www.synlab.com
SYNLABEurope’s Number One Medical Diagnostics Provider
9M/Q3’16 Results
Conference call - Dec 1st, 2016
Agenda
2
9M 2016 Highlights
9M/Q3 2016 Financial Results
Outlook
2
3
1
1 – 9M 2016 Highlights
3
9M 2016 Highlights (I)
4
Trading environment:
Volumes generally supportive in largest countries: Continuous strong tailwinds in France;
Volume growth in Germany and Switzerland;
Spanish volume growth driven by innovation;
Italy beginning to partially recover from the headwinds of Lorenzin decree earlier in the year as full-year ASL budgets remained unchanged;
Pricing: Overall pricing stability;
Price decrease of 1% having taken effect in France from April 20th;
Price decrease in Belgium having taken effect from April;
Reversal of previously negative price trends in the Czech Republic due to growing number of unique patients;
Solid financial performance 9M 2016 with AEBITDA organic growth accelerating in Q3:
Revenue growth of 5,6% on as published basis – 2,2% on a like-for-like basis for 9M and 2,0% on a like-for-like basis for Q3:
Continuing positive momentum in France / Germany developing positively in Q3;
The Czech Republic and UK contributing strongly to Q3 revenue;
Italy disproportionately affected in H1, as budgets confirmation allowing for reversal to organic growth in 2nd half of the year, already beginning to be evident in Q3;
EBITDA growth of 10,1% on as published basis – 6,1% on a like-for-like basis for 9M and 7,2% on a like-for-like basis for Q3:
Delivering on Gemini Synergies;
AEBITDA margin below Q1 and Q2 levels due to seasonality but growing y-o-y.
5
Total synergies identified so far confirmed at 26,5M€ (AEBITDA):
Materials price optimization contributes about ⅔ of the
total synergies amount;
As of September 30, around 8,2M€ synergies have
already been accounted for; another 7,6M€ are expected
to be realized by the end of the year;
Procurement:
Signing of contracts with key suppliers continues to be on
track;
Total impact in 2016: reiterated to be approx. 14M€;
Positive impact of lower prices on the September YTD
accounts amounts to 7,8M€;
Automates purchase:
Purchase of lab machines for 17,5M€ is planned, resulting
in 3,5M€ annual savings in COGS;
Purchase of 7,5M€ realized, negotiations over further
10M€ in progress;
Impact expected in 2016 accounts: up to 1,0M€;
Footprint:
UK has been executed in 2015;
Italy in place & being implemented;
Belgium is in progress;
HQ footprint including strengthening of functions
is on track.
9M 2016 Highlights (II): Gemini update
(M€) Total Synergies by Category
Total Synergies by
Time of Realisation
Disciplined business development:
• 24 transactions have been closed as of September YTD for an aggregate
EV of 126M€ / expected post synergies multiple of 4,4-5,1x:
− SHLS in the United Kingdom:
diversification of the UK business into NHS independent segments of alcohol, drug
and nutritional testing;
− Lab Top in Zurich area of Switzerland:
consolidation of leadership position in Switzerland;
− Biolac in France:
acquisition of a central platform in Haute-Savoie region;
− Bolt-ons in Italy, Germany, Spain and Portugal.
• In addition, 7 transactions have also been signed as of September YTD for
an aggregate EV of 45M€ / post synergies multiple of 3,2-6,2x.
9M 2016 Highlights (III)
6
2 – 9M/Q3 2016 Financial Results
7
Key Financials 9M 2016
8
5,6%
Revenue (M€) AEBITDA (M€)
10,1%
Synlab Bondco PF P&L Statement
9* Non-recurring items primarily relate to share-based remuneration.
M€
Group
Synlab
Bondco
9M'16
%
PF
Combined
9M'15
% Var %
Revenue 1 159 100,0% 1 098 100,0% 61 5,6%
Materials and related expenses ( 264) (22,8%) ( 252) (22,9%) ( 12) 4,9%
Payroll and related expenses ( 455) (39,2%) ( 438) (39,9%) ( 17) 3,9%
Other operating income 18 1,5% 17 1,6% 1 3,9%
Other operating expenses ( 241) (20,8%) ( 226) (20,6%) ( 15) 6,9%
EBITDA 216,8 18,7% 200,1 18,2% 17 8,3%
Non-recurring items
incl. in EBITDA to be adjusted *5,5 1,8
Adjusted EBITDA 222,3 19,2% 201,9 18,4% 20 10,1%
Synlab Bondco: Net profit for the period
Overview of the expenses
for restructuring and other
significant items:
These relate to major
restructuring projects,
both initiated by the two
companies before the
merger as well as to the
merger of the companies
itself (project ‘Gemini’);
Out of the total amount,
expenses related to the
merger (project ‘Gemini’)
amounted to 5,5M€ as of
September YTD;
The amount is net of
5,4M€ one-time income
from compensation from
an IT supplier realized in
H1.
M€ 9M'16% of
Revenue
EBITDA 216,8 19%
Depreciation and amortisation (78,8) ( 7%)
Operating profit before acquisition and restructuring expenses 138,0 12%
Expenses for restructuring and other significant items (3,5) ( 0%)
Acquisitions related expenses (4,1) ( 0%)
Impairment and reversal of impairment of non-current assets (0,1) ( 0%)
Operating profit 130,3 11%
Share of profit of associates and result from deconsolidation 6,5 1%
Finance Income 5,6 0%
Finance Costs (107,5) ( 9%)
Profit before taxes 34,9 3%
Income tax expense (30,1) ( 3%)
Net profit for the period 4,8 0,4%
Synlab: Revenue 9M’16 vs 9M’15
11
5,8%
Perimeter Dec’15 excl. disposals
2,2%
5,6%(M€)
Synlab: Like-for-like Revenue 9M’16 vs 9M’15
12
2,2%
Perimeter Dec’15 excl. disposals
3,0%
(M€)
Synlab: Adjusted EBITDA 9M’16 vs 9M’15
Perimeter Dec’15 excl. disposals
6,1%
7,4%
6,9%
10,1%
13
(M€)
Key Financials Q3 2016
14
5,7%
Revenue (M€) AEBITDA (M€)
11,2%
Synlab: Adjusted EBITDA Q3’16 vs Q3’15
Perimeter Dec’15 excl. disposals
7,2%
7,1%
11,2%
15
(M€)
Estimated Quarterly Breakdown
16
Please note:
- FY‘14 figures presented as in the Offering Memorandum of November 4, 2016, where the PF impact of the acquisition of
SDN (a company in Campania, Italy, acquired by ex-Labco in the summer of 2014) was excluded from the PF figures of
2014; impact upon AEBITDA amounts to (18,2)M€;
- Also FY’15 figures are presented as in the Offering Memorandum of November 4, 2016: the change in AEBITDA amounts to
(1,2)M€ and relates to the effect of pensions in Switzerland; quarterly AEBITDA amounts of 2015 have changed accordingly.
M€ FY'14 Q1'15 Q2'15 Q3'15 Q4'15 FY'15 Q1'16 Q2'16 Q3'16 9M'16
Revenue 1.341 371 376 351 381 1.479 387 401 371 1.159
AEBITDA 241,5 73,1 73,2 55,7 64,6 266,5 78,9 81,5 61,9 222,3
AEBITDA
Margin, %18,0% 19,7% 19,5% 15,9% 16,9% 18,0% 20,4% 20,3% 16,7% 19,2%
Pro forma figures for 2014 and 2015 have been reviewed by the auditors in course of the production of the Offering Memorandum of November 4th, 2016;
Adjusted EBITDA margin expansion:
• For 9M 2016, AEBITDA margin grew by 80 bps from 18,4% in 2015 to 19,2% in 2016;
• For Q3, AEBITDA margin grew by 80 bps from 15,9% in 2015 to 16,7% in 2016.
UPDATED
M€ Sep'16
SSN (net of issuance costs) 884
SSFRN (net of issuance costs) 761
RCF (net of issuance costs) 38
Finance Lease 48
Other 29
Total Net Debt (excl. SN) 1.759
SN I/CO loan 370
Total Net Debt 2.129
Cash 91
Total Net Debt (Bondco) 2.038
M€ Sep'16
Goodwill 2.251
Intangib le assets 830
Property, Plant and Equipment 198
Other Non-Current Assets 81
Non Current Assets 3.360
Other Current Assets (A) 349
Cash & Cash Eq. (B) 91
Total Assets 3.800
Equity 1.086
Financial Liabilities (C) 2.129
Current Liabilities (D) 316
Other Non Current Liabilities 268
Total Equity & Liabiltities 3.800
Net Financial Debt (C)-(B) 2.038
Cur. Asset - Cur. Lia (A)-(D) 32
Synlab Bondco: Balance Sheet
LTM Pro Forma Combined Estimated Adjusted
EBITDA
PF for acquisitions:
• Pro forma effect for Acq.15 & 16,
including deals closed till Nov 4th;
Accounting Effects:
• Non cash impact of IAS 19 in CH;
• Impact of accounting harmonization;
• VAT leakage on management services;
Roadmap Germany:
• Run rate effects of efficiency
enhancing program in Germany;
Most of other restructuring relates to:
• UK transitional losses;
• Merger of operations in Barcelona;
Gemini Effect:
• Full-year effect 26,5M€ of which
8,2M€ have been recorded in the
books YTD Sep’16.
M€LTM
Sep'16
AEBITDA 286,9
PF for acquisitions 16,0
PF AEBITDA, LTM for the period 302,8
Accounting Effects 4,3
Roadmap Germany 1,7
Other restructuring 3,3
Gemini Synergies 18,3
Synergies of 2015 acquisitions @80% 1,1
Synergies of 2016 acquisitions @80% 4,8
Consolidated EBITDA used for
Leverage calculation336,4
Leverage
M€ Leverage
Cash (91)
Super Senior RCF (€250mm) 42
Senior Secured FRN 775
Senior Secured Notes 900
Other Bank Debt 12
Bank Overdraft 2
Finance Lease 48
Accrued Interest 14
Adjusted Net Senior Debt 1.703 5,1x
Deferred Consideration for Acquisitions 21
Senior Notes 375
Accrued Interest 8
Adjusted Net Total Debt 2.107 6,3x
PF Combined Estimated AEBITDA 336,4
LTM Sep'16
Please note:
- Deferred Consideration for
Acquisitions includes 5M€ EV of
acquisitions closed in Q4 till Nov 4th.
*
Synlab: Cash Flow
Net working capital:
• Stronger seasonality effect in trade
accounts receivable in 2016 compared to
prior year;
• Higher taxes paid in line with the growth in
business;
Operating CAPEX:
• 48M€ CAPEX in 9M 2016 include 7M€
one-time spending relating to the Gemini
project;
• Organic CAPEX in line with expectations;
Business acquisitions:
• 147M€ consist of payments for 2016
acquisitions as well as deferred payments
for 2015 and earlier ones where deferred
payment was agreed;
Financing activities:
• Net borrowings include 190M€ tap
executed in May 2016 as well as net RCF
drawing;
• Interest paid and lease payments in line
with expectations.
M€ 9M'15 9M'16
Adjusted EBITDA 201,9 222,3
Net non-recurring items,
change in provisions and other non-cash effects (16) 2
Profit before changes in net working capital 186 224
Change in inventories 2 (2)
Change in trade accounts receivable (10) (32)
Change in trade accounts payable 0 (4)
Change in other net working capital (5) 2
Income tax paid (26) (29)
CF from (used in) operating activities (A) 147 158
Business acquisitions (481) (147)
Operating CAPEX (42) (48)
Net change in other non-current assets 3 3
CF from (used in) investing activities (B) (520) (193)
Proceeds from share capital increase -
Interest paid and other net cash (79)
Net borrowings (excluding finance lease) 127
Repayment of finance lease liabilities (13)
Dividends paid and other similar payments (1)
CF from (used in) financing activities (C) 1.711 34
TOTAL CASH FLOWS (A+B+C) 1.338 (0)
Change effect in foreign exchange rate 4 (3)
3 – Outlook
21
22
Outlook (I)
Trading environment:
Continuing positive momentum in most countries: France, Germany;
Italy headwinds reversing:
o Access to ASL Budgets expected to be available till end of the year;
o Ramp-up of new hospital contract in Como and private patients initiatives;
The Czech Republic back to growth.
Pricing stability expected: Settlement achieved with social security on next multi-year agreement in France;
Temporary price cut in the last six weeks of the year in France affecting the results by around 2M€;
Full half year of Belgium price decrease;
Temporary price cut in Romania effective till the end of the year;
Gemini synergy programs completion:
Last strategic supplier contracts to be executed;
Further savings pools being investigated for reaching group-wide initiated with G&A: fixed expenses, logistics, …
New CEO of Germany Dr. Christoph Mahnke started in October.
23
Outlook (II)
On November 16th, SYNLAB successfully completed an offering of SS Floating
Rate Notes:
Amount: 940M€;
Currency: EUR;
Maturity: July 2022;
Coupon: 3M Euribor + 3,50%;
Notes priced at par;
Ranking: Senior Secured;
Security and Guarantors: in line with existing Senior Secured Notes;
Use of proceeds: Refinancing of existing floating rate notes (775M€),
repayment of drawn RCF and general corporate purposes.
24
Outlook (III)
Business development:
6 transactions for EV of approximately 23M€ closed since end of Q3: Two sizeable environmental targets in Germany in the food and industry-related
analytics segments;
2 transactions for EV of approximately 25M€ signed to be closed upon
authorities' approval;
Well filled pipeline with transactions that might be closed by early 2017 with
combined EV of over 40M€.
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