EU HEALTHCARE: Eurofins (ERFFP: Baa3/ /BBB-) Q1 25 Preview 23rd April
We do not see an upgrade on the horizon near-term but improved governance standards and steadily improving revenue generation may warrant taking a look given how wide it trades. Bonds have recovered significantly in the past 10 days: up to 30 tighter. Tariff exposure is low.
- Company reported leverage of 1.9x at YE24. This is Net and excluding Hybrids (1bn at YE)
- Target is to reduce leverage further to 1.5x by 2027
- Leverage reduction is likely to be back-ended as Eurofins is still investing in IT and bolt-on acquisitions
- Aiming for 6.5% organic growth + €250m p.a. revenue add from M&A (equates to around €500m spend p.a.)
- Revenue is now above Covid levels and analyst expectations are for 6.8% growth in 2025. Down from the >20% M&A fuelled levels before Covid but still healthy
- Adj Margin was 22.3% at FY24 with the aim to grow to 24%. Company explicitly said that this would be delayed to 2027 due to Capex and M&A
- Announced some governance improvements recently. The company is buying 30 sites from Analytical Bio (Martin family) to remove related party risks. This will add 0.2x to leverage over next 4 yrs. The company also appointed a new Independent Non-Exec to the board.
- Moody's moved to Stable (from Pos) in 2023. Criteria for Upgrade would be Moody's Adj Debt/EBITDA <2.5x and RCF/NetDebt >30%. I would put Gross Debt + Hybrids/EBITDA @ 3.2x so an upgrade is off the cards any time soon
- The recent Hybrid issue benefits from having an S&P rating before the Reset date. Some way off and it does not have to be IG.
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US TSY OPTIONS: BLOCK: Large Jun'25 10Y Volatility Buying
- +15,000 TYM5 107.5/113.5 strangles, 35 vs. 110-18.5/0.05% at 0917:53ET
- Additionally, +9,000 TYM5 108/113 strangles, 45 vs. 110-19/0.05% on screen
UK: BOE MNI Instant Answer questions for March 2025 meet
The BOE policy decision is due March 20, with the answers to below questions published at midday:
1. Was the Bank Rate changed, and if so by how much?
2. Number of members voting for cut of 50bp or greater?
3. Number of members voting for 25bp cut?
4. Number of members voting for unchanged rate?
NB: On questions 2-4 we will name the dissenters (and the magnitude of dissent)
5. Did the MPC drop reference to a “gradual approach” to removing “policy restraint being appropriate” from their Statement?
6. In the guidance, alongside a “gradual” approach to removing policy restraint, did the MPC use “careful”?
7. Did the MPC again say Bank Rate is likely to “remain restrictive for sufficiently long”?
8. Did the MPC again say it will “decide the appropriate degree of monetary policy restrictiveness at each meeting”?
9. Did the MPC leave its guidance paragraph materially unchanged versus the February policy statement?
EQUITIES: US Cash Opening calls
US Cash opening calls, set for a steady open, SPX should be close to Yesterday's mid range, as the Emini also trades at Yesterday's mid pre Cash open.
- Calls: SPX: 5,659.3 (-0.3%); DJIA: 41,799 (-0.1%/-43pts); NDX: 19,708.3 (-0.5%).
