INTERNATIONAL
Elis, the international multi-service provider that offers textile, hygiene and facility services solutions in Europe and Latin America, announced its results for the half year ending June 30, 2020. Despite the Covid 19 crisis, the company reported an EBITDA * margin improvement and strong positive free cash flow ”and said the results were“ confirmation of the Group's resilience ”.
Xavier Martiré, Elis' CEO, commented the announcement as follows: “The results for the first half of 2020 are very satisfactory as the EBITDA margin improves and free cash flow is largely positive in an environment shaped by the Covid 19 pandemic. This achievement once again demonstrates the Group's responsiveness and resilience, which adapts quickly and takes all necessary operational measures in the context of an unprecedented crisis.
The containment measures implemented in most of the countries in which we operate have obviously affected our activities, particularly in the hospitality industry. As a result, Elis' organic revenue declined. C. 15% in the first half with a decrease of -27% in the second quarter and a low in April.
In this context, Elis reacted quickly: as soon as the first restrictive measures were implemented in Europe, the group adjusted its operational and management structures in order to maintain its margins and cash flow. During this period, more than 100 plants were shut down and the production teams reduced on a case by case basis. In addition to these activity-related adjustments, Elis has implemented a cost reduction plan in all of its country headquarters to ensure a long-term reduction in the cost base. The EBITDA margin in the first half of the year increased by 20 basis points and the free cash flow after leasing payments was EUR 56 million, an improvement of EUR + 75 million compared to the same period last year.
Other measures have also been taken to improve the Group's liquidity. Upon request, Elis was given a waiver of the Bank Covenant test as of June 30, 2020, December 31, 2020 and June 30, 2021 in order to benefit from greater financial flexibility in order to manage this sensitive time more comfortably. The group has no major due date before 2023 and has c. € 1.1 billion liquidity in the form of two revolving credit lines for an undrawn amount of € 900 million and c. € 150 million in cash.
We have seen a steady increase in activity since April, and overall hospitality is making good progress in July. However, we believe that given the uncertainties surrounding a revival in the hospitality industry after the summer and the future consequences of the economic crisis, we will not be able to make sales forecasts for 2020.
However, the impressive efforts made in all countries, at factories and at headquarters in the first half of the year make the group perfectly prepared for the next 18 months.
In 2020, Elis should be able to keep the EBITDA margin and free cash flow after lease payments at a level very close to the 2019 level.
Although the current situation requires extreme vigilance, we will be calm over the next few months: the Group's fundamentals are strong, our diversification is a great asset, and our business model will enable Elis to maintain its leadership position in all countries in which it is present . ”
H1 revenue affected by the crisis; EBITDA margin increased and free cash flow positive
- Sales in the first half decreased by -15.7% (-14.7% on an organic basis)
- Significant slowdown in hospitality activity, less in other end markets
- The EBITDA margin increased by + 20 basis points to 32.5% of sales
- Adjusted net income decreased by -51.2% to € 49.7 million
- Free cash flow of € 56.1 million (after leasing payments), + € 75 million compared to the previous year
Implement drastic operational measures to respond to the crisis and prepare for the future
- Personnel adjustments in all country headquarters and in all plants that are affected by a decline in activity in order to optimize capacity and control costs
- Temporary shutdown or almost complete interruption of up to c. 100 plants during the lock-up period
- Thorough review of operational organization in each country and implementation of sustainable cost-cutting measures: permanent plant decommissioning, plant restructuring, lowering central costs, reviewing the 2020/2021 industrial investment plan, including the cancellation of most projects to increase capacity
- Start of numerous commercial initiatives to meet new customer needs
Active cash management and improvement of financial flexibility
- Bank Covenant tests waived as of June 30, 2020, December 31, 2020 and June 30, 2021
- 1.1 billion euros of available liquidity and no major debt maturity before 2023
- As of June 30, 2020, the net debt ratio was 3.5 times and was stable compared to the previous year
Outlook 2020
- Despite a significant increase in hospitality in July, the continuing uncertainties regarding the increase in activity and the very uncertain economic environment do not allow us to provide a sales outlook for the year
- Thanks to the important efforts to reduce the cost base in the first half of the year and the defined action plans, the group is calm about the next 18 months
- In this context, the EBITDA margin and free cash flow in 2020 should roughly match what the Group achieved in 2019
* EBIDTA – net profit (or gain) with interest, taxes, depreciation and amortization
