Eurofins Scientific Stock

Good day, ladies and gentlemen, and welcome to the Eurofins H1 2026 Conference Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Mr. Andrew Swift. Sir, the floor is yours.

Thank you for joining the Eurofins H1 2026 Conference Call. Please note that 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 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.

Hello, everybody, and thank you for joining our half year results call. We have a small presentation. I guess some of you could download it. So we've had a strong H1 2026 with very strong improvement of results, 29% EPS growth. That's a continuation of the progress we've seen on margins and profit in the last year.

If we go to the summary that we have on Page 4 -- on Page 5, we can highlight some numbers. The growth is still not at our midterm objectives, but it has been improving between Q2 and Q1. In our life sector, especially in environment, we've seen the growth accelerating to -- as we recovered some of the weather effect that we saw in Q1. We had not flagged a particular catch-up in BioPharma in the second quarter. We think the later part of the year, especially Q4 will be -- we should see much more effect from the positive comparable and potentially some restart or start of some important programs in our clinical business and also the end of some of the constructions of some areas in agroscience, for example, where we have rationalized also the capacity. So no big surprise on the top line.

On the margin, on the other hand, we are above our objectives. We are above what we were expecting in what is traditionally the lower margin part of the year. We have achieved the 23.7% on the adjusted margin -- EBITDA margin, which is quite good, and it shows what our business can deliver. Overall, we continue to reduce our separately disclosed item. And as we finish the integration of all the companies we acquired, we are moving forward in the building of the hub-and-spoke model, and we start to see the benefits. We're not there yet.

We still have enormous expenses in IT, enormous disruptions to our business in deploying our new IT solutions in our food and environmental testing businesses in Europe. But all of that is progressing. So we are positive that by the end of '27, we will complete those programs, and we'll have a very efficient completely digital network with the latest technologies and start to deploy some AI tools for being even faster and more efficient in some areas. Those programs are doing well, and we start to see them faster than we thought. So that's on the -- and we also -- [indiscernible] our investments are done. So we have to invest a little bit less.

The other thing we continue to focus our business. We've already discussed that we agreed to divest our electrical and electronic testing business. It's a good business that we built over the last 15 years, but it's not necessarily core to our testing for life business. UL will be a better owner. So we were able to divest it. We were able -- we announced that on Monday to acquire a business of similar size in North America, which is an area that is actually growing better than Europe, focused on the core of our business, mainly BioPharma product testing, but also environmental and some food testing.

So this is an example of two transactions that are in line with the goal to focus. Of course, the more we focus on one area of activity, the more efficient we are, the better we can deploy our IT solutions. We hadn't started developing a whole suite of IT solutions for the electrical and electronic testing business, which is slightly different than our other businesses. But in that business we acquire, we have all the tools that we can deploy almost from day one and make it more efficient. So that's an example of how we intend to continue to allocate capital going forward.

On Page 6, you see some of the reasons for the margin improvement. And -- but if I summarize it, as I just said, it's basically we are starting to see the benefits of all the efforts we did. And we're also at the end of some of the costs for duplicate sites and et cetera, the exceptional costs are also going down and because we -- we are still doing some new sites, moving to a new site in the Netherlands. We're moving to a new environmental testing site, where we will be moving to pharma testing site to bring together 4 different sites. So all of that is, of course, costing still a lot of money, but a lot of that -- those programs are behind us, and we see the benefit.

On Page 7, you see the various evolutions. And on organic growth. So our Life business is still slightly below where it should be, but it's doing well overall, close to the mid-single digits, close to 5%. BioPharma is a bit soft. Even BioPharma product testing in Europe has been softer than in previous periods. We've had a couple of large contracts that ended. We are working on replacing them and some parts will be replaced, but it had an impact, especially in Q2.

Diagnostic business was doing well in Europe. In North America, we still have the impact of some regulatory changes. One affected our transplant business. We've already covered that several times, but we still have the base effect in the first half of 2025 in the change of reimbursement of the transplant rejection test that we have. And we also have a change of the mix of tests required for donor product testing, which impacts our growth.

We've had negative growth in diagnostics in North America, which affect the overall growth. But here again, soon as the time passes, the comparable will ease and that should improve. And consumer has been doing well. We have a bigger exposure to Asia in consumer than to Europe and North America. And Asia is doing well. And also, we have our material testing business. We have some nice developments with AI and semiconductors, and that business is progressing very positively.

On Page 8, we give a bit more color on the components of our BioPharma sector and where you -- as you can see, we still have, unfortunately, some areas which are -- which have negative growth. Discovery is still slightly negative. That's the early phase of BioPharma. We see some green shoots. We -- the funding of biotech is improving. We have requests for quotes, but we haven't seen a big impact on the actual numbers yet, although that should materialize at some point.

Agroscience and genomics are still challenged on the top line. We are rationalizing sites. We are rationalizing capacity. And we also do believe that this will hit bottom over the next few quarters. So the opportunity there is the impact of those areas that are negative is getting smaller and smaller every quarter. And at some point, we get to the core that will not decrease anymore. And of course, that leads to rationalization in the market. There are fewer and fewer players in Agroscience and a lot of companies are closing or rationalizing also. So that's the outlook on BioPharma. [indiscernible] continued to do very well, double digit in North America and in Europe for the reason that the soft [indiscernible].

Laurent will now give you some more details and more color on the financial numbers.

Thank you, Gilles. Good afternoon. It's my pleasure to walk you through our half year results. On Slide 10, despite the moderate revenue growth, we delivered a strong improvement of margins and earnings per share. Our reported EBITDA recorded a 190 bps improvement year-on-year, reaching 23.3%, including a 50 bps exceptional gain from legal settlements.

Our adjusted EBITDA increased by 130 bps year-on-year, reaching 23.7% with reduced SDI, which are now weighting only 0.4% of revenues. So overall, we saw a very strong increase of our earnings per share at plus 29% year-on-year, reaching the level of EUR 1.55.

On Slide 11, as you can see, our moderate revenue growth was a result of mostly two factors, an organic growth of 2.7%, but also a very strong FX headwind of 2.9%. The M&A contribution in H1 was very limited.

On Slide 12, if we look at the breakdown of our H1 results by region, we see a very strong growth of revenues in the Rest of the World, plus 9% organically and plus 5% in reported figures. And we see a very good improvement of margins across all regions with Europe recording a plus 210 bps improvement, North America, a plus 230 bps improvement. If we exclude the onetime gain from settlement, it's still a 90 bps improvement and a plus 130 bps improvement in the Rest of the World.

On Slide 13, if we look at another breakdown of our H1 results between mature and nonmature scopes, we see a mature business, which is reaching 25.3% margin, well ahead of our group objectives. And we see also a nonmature headwind decreasing year after year with SDI at only 0.4% of revenues.

On Slide 14, in line with this strong margin improvement, we also had a very strong cash flow improvement. We saw our free cash flow to the firm increased by 46% year-on-year and reaching EUR 403 million. We also had a record cash conversion of 47%, which resulted in a very stable leverage versus December of 2.2. All this enabled us to increase our share buybacks by another EUR 200 million in the first half.

On Slide 15, if we zoom at the levers behind the strong improvement of cash generation, of course, it's due to the improved margin, plus 500 bps in the last 3 years, but also to reduce CapEx, 240 bps less in the last 3 years and a much decreased net working capital intensity, which increased by 190 bps in the last 3 years. All in all, it's notable to see that we were able to multiply by 5 of free cash flow to the firm in the last 3 years.

Now I will give back the mic to Gilles.

So a bit more color on this focus on our core business. On Slide 17, we talked again about the divestment of electrical and electronic product testing. So this was a transaction that was also generated, as you can see from the numbers at a much, much higher multiple than the overall multiple at which Eurofins shares are trading, almost double. And this business is not -- doesn't have a higher margin, and it's not growing faster than the rest of Eurofins. It's just a small indication of the value that is within Eurofins and that actually can be realized by those transactions or at least shown. And it generates some cash.

And with this cash, we can reinvest in our core business, which we did, and you have some details on Page 18. We did the agreement to acquire Element Material Technologies Life Science Testing Services. Element is a business that was formed by private equity, by a number of acquisitions over the years. It was sold to Temasek. And like many, many big players, when markets become more advanced and the companies like Eurofins that are very specialized become more competitive, it becomes harder for conglomerates that are serving a large number of verticals to be very good in all verticals and to invest in the digitalization, in the robotics, in the AI tools that are bespoke for each type of activity. And so it does really make sense for Element to dispose of an activity where they will never have had a global or local leadership in North America. Like UL is a better owner for the electrical and product testing that Eurofins used to own, Eurofins is a much better owner for the life science testing that belongs to Element. So it's win-win deals for both parties in both cases.

Over time, we think we can create significant value of that business. We have a very clear integration plans. We know what tools we can develop. We can deploy our IT solutions for BPT, are world-class. And this business is growing well for us in North America, where those businesses are present. We have a large food testing, a large environmental testing business in North America. So we can easily add the few labs that Element has in those areas, and they can fall under our leadership team and our IT solutions. So those are -- this is a very good fit acquisition for us.

And I think you will see over the next few years that the most successful TIC businesses will be the very focused TIC businesses as it's difficult to be the best in all areas. That applies to TIC like it applies to any other industry. On the side of those large acquisitions, we continue with our M&A, which -- where we have a target to add about EUR 250 million revenues per year from a number of bolt-on acquisitions, and we continue to do that in the first half of this year, with several transactions, including some that will close -- that we are working on and that will close over the next few months.

On Page 20, we give a couple of examples of the new sites that we have been building. Building new sites to create hubs and to consolidate the smaller labs that we acquired over the years is not something that is done overnight. The lab in the Netherlands is a project we started 3 years ago. We needed to buy land to obtain planning permission to get it built, and now we're getting it qualified. [indiscernible] one year, all our businesses that are in the Netherlands into that building. We need to qualify the businesses after the moves. So all those moves are very costly, disruptive.

They dilute our margins. And of course, they dilute our return on capital employed while we do them. But once we are done, once they are done, they provide significant scale advantages for a decade or more or actually much more because on those sites, we have extra land. So if we need to grow, we don't need to move the sites. We don't need to add, destroyed buildings. We can just add a wing to the buildings we have built. So -- we still have a few to do.

The last one will be an extension of our Lancaster campus in North America that will complete in 2028. But with that, we will be by the end of next year, with that exception, pretty much complete to integrate all our network into the right footprint with very large hubs with scale effects, automation, robotics, et cetera, and bespokes to do the time-critical assays closer to our customers, but only when it's required. On technology, we don't talk very much about that because it's more in the trade journals that we talk about it for the clients that are interested in each area, but our labs continue to invest a lot in R&D, developing new solutions that are in the testing world, usually quite advanced compared to the rest of the industry. So we can talk a few -- we presented a few on Page 21. And we are proud to have some of the most innovative labs in our sector.

So if we look at how we see the future, we are not changing our outlook. It is obvious that to hit the mid-single-digit organic growth for this year, we need to have a significant pickup in H2. We believe we will have a pickup in H2. How big the pickup will be, we will see. But we still think mid-single digit is achievable, whether we will achieve it or not will depend on a number of factors, but we have decided to keep that objective.

Our margins, we think of margins, we keep our objectives. Basically, we haven't changed anything. Our margins will improve this year. And we also confirm our objectives for next year. It's -- if you look at the numbers for the first half of this year, it probably makes very credible our objectives for next year. And we confirm also our objective for next year. And we do think the softness in BioPharma is temporary. It is shown in our numbers as bigger than it is for the core of our BioPharma, which is BPT. So clearly, at some point, all those ancillary activities in BioPharma will stabilize, will start growing or we will shrink them to a point where they don't matter. So we maintain our objective to grow a bit above mid-single digits on the secular level.

And another factor is once we are done with restructuring our network around our hub-and-spoke network, deploying our IT solutions, deploying AI and robotics, our operational performance will also significantly improve. At the moment, we lose clients because we are changing limbs, because when you change IT systems, your performance decreases, you have issues. And at some point, this is done. And then the other -- the opposite happens, we will be much faster, much better, much more reliable in our delivery times than pretty much anyone in the market, which should also provide the opportunity for gaining significant share. Also will be much more efficient.

So we are really looking forward in all of our markets to being done with those programs, and we are right in the middle of it in Europe at the moment in food and environmental testing. So it is a drag. But the progress is good, and we are confident that we'll come out of 2027 with the best network possible in terms of footprint and in terms of IT solutions, service delivery, speed and quality of interaction with clients. So we're optimistic for the midterm growth once we are done with that. In the meantime, we continue to improve our margins. We continue to generate more cash flow.

Our CapEx is kept within the objectives that we have set for our CapEx of EUR 400 million per year. That can go down when we are done with this program of building the hub-and-spoke network and the digital investment program. So beyond 2027, we might be able to do less than that. We will also be done with spending to own our own sites. And so beyond 2027, we see the cash flow that we generate to continue to increase, and we can use it to either grow organically or to return to shareholders.

And even now when we are not done with building our network, we return a lot of money to our shareholders through dividends and through share buybacks. And as we continue to improve our margins and cash flow, we can increase those returns to shareholders and continue to take advantage of a very depressed share price to create long-term value for those shareholders who believe in the long term of Eurofins. So overall, we repeat our objective, we confirm our objectives.

And if I move to the conclusion slide on Page 24. I think we've had a very good first half. Things are moving as we expect, actually better than we expect. Our network is coming together very well. We still have a number of loss-making units that either are start-ups and that are working -- that are growing to profitability or are in the middle of a reorganization. The SYNLAB network in Spain, the integration is going well, but it's still very dilutive to our profits. So we still need a couple of years to get to our target profitability there. We've ended a lot of loss-making contracts there that also impacts our organic growth, of course, when we do that. But then we focus on business that is profitable long term and clients that are prepared to pay to their providers make an acceptable profit.

So we are, as I said, optimistic that the organic growth will pick up going forward. The [indiscernible] difficult to say, but we will go back to what we were used to be mid or high mid-single digits. We will continue to deploy capital carefully to focus on our core business. And overall, we are convinced we will finalize our program, our 5-years program by the end of next year, achieving our financial objectives, and that will give us a very good platform for growth of top line and profits.

So that is from my -- for our introduction, and we can now take questions. Thank you.

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

A couple for me, please. I think at the 1Q results, you had indicated that growth was coming back to normal by the end of the quarter. And therefore, the expectation was for 2Q to deliver reasonable mid-single-digit growth. Just trying to understand what changed, please? And specifically in BioPharma, when you talked about the contracts that ended, was it a competitive loss? Or was that something else? Second one on CapEx actually. It feels a little bit light, especially on the real estate spend in 1H. Is that a timing issue? Or should we expect maybe separately less spend on real estate for the rest of the year?

Thank you, Suhasini. Well, what we're talking about, if I remember well, was mostly the environment and the businesses that were affected by weather that were coming back, and they are back at mid-single digits. BioPharma, we have different components in BioPharma. So the Genomics and the Agroscience, the outlook then was not good and it's still not good. We don't expect a pickup in those areas -- a significant pickup in the short term. Then we have Discovery. Discovery is close to 0, slightly negative in the first half.

Here, again, we believe it will pick up, but there's no -- we haven't flagged -- we hadn't flagged and we still can't flag a significant pickup or timing of a pickup. On BPT, the U.S. continued mid-single digits. Europe was flat in the first half of the year. It depends on the countries. We have countries growing very well, double digit actually. And we have countries that are a bit more challenged, France and Germany, among others.

And then there is the impact of some large contracts that -- it's not that we lost it to a competitor, but sometimes pharma has certain programs, they develop a new product or they build a new site that they need to validate. So it makes it a little bit lumpy. So usually, we win more contracts and it's not shown. But maybe in an environment that's a bit less dynamic for BioPharma, it shows more when one of those contracts end.

And CapEx, yes, especially real estate CapEx is not linear. It's a bit bulky. It depends when we complete the building. So we're still guiding for more or less EUR 200 million on our own site. Maybe some will shift to 2028 because I don't think we can complete Lancaster by the end of 2027. And the overall other CapEx, which includes growth and maintenance CapEx, maintenance CapEx is 2% or 3% and the rest is growth CapEx, we spend as we need it.

So indeed some of our businesses that are more challenged on growth, they spend less than -- and so that may be why we're a bit below. But other businesses that are growing fast are in the normal spend of CapEx that we have planned. Of course, we're frugal. We don't spend when we don't need to spend.

Our next question is coming from François Digard with Kepler Cheuvreux.

Coming back on BioPharma. So is it fair to understand from your comments that improvement will come mainly from easier comps. But I had in mind that you were also expecting new contracts to come. Are these contracts already signed? And are we talking about smaller number of contracts or a broad number of smaller contracts? And I have a second question, if I may. Do you today consider Eurofins to be a conglomerate or already sufficiently focused?

BPT, well, we have BioPharma, we have many things. We have a business, which is a small clinical business, where we have large contracts compared to the size of that business. That affects our Central Lab, BioAnalysis and also our CDMO to some extent, where it can -- a contract can make a difference. In BPT, it's much less so, but we do have EUR 5 million or EUR 10 million contracts with some clients that are linked to certain projects.

But BPT is mostly a lot of small contracts compared to the size of the business. They might be big in absolute terms. And the clinical contract -- clinical business like central lab would be larger contracts compared to the size of that business. And we have some that are signed, but we don't -- we're not exactly sure when they will start being implemented, pick up when the patient recruitment will show some significant momentum.

So we cannot give precise timing. We do think we'll see an impact in the back end of this year of those contracts starting. And of course, as you mentioned, we'll have the comps. How do I define focused? I would say focused is if you are 3 or 4x bigger than your next competitor and you are the market leader, you benefit from the scale. You benefit from being focused, and you can have 1 or 2 verticals. The question is, in each vertical, how much bigger are you? Are you the market leader in each vertical and potentially in each market, in each geography? And if you're a market leader, how much -- how many times bigger than the next one are you?

And that gives you scale and that gives you a benefit of your focus. So that's how I would look at focus. And when I look at other companies that are more conglomerate, they have -- they sprinkle their market shares. They have a bit of this in one country, a bit of that in another country, but they are not leaders in many places, if any. And to build the efficiency, the scale, the digital -- the dedicated digital tools that will make -- and that makes people winners.

If you look -- I mean, on the traded companies, it's difficult to see because you don't get the detailed numbers of each of the vertical. You have some focused companies. And if you look at UL, for example, which is much more focused on core products and this type of certification activity, they do have significantly higher margin, trade at higher multiples, just to give one example. Most of the other examples, you only see when you look at private companies that are sold in private transactions. So the numbers are not public. But in my experience from what I've seen in the last few years, in the last actually decades, focus is of high benefit.

And do you think that today, Eurofins is already focused enough?

Well, 70% of our business -- in those activities. The other 30%, we can be #1 in a geography. And then the question is in those businesses like clinical diagnostics, we are #1 in Spain, for example, we're #1 in Ireland. Is it necessary to be #1 worldwide in that sector? That would be the question. And I think we like what we have. And we have businesses, for example, in consumer product testing. If I take our material science business, we are #1 in the world in that niche. It is a niche. It is a global niche.

We are #1 in the world, and we have a great business. We have a fantastic business. We are working for some of the most advanced companies in the world, where they need very specific advanced microscopy testing that we're among the very few companies in the world that we can offer. We put it, we classify it as consumer product testing, but it is an extremely focused and extremely successful business that is global market leader and actually 2 or 3x bigger than the next one.

Our next question is coming from Allen Wells with Jefferies.

A couple from me, please. Firstly, I just wanted to follow up on Suhasini's question earlier, but with a focus maybe on visibility. I don't think any of us thought that pharma was necessarily going to get significantly better in Q2. I think most people probably didn't expect it to get sequentially worse. Could you maybe just comment a little bit about the increase or decrease in visibility that you maybe have across the business with a particular focus on pharma.

And I guess that I would have expected that you would have known that some of those contracts were ending in Q2 and that there may be nothing lined up to replace them. So just trying to understand that. And then linked to that, is there any comment you can make on kind of June, July exit rates for the business as a whole? That's my first couple of questions. And then secondly, just on BioPharma.

Growth obviously weakened. If I then add in the prior year comp that eased as well. That's almost a 500 basis point underlying deterioration between Q1 and Q2. And if I go through the building blocks, I mean, yes, ancillary is obviously weaker, but it does feel like a lot of that is in the product testing side.

The text commentary in the release for instance talked about Europe being stable and the U.S. staying solid. So how do I reconcile between the text numbers? And maybe you can quantify some of the building blocks within the product testing business. How much was the contract exits of that almost 500 basis points underlying versus whatever else was in there that was moving against you, just so we can understand the moving parts.

Yes. Thanks, Adam, for your question. Visibility, we don't -- we're not in the business of making, I would say, rolling forecast or things like that. So we don't -- we only look at the results at the end of the quarter. And frankly, there are so many contracts we can win or we can lose, they can start or clients can send sample wherever they want. It would be actually very hard to do that.

Also, we think the impact is immaterial on the long-term prospect and the long-term value of the company because we know what we're doing, we know what we're doing and you see it on the profitability and whether we are 1% or 2% above in the quarter doesn't change anything on the midterm outlook in our opinion. So we could put a lot of effort in the fine planning of all of those things, which would be extremely difficult to do. I don't know if we could actually do it, but we don't do it. I'm not sure I follow the 500 basis points that you mentioned, but is 500 basis points between what and what for what period, what activity?

So yes, I mean, maybe this is, again, focused on quarterly movements more than anything else, but I was just looking at growth was minus 1.1% in Q2 from plus 1.1%. But in the prior year comp. Got almost 220 basis point and the [indiscernible] as well -- in BioPharma, sorry.

Oh, BioPharma. The whole of BioPharma. The whole of BioPharma -- so you say there is 220 basis point difference in the total of BioPharma? Is that what you are saying?

Yes, and the prior year comps got easier as well. So I'm just trying to work out like sequentially, the growth eased, but the prior year comps got easier, so you should have got a benefit. But again, I think it probably comes back to your point if you're not managing quarterly by quarterly. That's not something you're going to comment on.

Yes. 2025, we were at 0.3% organic growth in Q1 and 1.5% in Q2. And so this year, we are a bit higher in Q1, 1.1% and Q2, minus 1.1%. But in that thing, in Q2, just to give you an idea, we are at minus 16% in our Phase I clinics in Europe and 20% in our European CDMO because some contracts ended in CDMO. And in North America, those negatives can have a big impact. We are -- our BioPharma and BioAnalysis is minus 20% compared to the comp of the quarter -- of the same quarter last year, and that has a big impact. Now that can revert also to plus 40% once your contract starts in those activities.

And the bigger impact between Q1 and Q2 are basically is that our BPT Europe was at 0, which is a substantial business in the first half of the year, while the U.S. was mid-single-digit growth. And we don't think this is a long-term trend for Europe. But indeed, we had the impact of a couple of contracts, and we have a bit of a softer activity, for example, in France. That's a lot of numbers, lots of small activities that go in different directions.

But the bigger impact is mostly the European BPT this half year and some of those ancillary activities have been very significant negative. But at some point, they bottom up and they grow again. Our Agroscience was 20% down in Europe in the second quarter, just -- in North America in the second quarter. Not big numbers, but still it's an impact.

Okay. Could I just have one quick maybe bigger picture follow-up coming back on the CapEx side. CapEx was obviously down 15%, I think, year-on-year. And at the same time, obviously, growth is coming down. Can you just maybe just comment on how confident you are that this level of CapEx is sufficient to support growth acceleration within the business as we move through this year into 2027?

I think less CapEx should give more growth because a lot of that CapEx is just building the basics in those new sites we have been building. It's not -- the CapEx we have now should sustain much more growth than we have at the moment in some areas. But some areas we are growing at 10%, 15%. So it's -- if you look at the --a lot of components that are moving in different directions. [Audio Gap] But overall, if you look at our business, so we split it between SDI and core business, but there is a slide that gives you a bit of a breakdown.

I think Laurent mentioned on Page 10. If you look [Audio Gap] adjusted results. So we have our mature business [indiscernible] the first half. So it's a EUR 7 billion business, which is turning 25.3% EBITDA margin on mature revenues, reported 23.7% and reported EBITDA margin of 17.5%. So we have a very strong, very good business that is well invested, that doesn't need so much more CapEx and that will grow for years to come.

And of course, BioPharma at some point will pick up. And the businesses that are still being integrated, including SYNLAB, which is a big chunk of the EUR 240 million of the SDI, at some point, they will get there. And this part of SDI will become immaterial. So overall, that explains why I'm quite happy about the results and I'm not too concerned about 1 quarter being a bit down or a bit up in one component or the other.

And the things is, you know what we've also done, we have a number of businesses which are indeed hurting our growth. and we're closing some. And we closed some -- or we sold some of those clinical businesses we had in the Netherlands that have been dragging on our growth and profitability for -- basically since COVID. So we have no hesitation to sell or close the businesses where we don't see the potential to have long-term good growth and good profitability.

Of course, it takes time. Nothing changes so much from one quarter to the next. But we're confident we will execute and we'll get a very, very strong business, which is, for the most part, already quite strong now. Because if you look at -- if you compare those performance of our mature business with many other companies in the sector, they are extremely good.

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

Gilles, I'm going to push you a little bit. You know that most of your investor base is focusing into the top line and the midterm guidance, 6.5%. We are very much far away from that. And so lots of questions coming out about why you're not giving up on this guidance. And second question would be more broadly about the picture. You never had and you're talking about this mature revenue, you've never been in such a comfortable position when you look at the cash flow, the free cash flow, operating cash flow, the pure accretion that the business is giving up now in terms of a mature business.

So why don't you accelerate massively the cleanup of the portfolio and be very active when it comes either to spin-off or sell or acquisition. What about that? What is lacking currently in your comments not to be more active?

I think we are quite active. But you don't run a company like you run a portfolio. Portfolio, it's easy to go to the market and sell shares and buy shares if you have liquidity when you have a large business and to buy a business, well, first, you have to have sellers and we buy a number of businesses every year that fit very well with what we want to own long term. If we want to dispose of a business, it's a 1-year process to prepare at least 6 months.

And until it closes, it's at least a year with all the regulatory clearances. So we are doing that. Building a network of hub-and-spoke labs is unfortunately very long. I talked -- I mentioned the lab in the Netherlands, we built for BioPharma. We haven't yet moved in, and we started 3 years ago with that program. Everything in a highly regulated business like Eurofins take a long time.

The good thing is it's highly regulated. So it's hard to build a BioPharma product testing. It's hard to get all the validation and certification and client approval. But once you have it, clients don't change. They don't change because somebody comes and offers a 10% lower price. They have their studies there. They have the history of their studies there and they stay. So it's a very recurring business, very stable business, and it takes time to change.

But -- and why don't we give up the 6.5% or mid- to high. I think this is what our business can give historically. It's, of course, a secular objective. And if you take the average over many, many years, that's where we have been. So I think that's where we should be. Now it will depend on the mix, maybe clinical diagnostic is a bit lower. In the end, I don't think any of that matters because the business is valued now at such a low multiple compared to the component that all of that is basically irrelevant.

So investors decide they put a number in their plans and basically, they decide what the business is worth. We buy a lot of shares as much as we can if we look at our leverage, we want to stay within our leverage obligation. We want to have headroom to do acquisitions if we need to. But in the long term, the market will decide and the market will see and we'll see what growth we achieve. We think this is -- there's no reason to change that at the moment.

All right. Okay. If I may a follow-up regarding possibly more pragmatic on the consumer and technology products. You had a positive base effect last year, but you also delivered a very strong performance driven by the semiconductor. So as you do mention the stickiness of the clients when it comes to some of the testing, do you think that you open a new -- in a way, a new door or a new window for the semiconductor industry to go probably more actively with Eurofins when it comes to testing? Or is it really a quarter effect related?

No, it's a mix. We also do very well in our softline and hardline testing. We have more exposure in consumer to Asia, which, as you see, rest of the world is growing faster than Europe and North America overall, considering the mix we have.

I think that -- it's also medical device. It's also aerospace. It's also military. So anything with advanced materials, we are the leader in the world in this type of testing. It's not exactly testing for life, but it's a very good business that is doing very well within Eurofins and where we could invest more indeed.

Our next question is coming from Arthur Truslove with Citi.

First question was just on how you've done so well on the margins, obviously, with organic growth coming in a bit soggy. So I guess we just wondered how you've done that, we know you reduced headcount, how many people have you taken out? Is it been compulsory redundancies and sort of whereabouts regionally, has that happened?

And second question I had was, are you able to just highlight the contribution to the EBITDA or the adjusted EBITDA margin progression from ending weak profitability contracts? And also, could you just tell us how the abandonment of those contracts has impacted organic growth in both Q2 and the first half? And then finally for me, just in terms of the BPT activities. Obviously, significantly lower organic growth in H1 than the H2 last year. Are you able to just say sort of bottom up within the business, what's going to make that recover?

Thank you very much. Well, the margin is mostly stopping things that cost money. We've been -- we've made no secret that for the last 3.5 years, we've been building the network. We've been building hub labs, moving things from labs we acquired to new labs. Every time we do that, we become more efficient, and that reduces cost. You mentioned SYNLAB. Yes, we buy SYNLAB. We took out a lot of costs last year and this year. Because there was duplication of our existing network in Spain, and there is still some more to do. Also, we mentioned that post-COVID in our clinical business in Europe, we had much too much capacity and potential for rationalization. So we've done that.

Every time we finish a hub lab after integration, we get more operating leverage in that hub lab. We also have a number of companies I mentioned that we are -- we have been closing and we've been either integrating the business in other labs. We've sold a couple in the Netherlands or closed one. So all of those things flow into higher margin, and we're not done. We still have a lot to do. We still have a lot of things that we will improve. And coming back to what Delphine is saying, maybe it's too slow, but you find it too slow, but we are doing a lot of that, and we will see the impact.

We even see the impact on the margins faster than probably you expected. Because nobody believed we would do 24% margin next year or very few people believe that. And now it seems like for a lot of people much more credible. So we're doing that, and we still have a very long list of things we are working on and we'll complete by the end of next year that go in that direction. And that doesn't even take into account a much better competitive position we'll be in when we have finalized our digitalization program, which takes a long time, but it's a big network, and it's a lot of applications.

And on BPT, well, we continue to do very well in the U.S. It's just in Europe that we've had a bit of weaknesses in France and Germany, mainly and some [Audio Gap] that ended, but every day, we talk with clients and we sign new contracts. And I don't think it's a normal situation that what you've seen in BPT Europe for the first half of this year.

We will take our last question today from James Rowland Clark with Barclays.

So just firstly, on the BioPharma business, excluding product testing. You mentioned earlier to a question that you're not in the business providing rolling forecast regarding visibility. But you flagged that you've got confidence in the improvement in the second half in BioAnalysis and North American CDMO. So I just wonder what gives you that confidence to make that comment? And then where end markets look quite slow still in Discovery Genomics and then also the CDMO business in Europe, where you haven't yet replaced contracts and also central labs too.

Can you just comment on the underlying market activity and just sort of what's happening down the pike? And my final question is just on the margin. You have obviously very strong margin growth in the first half. And you've previously mentioned in Q&A that you think a lot of your businesses deliver over 30% margin, but the group never be there.

You're very close to the 24% margin that you've guided to for 2027. Is now the time to talk about what you could do beyond that? And where are you on the programs if you were to sort of say, out of 100%, where are you in the programs and delivering all the cost savings that you expect? And what could drive margins beyond 24%?

Thank you, James. So a number of questions. We have activities where we have thousands of small contracts compared to the size of the business, that's food, that's environment, that's BioPharma product testing. And then we have the clinical phases, Central Lab, BioAnalysis to some extent, where the contracts are much large -- and CDMO, where the contracts are much larger relative to the size of the business. So what we have in Central Lab, BioA and CDMO is a bit of a base effect because we've had a lot of contracts ending in the back end of '24 and '25.

And so they -- and some of them are signed to restart, but we don't know when they will restart. When they do, this will be material in the growth as the end of those contract was in the decrease of revenues. So we have more visibility, if you want, on that because once we get those contracts and we see them start, we know the impact will be significant because it will just take 2 or 3 programs to have a major impact on our central lab business, for example.

Discovery, Genomics is smaller. It's more like lots of small businesses. So it's really harder to forecast. It's a law of large numbers, more that play. And it's more the general outlook. Genomics, the outlook has been affected by the reduction of research spend in North America, NIH cuts, et cetera. Business outlook is not great. We don't think it will continue to go down because at some point, you get your core volume of customers and unless there's even more cuts and more reductions in spending and funding, we don't see that continuing to go down.

So we get to a base effect there. And Discovery is mixed. We have some good signs, but we -- it's really hard to know when those orders will really translate into samples. So it's hard to give you more visibility on the Discovery business than saying, okay, we don't think it's going to get much worse. When will it start to be much better? I don't know. It's not a huge business for Eurofins. It's EUR 100 million. And on the profit, once we've adjusted the cost to the level of revenues, we still can make very good margins at those level of revenues.

Ladies and gentlemen, this is all the time we have for today's question-and-answer session. We would like to turn the conference back to Dr. Gilles Martin for closing remarks.

Thank you very much. Thank you, everyone, for your questions and your research and your homework. We'll be meeting some of you in London tomorrow and follow up one-on-one. As I said, we are building a very strong network of laboratories. As you can see by the results of our mature business. This is a very profitable activity. We still can improve that. We are not done where we are.

We think all those actions will also have a positive impact on organic growth. We think we're in good markets, regulated markets where scale and regulation make it very hard for new entrants. And also, we are in resilient markets in difficult times and difficult economies. So we're happy about what we have done. Of course, we would wish to have had a better growth in Q2 of this year. But as you can see, even with moderate growth, we can significantly increase our profitability, and we think we can continue doing that. So thank you very much for your support. I wish you all a happy summer breaks if you take some and looking forward to meeting you in person soon. Goodbye.

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

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.