Elis, which operates in Europe and Latin America, today reports its first quarter 2020 sales with Q1 revenue impacted by the Covid-19 crisis resulting in the company seeing a marked drop in activity in hospitality along with a more restrained decrease in other end markets.
CEO Xavier Martiré, said: "The Covid-19 epidemic has plunged the world into an unprecedented crisis, with more than half of the world's population subject to containment to date. In this context, Elis' sales fell by 1.8% organically in the first quarter, including -12% in March, reflecting the gradual implementation of containment measures in most of our countries. This decline, while significant, needs to be placed in the current exceptional context. While our hotel business is now almost at a standstill, it is worth noting the resilience of many of our customers in industry, commerce and services, or in the health sector.
“In addition, the Group's great geographical diversification, the result of the strategy we have been pursuing for several years, allows us to be present in regions where activity is holding up well, such as in Latin America or in most of the countries of the former Berendsen perimeter, notably the Scandinavian countries and Germany.
“As reported in March, Elis quickly adapted to this exceptional crisis: as soon as the first containment measures were put in place in Europe, the Group adjusted its operational and managerial structures in order to preserve its margins as quickly as possible. To date, we have temporarily closed one hundred sites.”
“Other measures have also been taken to improve the Group's liquidity. Elis obtained, at his request, a redesign of the test of his banking covenant on 30 June 2020, in order to benefit from greater financial flexibility in order to be able to calmly go through this delicate period; similar discussions will take place shortly in order to obtain a similar redevelopment for the test as of 31 December 2020. The Group has no significant debt maturity until 2023 and now has approximately 1.1 billion euros of liquidity at its disposal, in the form of two lines of credit for an unflected amount of 800 million euros and about 300 million euros in cash.
“To date, it is still too early to give new prospects for 2020. Our April activity will be in line with that observed in the second half of March, with an expected 40% organic sales decline. However, in recent days we have seen a slight resurgence of activity in countries that have already eased or lifted containment measures, such as Denmark, Italy, and Poland, where we are seeing a start of recovery among some of our customers.
“Even if the current environment encourages us to be very vigilant, we approach the coming months with serenity: the Group's fundamentals are solid, our diversification is a major asset and our business model will allow Elis to benefit immediately from any resumption of activity by its customers. The Group will also be able to seize the business opportunities that will arise, to meet the needs of our customers in the post-Covid-19world.”
He reports that Q1 revenue is down -2.3%, with -1.8% on an organic basis with the cnfienmnt measures having a very material impact on March revenue (-12.4% organically), after a good start of the year (+4.6% and +3.0% on an organic basis in January and February respectively).
Hospitality is the most impacted business, with a significant impact in France (-4.1%), Southern Europe (-5.8%) and in the UK & Ireland (-6.7%) on an organic basis. However, Industry, Trade & Services and Healthcare sectors show more resilience and the regions mostly serving these clients are stable or up in the quarter (+0.6% in Central Europe, -0.3% in Scandinavia and Eastern Europe and +6.4% in Latin America on an organic basis)
Elis has swiftly implemented a series of operational actions to face the exceptional situation including temporary shutdown or near-total stoppage of around 100 plants in order to optimise capacity and control costs. The workforce has seen adjustment at central level and in all the Group’s plants that are impacted by a decrease in activity. There has also been a launch of many commercial initiatives to address new client needs, said Matiré, along with a review of the 2020 industrial capex plan, with the cancellation of all projects to increase capacity.
There has also been a decrease in the remuneration of management board members, executive committee members and country management committee members in all Group countries.
Matiré also pointed to:
• Active cash management and improvement of financial flexibility
o Positive free cash flow in March and in the first three weeks of April, despite the numerous lockdown measures enforced across Europe
o Waiver obtained for the bank covenant test as of 30 June 2020
o Cancellation of the dividend for 2019 and temporary suspension of M&A
o 1.1 billion euros of liquidity available and no major debt maturity before 2023
• Sharper decrease in activity expected in Q2 compared to Q1
o c. –40% organic revenue evolution expected in April, marking a low point: Hospitality business virtually stopped, c. -20% in Industry, c. -30% in Trade & Services and c. -15% in Healthcare
o For each euro of lost revenue, EBITDA should decrease by around 50 cents; around 20 cents should be saved on investments and around 10 cents on tax
“Elis is particularly proud to have public health organisations in many countries, such as the NHS in the UK or the AP-HP in France, and thus contribute, through the quality of the service provided, to the global effort to contain this epidemic.
“I would like to extend my warmest thanks to the Group's employees who continue the work with passion and dedication, and for their continued service to our customers in our 28 countries,” concluded Martiré
First half 2020 results are due to be announced 29 July 29.