Eurofins Scientific SE · EURONEXT:ERF
Eurofins Scientific — FY2011 Earnings Presentation
52 slides from Eurofins Scientific's earnings presentation, Apr 17, 2012
Slide 1: Eurofins Corporate Presentation Full Year 2011 Results
Eurofins A global leader in bioanalytical testing in the food, environment and pharmaceutical sectors Corporate Presentation Full Year 2011 Results www.eurofins.com1
Slide 2: Contents
Contents Introduction Market & Strategic Positioning Finance & Outlook Summary Appendix 2
Slide 3: Eurofins Mission and Key Figures
Eurofins Mission is to contribute to global Health and Safety with the best in bioanalysis Founded in 1987 Eurofins provides testing services in three main areas: IPO in 1997 in Paris Food Network of more than 150 laboratories in 30 countries Over 100,000 reliable analytical methods Over 10,000 empl
Slide 4: Strong leading global and local market positions
Eurofins has strong leading global and local market positions N°1 N°1 to N°3 N°1 10% worldwide worldwide worldwide Food & Testing for Market growth Feed Pharma/ rate Biotech Environment Testing Testing 5% (~ 40% of (~ 40% of (~ 20% of revenues) revenues) revenues) Market size ~ EUR 1.5 - 2.0bn ~ EUR
Slide 5: Drivers for long-term growth in Eurofins' markets
Drivers for long-term growth in Eurofins’ markets Secular underlying fundamentals General Market Drivers Laboratory Market Drivers Consumer Demand for pharmaceuticals, Increasing Wealth expectations for quality food and clean and Quality of Life protection environment Consolidation of the fragmented
Slide 6: Reaping the Benefits of the last investment cycle
In 2011, Eurofins started Reaping the Benefits of the last investment cycle Eurofins Growth cycles 1,000 1,000 25% 1 (2000-2004) 2004 - 2005 2 From 2011 Reaping the Benefits (2006-2010) Reaping the Benefits Entry in 11 new markets 900 End of investment cycle 17 start-ups From 7 to 18 countries Entry
Slide 7: Strong 2011 Results reflect hard work of last 5 years
Strong 2011 Results reflect Eurofins’ hard work in the last 5 years towards greater profitability Eurofins: 2011 Achievements Eurofins 5 Year Report Card: 2006-2011 CAGR Organic growth of almost 8% versus 5% 54.6% objective Completed acquisitions exceed 2011 objective 2 largest acquisitions in Group
Slide 8: Investments are starting to pay off
Investments are starting to pay off Earnings have not only recovered, but start to be significant Large investments of the last 5 years start to pay off 12 18% 5€ 20% 16% 18% 10 4€ 16% 14% 14% 8 12% Organic Growth in Percentage Point Return on Capital Employed (%) 3€ Adjusted EBITDA Margin (%) Earni
Slide 9: Increasingly attractive cash generation
Increasingly attractive cash generation Strong cash generation reflected in solid FCF Yields 6.0% 5.1% 5.0% 4.3% 4.0% 3.0% 2.0% 1.0% 0.3% 0.0% -1.0% -0.9% -1.1% -2.0% 2007 2008 2009 2010 2011 Source: Bloomberg, Eurofins *Based on average yearly share prices 2006: EUR 49.3, 2007: EUR 65.0, 2008: EUR
Slide 10: Lancaster strengthens our pharma offering
Lancaster strengthens our pharma offering Leading provider of pharmaceutical Secures position as No.1 pharma product testing/ QC provider in the world product testing/ QC in North America Strengthens offering across the pharma cycle Largest single-site pharma products- No site consolidations or rest
Slide 11: Lancaster integration is underway
Lancaster integration is underway Leading position in North Strong contribution and American pharmaceutical outperformance validate acquisition products testing market Multiple cross-selling opportunities Limited overlap with existing identified Eurofins activities Initiatives to leverage customer B
Slide 12: IPL reinforces our market position in French Environmental Testing
IPL reinforces our market position in French Environmental Testing Acquisition of the majority of IPL SED* Leadership in the French environmental testing market Leadership position in the water control market in which Eurofins was previously not active in A strong network of laboratories in France A
Slide 13: International network of world class laboratories
An international network of world class, standardised laboratories is attractive for our customers FY 2011 revenue split : Germany 21% France 18% Nordic Region 18% N. America 18% Others 10% Benelux 9% Entry into high- UK & Ireland 6% growth markets with 17 start ups 80% of the world’s population sti
Slide 14: Exposure to big economies and fast-growing markets
Exposure to big economies and fast-growing markets Share of Eurofins revenues in various markets (2011) 100.0% 3.2% 0.6% 18.4% 100% 90% 78.3% 5.9% 80% 72.4% 22.3% 70% 60% 26.9% 49.6% 50% 40% 30% 22.7% 20% 10% 0% Germany Benelux Germany & USA Germany UK Total France Italy Spain TOTAL Austria Scandina
Slide 15: 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, one stop contact for Proprietary technologies for proof of compliance to regulatio
Slide 16: Contents
Contents Introduction Market & Strategic Positioning Finance & Outlook Summary Appendix 16
Slide 17: The Food testing market has robust growth drivers
The Food testing market has 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 pract
Slide 18: Food & Feed testing offering is the most comprehensive
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 19: High profile food scares have expensive consequences
High profile food scares have expensive consequences for producers… Year Brand Contamination Impact Cost Source 2008 USA/ Salmonella About 1,500 people sick throughout US ~ USD 100m Mexico in tomatoes & Canada – pulling of products from – USD 250m FreshPlaza and peppers shops & restaurants Maple Lea
Slide 20: …and destroy market value
…and destroy market value 2007 example: Menu Foods is the largest maker of wet cat and dog food in N. America Contamination Direct impact Indirect impact Melamine contamination of pet 48% drop in share price in first week. Tens, possibly foods due to illegal use of a plasticiser hundreds of Threat o
Slide 21: Eurofins is meeting the demands of global players
Eurofins is meeting the demands of global players 80% of top 20 global food & beverage producers and retailers are clients of Eurofins 2010 Sales in 2010 Sales in Food and Beverage EUR billion Retailers EUR billion Nestlé SA Switzerland 87.7 Wal-Mart Stores Inc. USA 313.5 Unilever UK /Netherlands 44
Slide 22: The Pharma testing market is 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. Clinical trials’ complexity leads to increasing amounts of d
Slide 23: Underlying trends are increasing
Underlying trends are increasing Global Drug R&D Spending (USD billion) CAGR 8% Large pharmas need to refill their product pipeline 116 119 as the ‘blockbusters’ start to come off patent 100 84 Drug development expenditures have increased 68 substantially in recent years Total R&D is over USD 100bn
Slide 24: Eurofins Pharma Services activity groups
Eurofins Pharma Services: 5 activity groups Genomics Pre-clinical / Clinical Registration Pharma Early (Central Products Development Laboratory) Testing / cGMP QC Sequencing Pharmacology Biomarkers Regulatory/Biocides/ Impurities Analysis Oligonucleotides Bioanalytical Bioanalysis Chemicals/Agro- St
Slide 25: Selected customers from the pharmaceutical industry
Selected customers from the pharmaceutical industry: 8 out of 10 are clients of Eurofins Top 10 pharma companies Country Pfizer USA Global CRO Market Sanofi Aventis France Market GlaxoSmithKline UK Breakdown CAGR* Novartis Switzerland USA 60% 12% AstraZeneca UK Europe 20% 9% Merck & Co USA Japan 8%
Slide 26: The Environmental testing market continues to grow
The Environmental testing market continues to grow Rise in Progress in epidemiology contamination & & medicine identified more pollution issues compounds as toxic Increasing demand by citizens for clean environment EU increases regulation (e.g. REACH) Increasingly long list of products identified as
Slide 27: Eurofins serves all the main environmental testing markets
Eurofins serves all the main environmental testing markets With Lancaster, 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
Slide 28: 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 (no slowdown) 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 pi
Slide 29: EU regulations a key driver – REACH directive
EU regulations a key driver for Eurofins business – e.g. REACH directive Objectives Examples of affected products or industries Listing and assessing the safety of 30,000 Metals, resin, acids, solvents, oils, fibres in textile, chemical substances used by industries in car components, toys, cosmetic
Slide 30: Outsourcing adds to market growth
Outsourcing adds to market growth Company Outsourced Activity Country Novartis Medinet The Netherlands Danish Hydrology Inst. Official water reference lab. Scandinavia Suez/Sita Envirolab The Netherlands Danish farmers association Steins’ water/environment laboratory Denmark Southern Water Water Tes
Slide 31: Strategy builds high Barriers to Entry
Eurofins’ strategy builds high Barriers to Entry Offering a premium quality service … ... and leveraging internal efficiencies Portfolio: 100,000 reliable methods – Industrialising the laboratory process: unique in the world ahead of competition rationalisation of sites and personnel Global laborato
Slide 32: Contents
Contents Introduction Market & Strategic Positioning Finance & Outlook Summary Appendix 32
Slide 33: Following a clear financial strategy
Following a clear financial strategy In 2011 Eurofins entered a phase of its growth cycle where it started to reap the benefits of its 5-year investment programme which ended in 2010. The results achieved during the year reflect the benefits of the last investment cycle . 33
Slide 34: 5 years of heavy investment (1/2): Laboratory start-ups
5 years of heavy investment (1/2): Laboratory start-ups to enter high-growth markets Country Market Operative achievements 1 Singapore Pharma 2 China Food, Pharma India: Food Lab profitable in year 2 of Asia start-up 3 India Pharma, Food 4 Japan Food, Pharma Japan: Radioactivity lab set up and profi
Slide 35: 5 years of heavy investment (2/2): Expand / modernise laboratory sites
5 years of heavy investment (2/2): Expand / modernise laboratory sites 60 new/expanded modern state-of-the-art sites to enable consolidation / closure of smaller or old sites Total of ca. 180’000 m2 added / brought to most modern standards between 2005 - 2011 Programme to build / modernise / expand
Slide 36: Reach leadership position within 5 years of entering a new market
Objective: Reach leadership position within 5 years of entering a new market New Markets 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 X = market entry Denmark: Food and Env. X No 1 Brazil: GMO X No 1 Pesticides, Veterinary residues etc. X No 1/2 France Environment X No 1 USA: Pharma Produc
Slide 37: Heavy investment in new markets and resources for future profits
Heavy investment in new markets and resources for future profits Building corporate Bringing recently Under development resource for future size acquired labs to group perimeter and growth standards Start-ups: 17 start ups Recruitment of top Deploy IT systems between 2006 and 2010 leadership (eLIMS,
Slide 38: Strong results in 2011 reflect benefits of investment programmes
Strong results in 2011 reflect the benefits of the investment and reorganization programmes EUR m 2009 2010 2011 -/+ % Q4 2010 Q4 2011 -/+ % Sales 640.1 680.3 828.9 +22% 186.4 243.1 +31% Adjusted* EBITDA 102.0 118.7 151.6 +27.7% 37.0 49.0 +32% Adjusted EBITDA Margin 15.9% 17.4% 18.3% +84 bps 19.9% 2
Slide 39: Strong improvement in underlying profitability
Strong improvement in underlying profitability Improving Profitability 3-tiered margin support towards mid- 180 20.0% term profitability objective 160 18.0% 1. Removal of non-recurring costs related to 140 16.0% the reorganization Adjusted EBITDA Margin % 14.0% 120 2. Narrowing losses from start-ups
Slide 40: Solid Balance Sheet with headroom
Solid Balance Sheet with headroom EUR 90m additional equity in 2011 to EUR 320m OBSAAR Covenants applicable to financial instruments: issued March 2006 and June 2010 Dec’11 Dec’10 Max.limits maturity: 2006 bond EUR 32m split Net Debt/ clean EBITDA 1.7 x 1.5 x 3.5 x across 2012, 2013 Net Debt/ Equity
Slide 41: Debt ratios remain well below covenant limits
Debt ratios remain well below covenant limits 3.5x Net debt/Clean Debt ratios remain almost unchanged EBITDA: max 3.5x despite completion of the 2 largest acquisitions in Eurofins’ history in 3.0x 2011 2.5x Solid balance sheet EUR 180m cash at 31.12.2011 2.0x 2.0x 1.7x 1.7x OBSAAR issue in June 2010
Slide 42: Outlook: becoming the world leader in bioanalytical testing
Outlook: becoming the world leader in the bioanalytical testing market Sustainable Market Growth Drivers + Key Success Factors = Solid Outlook Food safety & contamination issues Unique technology portfolio of over 100,000 methods 2013 Objectives New regulations (e.g. REACH) Outsourcing trend Volume
Slide 43: Profitability Objectives
Profitability Objectives Group Profitability Objectives++ 225 22% Objectives / Assumptions 20% Adjusted EBITDA (before one-off costs and start-up losses) 200 17.4% 18.3% At least 5% organic growth; 18% 175 15.9% fewer remainder from acquisitions acquisitions 16% 150 Start-ups should be close to brea
Slide 44: Contents
Contents Introduction Market & Strategic Positioning Finance & Outlook Summary Appendix 44
Slide 45: 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 No. 1 or 2 worldwide in most business lines Advancing globalisation but with very few global Strong international presence
Slide 46: Appendix / Back up slides
= eurofins Appendix / Back up slides 46
Slide 47: Eurofins has vastly outperformed the market since its IPO
Eurofins has vastly outperformed the market since its IPO and each of its 3 equity offerings (based on share price of EUR 63.2 as of 8 Feb 2012) 5000% Eurofins: +3,352% (27% CAGR) Since IPO CAC 40: + 23% (1.4% CAGR) Nasdaq: + 54% (3% CAGR) 4500% Eurostoxx 50: +6% (0.4% CAGR) Eurofins: +607% (15% CAG
Slide 48: Income statement
Income statement EUR m 2011 2010 Sales 828.9 680.3 Cost of purchases material and services -294.2 -253.6 Personnel expenses -401.4 -327.6 Other operating income and expenses, net 5.9 -6.0 Statutory EBITDA 139.2 93.2 Exceptional/one-off costs 7.9 18.1 Clean EBITDA 147.1 111.3 Losses from start-ups 4.
Slide 49: Balance sheet
Balance sheet Assets 31.12.2011 31.12.2010 Liabilities 31.12.2011 31.12.2010 Shareholders’ equity Inventories 10.0 8.4 320.3 230.7 and minority interest Trade a/c receivable 214.8 154.0 Borrowings 211.8 32.9 Other 37.6 25.9 OBSAAR bonds 188.9 205.7 Cash and cash eq. 179.5 107.5 A/c payable on inv’t.
Slide 50: Cash Flow statement
Cash Flow statement EUR m 2011 2010 Results before income tax 70.5 36.2 Depreciation and amortisation 48.2 42.2 Change in net working capital -6.9 2.1 Other 13.6 14.1 Income taxes paid -15.1 -9.6 Net cash provided by operating activities 110.3 84.9 Acquisition payments -152.4 -9.3 Purchase of proper
Slide 51: Quarterly reporting format from 2012
Quarterly reporting format from 2012 to better reflect core Group economic performance Q4 2011 Q4 2010 Q4 2011 EURm Adjusted Separately Statutory Adjusted Separately Statutory +/- % Results disclosed Results Results disclosed Results Adjusted items items Results Revenues 243.1 243.1 186.4 186.4 30.5
Slide 52: Post acquisition and integration, sales and profits increase significantly
Post acquisition and integration into Eurofins, both sales and profits 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 freque