Release Date: November 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Elior Group SA (STU:21E, Financial) achieved a strong recovery in profitability for the fiscal year 2023/2024, with a significant improvement in EBITDA by EUR127 million, reaching EUR333 million.
- The company recorded a positive free cash flow of EUR215 million, contributing to a reduction in the leverage ratio to 3.8 times EBITDA, comfortably below the bank covenant.
- Consolidated revenue increased by 16.9% year-on-year, driven by solid organic growth of 5.1% and contributions from acquisitions.
- Elior Group SA (STU:21E) successfully implemented cost synergies and operational efficiencies, resulting in a cost reduction of EUR55 million in 2024.
- The company has developed a new ESG roadmap, 'Aimer sa terre for Horizon 2030,' focusing on social and environmental ambitions, with significant progress in reducing food waste and greenhouse gas emissions.
Negative Points
- Net income stood at a loss of EUR41 million, although this was a significant reduction compared to the previous year.
- Net financial charges increased to minus EUR105 million, reflecting higher average net debt and interest rates.
- The retention rate decreased slightly from 93.6% last year to 92.7% this year, indicating some challenges in retaining contracts.
- The company faced nonrecurring charges of minus EUR31 million, mainly related to restructuring plans and reorganization efforts.
- There is uncertainty in the macroeconomic context, including potential impacts from labor costs and social charges, which could affect future profitability.
Q & A Highlights
Q: Adjusted for exits, retention came down from 93.6% last year to 92.7% this year. Could you provide some color on this, and how should we look at retention next year? Are there more exits incorporated in your 3% to 5% organic growth guidance?
A: Retention was calculated for all activities, including multiservices, based on 2023 revenue pro forma. Facility services historically have a lower retention rate than contract catering. The US retention was slightly lower than last year but still above average. Despite a lower retention rate, we recorded one of the highest net development balances, favoring margin improvement over revenue growth. For next year, we expect limited impact from contract exits on our organic growth guidance.
Q: Your margin guidance for next year implies a 20-basis point expansion year-on-year. Could you provide more color on the different moving parts? It seems a bit conservative.
A: Our guidance considers uncertainties in the macroeconomic context, geopolitical, and regulatory environment. We expect a net positive inflation balance in 2025, though at a lower level as inflation decelerates. Operational efficiencies will continue to contribute to margin improvement, comparable to the second half of 2024. Synergies will progressively close the gap to the EUR56 million target by 2026, and net development is expected to be accretive.
Q: Can you talk about the moving parts of organic growth in H2 '24 and the guidance for next year, especially on volumes and net new?
A: Organic growth was driven by higher attendance in restaurants and development of annexes. We expect stabilization of this driver next year. The net development was reduced in H2 2024, but the focus remains on accretive margin improvement. Current trading aligns with our guidance, and we are more selective in tenders to ensure margin improvement.
Q: On price increases, you mentioned EUR57 million of carryover. How does this affect your margin expectations for 2025?
A: The carryover represents price increases negotiated but not yet impacting results. We expect a positive net inflation balance in 2025, though lower than 2024. The carryover will benefit us as inflation normalizes, and we anticipate a balanced inflation impact by 2026.
Q: Regarding the new business, you mentioned EBIT of EUR16 million on new contracts. Is there further analysis on the range of potential margins?
A: The EUR16 million reflects the momentum in opening new contracts, which is the main driver of net commercial balance. The accretive margin is the year-over-year improvement, considering contract losses. We continue to improve margins through commercial development and replacing contract losses with higher-margin contracts.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
