Eurofins plummeted 11 percent on Wednesday (March 6) after the Luxembourg-based laboratory services company said it will reduce its investment in mergers and acquisitions in the coming years to focus on operational performance optimisation, which it expects should also improve its margins and cash flow generation.
The 32-year old company pursued an aggressive strategy of expansion, buying more than eighty competitors worldwide since it was founded. Notable examples include the acquisition in 2005 of Germany's MWG-Biotech and in 2011 of Lancaster Laboratories, one of the largest contract laboratories in the United States, the latter being acquired for 150 million euros.
In 2018, Eurofins made 50 acquisitions, representing annual revenues of ca. EUR 720m in FY 2018, for a total investment of about EUR 1.2bn.
“From a financial perspective, the exceptional M&A activity of the last two years and subsequent integration efforts as well as the heavy investments into building an unmatched state-of-the-art laboratory platform (laboratory buildings, start-ups and IT) with significant scale advantages are still weighing on the margins and cash flow generation. In 2019 and 2020, the focus for the Group will be less on M&A, as most strategic acquisitions have been completed, and much more on finalising those internal investments and making progress towards operational excellence, and thus on beginning to improve profitability, cash flow and return on investment” Eurofins CEO Dr. Gilles Martin said in a statement.
(Eurofins World Map-Graphic source: Eurofins)
Eurofins is one of the fastest growing listed European companies. Since its IPO on the French stock exchange in 1997, Eurofins’ sales have increased by 36% each year (in compound average) to over EUR 2.97 billion in 2017. Between the Initial Public Offering on 24 October 1997 (€1.83) and 31 December 2018 (€326.00), Eurofins’ share price has multiplied by 177x, an annual average increase of 28% (against 3% for the SBF 120, 3% for the CAC 40 and 5% for the S&P 500 over the same period).
The company delivered solid FY 2018 results with revenues of EUR 3,781M (+27% yoy) and Adjusted EBITDA of EUR 720M (19.0% of Revenues), in line with its recently upgraded objectives.
Eurofins has an international network of more than 800 laboratories across 47 countries in Europe, North and South America and Asia-Pacific, a portfolio of over 200,000 validated analytical methods for characterising the safety, identity, purity, composition, authenticity and origin of products and biological substances and over 45,000 employees.