Chairman of ELIS ELIS, leader in the rental and cleaning of textiles and hygiene services 2008 operations

Outlook 2008 annual accounts Sustainable development

	Xavier Martiré | CEO of ELIS

In 2008, Elis grew 4.3% over 2007 and crossed the billion euro revenue mark. This steady growth was driven by strong commercial investment in 2008 through the integration of hundred or more additional sales persons. Our accelerated international development and various bolt-on acquisitions also helped to drive up revenues in 2008. These three pillars remain the growth engines for 2009. The stability of our business model is based on multiyear subscription contracts and the resilience of certain markets such as the Healthcare market which allows us to maintain our growth ambitions for upcoming years.

	Elis, leader in the rental and cleaning of textiles and hygiene services in continental Europe

Held by Eurazeo since October 2007, Elis is a leading company in the rental and cleaning of textiles and hygiene services in continental Europe, with approximately 12% market share. The company’s network stretches across the whole of Western Europe through 74 industrial centers and 138 service centers mainly located in France, as well as in Germany, Belgium, Spain, Italy, Luxembourg, Portugal, the Czech Republic and Switzerland.

     

	2008 operations

4.3% revenue growth

The one billion euro-mark of revenues was achieved in 2008, moving from 993 million euros in 2007 to 1.036 billion euros in 2008, in other words, growth of 4.3%. This increase was fueled by a mix of organic growth and acquisitions. After a very hectic start to the year, the hospitality market slowed down and revenue growth in the industry followed the trend, with the last quarter 2008 showing clearly weaker growth than in the first nine months of the year. Growth was 3%, if we exclude acquisitions.

The other markets continued to grow, driven by highly technical specific cloths in the Industry, Trade and Services market and by the continued growth in the Hygiene & Wellbeing segment, partially due to the acquisition of CWS France and CWS Spain during the first months of the year. Elis continued its bolt-on acquisitions policy and completed six acquisitions with annualized revenues of 17 million euros.

Higher EBIT against a background of rising costs

EBIT totaled 169.4 million euros, affected by rising payroll costs following the two successive increases in the minimum wage (SMIC) in France and the rising energy costs, which could not be partially offset by price hikes. Furthermore, Elis greatly invested in its sales force to enhance its penetration and reach identified targets such as the sub-users of the textile rental & cleaning and hygiene and wellbeing services. Internationally, the results continued to grow boosted by an aggressive commercial policy and the capacity of organizations to absorb additional volumes in existing structures. EBIT margin remained flat at 16.8% if we exclude the energy impact.

A local multi-service offering

One of Elis’s specific strengths include the capacity and the flexibility to tailor its services to meet requirements expressed by its clients due to its extensive local presence, or even create dedicated and specific services whenever necessary.

These services are delivered from a very close-knit industrial and logistical base which allows Elis to be always close to its clients (80% of clients are less than 50 km from an Elis center). Constant huge investments to ensure to deliver top quality service and productivity. Every year, Elis creates or replaces one out of two plants.

Elis Group revenues – Monthly Revenues 1967/2008 (in million euros)

	Outlook

It is still difficult to predict economic trends in upcoming months. However, due to our robust business model, we are quite confident that the rental-cleaning market will continue its upward trend. Against this background, we expect a slowdown in the Hotels, slight growth in Healthcare, and perhaps slightly steadier growth in Industry, Trade and Services, return from the commercial investments made in 2008 in addition to the continued international development.

	2008 annual accounts

Income statement items

	(In million euros - January - December)   2007 proforma restated* 2008 Revenues 992.9 1,035.9 EBITDA 318.0 327.0 EBITDA margin 32.0% 31.6% EBIT 166.9 169.4 EBIT margin 16.8% 16.4%       (*) Effect of the definitive allocation of goodwill.

Condensed balance sheet as at December 31, 2008

	(In million euros) ASSETS LIABILITIES AND SHAREHOLDERS’ EQUITY Goodwill 1,467.7 Share capital and additional paid-in capital 218.9 Intangible assets 649.8 Quasi equity (103.0) Property, plant & equipment 524.6 Provisions for employee benefit liabilities 43.6     Interest-bearing loans and borrowings 2,168.2 Other non-current assets 2.8 Other non-current liabilities 69.2 Deferred tax assets 13.1 Deferred income tax liabilities 254.4 Total non-current assets 2,658.1 Total non-current liabilities 2,651.3 Inventories 33.8 Provisions for liabilities due in less than one year 5.3 Trade and other receivables 255.2 Trade and other payables 107.5 Other current assets 4.9 Other liabilities 189.6 Cash and cash equivalents 83.9 Bank overdrafts and portions of loans due in less than one year 82.3 Total current assets 377.8 Total current liabilities 384.7 Assets classified as held for sale - Liabilities directly related to assets held for sale - Total assets 3,035.9 Total liabilities and shareholders’ equity 3,035.9

	Sustainable development

Elis, rental and cleaning of textiles articles

The rental and cleaning of linen is a thrifty and environmentally-friendly approach that replaces owning a product by its use. It involves the sale of a use (function) of a good more than the good itself: this is known as the “functional economy”, a business model developed over the past 30 years by Elis. Application of this model yields numerous advantages: reduction of the number of textile articles manufactured, streamlining of linen cleaning and maximization of its use, creation of local jobs. It makes Elis a sustainable development operator through the very nature of its activity.

To officialize its approach in favor of sustainable development, Elis has pledged since 2006 to support the ten principles of the United Nationals Global Compact.

Elis’s strategy is clear on environmental issues: less water, less energy and therefore less carbon emissions, more environmentally-friendly washing products and reduced quantities. This strategy is reflected in five progress fronts for 2008/2009:

• Reduce energy consumption while developing a comprehensive action plan: (Manual on the good practices in energy management in a dry cleaning service, site diagnostics through a special central service);
  
  
• Save water at the washing phase thanks to new recycling solutions;
  
  
• Gradually reduce phosphates in the washing formulas used;
  
  
• Study new cloths treatment solutions to reduce soap in the treatment;
  
  
• Reduce the wear of textile articles and other rental-cleaning products thanks to better cleaning service and improve their recyclability;

On the social level, the training and constant involvement of management in the social relationship is critical. A new training program for supervisors was rolled out in 2006/2008: an « Ecole des maîtrises” has been created to foster internal promotion and correct delegation in management. Another major commitment for 2009: reduction in half of industrial accidents in three years, with a first 12% drop observed on the frequency and seriousness rate in 2008.

It is also aware of the key role it plays in the society. Its activity in fact creates local jobs that cannot be relocated. Furthermore, the development of partnerships upstream of the production industry of textile articles has an impact on the entire production chain and the use of products: In 2008, 100% of textile articles suppliers signed the Elis Sustainable Development Charter.

Lastly, with the Functional Economy, Elis proposes to public authorities a societal solution for the preservation of raw materials compatible with job creation.

Huge success for the Functional Economy business model!

In 2008, Elis was successfully involved in the France’s bipartisan nationwide brainstorming on the environmental (“Grenelle de l’Environnement”), dedicated to the functional economy. Elis accepted to participate in a study aimed at comparing its business model to alternative working gear models. The report submitted to the Minister of the Environment at the end of 2008 helped to demonstrate the environmental superiority of Elis’s functional economy model. Recommendations were made to assess the applicability of this model to other sectors of the economy.