Elior: Preparing to make a strategic shift, Elior is seeing its business grow a little more than expected


(BFM Bourse) – The collective catering group has delivered annual organic growth above expectations and has revised its growth forecast slightly upwards for the current financial year. Elior is also preparing to announce the results of its strategic review.

Elior’s 2021-2022 financial year has proven to be challenging. In March, the group lost its managing director, Philippe Guillemot, who left for Vallourec, and had to contend throughout the year with galloping inflation which led him to renegotiate the vast majority of his contracts. This while the market is worried about its debt and its balance sheet in a context of rising interest rates.

The results delivered by the company specializing in collective catering for the entire financial year ended in September, however, provide some grounds for satisfaction in terms of growth.

Over the full year, revenues increased by 20.6% over one year to 4.45 billion euros with organic growth – i.e. excluding changes in exchange rates and scope – of 18 .3%. In the fourth quarter alone, organic growth was 12.2% and revenues represented 95% of their level in the fourth quarter of 2018-2019, the last financial year not to have been penalized by the pandemic.

According to a consensus quoted by Stifel, analysts on average expected organic growth of 17% for the whole of the 2021-2022 financial year and a level of activity in the fourth quarter representing 93% of that of 2018-2019.

An increasing retention rate

The design office notes “a positive dynamic on the revenues” of the company, due in particular to an important commercial development, with a positive contribution of the new contracts of 3% to the organic growth.

At the same time, the customer retention rate, an indicator closely monitored by the market in collective catering, rose to reach 93.2% at the end of September against 91.2% a year earlier. This rate notably rose to 97% in the United States, the most promising market in the sector, but to which the group is much less exposed than its competitors Sodexo and Compass.

Apart from this buoyant activity, the company’s profitability was strongly affected by inflationary pressures. Elior recorded restated current operating income (adjusted Ebita) for the whole of the 2021-2022 financial year close to break-even (-€6 million), nevertheless excluding a €45 million impact due to Preferred Meals Company. This American company distributing ready-made and frozen meals, in chronic loss, will see its activity be stopped by Elior, who judged that this company was too far from its core business.

Elior’s net loss quadrupled to 427 million euros. Above all, the group burned cash with a negative free cash flow of 48 million euros, while its financial debt stood at 1.22 billion euros at the end of September against 1.11 billion a year earlier. .

Regarding its outlook, Elior has very slightly raised its growth forecast for the current financial year 2022-2023, expecting organic growth of at least 8% against at least 7% previously. The company also expects to achieve an adjusted Ebita margin of between 1.5% and 2% of sales.

A strategic review soon completed

The group should especially return to the market in a few weeks. The company announced that the strategic review unveiled in early July should be completed “in the coming weeks”. Bernard Gault, the group’s CEO, told financial analysts that this will include discussing cooperation with the recycling and services company Derichebourg – which took more than 20% of Elior’s capital in the spring – and find measures to strengthen the group’s balance sheet.

Known for reacting in a very volatile and erratic way to announcements, Elior’s share price is struggling to stabilize but remains in the green following all of the group’s communication. The title takes 8.2% around 11:10 am.

“Perhaps the market appreciates the fact that announcements will soon be made as part of the strategic review, but concretely the balance sheet remains the company’s big problem”, judges an analyst. “We cannot be calm on the balance sheet when they have still burned cash”, underlines another financial intermediary.

Julien Marion – ©2022 BFM Bourse

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