Eurofins Scientific Aktie

Good day, ladies and gentlemen. Welcome, and thank you for joining Eurofins' First Quarter 2026 Trading Update Conference Call. Please note that this call is being recorded and will later be available for replay on Eurofins' Investor Relations website. [Operator Instructions] During this call, Eurofins' management may make forward-looking statements, including, but not limited to, statements with respect to outlook and the related assumptions.

Management will also discuss alternative performance measures such as organic growth and EBITDA, which are defined in the footnotes of our press release. Actual results may differ materially from objectives discussed. Risks and uncertainties that may affect Eurofins' future results include, but are not limited to, those described in the Risk Factors section of the most recent Eurofins annual and half year reports. Please also read the disclaimer on Page 2 of this presentation, subject to which this call and the Q&A session are made. I would now like to turn the conference over to Dr. Gilles Martin, Eurofins' Chief Executive Officer. Please go ahead.

Hello, everybody, and welcome to our quarterly call. So in the first quarter, we only -- in the third quarter, we only published -- it's a limited comment that I will make today. In Q1 was a continuation of last year. We've had a softer revenue growth with a big impact on weather. Those who live in North America, in the Midwest or the East Coast and even in the South will remember that January and February were particularly harsh with storms and unprecedented weather. In Northern Europe, we had similar situation.

I read somewhere that Finland had the worst winter in 40 years this year. You can all do your research about that. How does that impact us? Well, when we don't -- when there is snow and storm and we don't get samples coming into our labs, we can't test. When in an environment when people cannot go and sample outside because it's too cold, everything is frozen, we don't test. People don't go to the doctor to get tested. They don't go to the hospital to get their procedure. That has all an impact. And every winter, of course, we have an impact. It's a matter of magnitude. And normally, we catch up during the year.

It just happens that this year was [indiscernible]. I've had a question of how do we quantify that? Well, Q1 at 62.5 days. If you have to shut down 3 days, not even a full week, you're losing 5% of your revenues for the month if people can't come to work or you don't get samples. So that's relatively easy to see that the impact can be significant. And of course, we get the question, can we catch up? Normally, we catch up. It just happens that this year, the catch-up might take probably longer than just 1 quarter because we had a very strong winter. However, also March and 1 more day. But even with that effect, March was back to our mid-single-digit target.

However, it was not enough to compensate for what happened in the earlier part of the quarter. We do think that much of that will come back at some point during the year, maybe not fully. But overall, we are sticking with our objective of mid-single-digit organic growth for the full year. Overall, our business is doing well. We have a slide show, if you want, I'm on Page 3, but I will not read everything from a slide show, you're welcome to go back and read it yourself or ask further questions in the call later.

Overall, our business is doing well. We -- our biopharma product testing is doing well. We continue to build our hub and spoke network, the completion of which is making further progress. We will be done by the end of 2027, as we believe. And we start to see the impact of that because even with fairly soft growth in Q1, losing some volume due to weather, for example, we still continue to improve significantly our profitability. So we are very confident on our objectives to achieve the profitability and cash flow growth that we have set for the next -- for this year and next year.

The biopharma, the core biopharma product testing, as I said, is doing well, is mid-single digits. We still have softness in the ancillary biopharma. Discovery is also still a little bit soft, the very early phase of biopharma. Genomics, forensics, agroscience, unfortunately, are dragging the growth and we will get bottom on those activities. We've done a lot of rationalization. We also continue to rationalize the contracts that we acquired from SYNLAB in Spain. They had a lot of loss-making contracts that we are exiting. We're exiting some of the distributorship we had in clinical diagnostics in Italy, which also has an impact on the growth.

How long will that go? Well, probably SYNLAB, we should be done this year with the cleanup and probably also Italy. We've exited completely one activity in the Netherlands in clinical diagnostics because we didn't see potential upside. So we are really making the company very efficient, highly digital, and we're quite positive for the outlook. On Page 4, we give a breakdown. Of course, we have an FX impact. It's very difficult to predict what the further FX impact will be going forward. Some of you know, please tell me how the currencies will evolve.

On Page 5, we give a bit more color on the various components of the growth in the different activities, life, biopharma and diagnostic pharma includes ancillary activities like agroscience, genomics, forensics, which are really diluting the growth of our core business. Our CDMO is also quite lumpy. We actually got an award as one of the best or the best mid-scale CDMO recently yesterday or the day before. So we have a good product, but it's fairly lumpy when you're small, you get a big contract. And that has an impact. But overall, we like that activity, which -- the profitability of which, especially on our large campus in Toronto is doing very well.

On Page 6, we talk about acquisitions. We continue our acquisition plan. We do think we can achieve the EUR 250 million additional revenue in 2026, a smaller bolt-on acquisition at acceptable multiples. On Page 7, maybe I can give a bit more color on the divestment of our electrical and electronic testing business. We had talked about the possibility of such things happening. We like consumer product testing. This is definitely not an exit of consumer product testing. We believe consumer product testing has a strong impact on health. If you take cosmetics, those are things that we put on our skin and definitely impact our health and they fit very well in testing for life.

And if you get things from if you wear shoes and they leak chemicals, this has also an impact. You might have seen recently the Texas state suing Lululemon for PFAS-containing clothing. And indeed, clothing may contain chemicals. So the level of health impact is there potentially. So we do like consumer products. We think they fit very well. But electrical and electronic was a little bit different. It's more like type certification of products. It's not checking every single batch or every single product. We thought the fit with our testing for life objectives was not perfect. Also, we were relatively small in that area. We are in many countries. And it was pretty obvious that it is a better fit with the buyer, UL, which already has a global network in this activity.

We would have had to develop all the digital backbone specific to that activity. We all know it's essential for long-term efficiency and leadership, and that was a bit too small to do the spend that we thought was required to make that platform the best in its activity in digital. As you can see the terms of that, I think it's a good highlight of what we have in the portfolio of Eurofins. It wasn't by far our strongest business. It was a business where actually we hadn't started the digital journey. I think they [indiscernible] the right digital tool and so they can deploy that. So for them, it's very good.

For us, it would have cost a lot of capital to put the digital backbone in place, the hub and spoke and so on. We didn't have the scale to build proper hub and spoke. We had good accreditation. It is a nice global platform in that area. But it's definitely, if I compare it to the rest of Eurofins, not a crown jewel by far. And it shows in terms of valuation, what is contained in Eurofins businesses. I think the remaining businesses are definitely for us, from our perspective, more potential. On the Page 8, we are just repeating our objectives. So although the Q1 was a bit soft, we think we will achieve our goals for this year. We have already achieved significant continued profitability growth. On the M&A, we are on track. And our digitalization programs and building the hub and spoke network, we are on track. So that's it for my short introduction, but we can go to Q&A, and I can answer some specific questions.

[Operator Instructions] Our first question today will be coming from Remi Grenu with Morgan Stanley.

So I've got 2 on my side. So the first one would be on the Biopharma division performance, which seems to have slightly weakened sequentially versus Q4. So I just want to try to understand which subsegments within that division have seen the most organic growth pullback versus what you had in Q4? And if there is any explanation for the slight weakness there? And as part of that question, are you still confident in the potential recovery in the second half of the year?

I know I mean discussing some of the contracts within Central Lab, for example, and I think you're making some more positive comments on the pipeline as well and the contract win. So that would be the first question on biopharma. And then the second one, on the divestment, are there any other parts of the business you think could be potential candidates? And specifically on the divestments you've made, what would be the preferred use of the cash proceeds that you've received for the sale.

No, I don't think biopharma, we can -- we have a number of ancillary activity in biopharma, and they have not performed as they will and they should. And that's the main factor. We also had some weather impact on biopharma. It's not like any business in North America was fully immune to the situation. As I mentioned, our CDMO and especially in Europe had a through with a lot of contracts finishing with significant clients. So that had an impact. Our bioanalysis business is still soft. So those new contracts in Central Lab and so on haven't started.

So we still have a negative development there. I think that's the main thing. But the trend is really as we anticipated. We do expect recovery. As usual, the timing of recovery is always difficult to determine, especially for the clinical areas where you have large contracts, which are fairly lumpy and you never know exactly when they will start. Our clients -- one of our largest clients recently reconfirmed they really want to go ahead. Timing of that, we will see. On divestment, we have nothing specific on the agenda. We are doing a bit of, as I mentioned, of portfolio cleanup on smaller things can be contract or smaller activities. We exited clinical diagnostic in Brazil, for example, that was last year.

So we have a few smaller things that are ongoing anyway to really clean up our network. We have some inbounds, obviously, on a number of areas. We don't need to do any additional divestments. We could potentially at some point. We do active portfolio management, and we have to be the best owner of all assets. And we also look at some other M&A assets that could be interesting. So it's not that we want to shrink overall. We want to grow, but in areas where we are global market leaders, and we see some upside. So there's nothing imminent on the horizon. And of course, everything is possible. Some things are possible.

And the use of proceeds, you asked, well, we disclosed it in the press release. general business. First of all, it will reduce our overall leverage. And then depending on opportunities on M&A, we might use some of it for that. If not, we might use it for share buyback, but that depends, of course, on our share price. So we have a number of options to allocate capital, and we are driven by return. So we allocate capital where we think it provides a return significantly above our hurdle rate, and that's how we will manage. But short term, it's mostly debt reduction.

Okay. And if I just may ask a follow-up on that. Just taking a step back and given the recent Intertek announcement, interested in hearing what you think around sum of the parts valuation consideration on the business and whether you would be open to the idea of a broader strategic review on how to potentially crystallize any potential value if there is value into a sum of the part consideration?

No value is always there for the long-term owner. What the market says today doesn't define the value of the asset, if anyone wants to own that asset long term. So no, there is nothing on the agenda like this. However, on the sum of the parts, I've made no secret from the fact that I believe that our share price is at the moment, currently massively undervalued compared to the sum of the part and this small divestment for 2.5% of Eurofins. It shows clearly, if you take, for example, net sales revenues, a massive gap exists. And as I said, I don't think that part was any more profitable, any more faster growing for the last -- for the recent past or had any more general attributes that made it more worthwhile than any other assets that we own. But the market is always right at the moment, at any moment within the long term, I think the value always comes out.

[Operator Instructions] Our next question is coming from Neil Tyler with Rothschild & Company Redburn.

Two questions, please. Firstly, around your investment program, and you talked about investing in the digital backbone, which has been taking place for a little while now. Can you talk about how perhaps those investments may have had to have changed over the last couple of years and in the -- against the background of AI and large language model development and how that's allowed you to either accelerate or perhaps have had to increase investments and how you thought about the sort of integrated digital infrastructure across the business? That's the first question.

And the second one, much more specifically, you mentioned some reimbursement issues in the Diagnostics business in North America having held back revenue growth in this period. Can you talk about what that was and what the sort of incremental risk of the same thing repeating is again? Because it was my perception at least that the majority of the North American Diagnostics business was less exposed to those sorts of issues, which have obviously been a feature in Europe.

Thank you very much. Our digitalization program hasn't changed much with AI. We have deployed coding tools, obviously, AI coding tools. The impact on the speed of development so far is fairly modest, unfortunately. And of course, we're reading about many others. And while in the future, a lot of people hope that development will come much faster with AI, this impact is relatively slow. Does it speed up our development by 10%, 15% now? Maybe that's about the quality of code is improving, obviously.

All the coders have to learn to use those tools. And now we go to agentic AI and what happens, there was an interesting article in Bloomberg yesterday about actually what happens inside Google for their own coding needs. You're talking -- there are a number of coding tools that accelerate and facilitate coding. Some are for a few quarters better than others, but you end up having only a small part of your developers who are able to use them to the full capability of the tool. It's a learning, so it's an adaptation. So maybe on the long term, the speed acceleration of development that will be provided by that will be more significant.

But in the end, what matters, you have to define what you want to do. And in any case, that is the most difficult thing because you have to define exactly what processes you want to standardize around, and that is real engineering. I'm not sure AI does it really for you at the moment. So I do think it will certainly help us to get our program delivered on time. And as times go, we can improve our capabilities and our tools. But it's not -- AI is not a game changer, unfortunately, at the moment. Maybe it will be, but not quite yet.

Reimbursement. We have 2 specific things on reimbursement in the U.S. We have first, the end of the reimbursement of our TruGraf test, which happened last year, but is still impacting 2 or 3 quarters this year. And then we have a small activity we haven't talked a lot about. It's about EUR 100 million, but it is called donor product testing, where we test organs or we test cells that will be used, that will be implanted, transplanted. And the requirement for testing, it's not only reimbursement, it's mostly the policy of how often and what test has to be done for organ transplant, and that has changed recently. And that is starting to affect from Q1 of this year. So those are the 2 things that was -- we were referring to.

That's very helpful. Can I perhaps just ask a follow-up related to the first question around your comment around margins, expecting significant progress. Obviously, the investments you've made have been one of the support to margins and most evident in the U.S. And does that comment that you made around margin confidence apply both to the U.S. and to Europe as well for this year?

Yes, yes. margins will improve just by construction. So there are many things we've spent a lot of money on reorganization and so on that are coming to an end or have ended. Once we have the right-sized footprint, we don't have to have the shutdown, also the impact on the top line of shutdowns. When you shut down site and consolidate, you always lose a bit of revenue. So that's not good for the top line. But of course, once you have finished the consolidation and the new IT systems are bedded down and everything, you gain efficiency. So you need fewer people. So -- and in Europe, we have a huge catch-up because there was much more duplication.

There is still much more duplication in our network in Europe than North America and diversity and diversity of IT systems because each country had deployed an older versions of our system, which was configured differently in each country. So the cost of maintaining that is much higher. If I look at our IT costs in Europe, there are 5 -- just IT solutions, there are 5% of revenues in Europe versus 3% in the U.S. So already there, you've got a difference, and that should normalize once we have standardized everything. That gives some idea of the impact. And why irrespective of revenue growth, it's not only volume drop-through, we believe we will improve profitability.

[Operator Instructions] our next question is coming from Delphine Le Louet with Bernstein.

Just to be back as a follow-up on this margin story or the way you look at the margin and specifically into minding the gap in between the U.S. and the European margin. How should we think about the size of the gap in the next 5 years? This is the first one. The second one is really back to us to what is happening exactly on the margin into Q1 when you say we have the structural and mechanical gains due to be hub and spoke. But can you be more specific and possibly separate what you see coming out from the mix effect and what you see, let's say, more broadly coming from the COGS.

And finally, the question deal with the CDMO Canadian business that you bought and effectively, you had at the time of the buying some contract for a certain duration. So can we size actually what is the CDMO precisely in terms of revenue? And because we have the catch-up into the biomanufacturing happening right now, why you're not more in a way, active or being more successful in bringing new contract to the table to make this facility running at full capacity?

Thank you. Yes, the size of the gap between the U.S. and Europe is big in profitability. I don't think we'll ever fully catch up, although there were activities and areas in Europe where we have higher margin than in North America in the same business. So it's not impossible. It just needs the proper focusing on the sites and also finalization of all those very disruptive new digitalization programs. So I think the gap is -- can we have the gap? I don't know. We haven't made any objective beyond 2027. So I can't be specific about that. And again, in Q1, I cannot tell you more than what's in the press release. Otherwise, we'll have to do a new press release, I'm sorry, but we'll -- we are confident that we'll improve margins in a way to achieve our objectives for this year and next year, and that has gone well in that direction in the first quarter of this year.

On CDMO, globally...

Yes, you're right significantly. So how should we think about that? Should we think of the sort of a doubling of what you see into the organic growth? Or what the range, I presume you can give us a flavor.

I'm not sure I understand your question, but I cannot give you a number because otherwise, we'd have to issue a press release. I cannot give much more. I'm saying that we are completely confident on achieving our margin progression for this year and next year and the evolution in Q1 fully underlines that and makes us also even more confident about it. That's all I can say, I'm afraid. Otherwise, we think about sometime publishing a full financial report also for Q1 and Q3 that would have some benefit, because indeed, discussing just the top line growth is not much information for you guys to do your planning.

We're not there if we haven't decided to do that, maybe we should at some point. It is a valid question, Delphine. And I understand just what we can give with short of publishing a full P&L is frustrating. And yes, whether it's a COGS or the top line and COGS, improvement of COGS is linked to our purchasing effect. I mean the way we define it is mostly external cost. And if you include labor, lab labor, of course, that comes from productivity, and we have gains there. And also, we have a program to use our overheads better, and that's going to be a multiyear program.

So we think we can go beyond what we plan in terms of margin, but we first need to deliver that before we talk about what is possible after that. To your second question on CDMO, that's globally about EUR 100 million business. In Canada, we bought a small business, but we mostly expanded it. We've built a big site now. And every time we expand, it takes 2 years to fill, not to fill, but to qualify, to build the room, to build the equipment, to qualify the equipment so that it can be filled. So it's very lumpy. But we will do an Investors Day, I think, this year in Toronto.

So you can see the facility, and we can talk more about that. Our CDMO was affected in Europe this quarter because we do more biologics in Europe or in Canada also, but not only. And they had some contract that just ended. There was one client that had a clinical trial that didn't go well. So that stopped. And so overall, the CDMO in Europe is doing a lot of early stage and has been more affected by the funding issues of biotech. And of course, we get the impact a few quarters after the clients run out of money because the projects continue. They don't end abruptly. So that's what I can say with CDMO. Our positioning in Europe is good. It's mostly biologics. So when that picks up, we should be able to get good new contracts.

[Operator Instructions] our next question is coming from Suhasini Varanasi with Goldman Sachs.

Just 3 for me, please. Just to clarify, it's a weaker start to the year, but you've maintained your guide for mid-single-digit organic growth for the year. Can you maybe clarify how trends were in March and maybe early April? Did it return to more than 5% levels? Second question, we've obviously seen some news flow on AI partnerships by big pharma players, and there's some concern in the market that it could lead to more in-sourcing of biopharma R&D. Can you discuss the risks to Eurofins if this trend were to happen? The last one is on contract exits, specifically in clinical SYNLAB. How much will impact 1Q growth, please?

I think you were cut off. But I think the first question regarding the exit rate for growth. I alluded to that earlier saying we had a quite strong March. And even correcting for the extra working day, we're mid-single digits. That's one point. AI partnerships, that's more for discovery. We don't do a lot of discovery. We have an AI company also that works with clients to use a lot of data points we have for discovery to help them. Actually, if there is more discovery, there will be more work flowing through our labs because you cannot replace what we do with AI for the biopharma product testing. This is mandatory. This is testing with machine, and that is part of the -- what is it called the filing registration, how the product will be tested is part of the registration of the product.

So I don't really see what AI will impact for the type of business that we do, which requires brick-and-mortar and labs and touching the sample. If there are more products developed, the biopharma will not in-source the biopharma product testing because they bring more molecules in the clinic. They will still need -- they decided to outsource it long ago and I don't see why that would change before -- because of AI.

On SYNLAB, I think SYNLAB, over a number of months, quarters, we plan to shed EUR 20 million or EUR 25 million of revenues. That was what we announced when we bought it. That has started, of course, immediately when we bought it. First quarter, what the impact is? I can't tell, but it's significant. We're talking this year probably still EUR 10 million that will be shaved off the activity of that business. Now of course, we also increased prices. We do effect because we don't lose all the contracts. Sometimes we manage to conclude them at a higher price that provides the right profitability. So it's a complex multiple pieces moving.

This is all the questions we have for today's question-and-answer session. So we would like to turn the conference back to Dr. Gilles Martin for closing remarks.

Thank you very much. Well, thank you very much to all of you for your questions. As I mentioned, it's a bit frustrating to just talk about revenues, especially when we've had a soft quarter with a big impact on weather. I think the outlook has not changed. We're confident that we should be doing mid-single-digit growth this year, improve our margins, continue to build a strong competitive advantage, have a more efficient, more digital, more differentiated business, which our clients love. And also, we are fortunate to be in a resilient industry.

We do things that are not directly tied to energy. Of course, inflation can be a few percent. I had a question how much is energy. I think maybe energy is 3% or 4% of our cost between transportation and heating and so on. So it's not an enormous impact. It is an impact, but not super enormous. And in good or bad times, food has to be safe and tested. The air, the water we drink, the air we breathe, the water we drink has to be safe. And there is more biopharmaceutical research. The development in these areas are super exciting and more products will be developed and we provide some of the picks and shovels to get product registered. So we're feeling good about all our activities. We think they are resilient even in very unpredictable times. And we are getting close to having built a very efficient and very profitable lab network with very high market shares and strong differentiation. So thank you for your support, and we'll talk more in 3 months with profitability numbers that I hope you will all like. Thank you very much.

Thank you. Ladies and gentlemen, the call has now concluded, and you may disconnect your telephones at this time. Thank you for joining, and have a pleasant day.

Ladies and gentlemen, welcome, and thank you for joining Eurofins 2025 Full Year Results. Please note that this call is being recorded and will be -- will later be available for replay on the Eurofins Investor Relations website. [Operator Instructions] During this call, Eurofins management may make forward-looking statements, including, but not limited to, statements with respect to outlook and the related assumptions.

Management will also discuss alternative performance measures such as organic growth and EBITDA, which are defined in the footnotes of our press releases. Actual results may differ materially from objectives discussed. Risks and uncertainties that may affect Eurofins' future results include, but are not limited to, those described in the Risk Factors section of the most recent Eurofins' annual and half year reports. Please also read the disclaimer on Page 2 of this presentation, subject to which this call and Q&A session are made.

I would now like to turn the conference over to Dr. Gilles Martin, Eurofins' CEO. Please go ahead.

Thank you, Andrew, and hello, everybody, and thank you for joining our full year 2025 results call. I will keep -- we have a long slide show, but I will not go through every slide. I have to give apologies for Laurent Lebras, our CFO, who is not well today. So I will not go in great detail through the financial slide and leave time for questions.

If I start on Page 5, or the Slide 2. I'm happy to report on a strong year 2025, where we achieved all our objectives or exceeded [Technical Difficulty] Eurofins, as you know, is every 5 years defining a plan for the next 5 years and sharing with investors what we are trying to do, what we will do in the next 5 years. We just completed year 3 of that 5-year plan, where we are building a truly global network, fully digital network of laboratories organized in a hub-and-spoke structure. So we get the benefits of scale in our large hub laboratories.

And we have a network of local laboratories to collect samples close to our clients, serve our clients in their country, their language and yet be able in the large laboratories to implement automation, artificial intelligence and all the things that make our services much more unique and faster and more reliable than what others do and we do. So this is continuing to proceed at pace. I'm happy to report that I can confirm we should be done by 2027.

There's been massive investments. And we start to see some of the benefits of that in our operating leverage, which has continued to improve every year. It improved well in 2025. Overall, our margins -- reported margins and our adjusted margins continue to improve year-on-year. Our EPS has shown a remarkable growth, 24%. And I think it's just the beginning because we still have heavy investment, heavy OpEx investment, especially in our deployment of digital solutions, development of digital solutions, which should give us significant [Technical Difficulty] and the cost of which will go down. We have generated before those investments to buy our sites because we prefer to own our sites.

This is linked to the long-term view that we have. We think over the long term, although they provide a lower immediate return on capital deployed over the long term, we're going to use them forever. It's a great benefit to have them because we can expand on those sites. But before those investments, we have generated more than EUR 1 billion of free cash flow to the firm. So our group is starting to generate serious cash and it's just the beginning of that.

And if I move to Page 6, the nice thing is that is accelerating in the second half. Organic growth is still not where it will be, we think, when -- and we'll talk about that later, but it's still accelerating quarter-on-quarter and half year-on-half year. Our EPS growth in the second half even reached 30%, which is quite remarkable. And our free cash flow has grown also much faster in the second half than in the first half.

On our investment program on Page 7, you see that we are starting to be done. We still have massive IT investments that post 2027 should be less. And more importantly, we should get the benefit of that. We're still adding some start-ups, but you see the investment has started. We've done the peak of it, so it's starting to be less. So all of that is running according to plan. We still will add a few large and very efficient sites to our network over the next 2 years. They are being constructed right now, and we think the delivery will take place over the next 24 months, more or less for in our current perimeter that should take what we need in our program.

On Page 8, we provide a bridge on the evolution of margin. And you can see we've had a nice underlying operating leverage. As we had flagged, we have some dilution from the acquisition for a very low amount as compared to the profits we think we can generate in 2 or 3 years of the network of clinical laboratories of Synlab in Spain. We are merging it with our network, and we're taking a lot of cost out. We've had a lot of exceptional costs for that. And that should -- the first phase should be completed by the middle of next year.

We think we will create significant value from this combination. But nonetheless, short term, it has been dilutive, especially in the second half. First half, we only had 3 months. Second half, we had 6 months. We have a bit of an impact from the FX because we make more profits in North America, although we want to improve profits in Europe as we finalize this IT program and site consolidation.

So a good improvement of margin, good drop-through on Page 9. If you see the trend, well, the COVID peak is well behind us, but we are catching up. Our revenues now are over the peak revenues from COVID. Our margin is catching up. It's -- and I think we are very confident in exceeding 24% margin in EBITDA -- adjusted EBITDA in 2027. And considering the benefit of that beyond 2027, I think there is some room to, at some point, maybe achieve or get close to the margins we had during COVID.

So that's also encouraging. On the -- if you see -- if we look at the CAGR, we've had since 2019, 8% revenues CAGR, 35% CAGR of free cash flow to shareholders. So -- and that's ultimately the most important thing, while we still carry huge amounts of investments. And I think those investments, once we have built our network of labs, we have them for the next 20 or 30 years. So the growth of the EPS and the cash flow per share should be for quite some time over proportional to our total revenue growth.

On the financial numbers on Page 11, you have a breakdown. I think I will go back to that as part of the question and answers. Main point is our profits are going in the right direction, are growing, growing faster than revenues and the EPS is growing also faster than revenues.

We took the opportunities for us, the fact that our share price is massively undervalued is actually an opportunity, and we took advantage of that opportunity to acquire a lot of shares last year, which is even further boosting our EPS. And the impact of that, once we hit in 2027, our target -- margin targets and cash flow targets will be compounded.

On Page 12, you have a bridge of our revenue evolution. We generated EUR 250 million of organic growth. Of course, it has been a bit diluted by the FX impact. And we have a sequential increase quarter-on-quarter of growth. And I think that will continue because now the comps that were strong in some areas, I can talk about it a bit later, will not be there next year as we enter -- or this year as we start 2026.

On the Page 13, we give a bit more breakdown by area. I think all our areas are doing well. Life areas are doing well. Food & Feed and Environment are growing both in Europe, North America and Asia. BioPharma, and I'll come to that on the next slide, is starting to recover. It is still being soft, it is still being far from what we think we can achieve long term. Diagnostics could do a little bit better, but it's starting to show in many areas, some recovery. Q4, of course, didn't get the negative base effect of tariff reductions in France.

Consumer. Consumer has been hit because consumer and technology includes some material science testing, microscopy, et cetera. This had a big boost in 2024 from the -- a lot of tools companies were looking at potential stricter export restrictions, both from Europe and North America to China. And there was a lot of anticipated buying of tools from our clients in 2024 that gave us a bit of boost on that in 2024, which is not -- has not recurred in 2025, but now we think '25 has hit a plateau and we should grow from there.

But that explains the only 2.3% growth in Consumer & Technology. Consumer was better than that. On BioPharma. And here, we have, I think, the last year was a mixed picture. The bulk of it is our BioPharma product testing, where Eurofins is a global leader, and that has continued to do well, mid-single digits. We have done at times better, close to double digit or double digit on that. There is some potential upwards. And we have a good outlook for next year. We are adding a lot of capacity where we will be adding -- expanding our big site in Lancaster, expanding our site in the Netherlands.

So we'll have more capacity coming online in the next couple of years. So there is some upside potential on BioPharma product testing, but the growth has stayed solid -- quite solid during the time where BioPharma is reevaluating its pipelines, hasn't been affected like Discovery. In Discovery, this is, we think, plateauing now. It's still a little bit down in the second half of the year. Genomics is still hurting from cuts in research fundings. But again, we think we're hitting now a plateau and we can grow from there.

Agroscience is part of the ancillary activities, and that is still down significantly. So we have made significant efforts to cut our footprint. There has been massive restructuring for the size of that business, significant restructuring. That's also part of our SDI. We've closed a number of field stations to basically fit our capacity to the demand. There could be at some point upside when the agrochemical companies, Agroscience companies and the seed company have more visibility on regulations to get their products approved, especially in Europe.

So we keep that activity where we are a global leader, but that has suffered. And between Genomics and Agroscience that explains a large part of the overall softness of BioPharma. Otherwise, BioPharma will be at the same level of growth as our Life activity -- area of activity. So our CDMO did well in the first half of the year in the U.S. because we -- or in Canada because we filled a tranche that got completed at the end of the year before.

It's a bit less in the last quarter because now it's full, and we're going to have a next tranche coming up online in the next, I think, 24 months. CDMO was a bit softer in Europe. It was a bit more on smaller biologics clients, but we think this will pick up in the next few quarters, too. So that's for the ancillary activities for BioPharma.

We have, of course, in BioPharma, some clinical works, large contracts and our clients are positive. on the start of those programs. And of course, that would switch completely the growth of the ancillary activities. If we look at the -- especially Central Laboratory, Bioanalysis, we do think that some point in '27, we will have -- we should have a significant boost from those activities. That's also hurting our profits because we keep capacity that is in excess of what we have as volume right now because studies should start relatively soon.

We have significant demand from clients. So we're optimistic on that. And in any case, the -- we're now at a baseline where we don't think that would go down anymore and affect our BioPharma growth anymore in 2026.

On Page 15, you've got a split of the margins. So the margins are growing everywhere, especially in the rest of the world. The rest of the world is catching up with U.S. margin. Europe has not been improving as much as we wanted. We've had an impact, of course, in Europe of the reimbursement cuts in clinical diagnostic in France that occurred in 2024 that affected the comparable with 2025. We've got the dilution from Synlab. We've got a number of other things.

We think we have a big upside in Europe to increase the margins and make them move much closer to U.S. margins, which will also reduce the FX impact on the translational results and margin. So we're optimistic over the next 2 years to significantly increase the margins in Europe. Another thing that we do is described on Page 16. So we have labs that are well integrated, where we have deployed our IT solutions, where we -- that have been in the group for a long time. And then we have a number of start-ups that we launched over the next few -- the last few years.

The peak start-up investment is behind us and the start-ups of the peak start-up years are starting to be profitable. As I mentioned earlier, we are opening fewer start-ups now. They have a smaller impact on our results. So that's part of our nonmature scope. On that scope, we also have companies like Synlab that we just bought and we are restructuring.

And what is interesting to see is the impact of that nonmature scope on our overall results is starting to be less and less -- it's -- we have a target that SDI at EBITDA level will be less than 0.5% of our revenues, and we think we will achieve that by 2027 as planned. Anyway, even in 2025, the impact on the group EBITDA is starting to be negligible at 2.7%. But we will continue to show it separately and our reported results and the mature scope result will converge. It's nice to note that our mature scope is already achieving the 24% margin we are targeting for 2027.

So overall, very encouraging results. On Page 17, you see that we are self-financing all our investments, including our M&A in -- with EUR 150 million left after that. And we've had, of course, in 2015, the purchase of our -- of the related party buildings. I'll come to that in a minute. But -- and that was an exceptional one-off investment. We spent EUR 540 million to buy back our own shares. And from next year, our cash flow should be such that we will have a lot of headroom for our cash flow to finance further share repurchase, for example, building repurchase is done.

We won't have to spend money on that. So we can have a very compounding -- very well compounding model where with our cash flow, we can continue to do M&A, finance not only our CapEx, but our CapEx will be less. So we'll have more room for M&A financing and even more room for returning to shareholders and preferably through share buybacks as long as our share price remains so seriously undervalued in our opinion.

On Page 18, you see that our teams are starting to do a better job in managing net working capital. We've got a good result this year in managing net working capital. And there is still potential of improving things further. We're not -- certainly not best-in-class there, but we're making progress, and we think we can do more.

On funding on Page 19, we've continued our prudent financing management. We are well funded for the next few years. Our leverage is very reasonable considering our cash flow. Also, our EBITDA will increase over the next 2 years, we believe. So that will naturally bring the leverage down. We will generate some cash. So we're confident on maintaining our leverage between the 1.5 to 2.5 multiple range that we have set for ourselves as an objective.

On Page 21, I illustrate some of the new sites that came online. We can talk about that. On Page 22, we can have a summary of our footprint. We have a quite large lab footprint. We are very far along in building our -- and completing our hub-and-spoke laboratory network in Europe and North America, especially. We still will have opportunities in Southeast Asia and Asia generally for the next 10 years or 20 years, also a little bit in Latin America. We can still add a few locations in North America. We're not -- we don't have 100% coverage yet, but the impact of what we need compared to what we have is -- will be very modest past 2027.

And now we own most of our big sites. And what is planned for the next couple of years will mean that by 2027, we will own our big sites, and we usually have land next to that existing building so that if the demand increases for those hubs, we don't have to move. We don't have to lose all the investments we did in those buildings, which was our life for the last 10 years as we had to consolidate a lot of acquisitions that were not -- where we found them, they were not necessarily where they should be, and they didn't necessarily have the focus that we wanted or that was optimal for best efficiency.

Now we have that footprint, and that will stay, and we can just incrementally add capacity on the same site as we need. So we're quite pleased about the progress. That was a 10 years program. Now we own what we need to own.

On Page 23, some discussions on return on capital employed. I think that would be more for one-on-one meetings for those of you who are interested. But obviously, we have a mix of assets on our balance sheet. We have the labs that have grown organically and that have a very high return on capital employed. We have the lab that we acquired. And until 2018, we built Eurofins through a lot of acquisitions. So we incurred goodwill. And of course, that provides lower return on capital.

We have a substantial amount of our capital on our balance sheet, which is those buildings that we own that have a book value of EUR 1.3 billion. Probably if we were to do a sale and leaseback, it would be more like EUR 2 billion or more. And that has, of course, a lower return.

So we give on Page 23, an analysis of the returns of our business as we can see it. But it confirms that the business we run has a very high return on capital employed. And if we deploy additional capital, especially if we deploy it organically, we're looking at very significant returns.

On Page 24, it covers the start-ups that we've made over the last few years and peak start-ups of '22, '23 as a whole are starting to be profitable. So we have -- and that can only amplify going forward. So we are very satisfied with what we have built and the impact it should have on our performance, our service to clients and financial results over the next 2 years and later.

On Page 25, we give a list of some of the acquisitions we did. So we continue to be active. We think we also should add about EUR 250 million of revenues next year from acquisitions at reasonable multiple. That means a lot of small bolt-on acquisitions, maybe not the bigger ones that would be sold at a much higher multiple. But the world is big enough, and we have enough opportunities. We continue to be innovative. Our labs invent a lot of new tests and new capabilities. That's on Page 26, and I will not go through all of them.

You probably have heard of the baby food -- latest baby food contamination with cereulide, which could be caused by Bacillus toxin. This is not a test that people were doing routinely most of the time. It normally doesn't happen. So -- but when the crisis started, we developed the test very quickly. We developed a test that's actually more sensitive than what was available before in the market because most of those things come from encapsulated in this specific contamination, it comes from oil that is added to vitamins or that is added in the form of oil encapsulated.

And measuring it, you have to break the encapsulation to get to the full amount and the true amount. So we make a nice breakthrough here in developing within a very short time when the crisis started, the right test and the most sensitive test in the market, we believe. But we can go deeper on that if some of you are interested in Q&A.

Page 28. We basically, we can only confirm that our objectives for 2027 are realistic. We think we will exceed them. The plans for CapEx are unchanged. And BioPharma will pick up in the next few quarters, we believe. So we're still confident that we can revert to the typical organic growth we've had for decades of 6.5%, just to give a number, but higher mid-single digits, mid- to high single digits. And we are building the network for that. And also the efficiencies and quality of service we are building should enable us to grow significantly faster than our competitors and than the market.

On Page 29, we give some ideas about the returns that we are generating. So we were -- we are pleased to have returned EUR 1.5 billion to shareholders since 2021. So not only are we quite profitable, but we returned a lot of cash to our shareholders already, although we are still building the house, we return a lot. And we built Eurofins for a lot of acquisition until 2018, which caused us to incur a lot of goodwill on our balance sheet. But since then, we bought some companies, but much less.

And if you look at the return on capital -- on the incremental capital we've added since then, after this big M&A phase, and you see that even including the goodwill, we already have 23% return on the incremental capital, which shows that we are reasonable in what we pay for acquisitions. We create value from our acquisition and our stock of businesses continue to improve. So we're very satisfied about the performance of 2025. We're very optimistic about what we think we will generate over the next 2 years and especially beyond.

In fact, I think we are building something that's going to be quite extraordinary in our markets, more and more focused. We've been also reviewing our portfolio, shedding a few small things. So over the next 2 years, we'll continue to do that to be a true leader in our industry, to the most innovative in our industry.

I don't have time to talk about it now because it's a result presentation, but we're investing a lot in new technologies, in AI, in automation to create real competitive advantage, a real differentiation in the speed and quality of our service, which should make us really the partner of choice of all the multinationals around the world in the industries we are serving. And I don't think anybody else is doing the type of investments we're doing. So I'm very positive and optimistic as to our performance post 2027 when we are done building that.

When we are building that, this causes a lot of disruption to service when you deploy new IT solutions the last 2 years where we started deploying heavily new IT solutions. We've had a lot of disruption to service to clients. This is not the best when you change the digital tools in the company to show the best performance to clients. But this is now more and more working, and we see -- we're going to see the back end of that.

And then we see the opposite, much better performance, faster performance, and that should help us also in growth and gaining market share post 2027 and where we have in the countries where we are done already, already in '26 and '27. So that's my introduction for today. And sorry for the very quick speed of my speech and presentation. Now I'm happy to answer questions, and [ Busi ] is here too, if we have some financial questions that I don't know the answer of.

[Operator Instructions] Our first question is coming from Tom Burlton with BNP Paribas.

I've got a couple just on BioPharma to kick off and then one on capital allocation. So on BioPharma, specifically within ancillary activities and the Central Lab, Bioanalysis business, you referenced these awards. Is there anything you're able to give us in terms of additional details on sort of how big, anything slightly more granular about phasing and so forth? Because I was originally expecting some of these to start coming through in sort of mid-2025, and it feels like they got pushed to the right, I guess, because of client decisioning and things like that.

And in your opening remarks, you talked about anticipating potentially a significant sort of boost in demand. But you said by 2027, and then you went on to say that some of those could ramp up quite soon. So I'm just trying to understand the timing there and what's going on? Because it feels like that when it does come through, it could be quite a big driver to Biopharma and then to group organic growth.

The second one, still within BioPharma, just on the discovery part of the business. It looked like through the back end of last year, we've seen a bit of a pickup in terms of the biotech funding. And I think that only really accelerated to kind of through Q4. We don't have the kind of longer run, I guess, data on your discovery business by quarter. How would you think about the sort of normal lead lag time as to when that should flow through to your business, your network and we really start sort of seeing it in numbers? Just still trying to gauge the sort of, I guess, the cadence of BioPharma growth as we go through 2026.

And then just on capital allocation, keen to understand kind of how you're thinking about buybacks. So you mentioned towards the end of your remarks, you've been very -- you've been active in buying back shares and returning cash to shareholders and the share price has developed, I guess. You've got fairly fixed targets in terms of your added M&A revenues and your leverage is, I guess, within the target range. Would you expect buybacks to be a kind of ongoing feature, maybe not at the levels they were in 2025, but how should we think about kind of ongoing return of cash and whether you'll be kind of pragmatic or consistent about that?

Thanks a lot, Tom. On BioPharma, yes, Central Lab and Bioanalysis, we have some fairly large contracts. And our best guess now maybe would be H2 -- that we are talking about would be H2 2026 for start of that. It's always difficult to time. They have to recruit patients, et cetera. So that's our best guess as we can see. What is clear is the comp has eased now. So going forward, we don't expect anywhere those revenues going down.

And if you do the math, if you have a negative 20% or negative 30%, even on a small part of the scope, that has a big impact on the average growth of that scope. So that -- we don't think we're going to have any negative, especially not of that magnitude going forward, and that should have an impact on the overall growth of BioPharma this year. And in the second half, hopefully, if we get those programs to kick in, it could become quite substantial.

And well, maybe if I said 2027, I think overall, BioPharma, even our core BioPharma product testing could grow more than the mid-single digits where it is now. And that could also increase. When would that be? That's what maybe I said '27. But overall, BioPharma, I don't see why BioPharma as a whole shouldn't grow faster than life. It has been the case for decade. And this -- we've had phases like this again in 2012, where the pharma industry was reevaluating pipelines and so on.

The industry was a bit soft for a couple of years, and then we've had a decade of much faster growth. So I think that will return. And why will it return? Because simply, the research is providing so many new products that are so powerful that it's just worth it for the pharma industry to spend money to develop those drugs because they will make a lot of profit with it. Even at lower reimbursement, they will make a lot of profits.

Discovery, yes the lag time, that goes from company to company, project to project, but it's not immediate indeed before a project starts. What is it 6 months, 12 months to get things to flow through depending on the project and the products in actual work for even the coding, it takes 2, 3 months to design a study to design a project. It's not something that you buy off a catalog. All those studies for BioPharma, they are bespoke and they take time to define.

It's like you build a house, you need to get the plans, get the plans approved before you can start building it.

Capital allocation. Well, if you look at -- we're an active buyer in the market, and we also have our own assets that sometimes we get approached by people who would like to buy some of our potentially noncore assets. So we know what those assets are worth. If you look, ALS is trading at 15x EBITDA, UL is trading at 19 or 20x EBITDA. A lot of transactions are in that range between 15 and 20. Even with the recent rerating, our stock is trading at 10x.

So obviously, if I have extra capital to deploy, it's a no-brainer to buy back our shares. I know what I buy. I know the potential of the profit increase of what I buy. I don't have to do -- we don't have to do a due diligence on it. We know what we're buying. And so once we've done the M&A, we think it will be accretive, and we think we can get our return over our hurdle rates. And if we have extra possibilities, we are going to continue to do buybacks.

And I think we will generate a lot of cash. And actually, we might buy even more this year as we bought last year. Of course, that will depend on how the market view our share and share price, et cetera. But in spite of the recent good run of our shares, on those metrics, if you just look like the multiples of, that people pay for assets in the market, either public assets or private assets, we have -- we're anywhere between 30% and 60%, 70% undervalued.

And in the capital allocation policy that our Board follows and we talk about, buying back our shares appears very attractive at the moment. To us, we're insiders. So we -- maybe if you're an outsider, there are other considerations that apply. As an insider, we will continue the buybacks.

Our next question is coming from Suhasini Varanasi with Goldman Sachs.

A few from me, please. So you mentioned the cereulide testing that you had launched in January. Have you seen increased demand for that testing given the recalls seen in the market? And is it possible to quantify the proportion of benefit to revenues? That's the first one.

Second one is on the margins. Your reported EBITDA margins have seen very strong underlying improvement in 2025. Can you perhaps provide some color on the scale of the expansion that you expect in 2026 and maybe the key risks around this. FX, obviously, is a little bit of a risk. We can't quantify that. Synlab, maybe the drag is a little bit less than last year. Or maybe additional M&A? Just some color around that would be helpful. Thank you.

And I think in your prepared remarks, you had indicated something around EBITDA margins could potentially return to peak COVID levels beyond '27. Just wanted to understand -- get some clarity on that. And is it the medium-term target potentially beyond '27?

Yes. cereulide, it is just starting. We don't know how big this crisis will be, how many charges, how many lots were affected. I'm not sure it will become a routine test because that was apparently caused by a contamination from contaminated oil from China. So hopefully, that will stop and be put under control. So we -- and considering the size of Eurofins, for something like that to become material, it would have to be a really massive, massive global recall of all the milk in the market.

So we don't expect any impact -- any material impact on our revenues. But still, it's good for our clients to know that when there is something like that, we are there and we have the most sensitive methods, much more sensitive than the ISO method. So if they want to check their supplies, we can do that for them very well.

Yes, we've gone on the advice of many of our investors and potentially analysts, we've gone away from giving specific margin targets. And some companies do that. We've done it for 2027, and we stick to that because they were there and we believe in it. And hopefully, we can do better than that. So for this year, what we've said we will improve. And as you say, some of the factors that you mentioned will play a role.

FX, we don't exactly know what it will be. M&A, we don't exactly know. We have a number of start-ups. We have to see exactly how fast they ramp, new buildings when they come online, et cetera. So what we can say is we think we will improve. We think we'll achieve or do better than the 24% margin next year in '27. I can't be more specific this year. What is clear is we have massive investment in IT that we hope to largely complete this year. So that should help definitely next year.

How fast all those programs get deployed, all those software gets deployed, how fast do they get -- do we start to accrue the benefits of it is also a little bit difficult to plan quarter-by-quarter. And what I said about margin, maybe don't get too excited too quickly. But it has always been the case that our best scopes have -- EBITDA margin in excess of 30%. The whole of Eurofins will never be there, but there's no reason why 24% should be a cap.

Of course, we will talk about that once we complete that period. And depending on our perimeters then on potential M&A, we might do then, et cetera, we'll try to set objectives beyond 2027 when we publish 2027 results. But all things being equal, staying in our market, staying in our current perimeter, there's no reason why we shouldn't go beyond that because every year, we're improving. And there's a very long -- if I look at what we plan to achieve this year, there's a very long list of things we are doing that will improve our results substantially.

And if on top of that, BioPharma starts to pick up a bit, it could be even more faster and more meaningful.

Our next question is coming from Delphine Le Louet with Bernstein.

A couple of questions on my side and a bit of a clarification regarding the infant baby formula product and how big that is actually today into the food business. And sticking with the food business with a broader vision, where are you taking the most market share? Or where have you been taking the most of the market share over the course of '25 when it comes to segments or region into that field?

And second question, dealing with the CapEx envelope for next year and probably the year after in the range of EUR 400 million. I was wondering how much of that is dedicated to the regular, let's say, IT ongoing and to the IT transformation you're coming to a close now. Can you detail that a bit more, please?

Thank you. It's really hard to say where we gain share or where we don't. I think we gained share, especially in the markets where we are strong in North America. I think we continue to gain share in the many European countries we do too. And this baby formula testing, this test is not something we were doing in the past. By the way, we just developed the test, but it's not going to be a huge market, a huge -- I hope so for the milk industry.

Although from time to time, there are issues in the milk industry, and there were issues in North America and a lot of recalls in North America. We helped our clients a lot to go through the shortages to help them mitigate the shortages of the milk powder in North America over the last few years. So this is -- we work -- what we do is essential. People forget it, but there are segments of the population who are very fragile.

And when they eat contaminated food, it can be fatal and especially babies. And we also test a lot of supplements, sport supplements. If you put not enough or too much vitamin in certain products, it can be toxic. It's not only the bacteriological contaminants. So this is more like a reminder of you can't stop testing food. If you stop testing food, bad things happen. And actually, it shows maybe nobody could have guessed that, that would happen. But it shows you have to have very broad testing programs because even if a contamination hasn't happened in 5 years, it doesn't mean it won't happen again.

And if you have a brand that is valuable, you don't want to be the one whose products are contaminated. I think that's maybe one of the many wake-up calls. It's not because you haven't had a problem with your products in the last 5 years that you won't have one tomorrow. So testing is important. It's like having a fire detector, maybe you haven't had a fire in 20 years, but you best [Technical Difficulty] detector in your house or in your [Technical Difficulty] that can still happen. On the [Technical Difficulty]

Apologies ladies and gentlemen. We have appeared to have lost our speaker line. One moment, please, while we try to get them back. Once again, apologies, ladies and gentlemen, we are trying to get the speaker line back in, one moment, please.

Okay. Ladies and gentlemen, we have just heard from the speakers. They are trying to reconnect. So please hold, they would be with us momentarily. Okay. Ladies and gentlemen, I believe they will be with us in one moment. Once again, apologies for the slight delay in getting our speakers reconnected, but they will be with us shortly. Okay. I believe we have our speakers back with us.

Thank you. Sorry, everybody. I don't know what happened with the telephone line. So I was answering the answer -- the question on IT CapEx and indeed, maybe EUR 50 million of the IT CapEx is linked to this development of new IT solutions for digitalizing our full network of laboratories. I think we can take the next question.

Our next question is coming from Remi Grenu with Morgan Stanley.

Just one last question remaining on my side. I think there's been press coverage around the potential divestment of part of your consumer and tech product testing business. So can you maybe tell us how you're thinking about that division in the context of the perimeter of the company? And if overall divestments are still very much on the table as you flagged on previous call and how we should think about you going into 2026?

Thank you. Well, we get a lot of inbound calls. There are things businesses that we look from inside what we like, what we don't like. As I mentioned, there are smaller businesses in Clinical Diagnostics last year that we closed or sold in countries where we had no path to become market leader. We like our consumer product testing. We like our material science testing, although material science was softer in '25, we see a great potential with all the AI chips and the memories now that are in great demand and the needs for tools that's going to pick up.

So we like that division. We like consumer products, and we'll never part with certain elements of it. They are very close to the core of our business of medical device and testing for life, et cetera. But we do get inbounds. And then we are -- when our boards get inbound, we have a duty to look at it because, of course, we get very attractive offers sometimes, extremely attractive compared to our current valuation. And so we have to look at it. What comes out of those reviews, we never can know, and we'll look at it.

But I'm running a company as a CEO, but also as a member of the Board, I'm a capital allocator, and we have to look where we put our shareholders' capital to work. We have no limitation. We're not limited by the amount of capital we have to invest in our core sector, but maybe there might be at some point, M&A opportunities in our core area of business that are larger that we want to take on. And then maybe it's worth to have an active review of the value of all our assets. That's all I can say about that.

Our next question is coming from Allen Wells with Jefferies.

A couple from me, please. Firstly, just maybe a financial question. I just wanted to understand some of the moving parts on the free cash flow for the business. Obviously, solid reported number, but it does include another working capital inflow in Q4 and obviously, year-on-year reduction in CapEx. I just wondered how you guys are thinking about the sustainability, particularly of those two variables as we move back towards the ambition of a mid-single-digit growth level business.

Maybe you can talk a little bit about the drivers of that working capital movement because I think it's the second year in a row you've had an inflow at the full year? And likewise, on the CapEx side, it sounds like you expect similar levels of CapEx in 2026 versus 2025 or maybe even slightly lower. Can that level of CapEx support an acceleration in growth up to the kind of 6.5%? That's my first question. And secondly, just a follow-up question on [Technical Difficulty] net-debt-to-EBITDA towards the upper end of your, I guess, preferred range.

You talked about the potential to do more buyback of shares in 2026. But if I assume a similar CapEx and M&A trends, it doesn't look like that will be self-funded at least on my back of the envelope calculation says. So are you happy to run net-debt-to-EBITDA up towards the top or even above the top end of that range?

Very much. Yes. Well, we did a good job in working capital this year. And of course, that is finite. We're not going to get very big negative net working capital. I think we might still have a little bit of room over the next 2 or 3 years to be better at collection. We're not as good as maybe we should be at collection. And so -- but that's always a fight, of course, with our clients who want to pay later. And we -- but they don't always pay on time like in any business.

So I think we can be better at getting our clients to pay on time. And we're kind of kind to many suppliers. So we pay maybe a bit too fast. So I think I couldn't tell how fast net working capital will be improving, and it can maybe 1 year be a bit less good and so on. So that element, I think it was a good year of EUR 40 million or EUR 50 million this year and last year will not be a gain of EUR 50 million every year forever, obviously. I think long term, we can do a little bit better. That's what I can say on the net working capital.

On CapEx, I think we have a high CapEx at the moment. Our maintenance CapEx is 2% or 3%. And with that, we can grow mid-single digit. And so with CapEx at EUR 400 million ex investment in own sites, we have headroom. We didn't quite spend the EUR 400 million in the last couple of years in '24 and '25. So we're a little bit below in '24 and '25. But we are confident our EBITDA will increase. If you run the numbers, we don't want to give a number, but if you put 24% of whatever revenues you model based on M&A, et cetera, you're getting close to EUR 2 billion or around EUR 2 billion of EBITDA.

And if the free cash flow conversion is over 50% -- significantly over 50%, that's a lot of cash to use for buybacks and M&A. So we have headroom -- and as we talked about assets, when we look at certain assets that could give even more headroom. But we cannot predict the future. A lot of those things look at what we could buy for M&A. I don't know what is going to come our way at a value where we find we can get a good return. That is definitely very hard to plan.

And the same thing, are we going to keep all our assets or maybe some marginal ones we will dispose of for very high multiples. We did it already for the -- what is it called our software testing business and media testing business. I think we sold it for 18x EBITDA because we've got a really good offer. This is -- there's a bit of opportunism on that level of capital management depending on our own M&A opportunities and the level of our share price.

So net-debt-to-EBITDA, on the other hand, we don't want to exceed the 2.5x. That's clear. And I think overall, if you look at all the cash flow we should be generating this year and next year, unless our share price would be very depressed for that period, we should rather move down than up on the net-debt-to-EBITDA multiple.

Can I ask one kind of additional question? Just looking at the numbers around Europe as well. We know obviously that growth accelerated in Q4 to 5%. That was on a slightly easier comp. It looks like a chunk of that improvement was the diagnostics business, which we know there was a bit of comp effect.

Was there any contribution in that Diagnostics business from the organic growth in Synlab or maybe what's the organic contribution from Synlab in there? Because obviously, I know that you account for the organic growth from day 1.

I think it was 0 in Synlab. It's negative actually because we are shedding some contracts that were loss-making. So...

Just the Diagnostics, the underlying Diagnostics business coming back, nothing from Synlab?

And I think also Synlab is part of M&A. And so it's -- so no, Synlab is not-- another thing, I think looking at figures after the comma in organic growth per quarter and trying to analyze changes that post-comma changes on organic growth quarter-to-quarter is not really meaningful. It can be one contract, it can be just when something finishes, the contract finishes, doesn't finish. I wouldn't extrapolate too much, especially if you look at it at smaller slices like one activity in one continent.

We will take our final question today from François Digard with Kepler Cheuvreux.

I will -- maybe just a follow-up on cereulide analysis. Could you share with us how quickly you were able to roll out these tests? You shared already that the commercial implication is limited, but it's interesting to understand how you have processed through that, the first question.

The second question is on BIOSECURE Act in the U.S. Do you expect it to be a tailwind for you? Or could your France, European nationality in state prove to be a disadvantage in the U.S.?

Well, we have several labs around the world doing this test at the moment, and some are still setting it up, and they are cooperating to exchange method because that could be also an issue for clinical diagnostics in human health. I don't know if you heard, but in some countries, even the government labs didn't have a proper test to test the stool of the babies that were affected.

So I don't know the exact minute how many of our labs are actually doing it. But when it all started, I think within a week, there was a test running at one of our labs. And maybe we might have had a lab that was already able to do it, but was not performing the test routinely because the demand was not there.

And BIOSECURE Act, I don't know that it will have any impact. I mean I'm not sure I've heard from anyone in our company that would have an impact one way or another. No, we do our own testing locally in every country. So we have local companies that do testing in Europe, others do -- are based in China, the local testing in China, local companies in the U.S. doing testing in the U.S.

I have to conclude -- sorry operator. Yes, I have to conclude and thank everybody for joining our call. It was a long presentation. I apologize, but I tried to give some color from the management perspective on our numbers. I will be happy to meet some of you in London and for other meetings over the next couple of weeks and later during the year. Thanks a lot for your support, and have a great day. Goodbye.

Thank you, Dr. Martin. Ladies and gentlemen, the floor -- sorry, the call is now concluded, and you may disconnect your lines. And we thank you for joining us, and have a pleasant day.

Ladies and gentlemen, welcome, and thank you for joining Eurofins 9-month 2025 Trading Update. This call is being recorded and will later be available for replay on the Eurofins Investor Relations website. [Operator Instructions]

During this call, Eurofins' management may make forward-looking statements, including, but not limited to, statements with respect to outlook and the related assumptions. Management will also discuss alternative performance measures such as organic growth and EBITDA, which are defined in the footnotes of our press releases. Actual results may differ materially from objectives discussed. Risks and uncertainties that may affect Eurofins future results include, but are not limited to, those described in the Risk Factors section of the most recent Eurofins annual and half year report. Please also read the disclaimer on Page 2 of this presentation, subject to which this call and Q&A session are made.

I would now like to turn the conference over to Dr. Gilles Martin, Eurofins' CEO. Please go ahead.

Hello, everybody, and thank you for joining our quarterly call. We have posted a small presentation for those who are interested. I will refer to some of those slides.

I will start on Slide 3. So I'm happy to report on a good quarter, which is in line with our plans. We've made good progress on all our initiatives. As you know, we are in the middle of our 5 years plan to build a world-class network of laboratories in our core markets. We continue to build laboratories to finalize our hub-and-spoke network. This is continuing to make good progress. We will be, over the next few quarters, finalizing a number of labs, for example, in CDMO in our large campus in Toronto in Canada, in Laden, Leiden the Netherlands for BPT.

We're expanding our Lancaster campus. So we see a strong outlook overall for the next few years because BioPharma, some parts of BioPharma have been a bit soft following the COVID peak, but we are bullish about their future expansion. We are getting ready for that. The other big areas where we are investing is our digitalization programs where we aim at standardizing all the digital solutions for [indiscernible] and we are also making good progress on that. We plan to complete this by 2027, which should make us much more efficient, leaner, faster and differentiate further the level of service we can offer to our clients compared to what our competition is doing.

So this is also making good progress. Of course, when it will be finalized, we will have also a reduction of costs in addition to the benefits we will get operationally from those systems. Throughout the course of this year, things are developing as planned. We have a solid margin progress as planned. And overall, we are looking forward to delivering on our objectives for this year when we report in the beginning of 2026.

So overall, things are in line and we can give a bit more color during questions, if you want. The different segments are growing in line with the previous quarters. We have a very significant base effect that is going to flip in Q4 of this year, as we announced because we had a number of activities that we have in our ancillary BioPharma activities, especially the clinical areas, our central lab or bioanalysis, where very significant studies ended in Q3 of last year.

So we have that in the base until this quarter and next quarter, this should fade away. We also have a similar effect in pricing reduction in the French routine clinical business that will also fade in Q4. So we're looking forward to a strong Q4. The rest of our business is developing well. We continue to acquire businesses. In actuality, we are a bit above our objectives for this year. We will continue over the next few years to add about EUR 250 million revenues each year from acquisition. We continue our start-up programs. We have opened a number of start-ups and the blood collection points where blood collection points is because we find the cost of that is more attractive than buying existing businesses.

We are, of course, reviewing constantly our portfolio of businesses and may make some decisions on some limited divestments of noncore assets. This is something we are working on and evaluating.

On Page 7, we have a summary of the -- of how we see the outlook. So we simply confirm the objectives we set at the beginning of this year. Of course, we've had a little bit of dilution from SYNLAB, but there also the restructuring is going as planned. We will remove significant cost in the last quarter of this year and the beginning of next year. We, of course, incurred some costs for that and it creates some dilution but this dilution will fade in 2026 and 2027, and we believe we will create a lot of value with this acquisition and to the company we already had in Spain in clinical diagnostics.

So I'm happy to report that this is developing as planned. We have a small FX effect. Of course, nobody can predict the effects and it could go the other way at some point. Nobody really knows. But since it seems that the U.S. dollar to euro exchange rate is stabilizing somewhat at the current level. We gave an indication what the impact on the full year result of Eurofins would be. As you can see, it is not much. And the type of margin improvement we can do in our operational business is many times this impact. So we are confident that this will not affect our objectives for 2027 and our objectives for this year.

So overall, things are progressing as planned. It's a lot of work. And we are making our business even more competitive, even more effective, and we're very bullish for what we will achieve over the next 2 years and beyond as we enter a phase where we are much more cash flow generative. We own our buildings. We will have also less cash to spend for those buildings because we know them. So we are very bullish with the cash we will generate. And we continue to take opportunity of basically undervaluation, what we believe is undervaluation of our shares to buy back within the range of our leverage commitment, which we intend to keep between 1.5 and 2.5. Since we generate a lot of cash, and we think we'll generate a lot more cash. We have quite a bit of headroom for that in addition to potential asset divestments if we see opportunities for things that are not necessarily 100% fit for what we do.

So this is an overview of the progress of the business, and Laurent and I will be happy to answer questions if you have some.

[Operator Instructions] Our first question today is coming from Suhasini Varanasi with Goldman Sachs.

Two for me, please. Can you maybe share a little more color on the declines that you saw in Discovery Genomics and ancillary revenues in Q3. In first half, it was running at minus 4% and minus 10%, respectively. Just wanted to understand whether the declines have been similar in the third quarter to date? Or has it improved? And do you have any idea when this will stabilize, I suppose? That's the first part of the question.

The second question is on the BioPharma business. I think you mentioned that some large studies were in the base in Q3, which will flip and go away from the base in Q4. Is it possible to give some color on the magnitude of the benefit in the competitors? Is it like 0.5%, 1% benefit in the comps?

Thank you very much for your question. The Genomics, unfortunately, is continuing on the same trend, also Agroscience, Discovery is more stabilizing. We don't see an explosion, but more stabilization. I think we will also hit bottom in Genomics and Agroscience. So we don't foresee a continued decline of that order of magnitude in Q4 and especially going into next year.

More importantly, we can adjust the cost base to that new level of revenues and also the product mix in Agroscience, for example, there is still stronger demand in some areas like biologics or replacements of chemicals with bioorganic compounds.

So we refocused some of our teams on the markets that are more growing in this area. So we're optimistic that this will stabilize, probably not looking at significant growth for next year, but probably a stabilization. So that will also be a positive because it won't be dilutive on our growth.

On Discovery, there are some positive outlooks. But like others, we don't see it very much. So we're more looking to a stabilization in Discovery, so they're very early phase. And restart of significant growth in the next quarter. On BioPharma, our BPT is doing well, it's growing mid-single digits. But the -- where we were hit is we had very large studies in the central lab and the clinical phases that we do in bioanalysis and that -- those programs ended in Q3 of 2024. They have not restarted yet, but basically, we won't have the base effect next quarter. As to the impact, it is tens of millions of euros. I don't know if it's EUR 10 million, EUR 20 million, EUR 30 million. This is something we and also, if it's per year or per quarter, but it is significant.

So we will see it. I don't know if Laurent has a number. No, we don't have it here, but we will -- it's a good point. We'll try to publish that with Q4 or give some indication with Q4 on that. But it is significant. And of course, there is the other side is we have signed contracts and we think there will be a restart of those contracts. As usual, for clinical research, it's difficult to know exactly when our clients will restart when they will start recruiting at a significant level. But we do hope in the course of next year to also see a rebound of growth. We have capacity. We have an efficient central lab. We're an efficient bioanalytical lab, that can support a central lab, and we have clients that have selected us and would like to start studies with us. When exactly those studies will start is a question, but they really plan to do it and they are preparing for it.

Our next question is coming from James Rowland Clark with Barclays.

Just following up on the easing comps in the fourth quarter beyond the BioPharma business. I think you also have easing comps in clinical diagnostics and also in consumer. So I wondered if you could help quantify what those 2 could look like as well? And then just on FX, I just wanted to check, would there be any margin dilution from 1.5% headwind on revenue, i.e., is the EBITDA impact larger than that 1.5%? Or is it similar? And then my final question is on Life, which has accelerated in the last 2 quarters really good performance in food, in particular.

Is that now running at what you think is a sustainable rate of growth? Or is the environment business being flattered by easy comps and so actually moderates down a tiny bit in the future?

Thank you very much. Yes, the clinical business is about, I think, EUR 300 million, and the hit was 8% on an annual basis. So you can more or less calculate per quarter, it's EUR 75 million and EUR 5 million or EUR 6 million or EUR 7 million impact on the French clinical business. What was the other -- the second one you mentioned, excuse me?

Consumer.

Consumer, this is a mix of many different things. We have the -- we had a lot of orders in our the microscopy and microscopy and material science business because of prestocking prior to prior to memories and other things and instrument going to China because we also test instrument in the summer industry and that was a big boost to 2024, and that is easing a little bit.

So we do hope to see better numbers on that in Q4 and the resumption of growth next year. So that was the second one. That's -- we lump it in consumer, but that's mostly on this activity. The rest of consumer is going well, actually, surprisingly, considering the economic situation. So we don't see that changing very much. Of course, we also have a heavier weight in Asia in that area, and Asia is doing well.

The economies in Asia are doing much better than in Europe. So that is good. And life, yes, life is essentially a mid- to high single-digit growth business. We've seen that for a long time. What you have to realize also is an environment we have a seasonal impact. And depending on weather effects, you can have one quarter in Q1, especially, which is a lower quarter.

If it snows a lot, if there is everything is frozen or if there is a hurricane or if something happens, that can affect one quarter in environment more than the other areas like food. Food is more affected by scandals or contamination events and things like that. Although we are so big now that anything happening in one continent wouldn't so materially affect the whole. And so environment -- the growth in environment can vary from quarter-to-quarter without being probaly meaningful on an annual basis.

And sorry, just on FX. Is it safe to assume a 1.5% headwind on EBITDA as well as revenue?

Yes. Well, we have a slightly higher margin in the U.S. That's why we comment and if you can do the math yourself if you take 2024 and you take the split of margin in the U.S., in North America versus Europe. There is a small dilutive margin effect from -- if we have -- if the Dollar is lower versus the Euro, we've quantified it on a full year impact.

So that's probably the same order of magnitude on the quarterly impact that we will see on the margin. But this is more than offset by the things we do operationally to, of course, continue to optimize our margins, and this program is going well. For a strong change in dollar value, the impact of margin, as we calculated, was 0.2% on a full year basis.

So we're not talking of huge impact on margins, it's mostly translational. And over time, our margins in Europe should catch up in North America as we finalize all our IT standardization program and also the hub-and-spoke model, where we cut duplication across countries in Europe. So it shouldn't be that forever, we have lower -- significantly lower margins in Europe than America. Over time, we've had times where Europe and higher margins in North America. And so we will see how that evolves over the next 2 or 3 years.

Our next question is coming from Virginia Montorsi with Bank of America.

I just had 2 quick ones. One is, could you elaborate a little bit more on how you're thinking about buybacks into end of the year and next year? And then just on the FX impact, at total level, if I think about the 1.6% headwind that you're talking about due to the dollar, would it be fair to assume just a little bit more at group level when I consider all of the currency impact? Or should we think about that differently?

Yes, buybacks, we -- it is the best investment we can do at the moment when I compare to M&A, the quality of M&A in the market. What we pay for M&A, companies we don't always know. And more importantly, what others pay for M&A, which usually we pass on because we think it's quite high in our sector, transactions go for 15x and more 12x depending on the sector. And so when we can buy Europe at 8x or 9x or depending on what your look at, we think it's a bargain.

Now of course, we have a leverage range we want to respect and so we will respect that, but that still leaves a lot of headroom as our EBITDA is growing and it's growing every year. And on top of that, we generate a lot of cash and our investment in buildings, this will also, at some point, is out because at some point, we will have the hub-and-spoke network, we're very far along.

So that will generate more cash. Additionally, if things stay completely abnormal as they are now, we could sell a significant asset and use that cash to buy back even more share or to reduce leverage. So we have a number of options, which means we can continue to do buyback opportunistically. And maybe going forward, more massively if things continue, maybe not short term, for the rest of this year anyway. And -- as to FX, well, it's the same thing. It's all mostly translational. We have a slightly higher -- slightly -- so on your 1.6% was for the dollar, as we pointed out on the top line the dollar represents about 70% of the FX effect, but the FX effects on other currencies since the margin is similar to our average group margin, in the rest of the world or in the other areas covered by the other currencies that wouldn't necessarily impact the margin. So that's an indication we can give on that level.

Our next question is coming from Arthur Truslove with Citi.

A couple if I may. So the first one, just on the organic growth guidance. Obviously, mid-single digit you're talking to. My guess would be that, that means at least plus 4%. And could you confirm whether that relates to organic growth adjusted for working days or not adjusted? So I guess, at 9 months, that's whether it's 3.3% or 4%, that would be the reference point.

Second question, I don't think it was in the release, but -- are you able to say how much revenue you've acquired so far this year in terms of deals that you've done? And also how much you've paid for it. And I guess, just on capital allocation as well, you mentioned in response to a prior question that you could potentially sell a major asset. In what circumstances do you think you would actually do that?

Yes, the organic guidance is adjusted for working days, but it doesn't mean we can't exceed it. So we will see, as I mentioned, the comps should help us in Q4 significantly, and our business is doing well. We see some acceleration in some areas. So we will see what Q4 brings.

More importantly is whether our growth is 7%, 6%, 5%, 4%, we will improve margins and we will improve profits over proportionately. And more and more, as we advance through our digitalization and the network expansion program. And we've shown that, that with less growth than our secular growth targets, we can improve margin significantly. We showed that last year, we showed that in the first half of this year, and we will show it again in the second half of this year, we believe.

So that's on that. Also on organic growth, if you look at 1 quarter, I've heard people saying, "Oh, yes, but the BioPharma organic growth in Q3 is slightly lower. We're talking a very small numbers. BioPharma is EUR 500 million and in Q3, of last year in 2024, there was 1 building of our CDMO in Canada that started working that added EUR 4 million to our revenues, and that is 0.8% of the BioPharma and of course, that is now included in the comps because it started in Q3 of last year of 2024.

So one should not draw things over conclude on things that are very small -- there are very small numbers we're talking about. So we are -- we don't see any change of trend, maybe there was a single event that confuse -- can confuse some people. But overall, we'll see the evolution in BioPharma, as we described with the BPT doing very well, the CDMO doing very well, and the ancillary activities staying soft and having base effect for the clinical with studies that ended in Q3 of last year.

So overall, we are very confident with our objectives for the rest of the year and on the organic growth level and even more on the margin level. Acquired revenues. I don't think we have published that, so we will look for it, but it's nothing extraordinary in Q3. We published a number of small acquisitions or we did a number of small acquisitions.

In H1, it was EUR 210 million on a full year basis. So it's going to be EUR 10 million, EUR 20 million more for Q3.

For the revenues.

Yes for the revenues on a full year basis.

So we didn't do any large deal in Q3. So we do mostly small bolt-ons because we focus on finalizing our hub-and-spoke network. And capital allocation, this will be if we ever sell assets, it will be either -- it will be mostly opportunistic. If we see an asset that potentially is not 100% fit with our plans and where maybe we will not become #1 in the world in that area, we might consider exiting that asset if we get a really good price for it.

I think that would be it. And then we're arbitrage with the buying of our shares. I don't know how long this undervaluation, in our opinion, will continue. We think it is quite massive. But of course, the market is always right. And so we have -- we will opportunistically arbitrate if we need to. And of course, those things are done confidentially, so there will be no warning. If we do a deal, we'll announce it when it's signed.

[Operator Instructions] Our next question is coming from Allen Wells with Jefferies.

A couple for me. Just a clarification question off the back of Suhasini's question from the start. I just really want to understand the sequential change in pharma growth. It looks obviously like the sequentially pharma overall growth was weaker in Q3 versus Q2 by at least 110 basis points. And it also looks like the comp was easier as well as you say this some trialing that starts to drop out in Q3.

But in your commentary at the start, you talked about Genomics, Agroscience was weak, but kind of at the bottom Ancillary was kind of stable, maybe getting a little bit better. Discovery was stable. So I'm just trying to understand what's actually got worse in Q3 versus Q2 to drive that sequential weakness? That's my first question.

And then secondly, just maybe which could also answer some of it as well is regionally, I just wanted to understand what was going on in North America, again, sequentially, it's been a good region for you, but sequentially, it looks weaker by kind of 40 basis points in Q3 versus Q2 against an easier comp it's 100 basis points of decline in North America. Are there particular moving parts in particular pharma or is it food that's driving that North America slowdown as well? So just pharma and North America for me, please.

Your first question was cut off. So I'm not sure I understand what you said. I don't see 110 basis points going down anywhere. So I don't really understand your numbers. Do you mind rephrasing?

Yes, sorry. So if I just look at the Q2 growth, at least to my headline numbers, working what reported was 1.5-ish%, 1.4%, 1.5% in Q2. Pharma looks like 0.4% in Q3. So that looks like 100, 110 basis points of decline sequentially. And maybe that number is wrong, but it looks like pharma got sequentially weaker in Q2 versus Q3. Yet the commentary around Genomics, Agroscience, Discovery all feels like it's weak but stable, but something must have got worse in Q3 versus Q2, unless I'm misunderstanding the numbers here.

Yes. No, I was commenting on that earlier. We have, for example, one in Q3 of 2024 we had one unit of our new CDMO building in Canada that started, and that added 0.8% to the pharma in Q4 of 2024. And of course, that's a base effect for this quarter because this unit is growing, but it's not growing in the same order of magnitude, so doubling in size or whatever.

So those are the kind of effects you can have from one quarter to the next, which don't mean anything. And so that's basically this question. On the other aspects, I'm not sure, I think I answered already about the different components that we think the Agroscience and part of the Agroscience actually. Agroscience and Genomics are still down and still down meaningfully, but we think they will bottom up in the relatively near future, and we are adjusting the cost to the level where they are. While Discovery is soft, but we see the outlook more positive and looking for stabilization, but it's not significantly down.

I think that's a comment I gave. And as to the clinical part of BioPharma, we had very large studies that ended at the end of Q3 of 2024. And therefore, was still a significant amount of revenues in Q3 of 2024, which are not there in Q3 of 2025. But when we go in Q4 of 2025, the comps will, of course, not include those revenues because those studies ended in Q3 of 2024. I think that's what I said earlier.

Okay. And then just on North America, the change sequentially, what's driving the slightly slower North America growth?

I don't think there is any meaningful explanation other than the one I gave. Our BioPharma is bigger in North America. The CDMO is a North America effect that happened in Q3 that was a big plus in Q3 2024. I don't think there is anything meaningful in North America in one way or another that they could extrapolate any way in any particular way.

Frankly, I think, of course, you -- there is not a lot of data in a quarterly release and maybe it gets overanalyzed and over extrapolated over 2,000 quarters a trend of one quarter. That is, of course, possible. But our view from inside is everything is evolving as planned and we think we will achieve or exceed our objectives for this year, and we're bullish about the evolution for next year and the achievement of our 2027 objectives.

This is all the time we have for today's question-and-answer session. So we would like to turn the call back over to Dr. Gilles Martin for any closing remarks.

Right. Thank you, everybody, for your questions. Of course, we are available offline for more questions. Laurent or myself at investor conferences, we'll be holding one investors meeting in Hamburg later this week on Friday and we will also be holding an investor meeting in Lancaster. That will give you the opportunity to meet our leaders who lead our different business lines and ask more questions, they are definitely more competent to give you views about how they see the future in details in their business lines.

But overall, we have done a lot internally to improve our business, improve our efficiency. We are continuing to do that, and that makes us very bullish about how well we will do in a sector that's very resilient. That's not too affected by the economic cycles. We build very -- for our market with our extraordinary efficiencies, and that should help us in the end stages of the consolidation of this market. And we think our competitive advantage in the market can only improve, will improve and will be more and more appreciated by clients, which will lead to market share gains that are also an important part of the growth that we see going forward.

So that concludes this call. Looking forward to meeting some of you in person on Friday and in November in America. Thank you very much.

Thank you. Ladies and gentlemen, the call has now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day.

Ladies and gentlemen, welcome, and thank you for joining Eurofins Half Year 2025 Results Presentation. Please note that this call is being recorded and will be later available for replay on the Eurofins Investor Relations website. [Operator Instructions]

During this call, Eurofins management may make forward-looking statements, including, but not limited to, statements with respect to outlook and the related assumptions. Management will also discuss alternative performance measures such as organic growth and EBITDA, which are defined in the appendices of our press releases. Actual results may differ materially from objectives discussed. Risks and uncertainties that may affect Eurofins' future results include, but are not limited to, those described in the Risk Factors section of the most recent Eurofins annual report. Please also read the disclaimer on Page 2 of this presentation, subject to which this call and Q&A session are made.

I would now like to turn the conference call over to Dr. Gilles Martin, Eurofins' CEO. Please go ahead.

Hello, everybody, and thank you for joining our quarterly and half year conference call. Well, I am happy to report on a good development in this first half year of 2025. We have achieved the objectives that we're aiming at in terms of growth and in terms of margin improvement, cash flow improvement and especially on the earnings per share improvement, which is very strong in the first half of this year.

So we have a little slide show, and I'm on Page 5 currently. I'll do a short overview, and then Laurent, our CFO, will go a bit more in the numbers. But overall, we are happy of all developments in the P&L, organic growth and growth of margin. We are still in a phase where we make significant investments. We have acquired also some businesses. We have acquired a business SYNLAB. As you see in the publication of our balance sheet, we have details there for a fairly low amount, a very small percentage of revenues, but it starts from a loss-making position. And with our existing teams in Spain and synergies, we believe we can improve the margin significantly over the next 2 years. So it is, for us, a good opportunity to create value. It's a little bit dilutive short term, but it should be a good use of cash and provide a good return in our opinion.

We started last year with a very high level of net working capital at the end of 2023. Which makes show maybe a bit less growth of the free cash flow from period to period, but that's due to this one-off effect. Overall, our net working capital produced in this first half year at the end of the first half year were lower than last year. Of course, the second half year, we generate much more net working capital. We have an improvement and we generate cash. So the first half of the year was good. It's not the half of the year where we generate the most cash traditionally, but it is positive on all aspects.

One thing that was decided and maybe indicated yet is we will -- the company will acquire -- the companies under Analytical Bioventures, my private holding or private family holding. The company holding all the buildings that Eurofins use or except those that Eurofins doesn't want to use in the future, which will be exited. We thought about stretching that over 2 or 3 years, but our cash position is good. Our leverage is not high, and it will be done. We polled our investors. It was a formal vote that clearly stated that investors who really own shares at Eurofins would like this to be done and be over with. So we will do that in the second half of this year. We can afford it. It won't push our leverage too high. Also, it will save Eurofins EUR 36 million cash per year in rent. So by the end of our 2027 5-year plan, a significant part of the purchase price, almost EUR 80 million will have been paid back anyway by rent savings. So that's something that the company can afford, and we will put that behind us.

And with that and the other sites building or acquisitions that are currently ongoing and we plan to finalize by 2027, we should be done. We're building an incredibly strong and efficient laboratory infrastructure in almost all the countries where we're active, a very nice hub and spoke model that will make us very efficient, provide very good logistics, very fast service to clients and economies of scale in the large labs. And this is one of the major capital outlay that we are doing in this 5-year plan, together with the capital outlay linked to full digitalization of our processes, which is going -- moving ahead, is almost finalized in our biopharma product testing and is making good progress in our food and environmental testing businesses. Clinical is the last business line where we started those developments.

So that was a discussion on Page 6 on the real estate. So we were fairly neutral on that. The financial conditions have been disclosed in the invitation to the general assembly. So I won't go back on that. But if there are any questions, we can go there. Obviously, I was not involved in that nor did my holding vote in this decision. So the 95.6% of the positive votes are of non-family investors.

On Page 7, we are talking a bit again about the -- our site ownership. And we do plan to complete -- I already talked about that, but we do plan to complete this building of our hub and spoke network by the end of 2027. And we will continue to do some in the first half of this year. We will do a few more in the rest of this year.

And on Page 8, you have more details. We'll do a few very large sites in the Netherlands, for example, in Kansas and St. Charles. So we -- and Mississauga in Canada. So they will -- all those buildings have been ongoing. They've been drawing cash, and they should give us the benefits of more efficiencies by 2027. So we'll be pleased to have built a very strong network, very efficient company. And of course, we should get the benefits of all those investments in our efficiency, in our cash flow, in our growth by offering better service to clients, creating capacity, et cetera.

So I think from now, Laurent will give a few comments on our financial aspects or -- what I can say on the overview on Page 9. First, we disclosed our business. Of course, we provide the total results and the total result, which is on Page 9, the last block, you see a nice improvement. But we also provide the result of our core scope, our mature scope and the nonmature scope that includes start-ups and companies that we just acquired and that we are restructuring heavily like SYNLAB, for example.

And as you see, year-over-year, our mature scope continues to improve. It is already at a level of margin of 24%, which is our target margin. And the dilution from the nonmature scopes become smaller and smaller. And the SDI also are reducing. So we think this is all progressing as we plan. And we're looking forward to, by 2027, have a very small residual nonmature scope that will provide a very negligible dilution to the overall results.

On Page 10, we comment a bit on our start-ups. We're continuing to open labs. It's always an arbitrage. If we buy a company, maybe it will improve if we don't pay too much our EPS immediately, it will be immediately dilutive, but we incur a lot of goodwills. The multiples haven't gone down significantly for large profitable targets. And so we always have the option to start a lab. If we are not in one region or one part of one country and we can't buy something there that we like, we know our lab looks like. We have the blueprint for a lab. We have good conditions when buying equipment. We can deploy our IT solutions. So sometimes, we're just better off opening a lab. So we continue to do that at a more moderate pace compared to the overall size of the company than before, but this is our plan to continue over the next 2 or 3 years.

On Page 11, we discuss acquisitions. As you can see, we are frugal in our acquisition policy. We are spending less than we thought we would spend, not so much that we are going to get less revenues from those acquisitions because we are almost at the target for this year. But the revenue multiple is less, and we like that to buy a company that may be not fully at its peak in terms of performance, but we have the means from our teams, synergies, software purchasing to improve performance and create value.

This is usually our target for acquisitions. It's not size per se. It's not having a certain percentage of revenues in this geography or that geography. This is only relevant to us. It's making our businesses stronger, buying sometimes nice technology businesses that complement what we have or winning new customers. And we like to buy businesses where we can really create value by improving the results over the 2 or 3 years following the acquisition.

Laurent will now comment a bit on the specifics of the financials.

Thank you, Gilles, and good afternoon, everyone. It's my pleasure to walk you through the details of our first half financial results. On Slide 13, as you can see, we had a sustained growth of revenues at plus 5.7% and even stronger growth of our EBITDA at plus 8%. We also had reduced SDIs, leading to an adjusted EBITDA margin of 22.4%, an increase of 30 bps year-on-year. Overall, generating a significant year-on-year increase of net profit, plus 12% and of earnings per share at plus 18%.

On Slide 14, you can find our revenue bridge for the first half. We had a negative FX impact of minus 0.7%, mostly linked to the USD-euro evolution in Q2. We had a solid organic growth of 3.9% and a good contribution from our M&As, EUR 49 million in H1, representing full year revenues of EUR 210 million.

On Slide 15, you can see the breakdown of our organic growth by activity. The Life activities were growing at plus 5.7%. This remains a very strong growth, both on Food and Environment in all regions. Biopharma at plus 0.8% remains soft, and I'll share with you more details on this on the next slide. Diagnostics at plus 1.3% was impacted by the tariff cuts in France from September of '24 and the acquisition and integration of the diagnostic activities from SYNLAB in Spain. While Consumers & Technologies at plus 1.5% was mostly affected by strong comps in North America and trade tensions in Asia.

On Slide 16, you can see a semester-by-semester evolution of biopharma activities around 3 buckets. We have what we call biopharma product testing, which is the largest bucket, discovery and genomics and ancillary activities. First of all, you can see that last year, we had a decline of ancillary and discovery and genomics activities in H2, while the BPT activities growth remained very solid, but overall, leading to a negative growth of 0.9% in H2 last year.

While in H1 this year, we were able to renew with growth at plus 0.8% with a strong BPT growth, while discovery and genomics and ancillaries remain in negative territory. So overall, our main activity, BPT is growing well. It's hard to predict what it will be in H2, but at least we should be able to enjoy better comps going forward.

On Slide 17, you can find a breakdown of our margins by region. Europe incurred a slight decrease by 20 bps of margins due to the French clinical tariff cuts in September '24 and the integration of SYNLAB Spain in Q2, which remains dilutive to our margins. North America continued to increase its margins by 140 bps to 28.5%, while Rest of the World also continued to increase its margin by 140 bps to 24.8%.

On Slide 18, you can see the details about our H1 cash generation. So despite a strong improvement of net working capital intensity by 80 bps, we incurred a negative net working capital change due to the exceptional improvement of net working capital position between December '23 and December '24. Our total CapEx spend remained disciplined and flat, leading to a stable free cash flow to the firm of EUR 276 million for the period.

On Slide 19, looking at our first half CapEx spend in details, we reduced our [ NTT ] by 50 bps to 6.9% of revenues, and we allocated the CapEx at 69% to what we call operating CapEx and 31% to investments in owned sites. On Slide 20, you can see that our net working capital intensity improved significantly by 80 bps to 5.5% of revenues, thanks to a reduction of DSOs by 3 days and stable inventories at 2.1%.

And to conclude on Slide 21, we have refinanced in the first half our '25 Schuldschein and hybrid bonds. We have increased our leverage by 0.2 to 2.1 turns following the share buybacks, but remain well within our target of 1.5 to 2.5 turns. And we continue to have access to ample RCFs and enjoy well-spread maturities of our debt and hybrid instruments for the future.

Now giving back the mic to Gilles to conclude this presentation.

Thank you, Laurent. Well, to conclude, we have 23 -- a slide where we, as in the press release, reiterate our objectives for this year and 2027. What you see with Eurofins is we have a lot to do internally. We are still building the house, building the company, building the infrastructure and integrating some of the companies we acquired recently. So even if the top line has been a bit lower in the last couple of years, especially in biopharma than what we were aiming for. And of course, we cannot control what our clients spend. There's a lot we can do to improve profitability. And of course, some of the spend we have that goes in OpEx on, for example, IT, development of new solutions, reorganizations, all of those things are also finite in time lines.

So we're confident that we will be able to continue to improve our performance towards 2027. And we're also confident that there will be a pickup in biopharma. The industry, of course, is reevaluating its priority, which classes of drugs they fund, but we have very positive dialogues with our clients, which are mostly big pharma. And so we're positive that biopharma will [indiscernible] bottom in some of our activities like agroscience and genomics that have been hit by a new or different changes. It will also clean up those markets. A lot of the smaller companies in those markets will be very struggling. Some are disappearing, some are going bankrupt or being sold for very little.

So we think we should be able to emerge with a very, very strong market positions in all our verticals by next year or 2027, which we should show in our sales growth, in our pricing, of course, and our productivity. So we are quite positive that we are executing according to plan, that opportunities will become more significant.

And also all the CapEx that we're spending, when we have a building, we don't have to pay the rent anymore, and that applies to the related party buildings, but all these other buildings that we are constructing at the moment and will move in and occupy over the next 2 years, and the ones we did already, they replace rented buildings that cost cash. It may be a bit less visible in the IFRS statements because of the way the rent is being treated. But the -- we are optimistic not only improvement for the next couple of years, but also cash flow generation. This is also one reason why we pulled forward the purchase of the related party buildings because we are very confident on the cash flow future of Eurofins and cash flow trend improvement past this large investment program in buildings and in digitalization.

We have infrastructure rebuilding of our business around more resilient, more segregated environments for each of our regional business lines. It's a lot of housebuilding that we've been doing for a long time, of course. And we are slowly -- now we are halfway through this program and -- but we are also slowly nearing the end of it. And we are confident we will harvest the benefits of all those investments.

And at the same time, we don't see our competitors doing anything of that magnitude. There are -- many are owned by private equity with relatively short horizons, want to exit after 3 to 5 years. They are starting to struggle because many private equity companies overpaid for assets in our space, and they will be struggling when refinancing time are not collapsing, but they are not increasing either, which are starting to make exits very challenging, which means even less CapEx, even less investment for those businesses, even more squeeze on the teams that can lead to worse performance, client dissatisfaction.

So on that end, that's good. And our corporate competitors, they are all too diversified. So they cannot make and it doesn't make sense for them to make the type of investments we are doing to offer better service to clients. So we are overall strategically and midterm, very positive about our outlook.

But that's it for our introduction, and we can answer questions if there are some.

[Operator Instructions] Our first question is coming from James Rowland Clark with Barclays Bank.

I've got three, please. My first is on consumer, where your organic growth went from 3.5% in the first quarter to a small decline in Q2, which you've put down to the AI-related comps. Could you outline what the drag was from AI-related comps and whether there's anything else at play driving that deceleration? And how would you outline the outlook in consumer from here as a result of that?

My second is in biopharma. And you've provided a sort of a bit of a breakdown of the organic in the first half across a group of verticals there. In discovery and genomics, it's declined to a 4% decline from 2% in the second half of last year. Is it fair to say that the discovery element of that has gotten worse in terms of the outlook in the second quarter? I guess maybe can you help us with the exit rate of discovery and genomics within that 4%?

And then finally, you're facing an FX headwind this year, specifically -- particularly steep in the second half. Do you think you can deliver second half margins that are sequentially ahead of the first half? And maybe could you help us think a little bit about how the FX headwind looks for the full year? Can you deliver margin growth? Do you think consensus has a small decline?

Thank you. Well, consumers contains a number of things. It contains softline and hardlines. It contains electrical and electronic product testing, and it contains a significant material science testing and material science is on medical device, but it's also on electronic products on semiconductors, and there has been a very strong boost in the first half of 2024 due to a lot of CapEx, huge CapEx investments in AI data centers and so on, which has been a bit lumpy. So this business is always a bit going with the -- not all the cycles of semiconductors, but some of it depending on working on memory. We work a lot on tools company, providing tools for semiconductors. Maybe China had put forward at the time some purchases of a lot of equipment to manufacture semiconductors. So this can be a bit lumpy in this business. So the impact on consumer is mostly from that material science business.

And also, we think there the comps at some point will normalize at some point and that should turn positive. On discovery and genomics, we're a bit affected in the U.S. in the genomics business. We don't work a lot for academia. We just have this small genomics business, which is doing -- producing oligonucleotide for testing, DNA testing and for research and providing also custom sequencing services. The research and academic to 40% of that business depending on the companies. And in America, it is doing very badly. There has been significant cuts in the academics budget. Universities are struggling, NIH is spending less. So that genomics business has been hit this year. And it probably will continue to be hit for the next couple of quarters next year. I think it has hit bottom in the meantime, but that's a bigger impact.

Discovery is not dynamic, but it's not -- the situation for discovery hasn't changed materially, as I can remember. And the FX headwind, well, I'll let Laurent comment a little bit on this one. Of course, we don't know where anything will be, and it's not only the dollar, but there are many currencies moving. What we have, we have our costs where we have our revenues. So all of that is translational. And of course, if you reconvert our overall P&L in dollars, it will look better in dollar terms. So this is all a matter of from which perspective you're looking at it. But Laurent can comment.

Yes. I mean on H1, we know what is certain already. I mean we had an FX impact on the revenue of 0.7%. We had no FX impact on the EBITDA margin. And if we do a simple calculation, which is to simulate the rest of the year with the dollar as it is today, we would have potentially an impact on the top line of 1.7%, but still no effect on the EBITDA margin. We would have potentially a small impact on the free cash flow to the firm, but not to the level that it would be forcing us to revise our objective at this stage.

Our objectives are made at a given FX mix, and we don't know what it will be in advance. Nobody can know that, and we've been surprised more than once. So we will be -- it will be what it will be. We're not talking huge amounts when I look at the Excel sheet. But it could be that the dollar plunges 50% or the euro has big problems because Europe is not like in the best shape either. So it's -- we cannot change objectives every month depending on whatever we think the dollar might be, whether we're right or wrong. So we -- that's why we make objectives at constant currencies.

Our next question is coming from Suhasini Varanasi with Goldman Sachs.

Just a couple for me, please. Can you maybe discuss how you see the drag from SYNLAB Spain in the second half margins compared to what -- compared to the drag that you saw in first half? How should we think about potential improvement? And second question is on the medium-term target, where you've reiterated your guide for 6.5% organic growth by 2027. It kind of implies a pretty strong acceleration in '26 and '27, given the slower growth that you saw this year and last year. Can you maybe help us understand what gives you the confidence that, that will drive faster growth? I think you had mentioned larger contract wins in maybe biopharma, ancillary services, ancillary activities. Is there anything else that we should be keeping in mind?

Thank you very much. We had only 1 quarter of SYNLAB in the first half. And we don't think SYNLAB will very significant reorganization measures. And so I can let Laurent comment on it specifically because he has looked at it more.

I mean the impact on the first quarter of integration on our result for H1 was about 20 bps of dilution of our margins. Going forward and taking into account the restructuring that we need to perform, we will have an impact in the area of 60 bps for the full year.

And of course, we -- all those costs and reorganization, they will have a positive impact once we have removed the costs that are due to duplication of labs of sampling points, blood collection points, et cetera. On the medium term, we have a number of businesses right now that are not in positive territory. So if you remove that, at some point, they will at least hit bottom, flatten out and start growing. And if you remove the minuses, that has a very significant positive impact. We've had a very significant cut of revenue in clinical in France that was a big one-off this year that has affected the fourth quarter of last year and will affect the first 3 quarters of this year.

As I already commented, we do feel biopharma will pick up and actually parts of our biopharma is very healthy. And then we have all the benefits we expect from the end of all our reorganizations and IT deployments. When we deploy new IT systems, it is extremely disruptive for the business. Things are not working as expected. You have outages, you have systems that -- you have users that are not so used with a new system. We -- our service to clients is usually degraded every time we deploy a new system for 1 year or 6 months to 1 year, we have a decrease of productivity and quality of service to clients. But once this is all bedded in, we get significant improvement of service to clients. Also, our competitive position is going to improve significantly once we're done. So we think there are a number of reasons why growth could continue to accelerate.

Now of course, there is an element that is unknown is what inflation is. The 6.5% includes some element of inflation increase compared to when we had a 5% target objective. 1% inflation, 1%, 2% inflation. So 6.5% assumes more like a 3% inflation or something like that. But it's a secular target over a number of years.

So when we get back to normalcy, when normalcy will be with all the elements in the world and global aspect is hard to know. What is clear is we do things that are recurring and stable. Whether things are produced in one part of the world or another part of the world, they have to be tested. There might be some transitional issues. People are waiting. There's a lot of waiting at the moment in many areas. People are waiting to see what the situation will be before they invest, before they decide anything. But this at some point will normalize, and we're confident in the growth potential of our sectors.

And yes, there are -- we had some real one-offs at the back end of last year that ended that will normalize in terms of comps in the [indiscernible].

Our next question is coming from Carl Raynsford with Berenberg.

I have three questions, if I may. The first is just going through the growth commentary. There's no mention of diagnostics in the U.S. or rest of world from what I could tell. You call out diagnostics is broadly flat in Europe, but I calculate the organic growth to be around 2.5% in Q2 and you adjust for the working days there. So that implies U.S. and Rest of World at a high single-digit rate. So I just wanted to know if that's a fair way to be thinking about it and what the drivers are really through the first half.

And the second question is just really a follow-up on consumer. Have you seen any sort of material impact on the softline hardline volumes because of tariff uncertainty? And the last question, I know you're very confident on cash flow, but would you think about another share buyback if market valuation was soft, but it meant that leverage wouldn't hit the sort of 1.5x by 2027. I'm just wondering what the main priority is in terms of cash really there.

Thank you. Well, I'm not sure I fully understood your calculation on diagnostics, but Laurent can answer. I think he understood your question.

Yes. Thank you. I mean, Gilles. I mean, our growth, I mean, in North America for what we call diagnostics was closer to about 3%, 4% organic growth in the first half. I think -- because I saw your e-mail to Bernard in the meantime, I think you had a bit of weight between the regions on that segment, not totally correct, but Bernard will follow up with you.

Then on consumer, we don't see so much of the tariff impact on softlines and hardline. It's a small business for us. So it can depend on 1 client, 2 clients. We are winning share. We are winning new nominations by clients being a small player, but a small global players, one of the few global players. We should have a nice runway to grow our consumer because the clients want alternatives to the semi oligopoly that exist.

And on share buyback, we will be -- we try to always make the best decisions for our shareholders. And so I cannot say what our decision will be in 6 months or 12 months or 3 months. We try to -- we know the value of our assets. Eurofins has different verticals as a number of assets, and we know what they are worth, all those assets. So we see that we are still today after our share, rerated a little bit very much discounted to -- compared to the market and to private transactions. So we have a very significant discount to peers in the market in EBITDA multiple and even bigger discount to value when we look at the value of our different assets on private markets for full transactions. So we are very safe when we do buybacks at the valuations that we have because we know if we ever need cash, we can always sell an asset and do even more buybacks.

Now when the gap will close, we will see. The markets are volatile, and we've had -- we've been hit by the number of factors since the war in Ukraine and the softness in biopharma. So we will consider buybacks. Indeed. This is something that's an option, but we also don't want to exceed our 2.5x leverage.

Also, as I mentioned earlier, we think we will come in a phase where our cash flow will increase significantly and especially in 2027. Once we're done with all this CapEx and there is much less cash flowing out. We have very significant levels of EBITDA. It's not that we don't generate cash, but we invest that cash to build the house, to build the business. But at some point, the house is built, and we use much less cash to do that. So it's a bit -- it's an answer. I cannot give you an answer because it depends on a number of parameters at any given time or share price or acquisition options or opportunities, different opportunities. But we are a steward of our shareholders' money, and we try to make the right decisions. And if you look at the buybacks we did in the last 12 months, we could buy back our shares, I think, on average, around EUR 50, and we think it's really good value. It's a very good investment for our shareholders.

Another factor, if I may add, because people look at different numbers. They look at EBITDA multiple, EBIT multiple and EPS multiples. It's all very interesting. One thing, if you compare Eurofins depreciation schedules with other listed companies, we also depreciate very fast. We are conservative in our accounting. And if we were depreciating at the same speed than others, our EBIT would be even higher. But we think EBITDA is a better proxy. That's the cash we generate. And we know why we do CapEx. We know what our maintenance CapEx is, which is fairly low at about 2%. So that's why we know when we buy businesses, that's how they are valued. And so if you look at our EBITDA multiple, we are still trading probably at 30% discount to the market, which we don't really see any long-term justification for.

Our next question is coming from Remi Grenu with Morgan Stanley.

Just two remaining on my side. On the M&A, I think you referred to the fact that it was quite an active environment in the first half of the year, almost doing a little bit more than EUR 200 million of revenues acquired there. So should we assume a quiet H2 or you're still very much willing to engage at the same pace and get the opportunities you're seeing there? So that would be the first one.

And then the second one on the central lab activity and the comments you were making on some of the programs already contracted and likely to start in the second half of this year or 2026. If you can elaborate a little bit on that and the discussions with customers and what kind of visibility you've got and what it means for the recovery of that part of the business?

We don't provide guidances. We provide -- we share our objectives, that's the objective that our teams have, both in terms of organic growth, profits, et cetera. And the reality is whatever markets, clients and so on decide. In terms of acquisitions, M&A, this is even more true. We don't know what we will buy. We know that most likely adding EUR 250 million revenue each year -- revenues each year from acquisition is achievable while being very disciplined on valuation and acquiring assets that can create value.

Maybe we'll do a bit more than EUR 250 million this year. We have -- our teams are active. We look at many small bolt-ons that are valued at levels where we think we can generate very good return. We have a hurdle rate of 16% [indiscernible] in year 3, when we bought a company. And so that's a high bar. So we pass on many assets, but we look also at many assets. As I mentioned, there hasn't been a collapse in valuation of the larger, more profitable assets.

On the other hand, there are also very few transactions and many transactions get aborted. People think they're going to get a deal and then the buyers are in then not closing or not signing. And so it's a bit of a wait and see. A lot of PE have trouble exiting their investments. Some of them will have to do either bankruptcies or the lenders will take over or they'll be negotiating with the lenders. There are some of those things happening at the moment. And we're quite happy that nothing happens because, frankly, now we are focusing on putting the house in order. That's not the moment where we want to do a lot of M&A. And -- but by 2027, we'll be very efficient, lean and mean, and we'll have better IT tools to deploy in acquired companies to extract more value.

So that's a question, and it's an answer on M&A. And central labs, yes, we have good discussions with clients on that. Of course, when exactly their programs start is in central lab, if you look at Covance, Covance now is part of LabCorp, it's very hard to time exactly when studies start. But so that's what we wrote was is what we believe at the moment for some of the larger programs.

Our next question is coming from Neil Tyler with Rothschild & Company.

Hopefully, you can hear me -- it's a bit cracking my end. I wanted to ask a question sort of about the medium-term margin objective, Gilles and Laurent. If you were to sort of bucket the components of margin improvement that you envisaged back in 2022 that would get you to the 24%. And I'm thinking things of, I suppose, cost savings, operating leverage from volume growth, efficiency gains from the digital investments and any other you want to add to that list.

Can you perhaps talk a little bit around those, how they have materialized so far compared to what you expected? I suspect operating leverage has been less, but some of the others are probably on track. And what's left in the locker in terms of the contribution from each, if -- hopefully, that question makes sense.

Yes. I think we still have a long way to go in Europe, especially. You see in the U.S., the benefit of putting your house in order. We have put the right footprint in place in the U.S., hub and spoke. We have the right locations. We can still add more. We don't cover the full territory of the United States, but we cover a large part of the United States. It's easier to have the same software, the same processes, et cetera, and get the scale.

In Europe, we're still doing that. And Europe is burdened by very significant IT investment and still some site rationalization. We still also have a number of situations where our local leader may not be doing a very good job, and we still carry some reorganization, loss-making companies. So we do believe this, the streamlining of our network in Europe and the finalization of deployment of more standard and more modern IT solution will go a long way to bring the margins in Europe much closer to what they are in America. Americas still have potential to improve, but it is already at a very good level.

So that's -- and then on top of that, of course, once this is all done, you're going to have operating leverage, you're going to have the benefits of more organic growth. We are still not great at selling. So this is also we focus more on operational excellence because we provide quality, we have our operations and the quality of the results we provide is the most important. The timeliness of the results we provide is the most important. So that's why we put so much CapEx in our labs, in our IT, in our digital. But there's a big improvement potential in how we go to market, how we approach clients, how we market, how we win share. But we first want to have excellent performance everywhere before we unleash even more commercial activities to win and convince new clients.

And then you still have the significant business that is not outsourced by clients. And one thing that could happen is if our clients get squeezed and the squeeze continue, they might consider more outsourcing. There's still a significant amount of work that is in-house at our clients that should be economically and for many other reasons, outsourced. So that's some of the thoughts we have about future margin improvements. But we are already very close. If we just got our not mature scope in order, and that will happen over time, we are already where we want to be in terms of margin.

And just perhaps by way of follow-up and picking up on some of those comments about the commercial approach. You've mentioned in the past year or 2, the increased emphasis on pricing and how obviously, a couple of years ago, the inflation created a bit of a squeeze. Are you -- I don't want to use the word satisfied, but are you sort of happier now that the pricing approach is more sort of embedded in the commercial approach to customers than it was back then? And is there sort of further room to grow there?

Yes, we have made progress. It's not perfect, and we also had very long contracts in some cases, but it is much more accepted by clients that we raise prices every year and potentially midyear with indexing and so on. Not where we want to be, and we certainly do not push our pricing at the moment. As I said, our philosophy is, first, get our house in order, provide the best performance possible, finalize the digitalization, which might mean for some adaptation to new systems and so on. That's not the time where you maximize pricing.

And price has to basically be the recognition of savings for our clients, efficiency for our clients and the fact that maybe if we interconnect our systems better with their systems, they're going to save a lot of money on their side. And maybe we can in-source some of their labs and make them save a lot of money. So it's all a complex thing, but we are getting much more mature at that.

One of our goals by 2027 is also to be able to exactly measure how much price we gain every year, which is imminently complex when you sell projects that are not comparable from year-to-year. But if you tackle the matter directly from the quotation time, there is a way to do it that we are piloting at the moment, also in our project-based businesses. So there are a very large number of initiatives that are costly and disruptive that we are carrying out at the moment to improve our measurement of pricing and profitability by client, by contract, by project, et cetera.

So we have -- we're not great, but we are better. I think also there, we're going to achieve things that no other player will achieve, especially at that scale, but it takes a long time.

Our next question is coming from Arthur Truslove with Citibank.

Three for me, if I may. So first one, just on the biopharma situation. Thanks very much for providing the situation around the comps. I guess, is it reasonable to think based on what you provided that if things sort of broadly stay as they are in the second half, biopharma could grow 3% to 4%. I guess, is that plausible? And does that -- do you see any kind of market recovery in that biopharma segment? And if not, when do you think it will happen?

Second question, slightly technical. If I go to your definition of organic growth in it's #13 in your release, there's an additional sentence, which says all revenues from discontinued activities/disposals in both the previous financial year and year why are excluded from the calculation. Are you able to just confirm that there's been no change to the organic growth calculation?

And then final question, there was some commentary that maybe there had been some sort of cyberattack on your business in the Netherlands. I just wondered, is that situation completely resolved? Were there any financial implications? Just wondered if you could comment on that, please.

Thank you. We're not in the business of making predictions business by business for the second half. We do think we'll have a better base, better comps for the ancillary activities and the part of biopharma and agroscience that are the most challenged. Whether it's going to be 2%, 3%, 4%, I don't know. If you look at the other -- I think you could look at other peers that are in biopharma that are even more like Thermo Fisher just published today, and they seem to have also a little bit of a pickup. But the -- how fast the pickup will be and the impact. The core of our biopharma is doing well, is growing double digit, not double digit, but above mid-single digits. It's mostly ancillary activities that are a bit lower.

And first, the comps will help. And then if we, in clinical gain new large contracts, this will be helpful, too. No, we have not changed anything in calculation of organic growth and discontinued is completely marginal. It's -- we haven't discontinued anything huge recently. And yes, unfortunately, sometimes businesses that we acquire, recently acquired businesses until they have been put to our standards can be victims, full victim of some cyberattacks, but we haven't seen anything that could be material at this stage.

Our next question is coming from Allen Wells with Jefferies.

Three for me, please, if that's okay. Firstly, just starting with a kind of CapEx investment question. I noted in the slides, you flagged -- you added 30,000 square meters of lab space in the first half. I think the guidance in that slide suggests there's 157 to add out through to 2026. So if you average that out, it's about 50-plus thousand square feet every half year. So it's quite a meaningful step-up in lab investment over the next 3 half years. So I just wonder what we need to read into that in terms of the overall outlook for CapEx. Just mindful that the CapEx number in the first half is down year-on-year. So is that CapEx investment going to need to ramp a little bit to hit that 157,000 square feet target? That's the first question.

Secondly, just to kind of follow up on a question, I think Arthur flagged just around that changing definition of organic growth, which I think was actually changed at the full year where you exclude the discontinued disposals. It looks like that was about a 30 basis point benefit to organic growth in the first half. Could you maybe just talk about what the rationale for adding that slight changing definition now? And is there any reason we need to think about like the appetite for discontinuing or disposing lower growth assets moving forward?

And then finally, just a clarification question just on SYNLAB. Laurent, I think you said it was a 60 basis point dilution to margin in the first half. My understanding from an accounting perspective that SYNLAB goes into the group at 0% margin at breakeven and that the losses are accounted for below the line. So EUR 140-ish million of revenues at 0%, it's about a 40 basis point dilution or 30 bps for the 9 months for this year. Am I misunderstanding that? I just want to try to understand what the dilution is and how we should think about the shape of that headwind through the second half as well.

Thank you. I don't think I follow all your calculations, and I think Laurent already answered for SYNLAB, but I will give the answer back to Laurent on that. On the buildings, this is what is planned. When it gets completed and the timing that could run over to 2027. So it's always a little bit difficult to find the time line of buildings. And if you look at previous publication, we -- on that one, we always have a lot more planned than what we actually can deliver in the time line.

So I'm not sure it's going to be a material pickup of how many we add per half year. It could be a little bit. That's why we have the budget of EUR 200 million. We are until now quite EUR 200 million per annum spend on additional buildings. But I don't see something super material -- now on your 2 -- I don't understand the question on organic growth because nothing has changed at all. But Laurent, I'll let Laurent answer that and...

Yes. So we didn't change any calculation or definition on organic growth. I mean the small change in the wording is just some clarity required by the auditors, but there is no change to the calculation. And we can follow up offline if you want to see what is making this impact that you just mentioned.

On SYNLAB, what I said is that on the H1, we only consolidated 1 quarter and the dilution to the first half results of the group was about 20 bps. On the full year, we foresee about 60 bps. It's not going to go below the line because most of the dilution is coming from restructuring cost, severance cost or basically a poor performance, which goes above the line. And this is what we have. So this is indeed 60 bps for the full year. And you're right on one thing. This is only 9 months, 3 quarters because the first quarter, it didn't belong to us.

We will take our final question today from Delphine Le Louet with Bernstein.

I got some questions for you and probably more into the year -- into the midterm and obviously, well done on the margin acceleration. So when you think about the shareholder return and the breakup and the policy we should have in mind between the buybacks, the dividend and the growth, what should be the priority tomorrow versus what has been the priority in '25 or probably in 2024 also?

The second question would deal with the CapEx and how we should think about the CapEx, 2/3 roughly is dedicated to the OpEx and 1/3 to the footprint expansion. And so we are coming to an end in Europe. What's this going to look like in 2 years? Should we think about this replication in other regions? Is it about thinking? How should we think about that envelope?

And finally, the question regarding the biopharma and because we had a very interesting day yesterday on the CRO space. It's taking a bit of time to see, and we do understand it's not easy to get long contract and big contract with the pharma business. But how should we think about going into new agencies and switch a bit out from the genomic business to probably more regular business when it comes to the biopharma?

Thank you very much. Well, in terms of shareholder return and how we allocate cash, we are very simple on that, and we haven't invented anything. I think a long time ago, Warren Buffett said good businesses are businesses where you can deploy a large amount of capital at high rates of return. And so that's basically our driving thing. If we see areas where we can deploy a lot of capital at good rates of return, we think a 16% hurdle rate is good. Organically, we're more at 30%, 40% return on the organic capital we deploy M&A, it's hard to do much more than 16% because multiples are high, especially only within 3 years.

And so this will drive our decisions regarding dividends, buyback, et cetera, is what are the opportunities for growth -- if there are enough opportunities to deploy a lot of capital, we will favor internal investment, organic or M&A. If we think the returns on -- especially M&A are not good, we might use our cash more to return it to investors, whether it's dividend or buyback.

And on CapEx, yes, indeed, when we are done with adding those buildings, we think we'll be done not only in Europe. And by the end of '27, this is the program for the business as we see it today. We might still do a little bit incrementally when we do M&A and they have sites, we will also try to put them into own sites over time, at least for the big labs, but it won't be the same order of magnitude that we plan now for EUR 200 million per year.

And biopharma, genomics is a small business. It's -- I don't know, EUR 60 million, EUR 80 million, and they have a number of verticals. The academic part is a very small part. And indeed, we are moving out of the academic part. We're keeping what we have, but we don't expand that very much. The bulk of our business in genomics is pivoting more towards diagnostics, so providing and also sequencing, providing the probes and the kits for all those diagnostic applications and sequencing applications. Also, there's a need for biopharma for mRNA and other things.

So we have a lot of -- a number of applications for end markets, for example, for environmental, for food testing. There are a number of adjacencies where we are already active. But indeed, our genomics, which is small, is going more industrial. And biopharma, we are not really like other CROs in the Phase III and the large clinical trials. We have a small central lab. It's also sub EUR 100 million. And this is a bit more volatile, that thing because of the size of the studies, especially if you're small. But the bulk of our biopharma is very recurring. It's biopharma product testing, and we see that continuing to grow well. So I hope I answered your questions.

This is all the time we have for today's question-and-answer session. I would now like to turn the conference back over to Dr. Gilles Martin for closing remarks.

Thank you very much. Thank you, everyone, for your questions, and I hope we could answer adequately. You are welcome to follow up with Bernard or with Laurent, if you have some calculation questions. But nothing is changing in the way we produce our numbers, we account. We try to be very conservative on all aspects. And over the years, we've added more disclosures. We give you information by area of activity in addition to full segment remains the biggest difference. But we are open to any suggestions you may have.

And with the sale of the real estate to the company, one thing that was a nuance point for some of you is going to go away at the end of this year. So we think we will deliver a very strong company at the end of this year on all aspects, including we've added a Board member -- any aspect that was considered nuisance value by some observers. And so we're quite happy about what we are doing, what -- how things are going, considering the world is still a little bit shaky and uncertain in many areas.

We are happy to be in sectors that are not really affected by tariffs and all those things that are very resilient also in case there would be a recession. And we're very optimistic that biopharma will pick up. And as you see, the core of it in our business is already doing very well. So we're continuing to build the house, and we're getting close to the end of the program. 2026 will be the year before last. And in '26, we should start to see some of all those benefits and even more importantly, in 2027.

So I will meet some of you tomorrow in London. I'm looking forward to that. And for those of you that I won't meet, I wish you a nice summer break, and I'm looking forward to talk to you in the fall when we will come back. Thank you very much.

Thank you. Ladies and gentlemen, the call has now concluded, and you may disconnect your telephone lines. We thank you for joining, and hope you have a pleasant day.