Hello, welcome to the Eurofins Scientific H1 2020 Results Conference Call. For the first part of this call, all participants will be in listen mode. Afterwards, there will be a question-and-answer session. During this call, Eurofins' management may look forward to statements including, but not limited to, statements with respect to the outlook and related assumptions. Management will also discuss alternative performance measures, such as organic growth, which are defined by 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 Eurofins' annual report and the half-year report. Please also read the disclaimer on page two of this presentation, subject to which this call and the Q&A session are made. Today, we are pleased to present Dr. Gilles Martin, Eurofins' CEO. Please begin.
Hello, everybody, thank you for joining our half-year result call in the middle of the summer. We are living difficult times, through very unprecedented times. We have done our best to present our results in as transparent way as possible, so you can draw your own conclusions. I will mention the slides of the slideshow. We have a short introduction of 10, 15 minutes, the bulk of this call is, as usual, planned for question-and-answers. On page four of the slideshow, we have summarized the financial results of the group in the first half. Of course, the results would have been better should there not have been the COVID-19 pandemic. We started a very strong January and February, we already had some impact in China and Asia in March. The impact started in France.
In the second quarter, the situation was very difficult in some European countries, France especially, where we have a lot of revenues, was severely hit with some of our laboratories ordered to close, and some of the industries, even the clinical diagnostic testing being much lower because people didn't go to the doctor. I will go to page five. Nonetheless, our teams worked very hard to try to mitigate those impacts, and in the end, I think we can say things worked out fairly well. We mitigated, to a large extent, the impact of the pandemic on our revenues, on our profits, and on our cash flow. What we have seen is that our end markets are very resilient. Food needs to be safe. It has to be tested. Of course, the part of our work that deals with testing food in restaurants was impacted as restaurants got closed.
Our environmental testing was probably the most impacted of our activities. In those areas that were or still are a bit impacted, we had to do some cost reduction, unfortunately, to adjust our scope to what our clients were doing. Overall, we have found our business to be very resilient, our core business, and some of our other activities were extremely dynamic. Our biopharma activities were very dynamic as the research for vaccine and pharmaceutical products to fight the COVID-19 intensified. This is even picking up a momentum right now. The first thing we did is to try to protect our staff. We instituted social distancing, and then we decided to work to develop solutions to fight the disease. We are not a big diagnostic company. It's probably the first time you heard about Eurofins' activity in IVD was when we reported our Q1 results.
While the small teams have done wonders and they've developed now, which is an outstanding range of products to combat the COVID-19 pandemic, and took a bit of time to get all the governments' approval, and some are still pending. We now feel we have a very strong portfolio, and I'll talk about it a bit more. What we also did is we decided to do something to help our clients, of course, first in the food industry, but also all the clients we serve in other industries and new clients to return safely to work. We had done that on a test basis in our own site and our own laboratories to make sure we do what we can to keep our employees safe.
We've developed, which is now an outstanding program, to detect occurrence of the disease in one workplace or government building, and basically be able to isolate the first patients who turn out positive before they can contaminate too many others. One element of that is the Eurofins Sentinel, which is a unique solution that we'll talk to you about later. Even yesterday, we launched a lower cost full COVID-19 PCR test that could turn out to be very handy if government decide to test millions and millions of people almost on a twice a week basis.
Of course, the modalities for sampling has to be improved and facilitated, but it could be that this type of test is required. In the end, it could be the pandemic doesn't go away, and if the vaccines do not work out as well or as fast as we want, that we will all have to do a lot of tests. I will go to slide seven. Sorry. For the next section, I will ask Laurent Lebras, our CFO, to comment on the financial figures, and then I'll comment more in details on the operational aspects.
Thank you, Gilles. Good afternoon, everyone. I'm happy to present our 2020 first half financial results. Starting with organic growth on page seven, which, despite the COVID-19 disruption, was strong. 5.1% in the first half and 6.1% organic growth in the second quarter. Much better than our peers and in line with the top IVD players, showing again the strong resilience of our end market and the agility of our teams in this first half. Associated to a strong growth of revenue, we also performed a series of cost-saving measures, which resulted in a strong increase of our EBITDA that you can see on slide number eight. Our reported EBITDA was at 19.7% for the first half, a strong increase of 260 basis points year on year. Our adjusted EBITDA at 21.2%, again, a strong increase year on year.
Even if you look at the EBITDA of our more mature companies, all the ones present in the group before 2017, their EBITDA reached 22%, which is a very strong increase of 350 basis points year-on-year. All this in the first semester, which is traditionally the weakest half of the year. In line with our objectives, the separately disclosed items decreased by 20% year-on-year. You can see the details on page nine. They now account for about 7% of the adjusted EBITDA, which is in line with most of our peers and which is also confirming the near completion of our five-year infrastructure program, which we started in 2015. Moving to slide 11, about cash-flow generation. Thanks to our strong growth of profit, we also had a strong growth of cash-flow.
Our net cash flow from operations increased by 92% year on year to EUR 445 million. Our free cash flow increased by 185% to EUR 350 million. Our net working capital was controlled. It decreased to 5.3%, despite the inventory build-up for the COVID-19 testing activities. You can also see that we had stable CapEx and a reduced M&A spend. Focusing on CapEx on slide 12, this stood at 5.6% of revenues, flat year on year. Despite the COVID-19 ramp up of capacities, they are now well below our depreciation percentage in terms of revenues, and they contribute strongly to free cash flow generation and EBITDA to cash conversion. Moving to slide 13. Our first half was also marked by a significant deleveraging. We were able to reduce our leverage by 0.7 turn, and we now are at 2.54 turns.
Thanks to the free cash flow and the equity raise that we successfully performed in May, we were able to repay all our short-term borrowing and to bring forward by one year our deleveraging objective of 2.5 turns maximum. Even before we issued our first half results, we got an investment-grade rating from the Moody's rating agency based on our Q1 results. To conclude, moving to slide 14, we had a very strong first half in 2020 on all fronts, revenues, profits, cash flow generation, and deleveraging, which all resulted in a basic EPS increase of 57% year on year. Thank you for your attention. Now I'm giving back the mic to Gilles for the business review.
Thank you, Laurent. We don't normally present organic growth of competitors in our slides, but since we've had some people who like us very much criticize us for a long time on organic growth, we thought we should show that. On the business review on page 16, what we have seen in the first half is that overall, inside a very, very troubled economic conditions and operational conditions, our end markets, the industries we serve and the clients we serve need our services even in times of crisis. We were once in a deep crisis in the Great Recession in 2008, 2009. At the lowest part of this, we still had positive organic growth for a couple of %. I think we're going to see the same this year.
Even if we don't count the COVID-19 testing or reagent revenues, we will probably see that our core business is very resilient as a whole. Of course, we have a mix of businesses with various growth rates. Obviously, the clinical testing normally doesn't have a huge growth rate, so others grow faster. On the other hand, clinical testing is also very resilient. On a full-year basis, we've seen already in July some catch-up of the doctor's visits that couldn't take place before. What we've also seen in the first half of this year is that our decentral model, with more than 900 companies, make us very reactive, make us very agile.
it was amazing to see when we launched a call for our best scientists around the group to develop multiple testing solutions to fight COVID-19 and solutions to test personal protection equipment like masks, to test respirators, and find solutions for our clients and basically any company to protect their employees in the workplace. We're extremely fast in developing a whole range of services. If you go on our website on COVID-19 response, you will see the range of things that we've developed in very little time. some of those tools are very, very good. that was, for me, very impressive to see our teams mobilize to develop that. As I said, we are not a big IVD company. We are a tiny IVD company.
This is something we did mostly because for our internal needs, because we want to be very innovative in what we offer the clients of our laboratories. Having our own IVD companies was more historically for R&D point of view, to be fast in developing new solutions and standardize this. This is turning, proving handy, and we supported the small IVD companies to develop product in record times. It's a nice complement to overall mix. I will go to slide number 17. This gives you an overview of the things we've been developing. At the Q1 result, we talked a bit about the development of PCR testing kits and development of some serologic antibody kits.
What happened in the meantime is we put together what we call the SAFER@WORK program, which is a range of services to help companies bring their employees back to work. It's impossible to test everybody every day. If you have gotten a little sick in your nose, you know that it's not terribly pleasant, so you cannot do that every day. You have to use a mix of solutions that are risk-based, but that can catch an outbreak before many employees get infected. We've put together services that can start with the Sentinel program, which is a program that can detect early onset of the disease, for example, by testing wastewater or by testing worn masks or by testing simply the work environment. We published a couple of papers on this. It's working very well.
In areas with low virus prevalence, this is something that can be used. Based on that and other artificial intelligence-based tools, we can help companies set up self-testing. We'll set it up in the right facilities at the right place at the right time and the right frequency so that not everybody has to be tested every two days, which is very burdensome and probably not acceptable. We think together we have really an outstanding program, and we're starting to get excellent response. This is something we launched about a month ago, and we already signed more than 500 programs, and we've got a very large numbers in discussion right now. What we also launched recently is also a point-of-care testing, a very sensitive antibodies test.
It's not for acute epidemic, but in many areas on a population that is historically infection-free, that can also prove very useful. Also what we announced in the last couple of days, we launched, as I mentioned, a pooled PCR test that can reduce the cost significantly, not necessarily for clinical testing. It's not for all uses, but for uses of surveillance and detection of recurrence of virus, it can be very useful and cost-effective. We completed our portfolio for PCR testing with DNA extraction kits, because one of the bottleneck of the testing is the extraction of RNA before the analysis. On pages 18 and 19, you will see a description of those programs. We can go back to that in the question-and-answer session. There is a strong demand for our SAFER@WORK program.
overall industry hasn't really decided how they should respond. It's more a matter of we are waiting to see what the government will do. we have to deal with many scenarios. Nobody knows how this whole thing will unfold. We can be very optimistic and say, "Okay, after the second wave, this will be over, or the vaccines will work enough to completely suppress the virus so it doesn't infect other people when people catch it." nobody knows. We could also be phased, as the WHO is saying, with a prolonged period where the virus is circulating and where at some point it will become a responsibility of companies to contribute to the fight against the virus and to put in place very reliable prevention measures. as a company that focuses on serving industry, this is what we have been focusing on building.
Very early days, but we get very positive response to our SAFER@WORK program and our Eurofins COVID-19 Sentinel solutions. On page 20, you see, for example, one of our stands in Austria at the Formula One Grand Prix. We are the partner of Formula One to test everybody who is allowed on the circuit on regular basis at frequented intervals during those races. We're happy to contribute to help companies go back to business. This is something we're also discussing with airlines, with a lot of different groups of industries, which are extremely hard hit by the virus. With proper prevention and adequate testing, and especially risk-based testing, a high level of security can be achieved. On page 21, you see a couple of pictures of our team at Paris Airport.
France is starting to set up a testing program, required testing program for passengers who arrive from certain high-risk destinations, high-risk origins. This could be something that will be increasing in many countries. We already won mandates to do that at France's largest airport. Also in Germany, we're setting up in Frankfurt Airport, or we already have set up there. It requires a lot of effort, a lot of staff, but this could be something that countries will have to do, especially this fall and this winter, if the virus continues to spread. On the next page 22, you see some pictures at the Austrian Red Bull Ring for the Grand Prix and at Silverstone in the U.K. On page 23, we mentioned some of the product launches we did in the area of COVID testing. You can go back to that in case of questions.
On page 24, we're giving a bit more comments on the COVID-19 pool PCR test. At the moment, the reimbursement for the PCR test varies between, I think something like EUR 60 in Europe, probably lower in some Asian countries, and $100 in the US. This is all right for clinical testing, where for medical reasons, somebody needs to know if the patient is positive or not. This probably will end up being too much if you have to test the whole population at regular intervals. That's why we've been working on a number of solutions that could significantly reduce the cost of testing for monitoring and surveillance. This is the first one, and we started pooling with five samples, so it could be, of course, more. We are working on a number of other solutions that we hope to release over the next few weeks or months.
The Holy Grail in this area is doing it immediately and doing it for EUR 1. Whether that will be available anytime soon and doing it at home for EUR 1, we don't know, but we definitely are working to reduce the cost from the current levels and increase the speed. That's on page 25. I don't have any secrets to reveal now, but what I can say is after some initial time to get the R&D teams deciding on what were the right priorities, because there are hundreds of things we could have been working on. We feel now they are working on a number of potentially very good tools to fight the disease, that will complement what we already have in our portfolio. On page 27, I will briefly comment on how we see the future. Obviously, it's impossible to know.
When we talked after Q1, we thought there would be a huge need for testing in the next two months. What happened is that actually there was a need for testing in April and May, but then in June, it started to be that labs in Germany and France were basically not using their capacity. it's very hard to predict anything. For the second half of the year, we were all hoping that the virus had gone away and that life was slowly returning to normal. what I saw today is with the virus coming back and at higher levels in Spain, France, and Germany, we might not be there quite yet. it's impossible to predict anything, both for our core business and for our COVID testing. What we do have, however, is a built-in edge.
Normally, we feel our business should be more or less back to normal to a large extent everywhere, and we believe that hopefully authorities will take measures that make full lockdowns not necessary, if they do a proper prevention and testing. If the virus continues to circulate, we probably will have to test a lot more than we are doing at the moment. Everything I'm going to say about the outlook, of course, has to be qualified because nobody really knows where this whole thing will go as a whole and in each geography. We feel we are well positioned for most of the scenarios that could unfold.
Therefore, we think our objective, which is a secular objective, we set that objective more or less 10 years ago, to do about 5% organic growth this year, even corrected for the lower base last year due to the cyber attack. We should be able to hit EUR 5 billion revenues or a bit less if we don't do EUR 100 million of M&A contribution. We feel our EBITDA margin or EBITDA should be at the EUR 1.1 billion as we expected, and we should be able to generate about EUR 500 million of free cash flow. What we've done also as the pandemic started is we decided that the world would enter a phase of very high uncertainty. While we were comfortable with our leverage and the rate of reduction of the leverage in normal times, this was no longer the case in the situation we are finding ourselves.
we decided to accelerate the deleveraging to go back to 2.5 faster than the end of 2021, and that's why we stopped our dividend, and we did an accelerated increase last month. as a result, we are already almost at 2.5, and probably we will be able to improve on that in the second half of the year. We will continue to do that, is our intention. We are comfortable in the range of 1.5 to 2.5, but the closer we are to the bottom of the range, the more headroom we have if some interesting acquisition comes up. we'd rather be close at 1.5 and have more strategic options.
In terms of the broader outlook, we believe that for the year, the outlook is rather good considering we have this COVID testing and reagent edge that probably will accelerate if the pandemic expands and if it fits with the rest of our business. Overall midterm, I think it's pretty obvious for everybody that testing is very important, that testing can be used to prevent problems downstream. It can be in food, can be in environment, can be anywhere. The range of pathogens we are confronted with and will be confronted with is increasing, will continue to increase. In the end, testing is the most cost-effective way to prevent people from getting sick or of things getting out of control.
We feel probably even beyond this pandemic, there will be more and more need for testing, and our positioning is right. Now, of course, there are a lot of challenges ahead. I think we're very well-positioned, and the speed of reaction of our teams and the agility of our labs has demonstrated that we can navigate very difficult circumstances. Of course, we are all looking forward to difficult times, but we think we're in a good position. That is it for our introduction. I would like now to return the microphone to you for questions and answers. Thank you. Operator? Thank you.
Thank you. If you wish to ask an audio question, you may do so by pressing zero one on your telephone. If you wish to ask your question, you may do so. It's zero one on your telephone keypad if you wish to ask a question. Our first question comes from Jared Woodard, Bank of America. The floor is now open to you.
Perfect. Thank you very much. Yeah, it's Patrick at Bank of America. I have two, please. The first is on the COVID testing you've seen so far. Thank you for the 55 million number. Can you give us a sense, I'm guessing the vast majority of that is just straight down the line, single target molecular tests. I'm just curious if you guys are seeing any pickup in demand or initial [ inaudible] in multiplexing or NGS on that side of things. I'm just curious as to the rough mix that you're seeing within that 55. That's the first question. On the second side, within the biopharma business, obviously it's very minimal at this stage, but how should we think about the implication of delayed clinical trials and how that may affect that business over the next year or two? Thanks.
Thank you very much. Yes, you're right. Most of the testing is real-time PCR testing and single target. We have a test that is using NGS, and we have other tests actually in the pipeline, and we are working on Well, we have a Diatherix, a multiplex test with multiple respiratory pathogens. In a state of emergency, people focus more on COVID. I do agree with you, though, that when the winter will be coming, our multiplex test could prove very handy for people to know if they have a fever, if it's the flu or if it's COVID. you have to know that the COVID testing is only 70% not accurate, but a lot of people do not have virus in their throat when you sample it. therefore, it's not the test itself, which has a false negative, it's the sampling.
even if you test negative for with a PCR test, it doesn't mean you don't have COVID. if at the same time you test positive for the flu, it's very likely, it's not certain, but it's very likely that you have the flu and no COVID. those tests will come, and we also have a range of things we're working on that matter. you have to make them cost-effective, and you have to make sampling easy for patients, which I think one of the biggest bottlenecks.
For biopharma. Yes, biopharma has done well in the first half, but it's not all rosy. We do have a central lab which has been, of course, like many others, hit by some delays in clinical trials, and it will probably continue to be the case over the next year or so if the situation doesn't return to normal. While our biopharma as a whole does well, some components of it might do a bit less well, as was the case already.
Super. Thanks. Any questions, I'll pass to other people after. Thanks.
Thank you. Our next question comes from Suhasini Varanasi, Goldman Sachs. The floor is now open to you.
Hi, good afternoon to you. Thanks for taking my questions. I have three keys. One, can you comment on how the exit rate of business was in June excluding COVID-19? Maybe some color on how the trends for June and July now that the lockdowns have been lifted in all the countries. Second one, on working capital, you have mentioned that you're taking advantage of some of the government schemes on deferrals.
Is it possible to give a number on how much was the benefit on working capital and this will reverse in the second half of the year? Last one is on SAFER@WORK. It's very interesting that you've already signed up 500 customers. You're in discussions with 700 more, and you've also mentioned that it can add materially to revenues. Is it possible to put a number around it? A percentage point, 1%, 5% would be good to have in color there. Thank you.
Thank you very much. Yes, June was the strongest month of the three in terms of exit rate. June also had more working days. Although working days mean nothing at this time because it's all over the place with whether you have lockdown at that time in that country. How do you say that, a weighted average of the working days? Still June was stronger, especially the second half of June. If we look at it, I think in our scope, France was hit the worst by the lockdowns. Lockdowns were very strict, very followed, and the whole building activity pretty much shut down for a month or a month and a half. June was much better, especially the second half. Other than COVID, we got the COVID numbers for you because we thought you'd ask the question for July.
We're only on August 6th, and I don't have the rest of the results for July. My impression is, judging from the mood of our leaders, is that July should be good, but that's all I can say. Working capital, I don't have the exact number. I think it's about in the order of EUR 40 million or EUR 50 million, the government schemes. This is, of course, mitigated by all the stocks we have been doing for reagents for testing for COVID, partially mitigated. I don't have the exact numbers, but I think in order of magnitude, it's something like that, between EUR 20 million and EUR 50 million. SAFER@WORK, it is just starting. As I mentioned, companies are still not exactly sure what they need to do.
Some companies, especially in the meatpacking industry, know they have a problem because the work environment is one where the virus can spread easily. The slaughterhouses, et cetera, they've started to do something. The airlines are starting. I think the world is still trying to find its place. There are no regulations, really. It's just starting for travel, testing required around travel. We work proactively. We won a contract with the Emirates, with the UAE government, to set up one of the first passenger pre-testing program in the world. All those things are really early days. We talked about what we did with the Grand Prix. We're talking with some companies about very large global programs. We are in a good position because we have clinical labs pretty much all the big countries.
Our strategy in clinical was not to be doing everything for everyone, like Labcorp or Quest or other larger players, Sonic maybe, in one country or two countries or a certain geography, but to be highly specialized on advanced molecular tests in as many geographies as possible so we can distribute our advanced tests broadly. Like we do, we are the leaders in non-invasive prenatal testing in Europe, for example, which is an NGS-based test. We're strong in that area. We started in India and Japan, and we're also strong in Brazil, in the U.S. Now the advantage of that is that we can easily set up COVID testing sites at those high complexity sites around the world, and we're in a good position to respond to the need of truly global clients who need testing a bit everywhere.
It's hard to put a number on it, and some of it is included, of course, in the COVID testing. It's not only environmental testing. Some of it is simply human testing, like what we did at Silverstone or at the Australia Grand Prix for Formula 1. I think it's part of our view for the second half, and you could argue that five% is conservative over the whole year, which would be a bit more than five% on the second half, but nobody knows. We said this five% objective 10 years ago, and we figured out we might as well stick to five%. We'll see, in reality, what it is.
Understand. Thank you very much.
Thank you. Our next question comes from Witt Hawkins, Jefferies. The floor is now open to you.
Thanks very much. Three questions, please. The first one, just on the margin, a material move year-over-year. I wonder if you could give us the building blocks of that improvement. Proportion, maybe some cost savings from operational leverage. Secondly, on the COVID tests, the EUR 55 million of revenues that you referenced in July, I just wondered what that represented as a utilization of your current capacity, and whether the margin was in line with the 25% that I think you mentioned last time you spoke. Just finally, on the guidance, pulling the FY 2020 guidance back. I think previously there was an FY 2021 guidance as well, EUR 5.4 billion of rev, EUR 1.25 EPS, and EUR 600 million of free cash flow. Yeah, just the ingredient on there if you have any comment on that. Thanks very much.
Thank you very much. Yes, the margin is, I think our margin is still low, and it's still low because we are just finishing our five-year infrastructure building, where we are building those large hub-and-spoke labs. We're in the middle of it. We are finalizing the build-out of our large site in Madison in the U.S. for food testing. We still have material reorganization costs in the first half and some of it diminishing in the second half to basically put our business in order, to really have the shape that we need to be really efficient everywhere. We still have massive IT spend, especially following the cyber attack. We're upgrading a lot of our IT system. We have massive software development costs to finalize our software. We are definitely not where we should be on an ongoing basis.
Little by little, some of the benefits of that start to trickle. We have some catch-up, of course, for the cyber attack last year. The cyber attack, we did some estimate. The business we missed last year, of course, it's only an estimate. What we would have done in June and the rest of the year is nobody will ever know. Since people ask the question, we said, "Okay, if we had done EUR 62 million more in June last year, organic growth last year would have been 5.5%, 6.3%, I believe, if we correct for the Boston Heart disaster." Then this year, it will be a bit less in the first half, and I think we'll catch up the EUR 50 million that are missing in the second half. That contributes. Those extra revenues, they contribute to the bottom line. I think it's still not satisfactory.
We still suffer from a lot of things that are not going as they should be, and that I hope on a more normalized situation, we won't suffer of. We're doing also management improvements and leadership improvements in several areas. On the COVID test, yeah, our utilization is low. On serology, I think every clinical company will tell you that there's not a lot of serology testing being done. I think the world has still to figure out what and when they're going to use the serology. Actually, on serology, we're working on a range of other tests that might be even better when the vaccines will be introduced to monitor the vaccine effectiveness and so on. I think there's a lot more to say about potential for serology testing.
At the moment, serology testing is not happening in a great quantity. PCR testing, yes, July, especially the earlier part of July, was way below capacity. We're still ramping capacity. We might even have to ramp capacity beyond what we had talked about earlier, but it won't be used every single day and every single week and in every single country. There are still huge bottlenecks in sampling patients and bringing the samples to the labs and getting the IT in order to get reimbursement. The reimbursement for those tests is highly complex. The bureaucracy that has to be done to get paid by insurance and government is sometimes quite significant. All those things take time. I don't know. It could well be that we have a capacity that is never utilized fully, just because some labs will be overwhelmed and other labs won't get the samples.
we have to have extra capacity anyway, and that's why we probably will be building out, we are building out the capacity beyond the 100,000 tests a day that we mentioned earlier. I still hope that the virus will get controlled and we'll never have to use that it will go back to normal. We don't know. As to 2021, we're sorry. It's a good question. We should have thought about it. We didn't think about it. Frankly, it is so hard to see how even the next four months will pan out, that even if I had to do it, I wouldn't be sure. No, we gave a very optimistic outlook. We think Eurofins will be in a good place.
Of course, you would have to do many scenarios for 2021 about the COVID prevalence, whether vaccines work, whether vaccines are used, what level of COVID surveillance is required, whether our normal business can be fully back to normal in all its components. It's very difficult. On a broad brush point of view, I think we should do very well in 2021, in pretty much all of the scenarios I can think of. Nobody knows.
Okay. If I could just come back on that, the margin point around the COVID testing. I think you said you thought maybe 25% before.
Yeah, I think it's the margin. Actually, our margin should improve because as we get our own reagents approved in most countries, the cost of our own reagent is lower than the cost of the reagents we are buying from third parties. At the level of current reimbursement, yes, I believe that margin of 25% you mentioned is correct. It depends. Some countries have different reimbursement price. Every situation is different.
It depends if we have to do the sampling, which is very expensive. Each sampling station is costing a couple thousand EUR a day just to maintain a sampling station, and you never know how many patients will show up. It's difficult to know. That's why it's good that reimbursement is high in the U.S. because you also don't get paid of all samples you test. Sometimes for some obscure reason, an insurance will not reimburse. You have to take a mixed view on what you're going to get paid.
Okay. Thanks very much.
Thank you. Our next question comes from Patrick Sandy. Patrick Sandy, the floor is now open to you.
Hi. Thank you for taking my questions. I've got three as well, please. The first one. On the 55 million you talk about in July, sorry to labor the point, but can you give any kind of idea of what proportion of that 55 million came from SAFER@WORK really starting to ramp up? Following that, how long are these contracts typically being signed on for? Are they for a quarter or a year or longer? I'm just curious how sticky this SAFER@WORK revenue could be. The second one, on serology, you've already mentioned that utilization has been great so far. Of the 10 million test kits per month that you said that you were producing or could produce per month, how many of those have you sold? Will you only really see meaningful upside when reimbursement starts?
I'm just curious how quickly you can dial back CapEx in this area until reimbursement starts. Is it quite flexible? The final question. On the insurance claim, it looks like the insurance has gone through the EBITDA line. Given that it's a relatively material boost to the EBITDA margins, is that something that we can expect more insurance claim in the second half, more than EUR 10 million, or is it impossible to estimate at this point? Thank you.
Thank you very much. Yes. Well, I think in July, there's not so much in SAFER@WORK. Of course, the Formula One program is part of it. We gave you some numbers on it. A lot of it is simple clinical testing. I think the SAFER@WORK programs will take time to ramp materially. We could see some significant amount in Q2. They are not long-term programs. Nobody knows how the world will look like one year from now. Some companies may not even be in business. If the lockdowns continues for a year or two, I don't know how many hotels and airlines will still be in operation. It's still very difficult to predict. I wouldn't know what the average duration of a contract is, whether it is three months or I wouldn't know.
I think we will all have to be very adaptive to the situation. The good thing is, we are not a COVID testing company. We are doing that to help, to help everybody get back to their normal lives. We are doing that to contribute. Our goal is to be doing our normal work of testing food, testing the environment, helping the pharma industry develop new products, and doing innovation in clinical testing to fight cancer or different genetic diseases and things like that. This is our bread and butter. This is our core business. This is what we want to go back to doing as soon as possible. In fact, had we been able to do that undisturbed by COVID-19, we would have had even significantly better results this first half, I believe.
On the other hand, if this pandemic doesn't get under control soon, yes, we might generate very material revenues from contributing to the fight against the disease, and we don't hope to make more money there than we would have made in our normal business. we think we should have sufficient margin to compensate, at least. Yeah, serology, I'm not sure it's only a matter of reimbursement. I think it's more a matter of use case. People don't really know what they're going to do with the results, so public authorities are not pushing for it. They are rather pushing people to get a PCR test if it can be done. I think the use cases have yet to be firmly established in the healthcare system. When people get tested to know, well, did I have the virus?
It can be beneficial if people still feel some tired or other symptoms to know if they have had the disease. It's sometimes used when there's not enough PCR kits. We introduced, by the way, recently, a very nice point-of-care test for serology testing that's very sensitive. We got good evaluation of that. This test could be deployed in areas where there's no PCR testing because it gives you results in 10 minutes. In a population which is virus naive, you get a pretty good view of the situation with this point-of-care test. For insurance, yes, I think we got 10 million reimbursements. I think it affects the reported EBITDA, not the adjusted. Laurent, you may comment on that, please.
Yes. Gilles, we're in daily conversation with the insurer, even today. We got EUR 10 million last year, EUR 10 million this year, and we hope to get very shortly some amount. It's very hard to predict how much we will get and when we will get it, but normally, we should be able to announce something shortly. It's booked in between. Yeah, other income and expenses. We didn't exclude it in the adjusted EBITDA because we didn't exclude the cyber impact in our EBITDA either of the previous years.
Thank you. Can I follow up with a quick one? Given that you quite rightly say you're not a COVID testing company, can you tell us what food and environmental throughput that and what the exit rates are to get a feel for how quickly those two end markets are recovering around the world for you?
I don't have the exact numbers month by month or week by week. I think we've lost a little bit in food and environment, a few %. If we looked at the business outside of COVID, we're probably in the second quarter, down a few %, but much less than other peer companies, if you look at it. The second half of June was very strong. I think we probably are already in positive territory in terms of organic growth on the rest of the group as we exited June. Of course, you don't know. If there are new lockdowns coming, very strong lockdowns coming again in October, November, nobody knows what's going to happen.
The things that were hit is mostly where we have to sample, where we have to send people in a restaurant or a hotel to take samples or in a supermarket. Those activities are, of course, difficult to do when there is a lockdown. overall, I think those activities were very resilient. When I look at what all the testing companies have published, it seems to me that we are much more resilient in those activities, which probably is because our activities are, to a large extent, 90% + pure testing.
Excellent. Thank you.
Our next question comes from Tom Burlton, Berenberg. The floor is now open to you.
Hi. Yes. Hi, good afternoon, Gilles. Good afternoon, Laurent. just a couple more from me, please, just to follow up on the comments around insurance reimbursements. I just wanted to clarify that your guidance for the full-year, whether that is in any way dependent on you getting further insurance reimbursements in the second half or whether we should think about that more as a sort of additional income. just another point, actually, on the July exit rate you gave for COVID testing, the monthly figure of 55 million. You also made the comment that is currently increasing significantly week on week. I appreciate it's early days in August, but is it credible and reasonable to actually think that therefore, based on the demand you're seeing and the capacity ramp you're seeing, August and September, we should be seeing about a number above that 55 million? Thank you.
Yeah. Thanks, Tom. I think Laurent could tell you exactly when we did the objective for 2020, whether any components included reimbursement by insurance, maybe the cash flow objective did. Laurent can comment on that later. Anyway, we're in a different situation now, and my guess would be that with or without insurance reimbursements, we should be able to meet our objectives. That's how we can see it. There's such a level of uncertainty, as some of you noted, we could potentially overshoot significantly or not if things go really bad, but for reasons that I cannot think of right now, but that are always possible. That's one aspect. Yes, the second half of July was stronger than the first half, I believe. The question and the difficulty with COVID is to put the samples in front of the lab available capacity.
It's all a matter of having the right sampling people or working with people who can sample the patients, and then getting the reimbursement for that in the right place. I think that's more the challenge, to know how the capacity will be utilized. My feeling, unfortunately, from what I hear, is that the demand will probably increase in the next few months, unfortunately. What I'm really worried about is the winter, where a lot of people will get sick from other pathogens and colds, and it's very hard to know if you have a cold or it's the beginning of COVID.
I think the situation may become very difficult, and we're asking government to make sampling of patients easier so that people can maybe keep at home and just get tested when they feel they need to be tested without having to go anywhere. We're working towards that also. The legislation is different in each country. It will not be possible everywhere. Governments really have to find a way to make it easy for people to get tested, and then find a way for labs that have capacity to get those samples and test them, because it can change from one week to the next. In one region, the labs are completely swamped, and the next region, the labs are empty. That's going to be, I think, for everybody, a challenge going forward.
Thank you. Just one follow-up, if I could. Apologies if I missed it when you mentioned this earlier. Can you say sort of what benefit exactly you got or quantify any benefit you got from sort of government support schemes or use of furlough schemes or anything of that nature, kind of when you had laboratories closed for any period of time in Q2, either to quantify the cost benefit or maybe the margin benefit in the first half? That would be helpful, please.
Yeah, thank you very much. Well, not so much on the P&L point of view. In China has been funnily one of the most generous countries in [ inaudible] . There was a CARES Act in the U.S. also, where we get, I think, we got EUR 1 million or 2 million out of our labs that were shut down. I think the P&L impact is fairly not material, as I understand. What I was mentioning is more on a cash flow point of view, that we got the ability to defer some social charges and some taxes from the first half to the second half. Maybe that will be pushed further out by the government. We don't know yet. Laurent, do you want to comment on that?
No, that's correct. We got mostly deferrals in terms of payments on social charges and tax from Q2 through Q3. Some governments are not extending this scheme anymore, we might have a negative effect in the Q3.
We might use some of the reagent supply we've put together. I think overall, I'd had a look at your notes. Tom, I think the way you look at things is pretty good. You estimated what impact our core business has had, and then you added the COVID testing. I think that's one of the best way to look at it, and then each of you can make their own model. Some of you think you guessed our core business was down 2% in Q2 or something like that, and the COVID made a certain amount, and then you come to the total.
I think since nobody knows the future, it's probably the proper way to look at it and to say, "Okay, we think the core business will be hit by this much or will grow, or we think our core business will grow in the second half, and then on top of that will come COVID." If you are more pessimistic than us and you think our core business will be down in the second half, you can probably put a number on that and then add whichever COVID reagents and testing revenue you think is likely. I think that's probably the best way to model the future if you want to make scenarios. 2021 will be the same. It depends how optimistic or pessimistic you want to be about the economy and the lockdowns.
I think even with lockdowns, the hit to our revenues and our core business is fairly moderate. Of course, we generate some more and more substantial COVID revenues. If you look at it, EUR 55 million in July, that's annual run rate of EUR 650 million out of nowhere. That's pretty substantial. I don't know. Nobody knows what exactly this virus will do anywhere in the world. We have things we are working on that could be extremely powerful, that could generate very mature revenues, but it depends on whether they work, whether we can roll them out fast enough, or whether there is demand for it, whether governments approve them or not. It's very hard to know. We'd prefer our long-term shareholders to just think of Eurofins as we are a resilient company.
We think on a long-term basis, 10-years basis, 5% organic growth per annum is probably something we can achieve. We have a well-balanced set of businesses, with some that are a bit more fast growth in normal times than others, but all of them together should enable growth and stability. This is what we want for our employees, to be able to offer them stable jobs. We innovate a lot, so we think for innovation going forward, we could potentially see a boost. If unfortunately, the pandemic continues, yes, we might overshoot that a little bit for a while, but we don't hope for that. We hope for our situation to go back to normal.
Okay, that's very clear. Thank you very much for the detailed answer.
Our next question comes from Alan Spence, Exane. The floor is now open to you.
Good afternoon, Gilles. I guess three quick follow-ups or follow-ons on some of these questions, if I can. The first one, obviously, the strong margin improvement, 210 basis points year on year. Is there any way you can maybe quantify or help us with the building blocks? To ask the question relatively differently, how much of that improvement is from the benefit from investments and efficiency? How much is from COVID? How much from cost controls? It seems like the government support part of that might be limited, that was my first question. Secondly, just two quick ones. The EUR 40 million-EUR 50 million government support on the cash side.
Could I understand whether you'd expect the majority of that to be paid back in the third quarter, or the second half, or will it actually come back into 2021? There's different messages coming from different companies, depending on where they're operating at the moment. Finally, just following up on the Eurofins SAFER@WORK. How do you price these contracts? You've obviously given us some quite helpful numbers out there on PCR testing and serology tests. How do you price Eurofins SAFER@WORK? If you can give us some info there. Thank you very much.
Thank you very much. Yes, I think the margin improvement overall is not all that huge. We're still finalizing our reorganization programs. I think, as you say, little by little, we get an impact from efficiency. We got some improvement because we didn't have the cyber attack hit. That's a component, obviously. The margin on COVID-19 is probably compensating the margin that we lost on the growth. Actually, if I look at it, our core business, it's not that we're missing revenues, we're missing growth on our core business. On that growth, the COVID-19 revenues compensate that. We might have a bit of cost control indeed, because we deferred some of the increases for the second quarter. Government support is not really material on the P&L indeed.
It's a very small amount. Eurofins SAFER@WORK, at the moment, is mostly clinical testing for employees. The cost for the, what is it called? Sentinel testing is a bit lower than the clinical testing per sample, but it's usually a lot of sample if you do it on the whole site. The cost for wastewater testing is a bit higher. I think it's more like EUR 200 because it's more elaborate for sampling and for extracting the sample. That's the orders of magnitude. The bulk of it so far is mostly clinical testing. Sorry, I don't have the exact details on the breakdown on the margin. We didn't necessarily look at it this way.
No problem. On the deferred tax repayment, is that mostly this year unwind, or will some drop into 2021?
I think this year for the most part, but Laurent, I don't know what government will do because some of them are talking about continuing those programs. Laurent, do you know anything better?
No. What we see today is that in the countries where we are the most active, like France or U.S., France has asked to pay back the Q2 social charges and taxes which were deferred mid-July. We paid them in July. Now they are talking about extending the measures in maybe the end of Q3 or Q4, it's very uncertain. In most countries, this is more or less what it does. It's visibility month by month or week by week, we don't have better visibility at this stage, unfortunately.
Thank you very much.
Thank you. Our next question comes from Stephen Holledonne, Berenberg. The floor is now open to you.
Thanks for taking my question. Just got a few, if you don't mind. I just wanted to ask you about some of your organic growth calculation. If I look at the acquired revenues for last year, it was, I think, EUR 134 million on a pro forma basis. Obviously, if I look at the way that the organic growth is calculated for the first half, I think you stripped out about EUR 36 million. That kind of implies a pretty drastic drop on the organic of the acquired businesses, and obviously most of that is skewed towards the second quarter. I just wonder if that's the right calculation and whether or not there was anything else going on in that approach. The second question I have, just in terms of your outlook for the second half.
Obviously, within your Biopharma division, it appears there was at least some delay to clinical studies, and clearly within Clinical Diagnostics, people were avoiding going for tests. Are you seeing catch-up demand coming there? If so, to what extent are you seeing that? I guess, why then are you only sort of guiding to mid-single digits for the second half? On the COVID testing, are you actually able to tell us what the revenue contribution from COVID testing was in the second half?
How many tests you've done? The final one from me, sorry, just on the free cash flow definition. Obviously, in line with new standards, as you said. You stripped out the lease capitalization from the CapEx number, which in this half, I think, added about EUR 40 million on a full-year basis, I guess that adds about EUR 80 million to free cash flow. Is the 500 definition on the new standard, or is that on the old standard? That's it. Thank you very much.
Thank you very much, too. I'm not sure your question on the organic growth I followed. I will ask Laurent to answer that. I don't know, actually, if we looked exactly at that detail. Laurent, do you want to answer the first question?
Yes. The 36 million you're referring to is basically the consolidation of 2019 acquisition at the 2019 FX rates for 36 million. Your question, Stephen, is that you imply that this is a severe cut versus a pro forma of last year. That's what I get from your question?
Yeah, that's correct. If I kind of do a simple half of what you had in your accounts last year.
Okay. I'm checking with the team, and I will get back to you in one minute on the precise answer of these cuts, if any.
Great.
I don't think anywhere that 134 would correspond to 36 or half of twice. I think it's unrelated numbers as I can see, because we haven't had any massive erosion anywhere. Also, for H2 and catch-up demand, yes, we might have a little bit of catch-up demand in clinical diagnostic. I heard that for France, but it's hard to quantify it on a full-year. You know, biopharma, the central lab is a very small part of our biopharma. I think it's less than EUR 100 million out of over EUR 1 billion. The clinical trials, the delays that some of your colleagues mentioned that have hit our central lab won't have a material impact on the overall biopharma, which is quite strong.
Yes, stripping out exactly the COVID, we haven't done it well enough in the first half to really be able to report anything officially about it as you saw, it more than compensated whatever revenues we lost due to the lockdown. it was not that high. July was definitely the high point compared to the month before. It's not our average. It's way below that in the second quarter. the free cash flow definition, again, I'll ask Laurent to answer that question, please.
Yes. Coming back to the first question, the EUR 36 million is the increase versus what was already consolidated last year. This is why you think that there is a discount, but there is no discount actually. These companies are basically in line with their pro forma. What you see in the organic growth table is just the part which was not consolidated last year. Going to the free cash flow definition. Indeed, under IFRS 16, there are two ways to present your free cash flows. One, which we opted for last year, and which some of you told us was not the most readable way.
We also discussed with a regulatory body in Luxembourg, and which recommended to basically opt for a simplification where basically only cash outflows, real cash outflows and not accounting entries, are reflected in the cash flow statement this is why we changed the presentation in this first half, and we put a note, and we gave you the pro forma for last year to be able to compare. The objectives that we made were under the old definition.
Great. Thank you.
If you see that we did something like EUR 300 in the first half, which is normally the weaker half of the year, where we had a bigger hit with the lockdown and the COVID testing didn't pick up yet, I think we probably are comfortable with the EUR 500 million for the full-year. Again, when we go back to that objective, we haven't changed this 5% for 10 years. That's not a guidance, by the way. We're not guiding. We are just saying this is an objective that we think we should be able to achieve, and it could well be we do way better than that. Our objective is 5% and remains 5%, and we have no reason to believe that we should miss it.
As we can see, of course, that view can change if developments change. So far, we believe we can meet our secular objective of 5% organic growth this year, even if we correct for the missing revenues due to cyber last year. It could be we do way more than that in the second half. As a citizen, I don't hope for that because that would mean the COVID pandemic would be not going in the right direction. Yes, it could be we do much more than that. We'll see.
Okay.
Thank you. Our next question comes from Jonathan Darcy from Oddo BHF Asset Management. The floor is now open to you.
Hello, gentlemen. One more from me. I just wanted to know where are you on the Boston Heart Diagnostics side? Are you still restructuring it in a good way and will it be probably broken down this year? Thank you.
Thank you. Yes. Well, that has been a nightmare for us the last three years. In the end, as we said last year, it's very small now. Of course, the cardiovascular testing took a hit like any clinical testing in the second quarter. On the other hand, we've turned that lab into a COVID testing lab in the meantime, and in the meantime, the cardiovascular testing has picked up again as things normalize in the U.S., and we start to generate substantial amount of COVID testing from that side. I don't think, and I don't hope this will be a drag anymore in the future on our earnings and revenues and growth, and that's why we didn't mention it. Thank you for asking it.
Thank you.
Our next question comes from Mourad Lahmidi. The floor is now open to you.
Hi, good afternoon. I have two questions. Firstly, can you please shed some light on the diverse performance of food testing business in the Europe and North America? Because I think that in the Europe it was down, but in North America it was up. Can you please talk about the demand dynamics there? Secondly, can you please provide volume and price breakup of the H1 organic growth? I'm just trying to understand if there is any competition or pricing pressure, and how has been that progressing over the years. Thank you.
Thank you very much. Yes, you're right. I think the difference between food testing Europe and North America is that in Europe we have a bit more of work for the retailers and restaurants where we do sampling in their store and in their restaurants, and that part was hit . Whereas in North America, we do most of pure testing where our clients send us the samples, so they have to organize the sampling on their sites. That's one of the reasons. On top of that, the lockdowns in France were very hard, very strong, so a lot of the activity froze for pretty much a month. That, I think, explains the difference. Volume and price, I wish I would know. We have a very diverse business with 900 sites. They do also, each of them, a bit different things.
Some use a price list, some do, like biopharma , it's just a project-based business, so it's not really comparable from year to year. For food and environment, we try to do reviews with our managers on a business by business on the volume and price evolution. where we do it, when I give a question, normally when we do a 5% organic growth, it's probably 1.5%-2% price growth and the rest volume or something like that. I don't have any indication that it be different in the first half of this year for the places where we have the data. I don't think we'll ever have that data for the food business, unfortunately.
Okay. Thank you.
Just as a reminder, if you do wish to ask a question, you may do so by pressing zero one on your telephone keypad to register. Our next question comes from [inaudible] . The floor is now open to you.
Yes, it's Saul Casadio M&G. Thank you for taking my question and congratulations for the good results despite the circumstances and for achieving your investment grade rating. I have three questions, if I may. One on the business, one on the rating, and one on capital structure. Starting with the business, and if I understand correctly, the EUR 65 million revenue for July, the COVID-19 related revenue, they mainly come from proprietary diagnostic tests that you have been able to develop. That's what I would like to understand better, because my understanding, you're predominantly in this business, you manage clinical diagnostic labs which normally execute tests developed by other companies like Abbott, Thermo Fisher, this sort of company. I'd like to understand how you were able to seize this opportunity and develop these tests. That would be interesting to understand. The second one on the rating.
The corporate family rating came out a couple of weeks ago. I was expecting to be followed soon after by the ratings of the senior notes and the hybrids. I wonder whether you could give us an update on that, and on the capital structure. Looking at the capital structure with the long-term view, now that you have achieved investment grade rating at the corporate family rating level and considering that the heavy CapEx phase of your development predominantly is behind, do you still see a role for the hybrids going forward, or do you think that they will be naturally phased, let's say, rolled into senior unsecured paper? That's it from me, and thanks.
Thank you very much. Yes, we haven't said very much about our IVD products businesses. For a large number of years, we have been developing our own tests, our own molecular tests. We have a range of molecular tests for GMO testing and food pathogen testing for a long, long time. For a while we have been deciding to invest, to develop a broader range of molecular testing, not only for food testing, but for also IVD testing. The main purpose of those businesses was to supply our own labs to make us independent from vendors on one side, and on the other side, to be able to be faster in deploying in our labs worldwide new tests that we develop.
Because if you do another thing, which is called laboratory developed test, for which we have three EUAs in the U.S. for COVID, each lab has to do a lot of work to validate it and justify it. Whereas if you buy a product that is either CE- IVD, or has a FDA 510(k) clearance , for example, you can use it with less validation. That was the original idea when we started this very small business line five years ago, or three years ago. In the meantime, of course, that has proven beneficial for COVID because we cannot have reliable supplies, especially we could not in March or April from IVD suppliers. We've been able to use the knowledge of our scientists in our labs to support the smaller IVD companies we had, and to develop those products. I agree with you.
I'm amazed at how fast we were able to develop all those products. You have probably never heard of Eurofins as an IVD product supplier before COVID, because our companies were fairly small. In spite of that, by working together between the scientists in our labs and the scientists in our IVD companies, we were able to put together a complete portfolio. In the first half, we still bought a lot of reagents from third parties because we didn't get approval for our own reagents everywhere as fast as we wanted. I think going forward, we should be able to have a higher percentage of the tests we use in our labs come from our own internal reagent producers. It won't be everywhere. There are all kinds of restrictions and limitations, but this should increase. I will let Laurent answer the rating of our various debt instruments. Laurent?
Yes. Moody's indeed is rating our debt instruments, and they should announce it today or tomorrow. I cannot release it now because it's under their control, but today or tomorrow you should see it. Since your last question. Regarding your last question on the capital structure, we will see how things develop. Indeed, it could be if we don't do a lot of acquisitions, we do mostly organic development, that we won't need all that hybrid, and naturally, we'll reimburse it, refund it, repay it.
However, we like it. It's really a very low-risk type of instrument. After two crises, the Great Recession of 2008-2009 and this COVID crisis, we have seen that our business is very resilient, and we can withstand a crisis. Nonetheless, I think instruments like hybrid, the last one, I think we're paying 3.5%, that are not too expensive, that are not really causing any reimbursement risk in case of a very prolonged, very difficult economic situation, has proven helpful. I can't say we'll never reissue or replace some or all of those hybrids. It's increasingly unlikely we would need all of them, but time will tell.
Okay. Thank you very much.
Thank you. Our next question comes from Andy Grobler , Credit Suisse. The floor is now open to you.
Hi. Good afternoon. Just one from me, if I may. You mentioned earlier about changing one of the Boston Heart labs into a COVID testing. When you look forward and taking, I guess, a more positive view that the need for testing disappears in one or two years or whenever it may be, how quickly can you change that capacity into other usage? What are the costs and effects of making that change at some point when it's no longer hopefully needed?
Thank you very much. Yes. Actually, what we did, since BHD had unfortunately shrunk over the last two or three years, we had a lot of empty space in the lab. what we did is we reused some of that empty space to set up the COVID testing. all the investments, they've already gone through our CapEx spend. they are there, and the payback on those investments is relatively short at the current reimbursement rates. You're talking of a few months. that won't really be an issue. More importantly, what we're also doing through the COVID pandemic is developing our ability to serve consumers directly, developing our online systems, and developing new approaches that are more patient and consumer-centric. that will also develop well, we believe, in the next six to 12 months.
We're working on our offer regarding ways to help people help themselves to not get sick. Because the whole of the Clinical Diagnostics, not the whole, but the bulk of it, is focused on helping people who are sick, and this is therefore reimbursed by insurance. We believe there is much more public health benefit to be had from helping people not get sick. Especially, as we know, a lot of the chronic diseases we suffer come from obesity, overeating, and other problems. Clinical Diagnostics can also have a use for that in prevention, which would be probably more self-paid or employers paid than insurance reimbursed.
This is a business we are developing out of Boston Heart. Of course, COVID is not helping for people to focus on this aspect. We're also using the time to get ready for that. We think we're going to make something out of this platform, especially as you mentioned, over the next two or three years. We have a bit of time to do that, and the investments we do in IT and online platform, et cetera, for COVID, will lend themselves very well to that.
Just more broadly than Boston Heart, I guess. The kit that you put in for the COVID testing, just to understand, if that particular test is no longer needed, can that be repurposed for other usage relatively easily? You're not going to be stuck with a lot of kit that's no longer useful at some stage.
To be honest, yes. Anyway, compared to the size of the testing, it's not so much. If you look at it, that even at the low utilization that we're having, we could generate EUR 55 million of revenue, that's annual run rate to EUR 650 million. I think the CapEx related to that was probably less than EUR 50 million. It's not super CapEx intensive, so it's not so much. Yes, all of that can be reused for other molecular tests. Now, of course, the market for all those other molecular tests won't be at the size of the COVID test immediately. What we are doing in our labs is we are working on developing a range of tests, and actually, I'm very excited about that.
Because again, we went into Clinical Diagnostics because of our impression that the way clinical diagnostic is used today could be enhanced by more preventive actions and by more patient-centric actions. That's why we bought Diatherix in the U.S., which has panels of detection of respiratory pathogens that cover 25 different pathogens in one run. If somebody is coughing or somebody goes to the doctor, instead of being prescribed an antibiotic just to see what could happen, we can know immediately, if it's a virus or bacteria and if it's resistant to antibiotics, and then which antibiotics could work. We feel this type of approach has a huge potential. We've talked about it for rare disease. We've talked about it around birth, to help people conceive better.
There are many other areas where molecular testing can have a very strong impact on patients and patients' lives and their health. Over time, we will develop assays that can be used on those instruments, both in terms of infectious disease, in terms of women's health. You have all, a lot of things. You have all the STDs issues that are largely underdiagnosed. You have also testing around HPV. You've got a range of things that will go molecular and for which we are working to develop our own testing solutions. In addition to, of course, what our suppliers, our IVD suppliers will provide us. If COVID stops tomorrow, of course, we will have a huge overcapacity, but it would have been before anyway, already. That capacity may take some time to be used, but eventually, we will use, I think, a large part of it.
Excellent. Thank you very much.
Thank you. That is all for questions. now back to Gilles for any other words.
Well, thank you very much. Thank you very much to all of you to join our call. As you noticed, we are in the middle of a pandemic. A lot of people are suffering badly, and I hope none of you or your families were affected. That's why we don't want to be found over-optimistic or overly satisfied with the developments. We are relieved that we're able to mitigate the impact of the crisis on our companies. We think our contribution in the second half of this year to the fight against COVID-19 can be very meaningful. We've worked very hard to develop a very broad range of services. Our reach to clients is not as large as it should be so that enough clients can benefit from those services.
Of course, our clinical diagnostics, we developed the test, but we don't have the sales force and the installed base that a Roche or an Abbott or a Becton Dickinson have. Of course, we have a small share of the reagent, a very small share of the reagent market, but it doesn't matter. What matters is we have a sure supply for our labs. We can provide unique solutions to clients, especially business and industry, when they want to bring their staff back to work. I'm very optimistic and bullish as to what we can offer. We really thought through what we're doing. What we have done is develop solutions that really make sense from a cost-effectiveness point of view for employers or for governments, to help people go back to a normal working situation. The employees in our labs, it can be done, it's cost-effective.
It can have a very strong impact in detecting very early any cluster and mitigating the clusters. All those tools can be implemented. We have trained our teams, hundreds of people around the world, to implement them with clients. This is something that can really have a positive impact for governments and companies. Really, we'll play our part in the fight against COVID. Maybe it's going to be a lot more revenues than the 5% organic growth as we mentioned. In the end, it doesn't matter. That's not the objective. The objective is that we contribute to limiting the number of deaths, we contribute to helping everybody go back to work safely, that we contribute to everybody recovering their normal life, their social activities, hopefully one day their parties. That has been our objective.
yes, it's good that we can compensate with that, with business that we would have done otherwise. if we do a little bit more, and if our results this year are much better than our objective, so be it. This is money we'll invest for R&D in the future and for developing new innovative solutions that can have a strong impact for everybody, to eat safer food, to live in a safe environment, and also to prevent diseases. this is why our company is here, to make a contribution to the life, a positive contribution to the life of everybody.
I'm very proud and thankful to our teams for all the work they did. I think the result in the first half really demonstrate how fast we can mobilize and contribute. I wish you all to be safe. I wish you all as good as possible summer in spite of all the restrictions that are slowly creeping back in. I hope to be able to meet you in person in the not too distant future. It doesn't look too good for the second half of this year, but we'll see. Best wishes to all of you, and thank you very much.