EQS-News: SYNLAB AG: Continued strong performance in the second quarter of 2023
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EQS-News: SYNLAB AG
/ Key word(s): Half Year Results/Half Year Report
SYNLAB AG Moosacher Str. 88 80809 Munich Germany Press Release
Munich, 9 August 2023
SYNLAB AG (“SYNLAB” or “the Group”, FSE: SYAB), the leader in medical diagnostic services and specialty testing in Europe, today announced its auditor-reviewed Q2/H1 2023 results. The Group reports a strong H1 2023 driven by very robust underlying organic growth (excluding COVID-19 testing revenue) of 7.1%. Revenue reached €1.4 billion (H1 2022: €1.85 billion) in H1 2023 with an adjusted EBITDA (AEBITDA) of €232 million (H1 2022: €528 million) and an AEBITDA margin of 16.9% (H1 2022: 28.5%) which remained stable in Q2 vs. Q1 2023. The Half-Year Financial Report 2023 is available for download on the investor relations website: https://ag.synlab.com
“SYNLAB continues to be well on track and achieved a strong underlying growth in the first half of the year with solid contribution of our ‘FOR YOU’ growth initiative, which significantly exceeded our expectations. Additionally, we made strong progress in recovering our pre-pandemic productivity level: our SALIX multi-year efficiency programme recorded savings of around €21 million in the first half year of 2023, the COVID-19-related business by now became part of our routine activities and the COVID-19 capacity ramp-down is nearly completed”, said Mathieu Floreani, CEO of the SYNLAB Group. “We are actively following our portfolio management strategy by re-assessing our existing businesses on all levels: contracts, activities, customers, regions, and countries. One example was the successful sale of our operations in Switzerland. Further, we have invested in future-oriented endeavours such as the ongoing transformation of Synnovis to create a state-of-the-art hub lab concentrated in one location in South-East London.”
Financial performance Note: The decrease in COVID-19 PCR price and volume affects the year-on-year comparison.
* Based on a weighted average of 219,706,499 (basic) or 220,554,181 (diluted) shares outstanding in H1 2023 and 222,137,476 (basic) or 222,283,953 (diluted) in H1 2022, respectively
Strong underlying revenue growth, lower COVID-19 testing In H1 2023, revenue was €1.373 million (H1 2022: €1,851 million), following a particularly sharp downturn in COVID-19 testing to €33 million (H1 2022: €618 million) – H1 2022 was marked by the Omicron wave which led to peak COVID-19 testing volumes. The FX impact on revenue was -0.3% in H1 2023, mainly resulting from the weakness of the GBP, whereas M&A activities positively contributed 1.5% on a pro-forma basis. The second quarter saw revenues of €670 million (Q2 2022: €790 million) including only €7 million from COVID-19 testing (Q2 2022: €164 million). Underlying organic growth (excluding COVID-19 testing revenue) accelerated in H1 2023 to 7.1% in comparison to H1 2022 (3.1% normalized for Synnovis). This was driven by a robust volume growth of 5.9% and a price increase of 1.2% across the Group’s portfolio. Q2 2023 underlying growth was 4.4% with a volume growth of 3.5% and a price increase of 0.9%. In comparison to the very strong Q1 2023, underlying organic growth in Q2 was impacted by the second step of the planned price decrease in France which started in April 2023 and a negative working day effect which were partially offset by a strong price increase in the North & East segment.
H1 2023 AEBITDA margin at mid-point of FY 2023 margin guidance (16-18%) H1 2023 adjusted EBITDA (AEBITDA) was €232 million (H1 2022: €528 million) while adjusted operating profit (AOP) was €114 million (H1 2022: €411 million) with margins of 16.9% (H1 2022: 28.5%) and 8.3% (H1 2022: 22.2%), respectively. The AEBITDA margin remained stable at the mid-point of the FY 2023 margin guidance of 16-18% after the low point in the fourth quarter of 2022 (12.8%). The year-on-year reduction in AEBITDA margin was 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 €21 million in H1 2023 (Q2 2023: €11 million). Q2 2023 AEBITDA was €114 million (Q2 2022: €171 million) and AOP was €54 million (Q2 2022: €111 million) with margins of 17.0% (Q2 2022: 21.7%) and 8.0% (Q2 2022: 14.0%), respectively. The AEBITDA margin slightly improved in comparison to Q1 2023 (16.9%) with less COVID-19 testing volumes and price decreases being offset by a lower-than-expected inflation, reduced cost of the nearly completed COVID-19 capacity ramp-down and improved productivity.
M&A activities and active portfolio management SYNLAB completed six bolt-on acquisitions in H1 2023 with an accumulated EV of €74 million, therein three acquisitions in Germany, two in Belgium (Segment North & East) and one in Italy (Segment South). In line with its active portfolio management strategy that aims to improve Group performance, SYNLAB sold its operations in Switzerland in July 2023. The business in Switzerland had been dilutive to Group results in the last three years, with an even sharper effect following the 10% price drop in August 2022. Excluding the Switzerland business, underlying organic growth would have been at 4.9% instead of 4.4% and AEBITDA margin at 17.5% instead of 17.0% in Q2 2023.
Reduction of adjusted net profit and slight increase in adjusted (for covenant purpose) net debt In H1 2023, net profit (Group share) amounted to €40.0 million (H1 2022: €122 million) and adjusted net profit (Group share) was €49.9 million (H1 2022: €320 million), mainly due to lower COVID-19 testing volumes and higher net finance costs. H1 2023 unlevered free cash flow (uFCF) was €(12) million (H1 2022: €244 million). This was impacted by one-offs of ~€85 million including capital expenses related to the construction of the new laboratory under the Synnovis brand, COVID-19-related tax payments in Germany from prior year, a billing delay in France (LIS implementation) and general COVID-19-related normalisation of working capital in relation to successful profit generation in the prior year. H1 2023 uFCF excluding those one-offs would have been at ~€73 million. Net debt of the Group increased by €155 million to €1,730 million at the end of June 2023 (year-end 2022: €1,575 million). Adjusted (as per covenant definition) net debt at the end of June 2023 was at €1,700 million (year-end 2022: €1,645 million). This is mainly due to interest payments, M&A activities, the dividend payment to SYNLAB shareholders and the low uFCF. The leverage ratio rose from 2.85x at the end of Q1 2023 to 3.40x at the end of June 2023 due to 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, leading to an adjusted net debt of €1,543 million and a leverage ratio of 3.13x thereafter. SYNLAB held €275 million in cash at the end of June 2023 (year-end 2022: €542 million).
Outlook
As already communicated, SYNLAB implemented a temporary 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 already incorporated 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, and 5) lower M&A contribution. The following additional factors are now also reflected: 6) COVID-19 capacity ramp-down costs, 7) a positive effect of the sale of the operations in Switzerland, and 8) the strong development of the underlying organic growth.
Conference call
SYNLAB Management will hold a conference call for analysts and investors today at 3:00 p.m. CEST (9:00 a.m. EDT). 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).
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Appendix
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:
Adjusted operating profit (AOP) is operating profit adjusted for the following:
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).
09.08.2023 CET/CEST Dissemination of a Corporate News, transmitted by EQS News - a service of EQS Group AG. |
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| Language: | English |
| Company: | SYNLAB AG |
| Moosacher Straße 88 | |
| 80809 Munich | |
| Germany | |
| Phone: | +49 1701183753 |
| E-mail: | ir@synlab.com |
| 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: | 1698587 |
| End of News | EQS News Service |
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1698587 09.08.2023 CET/CEST
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