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Viewpoints - Xavier Martiré, Gilbert Saada |
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What do you think of Eurazeo’s support?
X. M.: We appreciate having a shareholder who does not favor a short-term vision, focused exclusively on cost reductions, but who shares our vision of creating value over the medium term by supporting our growth plans. In spite of the crisis, Eurazeo approved our decision to significantly expand our sales force and encouraged us in our targeted external growth policy, allowing us to make five acquisitions in 2009 after having already made six in 2008. On a larger scale, our shareholder also encouraged the implementation of the ID’Elis action plan. These initiatives will be extended in 2010. Beyond this shared vision, the frequency and quality of the dialogue we share help challenge us every day, and confirm our roadmap.
What do you discuss with Elis?
G. S.: Since we acquired Elis in 2007, we encouraged the company to stimulate growth by assisting them with both the analysis of potential targets and negotiations. In the face of the troubled economic environment of the past two years we maintained this strategic heading, just as we participated in the decision to hire hundreds of additional salespeople in France, convinced that both decisions would pay off in light of the tremendous potential of the French market for the rental and cleaning of linens. This enabled Elis to win many new contracts that have helped offset some of the weakness in the hotel and restaurant business, which has suffered declines in occupancy rate. This pro-growth strategy, both organic and external, will continue in 2010, as we have decided to significantly increase our marketing efforts abroad. We have; of course, paid careful attention to cost optimization and have encouraged the company to maintain strict pricing discipline. All of these measures allowed Elis to calmly traverse a potentially difficult period and left it poised to address the coming years with enhanced growth potential. |
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Elis, leader in the rental and cleaning of textile and hygiene services in Europe |
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Elis is the European leader in the rental and cleaning of linens and hygiene and well-being equipment, with a market share of around 12%.
Revenues held up to economic conditions
Revenues rose 0.6% to €1,042.4 million, and were down slightly (0.6%) at constant consolidation scope and exchange rates.
The year was marked by a modest increase in revenues in France (0.5%), stronger revenue growth abroad (3.7%), and lower revenues from the production subsidiaries (the latter contributing only a small share of the company’s total revenues).
In France, despite the decline in occupancy rates in hotels, the decrease in revenues for hotels and restaurants was limited to 2.2%, thanks to an extremely strong marketing effort and the winning of new customers. The revenues of the Health Division continued to grow (+1.8%), demonstrating once again the resilient character of this market. In the Industry, Trade and Services division, the slowdown in our existing customer base was offset by new business development and the conversion of new customers to rental and cleaning. It is worth noting that during the last four months of the year, Elis enjoyed higher demand for products to help limit the spread of influenza, such as distributors of alcohol-based gels.
Internationally, the two countries on the Iberian Peninsula were particularly affected by the economy. New business, however, helped offset the loss of customers and declines in revenue from existing customers.
EBITDA growth despite near stagnation of sales
Despite the delayed impact of the two increases in the minimum wage that occurred in 2008, EBITDA was up 2.4% thanks to very good cost controls. From the beginning of the year, the company launched a plan of 20 specific actions (ID’Elis 2009) intended to minimize the impact of the crisis on the company’s results, in three ways:
- Growing revenues;
- Optimizing costs;
- Reducing the need for working capital.
The rapid and effective implementation of these measures significantly improved Elis’s results in 2009, and will also improve and increase the company’s profitability for years to come.
Revenue
Occupancy rates remain a key driver of revenue growth in Hotels and Restaurants
After a significant increase in the sales force in 2008, special efforts will be made in 2010 in France to revitalize the marketing efforts of the distribution agents, notably in order to further increase the loyalty of existing customers and to promote Elis’s services to them. Internationally, sales forces will in turn be strengthened significantly, with a 30% increase in sales force investment.
Furthermore, cost optimization continues with the regrouping on a single site of all of the alterations of the Company’s garments. Moreover, like in 2009, new initiatives are being deployed under the ID’Elis program.
> Participation in the service economy working group of the French Grenelle Environmental initiative.
> Reduction of gas consumption
> Optimization of water consumption
> Launch of a range of cotton textile items with the Fair trade / Max Havelaar label
> Creation of a career development program tailored for commercial distribution (division of Excellence Disco)
Elis’s business - the rental and cleaning of textiles and hygiene and well-being equipment - is representative of the service economy. What the company actually sells is the use of its products, resulting in an effort to ensure their sustainability. There is no conflict between the durability of the product and the sustainability of the service.
Several major initiatives were undertaken in 2009, from the optimization of working hours to the setting up of additional counters to the recovery of energy through the use of different types of heat exchangers in the various processes. Together, these measures reduced energy consumption by about 5% per kilogram of linen processed compared to 2008.
Because Elis’s employees are crucial to its success, a specialized monitoring of the career development of service staff was established in 2009 to promote career development of the commercial distribution teams, offering the best among them the opportunity to evolve toward management functions within the company. The goal is to improve both their expertise - by strengthening theoretical fundamentals and enhancing critical sales techniques - and their managerial skills by giving them the keys they will need to manage and lead a team.
Summary income statement
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| (In millions of euros) |
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2008 |
2009 |
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| Revenues |
1,035.9 |
1,042.4 |
| EBIT |
169.4 |
170.9 |
| EBITDA |
327.0 |
334.8 |
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Consolidated balance sheet as of December 31, 2009
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| (In millions of euros) |
ASSETS |
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LIABILITIES AND EQUITY |
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| Goodwill |
1,474.3 |
Capital stock and additional paid-in capital |
218.9 |
| Intangible assets |
595.2 |
Other components of equity |
(155.4) |
| Property, plant and equipment |
529.6 |
Provisions and liabilities related to employee benefits |
43.7 |
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Borrowings and financial debt |
2,177.9 |
| Other non-current assets |
2.8 |
Other non-current liabilities |
90.5 |
| Deferred tax assets |
12.4 |
Deferred tax liabilities |
233.0 |
| Total non-current assets |
2,614.3 |
Total non-current liabilities |
2,545.0 |
| Inventories |
36.0 |
Provisions - current portion |
4.4 |
| Trade and other receivables |
241.6 |
Trade and other payables |
77.2 |
| Other current assets |
2.9 |
Other liabilities |
192.6 |
| Cash and cash equivalents |
39.0 |
Bank overdrafts and current portion of loans |
50.9 |
| Total current assets |
319.4 |
Total current liabilities |
325.1 |
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| Total assets |
2,933.7 |
Total liabilities and equity |
2,933.7 |
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