Strong Growth and Operating Leverage Trebles Eurofins' Net Profit in H1 2011 | Bourse Reflex
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Strong Growth and Operating Leverage Trebles Eurofins' Net Profit in H1 2011

Mardi 30 Aoû 2011 à 07:30


30 August 2011

Eurofins delivers Q2 2011 results above expectations as revenues increased 23% to EUR 208m on strong organic growth driven by increased volumes, contract wins, market share gains and solid contribution from Lancaster. Wide margin expansion across the Group boosted net profit by 84% to EUR 13m. Year to date, revenues have grown 17% to EUR 372m and net profit trebled to EUR 15m compared to H1 2010.

Q2/H1 2011 Statutory Results Summary (EUR m) Q2 2011 Q2 2010 +/- % H1 2011 H1 2010 +/- %
Revenues 207.8 169.4 22.6% 372.1 318.6 16.8%
EBITDA3 34.9 24.5 42.7% 52.2 34.9 49.6%
EBITDA Margin 16.8% 14.4% +240 bp 14.0% 11.0% +300 bp
EBITAS1 23.4 13.8 69.5% 30.0 14.6 105.0%
Net Profit 13.0 7.0 84.3% 14.6 4.5 226.1%
Net Operating Cash Flow5 21.1 10.1 109.7% 27.9 19.2 45.0%
Net Debt       271.1 198.0 37.0%
Reconciliation with previous reporting format
Clean2 EBITDA3 37.2 26.8 38.7% 55.0 40.0 37.3%
Clean EBITDA Margin 17.9% 15.8% 210 bp 14.8% 12.6% 220 bp
Clean EBITAS 25.8 16.2 59.0% 32.8 19.8 65.7%
Adjusted4 EBITDA 38.1 29.5 29.1% 57.4 45.4 26.4%
Adjusted4 EBITDA Margin 18.3% 17.4% 90 bp 15.4% 14.3% 110 bp

Q2/H1 2011 Results Highlights

§ Revenues grew 22.6% to EUR 207.8m in Q2 2011, on organic growth of over 8%. Year to date, revenues stood at EUR 372.1m, up 16.8% versus H1 2010.

§ Q2 2011 reported EBITDA grew 42.7% to EUR 34.9m as margin expanded by 240bp from Q2 2010, whilst adjusted4 EBITDA of EUR 38.1m implies 18.3% margin. H1 2011 adjusted4 EBITDA of EUR 57.4m implies a margin of 15.4% for the traditionally weaker first half of the year.

§ Strong revenue momentum and profitability led to a doubling of EBITAS to EUR 30.0m and a trebling in net profit to EUR 14.6m year to date.

§ 45% increase in Net Operating Cash Flow to EUR 27.9m in H1 2011 despite temporary uptick in NWC

§ Fully funded with significant headroom in the balance sheet. After payment for Lancaster, net debt as of June 30, 2011 stood at EUR 271.1m, representing net debt/equity of 1.0x and net debt/clean EBITDA of 2.1x, substantially below Eurofins’ covenant limits of 1.5x and 3.5x respectively, despite taking only 3 months’ EBITDA contribution from Lancaster.


Comments from the CEO, Dr. Gilles Martin:

“Eurofins has delivered strong results in H1 2011. The strong organic growth, achieved despite the fact that our presence in emerging markets is still limited, reflects the benefits of our investments in building a world class laboratory network. The increased operating leverage from our streamlined organization is also starting to come through in margin expansion. Our businesses continue to perform well across markets and we are confident that we have invested smartly to take us through these uncertain economic conditions. We remain committed to our mid-term objectives of generating EUR 1bn revenues and 21% EBITDA margin by 2013.”


In the second quarter, revenues grew 22.6% to EUR 207.8m, as operating momentum continues to strengthen across our markets. Whilst the consolidation of Lancaster significantly boosted Eurofins’ performance in Q2, organic growth of over 8% during the quarter confirms the positive trends in the last four quarters and the benefits of the Group’s investments in the last five years. The growth acceleration puts revenues year to date at EUR 372.1m, representing a 16.8% increase over H1 2010.


Geographically, our biggest markets delivered the strongest growth, reflecting the benefit of our leading market position to continue capturing market volume. In addition to the strong contribution of Lancaster, our activities in North America continue to benefit from the consolidation of our market position, and generally positive trends in food testing and pharmaceutical product testing.


Across our businesses, the food testing business goes from strength to strength, driven by positive structural trends (regulation) and market developments (food scandals). The recovery in the environmental testing business was sustained with modest growth across water, soil and air testing. The pharmaceutical product testing business posted solid growth, and trends indicate that it should remain robust. Pre-clinical and clinical testing for the pharma industry remain soft but appear to be stabilizing. In most of its businesses, Eurofins continues to increase its market share by winning new customers switching from competitors, and increasing business from existing customers. 



Eurofins delivered strong clean EBITDA growth of 38.7% to EUR 37.2m in the second quarter, implying a 210 bp margin expansion to 17.9%. Clean EBITDA year to date stands at EUR 55.0m, up 37.3% from H1 2010, and implies 14.8% margin for H1 2011. Even taking into account the modest exceptional costs, Q2 2011 EBITDA of EUR 34.9m still represents a margin of 16.8%, the highest Q2 margin since 2005. 


The core EBITDA margin development is even plainer to see when one adjusts for the losses from the Group’s start-up activities in its new markets, which, as previously communicated, are expected to steadily decline to below EUR 5m in 2011, until these activities break-even by 2013. The Group adjusted EBITDA was EUR 38.1m in Q2 2011, and EUR 57.4m for H1 2011, implying margins of 18.3% and 15.4% respectively. 


The continued margin expansion during the second quarter, and in H1 2011, demonstrates the operating leverage of the business following the intense investments in the last five years. The rate of cost inflation continues to decelerate compared to revenue appreciation. Despite the increase of 22% in personnel expenses and 16% in cost of materials in the second quarter, as a proportion of revenues, they have declined to 48.7% and 35.1% from 52.5% and 37.8% respectively in the previous quarter. These should continue to decline in the second half, and especially in the last quarter of the year, as revenues increase according to previously observed seasonality. Depreciation costs have remained fairly constant as a proportion of revenues, and hence the higher revenues and stronger margins during the quarter are reflected in the 70% increase in EBITAS to EUR 23.4m. On the back of strong revenue growth and profitability, net profit rose 84% to EUR 13.0m in Q2 2011. For H1 2011, Eurofins doubled its EBITAS to EUR 30.0m, and trebled its net profit to EUR 14.6m.


Balance Sheet

Total assets for the Group stood at EUR 861.7m at the end of June 2011, largely unchanged from the previous quarter, with the reduction in cash for Lancaster payment offset by the increase in long-term assets from the acquisition. Despite the Lancaster payment, Eurofins still ended the first half reporting period with cash and cash equivalents of EUR 81.0m, which, in addition to expected further strengthening of cash flow, ensure sufficient funding for the Group’s growth plans for at least the next three years.


Furthermore, despite the above cash disbursement, the Group’s debt profile remains solid, with a net debt of EUR 271.1m as of June 30, 2011 (EUR 198.0m in June 2010). The debt ratios therefore remain well below the covenant limits at net debt/clean EBITDA of 2.1x and net debt/equity of 1.0x, versus the limits of 3.5x and 1.5x respectively. These ratios should decline substantially in the coming quarters as profitability expands and with further Lancaster EBITDA contribution. It is worth noting that the aforementioned ratios include only 3 months’ worth of EBITDA from Lancaster given its consolidation in the second quarter.


Net working capital (NWC) increased to 7.1% of revenues as of June 30, 2011, versus 5.9% at the end of March and 5.7% at the end of June 2010. The growth and timing of payments, and the resulting increase in NWC led to a temporary cash flow compression. As communicated earlier, management is fully confident of managing NWC to 5% of revenues by the end of the year, according to its annual target, and therefore widen Free Cash Flow for the rest of 2011.


Cash Flow

The strong operating momentum resulted in a near 3-fold increase in the Group’s profit before taxes, which stood at EUR 20.6m year to date. Despite the temporary increase in NWC, the strong operating profit boosted Net Operating Cash Flow by 45.0% to EUR 27.9m.  


Capital expenditures in Q2 2011 came to EUR 11.9m (EUR 11.4m in Q2 2010), representing a reduction to 5.7% of revenues, versus 6.7% of revenues in Q2 2010. Year to date, capital expenditures stand at EUR 20.7m, or 5.6% of revenues, compared to 6.1% in H1 2010. Therefore, although NWC showed a short-term increase, interest payments were higher due to increased debt position, and dividends to shareholders were doubled, and paid out in June this year (paid in July in 2010), the Group’s Free Cash Outflow6 was significantly reduced by EUR 5.5m to EUR 6.6m, versus a Free Cash Outflow of EUR 12.1m in H1 2010. Management reiterates NWC should be fully normalized by year end, and together with further strengthening in operating results, should allow the Group to report positive Free Cash Flow for the full year.



The strong performance in the traditionally weaker first half reinforces management’s commitment to its 2013 objectives of generating EUR 1bn in sales and reaching 21% EBITDA margin.


Change in reporting format

Following Eurofins’ de-listing from the Frankfurt Stock Exchange in September 2010, Eurofins management has decided to modify the Group’s reporting structure and format. In line with industry reporting practices, and reflecting the increasing maturity of the business, the Group will be moving to adopt a structure closer to French regulatory standard, and a format closer to that of other listed companies often qualified by analysts and investors as our peers. The new format and structure will include lighter Q1 and Q3 reporting and better transparency of the core economic results of the Group, as illustrated on the table below. To facilitate the transition, we will also continue to report our FINANCIAL and operating results in the old format in 2011.


New Reporting Format

Q2 2011 Q2 2010 +/- % Adjusted Results
Q2 2011 EURm Adjusted Results Separately disclosed items Statutory Results Adjusted Results Separately disclosed items Statutory Results
Revenues 207.8   207.8 169.4   169.4 22.7%
EBITDA 38.1 -3.2 34.9 29.5 -5.0 24.5 29.1%
EBITDA Margin 18.3%   16.8% 17.4%   14.4% 90 bp
EBITAS 27.5 -4.1 23.4 19.8 -6.0 13.8 39.2%
Net Profit 19.1 -6.1 13.0 13.8 -6.8 7.0 38.6%
CAPEX     11.9     11.4 5.2%
Net Operating Cash Flow     21.1     10.1 109.7%
Net Debt     271.1     198 37.0%



H1 2011 H1 2010 +/- % Adjusted Results
H1 2011 EURm Adjusted Results Separately disclosed items Statutory Results Adjusted Results Separately disclosed items Statutory Results
Revenues 372.1   372.1 318.6   318.6 16.8%
EBITDA 57.4 -5.2 52.2 45.4 -10.5 34.9 26.4%
EBITDA Margin 15.4%   14.0% 14.3%   11.0% 110 bp
EBITAS 37.1 -7.1 30.0 26.9 -12.3 14.6 38.1%
Net Profit 24.6 -10.0 14.6 18.4 -13.9 4.5 33.6%
CAPEX     20.7     19.5 6.6%
Net Operating Cash Flow     27.9     19.2 45.0%
Net Debt     271.1     198.0 37.0%

Adjusted Results –Reflects the fundamental, recurring nature of the Group’s core businesses, and corrects for costs included in separately disclosed items.


Separately disclosed items - includes one-off costs from integration, reorganization and discontinued operations, temporary losses related to network expansion/start-ups, amortisation of acquisition intangibles, non-cash accounting charges for stock options, and other non-recurring costs.


1              EBITAS – Earnings Before Interest, Tax, Amortization of Intangible Assets related to acquisitions and impairment of goodwill and non-cash accounting charge for stock options

2              Clean - a proforma presentation excluding one-off costs from reorganization and discontinued operations, but including losses related to network expansion/start-ups

3              EBITDA – Earnings before interest, tax, depreciation and amortization

4              Adjusted - a proforma presentation excluding one-off costs from reorganization and discontinued operations, and losses related to network expansion/start-ups

5                      Net Operating Cash Flow – net cash provided by operating activities after tax.

6              Free Cash (out)Flow – Net Operating Cash Flow, less interest and hybrid dividend paid and cash used in investing activities (but excluding acquisition payments)



Full disclosure can be found in the First Half Year Report 2011, including further management commentary, consolidated financial statements and accompanying summary notes. The First Half Year Report 2011can be found on the Eurofins website at the following location:


For further information please contact:

Investor Relations 

Phone:    +32-2-769 7383   



Notes for the editor:

Eurofins – a global leader in bio-analysis

Eurofins Scientific is a life sciences company operating internationally to provide a comprehensive range of analytical testing services to clients from a wide range of industries including the pharmaceutical, food and environmental sectors.

With over 9,500 staff in more than 150 laboratories across 30 countries, Eurofins offers a portfolio of over 100,000 reliable analytical methods for evaluating the authenticity, origin, safety, identity, composition and purity of biological substances and products. The Group is committed to providing its customers with high quality services, accurate results in time and, if requested, expert advice by its highly qualified staff.

The Eurofins Group is the world leader in food, environment and pharmaceutical product testing and ranks among the top three global providers of central laboratory and genomic services. It intends to pursue its dynamic growth strategy and expand both its technology portfolio and its geographic reach. Through R&D and acquisitions, the Group draws on the latest developments in the field of biotechnology to offer its clients unique analytical solutions and the most comprehensive range of testing methods.

As one of the most innovative and quality oriented international players in its industry, Eurofins is ideally positioned to support its clients’ increasingly stringent quality and safety standards and the demands of regulatory authorities around the world.

The shares of Eurofins Scientific are listed on the NYSE Euronext Paris Stock Exchange (isin FR0000038259, Reuters EUFI.PA, Bloomberg ERF FP).

Important disclaimer:

This press release contains forward-looking statements and estimates that involve risks and uncertainties. The forward-looking statements and estimates contained herein represent the judgement of Eurofins Scientific’ management as of the date of this release. These forward-looking statements are not guarantees for future performance, and the forward-looking events discussed in this release may not occur. Eurofins Scientific disclaims any intent or obligation to update any of these forward-looking statements and estimates. All statements and estimates are MADE based on the data available to the Company as of the date of publication, but no guarantee can be made as to their validity.

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