EQS-News: Continued strong performance in the third quarter of 2023

EQS-News: SYNLAB AG / Key word(s): Quarter Results Continued strong performance in the third quarter of 2023 08.11.2023 / 07:30 CET/CEST The issuer is solely responsible for the content of this announcement. SYNLAB AG: Continued strong performance in the third quarter of 2023 Robust 9M 2023 performance with revenue of €2.0 billion Strong underlying organic growth: 6.9% in 9M 2023 (Q3 2023: 5.1%), well above the mid-term organic growth target Adjusted EBITDA margin in 9M 2023 at 16.5% (Q3 2023: 15.6%), in line with the seasonality of the SYNLAB business €30 million of SALIX savings in 9M 2023 Back to positive unlevered free cash flow in Q3 and 9M 2023 Seven acquisitions completed with an EV of €75 million in 9M 2023 Several disposals in Q3 2023 in line with the active portfolio management strategy improving business performance Adjusted net debt at €1,314 million at the end of September 2023 with ~€346 million proceeds from disposals SYNLAB AG (“SYNLAB” or “the Group”, FSE: SYAB), the leader in medical diagnostic services and specialty testing in Europe, today announced its unaudited Q3/9M 2023 results. The Group reports strong first nine months in 2023 driven by robust underlying organic growth (excluding COVID-19 testing revenue) of 6.9%. Revenue reached €2.0 billion (9M 2022: €2.5 billion) in 9M 2023 with an adjusted EBITDA (AEBITDA) of €328 million (9M 2022: €644 million) and an AEBITDA margin of 16.5% (9M 2022: 26.0%) within the guided range for FY 2023 of 16-18% and in line with the seasonality of the SYNLAB business. The Q3/9M Financial Report 2023 is available for download on the investor relations website: https://ag.synlab.com “We are proud to announce that SYNLAB delivered strong results for the first nine months in 2023 with an excellent underlying organic growth of 6.9%, despite the challenging macroeconomic environment and inflationary pressure. This is partly driven by an over delivery of the FOR YOU growth initiatives with more than €10M revenue. Besides growth, our dedicated focus on performance improvements is paying off as we continue making substantial strides towards recovering to our pre-pandemic productivity levels. We also continued with our strategy of active portfolio management: densifying within our key countries and disposing of non-strategic assets”, said Mathieu Floreani, CEO of the SYNLAB Group. Financial performance Note: The decrease in COVID-19 PCR price and volume affects the year-on-year comparison. SYNLAB Key figures (€million, unless stated otherwise) Q3 2023 9M 2023 Change 9M 2023 vs. 9M 2022 Revenue 617.2 1,989.9 (22)% Operating profit 13.9 97.0 (63)% Net profit (Group share) 129.5 169.5 (11)%         Adjusted EBITDA (AEBITDA) 96.0 328.3 (50)% AEBITDA margin 15.6% 16.5% (9.5)pp Adjusted operating profit (AOP) 35.1 149.4 (69)% AOP margin 5.7% 7.5% (11.6)pp Adjusted net profit (Group share) (13.7) 36.2 (89)% Adjusted EPS (basic and diluted, €)* (0.06) 0.16  (1.34) Unlevered free cash flow (uFCF) 17.0 5.0 (99)% * Based on a weighted average of 219,707,332 (basic) or 220,787,467 (diluted) shares outstanding in 9M 2023 and 221,919,992 (basic) or 222,115,100 (diluted) in 9M 2022, respectively Strong underlying revenue growth, normalising COVID-19 testing In 9M 2023, revenue was €1,990 million (9M 2022: €2,549 million), still following a particularly sharp downturn in COVID-19 testing to €36 million (9M 2022: €679 million) – H1 2022 was marked by the Omicron wave which led to peak COVID-19 testing volumes. The FX impact on revenue was -0.4% in 9M 2023, mainly resulting from the weakness of the GBP and various emerging countries’ currencies, whereas M&A activities positively contributed 1.6% on a pro-forma basis. The third quarter saw revenues of €617 million (Q3 2022: €698 million) including only €4 million from COVID-19 testing (Q3 2022: €102 million). Underlying organic growth (excluding COVID-19 testing revenue) accelerated in the first nine months of 2023 to 6.9% in comparison to 9M 2022 (6.3% normalized for Synnovis). This was driven by a robust volume growth of 5.4% and a price increase of 1.5% across the Group’s portfolio. Q3 2023 underlying growth was 5.1% with strong volume growth of 3.5% and price increase of 1.6%. Synnovis, the South East London hospital outsourcing contract grew 14.3% in Q3 2023 and contributed 1.9pts of the overall Q3 2023 underlying growth.   9M 2023 AEBITDA margin within FY 2023 margin guidance (16-18%) and in line with the seasonality of the SYNLAB business 9M 2023 adjusted EBITDA (AEBITDA) was €328 million (9M 2022: €663 million) while adjusted operating profit (AOP) was €149 million (9M 2022: €487 million) with margins of 16.5% (9M 2022: 26.0%) and 7.5% (9M 2022: 19.1%), respectively. The AEBITDA margin remained within the FY 2023 margin guidance of 16-18% and was in line with the seasonality of the SYNLAB business, typically showing a weaker Q3 with lower revenue compared to the other quarters. Q3 2023 AEBITDA was €96 million (Q3 2022: €135 million) and AOP was €35million (Q3 2022: €76 million) with margins of 15.6% (Q3 2022: 19.3%) and 5.7% (Q3 2022: 10.9%), respectively. The year-on-year reduction in AEBITDA margin was still mainly driven by reduction of volumes and prices derived from COVID-19 testing and the still strong inflationary environment (mostly higher fuel and energy prices, and higher wage costs in some countries). These impacts continued to be partly offset by accelerated price increases especially in the North & East segment and efficiencies generated from the SALIX programme, which delivered savings amounting to €30 million in 9M 2023 (Q3 2023: €9 million). However, the difference in the AEBITDA margin compared to the same period in the last year decelerated with each quarter, reflecting the normalisation after the COVID-19 pandemic (Q1 2023 vs Q1 2022: (16.7) ppt; H1 2023 vs. H1 2022: (11.6) ppt; 9M 2023 vs 9M 2022: (9.5) ppt). M&A activities and active portfolio management improving business performance Following the sale of its business in Switzerland in July 2023, SYNLAB disposed of further margin-dilutive and non-strategic business areas such as its operations in Poland and Ukraine or the veterinary diagnostics business in Belgium, Germany, and Spain. From an M&A perspective, SYNLAB completed seven bolt-on acquisitions in 9M 2023 with an accumulated EV of €75 million, therein three acquisitions in Germany, two in Belgium (segment North & East) and two in Italy (segment South). The focus is to increase the network density and resulting use of synergies. Excluding the disposed business (Switzerland, Ukraine, Poland businesses and Veterinary), AEBITDA margin is at 16.9% compared to reported AEBITDA margin at 16.5% in 9M 2023. Reduction of adjusted net profit In 9M 2023, net profit (Group share) amounted to €169 million (9M 2022: €191 million) and adjusted net profit (Group share) was €36 million (9M 2022: €332 million), mainly due to lower COVID-19 testing volumes and higher net finance costs. Strong reduction of adjusted (for covenant purpose) net debt 9M 2023 unlevered free cash flow (uFCF) was €5 million (9M 2022: €339 million). This was impacted by exceptional capital expenses related to the construction of the new laboratory under the Synnovis brand, COVID-19-related tax payments in Germany from prior year and general COVID-19-related normalisation of working capital in relation to successful profit generation in the prior year. The Q3 2023 uFCF was €17 million (Q3 2022: €95 million) with a positive movement in working Capital, normalized tax payment but still significant high level of Net Capex related to Synnovis. Net debt of the Group decreased by €236 million to €1,339 million at the end of September 2023 (year-end 2022: €1,575 million). Adjusted (as per covenant definition) net debt at the end of September 2023 was at €1,314 million (year-end 2022: €1,645 million). The reduction is mainly due to the proceeds of the disposals of €346M. The leverage ratio dropped from 3.40x at the end of H1 2023 to 2.93x at the end of September 2023 thanks to the reduction of the adjusted net debt and despite the lower AEBITDA throughout the last twelve months. Following the sale of the operations in Switzerland in July 2023, the Term Loan B of €220 million due in 2026 was fully repaid. SYNLAB held €404 million in cash at the end of September 2023 (year-end 2022: €542 million). €200 million TLA debt was subsequently reimbursed in Q4 2023 following the sale of the Veterinary business at the end of September 2023. Outlook SYNLAB confirms its FY 2023 guidance. The Group continues to expect revenues of around €2.7 billion in FY 2023, considering the sale of the operations in Switzerland, the operations in Poland and Ukraine as well as the veterinary diagnostics business in Belgium, Germany, and Spain with an overall anticipated contribution to revenue generation of around €38 million in Q4 2023. This is being offset by a stronger underlying organic growth (excluding COVID-19 testing) which is anticipated to reach around 6% in 2023 driven by strong development of volumes and continued price increases within the core business. As already communicated, SYNLAB implemented a reduction of M&A spending in 2023 to around €100 million to fully focus the business on achieving the same productivity level as before the pandemic outbreak. SYNLAB also continues to expect the AEBITDA margin to be in a range of 16-18% in 2023. The prognosis regarding the AEBITDA margin incorporates the following factors: 1) the reduction of the COVID-19 testing volume and price, 2) the dilutive impact on the margin of setting up Direct to Consumer (D2C) activities, 3) general inflation risks, 4) a doubling of benefits from the SALIX programme in 2023 compared to prior years from productivity initiatives, 5) lower M&A contribution, 6) COVID-19 capacity ramp-down costs, 7) a positive effect of the sale of the operations in Poland, Switzerland and Ukraine as well as the veterinary diagnostics business in Belgium, Germany and Spain, and 8) the strong development of the underlying organic growth. On 23 October 2023, Ephios Luxembourg S.à r.l., an entity controlled by funds managed and/or advised by Cinven, launched its public acquisition offer of €10 per share for all outstanding shares of SYNLAB not directly held by it. The offer is subject to limited conditions and the acceptance period ends on 20 November 2023. There will be no additional acceptance period.  On 02 November 2023, Management Board and Supervisory Board of SYNLAB published their Joint Reasoned Statement. A specific press release was issued the same day and is available on the investor relations website: https://ag.synlab.com Conference call SYNLAB Management will hold a conference call for analysts and investors today at 3:00 p.m. CET (9:00 a.m. ET). Please register at least 10 minutes before the start of the event by clicking on the registration link on SYNLAB’s website (https://ag.synlab.com/conference-call) – Ends – For more information: Media contact: Steffi Susan Kim, FTI Consulting         [phone] [e-mail] Investor contact: Etienne Ziller, SYNLAB [phone] [e-mail] About SYNLAB SYNLAB Group is the leader in medical diagnostic services and specialty testing in Europe. The Group offers a full range of innovative and reliable medical diagnostics to patients, practising doctors, hospitals and clinics, governments and corporates. Providing the leading level of service within the industry, SYNLAB is the partner of choice for routine and specialty diagnostics in human medicine. The Group continuously innovates medical diagnostic services for the benefit of patients and customers. SYNLAB operates in more than 30 countries across four continents and holds leading positions in most markets, regularly reinforcing the strength of its network through a proven acquisition strategy. More than 27,000 employees, including over 2,000 medical experts, contribute every day to the Group’s worldwide success. SYNLAB performed around 600 million laboratory tests and achieved revenues of €3.25 billion in 2022. Ticker symbol: SYAB; ISIN: DE000A2TSL71 More information can be found on www.synlab.com Appendix Q3/9M 2023 SEGMENT REPORTING In €million, unless stated otherwise Revenue AOP   Q3 2023 Q3 2022 Under-lying Growth Organic Growth Q3 2023 Q3 2022 Margin Margin   France 120.6 145.5 (3.1)% (17.2)% 7.8 25.8 6.4% 17.7%   Germany 134.1 150.6 13.0% (19.9)% 1.0 26.2 0.7% 17.4%   South 173.9 207.3 (1.0)% (8.1)% 8.7 11.3 5.0% 5.5%   North & East 188.5 194.5 12.5% 0,2% 17.7 12.5 9.4% 6.4%   SYNLAB Group 617.2 697.9 5.1% (10.3)% 35.1 75.8 5.7% 10.9%     9M 2023 9M 2022 Under-lying Growth Organic Growth 9M 2023 9M 2022 Margin Margin   France 393.2 527.9 (0.3)% (25.9)% 40.8 108.8 10.4% 20.6%   Germany 401.7 556.6 9.3% (33.1)% (4.9) 134.0 (1.2)% 24.1%   South 617.3 745.4 4.5% (13.4)% 50.2 98.6 8.1% 13.2%   North & East 577.6 719.4 13.2% (17.3)% 63.3 145.4 11.0% 20.2%   SYNLAB Group 1,989.9 2,549.3 6.9% (21.7)% 149.4 486.7 7.5% 19.1%                       9M VIEW Simplified P&L       In €million, unless stated otherwise 9M 2023 9M 2022 Change Revenue 1,989.9 2,549.3 (22)% AEBITDA 328.3 663.0 (50)% As % of revenue -16.5% 26.0% (9.5)pp Adjusted operating profit (AOP) 149.4 486.7 (69)% As % of revenue 7.5% 19.1% (11.6)pp Operating profit 97.0 265.3 (63)% Financial result (66.8) (11.6) (55) Income tax expenses (42.7) (129.8) 87 Adjusted net profit (Group share) 36.2 332.4 (296) Net profit (Group share) 169.5 190.9 (21) Simplified cash flow       In €million 9M 2023 9M 2022 Change Operating cash flow 222 549 (327) Unlevered free cash flow (uFCF) 5 339 (334) Net debt and leverage       In €million, unless stated otherwise Sep. 2023 Dec. 2022 Change Net debt 1,339 1,575 (236) Adjusted net debt 1,314 1,645 (332) Leverage ratio 2.93x 2.07x 0.86x QUARTER VIEW Simplified P&L       In €million, unless stated otherwise Q3 2023 Q3 2022 Change Revenue 617.2 697.9 (12)% AEBITDA 96.0 135.0 (29)% As % of revenue 15.6% 19.3% (3.8)pp Adjusted operating profit (AOP) 35.1 75.8 (54)% As % of revenue 5.7% 10.9% (5.2)pp Operating profit 13.9 59.0 (76)% Financial result (31.6) (11.8) (20) Income tax expenses (20.6) (46.3) 26 Adjusted net profit (Group share) (13.7) 12.4 (26) Net profit (Group share) 129.5 69.1 60 Simplified cash flow       In €million Q3 2023 Q3 2022 Change Operating cash flow 94 165 (71) Unlevered free cash flow (uFCF) 17 95 (78) Forward looking statements This document does not constitute or form a part of, and should not be construed as, an offer for sale or subscription of or solicitation of any offer to purchase or subscribe for any securities in any jurisdiction. Statements made in this document may include forward-looking statements. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believes”, "expects”, “expected”, "may", "will", "would", "should", "seeks", "pro forma", "anticipates", "intends", "plans", "estimates", “estimated”, or the negative of any thereof or other variations thereof or comparable terminology, or by discussions of strategy or intentions. These statements are not guarantees of future actions or performance and involve risks, uncertainties, and assumptions as to future events that may not prove to be accurate. Actual actions or results may differ materially from what is expressed or forecasted in these forward-looking statements. As a result, these statements speak only as of the date they were made and SYNLAB undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. It should be noted that past performance is not a guide to future performance. Interim results are not necessarily indicative of full-year results. Declaration of non-IFRS measures Certain data included in this document are "non-IFRS" measures. These non-IFRS measures may not be comparable to similarly titled financial measures presented by other entities, nor should they be construed as an alternative to other financial measures determined in accordance with International Financial Reporting Standards or any other generally accepted accounting principles. Although SYNLAB believes these non-IFRS financial measures provide useful information to users in measuring the financial performance and condition of its business, users are cautioned not to place undue reliance on any non-IFRS financial measures and ratios included in this document. Due to rounding, numbers presented throughout this document may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures. Organic growth represents a non-IFRS measure calculating the growth in revenue for a given period compared to the equivalent prior year period for the same scope of businesses presented in a uniform currency, i.e. using the exchange rates of the prior-year period. When calculating organic growth, SYNLAB uses the scope of businesses that have been consolidated in the Group’s prior year financial statement. Revenue contribution from businesses acquired in the prior year but not consolidated for the full year are adjusted as if they had been consolidated as from January of the prior year. All revenues from businesses acquired since 1 January of the current year are excluded from the calculation. Adjusted EBITDA (AEBITDA) is operating profit adjusted for (by adding back) the following: depreciation and amortisation; impairment of goodwill; expenses related to acquisition and post-merger integration. Adjusted operating profit (AOP) is operating profit adjusted for the following: customer list amortisation; impairment of goodwill; expenses related to acquisition and post-merger integration. Adjusted net profit is defined as profit (Group share) adjusted for adjustment items defined in the adjusted operating profit definition including the respective tax effects. Adjusted net debt is defined as per banking covenant, the sum of financial debt including loans and borrowings adding back capitalised transaction costs, adjusted lease liabilities, and adjusted deferred price considerations for acquisitions, net of cash & cash equivalents. Unlevered free cash flow (uFCF) is defined as the sum of cash flow from operating activities, net CAPEX (defined as the cash outflow from the purchase of intangibles and property, plant and equipment, net of proceeds from the sale of intangibles and property, plant and equipment) and leases (defined as the sum of lease repayments and lease interest). 08.11.2023 CET/CEST Dissemination of a Corporate News, transmitted by EQS News - a service of EQS Group AG. The issuer is solely responsible for the content of this announcement. The EQS Distribution Services include Regulatory Announcements, Financial/Corporate News and Press Releases. Archive at www.eqs-news.com

Language:	English
Company:	SYNLAB AG
	Moosacher Straße 88
	80809 Munich
	Germany
Phone:	[phone]
E-mail:	[e-mail]
Internet:	www.synlab.com/
ISIN:	DE000A2TSL71
WKN:	A2TSL7
Indices:	SDAX
Listed:	Regulated Market in Frankfurt (Prime Standard); Regulated Unofficial Market in Berlin, Dusseldorf, Hamburg, Hanover, Munich, Stuttgart, Tradegate Exchange
EQS News ID:	1767619

End of News	EQS News Service

1767619  08.11.2023 CET/CEST