SYNLAB AG
SYNLAB delivers robust performance in FY 2023

• Revenue at €2.64 billion
• Strong underlying organic growth: 6.4% (Q4 2023: 4.9%), well above the mid-term organic growth target
• Adjusted EBITDA margin at 16.6% (Q4 2023: 17.0%)
• €40 million of SALIX savings
• Unlevered free cash flow at €75 million
• Eight acquisitions completed with an EV of €90 million
• Active portfolio management strategy improving business performance
• Adjusted net debt at €1.3 billion at the end of December 2023

SYNLAB AG (“SYNLAB” or “the Group”, FSE: SYAB), the leader in medical diagnostic services and specialty testing in Europe, today announced its audited FY 2023 results. The Group reports robust financial performance in 2023 driven by strong underlying organic growth (excluding COVID-19 testing revenue) of 6.4%. Revenue reached €2.64 billion (FY 2022: €3.25 billion) in FY 2023 with an adjusted EBITDA (AEBITDA) of €438 million (FY 2022: €753 million) and an AEBITDA margin of 16.6% (FY 2022: 23.2%) within the guided range for FY 2023 of 16-18%.

The Financial Report for FY 2023 is available for download on the investor relations website: https://ag.synlab.com

“Looking back at the financial year 2023, I am proud to report that our constant drive for medical excellence is mirrored in another outstanding financial performance this year. With a remarkable underlying organic growth of 6.4%, SYNLAB exceeded expectations and managed to navigate through a dynamic environment”, commented Mathieu Floreani, CEO of the SYNLAB Group. He further states: “Despite many challenges – be it the current macroeconomic environment or the completion of the COVID-19 capacity reductions and the transition to a post-pandemic environment – we have continued with determination our efforts in early detection, medical prevention and personalised medicine. We invested in growth areas, expanded our network capabilities and fostered innovation. At the same time, we focused on our core business and strategically divested non-core assets, strengthening the company further. In 2024, we will build on our success and drive forward our strategy to deliver unrivalled value in medical excellence.”

Financial performance

Note: The decrease in COVID-19 PCR price and volume affects the year-on-year comparison.

* Based on a weighted average of 219,719,171 (basic) or 220,962,537 (diluted) shares outstanding in FY 2023 and 221,558,169 (basic) or 221,865,874 (diluted) in FY 2022, respectively

Strong underlying organic revenue growth, normalising COVID-19 testing

2023 revenue was reported at €2,635 million (FY 2022: €3,251 million), reflecting a particularly sharp reduction in COVID-19 testing revenue to €40 million (FY 2022: €790 million). The FX impact on revenue was (0.3)% in 2023, mainly resulting from the weakness of the GBP and various emerging countries’ currencies, whereas acquisitions positively contributed 1.1% on a pro-forma basis. The fourth quarter saw revenues of €645 million (Q4 2022: €701 million) including only €5 million from COVID-19 testing (Q4 2022: €71 million).

Underlying organic growth (excluding COVID-19 testing revenue) accelerated in 2023 to 6.4% in comparison to 2022 (6.2%). This was driven by a robust volume growth of 4.8% and a price increase of 1.6% across the Group’s portfolio.

Business in Germany (20% of Group revenue) grew organically (excluding COVID-19 testing revenue) by 8.9% in 2023 driven by strong growth in hospitals and gain in prescribers. France (20% of Group revenue) decreased by (0.2)%, price decreases in 2023 more than offsetting strong volume growth. In the South Region (31% of Group revenue), underlying organic growth was 3.7% on the back of increases in price and volume. The underlying organic growth in the North & East Region (29% of Group revenue) was very robust at 12.5% owing to strong volume growth and a favorable pricing environment driven by health authorities partially mitigating the effects of inflation.

Synnovis, the South East London hospital outsourcing contract grew 12.2% in 2023 and contributed 0.6pts to the overall 2023 underlying organic growth.

In Q4 2023 underlying organic growth was 4.9% with strong volume growth of 3.1% partially impacted by unfavourable working day in December and a stronger price increase of 1.8%.

FY 2023 AEBITDA margin within FY 2023 margin guidance (16-18%)

FY 2023 adjusted EBITDA (AEBITDA) was €438 million (FY 2022: €753 million) while adjusted operating profit (AOP) was €194 million (FY 2022: €508 million) with margins of 16.6% (FY 2022: 23.2%) and 7.4% (FY 2022: 15.6%), respectively. The AEBITDA margin remained within the FY 2023 margin guidance of 16-18%.

Q4 2023 AEBITDA was €110 million (Q4 2022: €90 million) and AOP was €45 million (Q4 2022: €21 million) with margins of 17.0% (Q4 2022: 12.9%) and 6.9% (Q4 2022: 3.0%), respectively.

The year-on-year reduction in AEBITDA margin was still mainly driven by reduction of volumes and prices derived from COVID-19 testing and the strong inflationary environment (mostly higher wage costs in addition to higher energy prices). These impacts continued to be partly offset by accelerated price increases especially in the North & East segment and efficiencies generated from the SALIX programme, which delivered savings amounting to €40 million in FY 2023 (Q4 2023: €10 million).

M&A activities and active portfolio management improving business performance

From an M&A perspective, SYNLAB completed eight acquisitions in FY 2023, therein three acquisitions in Germany, two in Belgium (segment North & East), two in Italy (segment South) and one in France. The focus is to increase the network density. The total EV spend in 2023 was €90 million.

In 2023, SYNLAB initiated a portfolio management initiative that resulted in the sale of its business in Switzerland as well as non-strategic business areas such as its operations in Poland and Ukraine or the veterinary diagnostics business in Belgium, Germany, and Spain in Q3 2023.

Excluding the disposed business (Switzerland, Ukraine, Poland businesses and Veterinary), AEBITDA margin is at 16.9% compared to reported AEBITDA margin at 16.6% in FY 2023.

Reduction of adjusted net profit

In FY 2023, adjusted net profit (Group share) was €44 million (FY 2022: €342 million), mainly due to lower COVID-19 testing volumes and higher net finance costs. The profit (Group share) amounted to €92 million (FY 2022: €151 million); it includes €184 million profit before tax from the disposed business as well as a goodwill impairment of €68 million in Germany.

Strong reduction of adjusted (for covenant purpose) net debt

FY 2023 unlevered free cash flow (uFCF) was €74 million (FY 2022: €312 million). The FY 2023 uFCF performance was impacted by exceptional capital expenses related to the construction of the new Synnovis laboratory in London, COVID-19-related tax payments in Germany from prior year earnings and general COVID-19-related normalisation of working capital. The Q4 2023 uFCF was strong at €69 million (Q4 2022: €(27) million) with a positive movement in working capital.

Net debt of the Group decreased by €224 million to €1,341 million at the end of December 2023 (year-end 2022: €1,575 million). Adjusted (as per covenant definition) net debt at the end of December 2023 was at €1,303 million (year-end 2022: €1,645 million). The reduction is mainly due to the proceeds of the disposals of €336 million net of tax.

The leverage ratio increased from 2.07x at the end of December 2022 to 2.90x at the end of December 2023 from the normalization of AEBITDA post COVID and despite the reduction of the adjusted net debt. In 2023, €520 million of the Term Loan debt was repaid (the Term Loan B of €320 million due in 2026 was fully repaid and €200 million of the Term Loan A debt was also repaid).

SYNLAB held €221 million in cash at the end of December 2023 (year-end 2022: €542 million).

For 2024 SYNLAB expect revenues of around €2.7 billion (at current perimeter) with an underlying organic growth around 4%.

SYNLAB also continues to expect the AEBITDA margin to improve from its low point in 2023 with a minimum increase of 50bp. The AEBITDA margin is expected to be within the range of 17-18% considering the ongoing effort on the portfolio management, the continuous delivery of SALIX initiatives and the price net of inflation trajectory.

SYNLAB will continue in 2024 its bolt-on M&A strategy with an expected EV spend to be within the range of €50 million to €100 million.

On 23 October 2023, Ephios Luxembourg S.à r.l., an entity controlled by funds managed and/or advised by Cinven, launched its public acquisition offer of €10 per share for all outstanding shares of SYNLAB not directly held by it. 

On 02 November 2023, Management Board and Supervisory Board of SYNLAB published their Joint Reasoned Statement. A specific press release was issued the same day and is available on the investor relations website: https://ag.synlab.com

At the end of the acceptance period on 20 November 2023, the offer was accepted for a total of 77,765,194 SYNLAB shares. This corresponded to approximately 34.99% of the company’s share capital. At the end of the acceptance period, Ephios directly held approx. 42.75% of the company’s share capital. In addition, Ephios concluded re-investment agreements for approx. 6.90% of the company’s share capital. The total shareholding therefore amounted to approx. 84.65% of the company’s share capital.

The major shareholders of SYNLAB at year end 2023 are Cinven Capital Management (V) General Partner Limited, Novo Nordisk Foundation, Ontario Teachers’ Pension Plan Board, Elliott Investment Management L.P., State of Qatar and Dr. Bartholomäus Wimmer.

As of today, the conditions set out in the Cinven Offer Document are not yet fully satisfied. Based on its fiduciary duties, the Management Board of SYNLAB AG will assess any next steps in the interest of its shareholders after the fulfillment of the conditions.

Following fulfilment of the conditions set out in the offer document and the corresponding acquisition of the shares, Cinven will hold 188,112,767 SYNLAB shares. This corresponds to approximately 85.61 % of all voting rights and approximately 84.65 % of the company’s share capital.

Conference call

SYNLAB Management will hold a conference call for analysts and investors today at 3:00 p.m. CET (10:00 a.m. ET). 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 medicine. The Group continuously innovates medical diagnostic services for the benefit of patients and customers.
• SYNLAB operates in more than 30 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 27,000 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 €2.64 billion in 2023.
• Ticker symbol: SYAB; ISIN: DE000A2TSL71
• More information can be found on www.synlab.com

Appendix

1. Q4/FY 2023 SEGMENT REPORTING

2. FY VIEW

3. 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. The Underlying organic growth is the organic growth excluding COVID-19 testing revenue.

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 (and effects from sale of businesses).

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).