On slide 16, as mentioned earlier by Gilles, we continue to invest to develop a unique competitive advantage. So with our capex level to 7.4% of revenues, we still spent 25% to purchase and build out our own size, 21% on IT and 44% on lab equipment. On slide 17, we had a better networking capital at 6.3% of revenues, thanks to improvement on both the DSOs by one day and the DPOs by two days. And to conclude on slide 18, you can see that we have a very healthy leverage of 1.9 turns in H1, well within our target range. We have no more debt maturity until year end due to the strong cash generation in the first half and the early redemption of the July bonds that we paid in June. And overall, we have a very strong balance sheet, well-spread debt maturities, and very ample liquidity with over €1 billion of untapped credit lines. And now I turn back the microphone to Gilles for the conclusion of this.