(BFM Bourse) – Elior starts the week down, penalized by a rating from Barclays. In its latest delivery, the design office points in particular to the weakness of the financial balance sheet of the specialist in collective catering and fears that it will not keep its financial commitments to its banking partners.
Elior is not on his plate at the start of the week. The title of the specialist in collective catering shows the largest drop in the SBF 120, and drops another 7% to 2.662 euros around 3:00 p.m., after having returned more than 11% a little earlier in the day. Several financial intermediaries doubt the ability of the collective catering specialist to stand out in an inflationary environment.
The latest to show a cautious bias on Elior, we find Barclays downgrading its online weighting opinion to underweight on the file. The design office lowers its price target heavily to target only 2 euros on the title after 6 euros in a previous note.
Barclays analysts point to several concerns about Elior. According to them, the collective catering specialist is particularly vulnerable to a rise in interest rates given its high level of indebtedness. Analysts also fear breach of covenant, that is to say that the company does not keep its financial commitments to its banking partners. In this context, Elior could request a renegotiation of its debt, indicates Barclays. If it were to be carried out, such an operation would result in a dilution of Elior’s earnings per share of around 30%, adds the financial intermediary.
The research department also points to the risks of a recession on Elior’s results and more particularly on its earnings per share.
“Zero Visibility”
For Barclays analysts, visibility is more than reduced on the recovery plan initiated by Bernard Gault, who had taken over as interim general manager of the company (and has since become CEO of the group) after the departure of Philippe Guillemot in early March. last.
“We have no visibility into the ongoing strategic review, which at best could result in the sale of parts of the business, resulting in significant cash inflows and balance sheet relief” , says Barclays. The design office therefore expects management to communicate the details and progress of the ongoing strategic review.
Barclays is following in the footsteps of UBS. On Friday, the Swiss research office also expressed its doubts about Elior, in particular its ability to maintain its margins in an inflationary environment. He therefore reduced his estimates on the restaurant specialist to reflect his concerns about inflation. “We are now more cautious about the margin outlook,” said UBS, which lowered its price target to 3 euros against 3.3 euros. The research department maintains its neutral recommendation on the stock. The effects of the pandemic and inflationary pressures on margins prompted Elior to revise its financial objectives for the current financial year and the medium term on May 18.
The analysts on the panel are therefore far from convinced of the effects of the recovery plan initiated by the new CEO of the Elior group. However, the latest communication from the collective catering specialist reported better than expected activity, with in particular organic growth of 25% for its third quarter of its 2021-2022 financial year. The group then explained that it had benefited from “more favorable sanitary conditions, but also from strong commercial development and an increase in the retention rate” of its customers. At the same time, Elior confirmed its objectives for this same financial year and its medium-term ambitions. An optimism that had then seduced investors, Elior had even closed the session of July 27 with a hearty gain of 31.35%.
Since then, investors are no longer convinced of Elior’s return to better fortune. The stock has lost 60% of its value since the start of the year. Elior’s valuation has been divided by nearly 6 since its (successful) return to the stock market at a price of 14.75 euros in June 2014. The group will publish its quarterly accounts on November 23, an opportunity for Elior to confirm or not the efforts made over several quarters.
Sabrina Sadgui – ©2022 BFM Bourse
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