Dear ladies and gentlemen, welcome to the SYNLAB Q2 and half year 2022 financial results call. At our customer's request, this conference will be recorded. If any participant has difficulty hearing the conference, please press star key followed by zero on your telephone for operator assistance. Today's call will be hosted by Mathieu Floreani, CEO of SYNLAB, and Sami Badarani, CFO of SYNLAB. After the presentation, there will be an opportunity to ask questions. May I now hand you over to Mathieu Floreani, who will lead you through this conference. Please go ahead, sir. Thank you. Good morning and good afternoon to all, and welcome to our call. We will present today our Q2 and H1 2022 results and this, of course, together with Sami Badarani. It has only been a few weeks since we hosted our CMD in Barcelona, where we gave you a three hours plus presentation. We'll try to keep it short in our presentation today. I'm very pleased to report another quarter showing the strength and resilience of our business model. I'm also pleased to be able to raise one more time our guidance for 2022. Let's start with our financial highlight on page five. We report strong business growth in the base business, plus 7.2% in H1 2022, and plus 4% in Q2 2022. COVID-19 testing revenue is declining as expected, but remains higher than our initial forecast at EUR 680 million for H1 only. Our EBITDA margin stands at 28.5%, declining sequentially, but remaining strong. We further reduced our adjusted net debt, and we raised again our guidance, now expecting revenue to be around EUR 3.2 billion for a 24%-25% margin. Moving to page six and our operational quadrant. There, the summary is good execution across the board. I start with the first pillar on organic growth. Here, despite some periodic softness in our underlying volume, which is correlated with COVID-19 waves, we saw growth firming up over H1 2022, and that's also supported by positive price development in the second quarter in our south and north and east segments. Our retail initiative is progressing. 46 new BCPs opened in Q2. Our D2C initiative is also making good progress. We are building our operations under the SYNLAB - Health for You umbrella. Finally, in specialties, I'm happy to report new contract wins in Spain and Germany. They range between EUR 300K for the smallest annually to more than EUR 2 million for the biggest. The second pillar, operational excellence, also good progress, with Alex delivering EUR 7 million of savings in Q2. The renewal of our core lab equipment is now completed, which means that we operate the most modern infrastructure across Europe and also that we are very well equipped for the coming years. Meanwhile, we are continuously adapting our COVID-19 testing capacity, keeping in mind that we need enough capacity to be able to respond to future COVID-19 waves. M&A, our third pillar. 14 acquisitions completed year to date in 7 countries for about EUR 90 million EV. They represent together around EUR 50 million in revenue, and we have the pipeline to successfully close EUR 200 million of EV by year-end and expect to really get there. Finally, on the fourth pillar of employee engagement, many good stories as usual. I will here focus on the first one, where we today have held our very own first medical congress, and that's a place to share best practices and strengthen our community of medical leadership, where this first edition gathered about 80 participants from 23 countries around four medical topics, genetics, antimicrobial stewardship, oncology, and microbiome. Now moving to page 7, our usual upgrade on COVID-19 testing. Already commented on it in June. Daily volumes are now around 55,000 PCRs, and price is broadly stable in Q2 2022 at around EUR 42 per PCR test. We expect the prices to decrease with the cuts announced in France and Germany, but we remain also comfortably about our long-term business case. I now hand over to Sami for the financial section of the presentation. Thank you, Mathieu. Good afternoon, everyone. I'm very pleased to walk you through the Q2 and H1 2022 financial performance of the SYNLAB Group. These are SYNLAB again consolidated financials reviewed by our auditors. Let's start with the revenue on page nine. The Q2 2022 reported revenue stands at EUR 790 million. Roughly same revenue on a pro forma basis, adding the additional revenue as if 2022 acquisition had been consolidated on January 1, 2022. 20% reduction in revenue year-over-year, 263 million of revenue reduction from COVID-19 testing, 77 million from price, and 186 million from volume drop. Q2 2022 COVID-19 organic revenue stands at EUR 164 million. 3.6 million PCR tests performed, with a price per test of EUR 42 per test. Prices will continue to reduce gradually, as Mathieu mentioned. Prices and volume are higher than what we have forecasted for Q2. The underlying business, the base business, EUR 24 million of underlying organic growth, 4% organic growth. Q2 2022 prices are up 1.4%, reflecting the positive effect of price indexations in several countries from the north and east and south segments. The Q2 2022 volume is up 2.6% only. Volume growth is lower than usual, reflecting some continued softness in hospital business, some residual impact of the Omicron wave on non-COVID-19 testing activities, and some challenging comparison, mainly in Germany and Italy. Mathieu will provide more color in the business review of Q2 by segment. We have positive effects impact in Q2 with the strength of the pound, the Swiss franc, and the Mexican peso, more than offsetting the weakening of a few other emerging currencies. Overall, EUR 8 million from the ten acquisitions completed in H1 2022. Moving now to page 10 for the H1 revenue performance. The reported revenue stands at EUR 1,851 million, rounded 4% revenue variance negative year-over-year. EUR 247 million of revenue reduction from COVID-19 testing, 206 from price, and 41 from volume drop. H1 2022 COVID organic revenue stands at EUR 614 million. This is the organic piece. 13.8 million PCR tests performed with a price of EUR 42 per test. On the underlying basis, EUR 81 million underlying organic growth, 7.2% organic growth, 3.1% excluding Q1 SEL, Southeast London contract. That has now been through a cycle of 12 months. Same positive impact from FX and 2021 acquisitions, EUR 17 million and EUR 18 million respectively. Page 11, profitability. The H1 2022 reported adjusted EBITDA stands at EUR 528 million, EUR 160 million organic EBITDA drop, around EUR 26 million price drop, mostly from COVID-19, but positive price in underlying business in the first half. EUR 23 million negative inflation, 2.5% overall on the base business. We have limited incremental inflation so far on the OPEX at 2.3%. We have strong inflation on OPEX at 4.3%, mostly energy and fuel at double digit. We have limited inflation on MatEx at 1.4%, mostly consumables and external labor, as our reagent costs are for the most part fixed with multi-year contracts. The rest of business is at EUR 66 million positive. It includes, on the negative side, the volume drop on COVID-19 and the cost of maintaining sufficient COVID-19 capacity, more than offset by positive organic volume growth. COVID-19 material expense reduction, maintaining a flat COVID-19 gross margin and the SALEX benefit of EUR 12 million. We have more and more difficulty to allocate costs between COVID-19 and base business. For example, our resources that we're keeping to maintain capacity are not staying idle where there is lower COVID activity, but they are supporting the base business. The H1 EBITDA margin of the group stands at 28.5%, down six points from H1 2021, mostly from COVID-19 price drop. The H1 margin is stable excluding the price decline. The Q2 2022 EBITDA margin stands at 21.7%. Moving now to the net profit. The bridge from EBITDA to net profit and from reported to adjusted financials. EBITDA first, we have nominal adjustment of 4.1%, acquisition-related costs including PMI costs. The adjusted operating profit is at EUR 410.8 million. It's down EUR 158 million from H1 2021. Again, COVID-19 price reductions. The adjusted operating profit excludes EUR 173 million of goodwill impairment in Germany. In our 2021 annual report, we indicated a sensitivity analysis where goodwill impairment was possible if WACC or business projected performance would evolve adversely. With the current macroeconomic environment, WACC increase and inflationary pressure, we adjusted our goodwill in Germany. This is obviously a non-cash event. The net finance result is quasi null, thanks to net other financial gain, mainly financial instruments revaluation. Interest expense s are at EUR 15 million in H1, 1.9% average interest rate on our financial debt. The tax line is increasing based on increased volume with a lower adjusted effective tax rate at 22% with the activation of carry forward losses, mainly in Germany. The H1 2022 adjusted net profit stands at EUR 320 million, down EUR 51 million year-over-year. Adjusted EPS is at EUR 1.44 per share. It would translate already to EUR 0.29 per share of dividend, assuming the guidance of 20% adjusted net profit. The goodwill impairment does not impact the adjusted net debt, net profit, nor the dividend calculation. Page 13, cash flow generation. The strong EBITDA translate into strong cash flow generation. Receivables, DSO is at 60 days, down 2 days compared to year-end. Normalization of the working capital is ongoing post Omicron peak wave in Q1 2022. We have a strong tax payment in H1 2022. The CapEx is increasing EUR 46 million, year-over-year as planned, including leases. Again, IT, retail expansion are the biggest contributors. EUR 244 million, rounded number of unlevered free cash flow, 46% conversion of EBITDA. We have a strong balance sheet on page 14 with the view expressed with capital employed and capital resources. The overall capital employed is stable, post goodwill impairment and the impact of the ten acquisitions completed and consolidated in H1 2022. The net debt of the group is now at EUR 1,535 million, down EUR 67 million versus December 2021. The group has a strong balance sheet with EUR 500 million cash on hand and EUR 500 million of undrawn RCF. The ROCE is at rounded 17% at the end of Q2 2022. Looking at the net debt bridge on the following page, the adjusted net debt is at EUR 1.6 billion at the end of June. The bridge includes for the first time, the dividends paid to SYNLAB AG shareholders for EUR 73 million, as well as EUR 11.7 million for cost of the share buyback program to cover for the LTI plans and the employee purchase plan matching shares. We have spent EUR 73 million for H1 and residual payment for prior M&A acquisitions. The LTM pro forma EBITDA stands now at EUR 1,089 million, and the leverage ratio, debt to EBITDA, stands at 1.48x, up 13 basis points compared to year-end 2021. With the reduction of COVID-19 contribution, it will mechanically continue to increase to slightly above 2x by year-end. This concludes the financial section of the presentation, and I will now hand it back to Mathieu for the business review. Thank you, Sami. Very strong financial position indeed, which gives us a lot of flexibility for further development. As Sami said, we'll now cover our main geographies on page 17, starting with France. 13% decrease in revenue in H1, 29% in AOP, and that's mostly due to a reduction in the COVID-19 contribution, which is both volume and price. Minus 0.4% underlying revenue evolution, and that's hiding a very robust volume growth of 3.3%, which is offset by a sharp price decrease. There are two components here. The normal price decrease as per the three years agreement, which is 2.5% since January 2022, and an unfavorable comparison base in Q1 as the 2021 price decrease started later in April. To be noted also, and as expected, a further COVID PCR price decrease, which will impact H2, and there is also the start of the discussion with the authorities for the new price framework. France remains, of course, an attractive market for larger players like us, and we believe that the M&A landscape might actually improve in coming quarters. On to page 18, Germany. Plus 11% increase in revenue in H1 and 13% increase in AOP with very strong margins despite some inflationary pressure. 2.2% underlying growth in H1, and that includes -1.8% in Q2 after a strong +3.9% in Q1. We had flagged the soft comparison base of Q1 2021, and on the contrary, the strong catch up in Q2 last year, which resulted at that time in a 5.5% volume growth. To be noted also a decline in the PCR testing price, which has started July first. Moving on to page 19, South Region. Minus 1% revenue evolution in H1 and a more marked reduction there in AOP due to number one, the sharp drop in COVID PCR testing volume. Number two, Italy headwinds, and number three, some inflation. Minus 0.6% underlying revenue evolution in H1 with robust volume, that's excluding Italy, and strong positive price in Q2. Italy growth is improving sequentially but remains negative against the very strong comparison base of last year. To be noted, the price reduction in Switzerland, which is starting in August, where we estimate the impact to be around EUR 10 million on an annualized basis. The strong network expansion continues in South, with 32 BCPs opened in Q2 and 9 acquisitions closed since the beginning of the year. Page 20, our North and East region. Minus 8% in revenue in H1, -39% in AOP, with a strong margin drop in Q2 driven by the lower COVID-19 contribution, the SEL contract margin dilution, and some inflationary pressure more pronounced than in other segments. The offset to this is a strong positive price effect, which is the result of price indexation in Eastern Europe and in the UK, and very strong volume growth in Eastern Europe and in the UK, driving together a +12% underlying growth. We continue also there our network expansion with 14 BCPs open. In total, to summarize, our H1 was a bit more volatile than usual. The obvious reason is, of course, the decline of COVID-19 in Q2 that we all expected, but the COVID-19 waves also created periodic softness in our underlying volume, notably in the hospital business. However, we remain still above our 3%+ underlying growth target and are very confident for the future there. Now, let's move to the concluding section of the presentation, which is the outlook. Revised outlook for 2022. We now expect the group revenue in this year, 2022, to be around EUR 3.2 billion. Our adjusted EBITDA margin is expected within the range of 24%-25%, and this represents, at the midpoint of the range, a 24-25 million increase, EUR million euros, increase in adjusted EBITDA compared with the previous guidance. That takes into account, number one, short-term dilutive impact on margins of the COVID-19 capacity ramp down or, the part we keep. Point two, the ramp-up effect from organic growth initiative, investments, notably in, direct to consumer. Number three, the inflation on costs. On the bottom part of the page, our key priorities for 2022 in terms of capital allocation unchanged, CapEx, M&A, while paying out 20% of adjusted EPS in dividend. In summary, once again, the last quarter reinforced our confidence in the fundamentals of our business model and in the quality of our execution. This concludes the presentation of today. Thank you for listening, and we'll now open the floor for your questions. Thank you. We will now begin our question- and- answer session. If you have a question for our speakers, please dial zero one on your telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you have heard your question is answered before it is your turn to speak, you can dial zero two to cancel your question. If you're using speaker equipment today, please lift your handset before making your selection. One moment, please, for the first question. The first question come from Blanka Porkolab at Barclays. Hi, can you hear me? Yes. Yeah, we can. Hi, Blanka from Barclays. I'm filling in for Hassan. Thank you for taking my questions. I have two, please. The first one is, to what degree was the write-down driven by changes in margin assumptions, and how significant is this for the German business? Does this represent anything incremental to what you spoke about at the CMD with regards to medium-term margins being pushed out a couple of years? My second question is, what is driving the positive pricing impact, and how should we think about the development of price for the remainder of the year, ex-COVID? Previously, you said that you can action prices on 50% of the mix. Could you help quantify that out of the 50% where action has already been taken? Thank you. Thank you, Blanka. I think that's for Sami. First question on the goodwill impairment in Germany. This is a very technical topic here, which at the end is not impacting the operation, the ongoing operation. It's based on a model and there is interest rates rising in Germany and there is the WACC that takes into account in this calculation. There is also some assumptions on the future performance of the business, obviously, and here we have factored some inflation, obviously for next year and then as a new base, and this drives this EUR 173 million of goodwill impairment. The magnitude of this amount is driven by the history of the goodwill set up, which was not driven by bolt-on acquisition, but by the setup of SYNLAB and at the time of the merger between SYNLAB and Labco, which is a very technical accounting question here. No real impact on the business, I would say, and no change to the guidance we have or the mid-term, long-term guidance on the margin of the business. The second question in relation to the positive pricing in H1, how we translate into H2 and in the respective countries, there should be no change. You need to note that we have already mentioned this, that there is an incremental element with a negative price impact in Switzerland that started on the first of August with a 10% price drop on all the activity. So, we mentioned that this will have a EUR 4-6 million impact by the end of the year and in the following year or so, in the first half of the year. No real, I would say, increment or additional changes to prices so far. The big one is a French renegotiation, and this is ongoing, but it may not impact 2022, but 2023. We should know more about it at our next call in soon. Sorry, just to clarify. The French negotiation that's COVID or non-COVID related? No. We mentioned COVID earlier as a price drop, but here it's on the non-COVID and this is a renewal of this three-year plan that is. Okay. That should be terminated by year-end. Okay, great. Thank you. The next questions come from Ika Savi at BNP Paribas Exane. Your line is now open. Hello. Thanks for taking the question. Just a quick follow-up on the write-down in Germany. As you mentioned that it's the impact of the WACC and business performance. As you said, very technical here, but if you were able to isolate the impact of WACC and the impact of business and performance, your assumptions being revised here, well, what would it be? Is it mainly driven by WACC? Is it mainly driven by operations which you see impacted in the future here? With regards to the guidance upgrade on the sales, is it mainly COVID revenues holding up better than expected that is driving the upgrade of the sales guidance? As a result, should we still think about EUR 150 million as a floor for 2022, 2023, 2024 onwards? Lastly, quick follow-up on that, on your inflation assumption, which I think for the year are about EUR 45 million, is that still valid, or should we think about a higher number now? Thank you. Okay. Back to the first question on goodwill. This is again a very technical question because there is no one WACC. There is a range of WACC, and we select one number. Isolating the impact is difficult. It's very artificial because there is a range here. I would not guess. But obviously there is a component on the interest rate increase and the inflation increase. It impacts the WACC and the business case. Giving a split, I would not give it now. The second point on the COVID, obviously the EUR 100 million increase is coming from COVID and our confidence on delivering on the base business. I mean, as Mathieu mentioned, we have a 4% organic growth where our guidance has always been 3%+, and it's on the back of our 4% in March. Now we have 4% in Q2. We're confident in our underlying business. It's true that the biggest impact here is coming from EUR 100 million from the COVID activity in the second half, where now we've delivered EUR 618 million and EUR 164 million in Q2. For next, we're still at a run rate by quarter, which is much higher than the long-term assumption of EUR 150 million. We will probably gradually reduce this, and so 2023 should remain. I mean, I would not comment too much on 2023 today as the guidance will come later in the year. Last point on the inflation. The inflation we have—we are right on our forecasted inflation that we've communicated earlier in the year, where historically we have EUR 23 million inflation per year, and we've added EUR 25 million, so for a total of the year at EUR 48 million. Now in H1 we are at EUR 23 million. We are confident that we will be within the forecast communicated. No incremental pressure assumed in our overall guidance for the year. Thank you. The next questions come from Jan Koch at Deutsche Bank. Good afternoon, and thanks for taking my questions. I also have three. The first question is more a clarification. I listened to your press call this morning, and I think you mentioned that you expect about EUR 800 million of COVID revenue this year. On the last call you mentioned that you expect a bit more than EUR 600 million. The new guidance essentially implies up to EUR 200 million more on COVID, but you only increase your guidance by EUR 100 million on the top line. Are there any reasons for this, or is it just a rounding effect? Secondly, you mentioned some residual impact of the Omicron wave in Q2, especially in your hospital business. How did that evolve towards the end of the quarter? Some remarks on July would also be helpful. Finally, one more question on your hospital business. Given that the margin profile of this business is a bit lower, inflation effects could have a more severe effect on the profitability. Do these contracts and especially the SEL tender contain some inflation clauses? If so, how do they work? Sami, you want to clarify the 800 and 600? Yeah. No, this is all rounding. There is nothing here. We're in the rounding phase, so our EUR 800 million is a rounded number. We are today on the revenue in second half will gradually decrease on COVID-19. That's a key message. Nothing abnormal here. The second question was on the hospital piece. The Omicron in hospital, I can take that. Yeah. Basically, the evolution has been fairly stable. Of course, let's take April aside, right? Which is probably still a bit of Omicron remainder. If you look at May, June, July, it's fairly stable. In July, also our activity overall and in COVID is fairly stable. On your third question on hospital, usually there are. It really depends on the type of contracts. There can be some price adjustment clauses. Usually, they are not adjusted, but for SEL and the NHS contracts, there is always an inflation clause in it, which is a part of the price effect you have seen in Q2. They adjust not the cost, but the revenue of course. Great. One clarification if I may. You mentioned that performance in your hospital business has been fairly stable in July. You mean it didn't improve? In COVID you mean, I mean, right? I was answering your that second part of the question. Sorry, on non-COVID. The non-COVID. Yeah. I don't think there is anything overly special in July. It's still a bit young. Okay. to judge it completely. Sami, if you have any further information, but to me it was fairly normal. Yeah. Yeah. It's very difficult to read the July number yet. Too early, and usually July and August comes together 'cause its different vacation periods and working day effects. I would not comment on July today. Okay, great. Thank you. The next questions are coming from Alessia Ossena at HSBC Germany. Good morning. Hope you can hear me. I have two questions, please. One of them is about the goodwill, not the goodwill impairment you made, but the rest of the goodwill you have on the balance sheet. Will they also similarly be impacted by rising inflation and rising bond rates? For example, in France and in the South segment, you seem to have a higher goodwill. My second question is, thanks for giving the information on the acquisitions done so far, the EUR 90 million and EUR 50 million annualized revenues. When you're looking into this, does this include COVID revenues, or do you strip that out? If we think back to your statement at the time of the IPO that you usually lift the adjusted EBITDA margin by 300-500 basis points within two years post-acquisition, how does this apply in the current environment right now? Obviously, in the current acquisitions, if you have a COVID contribution, that calculation must change. Some color on that would be very helpful. Thank you. Sami? Okay. On the first question related to the goodwill on the rest of the business, obviously when we have done the impairment test, we've done it on all of our four segments. Here we're very comfortable on the other three. There is no goodwill impairment. Just despite the fact that we have inflation and probably more inflation in the other Segment than in Germany so far. The reasons behind it again is on the technical setup of the goodwill as a merger of SYNLAB and Labco, where more goodwill for accounting reasons were put onto the German segment, and that. There is no risk on the other ones. On the M&A, the 50 million EUR annualized revenue includes the COVID-19, which is relatively a minor piece of the business that we have acquired. It includes a number. When you have it in our presentation already, we have reported, for example, in H1, we have reported that the 18 million EUR on page 10, you can see that the 18 million EUR includes 4 million EUR of COVID-19. In H1 and in Q2, it was EUR 4.6 million. In Q2, yeah. How do we think about the margin improvement in that case? Can we still assume 300-500 basis points improvement of that base that includes COVID? On the underlying business, yes. I mean, obviously the margin of the acquired business is similarly to the core, I mean, our business, there is a component related to COVID and a non-COVID. On the non-COVID, no change here. We still, it's all bolt-on acquisitions, so there will be synergies coming from the consolidation and the integration of those businesses. It's fair to say that a portion related to COVID will evolve with the COVID activity. Understood. Thanks a lot. The next question comes from Grace Lee at Jefferies. Hi. Thanks for taking my question. I've only three questions, please. One on direct- to- consumer margin dilutive impact. How should we think about this? Because you flagged this as one of the sorts of margin impact. How should we think about that in terms of sort of thinking about the margin dynamics and how sort of phasing of that as you ramp up this initiative as a part of your organic growth strategies. Second part of that question is about outsourcing. Any updates in CMD in terms of the opportunities there, which you highlighted as very exciting at the CMD. Third question is sort of follow-up question on the profitability. I'll follow up separately. Thanks. On the D2C, to be clear, the dilutive impact is because we are investing in OPEX. But the nature of the business of the direct to consumer business and its margin is not dilutive. I would say it's rather dilutive. We are in the investment phase. That's what it meant. Anything to add, Sami? No. I mean, the magnitude in terms of investment to where we're talking tax, OPEX and CapEx in total, we're talking about around EUR 10 million in the first 12 months. That means a portion will come and then another piece in the second tranche in the following 12 months. For this year, it will be less because we have not started day one. But that's the magnitude. In outsourcing, no change to what we said at the CMD, which means we are equally excited about the opportunity. No change neither on saying that this is a long cycle type of business that doesn't just pop up from one day to the other. At this point since June, there was no change to report on this. Okay, thank you so much. My final question on the profitability. I think people are just trying to understand how to think about that sort of profitability going forward, especially sort of if we look at implied margin, for example, FY 2022, that's sort of about, circa, we have it at about 19%. You've obviously, I think it was helpful to see that OPEX is sort of increased with the energy and fuel growth versus, for example, the CMD slide that you've shown us. Isn't that sort of incremental sort of margin impact that you are embedding in your second half implied margin? How should we think about that in your illustrative margin? I think there was a question, further ahead, but in terms of thinking about illustratively, how that impacts into sort of next year, for example. Thank you. Yeah. I mean, the exercise done at the CMD is valid obviously, and it's still valid. That means that there will be an impact of the inflation on our profitability in the near future. Now, it's already embedded into our guidance for 2022. The second half, as you mentioned, at the midpoint will be at around 19%. It can vary between 18%-20%. If you compute the 24%-25% into the second half with the EUR 3.2 billion revenue. The Now for 2023 onward, I mean, we are very careful on this because we are a very distributed business and we need to wait to have a very granular understanding of the development on each country. We will not comment on 2023 margin today, and we'll wait at least the Q3 results with where it will come at the time of our budget process, and we have a better view, more granular view, firm view on 2023. Okay, thank you. As a reminder, if you have a question for our speakers, please dial zero one now to enter the queue. There are no further questions at the moment. For closing remarks, I'll hand back to the speakers. I think we can still wait for. Okay. Maybe last minute struggle with the zero one. I give it a few seconds and then we can close. All right. It looks like we covered everything in this middle of August session. Thank you for your attendance and your questions. The next report will be on Q3 results tenth of November. Meanwhile, we wish you a very good end of the summer and successful business dealings. Have a good one. Bye-bye, everyone. Ladies and gentlemen, thank you for your attendance. This conference has been concluded.