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Eurofins does not rule out significant acquisitions – CFO

Eurofins Scientific [EPA:ERF], a European life sciences and testing company, does not rule out making large acquisitions, CFO Hugues Vaussy said. The company could consider buying targets valued up to EUR 500m, he added.

The company could finance such large acquisitions by raising new debt, Vaussy said, adding that its last EUR 200m fundraise from CDPQ in June 2016 enables the company to be more reactive if an interesting opportunity arises.

As of 30 June 2016, the company’s net debt leverage ratio stood at adjusted EBITDA 1.88x, down from adjusted EBITDA 2.54x at the end of 2015. The company could increase its leverage ratio up to EBITDA 3x or 3.5x if needed, as long as it is not too detrimental to the company’s credit profile, Vaussy said.

However, apart from potential large buys, Eurofins will not change its acquisition strategy and will primarily focus on small opportunities like it did in 1H16, Vaussy said.

From January 2016 until the end of July 2016, the company completed 16 acquisitions, which represent an annualized turnover of EUR 100m.

For 2016, Eurofins aims to gain a total of EUR 200m in revenues through acquisitions, he said.

The company is looking for opportunities active in all its sector segments, in any country, and with test portfolios that are complementary to its own, Vaussy said, without giving further details.

Eurofins has previously been reported by this news service to be one of the front runners in the sale process for Adiuva Capital-backed Gesellschaft fuer Bioanalytik, for which first round bids were due at the end of July 2016. Vaussy declined to comment on the situation.

Eurofins will likely remain opportunistic and consider opportunities worldwide, as long as they enable the company to become the local leader in one of its sector segments, an analyst following the company said. However, the company might move its focus away from France and the Nordic countries, where its market share is already significant, the analyst suggested.

The company will not make an acquisition if it doesn’t expect a yearly 12% ROI before taxes in the three to four years after the completion of the deal, Vaussy said.

Excluding potential large buys, Eurofins could spend up to EUR 1bn until 2020 for its M&A strategy, he added.

Eurofins, which posted a EUR 1.95bn turnover in 2015, intends to reach a EUR 2.5bn turnover in 2016.

With the kick-off of the Premier League season this weekend, BT and Sky are set for their biggest match yet, battling to win over football fans with aggressive marketing campaigns and cut-price offers.

BT, which launched its sports broadcasting division just three years ago, has made a big bet on premium soccer programming, spending more than £1.8bn to snap up the rights to more than 400 football matches. This includes the exclusive rights to air every Champions League and Europa League match as well as 42 Premier League and two dozen FA Cup matches this season.

The UK telecoms group is hoping its new primetime line-up — BT Sport is broadcasting nearly all of its Premier League games on Saturday evenings this season — will enable it to lure more of rival Sky’s pay-TV customers. It is pitching itself to viewers as a one-stop-shop for football coverage by running advertisements with the tagline “Four Competitions, One Venue”.

BT is also seeking to leverage its £12.5bn acquisition this year of the UK’s largest mobile operator, EE, to broaden its sport customer base, offering six months of free football viewing to all EE customers.

Rival Sky, however, is still the UK’s dominant sports broadcaster. Last season, it aired 49 of the 50 most-watched Premier League matches. This season, the network is set to air three times as many Premier League matches as BT, including the most-watched Sunday kick-offs — and has branded itself “The home of the Premier League”. The broadcaster also has the rights to more than 100 English Football League matches, in addition to hundreds of matches from Spain’s La Liga.

But Sky’s vast programming schedule comes at a steep cost: in a high-stakes auction last year that saw the overall cost of airing Premier League matches soar by 70 per cent, the pay-TV leader agreed to pay £1.4bn each year for its Premier League rights. BT is paying £320m a year for its share of the Premier League matches.

Both Sky and BT make a loss on their sports programming, but compensate for the high costs by selling customers TV packages and high-speed broadband, respectively. With BT’s acquisition of EE, and Sky’s expected entrance into the mobile market later this year via a partnership with mobile operator O2, the two companies are also set to start competing for mobile customers.

So far, the cross-platform strategy has paid off.

BT’s move into sports programming in 2012 was partly motivated by concerns that Sky’s dominance of premium sports rights was undermining its core telephone and broadband markets — by some estimates, more than half of BT broadband customers who abandoned their subscriptions were switching to Sky.

Since launching BT Sport, however, the company has been able to reduce its rate of broadband churn — the share of its customers leaving for other providers — while bringing in new subscribers. The company reported a 58 per cent year-on-year increase in BT Sport viewers last quarter.

John Petter, chief executive of BT Consumer, said the company’s football and other sports offerings — the company also recently signed a multiyear deal with Cricket Australia to broadcast the 2016-17 Ashes series and the Twenty20 Big Bash tournament — were satisfying sports fans, while shoring up the long-term sustainability of BT Group.

“If it encourages more people to bring their broadband to BT or their mobile services to EE, there’s a commercial case for it,” Mr Petter said.

Meanwhile, Sky, which expanded into Europe in 2014 when it bought control of Sky Deutschland and Sky Italia from 21st Century Fox, has attracted hundreds of thousands of new customers each year, investing in new content across the board and rolling out its Now TV pay-as-you-go streaming services to compete with the likes of Netflix and Amazon Prime.

Full Sky Sports annual contracts start at around £25 per month, but viewers can watch the network’s sports coverage for as little as £6.99 for a 24-hour “day pass”. The company is set to reach an even wider audience this month, with the launch of Sky Sports Mix, a new sports channel for all Sky subscribers, regardless of whether they pay extra for Sky Sports.

Yet the already-high cost of broadcasting football is multiplying — in June, Sky agreed to pay the German Bundesliga €486m a season, an 85 per cent increase on the previous auction — leading many to question both Sky and BT’s long-term ability to control costs and maintain growth.

It is unlikely that the companies will pass the full cost on to consumers: Sky posted its highest level of churn in nearly a decade last month, after TV customers reacted to a 4 to 5 per cent price rise.

But many analysts point out that networks can only slash so much in operational expenses to offset football costs — Sky is targeting £200m in cost-cutting this year — before they are forced to row back on investment in other programming, such as premium scripted content.

Ian Whittaker of Liberum said the high levels of churn showed competition was increasing for Sky and BT, with pressure from “over-the-top” services like Netflix and Amazon “potentially undermining their pricing power and therefore revenue growth potential”.

Stephane Beyazian of Raymond James, another analyst, said both BT and Sky were “potentially financially at risk” if they “don’t bring down the pressure on sports content auctions”.

But Mr Beyazian added that the head-to-head battle between the UK sports broadcasters may be shortlived, warning that new competitors with deep pockets could be entering the space soon.

“Google, Netflix and Apple haven’t invested heavily in sports yet,” he said. “One day or another, they may give it a try.”

The glamorous island has remained popular with international buyers throughout the financial crisis, helping to limit price falls

With its intense nightlife, top-flight restaurants and a background soundtrack of electronic Zen lounge music, Mykonos is often billed as the new Ibiza. British writer Lawrence Durrell, who first visited the island in 1940, wrote: “It does not try to charm, it brands you like a hot iron.”

Yet while the 24-hour party people have certainly arrived, Mykonos is small compared with Ibiza, being just a fifth of the size and much more bijou. Prices can be steep, as much as €20 for a cocktail in the swankier bars, which may have helped put the brakes on mass tourism; none of the large international hotel chains has yet arrived. Last August the average hotel room in Mykonos was €507 a night, beating even the going rate of €470 a night in Monte Carlo, according to price comparison website Trivago. Meanwhile, international restaurants such as London’s Hakkasan and Buddha-Bar of Paris fame have set up offshoots on Mykonos, ensuring that the fashion set feel at home.

For some, the island’s Forbes-list clientele and beach-club dining scene are more comparable with the Côte d’Azur than the Balearics. “It’s like a little St Tropez,” says Nicolas Mugni, of French property agency Demeures de Grece.

The approval of the international jet set has helped Mykonos become the most resilient market in Greece, attracting more inquiries than anywhere else in the country, according to several agents. It attracts the same breed of foreign buyers as other sophisticated European hotspots, from Tuscany to the Swiss Alps.

Konstantinos Sideris, an analyst at Algean Property, says Mykonos “offers a combination of tradition and glamour”, which makes it the first port of call for international buyers seeking a property in Greece. “Even if they buy on another island, in the end they almost always start with Mykonos,” he says.

The ongoing financial crisis in Greece has hit the country’s real estate market hard, with prices down 43 per cent in Athens and areas of the mainland since 2008, according to the Bank of Greece. Agents say the decline is more than 50 per cent in the worst hit areas. It would have taken nerves of steel to invest in the country last summer as it teetered on the edge of leaving the eurozone.

But after Athens agreed a third bailout with the EU in August 2015, buyers appear to be reassured, says Yannis Ploumis, a representative for Christie’s International Real Estate in Greece, “There’s now a security umbrella that convinces us Greece won’t leave the euro.” Mykonos bounced back in particular, Ploumis says, with sales doubling this year compared with the first half of last year. “It’s in its own special market,” he adds.

Mykonos “has displayed the highest resistance in the current turmoil, with demand from international buyers almost undiminished,” says Mike Braunholtz at Prestige Property Group.

Of course the island has not remained immune from the crisis: agents agree that prices remain as much as 30 per cent below their 2008 peak. Yet Braunholtz attributes this reduction to a previously overpriced market, which he says has now undergone a correction.

Perhaps as a result, inquiries have surged 50 per cent in 2016 at Demeures de Grece, buoyed by demand from Middle Eastern investors. Mykonos is just 35 minutes from Athens by air and is also served by direct international flights, making it popular with Italians and Greeks living abroad.

Part of the island’s attraction as an investment is the potential for high rental yields with agents estimating returns of between 8 and 12 per cent over a season from April to October.

The most popular areas include Agios Ioannis and Agios Lazaros where Algean Property is marketing a seven-bedroom villa with views towards the small island of Delos, just off Mykonos, for €6m. Christie’s International Real Estate is selling a 16-bedroom property with a pool on Delos itself for €11m.

Southern beaches such as Super Paradise are also popular since they are more protected from the wind. Demeures de Grece is selling a villa with six bedrooms and a pool on the south coast near Elia for €2.2m.

Since the UK’s EU referendum vote, Europe is about a sixth more expensive for those spending in sterling. Braunholtz says several British buyers withdrew from sales after sterling crashed last month. But with 80 per cent of his client base from outside the UK he remains optimistic, especially about Mykonos where villas are about a third of the price of those on the Côte d’Azur.

Of course there is a risk that Grexit could follow Brexit. If Greece did abandon the euro and returned to the drachma, investors would face a sharp devaluation of their property value. Property taxes could also be raised to enable the Greek government to bolster its depleted revenues. In such a scenario the international investor might return to calmer waters on the Côte d’Azur.

Hedge funds have upped their bets against the shares of Obrascón Huarte Lain, one of Spain’s largest construction companies, to the highest level in a year as concerns mount over the interlinked debts of the company and its biggest shareholder.

The rise in short positions comes as Juan Miguel Villar Mir, one of Spain’s richest men, this week reorganised his stake in OHL, a large part of which is pledged to banks as collateral for loans. He holds his stake through the private conglomerate Grupo Villar Mir, which is OHL’s largest investor.

Shares in OHL have lost more than 80 per cent of their value since the company last October raised €1bn in a rights issue. At the time, OHL said the proceeds would be used to repurchase €300m of bonds, however it only bought back €46m.

Debtholders this week questioned OHL’s decision to now spend money buying back shares, which plunged in value after the company announced large losses for the second quarter on July 29.

“It makes no sense,” said one debt investor who described the decision to buy back equity as “bizarre.”

OHL said that it was being attacked by hedge funds and they launched the share buyback to bolster investor confidence in the company. The company also said the low amount of bonds bought in October was due to investors not tendering their debt.

OHL is the latest of Spain’s large construction businesses to face difficulties in the aftermath of the eurozone crisis. Several of the country’s builders have in recent years been forced to sell assets to trim their large levels of debt. One of these, Abengoa, defaulted on its bonds last year while another, Isolux, gained agreement for a restructuring of its debt in July.

The amount of OHL shares out on loan, a proxy for short positions, has hit 8 per cent of its total shares outstanding, according to Markit. Marshall Wace, WorldQuant and Oxford Asset Management have all disclosed bets against the construction group, according to Spanish regulatory filings.

Holders of the company’s bonds say they are worried about potential “leakage” of cash — by transactions such as share buybacks — from OHL to Mr Villar Mir’s holding company, as well as to other equity holders, which could reduce the amount of funds available to repay creditors.

“It’s just the wrong sign to all the bondholders if you give cash back to shareholders given such poor results,” said Jannik Prochnow, a fixed-income analyst at Berenberg.

One debt investor who used to own the company’s bonds described the builder as “complicated and capital hungry”.

Shareholders in Obrascón Huarte Lain appear to have also taken fright at a complicated financing arrangement that Mr Villar Mir entered into with the Monaco-based hedge fund Tyrus Capital.

The contract was signed between Grupo Villar Mir and Tyrus after the hedge fund took an 8 per cent stake in OHL as part of an emergency fundraising round last year.

While the exact details of the contract have not been made public the company has said that under the terms Tyrus and GVM will share any losses and gains made on the stake. Shares in OHL are down more than 70 per cent since Tyrus agreed to the deal in October.