DGAP-News: SYNLAB AG
/ Key word(s): Half Year Results
SYNLAB reports solid H1 2022 results and raises 2022 revenue guidance
The issuer is solely responsible for the content of this announcement.
SYNLAB, the leader in medical diagnostic services and specialty testing in Europe, today announced its Q2/H1 2022 results. SYNLAB reports a very robust H1 2022 performance driven by strong underlying organic growth (excluding COVID-19 related revenues) and higher than expected COVID-19 testing. Revenue reaches €1.85 billion (H1 2021: €1.92 billion) with an adjusted EBITDA of €528 million (H1 2021: €663 million) and an adjusted EPS of €1.44.
“SYNLAB continues to show the resilience of its business model. Despite periodic softness in our underlying business, correlated with the COVID-19 waves, underlying growth is firming up over H1 2022, also supported by a positive price development in the second quarter. As expected, COVID-19 testing revenue is declining compared with 2021 but remains higher than our initial forecasts. Irrespective of this, and as highlighted during our investor day in June, we continue our efforts in key growth areas such as retail, direct-to-consumer, molecular diagnostics and hospital outsourcing to drive further organic growth and sustain our attractive margin profile” said Mathieu Floreani, CEO of SYNLAB Group.
Note: The expected decrease in PCR price and volume affects the year-on-year comparison in Q2 2022. Furthermore, adjusted figures exclude €173 million of goodwill impairment in Germany in Q2 2022.
Strong underlying growth, lower COVID-19 testing
H1 2022 reported revenue was down 4% to €1,851 million (H1 2021: €1,923 million), including a +13% year-on-year growth in Q1 2022 and a 20% decline in Q2 2022.
H1 2022 underlying organic growth was 7.2%, driven by a 7.0% volume growth and a 0.2% positive price impact and including the contribution of the South-East London hospital outsourcing contract (the “SEL” contract), annualising in Q2 2022. Excluding the contribution from SEL in Q1 2022, H1 2022 underlying organic growth was 3.1%.
Q2 2022 underlying organic growth was 4.0%. Volume growth was 2.6%, reflecting some continued softness in the hospital business, some residual impact of the Omicron wave on non-COVID-19 testing activities and some challenging comparison base, mainly in Germany and Italy. SYNLAB continued with the implementation of its organic growth initiatives, opening more than 40 new blood collection points in Q2 2022 as part of its retail initiative. Q2 2022 prices were up 1.4% when compared to the equivalent period in 2021, reflecting the positive effect of price indexations in several countries from the North & East and South segments.
H1 2022 COVID-19 testing revenue was above expectations but declined by ~30% compared with H1 2021 to €618 million. SYNLAB performed 13.8 million PCR and 2.1 million non-PCR tests during the semester. The average price per PCR test was around €42 in H1 2022, down from around €55 in H1 2021.
Q2 2022 COVID-19 testing revenue was €164 million, with SYNLAB performing around 3.6 million tests at an average price of around €42.
The total contribution of the ten H1 2022 acquisitions represented a 0.9% revenue growth. The transactions focused on bolt-on acquisitions as well as acquisitions in the field of specialty testing (e.g., Sistemas Genómicos in Spain). Since July, SYNLAB closed four additional deals, bringing the total number of acquisitions to fourteen, in seven countries. SYNLAB has spent approximately €90 million on acquisitions since the beginning of the year, representing an estimated annualised revenue of around €50 million.
FX impact was 0.8% with the strength of the GBP, the Swiss Franc and the Mexican peso more than offsetting the weakening of a few other emerging currencies.
High margins, reducing sequentially due to lower COVID-19 volume and higher inflation
H1 2022 adjusted EBITDA (AEBITDA) decreased by 20% to €528 million, while the adjusted operating profit (AOP) decreased by 28% to €411 million with margins of 28.5% and 22.2% respectively.
Q2 2022 AEBITDA was €171 million with an AOP of €111 million, representing margins of 21.7% and 14.0% respectively.
Margin developments are mainly explained by the reduction in the COVID-19 testing activity in Q2 2022, with margins dropping sequentially from the very high levels of Q1 2022. SYNLAB was able to offset some of the PCR price decrease with procurement efficiencies for reagents, but was impacted, as expected, by the volume drop and the planned lag time before capacity adjustments.
SYNLAB also experienced increased inflationary pressure, mostly from higher fuel and energy prices and a higher wage inflation in some countries. This was partly offset by efficiencies from the ongoing SALIX programme (€12 million of savings overall in H1 2022) and the Q2 2022 price increases. The SEL contract also had a dilutive impact on Group margins, of around one percentage point.
Net profit reflecting improved financial structure, lower tax and goodwill impairment in Germany
H1 2022 net profit (Group share) was €122 million with an improved financial result and a lower tax expense partly offsetting the decrease in operating profit and a €173 million goodwill impairment recorded in Germany. This impairment was mainly triggered by external factors: the currently high inflationary environment and the increase of the 30-year German government bond, impacting the WACC.
H1 2022 adjusted net profit was down by 14%, to €320 million, equivalent to an adjusted EPS of €1.44. Adjusted net profit and adjusted EPS exclude the €173 million of goodwill impairment.
Return on capital employed at 16.8%, reduction in net debt
Capital employed was €4.06 billion, broadly stable compared with year-end 2021. The return on capital employed was 16.8%, including a 0.8 percentage point improvement from the goodwill impairment.
The strong H1 2022 unlevered free cash flow generation, at €244 million and reduced net interest enabled SYNLAB to reduce adjusted net debt by another €62 million during the period. Meanwhile, SYNLAB continued to invest in M&A (€73 million cash out in H1 2022), paid its first dividend to SYNLAB AG shareholders (€73 million) and implemented a share buyback programme to cover various long-term share plans for employees (€11.7 million).
The decrease in the COVID-19 testing activity started to positively impact working capital in Q2 2022, with Days Sales Outstanding at 60 over the period, down from 69 days in Q1 2022.
At the end of June 2022, adjusted net debt was €1.61 billion compared with €1.67 billion at the end of December 2021. The leverage ratio remains at a low level: 1.5x at the end of June 2022.
Based on the strong start into the year due to the Omicron wave, and continuous strength in the base business, SYNLAB now expects FY 2022 revenue to be around €3.2 billion (May 2022 guidance: around €3.1 billion) compared with €3.76 billion in FY 2021.
The adjusted EBITDA margin is expected to be within a 24-25% range (unchanged vs. May 2022 guidance), compared with 32.1% in FY 2021. The year-on-year expected decrease is mostly attributable to lower COVID-19 testing revenue, driven by the expected lower volumes and prices.
The adjusted EBITDA margin range factors in: 1) the strategy to maintain the COVID-19 response capacity at the level medically necessary and potential lag time before any ramp down 2) the dilutive impact on margin of additional organic growth initiatives, notably in the Direct to Consumer (D2C) activity and 3) inflation risks.
The pipeline for future acquisitions remains strong and diversified. In line with the longer-term targets set at the IPO as well as the FY 2021 performance, SYNLAB aims to exceed €200 million of M&A spend again in 2022.
Starting today at 9:00 a.m. CEST, SYNLAB will hold a media webcast on its Q2 and H1 2022 results, hosted by Mathieu Floreani, CEO of SYNLAB and Sami Badarani, CFO of SYNLAB. Journalists can follow the webcast here.
The conference call with the SYNLAB Management Board for analysts and investors at 3:00 p.m. CEST can be accessed here.
For more information:
2022 Financial Calendar
The Q2/H1 2022 report has been published on the SYNLAB Investor Relations website.
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.
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.
Based on 222,137,476 shares in H1 2022
Including €4 million COVID-19 revenue from acquired companies
 At end June 2022, a total of 660,566 shares were bought under this programme, for a total net amount of €11.7 million representing an average price per share of €17.7.
 Net debt to LTM pro-forma adjusted EBITDA
 H1 2021 AEBITDA, AOP and Adjusted net profit restated by €0.7 million: share-based payment programmes no longer reported as an adjustment component
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