Q1 2022 Highlights
- Revenue of EUR 975.3m in Q1 2022, representing year-on-year growth of 59.4%. The Group generated record organic growth of 32.6% during the quarter, with strong performance in both Life Sciences and Industrial Chemicals, and across all regions.
- In the first three months of the year, Azelis completed 3 acquisitions representing total full year revenue of over EUR 160m[1].
- Gross profit of EUR 235.9m represents year-on-year growth of 71.3%, of which 43.0% was organic. The 167 bp gross profit margin expansion was driven by an acceleration in demand growth.
- Adjusted EBITA of EUR 116.0m representing a 94.6% increase implies 215 bp margin step-up. Conversion margin expanded by 589 bp to 49.2% compared to Q1 2021.
- Azelis generated free cash flow of EUR 57.9m despite elevated working capital to support strong performance.
- Leverage ratio reduced to 2.6x at the end of March 2022, compared to 5.0x in the previous year, and 2.7x at the end of December 2021.
- Raising full year 2022 guidance. The Group expects adjusted EBITA to exceed recently-upgraded consensus estimate of EUR 325m by at least 10% in 2022.
Azelis Group | Q1 2022 | Q1 2021 | Reported Change | Constant Currency |
Life Sciences | 592.8 | 372.6 | 59.1% | 57.0% |
Industrial Chemicals | 382.5 | 239.1 | 60.0% | 56.4% |
Revenue | 975.3 | 611.7 | 59.4% | 56.8% |
Gross Profit | 235.9 | 137.8 | 71.3% | 68.7% |
Gross Profit Margin | 24.2% | 22.5% | 167 bp | 170 bp |
Adjusted EBITDA (1) | 121.9 | 64.1 | 90.4% | 88.1% |
Adjusted EBITDA Margin | 12.5% | 10.5% | 203 bp | 208 bp |
Adjusted EBITA (2) | 116.0 | 59.6 | 94.6% | 92.3% |
Adjusted EBITA Margin | 11.9% | 9.8% | 215 bp | 219 bp |
Conversion Margin (3) | 49.2% | 43.3% | 589 bp | 601 bp |
Free Cash Flow (4) | 57.9 | 57.8 | ||
FCF Conversion ratio (5) | 49.5% | 96.0% | ||
Net working capital / Revenue normalized for acquisitions (6) | 14.6% | 10.8% | ||
Leverage ratio | 2.6x | 5.0x |
1) Adjusted EBITA before depreciation of property, plant and equipment
2) Operating profit or loss before amortization and impairment of intangible assets and excluding adjustments
3) Adjusted EBITA / Gross profit
4) Adjusted EBITDA less lease payments, plus changes in Net Working Capital, plus changes in other assets, liabilities and provisions, less net capital expenditures
5) Free Cash Flow divided by Adjusted EBITDA less lease payments
6) Net Working Capital/Revenue including those from acquisitions for the full period
Comment from Dr. Hans Joachim Müller, CEO: "Azelis had a very good start to the year, with strong momentum across our businesses translating to a 33% organic growth in the first quarter. We also completed 3 acquisitions with combined 2021 revenue of over EUR 160m. Adjusted EBITA increased by 95% to EUR 116m, translating to a significant improvement of 589 bp in the Group’s conversion margin over the period. Given the Group’s strong performance in the first three months despite ongoing supply chain disruptions as well as sustained inflation, I am confident that we should be able to exceed the recently-upgraded consensus estimate[2] for the full year by at least 10%."
Conference call
The management of Azelis invites you to a conference call and live webcast at 10:00 CET to discuss the operating trends and outlook for the remainder of the year. Please click here to view the webcast.
Contact information
Azelis Investor Relations
T: +32 3 613 01 27
E: investor-relations@azelis.com
Operational review
Azelis EMEA | Q1 2022 | Q1 2021 | Reported Change | Constant Currency |
Revenue | 450.5 | 297.1 | 51.6% | 53.4% |
Gross Profit | 111.6 | 71.1 | 56.9% | 58.3% |
Gross Profit Margin | 24.8% | 23.9% | 84 bp | 73 bp |
Adjusted EBITDA | 62.5 | 36.1 | 73.1% | 75.3% |
Adjusted EBITDA Margin | 13.9% | 12.2% | 172 bp | 178 bp |
Adjusted EBITA | 60.1 | 34.0 | 76.6% | 78.9% |
Adjusted EBITA Margin | 13.3% | 11.5% | 189 bp | 194 bp |
Conversion Margin | 53.9% | 47.9% | 600 bp | 643 bp |
EMEA revenue increased by 51.6% to EUR 450.5m in the first three months of the year. Recovery in Life Sciences, and in particular in Food & Health, observed in the second half of 2021 further strengthened in Q1 2022. During the period, our EMEA businesses generated organic growth of 33.9% supported by continued strength in end-market demand. Revenue growth contribution from acquisitions was 19.5%, whilst FX translation represented 1.8% headwind.
Gross profit increased 56.9% to EUR 111.6m in Q1 2022, implying gross profit margin of 24.8%, an expansion of 84 bps compared to the prior year, supported by positive mix effects as well as margin optimization initiatives. Adjusted EBITA grew 76.6% to EUR 60.1m, with adjusted EBITA margin expanding by 189 bps to 13.3%, implying solid conversion margin expansion to 53.9%.
Azelis Americas | Q1 2022 | Q1 2021 | Reported Change | Constant Currency |
Revenue | 366.5 | 243.7 | 50.4% | 43.0% |
Gross Profit | 92.9 | 52.0 | 78.8% | 71.4% |
Gross Profit Margin | 25.4% | 21.3% | 403 bp | 403 bp |
Adjusted EBITDA | 51.6 | 27.0 | 91.2% | 83.8% |
Adjusted EBITDA Margin | 14.1% | 11.1% | 300 bp | 353 bp |
Adjusted EBITA | 49.7 | 25.7 | 93.5% | 86.1% |
Adjusted EBITA Margin | 13.6% | 10.5% | 302 bp | 302 bp |
Conversion Margin | 53.5% | 49.4% | 407 bp | 407 bp |
Revenue in the Americas increased 50.4% to EUR 366.5m in Q1 2022. The Group’s activities in the Americas generated 27.9% organic growth, supported by continuing tailwinds in industrial chemicals, as well as growth with new and existing customers in both the Industrial Chemicals and Life Sciences markets. Revenue growth contribution from acquisitions was 15.1%, and FX translation represented a 7.4% tailwind for the period.
Gross profit in the region increased 78.8% to EUR 92.9m in Q1 2022, representing gross margin expansion of 403 bps compared to the prior year, largely from positive mix effect. During the period, adjusted EBITA grew 93.5% to EUR 49.7m, with the 302 bps Adjusted EBITA margin uplift largely due to impact from the inclusion of Vigon as well as efficiency gains.
Azelis Asia Pacific | Q1 2022 | Q1 2021 | Reported Change | Constant Currency |
Revenue | 158.3 | 70.9 | 123.4% | 118.1% |
Gross Profit | 31.4 | 14.8 | 112.6% | 108.4% |
Gross Profit Margin | 19.9% | 20.9% | -100 bp | -80 bp |
Adjusted EBITDA | 15.0 | 5.9 | 155.4% | 151.2% |
Adjusted EBITDA Margin | 9.5% | 8.3% | 119 bp | 127 bp |
Adjusted EBITA | 13.6 | 5.1 | 168.7% | 164.5% |
Adjusted EBITA Margin | 8.6% | 7.1% | 145 bp | 152 bp |
Conversion Margin | 43.2% | 34.2% | 900 bp | 903 bp |
Revenue in APAC increased 123.4% to EUR 158.3m in Q1 2022. The Group generated 43.6% of organic growth in the region, as robust end-market demand in most markets mitigate the impact of new lockdowns in China. Acquisitions contributed 74.5% of revenue growth, whilst FX translation represented a 5.3% tailwind during the period.
Gross profit increased 112.6% to EUR 31.4m during the period, representing margin contraction of 100 bps to 19.9% due mostly to negative mix effect. Adjusted EBITA grew 168.7% to EUR 13.6m during the period, reflecting a 145 bps adjusted EBITA margin step-up as scale benefits from our growing footprint in the region offset the impact of some of the recent acquisitions.
Holding companies | Q1 2022 | Q1 2021 | Reported Change | Constant Currency |
Adjusted EBITA (EURm) | -7.3 | -5.1 | 43.0% | 43.0% |
As % of Group Revenues | -0.8% | -0.8% | 8.6 bp | -2.2 bp |
Operating costs at the Group’s holding companies, which relate to the Group’s non-operating entities as well as the head office in Belgium, were EUR 7.3m in Q1 2022, compared to EUR 5.1m in the previous year. Relative to total revenue, operating costs at the Group’s holding companies remained broadly stable during the period.
Outlook
Our strategy of driving growth is underpinned by a constantly strengthening lateral value chain, supported by continuous investments in innovation capabilities and digitalization, as well as a commitment to sustainability to create long-term value. In line with this, we are positive that we should be able to generate 8-10% of revenue growth and deliver 10-15 bps adjusted EBITA margin expansion per year in the medium-term.
Although uncertainty from ongoing supply chain disruptions as well as sustained inflation persist, the outlook for the full year 2022 remains positive for Azelis. Given the strong performance in the first three months of the year, the management expects the Group to exceed the recently-upgraded consensus estimate of EUR 325m in adjusted EBITA for the full year by at least 10%.
Financial review
Azelis Headline Results | Q1 2022 | Q1 2021 | F/X Translation | M&A Growth Contribution | Organic Growth | Total Growth |
EMEA | 450.5 | 297.1 | -1.8% | 19.5% | 33.9% | 51.6% |
Americas | 366.5 | 243.7 | 7.4% | 15.1% | 27.9% | 50.4% |
Asia Pacific | 158.3 | 70.9 | 5.3% | 74.5% | 43.6% | 123.4% |
Group Revenue | 975.3 | 611.7 | 2.7% | 24.1% | 32.6% | 59.4% |
EMEA | 111.6 | 71.1 | -1.4% | 14.9% | 43.4% | 56.9% |
Americas | 92.9 | 52.0 | 7.4% | 32.1% | 39.3% | 78.8% |
Asia Pacific | 31.4 | 14.8 | 4.2% | 54.8% | 53.6% | 112.6% |
Group Gross Profit | 235.9 | 137.8 | 2.5% | 25.7% | 43.0% | 71.3% |
Revenue
Revenue increased 59.4% to EUR 975.3m in Q1 2022, largely driven by organic growth of 32.6% as demand remains strong across most of our end-markets. Revenue contribution from acquisitions was EUR 147.5m representing topline growth contribution of 24.1%, whilst FX translation represented a 2.7% revenue tailwind.
Revenue in Industrial Chemicals increased 60.0%, reflecting continued strong demand in the segment, and in particular in the CASE end-market supported by strong building and construction activities. Likewise, the recovery in Life Sciences market continued to strengthen, generating 59.1% revenue growth, with Food & Health as well as Pharma end segments starting to normalize to pre-Covid levels.
Profitability
Gross profit increased by 71.3% to EUR 235.9m in Q1 2022, implying gross profit margin of 24.2%. The 167 bps improvement in gross profit margin was due to positive mix effect as well as the Group’s pricing management discipline.
During the period, adjusted EBITA increased by 94.6% to EUR 116.0m, resulting in a step-up of 215 bps in adjusted EBITA margin to 11.9% as strong organic growth and the benefits of scale mitigated the impact from the ongoing pressures on the supply chain.
Cash Flow and Financing
Free cash flow was stable at EUR 57.9m, representing cash flow conversion of 49.5%, versus 96.0% in the prior year. The decline was driven by the temporary increase in working capital investments on the back of the strong revenue growth. Over the last twelve months, free cash flow conversion ratio was 55.5%.
Net working capital to sales was 14.6% at the end of March 2022, compared to 10.8% in the prior year, due largely to higher inventory levels to support the ongoing strong demand, as well as the impact of new acquisitions. Working capital represented 55 days of revenue at the end of March 2022, compared to 61 days at the end of December 2021 and 39 days at the end of March 2021.
Capital expenditure in Q1 2022 was EUR 4.4m, compared to EUR 2.3m in the prior year, as the Group continues to invest in digital and IT infrastructure, as well as laboratory network to support our growth.
At the end of March 2022, net debt was EUR 965.9m, with the leverage ratio reduced to 2.6x, versus EUR 1,155.5m and 5.0x respectively at the end of March 2021. At the end of the period, the Group had liquidity of EUR 287.3m in both cash and unused revolving credit facility (RCF).
Post-closing event
At the end of April 2022, Azelis successfully upsized its existing Euro Term Loan and Revolving Credit facilities by EUR 350m. The additional financing was provided by the Group’s existing club of banks, as well as 2 new bank partners. The additional funds were provided at the same terms and conditions as the original facilities in September 2021, with the amount split between the term loan and RCF on a pro-rated basis. The transaction further optimizes Azelis’ balance sheet, and strengthens the Group’s ability to respond to growth opportunities as and when they arise.
[1] Combined annual revenue in 2021
[2] Company-compiled consensus estimate for full year 2022 adjusted EBITA