Elis, the international multi-service provider, offering textile, hygiene and facility services solutions in Europe and Latin America, has announced its results for the six months ended 30 June 2020. The company reported a “very good H1 2020 results despite the Covid-19 crisis with EBITDA* margin improvement and strongly positive free cash-flow” and said the results are a “confirmation of the Group’s great resilience”.

Commenting on the announcement, Xavier Martiré, CEO of Elis, said: “H1 2020 results are very satisfactory with EBITDA margin improvement and largely positive free cash flow in an environment marked by the Covid-19 pandemic. This performance demonstrates once again the Group’s responsiveness and resilience, quickly adapting and taking all the necessary operational measures in a context of unprecedented crisis.

The confinement measures implemented in most countries in which we operate obviously had an impact on our activity, especially in hospitality. As a result, Elis’ organic revenue was down c. 15% in H1 with Q2 down -27% and a low point reached in April.

In this context, Elis reacted swiftly: As soon as the first confinement measures were implemented in Europe, the Group adjusted its operational and managerial structures in order to preserve its margins and cash flow. More than 100 plants were shut down during this period and production teams have been cut on a case by case basis. On top of these adjustments linked to activity, Elis has launched a cost reduction plan in all its countries’ head offices to ensure a long-term cost base decrease. H1 EBITDA margin was up 20bps and free cash flow after lease payments was 56 million euros, an improvement of + 75 million euros compared to the same period last year.

Other measures have also been taken to improve the Group’s liquidity. Elis obtained, at its request, a waiver regarding its bank covenant test as of 30 June 2020, 31 December 2020 and 30 June 2021 in order to benefit from greater financial flexibility to face this sensitive period more comfortably. The Group has no major debt maturity before 2023 and has, as of today, c.  €1.1bn of liquidity in the form of two revolving credit lines for an undrawn amount of €900mn and c. €150mn in cash.

Since April, we have been observing a steady pick-up in activity and hospitality is showing good progress overall in July. However, we feel we are not in a position to give any revenue guidance for 2020 given the uncertainties surrounding a pickup in hospitality after the summer and the future consequences of the economic crisis.

Nevertheless, the impressive efforts made in H1 in all countries, at plants, at head offices, make the group perfectly prepared to confront the coming 18 months.

In 2020, Elis should be able to maintain EBITDA margin and free cash flow after lease payments at levels quite close to those achieved in 2019.

Although the current situation requires the utmost vigilance, we face the next months with serenity: The Group’s fundamentals are strong, our diversification is a major advantage and our business model will enable Elis to assert its leadership in all the countries in which it is present.”

H1 revenue impacted by the crisis; EBITDA margin up and positive free cash flow

  • H1 revenue down -15.7% (-14.7% on an organic basis)
  • Marked activity slowdown in Hospitality, less so in other end-markets
  • EBITDA margin up +20bps at 32.5% of sales
  • Adjusted net income down -51.2% at €49.7mn
  • Free cash flow of €56.1mn (after lease payments), up +€75mn yoy

Implementation of drastic operational measures to respond to the crisis and prepare for the future

  • Headcount adjustments in all country head offices and in all plants impacted by a decrease in activity, to optimize capacity and control costs
  • Temporary shutdown or near-total stoppage of up to c. 100 plants during the lockdown period
  • In-depth review of the operational organization in every country and implementation of sustainable cost-saving measures: Permanent shutdown of plants, reorganization of plants, reduction of central costs, review of the 2020/2021 industrial capex plan, including the cancellation of most projects to increase capacity
  • Launch of numerous commercial initiatives to address new client needs

Active cash management and improvement of financial flexibility

  • Waiver obtained for the bank covenant tests as of 30 June 2020, 31 December 2020 and 30 June 2021
  • 1.1 billion euros of available liquidity and no major debt maturity before 2023
  • Total net leverage ratio of 3.5x as of 30 June 2020, stable vs last year

2020 outlook

  • Despite a marked increase of Hospitality in July, the persistent uncertainties regarding activity pickup as well as the very uncertain economic environment do not allow us to provide a revenue outlook for the year
  • Thanks to the important efforts to decrease the cost base in H1 and the action plans that have been defined, the Group is facing the next 18 months with serenity
  • In this context, 2020 EBITDA margin and free cash flow should be quite close to what the Group delivered in 2019

* EBIDTA – Net income (or earnings) with interest, taxes, depreciation, and amortization added back