Elis SA (ELIS.PA) Earnings Call Transcript & Summary

Thank you. Good afternoon to our participants in Europe, and good morning to everyone joining from across the Americas welcome to Elis 2025 Half Year Results presentation. I am Xavier Martire, CEO of Elis, speaking to you from Paris, and I'm joined by our CFO, Louis Guyot. I will begin with a brief overview of the key highlights from the first half of the year. Then I will hand over to Luis who will walk you through the financial results in detail. After that, I'd return to share our main CSR achievements and provide an update on our outlook for the remainder of 2025. We'll then open the floor for a Q&A session. And as always, Nicolas Buron will be available after the call to address any further questions. Before we begin, please take a moment to read the disclaimer. For the first half of 2025 confirm Eli's ability to deliver solid results in a demanding macroeconomic context. Revenue reached EUR 2.34 billion in the first half, up 4.3%, including 3.5% organic growth which is in line with our long-term target of 4% when adjusted for minus 0.5 points calendar impact. Adjusted EBITDA increased by 5.1% to EUR 813.8 million with a margin expansion of plus 30 basis points to 34.7%. Adjusted EBIT rose by plus 3% to EUR 353.8 million with a slight margin decline of 20 basis points to 15.1%. Headline net income per share was up plus 3%, reaching on a fully diluted basis. Free cash flow stood at EUR 31 million and the financial leverage ratio as of June 30, 2025, was down 14 basis points at 1.92x compared to June 2024. This performance reflects the strength of our model and the momentum behind our growth drivers, including a strong commercial dynamic supported by new contract wins in the workwear segment, solid performance in Hospitality, especially in Q2, positive pricing momentum across all regions offsetting cost inflation, operational improvements and productivity gains across our operations. Finally, it confirms all of its 2025 financial objectives, as communicated last March. Let's now move to the Slide 6, which focuses on top line growth drivers in the first half of 2025. With 70% of its business resilient to economic fluctuations and primarily based on fixed fee billing Elis remains firmly focused on its growth strategy. In the first half of 2025, Elis recorded plus 4.3% top line growth illustrating once again the effectiveness of its commercial and strategic choices. Growth was mainly driven by strong commercial momentum in workwear, supported by continued outsourcing trends across all geographies, both in [indiscernible] This quarter was further reinforced by the ramp-up of additional sales team in high potential countries. Hospitality also performed satisfactory, especially in France, where Q2 benefited from a favorable comparable base. Activity in Southern Europe remain dynamic, while the U.K. was more subdued. As anticipated, the calendar effects weighed modestly on organic growth in H1, [ trimming ] about 0.5 points. notably positive pricing dynamics across all markets helped offset the impact of inflation on our cost base. Revenue growth was also supported by a plus 1.8% contribution from M&A largely stemming from a recent acquisition in Central Europe. Lastly, we recorded minus 1% FX impact, mostly due to the depreciation of Latin American currencies. Let's now turn to Slide 7, which highlights our long-term ambition to replicate the successful French model in terms of footprint, scale and breadth of services across all other revenue. As local network density increases, we naturally extend our offering to smaller clients. This strategy is already well underway and proving highly effective in markets like in the U.K. and Brazil. We also continue to expand our service portfolio in countries where some of our offerings were not yet available, such as [ pest ] control and [indiscernible] both of which benefit from strong long-term hygiene trends. A clear example of our ability to save targeted opportunities is the recent contract wins in the U.K. and Spain for resident [ client ] services, nursing homes, segments where outsourcing still hold significant untapped potential. These multiple growth avenues go all in on with the need to scale up our sales force in countries where we see strong organic potential. We remain committed to proactively capturing every opportunity and will, therefore, continue to invest in local sales team going forward. Let's now take a look at each of our geographies, starting with France. France delivered another solid performance in the first half of 2025 with revenue growth at plus 3.1%, which was entirely organic. Growth was supported by good commercial momentum across all end markets, with a particularly strong Q2 in hospitality, thanks to a favorable comparison base. As in previous periods, pricing adjustments helped to offset the impact of inflation of our cost base. Importantly, the EBITDA margin continued to improve, reaching 41.8%, up plus 90 basis points year-on-year. This margin improvement was driven by logistic savings and efficiency gains in our workshops including higher productivity and more efficient use of energy and water. France remains a mature and well-structured geography for Elis, and we continue to focus on margin improvement through industrial excellence and disciplined commercial execution. Moving on to Slide 9. Let's focus on Central Europe which posted a strong home growth of plus 8.8% in the first half. Acquisitions played a significant role, contributing plus 5.7% to regional growth, while organic growth remained solid at plus 2.6% despite the calendar headwind estimated at minus 0.6% for the region. Growth was primarily driven by strong commercial momentum in the [indiscernible] the region continues to be highly diversified health care industry together account for 70% of the portfolio, followed by trade and services and hospitality. In Germany, top line growth was more selective, particularly in the Public Health care segment where we maintain a cautious stance due to the ongoing budgetary constraints within the public health system. On the profitability side, EBITDA margin improved by 100 bps to 32.3%, mainly reflecting lower general costs sustained operational progress in Germany, which alone delivered an impressive plus 240 basis points of margin expansion. Moving on to the next slide. Let's now take a look at Scandinavia and Eastern Europe, a region with solid fundamentals, but more challenging 1 month in the first half. Reported revenue was up plus 2.6%, including approximately plus 2% organic growth restated from the calendar effect. Commercial momentum was mixed across geographies we experienced volume losses in Denmark, where the competitive environment remained particularly intense by contracts, Norway, Finland and the Baltics performed well, showing positive trend. As in other regions, pricing adjustments were more limited and due to lower inflation level in early 2025. The negative calendar effect in Q1 weighed slightly on performance estimated at minus 0.4% for the region. On the profitability side, the EBITDA margin declined by 50 bps to 34.4%. While Sweden maintained a stable margin, Denmark continued to face pressure. Encouragingly, we saw strong margin improvement in the Baltics confirming the benefits of local operational initiatives. Despite the short-term headwinds, we remain confident in the region's fundamentals and continue to pursue selective growth opportunities especially where outsourcing potential remains underpenetrated. Moving on to the next slide. Let's now turn to the U.K. and Ireland, where continued productivity gains supported further margin improvement in the first half, bringing it close to 32%. Reported revenue was up plus 4%, including plus 2.8% organic growth moderate but solid performance, especially considering the mixed market context. Commercial momentum remained positive with many new contracts signed in hospitality. However, activity levels among our clients were somewhat subdued in H1, which impacted volumes. The pricing [indiscernible] was also softer than at year in line with the lower inflation observed in 2025 compared to 2024. In addition, the region faced the calendar effect of approximately minus 0.3% on H1 growth. On the positive side, we benefited from the appreciation of the British pound, which added plus 1.2% FX impact in the first half. Despite these external factors, Elis continue to improve profitability in the region. The EBITDA margin rose by 80 basis points to 31.9% thanks to effective cost control in workshop and logistics as well as ongoing productivity initiatives. Let's now move on to Latin America, which delivered a solid organic growth in the first half despite temporary margin headwinds. Momentum across the region remains strong with 7.3% organic growth. Once again, confirming Latin America's role as a key growth engine. In Brazil, organic growth was close to 10%, supported by strong performance in Healthcare, effective chair management and continued commercial success in workwear, including clean room services. Mexico posted mid-single-digit organic growth. Also some contract tenders were delayed towards the end of the year. These tenders have since been secured and will start contributing to growth in the second half. However, revenue was significantly impacted by currency depreciation, particularly in Brazil and Mexico, resulting in a minus 13.2% FX impact and a reported revenue decline of minus 5.9%. On the profitability side, the EBITDA margin declined by 220 bps to 32.5%. This was partly due to some one-off items, including recent government measures such as minimum wage increases, reduced working hours and the introduction of new labor premiums, many of which have not yet been fully reflected in our pricing. In addition, operational performance in Brazil could have been stronger in the first half. That said, we expect margin stabilization in the second half versus the second half of last year, supported by ongoing commercial renegotiations and continued productivity initiatives. We now conclude our geographic review on Slide 13 with Southern Europe, which posted a strong commercial momentum and a stable margin in the first half. Reported revenue increased by plus 9.5%, including plus 6.2% organic growth confirming our strong performance in Spain, Portugal and Italy. Growth was driven by continued outsourcing momentum in workwear with new contract wins, including [indiscernible] Good activity in hospitality, which remains a dominant segment in the region and solid performance in pest control supported by past bolt-on acquisition. We also benefited from the integration of [indiscernible] in Spain, which added plus 3.2% to the regional growth in H1. On the profitability side, the EBITDA margin came in at 31.8% virtually stable year-on-year, down just 10 bps. This was due to an unfavorable calendar effect in the region. Looking ahead, we expect the full year margin to improve, supported by continued volume growth and operational leverage. Moving on to the next slide to conclude on M&A. The group continued to execute its targeted bolt-on acquisition strategy. with M&A contributing plus 1.8% to revenue growth in the first half. Since the beginning of the year, 4 recently announced acquisitions have further strengthened our presence in key geographies and strategic market segments. In Spain, we acquired Casa, a plant located near Madrid and focus on in hospitality clients. The company generated around EUR 10 million in revenue in 2024. Also in Spain [indiscernible] located south of Barcelona and dedicated to the hospitality market delivered approximately EUR 12 million in revenue last year. In Germany, we acquired [indiscernible] which operates 2 plants serving [indiscernible] needs for health care and hospitality customers across Southern Germany and Northwest Austria. One of the 2 sites is new and offer significant spare capacity, the company generated nearly EUR 20 million in 2024 revenue. Finally, in Switzerland, we acquired Boden, which runs 2 plants covering Central and Eastern regions serving both hospitals and hotels. The business generated EUR 27 million in 2024, and we anticipate significant logistics and industrial synergies. These acquisitions are fully aligned with our bolt-on strategy, reinforcing local density, targeting high potential segments and creating long-term value through operational integration. With that, I will now hand over to Deep who will provide more detail on our H1 2025 financial performance.

Thank you, Xavier. Good afternoon, everyone. Moving on to the next slide. Let's first take a look at this chart, which we'd like to show regularly. It illustrates the evolution of Elis revenue and EBITDA margin over more than 2 decades. And it's fair to say that recent years have clearly confirmed the resilience and profitability of our business model. This resilience relies on 2 main pillars: first, a well-diversified geography footprint with France now representing less than 1/3 of revenue; and second, a broad and balanced client base diversified both by sector and client size. It's also worth highlighting that this profile has been further strengthened by our expansion into Latin America and the acquisition of [ Berendsen ], which structurally enhanced our growth potential and stability. Looking at the graph, you can see that EBITDA margin has remained consistently high fluctuating within a narrow range even through major discrepancy like global financial crisis, COVID-19 recession, energy crisis following the war in Ukraine. Remember that figures [indiscernible] include also the IFRS 16 impact. Another key strength is our linen investments adjust automatically to top line trends. As we saw in 2020, when revenue slows, investments dropped mechanically which preserves cash generation. And that brings us to free cash flow. Over the last 5 years, it has risen steadily from EUR 186 million in '19 to nearly EUR 350 million in '24 and we expect this upward trajectory to continue going forward. Moving on to the next slide, let me walk you through the usual revenue breakdown by activity and the market and geography, which illustrates Elis highly diversified and well-balanced profile, whichever angle you look at activity, customer segment or geography you'll see that Elis is not dependent on any single category, which is a key strength, especially in times of micro, macro uncertainties. By activity, revenue is split across flat linen, 46%, workwear 37% and [indiscernible] 17%, a mix that reflects the breadth of our service offering. On the market side, we serve 4 major end markets: health care, 30%, industry 27%, hospitality, 25%; and health service, 18%. Each segment is driven by different fundamentals and offers complementary growth drivers adding to our models overall stability. And looking at geography, France represents only 30% of group revenue. The rest shows a solid balance between mature regions like Central Europe, U.K., [indiscernible] and more dynamic regions as Latin America, Southern Europe, which offer strong growth potential. This well-balanced decertification is no coincidence. It is a result of a disciplined long-term strategy supported by marketing commercial execution and targeted M&A. Moving on to next slide let's now take a look at revenue growth and the EBITDA margin by geography. As Xavier mentioned, the total revenue growth of plus 4.3% includes 1.8% from M&A and minus 1% from ForEx, mainly due to the depreciation of currencies in Latin America. All in all, organic growth was 3.5% or approximately when restated for the minus 50 bps of negative calendar effect in H1. In a nutshell, top line is supported by commercial developments on the back of our 3 dimension strategy, product market size of clients, you see that particularly in Latin America and Southern Europe. Second, hotels activity was good in France pay in Portugal, but low in U.K. And third, adverse calendar affected particularly [indiscernible] U.K. For margin, that's another strong semester where no zones stand significantly below 32% in a nutshell, very good productivity performance everywhere. Energy hedging impacting more or less the regions, some one-off underlined [indiscernible] calendar effect in Southern Europe and lag to pass staff inflation in Latin America. Let's now take a look at the full P&L for the first half of '25. So revenue reached EUR 2.34 billion, up 4.3% year-on-year. Adjusted EBITDA increased by 5.1% to EUR 813.8 million with a margin of 34.7%, up 30 bps. I will provide more details on this in the next slide. But depreciation expenses represented 19.6% of revenue, up from 19.2% in '24. This resulted in a slight 20 bps decline in EBIT margin to 15.1% of revenue, which stood at EUR 353.8 million, up 3% year-on-year. Now below EBIT, the main items below EBIT and the operating income are noncurrent operating income and expense, which amounted to minus EUR 7.7 million, which is a standard amount for operational one-off like litigation or restructuring costs. In '24, you remember that we had around EUR 32 million of earn-out revaluation in the EUR 14.8 million. IFRS 2 expenses which corresponds to the accounting treatment of performance share plans rose to EUR 21.1 million compared to EUR 12.5 million last year. This increase is linked to the 3-year rise in Elis share price impacting LTIP valuation, but also to the higher employer contribution rate in France, rising from 20% to 30% following recent government decisions and social policy as set out in the 2025 social [indiscernible] And last, amortization of intangible assets from past acquisitions was stable at EUR 43.4 million as it is mostly linked to the 2017 acquisition of Berendsen and Labs. As a result, operating income increased by 13.6% to EUR 280.5 million. Below operating income, the net financial expense was EUR 64.9 million, roughly stable compared to before higher interest charges due to more expensive refinancing condition in '25 were offset by around EUR 7 million reduction in accession expense following the final payment of the earnout related to the [ '22 ] Mexican acquisition. Income tax expense came in at EUR 63.1 million, also stable year-on-year the effective tax rate decreased significantly to 29.3% as of June 30, '25, down from 34.3% a year earlier. This drop is mainly explained by the absence in '25 of material nontax deductible adjustments related to earn-out revaluations, which had impacted the 24 base. Please note also that it encompassed EUR 5.4 million of [ French25overtax ] compensated by the deductibility of the share buyback serving. Finally, net income rose sharply by 28.6%, reaching EUR 152.5 million compared to EUR 118.5 million in H1 '24 moving on to side, let me focus on the evolution of DNA as promised. As you know, [ linen ] CapEx is 2/3 of the total CapEx, and it is depreciated on 3 years only. It means that in case of [ linen ] CapEx perturbation, the whole group depreciation can be affected. That is the case in the recent years as shows the yellow curve at COVID [ linen ] CapEx is very low that 2021, then came a sharp rebound in year '22 and '23 driven by both inflation and catch-up effect. Since mid-'24, linen CapEx are nearly stable in euro and much lower in percentage of sales. And at the same time, the revenue has developed quite fast, '25 revenue shall be 25% above '22 in 45% above '19. So it means that the depreciation ratio to sales, which is the blue line, is at the worst in H125, and will go down in the coming semesters. Moving on to the next slide. Let's now take a look at the H125 fully diluted headline net income per share or EPS. As usual, the main restatements to get to headline net income include the amortization of insurable assets recognized impact acquisitions. IFRS 2 expenses which corresponds to noncash cost of performance share plans and noncurrent operating income and expenses, which were particularly high in H1 '24 due to the revaluation of the Mexican earnout and its related accretion impact on the financial results. In H1 '25, we also restated the extraordinary surcharge on French corporate tax, which applies only to the '25 fiscal year. All in, headline net income for the first stand at EUR 213.2 million, up 2.6% year-on-year. This translates into EUR 0.91 per share on a basic basis and EUR 0.85 on a fully diluted basis both up plus 3%. The fully diluted figure reflects the potential impact of performance share plans and convertible brand in which case the corresponding interest expense is restated in line with IFRS methodology. As you know, we started the share buyback in March only. So the impact of this program is most in the beginning especially as we serve the performance plan in April this year. Moving on to the next slide, let's now review our free cash flow performance for the first half of '25. Adjusted EBITDA came in at EUR 813.8 million, up 5% year-on-year, like I said, remains the starting point of our cash generation. As usual, we adjust for nonrecurring items, IFRS to social charges, which include the increased employer contribution rates mentioned earlier. This brings up as to a pre-CapEx cash flow of EUR 796.9 million, up 4.6% year-on-year. Net CapEx to that EUR 431.8 million or 18.4% of revenue against 19.2% last year, reflecting the low level of linen CapEx due to better control of linen on positive inflation. Change in working capital requirement was negative at this EUR 113 million typical in first half compared to H1 '24. The increase is mainly due to supplier payment calendar and a bit of stocking to improve lead time delivery of our were to clients. Net interest paid rose EUR 7 million to EUR 66 million, reflecting higher refinancing costs in '24 and '25. Tax paid amounted to EUR 67.7 million, pretty similar to H1 '24 level due to the drivers I mentioned with the P&L tax. Lease liabilities payments totaled EUR 87.3 million, including both [indiscernible] The increase versus last year is mainly due to [indiscernible] of our retail fleet and the replacement of previously owned vehicles. You understand it is a balance with the CapEx line. All in, free cash flow came to EUR 31 million for the first half, impacted by seasonal effects on working capital, but fully in line with our full year trajectory. Full year free cash flow which is the deployment of our capital allocation policy. First, M&A-related outflows of around EUR 70 million, adding the first 3 lines, mainly linked to bolt-ons and EUR 20 million for the last [indiscernible] payment. Second, the EUR 105 million dividend paid in May, free cash; third, EUR 84 million of equity-related outflows mainly related to the share buyback program which has reached nearly 4 million shares by end of June. The line other is mainly noncash items impacting the net debt via accounting. As a negative, there's a fee depreciation and convertible option depreciation, which are EUR 97 million as a positive this year can go both ways the accrued interest for EUR 22 million and also a positive this year, the USPP dollar currency translation for EUR 45 million was negative last year. As a result, net financial debt stood at EUR 3.207 billion in June compared to EUR 3.38 billion, end up '24 on EUR 3 billion mid '24. Moving on to the next slide. Let's look at the debt in detail, in line with our strategy. The debt is well spread between [ 26 and 35 ], mostly at a fixed rate -- we are rated investment grade by the 3 rating agencies with a lot of trocar. The current average cost of debt is 0.8%, average maturity 3 years. Going forward, we will, of course, remain opportunistic about potential refinancing. Moving on to the next slide. The group's net financial leverage ratio at the end of June continued to decline year-on-year done circa 0.14x compared to last year. Significant reduction in financial leverage in 2020 reflects both strong EBITDA growth and steady net debt reduction. As a reminder, the ratio has been temporarily impacted by the [indiscernible] in 2020. But since then, deleveraging has accelerated. Looking ahead, we expect a further reduction of around 0.1x by the end of '25 compared to '24, in line with our capital allocation policy, which Xavier will return to later in this presentation. Let's wrap up with the key financial takeaways for the first half of '25. First, organic revenue was up 3.5% despite a slightly negative calendar effect, driven by continued strong commercial momentum and adjusting trends across our markets. Second, our adjusted EBITDA margin improved reflecting ongoing productivity gains and more favorable energy purchasing conditions. Third, headline net income reached EUR 213 million, up 2.6% and headline EPS came in at $0.85 per share on a fully related basis, up 3% year-on-year. And finally, free cash flow for the first half is fully in line with the full year trajectory confirming the strength of our cash generation model. With that, I will now hand back to Xavier, who will give you an update on our CSR achievements in the first half.

Thank you, Louis. Let me now take a few moments to walk you through our key corporate social responsibility achievements for the first half of 2025 on Slide 27. First on the left, we focus on circular economy in 2024, we conducted a comprehensive life cycle analysis of our workwear to better understand the environmental impact of our products. And to support transparency and stakeholder engagement, we also launched environmental calculator in January 2025 which allows anyone to explore and quantify the environmental savings from using our services. These 2 has already recorded over 2,300 visits across all our markets, showing a strong stakeholder engagement. As you can see, these 2 illustrates the positive impact of washing workwear with savings in CO2, water, energy and waste. Also worth highlighting is our continued progress on circular product design we have extended our worker-to-worker project, which use 60% end of life in this product to create new garments. In January, we launched new item in the range, the chef jacket. On the right, a few additional CSR highlights. We maintain our strong focus on the workplace safety with a 30% reduction in accident frequency between [ May 24 and May 25 ]. We continue to green our fleet. 75 additional electric [ HEV ] trucks are expected in France by year-end, supporting our decarbonization goals. This year, the engagement survey saw a record participation rate of 88% and satisfaction rose by 2 points to 73%. Importantly, 74% of employees believe Elis is actively engaged in CSR, which reinforce the impact of our collective efforts. And finally, this foundation extended its reach to 2 more countries, Germany and Portugal. Overall, these milestones reflects the strength and maturity of our CSR strategy, which supports both business resilience and our long-term commitment to people and the planet. Moving to the next slide. This EBIT rate, our CSR performance continues to be acknowledged by several leading nonfinancial rating agencies. Thanks to our concrete actions and our circular economy business model. Our already high ratings have continued to improve across the board. This is included in the CDP A list following the Climate Kitchener. This is a major milestone as only 2% of the 24,800 companies assessed globally received. It highlights both the strength of our business model in addressing environmental challenges and our ongoing commitment to taking climate change. We also maintain our rating from MSCI, reflecting consistent ESG engagement. Our first analytic scores rates Elis as low risk. EcoVadis awarded us a score of 80 out of 100, the role level, placing Elis among the top 5% of 125,000 asset companies. And finally, our finance rating for [ Belaya ] was maintained at a good level with an improvement of 2 points, now reaching 75 out of 100. Taken together, these results are strong recognition of our strategy and above all of the dedication and day-to-day commitment of our teams across the group. Before we turn to our 2025 outlook, remainder of some of the main takeaways from the Capital Markets Day we hosted in London in May. The webcast replay of the event is available online for those who wish to hold the full presentation. During the event, the management team refined the group's long-term strategy and strong fundamentals built on a proven business model, combining operational excellence with commercial strength. Elis operates in recurring revenue markets with significant barriers to entry, which reinforce its market leadership and provide strong resilience over time. The business is also well aligned with ESG-driven expectations, thanks to its circular rental model and tangible contribution to client decarbonization and resource efficiency. In terms of growth, Elis continues to benefit from numerous organic opportunities in its existing geographies with additional potential for selective expansion to new countries. The group also offers a solid outlook for continued growth in revenue, margin and cash flow, and we will detail this medium-term financial trajectory on the next slide. Finally, deleveraging is well advanced and ongoing, allowing Elis to maintain financial flexibility while enhancing shareholder returns through a balanced capital allocation policy. Moving on to the Slide 31. Let's now take a look at our medium-term financial objectives as presented at the Capital Market Day. Over the 2025-2028 period, Elis targeted annual revenue growth of plus 5% to plus 6% at constant exchange rates with roughly plus 4% from organic growth and plus 1% to plus 2% from bolt-on acquisition in line with our proven M&A strategy. We also expect to deliver average annual EBITDA margin improvement of around plus 20 basis points, reflecting our ongoing efforts in productivity and operating leverage. We also anticipate that EBIT and EPS will grow faster than revenue, supported by margin expansion and good control of nonoperating costs. Finally, we have to generate approximately EUR 1.5 billion of cumulative free cash flow over the period, representing a plus 35% increase versus the previous 4 years. These targets reflect the strength and stability of our business model and our confidence in delivering profitable and sustainable growth over the long term. Moving on to the next slide. Elis also saw its capital allocation policy, first introduced with the release of our 2024 full year results last March. This policy structured around 3 clear priorities. First, Elis will continue to pursue its targeted bolt-on M&A strategy with an annual investment envelope of EUR 50 million to EUR 150 million, fully aligned with our strategy of consolidating local positions and densifying our network. Second, we remain committed to maintaining our investment-grade credit rating with further deleveraging expected through this will be limited to around 0.1x period. Finally, the remaining cash will be allocated to enhancing shareholder returns, either through special dividends or share buybacks depending on market conditions and opportunities. This disciplined approach ensures a balanced use of cash supporting both growth and shareholder value creation. As announced in March and in line with our updated capital allocation policy. Elis launched a EUR 150 million share buyback program for 2025, reflecting our strong balance sheet and our view that the group's current valuation does not fully capture its strength and long-term potential. This buyback comes in addition to the EUR 0.45 dividend financial year, which was paid on May 28 and represents a plus 5% increase year-on-year. The buyback program began on March 6, 2025 and may run through December 15. It sells 2 purposes. The first portion of shares will be used to cover maturing which benefit approximately 60 managers across the group and to support the employee share ownership plan planned for H2 2025. The remaining and larger portion of repurchased shares will be canceled, contributing to an overall reduction in the share count and enhancing long-term shareholder value. as of June 30, 2025, nearly 4 million shares has been bought back at a weight average price of EUR 22 for a total cash out of EUR 87 million. Finally, turning to Slide 34, a word on our 2025 outlook. And following this solid set of first half results, we are reaffirming the objectives first presented last March. Organic revenue growth is still expected to come in slightly below 4%, reflecting a calendar impact of approximately minus 0.3% for the full year. We anticipate modest improvement across all key profitability and cash flow indicator, adjusted EBITDA margin, adjusted EBIT margin, fully diluted headline minus 0.3% for the full year. We anticipate modest improvement across all key profitability and cash flow indicator. Adjusted EBITDA margin, adjusted EBIT margin, fully diluted headline net income per share and free cash flow. Lastly, we expect the financial leverage ratio to decrease by around minus 0.1x by year-end 2025, in line with the capital allocation policy just outlined. These expectations confirm our ability to deliver consistent profitable growth while maintaining financial discipline and continuing to enhance shareholders' returns. So that concludes our presentation. Thank you for your attention, and we are now happy to take your questions, operator, back to you.

[Operator Instructions] And the question comes line of Annelies Vermeulen from Morgan Stanley.

I have 2 questions, please. So firstly, you mentioned positive across all geographies offsetting cost base inflation. Could you quantify the price contribution to growth for the first half and also the second quarter? And perhaps comment on which as you're seeing the most pronounced cost base inflation. It sounds like Lat Am would be top of the list. But if you could elaborate on that, that would be great. And then secondly, you mentioned ongoing subdued client activity in the U.K. in hospitality. And how has this developed so far in Q3? And what are your expectations more generally for that going into the second half.

Thank you for the question. So pricing and volume. If we exclude the calendar effect, pricing and volume are more or less the same. So [indiscernible] for the situation in 2025. And you're perfectly right, the geographies where we see the biggest impact of cost inflation in Lat Am. You know that we operate in 4 countries with less [indiscernible] now, Mexico, Brazil, Chile and Colombia. And those governments have decided some strong merger for workers. And so it's not only a question of cost per hour, but also in some countries, they decided to decrease the number of working hours per week. And so it is clearly the geographies where we are seeing the biggest level of inflation of our costs. U.K., as we said and what you have seen is globally speaking, an activity that was quite weak for hospitality in Q2. Nevertheless, the activity has been much better in July, and it is a trend that we see quite everywhere. So it's, for us, a good news and the season starts very well. because the level of activities are quite good everywhere. So it is good in U.K. It's still super good in France. It's also not so bad in Nordics. And it remains super strong also in Southern Europe. So we are quite happy with the volume that we have seen in our plants in July. So it is just the beginning of the summer. Nevertheless, it starts very well.

Just a follow-up on that LatAm point. You mentioned you expect the margin in LatAm to stabilize. I assume part of that is also getting that cost base inflation under control. Could you clarify sort of what you mean by stabilization? And when do you expect that margin to recover to previous levels in LatAm specifically?

So what we have in mind when we say stabilization in H2 is we have seen a decline in H1. In H2, we expect the same level of margin -- so that means that more or less instead of having minus 200 bps for the first semester you can say that normally, we should have only a minus 100 for the full year and stabilization in the second semester. It is linked to several topics. First one, of course, we will implement progressively. And we have implemented positively some price increase to offset this impact of huge inflation of the cost of work out. It's not the only reason. -- we are not super satisfied with the performance in productivity in Brazil in H1, and we have seen that how we can improve and how we have started to improve this productivity. So that's why we are more confident for the second semester. And we have also a nice impact that will come in second semester in Mexico. In Mexico, we have some super big tender, public hospital tender quite sizable that has been postponed in the first semester. It's a super profitable contract. We have now win this tender, and it is massive. So we will have not only a nice growth in the second semester, thanks to this tender, but it will be also super profitable for the region because it's -- we have win the tender with a super good prices. So that's why if we take into account those 3 topics, we are comfortable to say that the margin in H2 will come back to the margin of [ 24 ].

And the question comes from the line of Ben Wild from Deutsche Bank.

Three questions from my side, please. Firstly, in H1 CapEx is flat year-on-year, broadly flat anyway. Do you expect that to be the case in H2 as well? And maybe Lilly, if you can just expand on the chart that's in the participation pack. The clear direction is probably with respect to lien investments, if I'm a downward trajectory. Is that going to continue, do you think, in '26 and '27 or will it start to stabilize next year? Second question is on Scandinavia. In 2018 and '19, -- and maybe you delivered EBITDA margins above the level that you delivered in France. And now there's a 750 basis point gap between the -- can you talk about what's going on in that geography and scope to recover margin over time. Over what time period would you expect to recover margin and -- do you think that you can get back to the levels of profitability that you had previously? And then a kind of third question on Southern Europe. We did 6% organic growth, but margins are broadly flat in Southern Europe. Why are you not generating operating leverage on what looks like fairly decent volume growth. Are you in a kind of investment phase to drive growth in your region? Or is there something else going on in H1.

Okay. Thank you, Ben, for your questions. So we start with Scandinavia -- so probably, it was slightly in [ '18 and '19 ]. But it's not the sole point that we can highlight. So I think if we try to summarize what happened over the period, the last 6 years, Globally speaking, the mix of growth has been quite unfavorable. So we see that we have more growth in [indiscernible] in this area in Sweden and Denmark mainly and less growth in mats and uniform. At the end, it has an impact on the margin improvement because in those 2 countries, the margin in [indiscernible] are significantly below the margin workwear and the math. Globally speaking, we are so big in those countries that are quite small and the total market are not super in Denmark, you have 5 million to 6 million inhabitant only, and we deliver EUR 250 million of sales, something like this with a market share of 50%. So that means that the potential of organic growth is limited. So the operating leverage is also limiting all in. So that's why to the second part of your question, do we expect to see a recovery of the margin in Scandinavia I don't think that it is cautious enough to bet on this for the future. When we did the exercise of a business plan for the next 2 to 3 years, what we have in our books now for Scandinavia is more stability of the EBITDA margin. So even for the full year, you will see that globally speaking, I think that the second semester will be better, and we can expect a kind of stability or a super small decline perhaps, but not a lot. And for the year to come, we will stabilize the margin in Scandinavia at a good level, we are more or less close to the -- or at the level of the group. So it's a decent level of margin. as we don't have a lot of growth in volume, of course, the beauty of these countries is in cash because we are not forced to put a lot of CapEx there. So the level of investment is limited. And at the end, it's a pure cash cow profile. So not a lot of potential of growth, stability of the EBITDA margin and super good level of cash flow. It is more or less what you can expect from Scandinavia in the years to come. Southern Europe for media analysis is much more positive than the Scandinavia, and it's -- you have some one-off also in the 241st semester in Spain, we received some subsidies regarding energy in Q1 '24. So when you compare H1 to H1, it has quite an important impact. Otherwise, we are improving the margin -- and I have absolutely no doubt about the full year margin of Southern Europe that will increase quite significantly. So of course, we will benefit from the growth -- and the margin in the Southern Europe will improve significantly on the full year. We have also, as we try to highlight, it's quite technical, but in Portugal, we charge and we invoice by week and the end of June was a super defavorable for the top line and immediately for the margin, of course. And we have seen in the first day of July, the recovery of this. So that's why all in Southern Europe does not repeat any kind of issue, and we are super happy with the intrinsic performance in H1 in Southern Europe. And as I said, I repeat, the margin for the full year will significantly improve.

So coming to the third question, Ben, so what you've seen in the first half, the super good news is that the linen CapEx, as you've seen, has strongly declined since 1 or 2 years ago. It started mid [ 24 ], that due to better control, better process and positive inflation balance between line and the top line. We are now in a [ 12.5 ] region where we were previously, as I remember, up to 13.6% in the [indiscernible].That is what is very well described on the slide with a chart with the CapEx on the depreciation year per year. So first, that's a very good news. It means that Linn are under control. And of course, it forecasts pretty well the future of CapEx if the inflation balance still remains at this good level for linen, it means that, indeed, CapEx may be in the bracket [ 18.5% to 19% ] onwards. It means also that mechanically, the linen depreciation impact shall drive the total depreciation done after '25 which probably will be the worst year for depreciation to sell the ratio may be in the region of 19.4%. But after that, it shall receive positively in the coming years. That is underlined by the yellow line in the chart described during the webcast.