Elior: FY 2013-2014 Results: a Solid Performance in Line with the Group's Forecasts

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 announced its results for FY 2013-2014, corresponding to the twelve months ended September 30, 2014.

Commenting on these results, Gilles Petit, Elior's Chief Executive Officer, stated:
"This is our first fiscal year-end since our IPO in June and I am delighted to announce that we have met – and in some cases exceeded – all of the objectives we set ourselves at that time. Revenue was on target, up 6.5% year on year driven by a robust organic growth of nearly 4% as well as external growth, and our EBITDA margin was in line with forecasts at 8.4% – broadly stable compared with FY 2012-2013. We ended the fiscal year with a much better leverage ratio than targeted thanks to the strong cash flow generated by our operations. Going forward, we are confident in our growth prospects and therefore at the next Annual Shareholders' Meeting the Board of Directors intends to recommend a dividend payment of €0.20 per share".

Business development

FY 2013-2014 was a very good year in terms of business development. With a client retention rate of approximately 93% in the Contract Catering & Support Services segment (excluding the Tesco contract in the United Kingdom) and a significant increase in new contract wins compared with FY 2012-2013, Elior has strengthened its positions in its target markets. New business won during the year included contracts signed with EDF, the Conseil Général des Hauts de Seine and the Parly 2 shopping mall in France, as well as Nottingham University Hospitals NHS Trust and Banca d'Italia in our international operations. The Group also won or extended a number of major contracts in the Concession Catering & Travel Retail segment, with clients such as APRR and Shell in France and Aeroporti di Roma and Adif (state owned entity in charge of administrating the Railway Infrastructures in Spain) in international markets.

Revenue

Consolidated revenue totaled €5,341 million in FY 2013-2014, up 6.5% year on year. This increase was in line with the Group's targets and was achieved despite a lackluster economic environment in Europe. It was driven by solid organic growth of 3.9%, or 3.7% after the negative impact of the difference in the number of working days in the Contract Catering business in France (the calendar effect). The 2013 acquisition of THS in the United States contributed an additional 3.1% to revenue growth during the year, net of the effect of the disposal of non-strategic businesses (Hold & Co UK and Honoré James in France and the Group's Concession Catering subsidiaries in Argentina and Morocco). Changes in exchange rates had a 0.3% negative impact on revenue, mainly due to the US dollar, Mexican peso and Chilean peso (see the press release issued on November 14, 2014).

EBITDA

Consolidated EBITDA rose by €23 million in FY 2013-2014 to €447 million. As a percentage of revenue, it represented 8.4%, broadly stable compared with FY 2012-2013 and in line with the Group's target for the year.

EBITDA for the Contract Catering & Support Services segment amounted to €293 million (versus €288 million in FY 2012-2013) and represented 7.8% of revenue:

• In France, EBITDA narrowed by €5 million to €185 million (8.7% of revenue), mainly reflecting the calendar effect in the Business & Industry and Education markets as well as the impact of start-up costs incurred as a result of major new contracts coming on stream, notably in Business & Industry.
• On international markets, Contract Catering & Support Services EBITDA was up €10 million on FY 2012-2013, at €108 million, representing 6.6% of revenue. Decline in profitability in Italy was largely compensated by a higher contribution from the United States and strong business momentum in the United Kingdom.

For the Concession Catering & Travel Retail segment, EBITDA amounted to €159 million (versus €143 million in FY 2012-2013) and represented 10.1% of revenue, up 80 bps year on year:

• In France, Germany, Belgium and Italy, the EBITDA figure was €105 million (compared with €102 million for the previous year) and represented 11.0% of revenue. The impact of the slowdown in business in the Motorways market in France was more than offset by additional EBITDA contributions resulting from new motorway service areas in Germany and Italy and higher margins achieved in the leisure and railway stations sectors. Performance in the Airports market in France was weighed down during the year by the Air France pilot strike that took place in September.
• In Spain, Portugal and the Americas, EBITDA rose by €14 million to €54 million and as a percentage of revenue represented 8.7%, well up on the 6.7% reported for FY 2012-2013. This strong performance was attributable to the ramp-up of operations in the Motorways and Airports markets in the United States, additional EBITDA generated as a result of the Group’s new contract at Madrid Barajas airport in Spain, and streamlining measures put in place within the Spanish Motorways market.

Recurring operating profit (EBIT)

Consolidated EBIT totaled €308 million for FY 2013-2014, up €22 million on the previous year. At 5.8%, EBIT margin was 10 basis points higher than in FY 2012-2013 (see breakdown by business in Appendix 2).

Net result attributable to owners of the parent

The Group recorded net result Group share of €48 million, up from €9 million in FY 2012-2013. Reported earnings per share stood at €0.38 for FY 2013-2014, compared with €0.08 for the previous year. On the basis of the number of shares outstanding at September 30, 2014, it would have amounted to €0.29.

Non-recurring items represented a net charge of €73 million and primarily included:

• non-recurring charges related to Elior’s IPO in June 2014 and the subsequent early repayment of a portion of the Group's debt;
• provisions for restructuring costs related to the implementation of a performance improvement plan in Europe aimed at enhancing productivity and adapting operating organizational structures to the region's ongoing difficult economic environment.

Net financial charge was lower than in FY 2012-2013, totaling €137 million and reflecting the early repayment of a portion of the Group's debt during the year.

Income tax amounted to €41 million in FY 2013-2014, representing a 6% year on year increase due to the impact of the acquisition of THS and a higher tax charge in Italy, where one-off tax credits were recognized in FY 2012-2013. However, these unfavorable effects were partially offset by a lower income tax expense recorded in France.

Operating cash flow and net debt

Operating cash flow (before interest and tax) rose €82 million, or +37%, in FY 2013-2014 to €301 million. This corresponds to an EBITDA conversion ratio of 67% (versus 52% in FY 2012-2013).

Net debt stood at €1,380 million at September 30, 2014, down €801 million compared with one year earlier. This resulted in a leverage ratio of 3.1x EBITDA at the fiscal year-end versus 4.9x³ at September 30, 2013.

Dividend

The Board of Directors is confident in the Group's growth prospects and therefore at the Annual Shareholders' Meeting and will propose the payment of a €0.20 per share dividend for FY 2013-2014, to be paid in 2015. This corresponds to a payout ratio of around 40% of net result excluding the provisions for non-recurring charges recognized during the year.
The Group's policy is to maintain the same normative payout ratio of about 40% for the coming years.

Refinancing

Elior signed on December 3^rd, 2014 with a group of banks refinancing agreements for €1,250 million, of which:

• €800 million 5-year maturity senior debt,
• €150 million 8-year maturity senior debt,
• €300 million 5-year maturity revolving credit facility.

The favorable conditions of these refinancing agreements will allow the Group to significantly reduce financing costs as from December 10, 2014.

Outlook

For FY 2014-2015, in a difficult macro-economic environment in continental Europe and with a lack of inflation, the Group expects:

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

For FY 2015-2016 and FY 2016-2017, the Group confirms its targets, namely:

• An average annual organic revenue growth of 3.5%,
• An EBITDA margin of 9% of revenue in 2017.

The Group also intends to continue its multi-year acquisition program with a €450 million envelope to be invested over FY 2014-2015, FY 2015-2016, FY 2016-2017.

Appendix 1: Operating profitability
Appendix 2: Consolidated financial statements

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 17,500 restaurants and points of sale in 13 countries. Driven by an unwavering commitment to excellence, our 105,000 passionately professional employees provide personalized catering and service solutions on a daily basis to 3.7 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 relations with others and the community at large - is clearly 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)

APPENDIX 1: FY 2013-2014 CONSOLIDATED FINANCIAL STATEMENTS

Consolidated income statement

Consolidated balance sheet – assets

Consolidated balance sheet – liabilities

Consolidated cash flow statement

APPENDIX 2: FY 2013-2014 OPERATIONAL PROFITABILITY

EBITDA

EBIT

¹ Will be proposed at the Annual Shareholders’ Meeting
² Calculated according to SFA provision : consolidated net debt / LTM EBITDA proforma for acquisitions / divestments
³ Calculated according to SFA provision : consolidated net debt / LTM EBITDA proforma for acquisitions / divestments