ELIOR GROUP 2020 · 24/09/2015 · Railways, City sites & Leisure 19% 20% 12% 11% 7% Business &...

ELIOR GROUP 2020Develop, Innovate, Accelerate

Strategic Review 2016-2020

September 24, 2015

Elior Group09/24/2015

2020 STRATEGY:Develop, Innovate, Accelerate

2

ELIORA successful growth story

• Track record of organic

development and acquisitions

over time

• Thanks to the complementarity

of its activities in catering,

its focused and selective

development strategy,

its entrepreneurial spirit and

its decentralized organization

ELIORPresence on two large and structurally growing markets

• Contract catering: a €150bn

outsourced market (out of a total

€430bn market), growing at 6%

on average per annum

• Concession catering: a €23bn

market growing at 4% p.a. on

average globally, driven by even

stronger growth in airports

ELIORBenefits from significant growth opportunities on each market

1 2 3

EXECUTIVE SUMMARY



3

The 2020 strategy answers three critical questions for the upcoming development of the Group:

WHAT?Food will remain our core business, in

contract and concession catering.

We will have a selective approach with

regards to BtoB services.

HOW?With a stronger focus on the

consumer, its needs, its aspirations.

We will work on improving their

experience, through careful attention,

innovation, and technology, including

digital.

WHERE?In countries in which we believe we can reach top

3 positions, either globally or on niche segments.

We will thus consolidate our positions in

Continental Europe, expand our UK and US

contract catering business and set a foot in Asia.

We will grow organically in US airports and

expand in Northern Europe, Asia and Middle East

in airports.

EXECUTIVE SUMMARY



4

To implement this strategy we have designed a new organization, formed a skilled and

experienced team and elaborated an 8-project transformation plan (Tsubaki) focusing on:

This roadmap results in financial objectives

for 2020:

Sales

€7-8 bn

EBITDA margin

9 to 10%

FCF/EBITDA

45 to 55%

GROWTHCOST

REDUCTIONQUALITY

3. DIGITAL EXPERIENCE

2. MARKETING & PRICING (BtoC)

1. SALES EFFECTIVENESS (BtoB)

6. G&A OPTIMIZATION

5. ACTIVITIES AND CONTRACTS PORTFOLIO REVIEW

4. PURCHASING

8. OPERATIONAL EXCELLENCE

7. HUMAN RESOURCES

EXECUTIVE SUMMARY


Our Vision:the Consumers’ Turn

5


TO BE THE CATERER OF CHOICE,

DRIVEN BY QUALITY

AND INNOVATIVE

CONSUMER EXPERIENCE

6


2THE CONTRACTCATERING MARKET

1A SUCCESSFULGROWTH STORY

3THE CONCESSIONCATERING MARKET

52020 AMBITIONS

4STRATEGY

6CONCLUSION

TODAY’S AGENDA

7


A SUCCESSFUL GROWTH STORY

1

PHILIPPE SALLE

Group Chairman and CEO

8


One Core Business:Food Catering

1. A SUCCESSFUL GROWTH STORY 2. THE CONTRACT CATERING MARKET 3. THE CONCESSION CATERING MARKET 4. STRATEGY 5. 2020 AMBITIONS 6. CONCLUSION AND Q&A

9


Every day, our 106,000 employees*

take genuine care of each of our 3.8m customers through

18,000 restaurants and points of sale in 13 countries


*In 2014

10



POSITION IN CONTRACT CATERING

POSITION IN CONCESSION CATERING

36

12

5

1235

12

5

1235

12

5

1135

12

5

1134

12

5

1133

12

5

1131

12

5

1131

11

5

11

66

200620072008200920102011201220132014

ELIOR GROUP, A LEADER IN EUROPE AND A GROWING CHALLENGER IN THE USA

31

11

5

11

11


FY 2013-2014 REVENUE: €5.3bn

AN INCREASINGLY BALANCED PORTFOLIO

A CONSISTENTLY DIVERSIFIED PORTFOLIO

EVOLUTION OF BUSINESS PROFILE

Other

France53%

4%

UK5%

USA9%

Spain & Portugal

15%

Italy14%

EducationHealthcare

Airports

Motorways

Railways, City sites & Leisure

20%19%

12%

11%

7%

Business& Industry

32 %


12

2011201220132014


REVENUE (€m)

EBITDA MARGIN

3,769 4,1584,464 5,017

5,341

FY 2010A FY 2011A FY 2012A FY 2013A FY 2014A

+9.1%

2010-2014 CAGR

8.8% 8.7% 8.1% 8.5% 8.4%

A SUSTAINED GROWTH PATTERN

GROWTH RATE

5.8%10.3%

7.4%12.4%

6.5%

5.0% 5.1%0.7% 1.1%

3.9%

Group revenue growth

Organic growth


13


KEY PILLARS OF SUCCESS


Focus on selectedmarkets

Acquisitions viapartnerships

Experiencedand entrepreneurialmanagement team

Decentralizedorganization

2 activities:• Contract

Catering• Concession

Catering

14


THE CONTRACT CATERING MARKET

2

PHILIPPE SALLE


15


A LARGE OUTSOURCED MARKET

€Xbn

OUTSOURCEDMARKET

~ €7bn

~ €13bn

~ €47bnASIA


Source: IMF; GIRA; Koncept's Global Contract Catering Market Report 2014.

~ €13bnREST OF EUROPE

~ €34bn

~ €36bnREST OF

THE WORLD

€150bnTOTAL OUTSOURCED

16


AN EVEN WIDER TOTAL CONTRACT CATERING MARKET


Japan China France IndiaGermanyCanadaItalyUKUSA Turkey Mexico Brazil SpainAustralia Russia Other

48

175

12147712

60

96

120

47 94 8

29 7 3333471234 3622 22 2

Level of outsourcing

35% 60% 20% 41% 54% 65% 51% 20% 23% 54% 33% 50% 22% 24% 30%46%

150

280

35%average

€bn, 2014


Outsourced catering In-house catering

€430bnTOTAL ADDRESSABLE

17


A STRUCTURALLY GROWING MARKET

15% 3% 2% 17% 16% 20% 15% 8% 3% 2-3% 4% 2% 2-3% 1% 6%1%

Australia Germany Other 2018ItalySpainCanada UKMexico RussiaFranceUSA2014 Japan Turkey BrazilChina India

Market growthCAGR

150.0

~ 190

9.0 4.2 2.4 2.3 2.2 2.0 1.5 1.2 0.8 0.7 0.4 0.3 0.2 0.2 0.1 9.5 141.4

114.0

36.0 45.5

Top 15countries

Other

Elior countries



€bn

+6% p.a.TOTAL GROWTH

18

Elior Group09/24/2015 19

Source: GIRA; WorldBank.

CONTRACT CATERING IS A RESILIENT MARKET


France Italy

Spain UK

Nominal GDP (i.e. including inflation)

Total catering market (outsourced + in-house)

19


MARKET CHARACTERISTICS

Structural growth globally,all geographies have different maturities

Local spending, with low level of international purchasing

Low level of bundling with other business services

Limited barriers to entry but only small players

New trends: snacking, local purchases, clients concentration, decreasing length of stay in healthcare, work from home in B&I…


20


KEY SUCCESS FACTORS IN THE CONTRACT CATERING BUSINESS

B TO C B TO BCONSUMERVALUE PROPOSITION

OPERATIONS EFFECTIVENESS

COMMERCIAL RELATIONSHIP

• Differentiatedpurchasing

• Recipes

• Brands

• Digital

• Talent

• Purchasing

• Productivity

• Contract

• Client intimacy

• Innovation

• Reactivity


21


CONTINENTAL EUROPE:

LEADER ON MATURE MARKETS

1

Outsourced market size Outsourcing rateExpected growth (p.a. 2014-2018) Elior position

FRANCE

SPAIN

ITALY

1

1

€7bn 41% +2-3%

€2bn 46% +2-3%

€4bn 65% +1%


22


USA & UK:

MAJOR CHALLENGER ON HIGH POTENTIAL MARKETS

Market size

UK

USA

€7bn* 54% >3%

€34bn** 35% >3%


* At £/€ 1.4** At €/$ 1.1

Outsourcing rate Elior position

5

6

Expected growth (p.a. 2014-2018)

23


ELIOR SOURCES OF COMPETITIVENESS

Criticalsize

Proximity withclients

InnovationNew concepts

Production tool

Purchasing scale and lower G&A costs

Differentiation and market share gain


24


CONCLUSION

• A VERY LARGE MARKET

• STRUCTURALLY GROWING AND RESILIENT

• COMPETITIVENESS THROUGH NATIONAL LEADERSHIP

• SIGNIFICANT OPPORTUNITIES


25


THE CONCESSION CATERING MARKET

PEDRO FONTANA

CEO of Concession Catering Worldwide

3

26


A WORTHY MARKET

€4bn

€16-19bnREST OF THE

WORLD

€3bn

€23-26bnTOTAL

€Xbn

MARKETSIZE


27


A GROWING MARKET MAINLY IN AIRPORTS

+5-6% p.a.

+1-2% p.a.

+2% p.a.


2014-2018

+4% p.a.TOTAL GROWTH

28



-8

-6

-4

-2

0

2

4

6

8

10

-4 -3 -2 -1 0 1 2 3

-8

-6

-4

-2

0

2

4

6

8

-1 0 1 2 3-8

-6

-4

-2

0

2

4

6

8

-1 0 1 2 3

Italy

Spain

France

USA

Germany

Germany

Spain

Italy FranceGermany

Italy

USA

Spain

France

Segment growthCAGR %, 2008-13



R²=88%(excl. Italy)R²=83% R²=78%

Passengers traffic growthCAGR %, 2008-14

GDP growthCAGR %, 2008-14

GDP growthCAGR %, 2008-14

AIRPORTSMOTORWAYS RAILWAYS

Source: GIRA; WorldBank.


The motorways and railways markets are correlated with GDP whereas the airports market is correlated with passenger traffic

29


Cyclical

Consumertrends

Market features

Global

Willingness to buy — Demand for value-for-money — Connectivity

CyclicalResilient

LocalLocal

Impulse buying

Captivity

Price sensitivity

Rational buying

AIRPORTSMOTORWAYSRAILWAYS


Price sensitivity

Rational buying


30


International imageNational scale

KEY SUCCESS FACTORS IN THE CONCESSION CATERING SEGMENTS

National scale


• Portfolio of attractive external brands and innovative internal concepts

• Operational excellence (operations, commercial, financial)

AIRPORTSMOTORWAYSRAILWAYS

31


CONTINENTAL EUROPE:

LEADER IN FRANCE, ITALY AND SPAIN

Market size Per segment Elior Group position

FRANCE

SPAIN

ITALY

€1.0bn +3%

€0.5bn +3%

€1.6bn +2%


1

1

1

3

40% MOTORWAYS

28% AIRPORTS

32% RAILWAYS

31% MOTORWAYS

56% AIRPORTS

13% RAILWAYS

69% MOTORWAYS

18% AIRPORTS

13% RAILWAYS


32


Market size Elior Group position

AIRPORTS

MOTORWAYS

€3.6bn +6%

€0.6bn +3%

USA:

CHALLENGER WITH SIGNIFICANT OPPORTUNITIES


6

2


33


ELIOR GROUP SOURCES OF COMPETITIVENESS

Brands & concepts portfolio

Strong local rooting Operational excellence

Leadership positions allowing to be attractive for external brands and meet the diversity of our customers’ needs

Leverage relationship with concession operators and local consumer trends knowledge

Leadership positions allowing to leverage procurement advantage

Experience curve on site management


34


A SOLID BRANDS PORTFOLIOOwn brands Franchised brands

FAST FOOD

COFFEE SHOP

CASUAL DINING

PREMIUM& FINE DINING

FAST CASUAL

RETAIL divers


35


A FULLY INTEGRATED NETWORK TO CAPTURE GLOBAL OPPORTUNITIES


2015: Elior Group increased its stake in Areas to 100%

A global and integrated organization

• Capitalizing on expertiseon each market segment

• Sharing best practices• Scale economies (purchasing

and SG&A)• Leveraging access to brands• Ensuring international reach

36


CONCLUSION


• A WORTHY MARKET

• TWO DIFFERENT DYNAMICS

• A SOLID BRANDS PORTFOLIO

• SIGNIFICANT OPPORTUNITIES IN AIRPORTS

37


STRATEGY4

PHILIPPE SALLE


38


SCOPE

REACH

ELIOR GROUP 2020:


EXPERIENCE

WHAT, WHERE, HOW?

39


SCOPE: WHAT?

Selective approach on other BtoB services

Focus on food

Contract and concession catering


40


REACH: WHERE?


Balanced footprintBy countries and / or business lines

ScaleSeek top 3 position in selected markets and / or segments

• Consolidate Continental Europe

• Expand UK (organic & M&A)

• Expand USA in selected niches (organic & M&A)

• Enter Asia (emerging markets around 1% of sales in 2020)

CONCESSION CATERINGCONTRACT CATERINGUNDERLYING STRATEGY

• Consolidate Continental Europe

• Grow organically USA airports

• Expand airports business in Northern Europe, Middle East and Asia

Focus

41


Increasingly service-based

economy

CONSUMER HABITS ARE CHANGING FAST...

Digital natives MobilityHyper information

EXPERIENCE: HOW?


42


... OFFERING A WIDE SCOPE OF OPPORTUNITIES TO STAND OUT

Food and nutrition Place entertainment Digital experience

EXPERIENCE: HOW?


43


AN EFFICIENT ORGANIZATION TO IMPLEMENT THE STRATEGY

ELIOR GROUPCHAIRMAN AND CEO

CONCESSION CATERING

Airports(Int.Biz dev)

France

Iberia

Italy

LatAm

USA

SERVICES

Airports

Motorways

Railways

Other

France

Italy

Iberia

USA

UK

B&I

Education

Healthcare

Other


CONTRACT CATERING

44


8OPERATIONAL EXCELLENCE

7HUMAN

RESOURCES

6G&A

OPTIMIZATION

5ACTIVITIES AND

CONTRACTS PORTFOLIO

REVIEW

4PURCHASING

3DIGITAL

EXPERIENCE

2MARKETING

&PRICING

(BtoC)

TSUBAKI: 8 PROJECTS

GROWTH FOCUS

QUALITY FOCUS

COSTFOCUS

1SALES

EFFECTIVENESS (BtoB)


45


TSUBAKI GROWTH: CLIENT OFFERING


1SALES

EFFECTIVENESS (BtoB)

2MARKETING

AND PRICING (BtoC)

Maintain leadership positions and develop new territories

Strengthen marketing innovation to create

competitive advantage

Leverage digital technologyto bring more value to

customers and consumers

Retention

Development (new CRM)

BtoB

BtoC

Innovation

Brands portfolio optimization

Offer modeling and pricing

3DIGITAL

EXPERIENCE

46


TSUBAKI COST: COST-BASE MANAGEMENT


4PURCHASING

5ACTIVITY AND CONTRACT

PORTFOLIO REVIEW

Terminate low-profitability contracts and sell non-core

activities

Align G&A with Elior Group 2020 ambitions

Shared-services center implementation

Cross-BU benchmarks

Organization simplification and delayering

New business models

Review of spending (volume and price)

Organization and processes

6G&A

OPTIMIZATION

Improve efficiency

47


TSUBAKI QUALITY


7HUMAN RESOURCES

8OPERATIONALEXCELLENCE

Improve Elior Group’soperational excellence

Incentives review

Group organization

Corporate culture

Attract, motivate andretain performing employees

Quality of service

Production tool (central kitchens)

48


A NEW GROUP BRAND IDENTITY


A corporate visual identity and baseline to match the Group strategy, driven by quality and innovative customer experience.

Time savored

49


STRATEGY IN THE USA CONTRACT CATERING MARKET

BRIAN POPLIN

CEO of Trust House Services


50


ELIOR GROUP WILL ACCELERATE IN THE USA

OUR MISSION IN THE USABE A TRUE IDEA SHAKER

ON THIS KEY MARKET


51


USA: A STORY OF GROWTH IN A LARGE MARKET

Total outsourcedmarket size:

€34bn

Total expectedgrowth:

>3%

Market size (€bn)Expected growth

(2014-2018)Profitability

B&I1 13 1-3% CAGR +

Education 10 > 3% CAGR ++

Healthcare 6 > 3% CAGR ++

Recreations & other

5 1-3% CAGR ++

1. Including vending, military and corrections


Source: Technomic

52


SUCCESSFUL TRACK RECORD OF ACQUISITIONS IN THE USA

KEY PLAYER IN NICHE MARKETS

2013

CREATION PF 2014 sales:

€360mFounded by Michael Bailey & Gryphon Investors

+€90m +€255m

20112008

INTEGRATIONWITHIN ELIOR

+€36m

2015


53


A NICHE PLAYER ON PROMISING SEGMENTS


Education(K-12)

Senior nutrition

Correction

B&I-Services

Privateschools

All

County jails

High-end

€bn - 2014

~25%

~2%

26%

21%

16%

82%

Outs. Rate

Segment Niches Outsourced market

Elior estimated market share

1

0,5

0,5

1

€3.0bnMARKET

54


CASE STUDY: STARR ACQUISITION

Through the acquisition of a fast-growing company (2014 revenue: ~$40m)

Providing a combination of strategic implementations in New York, Miami and Philadelphia

Capitalising on experienced teams and highly renowned Starr brand

Acquisition price in line with Elior Group's financial criteria

Penetration of the attractive high-end business and industry market in the USA


55


2020 AMBITIONS5

PHILIPPE SALLE


OLIVIER DUBOIS

Group CFO

56


2020 AMBITIONS


SALES

€7-8bn• Organic growth >3% on average p.a.

(low inflation case scenario)

• M&A up to €1bn cash investment over 5 years

57



(0.2-0.3)1.0-1.2

Divestments and contracts termination

(next 2 years)

2020Frevenues

2015Erevenues

(guidance)

Organic growth

5.6

0.7-1.4 7.0-8.0

Acquisitions

Current perimeter

€bn

2020 AMBITIONS

REVENUES

58


2020 AMBITIONS


EBITDA MARGIN

9-10%

59



2015E EBITDAMARGIN

(Guidance)

Purchasing G&A 2020F EBITDAMARGIN

Acquisitions 2019-2020

Divestments and contracts

termination

840

~(20)

20-4040-80

900-100020-60In bps

2020 AMBITIONS

EBITDA MARGIN

60


2020 MAIN AMBITIONS


FREE CASH FLOW*/EBITDA

45-50%

* FCF: EBITDA +/- CHANGE IN WORKING CAPITAL– CAPEX - NON-RECURRING – TAX

61


Required returns > 2 x WACC* Target net debt/EBITDA: 2.5xMinimum payout: 40% net result


M&A LEVERAGE SHAREHOLDERS RETURN

2020 AMBITIONS

ONGOING PRIORITIES FOR USE OF CASH

*Weighted Average Cost of Capital

62


2020 KPIs


OPERATIONS

FINANCE HUMAN RESOURCES

CUSTOMERQUALITY

63


2020 KPIs

OPERATIONS


OPERATIONS


CUSTOMERQUALITY

CUSTOMERQUALITY

64


2020 KPIs

CUSTOMER QUALITY

NET PROMOTER SCORE


65


OPERATIONS

FINANCE

CUSTOMERQUALITY

HUMAN RESOURCES

OPERATIONS

HUMAN RESOURCES

2020 KPIs


66


2020 KPIs

HUMAN RESOURCES

SENSE OF BELONGING

COMP & BEN

STAFF TURNOVER


67


2020 KPIs

OPERATIONS


OPERATIONS

HUMAN RESOURCES

CUSTOMERQUALITY

FINANCEFINANCE

68


2020 KPIs

FINANCE


EBITDA

CAPEX

NON-RECURRING CASH

WORKING CAPITAL

TAX CASH

-

-

+/-

-

FCF

- INTEREST CASH

NET CASH

69


2020 KPIs

FINANCE


~2% of revenues

Contract Catering

~5% of revenues

Concession Catering(except 2016 and 2017)

~€50m IT plan (over 5 years)

EBITDA

CAPEX

NON-RECURRING CASH

WORKING CAPITAL

TAX CASH

-

-

+/-

-

FCF

- INTEREST CASH

NET CASH

70


€60m over 2016/2017

Restructuring costs

Non-core business exit costs

2020 KPIs

FINANCE


EBITDA

CAPEX

NON-RECURRING CASH

WORKING CAPITAL

TAX CASH

-

-

+/-

-

FCF

- INTEREST CASH

NET CASH

71


Reduce DSO

• Invoicing acceleration

• Faster cash collection

Off-balance-sheet securitization of receivables

2020 KPIs

FINANCE


EBITDA

CAPEX

NON-RECURRING CASH

WORKING CAPITAL

TAX CASH

-

-

+/-

-

FCF

- INTEREST CASH

NET CASH

72


Optimization ongoing in France

Special focus on Spain and USA further to the buyout of minority stake in Areas

Assessment of further potential following the new French purchasing organization

2020 KPIs

FINANCE


EBITDA

CAPEX

NON-RECURRING CASH

WORKING CAPITAL

TAX CASH

-

-

+/-

-

FCF

- INTEREST CASH

NET CASH

73


2020 KPIs

FINANCE


Debt refinancing

Renegociation of securitization conditions

Swap agreements termination (€13m non-recurring charges)

High yield refinancing

Enlarged sources of funding

EBITDA

CAPEX

NON-RECURRING CASH

WORKING CAPITAL

TAX CASH

-

-

+/-

-

FCF

- INTEREST CASH

NET CASH

74


2020 KPIs

OPERATIONS


OPERATIONS


CUSTOMERQUALITY

OPERATIONS

75


CONCLUSION6

PHILIPPE SALLE


76


KEY TAKEAWAYS

DEVELOP

Focus on current scope

Specific approach by country

ACCELERATE

Tsubaki plan

Organization and team

M&A (up to €1bn cash)

INNOVATE

Differentiation through innovative offering

Brands identity

Digital strategy

SALES EBITDA MARGIN FCF/EBITDA

€7-8bn 9-10% 45-50%

2020 AMBITIONS


77


TO BE THE CATERER OF CHOICE,

DRIVEN BY QUALITY

AND INNOVATIVE

CONSUMER EXPERIENCE

78

ELIOR GROUP 2020Develop, Innovate, Accelerate

Strategic Review 2016-2020

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