(AOF) – Elior (+9.45% to 2.34 euros) is firmly established among the biggest risers in the SBF 120 index, with investors welcoming the recovery in the annual accounts. “No surprise, good surprise”, summarizes TP Icap Midcap for whom the online results and outlook for 2024 “tend to support its group recovery scenario”. At the end of July, the catering and multi-services specialist was sanctioned on the stock market after issuing a warning on its Ebita margin.
For the 2022-2023 financial year, adjusted Ebita stood at 59 million euros, compared to a loss of 48 million euros last year. The company exceeded consensus expectations of €50 million. The adjusted Ebita margin increased by 220 basis points to 1.1%, compared with a target of around 1%.
Turnover amounted to 5.223 billion euros, organic growth of 11.2%. He aimed at at least an increase of 10% and the market an increase of 10.7%. Pro forma turnover reached 5.76 billion euros.
Normalized free cash flow is negative at -20 million euros, but up sharply compared to -124 million euros in 2021-2022.
TP Icap Midcap judges “positively this end of the year, where the group has finally kept its commitments (in particular on the recovery of the problematic contracts of the third) and demonstrated that it had not lost sight of current affairs”.
“Having already exceeded the initial objective of cost synergies, we are revising the initial overall objective upwards, from 30 million euros to 56 million euros by 2026”, indicated the CEO, Daniel Derichebourg at about global synergies.
Cost reduction opportunities have been significantly increased. Their scope now includes all of the Group’s activities in France, multi-services in the Iberian zone, and the group’s headquarters. As of September 30, the annualized amount of cost synergies reached 27 million euros, higher than the initial target of 18 million euros set in December 2022.
Priority to debt reduction
“My main priority today is the reduction of the Group’s debt,” he added. The company’s objectives are a leverage ratio (net debt to Ebitda) of around 4 at September 30, 2024, then below 3 at September 30, 2026. It stood at 5.4 at the end of September 2023, below the test of covenant set at 6.
For the 2023-2024 financial year, the company anticipates organic revenue growth of between 4% and 5%, including a continuation of the contract portfolio rationalization process. This forecast is lower than the consensus of 5.9%.
Elior is also targeting an increase in the adjusted Ebita margin to reach around 2.5%, compared with a consensus of 2.6%. “This improvement should be supported by pricing initiatives and easing inflationary pressure,” says Stifel.
“While we view the revenue forecast as conservative, we believe the margin target is ambitious at this stage, although it can be achieved if the slowdown in inflation continues over the coming months “, adds the broker.
TP Icap Midcap considers “positively these prospects which demonstrate a new commercial approach focused on selectivity, risk management and customer retention”.
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