Ladies, and gentlemen, welcome and thank you for joining Eurofins' Half-Year 2024 Results Call. Please note that this call is being recorded and will later be available for replay on the Eurofins Investor Relations website. Throughout today's presentation, all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session. If you would like to ask a question, you may press star, followed by one on your touch-tone telephone to register for questions. For operator assistance, please press the star key, followed by zero. 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 two of this presentation, subject to which this call and the Q&A session are made. I would now like to turn the conference call over to Dr. Gilles Martin, Eurofins CEO. Please go ahead.
Hello, everybody, and thank you for joining our half-year conference call. We have a small slideshow that is online and you can access, and I'm going to start on page five. We have had a quite strong set of results for the first half of the year. We are very pleased with the results. As those of you who have been following Eurofins for a long time know, the first half of the year is by far the weakest part of the year. That's due to seasonality, mostly in the northern hemisphere, and clients finishing their budgets in the fourth quarter. Typically, the fourth quarter is usually our strongest quarter. Considering that, the results of the first half are very good, and they are good on many aspects. Operationally, we're achieving a lot.
We're making very strong progress in our digitalization initiatives and developing the tools, the bespoke IT solutions to run our labs most efficiently and in a standardized way. The more we look, the more we find the vast diversity of IT solutions everywhere, and we now have a clear path after successful pilots to rationalize a lot of this variety and, of course, achieve better service to clients in many areas. So that's one of our main objectives: to be the most digital company in our world, which, of course, brings a lot of other benefits because once we're very digital, we can use AI much more with the large amount of data we have. We can use robotization in our labs, streamline things very efficiently. So that's very encouraging, and the results are especially encouraging because we are carrying a lot of cost.
We are carrying a lot of cost that will not go on forever. First, we're rebuilding our IT infrastructure in independent zones with the latest security tooling and the most resilient structure we can find, deploying a lot of standardized applications also in the finance, treasury, et cetera. And so after things we've already completed long ago, like standardizing purchasing.
So a lot of investments, and in spite of all the spend we have in those investments, in spite of all the money we spend on startups, in spite of all the money we spend on building new labs, moving our labs into those large hubs, and building many more spokes to be close to customers for the time-critical assays, in spite of a large spend of M&A, in spite of significant share buybacks that we have been accelerating already in the first half, we still managed overall to reduce our leverage, and that's quite encouraging, and I see that continuing. So that's, in a nutshell, a quick summary of the first half. Of course, we can come back to specific aspects during the question-and-answer session. Laurent will talk more about financial aspects. On slide 6, you see the margin improvement.
We already had a 120 BP improvement in the second half of 2023. This is accelerating. Now we've got a 220 BP margin improvement. Again, in spite of all the costs we have in IT, et cetera, that are not CapEx, and they are really spend that we do to reorganize our IT and a lot of development costs and all the engineers deploying the software, designing the software, et cetera. So quite encouraging. For those of you who wanted more details, I think we are probably on that level one of the most transparent companies in the world because we give you not only a full segment reporting by geography, and we still feel that geography is the best way to give granularity to our results because there are true differences across continents between the performance in America where the economy is still quite dynamic and Europe where it's less.
We're also sharing with you the organic growth, the revenues, and organic growth performance by type of activity. So we give you two dimensions in that sense. What you see there is we're doing quite well overall. You probably, those of you who track other companies like Thermo, Danaher in other sectors, or, for example, Charles River, will know that the pharma industry is a bit soft, has been for a number of quarters, and actually we continue to grow, so we're positive. We are fortunate to be in some of the more resilient areas of service to the pharma industry. It has been a bit softer, especially in Q2, and the pharma industry is well-funded. There's a bit of hesitancy on project starts and so on. We think this is temporary and will pick up.
Exactly when is hard to say, whether it's Q3, Q4, Q1 of next year, but we see overall we're still very bullish on that activity. It has been a little bit softer, especially the second quarter. Otherwise, you see the usual higher growth in like, so Food and Environment Testing and Consumer Products have started, and Technology has picked up again. And the Clinical is always low single digits, low to mid single digits. So it's actually Clinical did relatively well in the first half at 4.5% organic growth, and you have more details in the press release. On page eight, we share what we do on buildings. We continue to do that. We continue to build new buildings.
We've had discussions with many of you regarding the buildings that my personal holding owns, and we are getting them all evaluated by third parties, and we'll give Eurofins the opportunity to buy them should the non-related shareholders so decide. It doesn't have to be all in one go. We don't want to stretch the balance sheet. We can replace some of the things we wanted to do externally by those buildings if our shareholders want that. Anyway, we'll all do that in a very transparent way when all of that is ready. On page nine, we talk a bit about startups. So we continue to do many startups.
We still feel acquisitions are expensive, but when Eurofins is trading at 8x or 8.3 x EBITDA, obviously, looking at external acquisitions that go for 10 or 12 or, for the good ones, 15, seems a bit as not the top priority, so we'd rather buy back our shares in those circumstances until this discount, basically what we feel is certainly not justified, is gone. We should rather buy back our shares. By the way, we are doing that. We announced it, and we're doing it, but we don't have to give you every detail of what we do and with conditions. Then acquisitions. We continue to do acquisitions. We have headroom. We'll have even more headroom as our profits continue to increase, and we're confident that they will continue to increase as per our plans. So we have a pipeline.
We still find acceptably priced acquisitions, mostly small, and if they fit well, if they have the right management, we still can find smaller companies that we can buy from 5x-8x EBITDA or sometimes slightly more. And so we continue to do that. So I think in this quarter, apart from the slight softness in biopharma, which we find is very temporary, everything's on green or very green, and the outlook is quite good. And Laurent will give you a bit more details, a little bit more color on the financial aspect.
Thank you, Gilles. Good afternoon. It's my pleasure to present you with a very good set of results for the first half. As you can see on slide 12, we had clear improvement on all fronts in the first half with a revenue growth of 6.5%, a good increase of our EBITDA by 21% year-on-year, reaching EUR 740 million, a very good increase of our Adjusted EBITDA margin, also a 220 basis points improvement year-on-year, reaching 22.1% ahead of our full-year objective, and a decreased SDI to only 6% of EBITDA. So all these translated in a very strong increase of net profits by 46% year-on-year at EUR 151 million.
Moving to slide 13, you can see that our revenue growth of 6.5% in the first half was mostly relying on a good organic growth of 5.6%, and we had a slight negative FX impact of 0.5% and a good contribution from M&A by 1.1% of revenues. On slide 14, our performance by segment shows a very strong improvement of margins in all regions, and especially in Europe, with a +330 basis points increase year-on-year thanks to volume, price, and cost control measures. This was particularly strong in the DACH region, and while France remained accretive to the profitability of the region. In North America, despite a slightly more moderate growth of revenues, the margin showed an improvement also of 190 basis points year-on-year thanks to cost discipline. In the rest of the world, we had overall a good growth and a good margin progress.
Moving to slide 15, you can see that we had a very strong cash flow in H1 . Our free cash flow was almost multiplied by four in the first half. It increased by EUR 205 million -EUR 279 million. We had a very good cash conversion at 39% of EBITDA and more than 100% of our net profits. Going forward, we aim at self-financing all our needs, whether they are M&A, share buyback, CapEx, or startups. On slide 16, as mentioned earlier by Gilles, we continue to invest to develop a unique competitive advantage. Though we hit our CapEx level to 7.4% of revenues, we still spent 25% to purchase and build out our own sites, 21% on IT, and 44% on lab equipment.
On slide 17, we had a better net working capital at 6.2% of revenues thanks to improvement on both the DSOs by one day and the DPOs by two days. To conclude on slide 18, you can see that we have a very healthy leverage of 1.9 turns in H1 , well within our target range. We have no more debt maturity until year-end due to the strong cash generation in the first half and the early redemption of the July bond that we paid in June. Overall, we have a very strong balance sheet, well-spread debt maturities, and very ample liquidity with over EUR 1 billion of untapped credit lines. Now I turn back the microphone to Gilles for the conclusion of this presentation.
Thank you, Laurent. Another thing where we spend a lot of money on is innovation.
So our labs are pioneers in many areas in tests that will have a big impact in the future. We'll just give you a couple of examples, but we have what we believe is the best prenatal testing test, which covers not only Down syndrome but many other diseases. And that's also acknowledged by peer-reviewed in peer-reviewed publications. Another area, everybody talks about AI, and AI in biopharma discovery is going to be starting to be actually a very useful tool. And Eurofins has huge datasets, being the largest company in this field or really the top companies serving the very early phase discovery phases. We generated over the years a huge amount of data, and we start to have good traction from clients in our AI-based discovery tools to accelerate their development.
And of course, when we do those programs, we can benefit from the follow-on work in our laboratories. Another thing where we spend a lot of money is TGI. Of course, it is part of our separately discussed investment paradigm of over $10 million or probably more than EUR 10 million in Clinical trials, the validity of the unique and proprietary tests that we have. And of course, those are things we could stop doing tomorrow if we decided not to, but we do them and we invest that money because we feel the result of those Clinical trials can lead to very high and very also profitable markets. So we're not only a lab company doing routine testing like any other labs. We are really developing unique solutions because we believe in the future they will generate very significant growth and very significant margin.
But of course, we cannot talk about all of them because we have many, many such initiatives throughout our group. On the outlook on page 22, maybe something to clarify. We wrote it in a press release, but we don't give guidance. We're not in the business every quarter of adjusting what we're going to do or what we're not going to do. We try to be transparent for long-term investors. We try to be very transparent about what we do, what our plans are, what we think. Period. Of course, to achieve certain things, we have to invest, and we do invest a lot of money.
We think, considering we are in very good sectors with good organic growth, good sector growth potential, and a big advantage to the biggest player in the sector and the most efficient players, the sector offers very high return on capital employed on organic developments, slightly lower on inorganic developments because we incur goodwill, which we think is a very good place to deploy capital. The main criteria for us is return on capital employed. We have a hurdle rate that we define, and as long as the interest rate remains in a certain range, we don't change it. It was long ago 16%, then the interest rate came down a lot. We brought it down to 12%. We brought it back up to 16%, and that drives most of our decision.
In terms of doing an organic investment, buying a company, we want every investment that we make to achieve the 16% hurdle rate at least in year three. Then we try to set an objective of organic growth, and that objective depends on the level of inflation and other aspects. So that's why that objective is not for each quarter. That's an objective that we set as what we think we can achieve over long periods, and it's currently 6.5%. Probably it's too precise. We should rather revert long-term to what other companies do with high single digit or mid to high single digit, et cetera. We might do that at some point once we've achieved those objectives that we have stated. And every year, we set an objective for the year. We're not in the business of setting objectives every quarter, changing objectives every quarter.
Unless something very significant happens, we just keep those objectives. Some of you have observed that we have a very significant margin improvement in the first half. By not changing our objectives, we're not saying that we will have a bad second half. We're just simply not changing our objectives. Each of you is totally free to set whatever objective they want for us or whatever result they think we're going to do in the second half. We're just saying nothing about it. To summarize on page 23, we've had, as Laurent explained, a very good half year, and we achieved a lot of things operationally. The financial results are very good. The things we can influence, I think our teams did a good job. We think we will continue to do a good job.
We don't know if biopharma will stay a bit soft for much longer or not, but anyway, we can adjust the cost to whatever growth we're going to have. We have this objective of 24% margin, and we're convinced we will get there by 2027 or before. We have those objectives on cash flow and those objectives on return on capital employed, and that's what we are sticking to. The second half might be favored by a bit more working days, but that's not the main thing. The main thing is that directionally, we think in the current inflation environment of anywhere between 2%-3%, our overall secular organic growth target of 6.5% is in the ballpark of what is achievable over long periods.
As we do all those investments and we benefit from the efficiencies from all those investments, we have quite some headroom to improve our margins and the resulting cash flows. That's what we can say about the outlook. I'm sure you have some questions, and I'm happy to turn over the microphone to you for questions.
Thank you very much, ladies, and gentlemen. At this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touch tone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you are using speaker equipment today, please lift the handset before you make your selections. Anyone who has a question may press star one at this time. Thank you. The first question will be asked by Suhasini Varanasi of Goldman Sachs. Please go ahead.
Hi, good afternoon. Thank you for taking my questions. I have three, please. One on the top line, the softness that was there in pharma. Do you get a sense that this softness will continue through the rest of the year, or do you expect it to pick up in the second half of 2024? Second is on SDIs. They did track a little bit lower year-over-year versus the full-year number that you gave of EUR 125 million. So can this be lower than your full-year number, or do you expect it to pick up in the second half? The third question is on margins. I appreciate the color that you gave in the commentary, but just to be clear, there is no reason why we should not expect a seasonal pickup in the second half of the year versus the already strong first half margins. Thank you.
Thank you very much. The top visibility on pharma, pharma has a lot of money. The big pharma has a lot of money. Biotech is starting to be also better funded. There's a bit of hesitancy in starting projects, and they're reviewing a bit their pipeline. It's very hard to time. I think there are other companies that are in the same boat that are serving the biopharma in a big way. Some of them are saying they see a pickup already, the first sign of a pickup, or pointing to Q4 as a pickup. Frankly, it's difficult to predict the future about that. Maybe later part of this year, early 2025, from what we can tell, but predicting the future is always difficult. I think overall, we are doing slightly better, actually, than other biopharma-exposed companies. On the SDI, we made an objective. That's what's in our budgets.
Maybe we're going to come out a bit lower than that. It depends on the ramp of startups. We have many startups that are starting. How fast do they ramp is a question. We have some reorganizations and moving also exactly how they land. So we opted not to change anything on that or not to change anything of our objectives. Could be we land below 125. Margin, yeah, we have no reason to think that the second half would be a bad second half. That's what I can say. On the other hand, we will not change objectives because we set objectives once a year, and unless something really terrible happens, we don't change them. They are already very detailed and very precise, probably too detailed and too precise. But they are like this, and we'll see how to formulate it maybe next year.
So we have a good outlook on the second half, but it's still the second half, so we're not going to otherwise. It's a lot of work to ask our teams to update their planning on a rolling basis every month or every quarter. We don't want to go into that.
Okay. Thank you.
Thank you very much. Your next question is coming from Zach Al-Qaryooti of Morgan Stanley. Zach, go ahead.
Hi. Thank you for taking my questions. I have two, please. So in your recent press release responding to the short seller allegations, you commented on the fact that you might increase the share buyback program quite significantly. So given the good free cash flow performance in the first half, why was this not announced today? And then secondly, given SGS this morning reiterated that they intend to keep their Crop Science business, could you just confirm, please, that you still expect the deal to close or whether anything's changed there? Thank you.
Thank you very much. We already announced that we will increase our share buyback, so I don't see the point of announcing it a second time. That's all I can say. We do disclose every three days or every five days. I don't know what we buy back every five days, every week, and you will see what we buy back. Now, of course, that depends on share price evolution, all kinds of factors. Yes, we intend to do what we said we would do. We have authorization you can look into for buying back shares from the general assembly. We have quite a lot of headroom to do that depending on share price evolution.
As I said, at the moment, considering the enormous discount that we suffer, I mean, it's close to 50% on an EBITDA basis, EBITDA multiple basis, obviously, this is something that we have to consider. We also have a lot of good ideas to deploy capital at high rates of return internally. So it's not our job to buy back the whole free float, but this is something we obviously should consider going forward, and we announced that we would do it. And so this is what we're doing. And the Crop Science, well, we have a difference of opinion of interpreting the contract. We believe the acquisition contract with SGS is still valid, and we're going to pursue our rights to get this transaction to close. And of course, this will have to be decided by the right bodies.
We cannot comment, of course, on the details of that. As we announced in the press release, we will pursue this deal to closing.
That's very clear. Thank you.
Thank you very much. Your next question is coming from Himanshu Agarwal of Bank of America. Please go ahead.
Hi. Thank you for taking my questions. Just one follow-up on the pharma business. I think in the past, you have mentioned that in a weaker macro environment, you benefit from more outsourcing by pharma companies. So isn't that the case in the current environment? If you can clarify on that. And secondly, if you can talk about given your decentralized structure, and I understand you are trying to build a centralized IT infrastructure, digital infrastructure. So how easy or difficult it is for you to build that? And also, how do you allocate the associated costs to different subsidiaries that you have?
Thank you. More outsourcing in a weaker environment, the environment is not so much weaker for the pharma industry. I think they're doing quite well overall, and they're making a lot of money. Of course, if the environment were to get tougher, that's usually what they do. They look at internal costs and look at what they can outsource. At the moment, I think from what I hear from our pharma team, it's more which program to prioritize. And so overall, the economic environment is a bit hesitant. It's doing well, but people are a little bit hesitant. And it could actually pick up all of a sudden. It's more a matter of mood than a bad economic environment. Yes, maybe some misunderstanding of decentrality.
We have independent companies run by independent entrepreneurs who are empowered to take decisions themselves to serve the client's world, to decide who they hire, who they fire, what they pay people, what they charge for their tests, and everything. However, we have clear areas of activity. And within food testing, there are specialties like pesticides, dioxins, and they are very different from microbiology. And we develop IT solutions specifically for each of those activities. But those IT solutions can be used worldwide. So all those labs can use the same IT solution. We have a different level of advancement in the deployment of those IT solutions. In BioPharma Product Testing, we have a very high level of deployment of the identical solution, maybe 80% worldwide for the central LIMS systems, maybe 60% for the online access for clients. And of course, there are other tools that we are finalizing.
We do think that by the end of 2026, we'll have 100% deployment of the whole suite of tools. But then those are the same tools everywhere. So the labs can operate completely autonomously, but they use the same IT tools because you're talking EUR 50 million-100 million, maybe more for a business line, maybe EUR 200 million to develop a complete suite of IT solutions on those business lines. So none of those individual labs could afford it. And you get from that enormous amount of transparency, of also efficiency. And for clients, they get the data in the same format from any lab around the world. So it's very expensive. So to your question, I mean, our IT costs are running now maybe overall, not even counting what we—sorry, the little bit that is capitalized, something like 6% of our revenues, maybe more.
It's at least double what it should be long term. We are in the middle of a peak investment phase for these digitalization programs. Not only will that go down when we have finalized this IT segregation of our infrastructure in smaller, more resilient zones, and also finalize the bulk of all those developments and the associated, let's say, operational problems linked to the deployment when you change the software for a while. It also reduces the effectiveness of the business that gets a new software. But once all that is behind us, we expect very significant improvements in productivity, efficiency, quality of service, as we already see where it's already done. That also makes us very bullish about the future.
Thank you. If I may just ask one more on the share buybacks. I see that in the last one month, you have stepped up the buybacks, doing around EUR 12 million every week. You have almost used half of the EUR 200 million of share buybacks that you announced last October. So should we expect—and given your earlier comments—should we expect another buyback program to be announced in line with one of your responses in the future?
That's possible. We'll see. I think it's quite funny what happens in the market. We see it from inside. We see claims that have been leveled against the company that are completely absurd. To claim that we invent cash, that basically claiming that all our accounts are a fraud, that we're like, "Then we should do another job." It's really completely crazy. And I think investors are not stupid. At some point, they will realize that this is just nonsense. And while some of those that are not close to the company might have somehow been scared because Muddy Waters sometimes got it right, here they got it very wrong. And some investors know that. So we're going to have to see how the share price evolves over the next few weeks and months, and we'll react accordingly.
What is clear right now is that we believe that buying back our shares is a very good investment.
Thank you.
Thank you very much. Your next question is coming from Neil Tyler of Redburn Atlantic. Please go ahead.
Thank you. Yeah, good afternoon, Gilles. A couple left, please. Firstly, in your statement this morning, there are numerous mentions of productivity improvements and site rationalizations. I know you've never been one for announcing sort of major restructuring initiatives, but it seems as if there's been quite a substantial response to the margin decline. Can you perhaps frame for us how far through those measures you are and whether, in terms of both the costs incurred and the benefits derived from those, if you sort of synthesize them all into one bundle? That's the first question. And the second one, relating to the investment in owned sites. Can you just sort of help me understand why you see it as a priority to purchase those sites owned by related parties? Is that sort of governance over sort of financial benefit?
Because I would have thought that one of the motivations being to try to avoid sort of egregious rent increases, that would be less of a likelihood for those sites that are owned by your holding company. Thank you.
Yes, I couldn't agree more with you. I think we have to deal with the market, and a lot of people in the market don't have time to do their homework and might have opinions that we don't share. Nonetheless, we take into account everyone's opinion. I do think that my holding is Eurofins very well, and it's a landlord that's not going to take advantage of the company. The current situation for me is probably the best for Eurofins, and I would agree with you. We should probably economically, from a pure cash for the company, profit for the company, et cetera, point of view, we probably could wait two, three years, as we had planned before, do the external acquisitions of buildings. It's not so many that we need, by the way, to finish our plan. 2027 is not so far out.
Anyway, some of that will happen anyway because it started. We are already constructing sites. We have sites that we need to redevelop and so on. So some of that will happen anyway. But yeah, it's more governance. It's more, how do you say that, appearance. And I think for a company of our size, it doesn't look good that there are related party transactions. We do our best. There's a special committee on the board that is tasked with that. We do our best to ensure everything is at arm's length and is fair. Well, it's very easy for short sellers to try to make that look unfair to the company. And some of our investors think it's a nuisance that's better avoided.
In that sense, if I look at it purely from the volatility of the share price point of view, there is a case to be made to prioritize buying back those buildings. Although economically, I would agree with you, it's probably not the best thing to do. We have to consider all points of view. Anyway, we'll see what the majority of our investors decide because I don't intend to take that decision myself. We'll propose it. My holding will give Europeans the option to do it. Then Europeans can decide what our non-related shareholders can decide if they think it makes sense or not and how fast. Now, in terms of your first question on productivity improvement, we are decentralized.
I don't believe in those programs where you say, "Yeah, we're going to cut 10% of our employees everywhere," because it's not one size fits all. We have areas that grow very fast, which are adding a lot of people. And what our teams did, there were areas that were built up during COVID, especially in Clinical Diagnostics, where indeed they had hired a lot during COVID. And after COVID, they might not have been fast enough in adjusting. And this is not finished. We also have shared that Europe has been soft overall, and especially in food testing for the last two years, although it's picking up a bit. We have some adjustment to do there, and we did it. And it's not completely finished, but it's also part of the program.
Sometimes we just need to finish building the hub labs before we can consolidate the local labs. So there are things that take time. We break down the amounts in terms of what are the core restructuring because in our SDIs, we have EUR 43 million, I believe, maybe EBITDA level. And the bulk of that is for our startups. And TGI is maybe EUR 10 million of it or close to EUR 8 million of it. So a large part is for our startups. A part of our restructuring is only EUR 15 million. I think SGS was EUR 30 million this quarter, this half year, or something like that. So we don't have massive restructuring, but we have some, and we let it to the leaders of our companies to decide or our countries to decide what makes sense. We still have some to go, but it won't be huge.
But we still have some to go. And we also have some companies that are really isolated in the market where we don't see them becoming leaders. We can consider selling them. We did small sales here and there over the last two or three years. We might continue that. Some we might simply close because we don't see them becoming leader in their market. So we flag that over this year, next year. And that's why on the SDI question, I wasn't super specific as to the EUR 125 million because it depends on the judgments of our leaders on the ground, whether they should do it, what solutions they find, if they can pivot the companies to better markets, et cetera.
So for this year, we have quite a buffer we've planned enough for them to do what is required in doing this streamlining, although we don't think we're going to need all that much money. Sorry that I can't be more quantitative. But next year, we'll give you an update on this when we said.
Great. Thank you. And just for those businesses that are still under review, I mean, presumably they're sort of fairly de minimis in terms of their contribution currently. But do you have a perspective on the percentage of revenues that are still under review?
We said it's less than EUR 100 million.
Okay. Thank you.
Thank you very much.
Thank you very much. Your next question is coming from Arthur Truslove of Citi. Please go ahead.
Thank you very much. Good afternoon, everyone. So three from me, if I may. First question, please. On the margin, you've clearly grown the margin really, really well. I guess biopharma has obviously underperformed growth-wise, and I would have understood that that was higher than group. North America looks like it's grown organically at high twos in Q2. I guess my question here is kind of, given those things, can you just provide a bit more detail on how you managed to do this? And if you have done any kind of restructuring, when that happened and when the benefit kicked off? Question two, you've clearly done very well increasing the payables days and reducing the receivables days. Are you able to just articulate a little bit more on how you've done that?
Then the third question, from the P&L in the first half report, you've got finance income of EUR 14.9 million, of which around 13.5 million is in separately disclosed items. Are you just able to say what the separately disclosed element of that finance income is, please? Thank you.
All right. So multiple questions. Yes, but on the margin, we had flagged already last year and maybe after Q1 that we carried a bit too much stuff and so on, among others, after COVID. And so we indeed, our teams and also in some areas of Europe, which were affected by lower growth, and we are working. Some of it has happened also in the second quarter. And we still have some to do in just adjusting to the slightly lower growth we see in Europe in some areas. And of course, biopharma, if their outlook doesn't firm up very quickly, we'll do the same. And so they have some room for improvement further. Payable receivable, Laurent can answer the other two questions, I think.
Yeah, yeah. I mean, so the improvement in the DSOs was linked to a much better monitoring of collection of receivables and unbilled items.
In terms of DPOs, that was also regarding your third question on the financing income in SDI. This is what relates to the income we generate through what we call the excess cash. The excess cash is basically defined as every cash on top of our average working capital, about 5%. And we basically allocate to the SDIs the income generated from these deposits of excess cash. So on those two questions, just a general remark from the CFO. I don't think we're particularly good in managing our working capital. I think we have room for improvement there. We built the company from a very small base. We grew very fast, and we are improving in all aspects. We have a large number of initiatives to improve. And indeed, in working capital, we could do better. Our teams know it. And we're going to do our best to improve.
It's a daily fight, of course, with everyone. Everyone who has managed working capital knows that. It's about having the right tools, but also staffing it properly and keeping the focus on it. So there is room for improvement. And also in investing our cash, we come out of a period where the interest rates are very, very low. And maybe we didn't pay enough attention to investing all our cash at the best rates, and the centralization is improving a lot with our cash pooling. So I think also on that, we are improving a lot and can further improve.
Are there more questions?
Arthur, do you have any further questions?
No, that's brilliant. Thank you very much.
Okay. Thank you. Your next question is coming from James Rose of Barclays. Please go ahead.
Hi, thank you. I've got two, please. The first is on the margin improvements you've had in the first half. How sustainable are those improvements? And could we expect a similar rate of improvement going through to the second half, for example? And then secondly, for cash conversion, we've had an improved cash conversion rate in the first half. Similarly, can we expect a similar improved level in the second half as well? Thank you.
Thank you. Well, I wish I could answer your question, but that would equate to changing our objectives, which we said we don't want to do. We set our objective once. We have no reason to think H2 will not be good and that we will not have improvements in H2. I can say that. Anyway, I think all of that is a bit of a moot point because I think a large part of the market didn't believe in our objectives for this year anyway. I don't know whether this has changed now. And apparently, even if they believe in it, they don't believe the company really, the accounts really exist, and they don't believe we have cash. So there's no point fighting about that. We have 50% discount to where we should be trading at if people believed in our numbers.
So splitting hair on H2 and whatever it's going to be or not be, whether it's going to be 21.5 or 22 or 25, I don't know. This is just, I think, not the issue. The issue is that basically people do their homework, and we're going to spend a bit of money to get results of some audits if there are some remaining questions. But that's the main thing that needs to happen because otherwise, we can generate 24% margin this year or next year. It's not going to change anything. So that's the main thing. We have to talk to investors. And if investors have legitimate questions, we think we addressed all the questions that there are. And that's more important. Yes, I know some companies have the policy to adjust, to give a guidance for each quarter, a very precise guidance on EPS and so on.
This is not what we opted to do. Maybe we'll do that in a couple of years. We'll see. I think more likely we're going to converge about giving objectives in high- to mid-single digits and things like that. Anyway, what I can say is there are many things that we are working on to improve. We think the outlook is good. We will be working over the next two or three years to improve. We're confident about our objectives for this year and our objectives for 2027. We'll update those objectives when we publish our 2024 results. That's what we intend to do at this stage.
Okay. Thank you for your answer.
Thank you very much. Your next question is coming from Allen Wells of Jefferies. Please go ahead.
Hey, good afternoon to you, Laurent. Most of my questions have been asked, but just two quick ones, please. Firstly, I kind of missed this earlier, but could you talk a little bit about in that organic growth number, the pricing versus volume component more broadly? We heard from, obviously, SGS today. It's a broad landscape, but it's talking about more like 50% of its growth was pricing. It seems like that's maybe stepping up. Has that been the same for Europe? That's the first question. And the second question, I just want to dig into a little bit on the startup losses just to understand exactly what's going on there. So EUR 25 million in the first half, that's a 35% reduction from what we saw last year.
If I look at the numbers in the presentation, like 50 startups for last year, 49 blood collection points, the pace slowed slightly in the first half of this year. But given what we've seen over the last couple of years, it's surprising that that startup loss has stepped down by so much. And by its nature, I would assume if a lab had started up relatively recently, more of its profits would be geared towards volume ramp than anything else. So just trying to understand what exactly is going on behind that big startup loss movement here, if that's okay.
Thank you very much. Yeah, I wish I could give you a precise split on growth with pricing and volume. We get a good measurement in the sample-based businesses where we have price lists. And there, maybe it's 60/40 volume price. But the problem is for the project-based, it's very difficult to measure price if you quote projects. So we're still working on it. We're doing some pilots. It's going to take some time until we can really measure price evolution. Startup losses, yeah, we have startups, but they are of various sizes. So we're going to have big startups, small startups. And some of those startups are profitable already. They are not all loss-making. They might not be at the group target margin, but if we have completely restarted a new activity, sometimes they get profitable on year two already.
So it's not really linear at all with the number of startups. And for H2, it also depends. Some of those are very early. So very early, the losses are also very low. It's not a lot of staff. Then we add the staff to get the validation of the methods. And each one has a specific cycle. We could put more controllers if we wanted to really precisely know what is going to be next quarter. We have the data somewhere, but startups are also an activity where planning is harder. The visibility on the speed of ramp is, of course, not as good as for an established activity. So they grow well. And of course, some startups don't do as well as we expect, unfortunately. Some do better. Overall, we think it's a place where the capital we invest gets good returns.
That's why we continue to do it. We've planned a significant buffer when we gave this total number of EUR 125 million to allow for variations on this as well as on the restructuring side. But we're pleased with the first half. I agree with your comment.
Great. And maybe just a very quick follow-up on I think we asked this question earlier on the margin improvement. I think you talk about you're particularly calling out personnel expenses and consumables, but you also talk about pricing attainment and volume. Is there any way you can maybe look at that 220 basis points and maybe split the margin improvement? Is it like 50% is the reduction in costs and largely personnel costs? And just to be clear on that personnel cost reduction, is that purely headcount reduction? So when we see full-year results, the 56,000-odd average FTEs will see that decline year-on-year from that. Or are there other measures around payment that you can move around there? Thank you.
Thank you. Yeah, we haven't looked exactly at your question the way you're asking it. So I would have to really dig into that to answer precisely. Certainly, some of our division activities have reduced headcount significantly, but others are adding some. The startups are adding some. Overall, indeed, our instruction is to be prudent. There is still some level of economic uncertainty. So I'm sorry I can't be more specific on that. You can see, of course, the personnel cost and how it improved compared to the same period last year. And you can look at it on headcount. I'll take the question offline and follow- up if it's possible because you can have it, Allen, from the financial statements because our personnel costs grew only by 3.4% year-on-year, the first half, and our top line grew by 6.5%. So you have a mechanical reduction there.
You can also divide it by the FTE after that because we publish the FTE. So there is a slight improvement. But it's sometimes due to mix effects, and you have to be careful with the geographical mix. Also, the cost of delivery, we have inflation on employees' costs. So I have to look at it on the headcount level and so on. Also, we have different prices. I mean, employees get paid better in North America than in Europe. I usually look at the numbers activity by activity in each continent.
Great. Thank you.
Thank you.
Operators, we have a.
Apologies, yes. We have our last question.
Ask if we have any more questions.
Yeah, we have our last question from Delphine Le Louët of Bernstein. Delphine, your line is live.
Yeah, thank you very much. Well done on the results. A follow-up, Gilles, on this one and more specifically regarding this pricing statements that you mentioned several times in the press release on the EBITDA. So just wondering if by default, if you can't really talk per division, but if we can get a flavor, it would be very useful. But probably also, if you can give us a flavor regarding what is the evolution compared to last year and how this H1, so I presume you attain this 100% price adjustment versus last year. How does that compare to H1 last year and H2 last year? Where were we in terms of achieving that? Second question, probably more for you also, Gilles, what about the timing regarding, let's say, the consultation and possibly the extraordinary shareholder meeting you're going to hold regarding the related party real estate?
Is it something that we can wait for October, November? Is it too early due to all the work you need to be done? But can you give us a bit of an idea of what might be the calendar now for your shareholder to decide?
Yes. On the first question, I'm not sure I understand your question. Do you mind reformulating it?
Yeah, regarding so we had 220 EBITDA improvement in H1 versus last year. And so wondering specifically on this pricing attainment because you're mentioning that several times, trying to figure out how big it is in terms of contribution. And so as you can't say anything, probably to give us a flavor, what was the achievement and how does that compare to H1 last year? Were you already there 40% of this price achievement when you talk about your service and contract? Was it 60% already? Did you gain this 40% remaining or more or less? Or can you give us a bit of a sense of how that developed over the course of 2023 and now how we get there to this 100% price attainment?
Thank you. Yes, I understand. I think I understand what you're referring to. Indeed, in 2022, we got a big hit because we got caught by surprise. We caught up some in 2023. I think this year we're going to catch up some more. I don't think it's quite 100%. It will depend. Really, the main thing is a gap between the actual inflation of our cost, so mostly labor, and what we charge to our clients, how we bridge that gap. If the second half, if inflation in the second half of this year is very muted, I think we'll catch up. Whether we catch up 100% this year, it's really hard to know. Again, we don't have all the metrics to measure it across the board. We have it country by country. We have it in the activity of sample-based. We have to run the analysis.
We do it usually at budget time. At budget time, people have to forecast in the way that you are asking the question. So they have to tell us how much they are catching up of the price gap. So that's when in October, November, when we have those meetings that we do a deep dive by activity. And it's still on a consolidated basis, a bit of anecdotal evidence because we don't have that for some project-based business line. And we have, again, on the consultation for the shareholder meeting. We said we would do that. We always said we would do it. There's nothing new. And the intention was more to do it maybe in 2026, 2027. We are happy to bring it forward. But let's keep things in perspective. We're talking EUR 35 million of rent.
We've disclosed for years what the rent per square meter is compared to all the buildings. The list of buildings concerned is not a secret. I don't know what this is going to change. It's going to change, I think, in reality, very little. And I don't know, I mean, maybe psychologically or governance point of view, it's going to alleviate some worries or worries that there could be more attacks on using this as a pretext for attacks. But economically, it's not going to be a game changer out of whatever, EUR 1.5 billion or EUR 1.6 billion of EBITDA, whatever it's going to be next year. To do that, we need to get everything evaluated, maybe even evaluated twice. We need to ask all our companies which buildings they want to keep long-term because obviously, there's no point for Eurofins buying a building where Eurofins wants to move out.
I would tend to say we will offer Eurofins the opportunity to do it step by step, focusing first on the large campuses where Eurofins want to continue to build because that would be the trick here in the current situation. We don't have timelines for that. We have mandated people to do it. It takes effort and resources because it's, I don't know, 50 or I don't know how many, 30-60 buildings. And reasonable timeline, maybe we can publish that with our results for this year and put it to the vote to the General Assembly where we get the results approved and do an extraordinary assembly for that. That could be an objective. Whether we get there and get it done by then remains to be seen. If we have data before, we'll publish before. While doing that, we're doing other audits.
Obviously, we're not happy with some of the claims that were made that are totally disrespectful and really slanderous. But that's secondary for us. I don't care what people call me. They can call me any names they want. I'm there to make sure our investors get a good return on investment. And that's the main thing I'm doing. And that's why we're focusing on the real areas of concern for our investors. But we'll still get to that at some point as part of all those audits. We'll get the result of the audit on cash, I hope, in the fall. I'm not sure exactly when. The earlier, the better. But we have to give the auditors the time to do all the investigation they want, have access to everything they want. We want them to be really very free to check everything that might be a question.
So they're going to need the time they've been appointed. We've announced that. They need the time to do their work. Same thing for valuing all those buildings and providing all the data again to verify for the end time, the arm's length nature of everything. That should be part of the package. So I'd rather have it done well. But our investors should know well. They know the quantum. They know what it costs Eurofins. It's more maybe governance and optical than really economically. The impact is nothing. But we're doing our best. We're going to meet with investors. If they have suggestions, we prioritize. The way we deal with that is we listen to our investors and we prioritize what they see as priorities. We deal with things one by one. We're trying to be transparent about everything we're doing.
I think from what I hear, we've addressed pretty much all the concerns. People will be happy to see a report to say that PricewaterhouseCoopers and Deloitte did a good job in auditing our accounts. Okay, we're going to have a third. We're going to have Ernst & Young check the cash. For me, it's totally unnecessary. But okay, we're going to do it anyway. And if there are other things that come up where our investors say it's important, we will do it. But things take time. Because obviously, anything we could do ourselves, like looking at documents and so on, we've done it. The rest, we need external parties to look at it. And that takes time.
Okay. Got it. Got you. And probably a final one regarding working cap management. Just wondering if that was something that was happening in, let's say, every country, every region, every business, or if there is a stronger contribution for one of the businesses versus another one.
No, there was a stronger contribution in Europe for the network. After that, there is a lot of mixed effects overall. So these are not very significant. But like Gilles said, we have to improve further because these improvements are small compared to where we should be.
Okay. Is that due to a new organization, sorry, or a new software or anything specific or just that is harder to?
More scrutiny. We are also. It's more scrutiny overall. We also are putting in place some dedicated functions to look after working capital in some geographies to get better traction.
Super. Thank you very much.
It's doing things one by one. It's doing things one by one. We have 5% net working capital, 5% of EUR 7 billion, EUR 350 million. If we invested those EUR 350 million, whatever, we borrow at 4%, the impact is not enormous. So we've been focusing on many other aspects that have much, much higher financial impact. Now, it's not bad 5% net working capital if you look at other companies. But we can do better. Whether we land at two, three, four, I don't know. We try to do everything we do well and to focus on things that have the biggest impact first. And that's what we're doing. But I'm always for continuous improvement. So we're striving to improve on that too. And Laurent will give it a bit more resources, a bit more people in the different geographies. And we think we can improve.
I think the time is up for this call, unfortunately. What I can confirm is we are positive for the rest of the year. We are positive for achieving our objectives. We are positive for achieving our objectives for 2027. And we'll be happy to meet some of you in person maybe tomorrow in London. And we wish you all a nice summer. And thank you very much for tuning in.
Ladies, and gentlemen, the call is now concluded. You may disconnect your telephone. Thank you for joining and have a pleasant day.