Elior Group Ord

Welcome to the Elior Group Full Year 2024-25 Financial Results Presentation. Please note, this call is being recorded. The management discussion and slide presentation plus the analyst questions and answers session is broadcasted live over the internet. Today's call will start with an introduction of Daniel Derishbore, Chairman and Group CEO. Mr. Derishbore will speak in French with an English translation right afterwards. After this introduction, Didier Grandpre, Group CFO, will carry on with the usual presentation before opening the Q&A session. Mr. Derishpour, please go ahead.

Yes, hello everyone. I'm sorry I can't speak English, but it's not at my age that I want to put myself in this position. As we heard last time in May, I told you that society was doing better and that we would normally Hello, everybody.

First, I'm sorry for not speaking English, but you know what? At my age, I'm not going to start learning now. We had told you in May that everything was going a lot better. and if everything went according to plan we would be able to pay out a dividend and as you've seen in the press release that has now been confirmed.

Okay so I'd like to thank you all for being here it really is

an honor to have you all here. And I'd now like to hand over to our financial director, Didier Grandpré, who's going to take us through the results.

Thank you, Daniel. Good afternoon, ladies and gentlemen, and welcome to Elior Group's full year result presentation. We have provided detailed financial information in our press release issued earlier this afternoon, which is available on Elior's website. I invite you to read the disclaimer on slide two, which is an integral part of the presentation. I will make a short introduction before covering our full year results in detail. Then I will share the progress made in the implementation of our CSR strategy, and I will continue with the business review section. And finally, I will conclude with our outlook for the next fiscal year before we answer, Daniel and I, your questions. Two years ago, the 2022-2023 fiscal year marked a turnaround in our operational profitability with a positive adjusted EBITDA of 59 million euros compared to a loss of 48 million euros in 2021-2022. The following year saw a remarkable improvement in performance with the adjusted EBITDA increasing by €108 million in one year. Now, the 2024-2025 fiscal year is a new major milestone. We've not only strengthened operating profitability with adjusted EBITDA exceeding €200 million, but also achieved a turnaround in profit before tax, reaching 65 million euros compared to a loss of 5 million euros last year. Elior has once again improved its performance in 2024-2025, although this was limited by a particularly challenging year for our temporary staffing business, which recorded an exceptional sharp revenue decline and an unusual negative EBITDA. After the takeover by a new management team in the second half of the year, our objective is clear, achieve a rapid return to profitability in this segment. In this context, it was important for us to present the 2024-2025 result, of course, as reported, but also excluding the underperformance of the temporary staffing business. Globally, our results for 2024-2025 are in line with the revised objectives set last May. First, in line with the first semester and our revised ambition, the organic growth was modest in the second semester, reaching plus 1.3% for the year. Growth stands at 1.7% when excluding temporary staffing activities. Adjusted EBITDA continue to grow, both in absolute value and in margin rate, up 50 basis points to 3.3%. Notably, the margin rate for 2024-2025 reached 3.5% when excluding the underperformance of temporary staffing activities, corresponding to a 70 basis points increase. we achieved a positive profit before tax of 65 million euro an improvement of 70 million euros including lower non-recurring charges following the successful implementation of optimized organization across our geographies within two years the payment of a dividend of four cents per share has been approved by the board of directors today and will be proposed to the AGM approval on February 4th, 2026. We remain focused on delivering value to our shareholders while continuing to pursue our deleveraging objectives. On this front, our leverage ratio was reduced by 0.5 points during the year, reaching 3.3 times at the end of September 2025, thanks to a sustained free cash flow exceeding 200 million euros for the second year in a row. Moving to our financial results in more detail, starting with the revenue on slide 7. Group revenue reached 6 billion 150 million euros, corresponding to an overall revenue growth of 1.6%, made of a group organic growth at 1.3%, within the expected range. Tactical acquisitions contributing for 0.8%, including notably the regional expansion of facility services in Spain to complement our leadership position in contract catering in that country. The negative currency impact of minus 0.3% came mainly from the softening of the US dollar. Organic growth was driven by contract catering at 2%, itself supported by strong commercial development in Spain, rigorous pricing discipline in the UK, and successful commercial activity in the US, especially in the education market. In 2024-2025, activity in Italy declined due to non-renewal of some public contracts at a level of margin below our expectations. In multi-services, the organic revenue decline is mainly due to temporary staff solutions. Excluding this activity, the segment grew by 1.1% thanks to a strong recovery in aeronautics and energy activities in the second semester. Contract retention slightly decreased in H2, including the full year impact of voluntary exits and non-renewals of some public contracts in Italy at the beginning of the fiscal year. to reach 90.6% at the end of September 2025 versus 91% at the end of March and 91.2% one year ago. Following the rationalization of our portfolio, we expect contract retention to start improving from next year. Operational profitability increased again this year. thanks to maintained discipline on price increases, especially in the US, UK and France, continued productivity improvement in purchasing and labour. It is worth noting, despite a negative commercial balance in revenue, we still contributed positively to adjusted EBITDA, especially in France, underscoring our strategy of profitable growth. The slide 9 illustrates the robustness of the foundation consolidated during the fiscal year 25, with a strong improvement in the profitability of contract actoring activities, up 100 basis points, driven by price increases in the US, UK and France, an accretive commercial development in Spain, the rationalization of our contract portfolio, and the streamlining of the operational organization in France and Italy. Excluding temporary staffing, there was a slight improvement in the profitability of multi-services activities, up 10 basis points to 3% in fiscal year 25. This improvement came notably from the increase in the level of activity in the industrial sector in the second semester. The slide 10 presents a major achievement for the past year with a positive pre-tax profit of 65 million euros compared to a loss of 5 million euros last year, an improvement of 70 million euros. and a positive net profit of 87 million euros this year, compared to a loss of 41 million euros last year, an improvement of 128 million. This turnaround is due to the continued improvement in operating profitability as just described, a decrease in amortization of intangible assets, down 13 million euros due to a one-off charge last year in the US for 11 million euros, related to short-term contracts. A sharp reduction in non-recurring charges, down to 9 million euros in fiscal year 2025, following the implementation of reorganization plans over the past two years, especially in France for both support and operational functions, and in Italy to adjust the organization to a level of activity and regain commercial agility. based on this year's strong performance and outlook we activity net operating losses in the us and france for a total of 39 million euros resulting in a tax benefit of 22 million compared to a 36 million euro tax charge last year the adjusted net group profits to that 112 million euros corresponding to an adjusted eps of 44 cents Moving to slide 12, free cash flow for the 2024-2025 fiscal year amounted to 228 million euros, which represented two-thirds of the EBITDA that reached 342 million euros or 5.6% of revenue. Free cash flow improved by 13 million euros compared to last year, mostly from operations. capex amounted to 144 million euros or 2.3 percent of revenue up 46 million euros or 70 basis points of revenue year on year this increase included investment in central kitchen to ensure sufficient production capacity for new contracts real estate investments to replace more expensive rentals in the long run and offer greater flexibility and the first phase of our transformation and innovation program to harmonize operational and financial processes within a common ERP platform. On top of business as usual investments related to new commercial contracts or renewals. In addition to adjusted EBITDA up by 10 million euros, other components of Free Cash Flow also improved compared to last year notably the change in operating working capital which contributed 56 million euros an improvement of 32 million euros thanks to better performance in the timely collection of receivables the ramp up of our new securitization program which began in september 2024 and contributed 89 million euros for the year an improvement of 6 million euros compared to last year Non-recurring expenses amounted to 15 million euros for the year, down 11 million euros from last year following the completion of reorganization programs. IFRS 16 rents were 81 million euros for the year, down 4 million euros due to either termination of leases or renewal of leases under better economic conditions. Tax paid remains stable at 17 million euros. The free cash flow contributed to reducing net debt from 1 billion 269 million euros to 1 billion 125 million euros at the end of September 2025. Financial interest amounted to 97 million euros plus 13 million euros in refinancing costs for the revolving credit facility and the high yield bond. IFRS 16 debt continued to decline as previously mentioned and tactical disposals and acquisitions resulted in a net increase of 9 million euros for the year. The reduction of the net debt by 144 million euros combined with an improved adjusted EBITDA allowed us to stabilize our leverage ratio at 3.3 times below the covenant of 4.5 and in line with our goal to fall below 3.5 by year end towards the target of 3 times in the short term. Moving to the next session on corporate social responsibility. This year, the group continued to implement its CSR strategy presented last year, MSATER or Love Your Earth Horizon 2030. With the new CSRD requirements, we refined the double materiality assessment and identified 37 material items consistent with our strategy. The table shows significant progress this year in the four pillars of our strategy towards the 2030 targets. This is especially true for the first pillar, preserved resources, with a significant step in reducing greenhouse gas emissions in contract catering activities, achieving a 7% reduction in fiscal year 2025, supported by a doubling year-on-year of low-carbon recipes. Two-thirds of single-use containers are sustainable packaging, and a 42% reduction in food waste, getting closer to the 50% target in five years. Similarly, for the second pillar, sustainable food and services, recipes with the highest Nutri-Score rating increased by 12 points to reach 61% in fiscal year 2025, getting closer to the 70% target. Third, significant social progress was achieved this year, including a 10% decrease year-on-year in the frequency rate of workplace accidents, the promotion of internal resources to management positions whenever relevant. This was actually the case for nearly half of vacancies this year. The group also strengthened its commitment to gender equality with 38% of women on leadership committees. Finally, the group expanded its local anchoring with two-thirds of national sourcing and maintained responsible sourcing with more than 15% purchased food products that are certified. In addition, the group has defined a decarbonisation plan built around nine levels of action and carried out a vulnerability assessment of its assets to physical risk, paving the way for adaptation plans. Moving to the business review section, starting on slide 18, that shows the evolution of the securitization program in the second semester, according to the seasonality of our sales. It is worth noting the weight of balance sheet compartment, reaching 82% at the end of March and 77% at the end of September 2025, up compared to previous years. It illustrates the quality of our receivables and the rigor applied in managing this new program. The right-hand side of the slide is a reminder of the maturity profile of our debt, with extended visibility up to 2029 and 2030, following its refinancing at the beginning of the year. Liquidity remains solid in fiscal year 2025, globally stable around 400 million euros since our refinancing at the start of the calendar year, supported by several factors. the security decision program providing an additional cash inflow of 18 million euros at the end of September 2025. As a reminder, the ramp-up of this program in the first quarter of the fiscal year was accompanied by the repayment of the entire term loan at the end of December 2024 for 100 million euros and a reduction of our bank overdraft credit line by 14 million euros. The refinancing of the RCF and bond provided a positive net available liquidity of 30 million euros. The success of our refinancing at the beginning of the year and improved performance already in H1 allowed us to revitalize our new commercial paper program, which reached 81 million euros at the end of September and has since surpassed 100 million euros, providing further visibility to this program. Finally, we executed the second annual repayment of the PGE, the state-granted loan, for 56 million euros. Then we pursued the deployment of synergies from the combination of Helior and de Richebourg multiservices with a further increase of 4 million euros in recorded synergies and 3 million euros in annualized synergies that reached 43 million euros at the end of September. We have almost completed the implementation of cost synergies while commercial synergies are gaining momentum and are expected to further ramp up next year. Following the rationalization of our contract portfolio, the commercial activity developed during the year demonstrated the relevance of our commercial and management organization closer to customers and greater empowerment of regional teams. New contract signings total nearly 540 million on analyzed basis, resulting in net positive commercial balance of 112 million euros, representing between 1.5% and 2% organic growth. In France, several notable signings occurred in both contract catering and multi-services segments. For contract catering, the signing of next generation campus in the utility sector in the Paris area, thanks to an offer meeting the needs for fluidity, diversity and innovation catering. The signing of a Ministry of Ecology responding to a need to an offer integrating CSR innovation and inclusion. For multi-services, contracts reinforcing our position as a leading player in retail and commercial spaces, a rehabilitation contract in the insurance sector, demonstrating our capacity to manage multiple technical lots, including structural works. In temporary staffing solutions, the national expansion of a contract with a major logistics provider, strengthening our position in these sectors. Other examples of notable signings came as well from outside France, in the US, with the entry into the public university market with the signing of a large university demonstrating our ability to win and deploy complex multi-site programs on campuses. In the UK, with the expansion of the business and industry sector following the recent rebranding to Helior at Work and the introduction of new culinary innovations with a particular focus on health, well-being and digital. In Spain, we contracted with a leading Spanish student residence operator, a fast-growing market for which Helior has developed a specific catering project consolidating its market leadership. And in Italy, commercial development was refocused on the private sector, especially in BNI, including a new site with a major player in defense and another contract in the health hygiene sector, strengthening our position in the high-end market segment. Moving to slide 22. i mentioned previously the drivers of the capex increase in fiscal year 2025 reaching 2.3 percent in percentage of revenue capex are expected to increase up to around three percent in fiscal year 2026 driven driven by two main factors first It is essential for our group to continue investing its capacity to develop commercial activity in education and early childhood markets, further strengthening our leadership position in this area. Investment to fulfill additional capacity requirements in our central kitchen were decided soon after Daniel de Richebourg took over as Group CEO. These requirements have been confirmed by growing commercial momentum in this area. These are medium-term investments with the first deployment realized in Fuscal year 2025 and a strong ramp-up expected this year in Fuscal year 2026 to expand our regional footprint with around 10 central kitchens. Second, last semester we announced the launch of a major transformation and innovation program to complete the integration of DMS and Elior activities on harmonized processes and common platforms. Fiscal year 25 and 26 will be mainly focused on the design and building of a core model while investments afterward will support deployment in all our geographies. So while overall capex should actually increase up to around 3% in fiscal year 2026, the ratio should trend towards circa 2% in the mid-term. It is also worth keeping in mind the timeline between the investment in new production tools and the subsequent generation of revenue, shorter for early childhood and aligned with school years for education. In other words, revenue growth objective for fiscal year 2026 include only partially the contribution expected from this capex made in fiscal year 2026. So this leads us to the last section of this presentation starting with the outlook for fiscal year 2025-2026 So after the efforts focused on optimizing the organization, dramatically streamlining the contract portfolio, and then developing commercial activity close to our customers, the 2025-2026 fiscal year should be marked by a return to growth, driven by price increases for which strict application is now established, and a return to positive business development while preserving margin. Organic growth is thus expected to be between 3% and 4% in fiscal year 2026. The same two factors, price increases and business development, should continue to contribute to the ongoing improvement of operational profitability, with an adjusted EBTA margin expected to increase by 20 to 40 basis points in the 3.5% to 3.7% range, framing a margin level equivalent to the last pre-COVID results. Finally, pursuing the net debt deleveraging remains a key priority, with a leverage ratio to further decrease down to around 3 times by the end of September 2026, consistent with our goal to further upgrade our credit rating. Conclusion To conclude on page 25, with a further improvement in the profitability despite moderate revenue growth, this fiscal year 2025 demonstrated the robustness of the model that has been put in place under the leadership of Daniel de Richebourg. The commercial approach with greater proximity to customers and empowered regional teams starting bearing fruit with a positive net development balance on an annualized basis thanks to the new wins consolidating our leadership in historical and new market segments. Combined with price discipline that will continue with the same rigor, the operating margin is expected to improve to reach next year's similar level to pre-COVID. Free cash flow generation and a prudent financial approach remain our priority while securing investments to support revenue growth and continuous productivity improvement. All these actions contribute to creating value for shareholders with the payment of dividends that resume this year and is expected to continue in the coming years. For the future, we expect the payment of dividends to trend towards around 30% of net result group share. So this concludes our presentation. We are now ready to answer your questions. Operator, could you please take the first question?

Ladies and gentlemen, if you wish to ask a question, please dial hashtag 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial hashtag 6 on your telephone keypad. The next question comes from Jaffer Mestari from BNP Paribas. Please go ahead.

Sorry, Jeff, we don't hear you.

We have some direction on what you expect in terms of new business pricing and volumes, please, for 26. Secondly, on synergies, you said you almost completed the delivery. I just wanted to check if the total target is still 56 million, so that would mean another 10 to 15 million in the next year. The run rate seems to be lower than that. You're close to adding four million synergies, I think, in the second half. So is there a jump in 26? Is the last batch a bit bigger? And lastly, in terms of your leverage targets, netted to EBITDA three times at the end of 26. This is despite CapEx, which is going to be at least $40 million higher, if I'm correct. Is that reduction in leverage mostly from a growing EBITDA, or can we expect absolute debt to come down meaningfully in 2026, please?

Sorry, I'm not sure we understood in full your first question, but my understanding is that you wanted to get more details about the driver of ABT improvement, of volume improvement, revenue growth for next year. So actually, the two main drivers that we see for next year's are still the price increases that I would say we would expect between 1.5% and 2%. And then the volume and net development in the same range, meaning in total this range of between 3% and 4%. So regarding the synergies, actually, most of the analyzed synergies are made of the cost synergies to reach 43 million euros. So we have, I would say, still around 5 million euros of cost synergies to be generated in fiscal year 2026. and we are expecting the ramp-up of commercial synergies that should increase especially on an annualized basis in fiscal year 2026 to come around, I would say, the initial target. Then considering the leverage ratio of three times at the end of September 2026, this is actually mainly driven by the EBITDA that is expected to increase next year in the same range. as a bta while as you said capex will further increase next year at the same time we need to keep in mind that we will have as well a further we're expecting as well a further ramp up in the cash flow generated by the reduction of our operating working capital we made really a very significant progress in fiscal year 2025, especially through the improvement of our collection of receivables. We still see some opportunities in some business lines. So they are part of the range we provided as well in our modeling details, contributing to a further contribution of operating working capital next year. That will be as well complemented by a further ramp up of our securitization program.

Thank you.

As a reminder, if you wish to ask a question, please dial pound key five or hashtag five on your telephone keypad. The next question comes from Praveen Gondhale from Barclays. Please go ahead.

Hi, Praveen from Barclays here. Thanks for taking my questions. Firstly, on the Next year, EBITDA margin guidance of 3.5 to 3.7 percent. It appears a bit conservative given the ramp-up in organic growth, as well as you are expecting net retention to go trend upwards next year, which should be margin accretive. Could you please help us provide some steer on what are the drivers of margin growth assumptions in your guidance there? And then secondly, the working capital securitization and factoring benefit of around 90 million this year. You explained that it was due to ramp up of new securitization program. How should we be thinking about evolution of this in FY26 and thereafter? Thanks.

Okay, so on your first question regarding the ABTA drivers, what we have seen in H2, and which was according to our expectation, is that we will have in 2026, let's say, a convergence of price increases towards a close to a break-even balance while it was contributing this year to 13 million euros on a full year basis so which is which is the first element second we are actually expecting a further contribution of net commercial balance that should take also into account the slight impacts of higher CAPEX that will impact slightly the EBITDA moving forward. And then we are still expecting our operational efficiency plans to deliver further benefits. So I would say it would be mainly a split between the net development and efficiencies and synergies contributing to this increase between 20 business points and 40 business points next year. Then the expected contribution of operating working capital is in the range that we have provided in the modeling details between 40 million euros and 60 million euros. I would say, roughly speaking, you should expect one third coming from the operational improvement, especially driven by a continuous improvement in the collection of receivables, as previously mentioned. the remaining part coming from the further ramp-up of the securitization program during the year, but still keeping in mind the seasonality, so meaning that we are still expecting a peak in mid-year around March, as it was the case in fiscal year 2025, and then a decline in the second semester which is offset in parallel by the free cash flow generation from operational activities. And after next year, we expect this to be fairly stable or slightly improving, but to a lesser extent.

Thank you very much. This is really helpful. Thanks. You're welcome, Pravin.

As a reminder, if you wish to ask a question, please dial pound key five or hashtag five on your telephone keypad. We'll wait a little while to give you time to participate. The next question comes from Sabrina Blanc from Bernstein. Please go ahead.

Yes, good evening gentlemen. I have two questions for my part. The first one is regarding the multi-service performance. You have provided organic growth including temporary staffing solutions. So I would like to understand firstly, could you remind us the size of the temporary staffing solutions? And do you anticipate any, I don't know, selling or something like that regarding this activity or just to highlight the fact that this year the activity was not very good? And my second question is regarding the taxes. I understood for 2025 you have benefited from positive element, but could we have a guidance for 2026 please?

So on your first question, so the temporary staffing services are representing around 10% of the multi-services activity. uh we do expect this activity to come back to a positive territory quickly that's why it was important for us to highlight that this this year was an exceptional one We have now a new management team fully in place with a new general manager, a new financial officer. They have worked on the reorganization of the activity. They have redirected the organization towards the commercial development. We have seen the first positive signs in terms of commercial momentum at the end of the fiscal year and we were expecting the recovery to start already next year. So no other plans than recovering the level of performance that we used to get in the past. Then regarding tax, we are not providing any guidance for next year. I mean, we still have some room to activate net operating losses as we did this year. Maybe it will be to a lesser extent, but it is today a little bit premature to assess what it could bring.

Thank you very much. You're welcome.

The next question comes from Christian de Vismes from CIC Market Solutions. Please go ahead.

Yes, good evening. I have one question about the expected growth or guidance in 2026 in terms of EBITDA margin and EBITDA margin because in 2025 we have an increase by 50 basis points in the EBITDA margin but only 10 basis points in the EBITDA margin due to the move in provision and so on. What should we expect in 2026? You guide on the growth of between 20 and 30 basis points on the EBITDA margin What should we expect on the EBITDA margin?

Thank you. Yeah. So you're right. So there were different movements in EBITDA and EBITDA in the last two years. For 2026, we expect a kind of normalization, if you want, from that perspective. So our expectation is the same level of contribution at the level of EBITDA than at the level of EBITDA.

Thank you.

There are no more questions at this time, so I hand the conference back to the speakers for any closing remarks.

So this concludes our call today. Our next financial release will be on May 20th post-market with our half-year result for fiscal year 2025-2026. Until then, please do not hesitate to get in touch. Thank you and good evening everyone. Goodbye.