SYNLAB AG: SYNLAB reports trading update for FY 2022 and revises FY 2023 guidance from lower COVID-19 testing

• FY 2022 revenue anticipated to be around €3.25 billion, above guided amount of €3.2 billion
• Expected strong underlying organic growth of around 6% (above 4% excluding the South-East London hospital outsourcing contract)
• FY 2022 adjusted EBITDA margin anticipated to be around 23%, slightly below FY 2022 guidance, due to Q4 2022 one-off costs primarily related to COVID-19 business
• COVID-19 testing revenue at around €800 million with gradual reductions in price and volume in Q4 2022
• FY 2023 guidance updated: revenue expected to be around €2.7 billion and adjusted EBITDA margin expected between 16-18% from lower COVID-19 testing revenue and lower M&A contribution

SYNLAB AG (SYNLAB, FSE: SYAB), the leader in medical diagnostic services and specialty testing in Europe, today announced a trading update for FY 2022. The Group reports a robust FY 2022 performance driven by continued strong underlying organic growth (excluding COVID-19 testing revenue) of around 6% (above 4% excluding the South-East London hospital outsourcing contract (the SEL contract)). Revenue is expected to be around €3.25 billion, above the previously guided amount of €3.2 billion (FY 2021: €3.76 billion) with an adjusted EBITDA margin expected to be around 23% (FY 2021: 32.1%).

SYNLAB also updated its FY 2023 guidance with a revenue target around €2.7 billion and an adjusted EBITDA margin within a range of 16-18% from lower COVID-19 testing revenue and lower M&A contribution.

“In a challenging environment, SYNLAB expects to post robust results based on its resilient business model. The continued growth in our core business put us in a strong position to reach revenues above the previously guided €3.2 billion in 2022. In January 2023 we are experiencing a reduced level of COVID-19 testing volume. In addition, COVID-19 PCR prices have already or are expected to drop in some of our key markets. This leads us to update our FY 2023 guidance, despite continued strong underlying business and our focus to recover our pre-pandemic productivity” said Mathieu Floreani, CEO of SYNLAB Group.

Financial performance

Underlying growth remains strong at around 6%

FY 2022 estimated revenue is anticipated to be around €3.25 billion (FY 2021: €3.76 billion).

FY 2022 underlying organic growth (excluding COVID-19 testing revenue) is expected to remain strong at around 6%. Excluding the SEL contract, FY 2022 underlying organic growth is anticipated to remain robust at 4%, which continues to be above the longer-term guidance of 3%. Q4 2022 underlying organic growth was above 6% with an accelerating price increase of 1.4% (compared to 1% in Q3 2022).

FY 2022 COVID-19 testing revenue is expected to be around €800 million (FY 2021: €1.6 billion). For Q4 2022, SYNLAB expects to report a COVID-19 testing revenue of around €70 million (Q3 2022: €105 million). The average COVID-19 PCR price in Q4 2022 was around €36 per test compared with €42 per test in Q3 2022.

Margin impacted by Q4 2022 one-off costs primarily from COVID-19 business

FY 2022 adjusted EBITDA margin is anticipated to be around 23%. Reduction of volumes and prices from COVID-19 testing were the main driver of margin reduction. The margin has also been impacted by the strong inflationary environment and by Q4 2022 one-off costs primarily from the COVID-19 business. In part, these impacts are offset by the accelerated price increases and by efficiencies generated from the SALIX programme, that delivered €25 million savings in FY 2022. The SEL contract continued to have a dilutive impact on Group margin, of around 80 basis points.

Outlook for FY 2023

In January 2023, SYNLAB is experiencing a reduced level of COVID-19 testing volume and dropping COVID-19 PCR prices in some of its key markets. This leads SYNLAB to update its FY 2023 guidance despite anticipated continued growing underlying business and the focus to recover pre-pandemic productivity.

SYNLAB now expects revenues to be around €2.7 billion (previously around €3.0 billion).

COVID-19 testing revenue, as part of total revenue, is now anticipated to be around €50 million in 2023 (previous expectation: around €250 million). At this moment, SYNLAB does not anticipate a recovery of COVID-19 testing revenue in the short-term, following the January trend on volume and price. For example, prices related to COVID-19 PCRs dropped by 19% from €37 to €30 in France in January 2023.

As a leader in medical excellence, SYNLAB will continue to monitor potential new SARS-CoV-2 variant developments in the course of 2023 and maintain its capability to be able to quickly respond to respective needs in COVID-19 testing.

Furthermore, SYNLAB expects the adjusted EBITDA margin to be in a range of 16-18% (previous guidance: at 18-20%). The adjusted EBITDA margin ranges-in the following factors: 1) the reduction of the COVID-19 testing volume and price, 2) the dilutive impact on the margin of setting up Direct to Consumer (D2C) activities, 3) general inflation risks, 4) a doubling of benefits from the SALIX programme in 2023 compared to prior years from productivity initiatives, and 5) lower M&A contribution.

The Group will indeed implement a temporary reduction of M&A spent in 2023 to around €100 million (as compared to the previous expectation of €200 million) to fully focus the business on reaching the same productivity level as before the pandemic outbreak.

SYNLAB continues to expect an underlying organic growth (excluding COVID-19 testing) at ~4%, driven by a strong development of volumes and accelerated price increases within the core business.

Conference call

SYNLAB Management will host a conference call for investors and analysts on Tuesday, 7 February 2023 at 3:00 pm CET (9.00 am ET). Please register at least 10 minutes before the start of the event via the registration link which will be available on SYNLAB’s website (https://ag.synlab.com/conference-call).

For more information:

About SYNLAB

• SYNLAB Group is the leader in medical diagnostic services and specialty testing in Europe. The Group offers a full range of innovative and reliable medical diagnostics to patients, practising doctors, hospitals and clinics, governments and corporates.
• Providing the leading level of service within the industry, SYNLAB is the partner of choice for routine and specialty diagnostics in human and veterinary medicine. The Group continuously innovates medical diagnostic services for the benefit of patients and customers.
• SYNLAB operates in 36 countries across four continents and holds leading positions in most markets, regularly reinforcing the strength of its network through a proven acquisition strategy.  More than 30,000 employees, including over 2,000 medical experts, contribute every day to the Group’s worldwide success.
• SYNLAB performed around 600 million laboratory tests and achieved revenues of €3.76 billion in 2021.
• More information can be found on www.synlab.com