DGAP-News: SYNLAB AG / Key word(s): Half Year Results 
SYNLAB delivers outstanding financial and operational results in Q2 and H1 2021 
2021-08-12 / 07:29 
The issuer is solely responsible for the content of this announcement. 
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- Revenue almost double for the second straight quarter: +96% growth in Q2'21 
- Sustained strong SARS-CoV-2 testing volumes, 7.5 million PCR tests carried out 
- Underlying organic growth^[1] acceleration at +11.7%, lifted by UK hospital outsourcing contract 
- H1'21 revenue of EUR 1,923 million, above expectations 
- H1'21 adjusted EBITDA of EUR 663 million compared to EUR 679 million for FY'20 
- H1'21 record unlevered FCF of EUR 428 million driving major leverage ratio reduction to 1.4x 
- On track to exceed 2021 M&A target: 12 deals completed, agreement to buy Mexico lab platform 
- Upward revision of 2021 guidance was provided on 8 July 
SYNLAB, (ISIN: DE000A2TSL71, SYMBOL: SYAB) the largest European clinical laboratory and medical diagnostic services 
company, announces its unaudited consolidated H1 results. 
"SYNLAB's results for the first six months of 2021 are outstanding, reflecting great focus on execution. More than 18 
months of relentless effort leading the way in COVID-19 response with over 30 million tests have not deterred us from 
our growth agenda. Our underlying organic growth is accelerating, driven by the continuous roll-out of growth 
initiatives, including a sizeable contribution from one of the largest hospital outsourcing contracts ever granted in 
the UK. We are on track to exceed our 2021 M&A target: we have completed 12 acquisitions since the beginning of the 
year, have agreed to purchase a leading laboratory platform in Mexico and our pipeline is very promising. With 2021 
results set to be materially above our initial expectations, as shown by the upward revision of our guidance on 8 July, 
we are best positioned to capture the multiple growth opportunities of the diagnostic services market" says Mathieu 
Floreani, CEO of SYNLAB Group. 
SYNLAB Key figures (?m) 
                           Q2 2021 YoY Growth H1 2021 YoY Growth 
Revenue                     984.8     +96%    1,923.0    +96% 
Operating profit            257.1     x5.5     515.3     x7.2 
Net profit (Group share)    155.1     +158     343.2     +365 
 
Adjusted EBITDA             338.6     x3.1     662.7     x3.4 
Adjusted operating profit   289.1     x4.4     569.4     x5.2 
Adjusted net profit         181.8     +173     371.5     +364 
 
Unlevered Free cash flow     246      +249      428      +419

H1'21 highlights: outstanding results

Nearly doubling of revenue on an organic basis

H1 2021 revenue increased by 96% to EUR 1,923 million (H1 2020: EUR 983 million). Growth was mostly organic at 95%, with similar growth rates in Q1 and Q2 2021.

H1 2021 saw sustained strong SARS-CoV-2 testing, against a comparable period last year which was impacted by a significant SARS-CoV-2 attrition^[2] impact. Since the start of 2021, testing volumes remained at elevated levels across all SYNLAB's geographies, with 14.5 million PCR tests and 2.2 million non-PCR tests performed. The estimated SARS-CoV-2 total revenue contribution was EUR 829 million for the period consisting of EUR 853^[3] million testing revenue (EUR 124 million in H1 2020) netted against an estimated EUR (24) million attrition impact (EUR (158) million in H1 2020). Virtually all the attrition impact in H1 2021 was recorded in Q1.

Excluding SARS-CoV-2 testing, but including the tailwind from lower attrition, total organic growth was +25% in H1 2021 and +44% in Q2 2021 alone.

Underlying organic growth, which excludes both SARS-CoV-2 testing revenue contribution and the positive impact of lower attrition, was 7.6% in H1 2021, with acceleration in Q2 2021 to 11.7%, lifted by the contribution of the South-East London (SEL) hospital outsourcing contract, which started on April 1^st 2021. Without the contribution from the SEL contract, the underlying organic growth in H1 2021 was 3.6%, supported by successful "For You" growth initiatives, and in line with the 3%+ set as a long-term guidance.

By Segment, underlying growth rates ranged from slightly positive to strong double-digit:

- France (23% of H1 Group revenue) recorded underlying organic growth of 0.4% in H1 2021: solid volume growth was partly offset by the expected price decrease as per the 3-year agreement with the French health authorities, implemented in Q2 2021. SYNLAB continuously implemented its "For You" growth initiative, notably around the optimization of its Blood Collection Point (BCP) network.

- Germany (19%) recorded underlying organic growth of 2.9% in H1 2021, driven by strong Q2 2021 volumes and a catch-up effect following slower growth in Q1 2021.

- South (28%) recorded underlying organic growth of 5.5% in H1 2021, with countries ex Switzerland (86% of South revenue) recording average growth of 8.3%. Switzerland (14% of South revenue) was impacted by price reductions implemented in December 2020 and the rollover effect of 2020 customer losses, with the latter now starting to phase out. Other countries experienced volume growth, broadly stable prices and the positive impact of "For You" growth initiatives, mostly around opening of new BCPs. Iberia (31% of South revenue) recorded low single digit underlying organic growth, while Latin America (16% of South revenue) and Italy (39% of South revenue) achieved high single and double digit growth respectively.

- North & East (30%) recorded underlying organic growth of 24.8% in H1 2021, lifted by the UK (20% of revenue), which grew by a triple digit percentage in Q2 compared to the same period last year thanks to the contribution of the SEL contract from April 1^st 2021. Excluding SEL, underlying organic growth was 6.9% in H1 2021, driven by volume growth, a positive pricing impact and specific "For You" growth initiatives such as the rollout of electronic order entry for new prescribers in Austria and the opening of new BCPs in Belgium.

Profit further increased due to volume leverage

H1 2021 gross profit grew by 97%, to EUR 1,447 million (H1 2020: EUR 736 million), driven by procurement efficiencies for PCR test reagents, reducing the dilutive impact of such tests on gross margin. Gross margin reached 75.2%, expanding by 30 basis point compared with H1 2020.

H1 2021 adjusted EBITDA increased by 3.4x and reached EUR 663 million (H1 2020: EUR 193 million). This compares to EUR 679 million of adjusted EBITDA recorded for the full year of 2020. The organic increase of adjusted EBITDA was EUR 468 million compared with H1 2020. In addition to higher gross profit, this was driven by strict management of personnel and other OPEX costs and supported by productivity gains related to the SALIX program (EUR 9.5 million positive impact in H1 2021). These productivity gains included significant procurement savings attributable to the core lab equipment renewal project. The strong volume leverage translated into an adjusted EBITDA margin expansion, at 34.5% (19.6% in H1 2020).

H1 2021 adjusted operating profit, increased by 5.2x and reached EUR 569 million (H1 2020: EUR 110 million), with the margin expanding materially to 29.6% (11.2% in H1 2020). This compares to EUR 504 million of adjusted operating profit recorded for the full year of 2020. D&A before customer relationship amortization was EUR 93 million, including accelerated depreciation of PCR testing equipment and additional depreciation coming from assets relating to the SEL contract. All segments recorded very material, volume-driven, margin expansion, with a particularly notable margin uplift in the North & East segment, driven by SARS-CoV-2 testing contracts in the North region.

H1 2021 operating profit increased by 7.2x and reached EUR 515 million (H1 2020: EUR 72 million). Total adjustments amounted to EUR 54 million, including EUR 25.1 million of customer relationship amortization, EUR 19.5 million of IPO-related costs and EUR 9.5 million of other adjustments, mostly related to acquisitions.

The H1 2021 financial result was a net expense of EUR 75 million, down by EUR 25 million compared to H1 2020. This major decrease comes from a combination of lower borrowings and lower borrowing costs. The SYNLAB average cost of borrowing reduced from 4.2% in H1 2020 to 2.5% in H1 2021.It is expected to further reduce in H2 2021 at 2.0%.

H1 2021 income tax expense was EUR 112 million (EUR 5 million in H1 2020). The effective tax rate was 25%, lower than the 28% normalized rate due to the activation of tax losses carried forward. The increased absolute tax expense compared to the previous period results from the strong performance of the business.

H1 2021 net profit (Group share) was EUR 343 million (H1 2020: EUR (21) million). A residual sale of the A&S business, classified as discontinued operations, had a positive EUR 17.9 million impact on net profit (Group share).

Basic earnings per share reached EUR 1.65^[4].

Record cash flow generation

H1 2021 operating cash flow from continuing operations expanded materially, to EUR 523 million, driven by profit growth despite the negative impact of SARS-CoV-2 testing activity on working capital. DSOs however improved to 61 days at the end of H1 2021, compared with 67 days at the end of H1 2020 (and 63 days at the end of H1 2019).

Total CAPEX (including Leases and related interest payments) was EUR 95 million in H1 2021 (EUR 84 million in H1 2020) representing 4.9% of H1 2021 revenue (8.5% in H1 2020). It included EUR 5.1 million of COVID-19 related CAPEX.

Despite the CAPEX increase in absolute terms, strong operating cash flow led to record unlevered free cash flow of EUR 428 million. The cash conversion ratio (Unlevered free cash flow / adjusted EBITDA) was 65%.

Strong balance sheet and returns

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August 12, 2021 01:29 ET (05:29 GMT)