Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on EUROFINS SCIENTIFIC. We currently have 2 research reports from 1 professional analysts.
Frequency of research reports
Research reports on
Strong top-line growth but margin progression remains slow
23 Mar 17
Eurofins Scientific ended FY 16 on a strong note (highest organic growth since 2008), although investors accustomed to a guidance beat (the company has historically reported above guidance results) were disappointed with the ‘in-line’ results – the stock slumped c.6% immediately post the announcement, before partially recovering to close down 2%. Revenue was up 30% yoy to €2.5bn, in line with our estimate. The growth of 30% was a mix of organic growth of 9% and acquisition growth of 21% (forex had a negligible impact). Geographically, all regions reported robust growth. North America grew 25% (high single-digit organic growth), led by market share gains, while France rose 69% (organic growth of c.5%), benefiting from acquisitions. The UK, Germany and Benelux all recorded double-digit growth. The company-defined adjusted EBITDA increased 33% to €480m (the margin improved 41bp to 18.9%), but came in below our expectation of €491m. Net income jumped 97% to €178m, mainly due to higher financial income (related to derivative instruments) and a lower effective tax rate. The company announced a dividend of €2 per share (+38%). Management confirmed its FY 17 guidance (at CER) of revenue of €2.9bn and adjusted EBITDA of €550m. The revenue guidance assumes an organic growth of 5% along with a €200m contribution from acquisitions.
Initiating coverage on Eurofins Scientific.
25 Oct 16
Recommendation and upside: We are initiating coverage on Eurofins Scientific (market cap. of c.€7.2bn and a float of c.58%) with a Reduce recommendation and a target price of €393 (c.8% downside). While we acknowledge the company’s dominant position in the attractive bioanalytical industry, its robust growth prospects, superior technical know-how and its successful value accretive M&A history, we believe the current share price (saw a rally of c.26% over the last three months, primarily fuelled by solid H1 16 results and full-year guidance upgrade) fully discounts all these positives. It currently trades at a 2016E EV/EBIT of c.28x (vs. 22x of SGS and 17x of Bureau Veritas), making the valuation highly demanding. Business: Eurofins Scientific operates in the €130bn global Testing, Inspection, and Certification (TIC) market (of which c.45% is outsourced), with a presence across 39 countries. It employs a total workforce of c.25k people across c.250 laboratories and offers c.130k tests/ methods to evaluate the identity, composition, safety and purity of biological products. Unlike SGS, Bureau Veritas and Intertek (the big three in the industry), which cater to diverse industries, Eurofins focuses on the niche bioanalytical testing market (outsourced market size of c.€12bn) consisting of three sub-segments – Food & Feed testing (market size: €2-3bn; market share: c.30%), Pharma/Biotech testing (market size: c.€5bn; markets share: c.10%) and Environment testing (market size: c.€4bn; market share: c.7%), all of which offer stable and strong growth prospects (in the mid single-digit range), mainly driven by the expansion and tightening of regulations, the growing demand for improved safety and quality of food and environment, the increasing trend towards outsourcing, a burgeoning middle class and rising demand in emerging markets. In addition, it has forayed into the c.€160bn clinical diagnostics space in 2014 through the acquisition of Viracor IBT and, since then, has made aggressive strides into this area with the help of several more acquisitions. Need to know: The bioanalytical testing industry is characterised by a number of small regional players, often operating with very low margins, providing excellent opportunities for consolidation by the handful of global players. Over the years, Eurofins has shown great acumen of identifying targets at a reasonable price, successfully integrating them into its group structure and improving profitability of these acquired companies. This has driven the strong growth in both the top-line and the bottom-line, thereby creating value for its shareholders. These acquisitions have also expanded Eurofins’s geographical reach, technological base and product offerings, helping it to become a leading player in the industry (#1 or #2 position in most businesses/countries in which it operates). This aggressive acquisition strategy, however, has come at the expense of its cash generation capabilities. The situation is exacerbated by the fact that unlike SGS, Bureau Veritas and Intertek Group, Eurofins’ business model is more capital intensive (capex is c.8% of sales vs 3-6% for the big three) given its focus on laboratory testing (requires significant capex), with negligible exposure to certification or inspection businesses (which require lesser capex). This is evident in the cash flow examination of the company – while the company has been able to convert c.80% of EBITDA into operating cash flow (over 2011-15), the FCF/EBITDA conversion is decidedly grimmer (average of c.20% over 2011-15). Eurofins’ share capital is primarily held by the founding (Martin) family, through a holding company, Analytical Bioventures, which owns 41.7% of the group’s share capital and 58.5% of the total voting rights, effectively controlling the company. The family remains involved in the day-to-day operations and the long-term strategy execution, as evidenced by their strong representation on the company’s board – three of the five board members belong to the Martin family (Gilles Martin himself, his brother Yves-Loïc Martin and their sister Valerie Hanote).
N+1 Singer - Morning Song 21-03-2017
21 Mar 17
accesso Technology (ACSO LN) Full year results in line, but key trading months still ahead | Augean (AUG LN) Double digit growth in ’16, good start to ‘17 | Earthport (EPO LN) Interims show continued top line strength | Goals Soccer Centres (GOAL LN) Good momentum under new team. It’s now all about delivery | IQE (IQE LN) FY’16 results prompt further upgrades | Microsaic Systems (MSYS LN) Challenges in 2016, strategy remains in place | mporium Group (MPM LN) Funds raised to help execute strategy | RhythmOne (RTHM LN) Dawn of the independents | ScS Group (SCS LN) Strong progress on key growth initiatives albeit comps now toughen | Sinclair Pharma (SPH LN) FY results: EBITDA ahead, Instalift™ gaining pace | Vectura Group (VEC LN) FY (9-month) results
N+1 Singer - EKF Diagnostics - Final results & potential buy back
20 Mar 17
FY16 prelims are slightly ahead of our latest expectations, those having been increased materially over the course of H2’16 as the strength of the recovery in trading became apparent. In order to maximise shareholder value, the directors are currently examining a potential break up of the group. This would also involve a delisting from AIM. A buy back offer at 21.5p would therefore be made to those investors that wish to exit now rather than holding their shares for the two years plus it would likely take to achieve a potentially higher realisation value for the businesses.
Good results, but further restructuring complex for investors
20 Mar 17
EKF Diagnostics FY 2016 results are slightly ahead of expectations, with both higher revenue and better EBITDA. Management has also announced plans to split the company into two separate companies, Point of Care and Laboratory Diagnostics, with the prospect of a delisting to manage the process. The primary metric for valuation of the two businesses is different consequently we believe that the separation is likely to generate significant value. However, in anticipation of the volatility likely given the restructuring announced this morning, despite the strength of the results, we reduce our recommendation to HOLD and maintain our 21p target price.
N+1 Singer - Morning Song 22-03-2017
22 Mar 17
Carador Income Fund (CIFU LN) Premium rating restored, high levels of refinancing activity | Cello Group (CLL LN) Outlook getting brighter – watch Pulsar | Eckoh (ECK LN) Largest ever US secure payments win | eg solutions (EGS LN) Full year results in line | Futura Medical (FUM LN) Licensing deal for CSD500 in Portugal | Verona Pharma (VRP LN) Global agreement with QuintilesIMS to support development of RPL554 | Xaar (XAR LN) 2016 results slightly ahead, reduced visibility in 2017