12 November 2009
The third quarter of 2009 started to show the first results of Eurofins' hard work to improve profitability and generate stronger cash flows. In addition there were positive signs that the few markets (among those in which the Group operates) which were weak in H1 2009 and are now becoming stable. Q3 2009 profits were better at all levels than in Q3 2008 including an EBITDA margin of 13.8% that was even higher than the 13.7% figure reached in Q3 2008 and net profit that increased 31% (¤5.9m Q3 2009, ¤4.5m Q3 2008) due to lower finance charges and income tax expense. This was in spite of high one-off reorganisation costs. As a result of this increased profitability and of a more normal level of capital expenditure (6.4% of revenues), free cash flow before acquisition payments increased by 44% for Q3 2009 and was positive for NM 2009 at ¤1.1m (-¤9.3m NM 2008). This makes Q3 2009 the best third quarter ever in terms of free cash flow for Eurofins and since the Group started quarterly reporting only Q4 2008, Q4 2006 and Q4 2005 have been better.Net cash flow provided by operating activities increased 44% from Q3 2008 (¤15.6m Q3 2009, ¤10.8m Q3 2008) and was up 26% to ¤27.4m in NM 2009 (¤21.7m NM 2008). Revenues for the first nine months were ¤468.1m, up 3% from ¤453.9m in NM 2008. Q3 2009 revenues increased to ¤163.1m from ¤157.9m in Q3 2008 (3% increase). EBITDA Q3 2009 (¤22.5m) was 4% better than Q3 2008 (¤21.6m). For Nine Months 2009 it reached ¤49.4m (NM 2008 ¤52.7m). EBITAS* was also better for Q3 2009 compared to Q3 2008 (¤13.0m vs ¤12.8m). EBITAS from NM 2009 was ¤21.0m (NM 2008 ¤27.3m).
During the third quarter Eurofins continued to focus its efforts on its programme to bring all parts of the business up to Group standards. Top line growth is still in excess of GDP growth and is good compared to most of the markets in which Eurofins' operates. Even some of the few areas that saw some slow down in the first six months of 2009 (some environmental testing and parts of the early stage Pharma market) have seen improvement in the third quarter. As mentioned before, the Group has also stopped or sold some activities: where the cycle of mandatory testing has come to an end (BSE, some GMO checks); where required to by competition authority rulings (Norway); or where the activities are more profitably provided at other laboratories in the Group (some microbiology testing). In the short term this has an effect on revenue growth. Eurofins management still believes that the longer-term orientation of its markets is as strong as in the past.
Following the investment in large, state-of-the-art laboratories over the last few years the Group is now in the process of transferring smaller, less profitable operations into those facilities. This is happening throughout the Group and the programme has been accelerated over the last few months in areas where the markets were weaker. The increase in profitability is therefore despite the Group incurring significant one-off costs in the accelerated consolidation.
Within the two perimeters, the Up to Standards business increased its nine month revenues to ¤373.4m (up 4%) and EBITAS was ¤36.2m, both affected to some extent by the discontinued activities and a higher level of one-off costs incurred as the consolidation programme takes effect. In Under Development, sales were ¤94.7m in NM 2009 (compared to ¤96.1m in NM 2008) as some activities have been discontinued and the reduction of costs takes precedence over sales growth. Management's objective at this stage is to ensure that there is a focus on the more profitable and strategic clients and activities. EBITAS has therefore improved from -¤20.2m in NM 2008 to -¤15.2m in NM 2009. In particular the Q3 EBITAS margin from Under Development is now -7.0% in 2009 compared to -22.5% in Q3 2008.
The improvement in the Eurofins cost structure plus the benefit of having operational gearing within the business (through a high fixed cost base, mainly composed of employee costs) is reflected by the increase in revenues from Q2 to Q3 (¤156.8m to ¤163.1m) being exceeded in the EBITAS profit increase (¤6.5m to ¤13.0m). In turn, the increases in profitability have had a positive effect on the Group's cash flow. Net cash flow from operating activities was up 44% in Q3 (¤15.6m vs. ¤10.8m in Q3 2008) and there was a 26% increase compared to NM 2008 (¤27.4m NM 2009, ¤21.7m NM 2008). The completion of most of the recent investment programme means that capital expenditure levels are now back to a more normal level (6.4% of revenues in NM 2009), which still includes investment for 10% organic growth, but means that excluding acquisitions the Group is generating positive free cash flow in spite of all the investments and one-off costs in start ups and to bring all areas up to standard. Eurofins also continues to maintain a "wait and see" approach to M&A in 2009, so no major acquisitions are foreseen for the remainder of the year. Having repaid ¤53.5m in borrowings during NM 2009 (¤13.9m NM 2008) with only ¤2.3m in draw-downs (¤48.0m NM 2008), Eurofins still has ¤50.0m in cash on its balance sheet and remains comfortably within its covenant ratios (0.9x net debt/equity and 2.3x net debt/EBITDA, with maximum 1.5x and 3.5x respectively), which have both improved since H1. Its operational flexibility derived from a good financing position therefore remains strong.
Overall Eurofins considers that despite soft markets for most of the year so far in some of the areas where it operates and a cost base that was geared towards growth, including substantial investment for the future, it has now gone a long way towards being ideally positioned for when all markets pick up. With the majority of its 'homework' mostly completed by the end of 2009, from now onwards the Group can increasingly concentrate on rapid increases in revenue, profit and cash flow.
|(¤m)||NM 2009||NM 2008||Q3 2009||Q3 2008|
|Net attr. profit||2.2||6.8||5.9||3.7|
|Net Op. cash flow||27.4||21.7||15.6||10.8|
|NM 2009||Up to Standard||Under Development|
EBITAS* - earnings before interest, tax, amortisation of intangible assets and non-cash charge for share options
Full disclosure can be found in the Nine Month Report 2009, including further management commentary, consolidated financial statements and accompanying summary notes.
The Nine Month Report 2009 can be found on the Eurofins website at the following location:
For further information please contact:
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 8,000 staff in more than 150 laboratories across 30 countries, Eurofins offers a portfolio of over 25,000 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 testing and one of the global market leaders in pharmaceuticals and environmental testing. 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 (ISIN FR0000038259) and Frankfurt (WKN 910 251) Stock Exchanges (Reuters EUFI.LN, Bloomberg ERF FP).
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 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.Information réglementée
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|EUROFINS SCIENTIF||Euronext Paris||405.20||-0.06%||5 242|