SYNLAB AG: SYNLAB reports strong start to fiscal year 2023

EQS-News: SYNLAB AG / Key word(s): Quarterly / Interim Statement/Quarter Results
SYNLAB AG: SYNLAB reports strong start to fiscal year 2023
10.05.2023 / 07:30 CET/CEST
The issuer is solely responsible for the content of this announcement.

SYNLAB reports strong start to fiscal year 2023

• Revenue stable at €702 million compared to prior quarter
• Robust underlying organic growth of 10.0%, above the 4% forecast for FY 2023
• COVID-19 testing revenue at €26 million vs. €70 million in previous quarter
• Adjusted EBITDA margin at 16.9%, at mid-point of FY 2023 guidance of 16-18%
• €10 million of SALIX savings
• Unlevered free cash flow before tax payment at €42 million
• Three acquisitions completed with an EV of €23 million
• Adjusted net debt reduced to €1,582 million

SYNLAB AG (“SYNLAB” or “the Group”, FSE: SYAB), the leader in medical diagnostic services and specialty testing in Europe, today announced its unaudited Q1 2023 results. The Group reports a strong start to FY 2023 driven by very robust underlying organic growth of 10.0% (excluding COVID-19 testing revenue). Revenue remained stable at €702 million as compared to the prior quarter with an increase in adjusted EBITDA of €119 million and adjusted EBITDA margin of 16.9%. SYNLAB confirms its FY 2023 guidance with a revenue target at around €2.7 billion and an adjusted EBITDA margin within a 16-18% range.

The SYNLAB Quarterly Report Q1 2023 is available for download on the investor relations website: https://ag.synlab.com

“SYNLAB delivered a very strong start to the fiscal year 2023 with underlying organic growth of 10.0% despite the challenging macroeconomic environment and inflationary pressure. We are very proud of our world-class standards of medical excellence and the achievements across all our business segments, especially as we see continuous progress in cost effectiveness through our SALIX multi-year efficiency programme and we are constantly increasing the leverage of scale effects.

We are confident that SYNLAB is very well positioned for the post-pandemic future and believe that 2023 will be the base for gradual and consistent improvement in our performance,” commented 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.

* Based on a weighted average of 220,241,309 shares outstanding in Q1 2023 and 222,222,222 in Q1 2022, respectively

Robust underlying revenue growth delivered

In Q1 2023, revenue was €702 million (Q1 2022: €1,061 million) following a particularly sharp downturn from COVID-19 testing to €26 million (Q1 2021: €450 million), since Q1 2022 was marked by the Omicron wave with peak COVID-19 testing volumes. However, Q1 2023 revenue was at the same level as prior-quarter revenue (Q4 2022: €701 million) despite lower COVID-19 testing volumes (Q4 2022: €70 million). Q1 2023 had more working days overall than Q1 2022, and SYNLAB achieved record daily revenues of €10 million with over-delivery of the Group’s For You Growth Initiatives.

Underlying organic growth (excluding COVID-19 testing revenue) was very strong at 10.0% in Q1 2023, with robust volume growth of 8.5% and a price increase of 1.5% across the Group’s portfolio. However, Q1 2022 provided a favourable comparison base as it was impacted by the Omicron wave and the working-day effect is equivalent to around 1.5ppt of growth.

Business in Germany (20% of Group revenue) saw a rebound from the Omicron wave in the previous year and grew organically by 8.2% in Q1 2023 with strong volume growth and a slightly positive advance in prices. Business in France (20% of Group revenue) grew organically by 4.0% with strong volume growth offsetting the price decrease starting in February 2023 and the effects of two strike days in Q1 2023. In the South segment (32% of Group revenue), growth at 9.3% was driven by robust volume growth especially in Colombia, Italy and Ecuador, and a modest price increase across all countries except Switzerland. Once again, underlying growth in the North & East segment (28% of Group revenue) was very robust at 16.8% in all countries, owing to strong volume growth and a favourable pricing environment driven by health authorities partially mitigating the effects of inflation.

SYNLAB completed three bolt-on acquisitions in Q1 2023 with an accumulated EV of €23 million. This relates to one medical centre in Germany and two veterinary laboratories in Belgium (Segment North & East).
 

Q1 2023 AEBITDA margin at mid-point of FY 2023 margin guidance (16-18%)

Adjusted EBITDA (AEBITDA) in Q1 2023 was €119 million (Q1 2022: €357 million), while adjusted operating profit (AOP) was €61 million (Q1 2022: €300 million) with margins of 16.9% (Q1 2022: 33.6%) and 8.6% (Q1 2022: 28.3%) respectively.

The year-on-year reduction in AEBITDA margin was mainly driven by reduction of volumes and prices derived from COVID-19 testing and the strong inflationary environment (mostly higher fuel and energy prices, and higher wage costs in some countries). These impacts were partly offset by accelerated price increases and efficiencies generated from the SALIX programme, which delivered savings amounting to €10 million in Q1 2023.

In Q1 2023, the AEBITDA margin of 16.9% shows recovery from the low point in the prior quarter (Q4 2022: 12.8%).
 

Reduction of adjusted net profit and adjusted (for covenant purpose) net debt

In Q1 2023, net profit (Group share) amounted to €28 million (Q1 2022: €216 million) and adjusted net profit (Group share) was €25 million (Q1 2022: €227 million), mainly due to lower COVID-19 testing volumes and higher net finance cost.

Q1 2023 unlevered free cash flow was €(7) million (Q1 2022: €155 million), impacted by the timing of tax payments of €49 million in relation to successful profit generation in the prior year. Q1 2023 unlevered free cash flow before tax amounted to €42 million, remaining on the same level as in the prior quarter (Q4 2022: €41 million).

Net debt of the Group increased by €40 million to €1,615 million at the end of March 2023 (year-end 2022: €1,575 million), mainly due to €32 million of acquisition payments including €13 million of advanced payments for acquisitions to be closed in Q2 2023. Adjusted (as per covenant definition) net debt at the end of Q1 2023 came down to €1,582 million from €1,645 million at year-end 2022, mainly relating to lease items. The leverage ratio rose from 2.07x at year-end 2022 to 2.85x due to lower AEBITDA throughout the last twelve months.

SYNLAB held €396 million in cash at the end of Q1 2023 (year-end 2022: €542 million) as the Group repaid €100 million gross debt in February 2023.
 

Outlook

SYNLAB maintains its FY 2023 guidance and continues to expect revenues of around €2.7 billion with around €50 million of COVID-19 testing revenue as well as underlying organic growth (excluding COVID-19 testing) at approximately 4% in 2023, driven by strong development of volumes and accelerated price increases within the core business.

The Group implemented a temporary reduction of M&A spent in 2023 to around €100 million to fully focus the business on achieving the same productivity level as before the pandemic outbreak.

SYNLAB expects the adjusted EBITDA margin to be in a range of 16-18% in 2023. The adjusted EBITDA 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, and 5) lower M&A contribution.

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).

– Ends –

For more information:

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 and veterinary medicine. The Group continuously innovates medical diagnostic services for the benefit of patients and customers.
• SYNLAB operates in 36 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 28,000 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

1. Q1 2023 SEGMENT REPORTING

1. QUARTER VIEW

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).

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