2018 Annual Report - Eurofins

Key Figures ? Eurofins Scientific Group

Revenues in EUR million

Adjusted EBITDA in EUR million

Operating Cash Flow in EUR million

Average Number of Full Time Employees (FTE)

EUR = Euro 5Y CAGR = Five Year Compound Annual Growth Rate Average Number of Full Time Employees (FTE) = average weighted number of employees, expressed as full time equivalent (FTE)

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THIS PUBLICATION CONTAINS FORWARD-LOOKING STATEMENTS AND ESTIMATES THAT INVOLVE RISKS AND UNCERTAINTIES. THE FORWARD-LOOKING STATEMENTS AND ESTIMATES CONTAINED HEREIN REPRESENT THE JUDGEMENT OF EUROFINS SCIENTIFIC AS OF THE DATE OF THE PUBLICATION. THESE FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES FOR FUTURE PERFORMANCE AND THE EVENTS DISCUSSED IN THIS DOCUMENT MAY NOT OCCUR. EUROFINS SCIENTIFIC DISCLAIMS ANY INTENT OR OBLIGATION TO UPDATE ALL OR ONE OF THESE FORWARD-LOOKING STATEMENTS AND ESTIMATES.

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Shareholders' information

Listing Euronext Paris (IPO on 24.10.1997)

Segments/ Indexes Paris: MSCI Europe, Euronext 100, SBF 120, STOXX Europe 600, SRD & Compartment A

Industry Group/ Prime Sector Healthcare/Healthcare Providers

Codes ISIN: FR0000038259

Tickers Paris: Reuters EUFI.PA, Bloomberg ERF FP

Nominal Capital (at 31.12.2018) EUR 1,775,215.80 (17,752,158 x EUR 0.10)

Simplified Ownership Structure Free Float 63.9% Martin Family 36.1%

2018 Share Price development Eurofins Scientific: -35.8% SBF 120: -11.7% Next 150 Index: -22.0% CAC 40 Index: -11.0% Euro Stoxx 50 Index: -14.3% Nasdaq Composite Index: -3.9% Dow Jones Industrial Average Index: -5.6%

Since its IPO in 1997 Eurofins has been one of the best performing shares in Europe, with a CAGR (Compound Annual Growth Rate) of its share price of 28% between its IPO on October 24th, 1997, at 1.83 and December 31st, 2018 at 326.0.

Analyst coverage Berenberg Bryan Garnier Exane BNP Paribas Gilbert Dupont Goldman Sachs HSBC Jefferies Kepler Cheuvreux MainFirst Morgan Stanley Oddo Soci?t? G?n?rale

Thomas Burlton Bruno de La Rochebrochard Allen Wells Guillaume Cuvillier Suhasini Varanasi Murielle Andr?-Pinard Will Kirkness Aymeric Poulain Nicolas Tabor Edward Stanley Christophe-Rapha?l Ganet Jean-Michel Belanger

Investor Relations Eurofins Scientific Group Phone: +32 2 769 7383 E-mail: ir@

Internet

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Contents

I. MANAGEMENT REPORT as of 31/12/2018 .............................................................................................. 4 1 Key Performance Indicators (KPIs) ......................................................................................................... 4 2 Message from the CEO............................................................................................................................. 5 3 The Business............................................................................................................................................. 7 4 Financial and operating review................................................................................................................ 16 5 Environment, Social and Governance Reporting................................................................................... 23 6 Risk Factors .............................................................................................................................................. 28 7 Eurofins Scientific SE, the Group Parent Company .............................................................................. 40 8 Corporate Governance ............................................................................................................................. 40 II. CORPORATE GOVERNANCE .................................................................................................................. 41 1 Corporate Governance Charter of Eurofins............................................................................................ 41 2 Corporate Governance Statements for the Period Ended on December 31st, 2018 ........................... 54 3 Statement of Persons Responsible for the Annual Report ................................................................... 70 III. ANNUAL FINANCIAL STATEMENTS ....................................................................................................... 71 1 Consolidated Financial Statements ........................................................................................................ 71 2 Auditor's Report on Eurofins Scientific SE's Consolidated Financial Statements............................. 132 3 Annual accounts - EUROFINS SCIENTIFIC S.E. ..................................................................................... 139 4 Auditor's Report on Eurofins Scientific SE's Annual Accounts ........................................................... 154

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I. MANAGEMENT REPORT as of 31/12/2018

1 Key Performance Indicators (KPIs)

Developments in some of Eurofins' Key Performance Indicators (KPIs), as illustrated by the charts below, are discussed in detail in later sections of this report.

Revenues EUR m

Adjusted EBITDA EUR m

Operating Cash Flow EUR m

Average Number of Full Time Employees (FTE)

Adj. Net Profit to Equity Holders EUR m

Adj. Earnings Per Share EUR (Basic total)

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2 Message from the CEO

I am pleased to report another set of strong results for Eurofins in 2018, the third year of its five years growth acceleration programme. In 2018 Eurofins made very good progress towards its operational objectives for 2020 of building an unmatched state-of-the-art global laboratory infrastructure in its markets.

Some of the highlights of 2018 include:

Organic growth10 was 4.5% in FY 2018, over 6% excluding Clinical Diagnostics which was affected by sharp one-off price reductions in Q4 in France and tests coverage and reimbursement cuts, particularly at Boston Heart Diagnostics in the U.S bringing annual revenues to EUR 3,781m in spite of -2.9% negative FX effect vs. 2017 average rates.

2018 was another strong year of M&A activity for the Group, with ca. 50 acquisitions closed during the year, representing annual revenues of ca. EUR 720m in FY 2018, for a total investment of about EUR 1.2bn.

Adjusted1 EBITDA3 of EUR 720m in FY 2018, in line with the Group's objectives (EUR 700m), resulting in a margin of 19.0% (+30bp vs. FY 2017 in spite of negative FX effects also on EBITDA). Reported EBITDA of EUR 651m, a +27% increase vs. the previous year, in line with total revenue growth and representing 17.2% margin.

The mature scope11 of the Group, now representing 93% of total Group revenues (EUR 3,505m) up from 91% in 2017, posted an adjusted EBITDA margin of 20.5%, stable yoy, despite the margin dilution caused by 2017 and 2018 acquisitions (2017 acquisitions at 19.5%, +160bp yoy, and 2018 acquisitions at 16.5% adjusted EBITDA margin for the part consolidated in 2018 accounts), thanks to productivity gains and better utilisation of the laboratory infrastructure.

Third start-up laboratory programme completed in FY 2018 with 15 new openings during the year, bringing the total number of start-ups opened since the beginning of the third programme in 2014 to 102 and to 145 since the year 2000. Start-ups launched during the third programme remain dilutive to Group's margin.

Basic adjusted earnings per share (EPS) increased 15% to EUR 20.11 in FY 2018 in spite of higher tax rate and finance costs for M&A and not yet benefitting from integrating recent acquisitions.

Strong operating cash flow8 generation up 34% to EUR 544m in FY2018, with net working capital below 5% of revenues. Free cash flow to the firm9 slightly decreased from EUR 192m in 2017 to EUR 183m in 2018, impacted by significant investments in laboratories and systems in order to build a leading global testing platform (capex of EUR 361m in 2018), the ramping up of costs in the Group's third start-up programme and the necessary

reorganisations linked to the many acquisitions made in 2017 and 2018 (SDIs2 of EUR 68m at EBITDA level in 2018, 9.5% of adjusted EBITDA).

Net debt to adjusted pro-forma EBITDA leverage stood at 3.38x as at 31st December 2018, below the Group's self-imposed limit of 3.5x. Over the coming years, as its five years infrastructure development programme should be completed by the end of 2020, Eurofins intends to deleverage as a result of improved cash flow generation from a reduction in capex, profitability improvement and lower M&A activity and revert back to its historical average leverage level.

Proposal to distribute a dividend of EUR 2.88 per share, a 20% increase vs. 2017 corresponding to 29% of basic reported EPS7 attributable to equity holders.

In FY 2018, the Group made significant improvements to its corporate governance and is expanding its annual report and disclosures on audit coverage, Board Committees' work, organic growth calculation and segment information. The Group's Board of Directors also mandated an independent third party audit on the authorization process of related parties transactions by its existing Governance Committee made up of independent directors only who approve these transactions, and created a Nomination & Remuneration Committee, whose work has been supported by an independent third party benchmark report on Board and CEO compensation.

Outlook: following two years of intense M&A activity and heavy investments into its leading global platform (mostly in state-of-the-art laboratories, start-ups and proprietary IT solutions), the Group will now increasingly focus on operational performance optimisation, which it expects should also improve its margins and cash flow generation. On the M&A side, after an exceptional level of ca. EUR 700m in revenues added in each of 2017 and 2018, Eurofins intends to be very selective and focus on deleveraging. As such for now, it intends to keep M&A investments under EUR 300m per annum on average in 2019 and 2020 and may not even reach that level in the absence of compelling assets.

At 2018 average exchange rates, Eurofins management has set the following objectives14 for the year 2019: EUR 4.5bn revenues, including 5% from organic growth and EUR 100m consolidated from acquisitions, EUR 850m adjusted EBITDA, and EUR 350m Free Cash Flow to the Firm9. These objectives reflect the beginning of a stronger focus on margins and cash flow generation and are accompanied by significantly reduced cash outflow resulting from self imposed limits of EUR 300m each for capex spend and M&A spend in 2019 and 2020. Eurofins will be completing its five years infrastructure global development programme in 2019 and 2020 and thus capex in laboratories and IT solutions, which remain relatively high until 2020, should reduce thereafter. The opening of new start-up laboratories should be minimal in 2019 and 2020.

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