ELIS Elis.

Very good 2020 financial performance:EBITDA margin improvement, record free cash-flow and debt reduction

Elis’ flexibility, geographical diversification and broad portfolio of activities enabled the Group to deliver a very solid 2020 financial performance despite a drop in activity due to the crisis linked to the Covid-19 pandemic

• 2020 revenue at €2,806.3m (-14.5% and -13.3% on an organic basis)
• EBITDA margin up +20bps to 33.8% of sales
• Headline net income at €138.7m
• Record Free cash flow (after lease payments) of €216.8m, (+24.5% yoy)

Strong responsiveness to the crisis: protecting the health of Elis employees, cost base adjustments and development of a specific service offer

• Headcount adjustments in all country head offices and in all plants impacted by a decrease in activity, to optimize production capacity and control costs
• Temporary shutdown or near-total stoppage of up to c. 100 plants during the lockdown period
• 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 and cancellation of most projects to increase capacity
• Launch of numerous commercial initiatives to address new client needs

Strong improvement in cash generation and reduction in Group indebtedness

• Record free cash-flow driven by (i) the decrease in capacity driven investments and in linen investments due to the activity slowdown, (ii) very good cash collection and (iii) lower interest payments
• €91.1m reduction in Group debt for the 2020 financial year
• €1.04bn euros of available liquidity
• Leverage ratio of 3.7x as of 31 December 2020

Further consolidation of the Group’s existing footprint

• 5 new acquisitions finalized in Europe and in Latin America
• Continued highly selective approach

New developments regarding the Group’s corporate social responsibility

• CSR committee established in November 2020
• Efficiency of the action plans supporting the non-financial objectives set for 2025

2021 outlook

• Q1 2021 organic revenue growth should be c. -15% due to a difficult 2020 comparable base in January and February
• The comparable base will become favorable from Q2 onwards and H1 2021 organic revenue growth should be stable
• In a context where many uncertainties remain around the evolution of the sanitary crisis (efficiency of vaccination campaigns, emergence of new virus variants, rebound in international travel), our working assumptions currently factor a modest activity improvement in our markets starting in Q2 2021, leading to c. +3% organic revenue growth for the year
• EBITDA margin should be slightly up on the back of savings achieved in 2020 and the Group’s proven ability to variabilize its costs in a context of activity slowdown
• Free cash flow after lease payments should be between €190m and €230m, the main variable being the change in working capital (impact of year-end activity on trade receivables)

Dividend suspension maintained given the persisting uncertainties linked to the crisis

1: A reconciliation is provided in the “Restated income statement for prior financial years” section of this release Margin rates and percentage change calculations are based on actual figures

Saint-Cloud, March 9, 2021 - Elis, an international multi-service provider, offering textile, hygiene and facility services solutions that is present in Europe and Latin America, today announces its 2020 full-year financial results. The accounts have been approved by the Management Board and examined by the Supervisory Board on March 8, 2021. They have been audited and the auditors issued a report without any qualification.

Commenting on the announcement, Xavier Martiré, CEO of Elis, said:

“In 2020, Elis demonstrated the robustness of its business model: In an environment marked by the Covid-19 pandemic and despite a 14.5% revenue decrease, the Group delivered EBITDA margin improvement and posted record free cash-flow, along with debt reduction of more than €90m. This remarkable performance demonstrates once again the relevance of our strategy: Our diversified geographical footprint, the great variety of our clients and of our product portfolio largely helped limit the impact of the crisis on our financial results.

From the outset of the crisis, Elis made the health of its employees one of its main priorities. Today, I wish to warmly thank all the Group’s employees, who continued to work with passion and commitment in 2020, allowing us to keep providing outstanding quality of service to our clients in our 28 countries, notably to public health organizations, such as the NHS in the UK or AP-HP in France, thus contributing to the global effort to contain the pandemic.

From a financial standpoint, 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 13% in 2020. In this context, Elis swiftly adjusted its operational and managerial structures 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 sustainable decrease in the cost base. 2020 EBITDA margin was up 20 basis points and free cash flow after lease payments was €217m, an improvement of €43m compared to the same period last year, representing an increase of +24% year-on-year.

Depending on the evolution of the sanitary situation, organic growth could be around +3% in 2021, assuming a slight activity improvement from Q2 onwards. The impressive efforts made in 2020 and the Group’s capacity to variabilize its cost base should lead to a further improvement in 2021 EBITDA margin. 2021 free cash flow should be between €190m and €230m, depending on the impact from change in working capital at year-end.

The current situation impels us to remain cautious, but we look to the future with confidence: 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.”

Revenue

« Others » includes Manufacturing Entities and HoldingsPercentage change calculations are based on actual figures

2020 organic revenue growth

« Others » includes Manufacturing Entities and HoldingsPercentage change calculations are based on actual figures

As announced on January 28, 2021, Group revenue for 2020 was down -14.5% (-13.3% on an organic basis) in the context of an unprecedented health crisis.

In France, 2020 revenue was down -18.6% (entirely organic). The strong slowdown in Hospitality (which represented c. 1/3 of Elis’ 2019 total French revenue) despite a decent summer season has weighed on activity since the beginning of the crisis. After a slowdown in Q2 in all end-markets, activity picked up in Industry, Healthcare and Trade & Services, with good commercial successes in Workwear and in Hygiene and well-being.

In Central Europe, 2020 revenue was down a limited -3.7% (-6.0% on an organic basis). In a region where the Group has very limited exposure to Hospitality, industrial activities showed good resilience with new Workwear contracts wins.

In Scandinavia & Eastern Europe, 2020 revenue decrease was contained at -6.5% in the region (-6.8% on an organic basis). The fact that the greater portion of our clients operates in the Industry segment enabled the region to be quite resilient since the beginning of the crisis.

In the United Kingdom & Ireland, 2020 revenue was down -23.0% (-24.2% on an organic basis). After a second quarter marked by decreases of nearly -50% in April and May, activity picked up slightly during the summer. Hospitality, which normally represents around one-third of the region’s revenue, was down -60% since the beginning of the crisis.

In Southern Europe, 2020 revenue decreased by -33.5% in the region (entirely organic) with a slowdown of c. -40% in Spain and c. -30% in Portugal. The geography is highly exposed to the Hospitality segment (more than 60% of total revenue in 2019) and suffered from the sharp decline of activity, especially given that the share of international tourism is normally very high.

In Latin America, revenue was down -18.7%. Organic revenue was up +5.4% but the currency effect was -24.6%. Mix of activity in the region is favorable with a high share of clients in Healthcare and the food processing Industry.

EBITDA

Margin rates are based on actual figures« Others » includes Manufacturing Entities and Holdings

In 2020, the Group delivered EBITDA of €947.5m. EBITDA margin increased +20bps to 33.8% of sales.

France

In 2020, EBITDA was down -18.8% at €329.9m but EBITDA margin was stable at 38.0%. This good performance reflects the operational adjustments and the savings achieved in a context of strong decrease in activity, especially in Hospitality.

Central Europe

In 2020, EBITDA was broadly stable at €231.0m despite a -3.7% revenue decline. EBITDA margin in the region was up +110bps at 32.7%. In Germany, operational adjustments and further productivity gains led to a +120bps EBITDA margin improvement at 27.3%. The Netherlands, Poland and Belux all delivered EBITDA margin improvement. In Switzerland, which is more exposed to Hospitality, we saw more impact from the crisis and EBITDA margin was down.

Scandinavia & Eastern Europe

In 2020 EBITDA was down -6,0% at €184.4m but EBITDA margin was up +20bps at 38.9%. Almost all countries in the region delivered EBITDA margin improvement, on the back of the efficient variabilization of costs and savings.

UK & Ireland

In 2020, despite a -23.0% revenue decrease, EBITDA margin was up +40bps at 29.0%. This performance underscores both the successful measures put in place since the acquisition of Berendsen to improve operations and the efficient operational adjustments implemented from March 2020 to limit the impact of the crisis.

Southern Europe

In 2020, EBITDA was down -46.8% at €45.7m, with EBITDA margin down -580bps at 23.0%. In this region, where the share of 2019 revenue in Hospitality was the Group’s highest (c. 60%), the saving measures implemented could not offset the -33.5% revenue decrease. In particular, first-half EBITDA was impacted by a lag in the implementation of some operational adjustments due to prevailing labor procedures in the country.

Latin America

In 2020, EBITDA margin was up +330bps at 33.7%, on the back of cost savings, further productivity improvement in the region’s plants, especially in Brazil, and short-term, very profitable contracts (supply of overgowns for Brazilian hospitals). EBITDA was down -9.7% at €72.0m due to a very negative currency effect.

From EBITDA to Net income

1: A reconciliation is provided in the “Restated income statement for prior financial years” section of this release2: A reconciliation is provided in the “From Income from continuing operations to Headline net income” section of this releasePercentage change calculations are based on actual figures

EBIT

As a percentage of revenue, EBIT was down -350bps in 2020. The 2017-2019 capex program dedicated to Berendsen impacted 2020 D&A (+1.2% vs 2019). However, the very material capex reduction in 2020 (especially in linen capex) led to a -2.4% D&A decrease in H2 2020 compared to H2 2019. Around 60% of the D&A corresponds to linen amortization and c. 40% to amortization of other assets (mainly industrial).

Operating income

The main items between EBIT and Operating income are as follows:

• Expenses related to free-share plans correspond to the requirements of the IFRS 2 accounting standard. They showed a +€2.4m increase in 2020 compared to 2019.
• The amortization of intangible assets recognized in a business combination is partly related to the goodwill allocation of Berendsen. The increase in 2020 is mainly due to the change in the amortization schedule of the Berendsen trademark, following the faster-than-planned rebranding.
• Non-current operating expenses are mainly made up of (i) c. €33m of restructuring costs relating to saving plans and site shutdowns and (ii) c. €22m of additional costs directly tied to the sanitary crisis in Q2.

Financial result

In 2020, net financial expense was €88.4m. It decreased by -€61.6m compared to 2019.

It is mainly made up of (i) interests on financial debt for c. €50m, (ii) interest expenses on lease liabilities related to the application of IFRS 16 for c. €10m, (iii) notional interests related to OCEANE for €9m and (iv) amortization of issuing costs for previous loans for c. €7m.

Income from continuing operations

Income from continuing operations was €3.9m in 2020 compared to €137.7m in 2019.

From Income from continuing operations to Headline net income

1: A reconciliation is provided in the “Restated income statement for prior financial years” section of this release2: Net of tax effect

Headline net income was €138.7m in 2020, down -45.9% compared to 2019.

Cash-flow statement

1: A reconciliation is provided in the “Restated income statement for prior financial years” section of this release

Capex

In 2020, the Group’s Net capex represented 17.6% of revenue vs 20.1% in 2019. This reflects the finalization of the capex program dedicated to Berendsen (completed at the end of 2019), lower linen investments in a context of lower client activity and the cancellation of some capacity-driven industrial projects.

Change in operating working capital requirement

In 2020, the Change in working capital requirement was c. +€27m. The lower activity led to lower trade receivables and accounts payable. Furthermore, strong focus was put on cash collection. Central inventories were up c. €13m as a result of lower linen consumption in the plants.

Free cash-flow

2020 Fee cash-flow (after lease liabilities payments) reached €216.8m, up +€42,6m yoy (+24,5%).

Net financial debt

The Group’s net financial debt at December 31, 2020 stood at €3,281.0m compared to €3,372.1m at December 31, 2019. Leverage Ratio was 3.7x as of December 31, lower than Group’s initial covenant of 3.75x. As a reminder, Elis obtained in 2020 a waiver regarding its June 30, 2020, December 31, 2020, and June 30, 2021 bank covenant tests. The renegotiated covenants are 5.0x, 4.75x and 4.5x respectively.

Pay-out for the 2020 financial year

Given the many persisting uncertainties surrounding the sanitary crisis, the suspension of the dividend is maintained and there will be no payout in 2021 for the 2020 financial year.

Restated income statement for prior financial years

The table below presents the adjustments linked to previous business combinations (IFRS3) at December 31, 2020 compared to the previously published income statement as of December 31, 2019:

Financial definitions

• 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” (as defined in the Document de Base) in each of the periods under comparison, as well as (ii) the impact of exchange rate fluctuations.
• EBITDA is defined as EBIT before depreciation and amortization net of the portion of subsidies transferred to income. It excludes non-recurring items directly related to the sanitary crisis, which are accounted for accounted for in “Non-current operating income and expenses”.
• EBITDA margin is defined as EBITDA divided by revenues.
• EBIT is defined as net income (or net loss) before financial expense, income tax, share in income of equity-accounted companies, amortization of customer relationships, goodwill impairment, non-current operating income and expenses, miscellaneous financial items (bank fees recognized in operating income) and expenses related to IFRS 2 (share-based payments).
• Free cash-flow is defined as cash EBITDA minus non-cash-items items, minus change in working capital, minus linen purchases and manufacturing capital expenditures, net of proceeds, minus tax paid, minus financial interests’ payments and minus lease liabilities payments.
• The leverage ratio is a leverage ratio calculated for bank loan covenants: Total net leverage is equal to [Net financial debt, less current accounts held for employee profit-sharing and accrued interest not yet due, plus unamortized debt issuance costs and finance lease liabilities as measured under IAS 17 had the standard had continued to apply] divided by [Pro forma EBITDA of acquisitions finalized during the last 12 months after synergies and excluding the impact of IFRS 16].

These alternative performance measures are meant to facilitate the analysis of Elis’ operating trends, financial performance and financial position and allow the provision to investors of additional information that the Managing Board believes to be useful and relevant regarding Elis’ results. These alternative performance measures generally have no standardized meaning and therefore may not be comparable to similarly labelled measures used by other companies. As a result, none of these alternative performance measures should be considered in isolation from, or as a substitute for, the Group’s consolidated financial statements and related notes prepared in accordance with IFRS.

2021 outlook

The guidance provided in this press release has been prepared in a manner comparable to the historical financial information, and in line with the Group's accounting methods.

Consolidated financial statements

Consolidated financial statements for the year 2020 are available at this address: https://fr.elis.com/en/group/investors-relations/regulated-information

Geographical breakdown

• France
• Central Europe: Germany, Netherlands, Switzerland, Poland, Belgium, Austria, Czech Republic, Hungary, Slovakia, Luxembourg
• Scandinavia & Eastern Europe: Sweden, Denmark, Norway, Finland, Latvia, Estonia, Lithuania, Russia
• UK & Ireland
• Southern Europe: Spain & Andorra, Portugal, Italy
• Latin America: Brazil, Chile, Colombia

Presentation of Elis’ 2020 full-year results (in English)

Date: Tuesday 9 March 2021 at 8:00am GMT (9:00am CET)

Speakers: Xavier Martiré (CEO) and Louis Guyot (CFO)

Webcast link (for live and replay): https://edge.media-server.com/mmc/p/96wikk65

Conference call dial in numbers:

United Kingdom: +44(0) 207 192 8338United States: +1 646 774 0219France: +33(0)1 70 70 07 81

Confirmation code: 8118956

Investor presentation

An investor presentation will be available at 7:45am GMT (8:45am CET) at this address: https://fr.elis.com/en/group/investors-relations/regulated-information

Forward looking statements

This document may contain information related to the Group’s outlook. Such outlook is based on data, assumptions and estimates that the Group regarded as reasonable at the date of this press release. Those data and assumptions may change or be adjusted as a result of uncertainties relating particularly to the economic, financial, competitive, regulatory or tax environment or as a result of other factors of which the Group was not aware on the date of this press release. Moreover, the materialization of certain risks described in chapter 4 “Risk factors, risk control, insurance policy, and vigilance plan” of the Universal Registration Document for the financial year ended December 31, 2019, and Section 1.4 “Risk Factors” of the half-year financial report as at June 30, 2020, which are available on Elis’s website (www.elis.com), may have an impact on the Group’s activities, financial position, results or outlook and therefore lead to a difference between the actual figures and those given or implied by the outlook presented in this document. Elis undertakes no obligation to publicly update or revise the Group’s outlook or any of the abovementioned data, assumptions or estimates, except as required by applicable laws and regulations. Reaching the outlook also implies success of the Group’s strategy. As a result, the Group makes no representation and gives no warranty regarding the attainment of any outlook set out above.

Next information

Q1 2021 revenue: May 5, 2021 (after market)

Contact

Nicolas Buron, Investor Relations Director - Phone: +33 1 75 49 98 30 - nicolas.buron@elis.com

Consolidated Financial Statements ExcerptP&L

Balance SheetAssets

Liabilities

Cash-flow statement

Attachment

• Elis - 2020 Annual Results (Press release)

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