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4-Traders Homepage  >  Equities  >  Euronext Paris  >  Elior Group    ELIOR   FR0011950732

ELIOR GROUP (ELIOR)
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Elior cuts full year guidance on tough competition, shares slump

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05/16/2018 | 12:07pm CEST
FILE PHOTO: The logo of Europe's third-largest catering group Elior is seen on top of the company's headquarters in the financial and business district in La Defense at Courbevoie near Paris, France

(Reuters) - Elior, Europe's third-largest catering group, cut full-year guidance after posting lower-than-expected preliminary first-half results due partly to tough competition in contract catering in France, sending its shares plunging by 14 percent.

The French caterer issued a previous profit warning six months ago, while rival Sodexo cut its full-year sales and profit margin outlook in March and Compass Group, the world's biggest catering firm, missed first-half earnings expectations in May.

"Our second-quarter performance was disappointing. Profit margins for contract catering in France were impacted by a tough competitive environment combined with a period of managerial instability," Chief Executive Officer Philippe Guillemot said in a statement on Wednesday.

Elior forecast an adjusted EBITDA (earnings before interest, taxes, depreciation and amortisation) margin of 7.5-7.8 percent for 2017-18, compared with a previous forecast of stable margins. The group reported an EBITDA margin of 8.3 percent in 2016-17.

The company said it expected organic growth in 2017-18 of close to 3 percent, compared with previous guidance of at least 3 percent. It expects a decrease in adjusted earnings per share, compared with a previous guidance of a slight increase.

The company said its total growth of 3.9 percent for the first half of its 2017-2018 fiscal year and an adjusted EBITDA margin of 6.9 percent were "below expectations".

"We are facing operational challenges and short-term headwinds that weighed and are still weighing on the group's performance," Guillemot said on a conference call on Wednesday.

Guillemot said the managerial instability was now behind the company, which is relying on a new French management team to implement efficiencies.

He said the company would draw up an "ambitious and credible business plan" for the medium and long-term that it will present on June 26.

Guillemot underlined constant pressure on margins due to increased rotation of its portfolio of contracts.

Transport strikes in France and poor weather in Italy, France, Britain and the United States had also dragged down revenue and profit, it said.

"Some of these factors... point towards a theme of increasing competition and a tougher environment in contract catering", says Morgan Stanley, which kept its "underweight" rating for Elior.

Guillemot said the company was eyeing acquisitions in the United States, where the company is "a relatively small player".

Sodexo shares were down 2 percent at 0930 GMT while Compass Group shares were down 1.9 percent.

(Reporting by Nolwenn Brossier in Gdynia; Editing by Subhranshu Sahu, Biju Dwarakanath and Adrian Croft)

Stocks mentioned in the article
ChangeLast1st jan.
COMPASS GROUP PLC 1.27% 1630 Delayed Quote.1.88%
SODEXO 1.29% 86.12 Real-time Quote.-23.14%
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2017Elior Group 2017 Q4 - Results - Earnings Call Slides 
2017Elior Group reports FY results 
2017Elior reports 1H results 
2017Elior reports FQ1 results 
Financials (€)
Sales 2018 6 687 M
EBIT 2018 300 M
Net income 2018 137 M
Debt 2018 1 650 M
Yield 2018 2,62%
P/E ratio 2018 18,83
P/E ratio 2019 15,88
EV / Sales 2018 0,64x
EV / Sales 2019 0,60x
Capitalization 2 604 M
Chart ELIOR GROUP
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Mean consensus OUTPERFORM
Number of Analysts 17
Average target price 18,0 €
Spread / Average Target 22%
EPS Revisions
Managers
NameTitle
Philippe Guillemot Chief Executive Officer & Director
Gilles Cojan Chairman
Esther Gaide Chief Financial Officer
Gilles Auffret Lead Director
Elisabeth van Damme Independent Non-Executive Director
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