Elior: First-Quarter 2014-2015 Results: In Line with Full-Year Objectives

Regulatory News:

Elior (Paris:ELIOR) (Euronext Paris – ISIN: FR 0011950732), one of the world's leading operators in the contracted food and support services industry, today released its results for first-quarter 2014-2015, corresponding to the three months ended December 31, 2014.

¹ Including the impact of IFRIC 21
² Defined as EBITDA + change in WCR - net capex
³ Calculated in accordance with the definition in the SFA: Consolidated net debt/LTM EBITDA pro forma for acquisitions and divestments

Business development

Business development was strong in the first quarter of 2014-2015. For Contract Catering & Support Services, the client retention rate remained high at over 93%, and several major new contracts were signed, including with AREVA, Eiffage and La Banque Postal in France, and with Carillon, TVE and VVF in international markets. In parallel, a number of new contracts started up in the Concession Catering & Travel Retail activity, notably at Alghero, Genoa, Lamezia, Pisa and Turin airports in Italy.

Revenue

Consolidated revenue totaled €1,419.8 million in the first quarter of 2014-2015. The 5.3% increase on the first quarter of 2013-2014 reflected robust organic growth of 3.3% over the period. The October 2014 acquisition of Lexington in the United Kingdom added 0.7% to revenue growth, net of the effect of the disposal of non-strategic concession catering operations in Argentina and Morocco. Changes in exchange rates had a 1.2% net positive impact, mainly due to the strengthening of the US dollar and sterling against the euro. International markets accounted for 49.0% of total consolidated revenue in the first three months of 2014-2015 versus 46.6% in the comparable prior-year period.

Change in accounting method that has affected the Group’s reported results

Elior’s consolidated quarterly financial statements have been affected by the application of IFRIC 21, "Levies” – issued in connection with International Financial Reporting Standards (IFRS) – which concerns the recognition of taxes other than on income and is applicable by the Group on a retrospective basis from the fiscal year beginning October 1, 2014. In accordance with IFRIC 21, levies are now recognized when the obligation to pay the levy (the "obligating event”) is triggered, whereas previously their recognition was deferred throughout the fiscal year. The impact on the first-quarter 2014-2015 income statement was a positive €2.9 million pre-tax and €2.0 million post-tax, and the income statement for the first three months of 2013-2014 has been restated for the same pre-tax and post-tax amounts. As a consequence the IFRIC 21 effect will be negative in subsequent quarters but the full-year impact will be close to nil.

EBITDA

Consolidated EBITDA rose by €1.6 million in first-quarter 2014-2015 to €106.2 million, representing 7.5% of revenue versus 7.8% in the first three months of 2013-2014.

EBITDA for the Contract Catering & Support Services activity amounted to €86.3 million (compared with €82.8 million in first-quarter 2013-2014). As a percentage of revenue it was stable year on year, representing 8.3%:

• In France, EBITDA rose by €1.0 million to €49.1 million and represented 8.8% of revenue, up 0.1 point on the EBITDA margin for first-quarter 2013-2014. The strong performance delivered in the Business & Industry market offset the slight contraction in the Education market caused by (i) the negative calendar effect during the period (with one day less than in first-quarter 2013-2014), and (ii) the costs incurred on the start-up of the secondary schools catering contract with the Conseil Général des Hauts-de-Seine.
• In international markets, Contract Catering & Support Services EBITDA was €2.6 million higher than in the comparable prior-year period, coming in at €37.2 million. As a percentage of revenue it was slightly lower than in the first quarter of 2013-2014, representing 7.6% versus 7.9%. International EBITDA for this activity was boosted during the period by higher margins reported in the United States and revenue growth in the United States, Spain and the United Kingdom.

For the Concession Catering & Travel Retail activity EBITDA totaled €22.3 million (versus 24.0 million in first-quarter 2013-2014) and represented 5.9% of revenue compared with 6.7%:

• In France, Germany, Belgium and Italy, the EBITDA figure was €15.0 million (versus €16.6 million for the prior-year period), and represented 6.5% of revenue. Lower year-on-year performance reported in France for the Motorways and Airports markets – particularly for Nice airport (whose contract was transferred as from January 1, 2015) – was partly offset by higher business levels in Italy and the City Sites & Leisure market.
• In Iberia and the Americas, EBITDA came in at €7.3 million, more or less unchanged from the prior-year period despite revenue growth in the first quarter of 2014-2015. This reflected the fact that although there was a stronger contribution from Iberia (driven by an upturn in business in the region) this positive impact was offset by lower margin rate in the United States due to the gradual ramp-up of the service areas on the Maryland turnpike.

Note that margin rate in Concessions is strongly impacted by seasonality of operations, as the level of activity is significantly lower during the first two quarters of the year than during the latter two.

Recurring operating profit (EBIT)

Consolidated EBIT totaled €67.3 million in first-quarter 2014-2015 (versus €69.5 million in the first three months of 2013-2014). EBIT margin amounted to 4.7% (see Appendix 2 for a breakdown by business).

Attributable profit for the period

Attributable profit for the period was up sharply, amounting to €19.7 million versus €6.0 million in the first three months of 2013-2014. This drove an increase in earnings per share to €0.12 from €0.06.

Non-recurring items represented a net charge of €10.3 million and primarily included non-recurring non cash costs further to the Group's senior debt refinancing in December 2014. This refinancing greatly reduces finance costs as from December 10, 2014.

At €23.3 million, net financial charge was considerably lower than in the first quarter of 2013-2014, reflecting the early repayment of a portion of the Group's debt following the IPO in June 2014 and the refinancing carried out in December 2014.

Income tax amounted to €14.1 million, down 28.8% compared with first-quarter 2013-2014 when a non-recurring provision was accrued following a tax audit carried out on a Group subsidiary.

Operating cash flow and net debt

Operating cash flow¹ (before interest and tax) represented a net €39.7 million outflow in first-quarter 2014-2015 versus a net €16.0 million outflow in the comparable prior-year period when operating cash flow was boosted by €17 million due to one-off receivable sales in Spain following the Spanish government’s decision to improve its payment terms.

¹ Defined as EBITDA + change in WCR - net capex

Net debt decreased by €722 million year on year to €1,527 million at December 31, 2014. This resulted in a leverage ratio¹ of 3.4x EBITDA compared with 5.1x at December 31, 2013.

Outlook

In view of its first-quarter 2014-2015 performance, the Group confirms its guidance for the full fiscal year, namely:

• Revenue growth of over 4% (with at least 2% organic growth). This objective does not take into account future acquisitions during the fiscal year.
• A stable EBITDA margin. The performance improvement plan implemented during FY 2013-2014 will help the Group meet this objective.
• An increase in operating cash flow² (before interest and tax).
• A sharp rise in earnings per share, thanks to a significant decrease in finance costs as a result of scaling back the Group's debt following the capital increase carried out in June 2014 and the senior debt refinancing that took place in December 2014. This in turn will lead to a strong increase in the dividend per share.

¹ Calculated in accordance with the definition in the SFA: Consolidated net debt/LTM EBITDA pro forma for acquisitions and divestments.
² Defined as EBITDA + change in WCR - net capex

Upcoming financial communications:

• First-half 2014-2015 results: May 29, 2015 – issue of press release before the start of trading plus conference call.
• Third-quarter 2014-2015 results: September 1, 2015 – issue of press release before the start of trading plus conference call.

Appendix 1: Consolidated financial statements – First-quarter 2014-2015
Appendix 2: Operating profitability – First-quarter 2014-2015

About Elior

Founded in 1991, Elior has grown into one of the world's leading operators in the contracted food and support services industry, generating revenue of €5,341 million in FY 2013-2014 through 18,000 restaurants and points of sale in 13 countries. Driven by an unwavering commitment to excellence, our 106,000 passionately professional employees provide personalized catering and service solutions on a daily basis to 3.8 million customers in the business & industry, education, healthcare, leisure and travel markets, taking genuine care of each and every person they serve. We place particular importance on corporate social responsibility and have been a member of the United Nations Global Compact since 2004. Our corporate philosophy – which is centered on quality and innovation as well as responsible relations with others and the community at large – is reflected in our motto: "Because the whole experience matters".

For further information please visit our website (www.elior.com) or follow us on Twitter (http://twitter.com/Elior_France)

¹ Including the impact of applying IFRIC 21.

¹ Including the impact of applying IFRIC 21.