Elior Group SA (ELIOR) Earnings Call Transcript & Summary

Good morning, and welcome, everyone, to the Elior Group first half 2019-2020 results. Today's conference is being recorded. At this time, I'd like to turn the conference over to Philippe Guillemot, Group Chief Executive Officer. Please go ahead, sir.

Good morning, ladies and gentlemen, and thank you for joining us this morning. Together with Esther Gaide, group CFO, we will comment on Elior's first half 2019-2020 results. As usual, we will take your questions at the end of our presentation. This presentation follows on the press release we published on May 5 outlining our preliminary first half financial results and the impact of the COVID-19 crisis. Esther will provide you with additional details, which are consistent with the figures we already published. During this webcast, I will be sharing with you the measures we are taking to mitigate the impact of the COVID-19 crisis and, above all, ensure that Elior is well positioned for the future. Turning to Slide 3. Prior to this devastating pandemic, despite the general strikes in France, Elior was well positioned to achieve its full year objectives. Our efforts were rewarded by customer loyalty, as client retention increased to 93% from 90% a year ago. Our CapEx for the first half was well below 3% of revenue at 2.2%. We also returned to shareholders EUR 20 million in share buybacks and the AGM approved the dividend, thus returning over EUR 70 million to shareholders this year. This demonstrates that our New Elior plan launched last year was well on track. In the COVID-19 context and as already mentioned in our May 5 communication, we deployed a quick and decisive action plan to mitigate its impact. Looking now at Slide 4. An integral part of our success relies on our team members. I would like to pay a special tribute to our teams who work in catering and services. I extend my thanks to all the women and men who work at Elior who showed dedication and engagement during this period. Since the start of the crisis, our teams in contract catering and services have been working hand-in-hand with medical staff in health care establishments, hospitals, clinics, residential care homes for the elderly and people with disabilities as well as in hospitals' nurseries to combat the virus. In providing meals to frontline workers during this epidemic, we have further reinforced our safety standards. To ensure the health and safety of our teams, customers and guests, we have implemented even stricter safety protocols. In addition, we have provided personal protective equipment; adapted our offers; and proposed new catering solutions that guarantee hygiene, food safety and nutritional value. The current crisis is a strong reminder of how our activity is essential in supporting key government workers and local communities. Faced with this unprecedented crisis, we can all be proud of the tremendous commitment demonstrated by our teams to accomplish their missions. I would also like to thank our support staff, many of whom are working from home. My thoughts also go to our teams who have been furloughed due to the impact of COVID-19 on our activities. Faithful to their regional roots, Elior teams are mobilized wherever they are present to carry out solidarity actions for local population in need. For example, in France, Elior and its subsidiaries Ansamble and Alsacienne de Restauration offered more than 3,000 meals to the Red Cross to provide emergency aid for the people most in need. In Italy, in the municipality of di -- Casalecchio di Reno, our teams donated more than 5,000 meals to families on public assistance and in particular to housebound people aged 65 and older. In Spain, the closure of all school structures has placed scholarship students from the most modest backgrounds in a highly precarious situation. In collaboration with the Junta de Andalucía and other collective catering companies, Elior's Spanish subsidiary Serunion guaranteed the distribution of meals to 18,000 Andalusian students during the confinement period. In Great Britain, in order to reduce food waste and to support local communities, Elior U.K. has teamed up with OLIO and already organized nearly 50 collections of surplus food that have been redistributed to the most unprivileged. In the United States, with public schools -- while public schools are closed, the Elior North American teams in Saint Peter, Minnesota have implemented solutions to continue distributing meals to the thousands of students who are very often dependent on free school meals or at reduced prices. Leveraging the effort of our teams, Elior strives to reaffirm its values as a responsible, engaged caterer and services operator. Before offering a more detailed explanation as to how Elior is weathering out this crisis and how we are turning it into an opportunity to accelerate Elior's transformation, I will give the floor to Esther, who will provide you with an analysis of our first half 2019-2020 financial results. Esther, the floor is yours.

Thank you, Philippe. Let's start off with Slide 7, where you see on the left Elior's second quarter revenues per segment. Overall Elior Group revenues were EUR 1,151 million in the second quarter 2019-2020, down 10% compared to the same period a year ago. It's important to note that March should have been a strong month in term of activity for Elior, as there was no bank holidays and only a few school vacations in any of the countries in which the group operates. In France, revenues were EUR 513 million. COVID-19 impacted France revenues by EUR 75 million. International revenues were lower than a year ago at EUR 636 million. COVID-19 impacted international revenues by EUR 81 million. The first to be impacted by COVID-19 was Italy, followed by Spain. Excluding the COVID 19 impacts, general strikes in France, voluntary contract exits in Italy and lower scope of the Tesco contracts in the U.K., Elior's organic revenue growth in the second quarter was up 2.5%. Let's turn to Slide 8 for first half revenues. On left -- on the left side, you will see that group revenues were EUR 2,459 million, a decrease of EUR 135 million compared to last year. In France, the total revenues were EUR 1,086 million, a decrease of EUR 78 million in the first half compared to last year. The general strikes in December and January impacted revenues by EUR 11 million, followed in March by the COVID-19 pandemic that impacted revenues by EUR 81 million. Excluding the strikes and COVID-19, Elior's organic growth in France was up 1.3%. International revenues declined to EUR 1,367 million, a decrease of EUR 52 million in the first half compared to last year. The COVID-19 impacted revenues by EUR 75 million. Elior's underlying international organic revenue growth was up 2%, excluding Italian public sector contracts that we chose not to renew last year, the reduced scope of the Tesco contracts in the U.K. and COVID-19. On Slide 9 is a bridge detailing Elior's group total revenue in the first half 2019-2020. Excluding the French strikes, COVID-19, voluntary exits in Italy and Tesco, Elior's underlying organic revenues would have been up 1.5% to EUR 2,633 million, driven by improvements in both France and international. On Slide 10, you see the P&L impacts for the first year implementation of IFRS 16. I will move directly on Slide 11. The bridge shows adjusted EBITA for continuing operations for the 6 months ended March 31, 2020. We see the results of a tight CapEx management on D&A and the EUR 70 million impact of COVID-19 on EBITA. Turning to Slide 12. On the left side, you will see that the impacts from the COVID-19 lockdown resulted in a drop in revenues that I have just commented upon, resulting in a drop-through in adjusted EBITA of EUR 70 million compared to last year. The resulting adjusted EBITA margin for Elior Group was 2.1% in the first half compared to 4.7% last year. 2.6% difference was due to COVID-19. In France, adjusted EBITA was EUR 37 million in the first half 2019-2020, EUR 32 million lower compared to last year, of which [ EUR 36 million ] were due to COVID-19. The adjusted EBITA as a percentage of revenue was 3.4% compared to 5.9% in the first half a year ago. International, the adjusted EBITA was EUR 26 million compared to EUR 66 million last year, notably due to the major impact of COVID-19. The adjusted EBITA as a percentage of revenue was 1.9% compared to 4.7% in the first half a year ago. Now I will take you through the P&L on Slide 13. Below adjusted EBITA, the charges related to share-based compensation were EUR 2 million in the first half, linked to lower performance. Acquisitions and intangible amortization were EUR 10 million, stable year-on-year. Nonrecurring items represented a net expense of EUR 6 million, stable with last year, consistent with our strict payback discipline related to our restructuring costs. Income tax expense declined to EUR 15 million in the first half of 2019-2020 compared to EUR 37 million last year, mainly coming from the decrease in profits due to the consequences of the COVID-19 pandemic. In view of the other factors. Net profit for the period from continuing operations amounted to EUR 2 million in the first half 2019-2020 compared with a net profit of EUR 32 million last year. Elior Group recorded EUR 20 million in net expense from discontinued operations compared to EUR 33 million last year, notably due to the net price adjustment related to the disposal of Areas last year. Therefore, the net income group share was negative EUR 17 million in the first half compared to breakeven last year, keeping in mind that we lost EUR 70 million in adjusted EBITA due to COVID-19. I invite you to turn to Slide 14 to take a closer look at Elior's financial results. I have stated during the full year results presentation last year Elior's financial charges declined due to the debt repayment following the disposal of Areas. This lower debt had a positive impact on interest rate margin which was applied as of December 2019. Now let's take a look at Elior Group's first half free -- 2020 free cash flow on Slide 15. Free cash flow reflects the significant impact of COVID-19 to adjusted EBITDA of EUR 74 million year-on-year. Excluding COVID 19 impact, free cash flow was in line with our expectations. We have also maintained our strict CapEx allocation policy. Change in operating working capital was negative at minus EUR 57 million, stable with last year, due to lower customers receivable on a decreasing revenue, compensated by lower supplies and social payables driven by the decrease in purchases and labor costs, respectively. The securitization of receivable increased by EUR 17 million in the first half based on invoice revenues until the end of February and was EUR 18 million lower than last year. On Slide 16 is the evolution of our net debt. In the first half, our net debt increased by EUR 24 million to EUR 533 million (sic) [ EUR 563 million ], with a leverage ratio of 2.5x at constant accounting principles. Free cash flow generated over the period of EUR 14 million is strongly impacted by the drop in EBITA due to COVID-19 by EUR 70 million. We completed the share buyback program of EUR 20 million, starting of end -- on end of January and finished on mid-March 2020. After the IFRS 16 implementation, Elior Group net debt at the end of March was EUR 786 million compared to EUR 771 million pro forma IFRS 16 at the end of September 2019. On Slide 17, to conclude. You will see that Elior's available liquidity at the end of March 2020 was EUR 917 million. This includes cash of EUR 717 million (sic) [ EUR 779 million ] after drawing down the revolving credit facilities of EUR 450 million and USD 250 million. Remaining available credit line is EUR 138 million. We obtained a covenant holiday. The next test on the debt will be at the end of 2021 based on Elior's group financial results at September 30, 2021. That concludes my comments, and I now hand you back to Philippe.

Thank you, Esther. The implications of COVID-19 have been profound, and the path to business recovery is evolving and bumpy. Yes, Elior is impacted by the crisis, but let me put that into context on Slide 19. As you will see throughout this presentation, we have 3 key priorities. First of all, we have reinforced our cash management discipline to minimize cash consumption. Cash management is a priority. Each country is managing its cash position on a daily basis, taking all necessary actions to minimize cash burn. We have rapidly adapted our cost structure, starting with direct labor cost, which represents roughly 50% of our cost baseline. We have taken quick and decisive actions to make use of all available measures to mitigate the impact of COVID-19 and support our employees. Support structure has been temporarily resized to adapt to our revenue level. All indirect spend are renegotiated, as for example, leases, insurance fees. We have further tightened our CapEx management. And we have also suspended our share buyback program and will recommend a pause in the dividend for 2021. Secondly, we are continuing to adjust to uncertain levels in revenues. In the context of a very progressive resumption of activity in schools and at companies, Elior is particularly attentive to calibrating its organization to preserve the economic balance that is essential to the company's profitability. The restart process will be very gradual and very considerably per country. For our business and industry, we estimate that the lowest level of activity will be in April and May and will progressively recover from June through September and will likely not return to pre-COVID-19 levels for some time. As for our education sector, we believe that activity will remain at a low level until the start of the new school year. You should also bear in mind that historically we have a low level of activity during the summer. Health care has been the most resilient yet, nonetheless impacted notably in Europe with elective and noncritical surgeries being rescheduled until after the pandemic. In this context, based on the major efforts made by our teams and the performance in April, the trends we are currently seeing, we confirm the estimated drop-through impact on adjusted EBITA of loss revenues to be around 30% for the full year 2019-2020. Our third priority is to use our agility and responsiveness to bring new offers and adapt to the needs of our customers. We have had to rethink our offering and how best to gradually restart activities in schools and for those returning to the workplace, all the while entering COVID-19 compliant hygiene protocols and food safety. This crisis is an opportunity for Elior to accelerate its transformation plan. Turning to Slide 20. Although we have been severely impacted, this crisis has also shown the importance and strength of our central kitchen network. This network has proven to be the perfect asset to adjust to the COVID-19 crisis, as we were able to address multiple segments. We have the right assets that have been essential in ensuring safety and business continuity to deliver high-quality meals throughout this pandemic. Several dozen of the central kitchens have also been mobilized to provide meals to health care personnel as well as to fragile, isolated people. Throughout the crisis, Elior central kitchens have been essential to support the business continuity plans of our clients. As shown on Slide 21, for nearly 30 years, our proven standards support our trusted relations with our clients. Leveraging this expertise, we have swiftly adapted our protocols to the COVID-19 context. At Elior, we have combined our skills in providing healthy and tasty meals with our expertise in food hygiene, safety and traceability. Starting on Slide 22, I would like to share with you how Elior has the right expertise and how we have rethought some offerings. In France, Elior's service businesses, the leader in hygiene and [ bio hygiene ] cleaning, is fully operational to perform the sanitization of schools, offices and manufacturing sites prior to their reopening. In catering, Elior as a responsible caterer has already started to provide solutions adapted to each site and client's needs that stringently complied with the requirements of hygiene and social distancing. Our operational agility and chef-centric business model gives our personnel on the frontline the empowerment to quickly adapt and define the best solution to the evolving needs of our clients and guests. This is, for example, the case of safe cafe at Elior North America, a QR code based system that provides easy and rapid access to our site's hygiene and sanitization measures. Turning to Slide 23. Against the background of these unusual times, we are focusing on agility and innovation, notably by accelerating the rollout of our digital transformation which was already well underway before the crisis. In all our countries of operation, we have extended the scope of our existing digital apps so they can support a greater variety of service models. Click and collect has been in place for some time and is accelerating. Our guests are now able to book tables in advance or have their meals delivered at their desks. Another example: We are already seeing an increasing interest amongst our clients for our hands-free checkout systems which we are integrating with Trayvisor, our [ tray ] visual recognition solution leveraging artificial intelligence. Through its new offers, the group is preparing for the new normal's contract catering. All of these efforts have reinforced the credibility we have with our clients; as you will see here on Slide 24, a few examples of our clients' comments valuing the way we proactively came with solutions that answered their specific needs. Turning to Slide 25. We are also looking beyond our current client base, and we are already seeing opportunities in 4 main directions. Firstly, increasing our market share. Many of the smaller players are unable to meet increasing standards in hygiene and food safety, while others are highly leveraged and are widely exposed to segments with little activity. Secondly, we have accelerated discussions with self-operated prospect. These potential new clients are realizing that the demanding hygiene and food safety protocols require established experts. Thirdly, we can further leverage our central kitchen infrastructure as the demand for social meals continues to increase. Moreover, there is ever more interest from potential clients with kitchen-less sites for solutions such as Food 360 that we present to you during our full year results last December. Fourthly, we are also seeing an increased demand for us to extend our service offerings, sanitizations with contract catering clients, meal kits with extended shelf life for employees working from home. All of these points makes Elior's strategy more relevant than ever. To conclude. While navigating these extraordinary times, we will continue to stick to our 5 value creation drivers as shown on Slide 26. We will continue to secure the well-being of our employees, clients and guests; and reinforce Elior's position as the world's leading caterer and services provider. These value creation drivers are just as relevant today to create value for all our stakeholders as they were when I presented them to you as part of the -- as -- of our full year results in December. Elior is well positioned to accelerate its transformation plan. With that, we conclude our presentation and are available to answer your questions.

[Operator Instructions] We'll take our first question today from Sabrina Blanc from Societe Generale.

Sabrina Blanc of Societe Generale speaking. I have 2 questions from my part. The first one is regarding the mitigation measures that you have, you are putting in place. Could we have more color in terms of costs, from one part; and secondly, in terms of CapEx? And to see how you would be able to reach a 30% drop-through. And the second question is regarding the working capital. Could we have more details on the impacts that we have seen in H1? What could be the COVID impact in the second part of the year and a full year basis?

Okay. Thank you, Sabrina. So as far as the mitigation measures are concerned, we strictly follow each line of the P&L, and obviously they are gearing differently. If you take food costs, it's a line of P&L we can flex almost 100% when we have a lower activity. As far as direct labor, which is around 50% of our P&L, we have obviously activated all the levers we can activate countries by countries. In some countries, obviously we have furlough mechanism. In most -- in all countries we operate, we have furlough mechanisms that we have fully activated, which obviously help us to flex a vast majority of this direct labor cost. As far as the other line of the P&L, SG&A and other indirect costs, SG&A is obviously made of labor costs too. We have used in countries where we operate the furlough mechanism to flex some of these costs too. And as far as the other indirect costs, as I mentioned, we have renegotiated all of them, leases, insurance, fees. You can name them. So the combination of all this, obviously, make us confident in our ability to be around 30% drop-through. And as I mentioned, our performance in April, which is now behind us, showed that it's obviously something we have been able to achieve and we will continue to achieve. As far as working capital is concerned, I will hand over to Esther.

Okay, yes. Sabrina, as you see, in H1, we have been -- the main impact is on -- is EBITA. So that's what we are also expecting for H2 because we have also -- as I mentioned before, we are monitoring our CapEx very closely, even more than before. We are giving -- the process is -- now is to review every single CapEx which has maybe been approved before and revise in view of the timing of the new contracts. If the new contract is not to start, for instance, with -- it might be delayed in H2. We will see and we'll take actions. So that's on CapEx, strong action. In working cap, we are working very closely. And Philippe mentioned we are monitoring the cash every day, daily. So we are actually working on our DSO strongly, and we are aiming to mitigate everything that can be mitigate. The only thing that is due to the COVID-19 which and due to the decrease of the sales is actually the securitization, on which we will be hit by the decline of the sales, but then when things are starting, that will be the reverse trend and we will be able to refinance part of that -- part our cash by that. So it's actually very closely monitoring of all those items of the free cash flow to minimize the impact of the cash.

Yes, but is it possible to know what was the cash burn in April?

The burn was low.

Yes.

Very low. All the action that Esther mentioned have proven to be delaying what we expected. And just can -- I won't give you the figure, but I can tell you that the cash burn in April was very low.

Again, we are monitoring that subject as high-level priority subject. We have called for some countries twice a week every week, for sure, for all the countries, and for some even more, so we know exactly where we are. And again, we are monitoring this very quickly. And it will -- it means this pandemic -- the COVID has shown us then, when you tell people you need to make sure you get your customers to pay and you push them and you are [ on their back ], it's actually we are concentrating on those topics.

Please keep in mind that, since I joined as the CEO, I've implemented a cash culture in Elior. And what we get the benefit of sort of this crisis is this work we did in the last 2 years with Esther to make sure that everybody in the organization knows what obviously has an impact on cash. And when we entered the crisis, we were already fully [ tabled ] as an organization to manage our cash position. And when Esther mentioned that we follow on a daily basis in every country our cash position and that we have people assigned to every parameter of our cash consumption or cash collection, it's a fact, I think. And that's why as a consequence we have delivered in April, and again, sorry, we will not give you the number, but -- an outstanding cash performance.

We'll go to our next question now from James Ainley from Citi.

Yes, yes. 2 questions, please. Could you talk a little bit more about what's guiding your views about the reopening profile? I guess the recent data points, one of your competitors, they've put out a low-recovery case suggesting that maybe only half of B&I attendance is up and running in the first half of 2021, quite a bearish outlook. Can you talk about what your clients are saying to you about their ability to reopen and their desire to reopen their sites as we go through 2021? And then secondly, where would you like the leverage in the group to end up on the other side of this crisis? So assuming EBITA returns to some kind of normality in 2022, what sort of leverage do you think is appropriate for the business?

So as far as how fast revenue will go back to level we had pre COVID-19 crisis, hard to predict. And again, I have no crystal ball. And for the time being, there are so many parameters that may impact this revenue ramp-up that I will not even dare predicting what's going to be our revenue mid in '20 -- end of '20 and '21. So as a consequence, and I mentioned it in my presentation, the only -- what we have to do is just to get ready to adjust to the revenue whatever it will be. And that's how we approach it today with our organization. It's clear that there are many unknowns. And as you know, I can -- let's take the example of B&I. If social distancing measures, minimum square meters per employee, a number of people, max number of people in elevators are still in rigor to be implemented in September, it will be different if it's not the case. And so far, nobody knows. Nobody knows. So when you are in a world of uncertainty, you plan for the worst, but anyway, you get ready to adjust to whatever revenue you'll have in the future. And that's what we are doing. As far as leverage is concerned, it's clear. We will be more leveraged out of this crisis than we were before entering into this crisis. I'll remind you that we were at 1.8x leverage, thanks to the deleveraging we did with the sale of Areas, as the Areas sales proceed was 100% used to deleverage our balance sheet. And it sounds good, we did it. And we likely will end up with a higher level of debt out of this crisis, but as we are a cash-generating business, we will deleverage over time. So you have to look at leverage not in '21, not even maybe mid-'22, but maybe end of '22 to have a sense of obviously where we could be back. Our objective is to go back slowly but surely, back to the range of 1.5x to 2x that obviously we had as an objective when we deleveraged our balance sheet before the COVID-19 crisis.

We'll now go to our next question from Andre Juillard from Deutsche Bank.

Three question, if I may. The first one is about top line. You were mentioning that your retention rate have reached 93% in H1. Have you seen any change in April and May? Do you see any signal from your clients on a drop in this rate? That's my first question. The second one is about the drop-through. And what are the risk or the opportunity on the figure you have given this morning about this drop-through of 30%? The third question is about CapEx. What is your midterm view on CapEx level? And if I may force one very quickly but just to be sure about what you've said about dividend: When you say no dividend in '21, it's the dividend in '20 paid in '21. Is that right?

Yes. For the dividend, it's one that will -- would have been paid in '21, yes, which I remind you was this year around EUR 50 million. And not obviously paying out this dividend contributes to the deleveraging I was talking about earlier on. Retention: Yes, what we observe right now is that -- 2 things. First, customers obviously may have delayed some request for quotation. So this obviously may contribute to better retention, but more important, on the other hand, customers have realized through this crisis that better deal with very solid, agile, responsive suppliers and caterer than with small companies that may go burst through this crisis. So what we observe is even new ask from self-operated customers that turn to us, so overall I think this crisis will be positive for established, solid player. Drop-through. As I said, around 30% obviously is our minimum objective. And we, as I said, are confident, given what happened in April, to be able to deliver it. Then there are some parameters that may impact this drop-through, the governments' decisions in the country we operate on the furlough mechanism. As you know, after this massive help in Europe, in countries in Europe, governments now have to reignite the economic engine. So they adjust accordingly this furlough mechanism. So these are the parameters, obviously, we have to take into account, but no, I think we as an organization are committed to deliver this 30% furlough at max -- drop-through at max. CapEx: Talking in percentage of revenue doesn't mean anything from now because the revenue has dropped significantly, so now we are more focused on the absolute value of CapEx. And our goal, starting from the 2.2% of revenue we used to have in absolute value, is to continue to obviously manage it in a very rigorous manner and likely lower this absolute value amount in the next few months. And dividend, I answered your questions.

We'll now go to our next question from Jaafar Mestari from Exane BNP Paribas.

I hope everyone is keeping well. I've got 3 questions, please. Firstly, on the shape of the recovery, I appreciate it's only been about 2.5 weeks since France has started to exit the lockdown, but could you discuss what percentage of client sites have already reopened in B&I and in education and where the employee and student volumes are compared to pre-virus levels in the sites that have reopened? And secondly, on cash burn, I think you said very clearly you're not going to give us an explicit number. Maybe looking at it differently, before the cost measures, what would have been a level of revenue that you needed to generate to not burn cash, to be cash breakeven? And where is that now? Is that 80% of your previous revenue? Is that higher or lower? And last question, please. In terms of liquidity, it looks like for the short term, if we're talking about you being solvent, it's all sorted, but you talked about the medium-term leverage. How do you look at your options when the recovery is confirmed? Do you think the most reasonable way forwards is to be deleveraging progressively over the next years? Or what would be the benefit of doing a onetime balance sheet fix and to go into the recovery with a fully delevered balance sheet, like some other companies in the sector have started to talk about? Or actually, would that help you?

Okay. Well, shape of the recovery, yes. You have been focused on France, but every country has -- there are many countries that have started to get out of the lockdown and have started to ramp up their activities. France in Europe is really the country where we observe. And again, we are a good proxy for what's going on in a given country, as we operate in health care, education and industry. France is the country we have dropped the most through the lockdown and is recovering the slowest. This is understood. And I think now government authorities are taking the necessary decisions to speed up this recovery. As far as B&I is concerned -- and it's true in every country. So it's true in France too. As you know, we have 2 types of activities in B&I, manufacturing; and offices, white collar offices. Manufacturing, obviously, has started, has ramped up much faster than offices, white collar offices. And for white collar offices, we are to obviously comply with rules, minimum square meters per employee, social distances, maximum number of people in the elevator. So this has an impact. And as long as it will be obviously in place, it will have an impact. As far education is concerned, France is the first country which has reopened schools, but it's very gradual. In France, local authorities can decide not to reopen schools. Professors may decide not to go back to schools, and parents may decide not to send their kids to school. So when you combine the 3, we end up with a low level of kids having come back to school, at least in May. This may change in June. And other countries have already announced, typically in the U.K., that kids will start to go back to school by -- I don't know. There are a few classes that will do it, starting in June. So that's what's going on. It's a slow ramp-up. And as I said, we don't expect to recover a significant part of our revenue pre COVID before September. Cash burn: So your question is what level of revenue would -- what revenue do we need to be cash breakeven, if I rephrase your ask…

Yes.

Let's be clear. I -- we work it, at Elior, the other way around. Whatever the revenue, we at minimum have to be cash breakeven. So we will take all the necessary decision and action to be cash breakeven whatever level of revenue we will have, starting obviously next fiscal year. And just to put in perspective: There are geographies where, thanks to our mix of activities, namely the U.S., we are still generating cash today. We are not burning cash in the U.S. Liquidity, midterm leverage. As I said, we need to look at our leverage over a longer period of time than usual. And first priority will be to not burn cash as soon as we can at whatever level of revenue we'll have, starting next fiscal year; hopefully, start to generate cash, as revenue will continue to ramp up; and deleverage and go back to the 1.5x to 2x leverage range that we had as an objective before the COVID-19 crisis. And for the time being, given our liquidity level, which was in proportion to our revenue rather high end of March, a EUR 917 million of liquidity, it's a healthy level of liquidity. So okay. So we have no urgent needs to activate all the levers to fix our balance sheet. So I don't know, Jaafar -- yes. So we have written questions. So 2 written questions. First one is again about cash burn. So I think Esther already covered it. I think -- as you know, as we have our receivables increasing, I think we will again get the benefits of our…

Securitization.

Securitization. So this will have -- obviously will accelerate our ability to obviously generate cash or stop burning cash when revenue will ramp up. And the second question, in terms of volume for B&I and education Q3, Q4. Again my question (sic) [ answer ] will always be the same to this question. We have in Elior no crystal ball for the time being, and I'm not sure we will have ever one. So there are so many parameters that the only thing we can do is to acknowledge the revenue we have and adjust accordingly and not bet for revenues that may never come; or the opposite, overreact to revenues that may not drop as much as people may anticipate today. Nevertheless, it's clear that in B&I what happens from the COVID-19 crisis will likely increase the number of people that will work from home, but at the opposite you may think that people coming to work, being very sensitive to safety, may rather eat what they can get at the workplace than go out. So our captation rate, as we call it, may increase. So there are plus and minuses through this crisis. And as I mentioned earlier, we have started to do it, but obviously now we have accelerated the deployment of these new solutions. We have solutions to address new working and eating habits at the workplace. Still, before the COVID-19 crisis, it was very often not viewed as feasible to deliver the meal to the desk. Now it's almost a given. Okay, there are no more -- it's not forbidden anymore in most of the places we operate. So again, this crisis has opened as many opportunities as challenges. And our duty as an organization, and that's how we built our plan before the crisis, is to be agile enough and innovative enough to turn them into opportunities. I hope I answered all questions. Again, there are more.

We do have a question now from Richard Clarke from Bernstein.

Just a few questions maybe on the structural opportunities that you've set out, you have mentioned there in your remarks. So if we're going through kind of each one: The additional services, do you have that functionality already, or is this -- is there anything you need to develop or acquire in that space? Similarly, when you talk about sort of the opportunities from -- to leverage smaller players, do you anticipate acquiring any of those, or is this more of an organic opportunity?

First, to solutions. First, to reopen sites, we have to have solutions. So now I'm talking about reality, not something we contemplate doing. By the way, going back to B&I, if we are able to have a solution which is obviously economically making sense at low level of meals with our given customers, it means that we have a solution to address kitchen-less customers we don't address today. As you know, this industry never chased customers with less than 300 employees, let's say, 150 meals a day. This crisis is accelerating our ability to do it, so that could be a potential expansion. Our historical market may shrink, but ironically our addressable market may grow and will grow. As far as smaller players are concerned, first, it will be organic, especially for the ones that will go bankrupt. And we have already started to see some players who will not be able to reopen in September and which customer base are turning to us. So any crisis in any industry leads to consolidation. That's a fact. And this industry will -- yes, will see the same phenomenon.

We'll go to our next question now from Vicki Stern from Barclays.

Just firstly, coming back on the furlough schemes, can you just quantify how big the benefit has been on the drop-through rate? So obviously, at a point, those will roll off. Just keen to know sort of how beneficial they are to the 30% guidance. Secondly, coming back on your comments about more working from home in the future. What is your mix in B&I? What percent is manufacturing versus the white collar office workers you talked about? And also, just what are you hearing actually directly from your clients today about that in terms of any long-term intentions they might be having on more flexible working? And finally, forgive me if I've missed it, but I don't know if you've actually said what the exit rate was in terms of what your -- sort of your trough revenue drop has looked like.

Sorry. I didn't understand the first part of your question.

The first one…

Yes. What was your first…

The first question. Actually, what's the benefit, yes, on the furlough schemes, so -- on that 30%. Would the 30% have been 35% if there weren't the furlough schemes? Just to try and understand the impact.

The furlough scheme is key because, as you know, our direct labor is around 50% of our revenue…

Globally.

So globally, yes, on average. So furlough schemes matters. Furlough schemes are different from country to country. In some countries, we have a high coverage of our direct labor costs for people who are not active; in some countries, less. Typically in France, on low salaries, we are less covered than we are in other countries. At least that was the case till for May. Maybe things will change, starting in June, but yes, it's -- as we are more exposed to Europe, obviously it's clear that we benefit more, in comparison to our main competitors, from this mechanism to keep skilled employees on our payroll until revenue comes back. As far as the split behind between manufacturing and white collar, it's roughly 40-60, which reflects more or less the workforce in the countries we operate. As far as -- your third question was what is the intent of our customer in terms of work from home. It's clear. It has educated at a fast speed all employees, all managers to use the digital technologies to continue to run their operation. So this education has been significantly speed up with this COVID-19 crisis. Nevertheless, devil is in the -- the devil is always in the details. In countries like France, if you start to have a vast majority of people working from home, you can likely expect that employers will have to somehow subsidize the square meters of people working from home, the printers, the PCs, the connections, maybe the meals. And then we will enter in maybe a discussion that will somehow rebalance the percentage of people that will work from home and will come to the office. And another point, I think being part of [ an organization ] is going beyond performing a task in a digital way. You are a member of the community. You -- it's a significant part of your life, and this cannot be ignored. So I will not bet on the fact that what we have observed under constrain during this lockdown and now as we get slowly out of lockdown is representative of what we will see in 1 or 2 years, but there are lessons to be learned from it. Likely, people will travel less, so we'll have maybe more people even staying in the office rather than being out of the office, which is positive for us at the end of the day. So I would be cautious. I hope I answered your questions.

All right, yes. The last one was just on the exit rates. So what actually was the year-on-year revenue decline that you saw, for example, in April?

Don't comment on…

No, no, we won't comment on our revenue in April, but April was announced with lockdown, full lockdown, in all the countries we are operating. So you can guess that obviously it leads to a significant drop of our revenue; and different from country to country, less in some geographies than others. Between -- India, we are mostly exposed to B&I. And the U.S., where we have a nice portfolio of activities, the gap is significant in terms of revenue drop; more in India, far less in the U.S.

We have one more question now from Johanna Jourdain from ODDO.

A quick question from me, please. You mentioned in the press release a change in the Board of Directors. So could you maybe give us any view on the reason for CDPQ to have no representative at the Board anymore?

Well, CDPQ. In fact, CDPQ is managing several portfolio of fund and investment. And we were -- our line -- their line in Elior was in the listed category and not -- usually for funds, when you are investing in a listed company, is to be agile enough to get in, get out, not being an insider. So in fact, they were not complying with their own internal rules even where our line was in their portfolio. They should have never been represented at the Board. So they just fixed something that they had to fix. And if you have paid attention, there were many changes in CDPQ's management. So the new management has just reviewed their compliance with their internal rules and discovered that they were not compliant, as far as Elior is concerned, and just fixed it, but let's be clear: They are committed shareholders to Elior and will continue to be a committed shareholder to Elior. Okay. Thank you very much for attending this half year results presentation, and thank you for your questions. And looking forward to interact with some of you through our road show in the next few days. Have a good day, and take care. Thank you.

Thank you. This will conclude the Elior Group First Half 2019-2020 Results Conference Call. Thank you for your participation, ladies and gentlemen. You may now disconnect.