Elior Group SA (ELIOR) Earnings Call Transcript & Summary

Hello, and welcome to the Elior Group's First Half 2023/'24 Results Call. My name is Saska, and I will be your coordinator for today's event. Please note, this call is being recorded. [Operator Instructions] I will now hand you over to Didier Grandpre, Group CFO, to begin today's conference. Please go ahead.

Thank you, Saska. Good morning, ladies and gentlemen. Welcome to Elior Group's half year results presentation. We have provided detailed financial information in our press release issued earlier today, which is available on Elior's website. I invite you to read the disclaimer on Slide 2, which is an integral part of our presentation. H1 2024 has been a key semester for Elior. Following our last fiscal year that recorded a turnaround, we further improved our profitability in the first semester and generated an unprecedented free cash flow that benefited to both liquidity and net debt deleveraging. I will make a short introduction before covering our half year results in detail. Then I will share with you a review of our business, including how we successfully address all levels of profitability. Finally, I will conclude with our outlook for the full year before answering your questions.. Let's now review Elior's half year results in detail. Starting on Slide 7. Consolidated revenue amounted to EUR 3.12 billion compared to EUR 2.48 billion a year ago. The 26% year-on-year increase reflects a solid organic growth of 5.9%, a positive 20.8% perimeter impact from acquisition, mainly DMS for -- mainly DMS for EUR 503 million and Cater to You Food Services for EUR 14 million. And finally, a limited negative currency impact of minus 0.7%. We have provided pro forma figures of fiscal 2023 in appendix of both our press release and this presentation. As in previous periods, both like-for-like and net development contributed to organic growth. Like-for-like growth was at plus 4.6%, fueled by higher volume of plus 1% and additional price increases of plus 3.6% in average. Commercial momentum remained strong, with openings at plus 9% following a plus 10.3% a year ago. On the other end, contract losses reduced revenue by 6.4%, reflecting a retention rate of 93.6%, excluding voluntary exits at the same level as at the end of September 2023. Voluntary exits of loss-making contracts reduced revenue further by 1.3%, which is a slightly lower impact than in fiscal year 2022, 2023 in average. First half 2024 recorded a further improvement in our profitability. Adjusted EBITA increased by EUR 59 million, more than doubled, year-on-year on a reported basis from EUR 41 million in H1 2023 to EUR 100 million in this semester. Group's adjusted EBITA margin was up 150 basis points year-on-year from 1.7% last year to 3.2% this year. Let's move on to the next slide to consider the various drivers of operating profitability improvement in detail. The like-for-like volume increase converted well into a profitability improvement of EUR 5 million in the first semester, leveraging our cost base. In addition, we benefited from a positive CSR effect, thanks to systematic price renegotiation, but more than counterbalance cost inflation. This resulted for the first semester in a positive net inflation balance of EUR 20 million. On top of that, the business net development was again margin accretive in the first semester and contributed to an EBITA uplift of EUR 6 million, including voluntary exit. In addition, the disciplined execution of our transformation plan to generate cost synergies and operational efficiencies brought an overall cost reduction of EUR 29 million in H1 2024. Finally, DMS and the acquisition of Cater to You Food Services added EUR 13 million. The margin improvement from our operations led to a turnaround in the net result. Net amortization of intangible assets was higher by minus EUR 5 million year-on-year following the acquisition of DMS. Nonrecurring charges amounted to minus EUR 15 million and were mainly related to the execution of our restructuring plans in France. Net financial charges amounted to minus EUR 52 million this year versus minus EUR 35 million last year, reflecting the increase in gross financial debt and interest rates and financial costs related to the DMS factoring to a lesser extent. Income tax was a loss of EUR 20 million this year versus a loss of EUR 3 million last year, recorded mainly in France. Current tax amounted to minus EUR 14 million, including the French contribution on the added value that increased by EUR 1 million following the integration of DMS. In addition, a deferred tax expense was recognized for EUR 6 million as a result of a positive profit before tax in France. All in all, net result group share was a profit of EUR 1 million versus a loss of minus EUR 23 million last year. Now on Slide 12, looking at the bridge from adjusted EBITDA to free cash flow. Adjusted EBITDA amounted to EUR 188 million. CapEx totaled EUR 43 million, equivalent to 1.4% of revenue, slightly above 1.3% last year. IFRS16 lease payments amounted to EUR 41 million, EUR 8 million higher than last year from the DMS acquisition. Nonrecurring cash expenses of EUR 13 million reflected mainly the implementation of our restructuring plans. Net change in operating working capital was a positive EUR 83 million with EUR 38 million coming from the full reversal of the temporary negative movement related to factoring and securitization at the end of fiscal year 2023. Therefore, subtracting EUR 38 million to reported free cash flow of EUR 169 million, gives a normalized free cash flow of EUR 131 million. This slide shows a major achievement in H1 2024, with the improvement in our free cash flow by EUR 146 million on a year-on-year normalized basis. This sharp increase comes first from the EUR 78 million improvement in adjusted EBITDA, which is a key driver for deleveraging. In addition, the change in operating working capital was EUR 90 million higher on a normalized basis. We transitioned during the first semester into an optimized level of operating working capital, following a strong organic growth and business development in the previous fiscal year. I already mentioned the increase in CapEx and leases following the integration of DMS. Tax paid corresponds mainly to done payments of corporate taxes in France. Now on Slide 14, a focus on Elior's net debt. The net debt decreased by EUR 137 million in the first semester from EUR 1.393 billion at the end of September 2023, down to EUR 1.256 billion at the end of March 2024. On top of free cash flow already discussed, interest paid and financial fees amounted to EUR 44 million this year versus EUR 29 million a year ago. The overall IFRS16 debt reduced by EUR 20 million in the first semester. The significant increase in the EBITDA and reduction in the net debt enabled the accelerated deleveraging in the first semester. The leverage ratio was further reduced to 4.1x based on reported net debt of EUR 1.256 billion and covenant EBITDA of EUR 308 million. This was comfortably below our covenant test level of 5.25x and shows a constant improvement from 7.1x a year ago and 5.4x at the end of September 2023. Moving forward, the test level at the end of September 2024 and beyond remains unchanged at 4.5x. Finally, to conclude this review of our half year results with Slide 16. Available liquidity came to EUR 342 million at the end of March 2024, increasing by EUR 29 million in the first semester. Liquidity evolved along the same financial -- cash flow for net debt, considering that the catch-up in the EUR 38 million temporary working capital movement and no impact on liquidity. In the first semester, we repaid EUR 20 million of new commercial papers. We started as well reimbursing the state-guaranteed loan, the PGE last October for EUR 28 million. Now I would like to move on to the next section of this presentation with Business Review. On a pro forma basis, total revenue increased by plus 5.3% with both segments contributing. Contract catering revenue increased by plus 5.7%, benefiting notably from a strong commercial momentum in Spain and the U.K., while portfolio rationalization concerned mainly France and Italy. Multiservices revenue increased by plus 4.3%. Along with revenue growth, the EBITA more than doubled on a pro forma basis as well with, again, both segments contributing. The EBITA margin improved as well by 150 basis points on a pro forma basis, with contract catering up 170 basis points and multi-services up 70 basis points. The reorganization of headquarters brought a cost reduction of EUR 2 million, part of the synergy. Profitability improvement across the board was achieved by a constant focus on customer relationship and relentless efforts on operational efficiencies. Profitability improvement and free cash flow generation remain our main priority to continue to deleverage. Let's now review our 5 productivity levers evolved in the first semester. Starting with the macro context, the food inflation continued to decelerate over the first semester 2024 in all our main geographies. The average year-over-year food inflation in the first semester of 2024 came below the average full inflation in fiscal 2022 after the peak recorded at the beginning of last fiscal year, transitioning progressively to close to normalized level. Pricing momentum remained strong in the first semester 2024, bringing an additional EUR 114 million of renegotiated price increases. It resulted in a positive CSR effect as price revisions well captured the level of inflation over the last 12 months in the context of inflation deceleration. This was especially the case in France, which recorded an average of plus 4.4% price increase on B&I and Health Welfare contracts at the beginning of the calendar year, following a plus 6.3% increase for education back in September. Price revision will be valid for the next 12 months and will therefore benefit as well to fiscal year 2025. Carryover is currently estimated around EUR 70 million. Slide 22 shows 2 significant commercial and operational dynamics. First, in H1 2024, net development contributed EUR 64 million of revenue and EUR 5 million of EBITA. In other words, 2.6% growth at 8.1% margin higher than in full fiscal year 2023. It illustrates the reinforced discipline in the selection of opportunities and the stronger focus on the cost-effective operational ramp-up of new contracts. The margin improvement benefited as well from the resolution of ramp-up issues encountered with major contracts last year. Second, we continued in H1 2024, the rationalization of our portfolio of legacy contracts that were still loss-making at the end of September 2023, as we continue to favor profitability of our growth. This meant losing EUR 34 million of revenue while adding EUR 1 million of EBITA with a loss-making margin at a similar level to last year. Moving to cost synergies. The left-hand side shows the effective deployment of our new corporate and operational organizations for contract catering and services in France, which went operationally live at the beginning of the new fiscal year. After EUR 7 million of cost synergies recorded in H2 2023, an additional EUR 9 million was recorded in H1 2024 for a total of EUR 16 million in almost 1 year. This amount is very close to the initial target of EUR 18 million of cost synergies, which illustrates the speed at which restructuring plans are being implemented. The right-hand side shows the progress made in the effective implementation of new synergies. The annualized value of implemented synergies increased by EUR 3 million in H1 2024 from EUR 27 million at the end of September 2024 to EUR 23 million, sorry, to EUR 30 million at the end of March 2024. This increase is mainly related to additional savings unlocked by the new organization for contract catering activities in France under the leadership of Boris Derichebourg. They are part of the overall target of EUR 44 million to be reached by the end of fiscal 2026. At the same time, our management and operational teams kept in constantly in our purposes and the way we operate. On top of synergies, we delivered another EUR 20 million of operational cost saving in H1 2024, about the same as in each semester of last year. This is a strong achievement as we have entered the third year of operational transformation. As you can see on the right side, efforts are coming from all countries -- question about the outlook for the current year. Activity is encouraging across catering and multiservices -- year 2024 will continue to benefit from price increases already secured. Commercial development will continue to be accompanied by a rationalization of our legacy [Technical Difficulty] last year. Considering on top of solid results in H1 as well as some uncertainties that remain [Technical Difficulty] confirming our objective for the current fiscal year with a growth between 4% and 5% and adjusted EBITDA margin of at least 2.5% and net debt [Technical Difficulty] around time at the end of September 2024. Medium-term objectives remain unchanged. Now on Slide 27 with some concluding remarks. First half 2024 results showed that the strategy implemented since April 2023 start bearing fruits. The last 12 months have been a critical management [Technical Difficulty] the new fit for purpose of [Technical Difficulty] position is more agile and efficient. Management and operational teams are focused on the development of our customer relationship and [Technical Difficulty] in all geographies where we operate. To conclude, I would say that the results presented to you today demonstrate the Group's real [Technical Difficulty] by maintaining its commercial development while deleveraging. I'm now ready to answer your questions. Saska, could you please take the first one?

[Operator Instructions] And our first question comes from Pravin Gondhale from Barclays.

I'll start with EBITDA margins. If you can help me with the moving parts of the EBITDA margins implied in the FY guidance, do you see any upside to FY margins given the price growth is now accretive and then we have more coming in as well in H2? And secondly, what held you back on margin upgrade after a very strong H1 results? And finally, can you give us any steer on how should we think about the EBIT margin evolution next year? How comfortable are you with the consensus margin expectations for FY'25?

So regarding the EBITDA margin, we see for the remainder of the year, the same dynamic at play as in the first semester. We will have -- I would say, from -- both from a revenue perspective and EBITDA perspective, the same driver that play as in H1, meaning the volume in terms of contribution to the revenue, the price increase that we expect around the same level in H2 than in H1. Same for the commercial development. We do see a good momentum, and we expect the net development at the same level as in H1. And this will be partially offset as in H1 with the impact of a loss-making contract rationalization that we plan to maintain at the same level for H2. So the way we look at it is that if you consider an EBITDA margin of 2.5% for the full year, this is representing a margin improvement by 140 basis points on a year-over-year basis following 150 basis points already recorded in H1. We do expect H2 to contribute at the same level. As we mentioned as well, there are some uncertainties. I would say at this stage, there would be many around the volume evolution. We know -- in particular, we have a big event in France, which is called Olympic Games. We will benefit to some extent from this exceptional event. We will have as well potentially some impacts in terms of development [indiscernible]. There have been some assumption consider, it could be some upside regarding the volume of activity, depending on how it evolves during this period. So to your point on 2025, so this is a bit early for us to comment on 2025. We will go through our budget exercise more during the first quarter of the current fiscal year. There is still a good pricing momentum as we shared during the call, with a significant part of the price revisions that have been obtained since the beginning of the year that will be carried over into next year. So this will be, again, next year contribution to the revenue and EBITDA improvement.

And if I may have a quick follow-up on the net new comments for H2. When we think of the voluntary exits, when do you think that will be done with? When do you expect that impact to fade and the portfolio division should be done?

Yes. So we keep our view from the beginning of the year. There have been really good efforts from all the teams, let's say, stronger in some geographies, especially in France and Italy. But the objective is to have the vast majority of how loss-making contracts behind us by the end of the year so that we can enter into a more, I would say, business as usual situation from the beginning of next year.

And we're moving on to a question from Andre Juillard from Deutsche Bank.

Congratulations for the strong results. First question, I wanted to come back on the portfolio cleaning. You mentioned that you are expecting it to come to an end, almost an end at the end of this fiscal year. Could you give us a little bit more color about the way you are doing things and what we could expect in terms of positive effects and negative effects on that side? Secondly, about the guidance. When I look at your profitability in H1, 3.2% EBITA margin and your guidance, which is at 2.5%, it appears as clearly conservative. So I perfectly understand that there are some question marks about the [ environment ], the Olympic games and so on. But all in all, we could consider that you are a little bit in advance compared to the initial plan you had? And third question, if I may, about your refinancing. Could you give us a little bit more color about what are the short-term and mid-term plans about it?

So starting with the portfolio rationalization, I would say this is still the result of continued -- of the same activities that have been intensified in some cases. So meaning, first, it always starts with a strong push with the customers to increase the prices wherever we find the profitability not at a sufficient level. And from that perspective we may record some good results that actually avoid exiting some contracts if we finally come to an acceptable level of margin from our perspective. There have been, let's say, a stronger push given especially on the French market with Boris Derichebourg just after he took the leadership on these activities to really systematically go to a customer, have a kind of open book approach to make sure that the customers are also fully aware of the challenges we are facing, so that we can have a constructive discussion and in some cases, a positive outcome. Then regarding the public contracts, as we already shared it would have been, in the past, more costly, more impactful on our profitability to prematurely exit the contract before the termination. But as time goes, we do reach the termination date, which gives us the possibility to exit from those contracts. In case they are not renewed at an acceptable level, which can be as well a possibility. And then we have been working as well on the resolution of the main contracts that impacted us last year with the start of operations that we are a little bit less cost impacting than expected as part of the commercial process. So now we have solved the 3 issues and the main contract will start being profitable in the second semester. To your question -- to your second question around the margin guidance. Think, what we need to keep in mind is that our EBITDA margin has been historically higher in H1 than in H2, considering the seasonality in the contract catering business with school holidays and vacation during the summer being our last quarter, as you know. So as I said, our full year fiscal 2023 regarding a margin of 1.1%, which was a plus 220 basis improvement year-on-year. And from that perspective, reaching already 2.5% in fiscal year 2024 would represent a year-over-year improvement of 140 basis points, following what is a significant achievement of 150 basis points in H1. So it means that we will for sure continue to activate all levers of profitability that has been a plus since we embarked on our transformation and even intensified with our management since 1 year. So we'll, for sure, grasp any opportunity for further improvement, but need to be cautious, as I mentioned earlier, but there are some uncertainty that remains in the market. So to your third question on the refinancing. So we are currently working on the refinancing of our securitization and factoring program, combining the two. This is well advanced. We have a target to go live with this new program, and we will share at that time more detailed information by the end of -- by the start of the summer vacation at the latest. We will address the second part of a refinancing, which is more about the SFA and the bond and we set the objective to ourselves to be ready to go to the market after the full year results, if there will be a favorable window that we expect.

And up next, we have Jaafar Mestari from BNB Paribas.

I've got a couple, and if that's okay, if I can ask them maybe one by one. Just on the guidance to clarify completely. You're referring to your guidance as being reiterated. I just wanted to check that there was nothing lost in translation because in the English version, we can now see at least 2.5%, while 6 months ago, we see around 2.5%, which I think would qualify as a small upgrade.

This is actually a small upgrade.

Okay. Very clear. And then on the medium term, at the moment, we have some broad targets on synergies and on financial leverage for 2026. Can we still expect you to articulate a more explicit set of targets for medium-term organic growth, medium-term margins soon? I think you mentioned you'd be going through your budgeting exercise later this year?

Yes, exactly. So we -- for the time being, we wanted to give at the beginning of this fiscal year, an outlook that was materializing our key objective to continue to deleverage. Therefore, first, the introduction of net debt leverage ratio as a new criteria and the objective set to be below 3x EBITDA by the end of fiscal year 2026. Now as you rightly said, we will review quite soon our business plan for the next 5 years. This is also for sure key element to support the preparation of the refinancing. And after this exercise is completed, we'll be able to complement in the second step. So I would expect this at the latest with the publication of our full year results, a more detailed guidance for the years to come.

Then apologies, I don't seem to be able to find the presentation. I'm sure we'll have it later, but there's some commentary inflation that sounded very interesting. If you could elaborate there was that one slide, I assume, where you were talking to cost inflation by item. And I have food inflation close to normalized levels in H1 '24. I was wondering if you were showing anything on labor inflation, for example, as well.

So we are actually always sharing the evolution of food inflation that was the most impactful as far as contract catering is concerned. There is nothing specific related to labor inflation. As you know, our labor costs are quite close to the national minimum wage. So you should consider that the expected evolution of the national minimum wage will give already a good indication of what will be the impact as far as we are concerned for both contract catering and services activities.

Great. if I can continue on inflation, major benefit this half and you said price increases have more than offset inflation, plus EUR 20 million. Is that actually you in the last 6 months, pricing above inflation, i.e., you're actually right now able to get the clients to accept price increases above the current rate of cost inflation? Or when you say more than offsets, it's a combination, there is a bit of pricing this year, but there's also price increases from last year that are still annualizing, et cetera? Just wondering if the clients are taking more or if it's just a bit of a compounding effect.

So actually, women driver is related to challenges that we have been facing in the past. So with some contracts, which are on the cost-plus model, we had the possibility to pass through the cost inflation to price increases to our customers in a quite fast manner. When we were not in a cost-plus situation, with a private contract. We went through intensive renegotiations in order to try to close the gap as quickly as possible. Where we had the challenge in the past was related to the public contracts, whereby our customers, although they went to them and try and push for price increases in advance of annual anniversary of price revision terms. Generally, we are not successful. So with the beginning of the fiscal year 2024, we came to this annual anniversary that enabled us to update the prices with our customers. So this was done in the first step around education, around the beginning of the new fiscal year and the second step around the beginning of this calendar year for the two other main markets, which are B&I and Health and welfare. And then it works that way that -- the revision takes into account the last 12 months of level of inflation, which was actually higher that what we see now and what we see since the beginning of the year. So that's where we are speaking about the CSR effect since we are taking into account in our prices, a higher level of cost inflation that what we see today in terms of cost inflation.

Okay. Very clear. So that's sort of backward looking. Just another one on this. So exactly on those examples, I think in France, you said plus 4.4% price increases on B&I and health care. And then you mentioned 6% in education a bit earlier, the blended increase for the group was 3.6%. So I'm just wondering what are the countries or industries where it's significantly lower in terms of price increases? And is that an issue?

The average price increase is actually a mix of a different contract portfolio. You had some which were more cost plus with a possibility to increase the prices already in the past, and you have a small part, which is also fixed price. So this is, I would say, the illustration of our profile of contract that is leading to this average.

Okay. And last [Technical Difficulty]. On the working capital inflow, EUR 83 million, even if I remove the reversal of EUR 38 million, you still had a EUR 45 million working capital inflow in the half year. Could you talk about some of the drivers there, if it's clean or if there's anything else to flag? You had quarters with much stronger revenue and not that sort of working capital inflows. So what's the normal working capital pattern for the business in low to mid-single-digit revenue growth environment, please?

So I would -- when you look at it on a full year basis, our objective would be to be flat in terms of working capital consumption. Last year was a bit exceptional, especially as a matter of fact, at the end of the year with a signature of major contracts that consume a little bit of receivables at the start of the operations. So what we have seen in H1, and that's why I was referring to earlier to a progressive transition, to a normalized level, is that we have been able to catch up from this working capital consumption we had at the end of last year into this year.

And from Citi, we have Leo Carrington with our next question.

Could you, firstly, help us on the retention rate trajectory? Last year, retention was notably stronger in the second half of the year. Is this a dynamic that you expect to repeat again this year? And then secondly, there was a small catering acquisition in Hong Kong announced in H1. Could you just elaborate on this a bit on the synergies with DMS here? Or just past a bigger opportunity for you in the region?

Okay. So in terms of retention, we have seen in H1, actually, a similar performance on average as in the full year 2023, which was actually better than last year. This remains, for sure, our objective to constantly improve in this indicator in this performance. And we believe that there is a good momentum with a strong push from the new management to be very close to the customer. It gives us an advantage to actually keep the relationship, making sure that we are close to them, more on the field taking into account their challenges, their issues directive in their resolution. I mean it may sound obvious, but as a matter of fact, this is also a bit of a change of culture that we see in all our geographies, and this is very critical for our management and considered the key foundation to develop revenue, the profitability and the free cash flow since, as you know, the free cash flow generation remains our key priority. We should focus on to keep deleveraging the group. And by the way, I don't know if you are aware, but we have a very worldwide known customer that we have been -- from that perspective, able to retain and for which we are developing the relationship, which is located in Italy and which is called the [ Vatican. ] So you have also some very good references that we really are pleased and we fight for keeping since they perfectly illustrate the quality of what we are able to deliver with our customers. Then regarding the contract. The acquisition in Hong Kong. So this is a company operating on the school market in Hong Kong with very high-quality standards. We are very pleased to benefit from a recent renewal of the production capacity that they made and which make them as well very cost-effective central kitchen to serve our existing customer base and help us develop new ones. So when -- it's for sure first step in this country. We are at the start of a commercial relationship. DMS was not located in this country. There may be some opportunity from the services business, but as a matter of fact, they will require local capability. It's not -- with the type of services we are delivering, it's not about, let's say, sending over capabilities for instance, to Hong Kong, although we can for sure share all what we are able to deliver in terms of services and experience we have accumulated now in France on a broad portfolio of products.

And our next question now comes from [indiscernible] from ODDO BHF.

Just on the Hong Kong acquisition, what should we expect on further M&A for H2? And how do you plan to finance that?

Yes. So actually, this is a small acquisition. I mean, our priority remains deleveraging the group. So I would say it's too early to speak about large acquisitions. So the acquisition made since 1 year, we had one as well in New York around the summer time last year on the premium K-12 education market. And this one, I would say, more bolt-on and are decided as part of our overall capital allocation process. So meaning, in some cases, and was the case for [indiscernible] as well. We may favor a small acquisition to a CapEx-intensive project, for instance. Regarding Hong Kong, following the decision, which was made last year to retain capturing activities on the premium market in India, we will continue -- we want to continue to invest in Asia that we see as a good potential for growth and profitability. And we are still in the process of finalizing the closing of this deal. So it will be a limited contribution for the current year. So more to come next year.

Next financial year?

Yes.

Okay. And one question again on working capital. If you say that you expected flat for the full financial year is that excluding the 38 temporary inflow which we saw in H1?

Sorry, I need to precise my previous answer. When I was answering to Jaafar, it was more on a regular basis, meaning that we are always targeting as part of growth that will be, let's say, more on a normalized level to support the development of our revenue with stable working capital. This year is a little bit different, and we have actually -- you will find a presentation that we will put on the website as well what we call the detailed [Technical Difficulty]. And as we shared at the beginning this year, [Technical Difficulty] between EUR 60 million and EUR 80 million, including the EUR 38 million that you just mentioned. With the same driver is that we did have a bit of working capital consumption last year, which was a strong year in terms of revenue growth, again, with some major contract sign and that became operational at the end of last fiscal year that will [Technical Difficulty] normalize in terms of receivables, in particular.

Okay. Understood. Can you confirm your CapEx guidance of 2%?

So it's the same. It's between 1.7% and 2%. So we -- it will be higher in H2. That's what we record in H1 at 1.4%. And in particular, due to some investments we made regarding some central kitchen, it takes some time to go through a project, and we expect some of them going live in the second semester of this year.

Perfect. And one question on inflation again, I mean we're seeing food inflation coming down quite heavily. So do you see the opposite effect of customers approaching you in order to decrease prices again?

Sorry, I did not hear the beginning of the question. There was some noise on the line. Can you please repeat, please?

So we are seeing food prices coming down -- food inflation coming down. And I wonder whether you -- whether you are approached by customers willing to decrease or wanting to decrease the prices?

So this is not a trend. You may have some customers asking for a price to be reviewed. But nevertheless, we have a strong case about the inflation that we -- that impacted us in the previous months, but we have not been able to always pass through at the full level, I would say, to our customers. So we always believe that there is a strong case to limit any downside from that perspective. And on top of this, we see as well, let's say, increasing requirements in terms of origin of the food, quality of the food, still a request from the customers to help them further attract people to come back to the office, especially on the services business. So I would say I don't see any sign of price reduction at this stage.

Perfect. And last, I didn't find that your factoring facility of EUR 360 million. I think it's fully used. How much of this on and how much of this is off balance sheet?

So you need to consider actually the two programs that are currently live, which is the securitization and the factoring. So in total, we used EUR 476 million with enough balance sheet of EUR 404 million and on balance sheet of EUR 72 million at the end of March.

And all of this without or with recourse?

So this is -- to make it very simple, you should consider without recourse at off balance sheet and with recourse as on balance sheet.

And up next, we have Estelle Weingrod from JPMorgan.

I just have 2 questions. The first one is on new developments. I mean it did slow down versus last year. Could you just provide a bit more color on this? Is that a matter of Elior being more focused on portfolio rationalization? And what are your expectations for new developments going forward? And also just one on net finance costs and tax, both were higher than what we expected. Could you provide some elements of guidance for the full year?

Sorry, I will start with the first one. I will ask you to ask again the second one because, again, it was -- the line was not good for the second one. So for the net development and basically [Technical Difficulty] versus 10.3% last year. I would say in terms of general approach, what we -- what we want is to get new contracts, which are very accretive from a margin standpoint. And you can see this in the performance related to the start of a new contract related to the openings with an EBITDA margin that reached 8.1% related to EUR 64 million of revenue from opening this year compared to a margin of [ 4.3% ] the year before. So to some extent, a higher selectivity of the offer and with -- as part of -- as consistent as well with rationalization of our portfolio, a clear priority given to profitability recovery, profitability improvement versus topline development as such.

Okay. And my second question was on net finance cost and taxes. I mean, tax -- both of them were higher than what we expected. Just wanted to know if you could provide some elements of guidance for the full year.

So on the income tax, the main income from the French tax perimeter, where we recorded actually positive profit before tax. Then this was, let's say, [Technical Difficulty] as well some deferred tax assets. So that's why you have a deferred tax expense of EUR 6 million in the [Technical Difficulty] of EUR 9 million. As we move forward, we need also to take into account that, as I mentioned earlier, the profitability in H2 is a little bit lower than in Q1. So we are expecting income tax to increase in the second semester, but to a very limited extent. So then in terms of cash modeling, I would say, to complement your question as we plan to use the deferred tax asset, we are -- we should consider that the impact from a cash standpoint would be roughly half of the 1 on the P&L. So with an average income tax rate of 25%, it would mean a conversion from a tax -- from a cash flow perspective at 12.5%...

Okay. And on net finance costs?

So net finance cost, so the increase as the result of -- increase of average net debt as well as the increase of financial interest as we see in the market. And we had as well a small contribution from additional financial costs related to factoring from DMS that we didn't have last year.

Okay. So H2 should be in line with H1? That's...

That's a fair assumption.

And our last question for today comes from [ Mark Watts ] of Citibank.

Just a couple of questions here. One is on the [ Sanofi ] contract in France. Just wondering what the status of that was of the semester, I believe that was up for renewal in April? Second question is more on the kind of cleaning and maintenance side. Just wondering if you could update on sort of the general trends in France and how you see that developing into the remainder of the calendar year? And also just on B&I, I know you've had some peers mentioning yesterday kind of stronger working-from-home trends, especially in terms -- or the movement away from working-from-home trends and more people coming to the office on Mondays and so forth. Are you seeing that evolve positively in terms of what you've seen in the last semester? Any comment around that would be great. And then finally, just on the 26 bonds, is there any intention to proactively refi those? Or how are you looking at that? I know you mentioned the factoring and the securitization, but just curious from a bondholder perspective, what your intention is there.

So starting from the last one, as I said, so we plan to be ready if there is a favorable window after the publication of our full year results. So it will be more towards the end of the year at the last, considering that at the same time, we have a milestone by mid-2025. So there is still a broad window to contemplate a refinancing of a bond. But we are preparing ourselves towards this refinancing when again, the window will be favorable. So on B&I, as I said, we see actually constantly increasing in the volume with people returning more and more to the office. This is where we are also supporting them as we get regular request to be innovative and developing new offers in order to attract people, especially on the B&I premium. So we do expect this as a trend. As I mentioned since you are referring to France, we do have as well to take into account the potential impact of all Olympic games around the summertime. So a bit of an unknown at that time, but at least a risk or at least an uncertainty to take into account. Regarding cleaning, we are seeing good momentum in terms of commercial development with -- as actually the portfolio of our customers is rather complementary. We are not exactly on the same market between, I would say, former [indiscernible] multiservice and historical Elior. Historically, Elior, for instance, being more present on the health care market, while multiservice addressing as well some industry like logistics retail, but we are not really addressing within Elior as well not exactly the same size in terms of customer, more major accounts on Elior side, smaller accounts on Derichebourg multiservice. Regional presence, which is also stronger from Derichebourg multiservice. So with the combination of the 2 and with as well new -- a broader portfolio of services that is available for Elior and for historical Elior customer. This is also another lever to extend the relationship with our existing customer base and for sure, go for new ones.

And sorry, just on that Sanofi contract, could you comment on that?

The Sanofi contract for me is still an open topic. So we might not be anymore on the frontline, but my understanding is that maybe not the end of the game.

Okay. And do you mind just elaborating on the Olympics there? So you're saying, have there been any kind of new contract wins out of the Olympics? Obviously, there are going to be a lot of people leaving the city at the time, but just kind of see trying to understand how you view that in terms of volumes...

Yes. So we do have some requests and we have still -- we kept from former areas, concession activities, some activities inside. This one are benefiting for some contracts. So this will be a business opportunity from that -- which is already signed from that perspective. Then I mean I cannot really elaborate further, but we know that there could be, in some cases, a risk of people going less to the office during this period, just what I want to mention as a risk and some uncertainties on the level of B&I activities in H2.

Thank you. And with that, I'd like to hand the call back over to Didier Grandpre for any additional or closing remarks.

Thank you very much for your participation today, for your -- and for your questions. So we will talk again on November 20 with the full review of our fiscal year 2024 numbers. So since then, do not hesitate to reach out, and I wish you a very nice day. Talk to you soon. Bye-bye.

Thank you for joining today's call. Ladies and gentlemen, you may now disconnect.