Elis: H1 2015 results

H1 2015 results - Revenues up nearly 6%
2015 outlook: revenues expected to grow +7%; EBITDA between €445m and €450m

• Revenue growth of c. 6%
  • Revenue: €682.4m (+5.9%)
  • EBITDA: €204.6m (30.0% of revenues)
  • Pricing pressure in France
  • IPO success and debt fully refinanced

• Dynamic M&A strategy
  • 6 acquisitions completed in H1 in France and Europe
  • 2 further acquisitions completed during July in Switzerland and Brazil
  • Agreement reached on the provisional sale of the Puteaux site for €54m

• FY15 outlook updated
  • FY15 revenue growth target increased to +7.0%
  • FY2015 EBITDA expected to be between €445m and €450m (+€15m/€20m vs 2014)

Percentage change calculations are based on actual figures
*H1 2014 figures are restated from the first application of the IFRIC 21 interpretation
**: of which €123m are non-recurring costs related to the IPO and subsequent refinancing

Puteaux, July 29 2015 - Elis, the leading multi-services group in Europe and Brazil, specializing in the rental and maintenance of professional clothing, textile articles, hygiene and well-being appliances, today announces its 2015 half year financial results.

Commenting on the 2015 first half results, Xavier Martiré, CEO of Elis, said:

"Elis' revenues grew +5.9% in H1 2015 to €682m on the back of +2.4% organic growth. This good performance was achieved despite a sluggish macro environment in Europe and Brazil. Revenue growth was driven by a sharp rebound in Southern Europe and recently completed acquisitions. However, pricing pressure in the French market had a dilutive impact on our first half margins.

Looking to the full year, we remain confident in our growth prospects and raise our FY15 revenue guidance to +7%. We expect EBITDA to increase by €15m to €20m and land between €445m and €450m.

Finally, the first half was marked by the IPO of Elis and the successful full refinancing of its debt. Elis now has a new financial status with an interest charge that is now a third of that paid previously and hence has larger access to financial resources. As such, the Group is able to accelerate the deployment of its 4 strategic pillars: 1) To consolidate our positions in all our geographies, 2) To continue the development of our Brazilian platform 3) To pursue the improvement of our operational excellence and 4) The launch of new products and services."

Revenues

Revenue growth

^a : After other items including rebates
Percentage change calculations are based on actual figures

Organic revenue growth

^a : After other items including rebates
Percentage change calculations are based on actual figures

Revenues for the six months ending 30th June 2015 increased 5.9% to €682.4m million.

This €38.1m increase was driven by organic growth in France, Southern Europe and Brazil along with the impact of recent acquisitions.

France

During the first half, revenue growth in France was driven entirely by organic growth of +2.3%. The ramp-up of large contracts was partially offset by pricing pressure.

• Revenues for the Hospitality segment increased 6.6% despite the negative impact from the terrorist attacks in Paris during January. The roll-out of large contracts was in line with our expectations.
• Revenues for the Healthcare segment grew by 4.2%, helped by market share gains for both short-stay and long-stay clients, with a sequential improvement in Q2.
• Revenues for the Industry segment rose by 0.7% helped by new contracts during the first quarter. However, the second quarter suffered from lower client activity.
• The persistently difficult macro environment (particularly for car retailer networks) led to a slight decline in Trade & Services revenues (-1.0%).

Europe

Revenue growth in Northern Europe (+16.1%) was driven by acquisitions in Germany and Switzerland. However, hospitality in Switzerland suffered from the rise of the Swiss franc which had an adverse impact on tourist traffic.
Revenues in Southern Europe (+11.2%) continued to rebound helped by an improving macro environment and impressive commercial momentum in all segments including Hospitality and Industry. The Spanish acquisitions also contributed to strong growth in Q2.

Brazil

Revenues in Brazil (+24.6%) benefited from the impact of acquisitions. Despite the persistently difficult macro environment in the country, commercial momentum was good underscoring our view that the market has strong potential. Organic revenue growth sequentially increased to +5.0% in Q2.

EBITDA²

Percentage change calculations are based on actual figures
*H1 2014 figures are restated from the first application of the IFRIC 21 interpretation

H1 EBITDA was flat compared to the same period last year. However, EBITDA margin decreased 180bps yoy largely due to:

• Phasing from a base effect in H1 2014 due to some non-recurring items,
• Pricing pressure in France due to an increasingly competitive environment in a sagging market,
• An unfavorable mix effect in Europe, with stronger growth from lower margin geographies.

Full-year EBITDA margin decline in France should not exceed 1 percentage point compared to 2014.
European EBITDA margin should remain flat in 2015.
As far as Brazil is concerned, operational indicators allow us to be confident for the full-year outlook and we expect EBITDA margin to increase.

EBITDA to net result

Percentage change calculations are based on actual figures
*H1 2014 figures are restated from the first application of the IFRIC 21 interpretation

Purchase of linen linked with the implementation of large contracts leads to higher depreciation, impacting EBIT greater than EBITDA. We anticipate EBIT margin for 2015 should fall c. 1 percentage point compared to 2014.

Operating result⁴

PPA depreciation was virtually flat in 2014. These intangible assets were accounted for in 2007 and their amortization period will end in 2018.
Other operating income and expenses were impacted by c. €21m, corresponding to non-recurring costs related to the IPO.

Financial result

Elis completely refinanced its debt in 2015 in 2 stages: (i) as part of the IPO in February, then (ii) on April 22 with the issuance of €800 million of 2022 Notes priced at 3.0%.
This new financial structure is totally unsecured, without any major maturity before 2020. This leads to a full year interest charge which should be a third of that paid in the prior year.
In the first half, the breakup fees and expenses of old debt and the issuance of the new notes impacted the Financial result by €102m.

Net result

Net result amounted to -€80.6m. It was impacted by c. €123m non-recurring expenses related to the IPO and various debt refinancing charges.

Other financial items

Investments

Group net investments encompass industrial investments and linen investments which were offset by disposals (including the sale & lease of real estate in 2014).
Capex for the first six months of 2015 amounted to €141.5m. The group undertook some exceptional linen purchases in the context of the implementation of large contracts signed at the end of 2014.

Operating cash-flow⁵

Operating cash-flow was €36.8m in H1 2015 compared to €176.2m in the same period last year. This significant decrease is due to (i) the negative base effect from the sale & lease operation in 2014 (c. €93m), (ii) higher investments over the period and (iii) the unfavorable evolution of working capital requirement in 2015.

Company free cash-flow⁶

Company free cash-flow amounted to -€117.5m in H1 2105. This was impacted by the evolution of Operating cash flow and refinancing costs of €97.8m.

Adjusted net financial debt⁷

Group adjusted net financial debt as of 30th June 2015 was €1,404.5m

Cash payment for the 2014 financial year

The Annual General Meeting convened on 24 June 2015 approved the cash payment of €0.35 per share for the 2014 financial year. This payment was implemented on 2 July 2015.

Investor and Analyst conference call

Speakers:
Xavier Martiré, CEO
Louis Guyot, CFO

Date: Wednesday, July 29
6:30 pm Paris time - 5:30 pm London time - 12:30 pm New York time

Webcast link (live and replay):
http://edge.media-server.com/m/p/rkskai92

Webcast replay will be available for 1 year following the event.

Financial definitions

1. Organic growth in the Group's revenue is calculated excluding (i) the impacts of changes in the scope of consolidation of "major acquisitions" and "major disposals" in each of the periods under comparison, as well as (ii) the impact of exchange rate fluctuations.
    
2. EBITDA is defined as EBIT before depreciation and amortization net of the portion of grants transferred to income.
    
3. EBIT is defined as net income (loss) before net financial expense, income tax, share in income of equity-accounted companies, amortization of customer relationships, goodwill impairment, other income and expense and miscellaneous financial items (bank fees and recurring dividends recognized in operating income).
    
4. Operating result is defined as net income (loss) before net financial expense, income tax, share in income of equity-accounted companies.
    
5. Operating cash-flow is defined as EBITDA minus non cash-items and after (i) business-related changes in working capital, (ii) linen purchases and (iii) manufacturing capital expenditures, net of proceeds.
    
6. Company free cash-flow is defined as Operating cash flow minus interests payments, minus tax paid and minus debt issuance expenses.
    
7. The concept of Adjusted net debt used by the Group consists of the sum of non-current financial liabilities, current financial liabilities and cash and cash equivalents adjusted by capitalized debt arrangement costs, the impact of applying the effective interest rate method, and the loan from employee profit-sharing fund.

Forward looking statements

This release may contain some forward-looking statements. These statements are not undertakings as to the future performance of the Company. Although the Company considers that such statements are based on reasonable expectations and assumptions on the date of publication of this release, they are by their nature subject to risks and uncertainties which could cause actual performance to differ from those indicated or implied in such statements.
These risks and uncertainties include without limitation the risk factors that are described in the Document de Base registered in France with the French Autorité des Marchés Financiers.
Investors and holders of shares of the Company may obtain copy of such annual report by contacting the Autorité des Marchés Financiers on its website www.amf-france.org or directly on the Company website www.corporate-elis.com
The Company does not have the obligation and undertakes no obligation to update or revise any of the forward-looking statements.

Next information

Q3 2015 revenues: November 9, 2015 (after market)

About Elis

Elis is a leading multi-services group in Europe and Brazil, specialized in the rental and maintenance of professional clothing and textile articles, as well as hygiene appliance and well-being services. With more than 19,000 employees spread across 12 countries, Elis' consolidated turnover in 2014 was €1.331 billion with consolidated EBITDA of €429 million. Benefiting from more than a century of experience, Elis today services more than 240 000 businesses of all sizes in the hotel, catering, healthcare, industry, retail and services sectors, thanks to its network of 275 production and distribution centers and 13 clean rooms, which guarantees it an unrivalled proximity to its clients.

Contact

Investor Relations:
Nicolas Buron, Investor Relations Director - Phone: +33 1 41 25 46 77 - nicolas.buron@elis.com

Appendices

Consolidated income statement for the period*

*H1 2014 figures are restated from the first application of the IFRIC 21 interpretation

Consolidated balance sheet

Assets

Equity and liabilities

Consolidated cash flow statement*

*H1 2014 figures are restated from the first application of the IFRIC 21 interpretation