(BFM Bourse) – The collective catering company jumps on the Paris Stock Exchange after publishing results better than expectations in the first half.
Elior has suffered in recent years. The collective catering group has suffered from the pandemic but also from inflation in food, energy and wages, while its income structure is less conducive to the passing on of price increases than those of its competitors Sodexo and Compass. Elior has, in fact, a higher exposure to the public sector, with which it is by nature more difficult to iron out cost inflation in contracts.
Concerns about the balance sheet have emerged, with the market fearing that the company will not respect its debt ratio commitments to its creditors (“covenants”).
The situation stabilized last year, in April, when the recycling and business services group Derichebourg became the company’s reference shareholder (44.8% of the capital). This in exchange for the contribution to Elior of its Derichebourg Multiservices (DMS) division, which offers various services to businesses (hygiene, security, reception, maintenance). These services offered significant complementarity to those of Elior (biocleaning, infrastructure maintenance) as well as to its collective catering activity, which is supposed to have strengthened its competitiveness in calls for tenders.
This reorganization of capital also resulted in the takeover of the Derichebourg family, Daniel Derichebourg taking the position of CEO of Elior, the manager having to constitute the key man in the financial recovery of Elior.
The publication of the company’s half-year results this Thursday shows that this project is on the right trajectory. TP ICAP Midcap even mentions “an excellent publication”, with a company “which has got ahead of its recovery plan”.
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Cash in the green
Over the entire first half of the company’s 2023-2024 financial year, i.e. from October to March, Elior generated revenues of 3.12 billion euros, up 26% year-on-year in published data. , and 5.9% on a comparable basis.
Growth was homogeneous between collective catering (+6%) and multitechnical services (+5.9%).
In collective catering, Elior improved its customer retention rate, a very important indicator in the sector, to bring it to 92.3% and 93.6% excluding voluntary exits from contracts, compared to 91.3% one year earlier.
“The real notable point of the publication is the Ebita (the current operating profit restated for certain elements)”, underlines TP ICAP Midcap. Adjusted Ebita more than doubled in the first half to 100 million euros compared to 41 million euros a year earlier. The corresponding margin stood at 3.2%, up 1.5 percentage points year-on-year. According to Oddo BHF, the consensus expected an adjusted Ebita of only 87 million euros for a margin of 2.8%.
Crucial point, moreover: Elior released cash, with a free cash flow of 169 million euros compared to a disbursement of 15 million euros in the first half of its previous financial year.
As a result, the group is reducing its debt, with net debt reduced by 137 million euros over the half-year, representing 4.1 times gross operating profit (Ebitda). The group is thus largely within the limits of its covenant, temporarily set at 5.25 instead of the usual 4.5, for the end of March.
Objectives confirmed
“The group’s operational profitability is back. We have extinguished the sources of losses on certain strategic contracts. (…) We are continuing to reduce the group’s debt. Our turnover and our growth are increasing overall and in our activities, such as our Ebitda and our margin rate, all signs of a recovery which continues with good momentum, even if there is still a way to go,” Daniel Derichebourg said in a press release.
Elior confirmed its growth objective for the 2023-2024 financial year, of 4% to 5% on a comparable basis, and slightly adjusted upwards, in its formulation, its profitability target. The group is targeting an Ebita rate of “at least 2.5%” compared to “around 2.5%” previously. The company also intends to reduce its debt leverage to 4 by September 30, 2024.
“These are an encouraging set of results for the first half, which show Elior’s significant operational progress, which should continue over the coming months,” appreciates Oddo BHF, although it is “underperforming” on the action.
On the Paris Stock Exchange, Elior shares soared, gaining 26.2% around 4:30 p.m. and dragging Derichebourg in its wake, which gained 8% at the same time.
Julien Marion – ©2024 BFM Bourse
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