Elis global sales figures for the third quarter of 2020 through September 30th have just been released and show a significant improvement in all of the company's markets, but with a sales decline of -10.6% on an organic basis and with The 2020 targets for EBITDA margin and free cash flow have been raised, according to the report Sales in the third quarter decreased by -10.6%. This is a notable improvement over the -26.7% posted in the second quarter.
In short, Elis reported:
• Around. 75% of total business1 returned to practically normal levels of activity in the third quarter: c. + 3% in health care, -2% in industry and -2% in trade and services
- This improvement was due to (i) a recovery in activity among our customers, (ii) an improvement in churn rate with good quality service during the crisis, and (iii) several contract wins related to higher demand for workwear and hygiene services
- The hospitality industry (approx. 25% of total sales in 2019) fell by almost -40% in the third quarter: During the summer season, domestic tourism was only able to partially offset the sharp decline in international tourism
- Central Europe and Scandinavia were tough due to the weight of the workwear in their mix. France, southern Europe, and the UK and Ireland were all affected by their exposure to the hospitality industry. Latin America gained due to very good health care activity
- Prices were stable in all of our regions.
- The general economic environment remains very uncertain and the new hygiene measures recently introduced in some countries are helping to make the group's fourth quarter activities, particularly in the hospitality sector, less visible
- The organic sales growth for the full year 2020 should match the 9-month figure
- The significant efforts to lower the implemented cost base and the action plans set should allow the Group to achieve an EBITDA margin of 2020 and free cash flow slightly above the 2019 level
Great Britain & Ireland
Organic sales in the third quarter of 2020 decreased by -21.6%. After falling almost -50% in April and May, summer activity increased slightly. The hospitality industry, which typically accounts for around a third of the region's sales, declined -55% in the third quarter. Industry and trade and services, which make up another third of total sales, saw a decline of -16% due to our high number of customers in the catering sector, which were badly affected by the health crisis. Government measures to support companies that were less affordable than in European countries like France and Spain have not prevented a high number of layoffs, which has led to a significant decrease in the number of people who wear our workwear for many of our customers. Finally, the Healthcare segment, which made up the remaining third, declined slightly in the third quarter.
Kings Laundry, which closed on July 7th, has been consolidated into our accounts since August 1st.
Commenting on the announcement, Xavier Martiré, CEO of Elis: “Sales in the third quarter declined organically by -10.6%, a remarkable improvement from the -26.7% recorded in the second quarter. Our activities in industry, healthcare and commerce and services that c. 75% of total 2019 sales returned to near-normal business levels in the third quarter. Hospitality remained subdued, even if domestic tourism was able to partially offset the almost complete interruption of international tourism during the summer season, particularly in France.
“From a commercial point of view, Elis took advantage of many opportunities that arise from the increasing demand for work clothes and hygiene services. In addition, our customer satisfaction indicators have improved across the board since the beginning of the crisis, which rewards the constant quality of service from Elis in these difficult times.
“As for our outlook, the general economic environment remains very uncertain and the new hygiene measures recently introduced in some countries are helping to reduce the visibility of the group’s fourth quarter operations, particularly in the hospitality sector. We estimate that the organic sales development for the full year 2020 should be in line with the 9-month figure.
“The impressive efforts since the first half of the year in all countries, in plants and at headquarters, should lead to a slight improvement in the EBITDA margin compared to 2019. After all, the heavy emphasis on cash collection as well as good control over investments should allow the group to slightly improve its free cash flow generation compared to 2019.
“Although the current situation calls for extreme vigilance, we face the next few months with confidence: the group's fundamentals are strong, our diversification is a great asset and our business model will allow Elis to maintain its leadership position in all the countries in which it is located is present. The permanent savings achieved since the beginning of the crisis and the operational restructuring carried out in the summer help to further strengthen this confidence in the future. "
1 Based on total annual sales for 2019