Elis SA (ELIS) Earnings Call Transcript & Summary

So good morning, everybody. I'm very happy to welcome you this morning for the presentation of the 2019 result of the company of Elis. It's a very good year for Elis. I think that we can be very happy and proud about the performance of the company. Last year, we have delivered a very solid performance, both on top line and EBITDA, with a turnover close to EUR 3.3 billion. It represents a growth of 4.7%, in which you will find the 3.3% pure organic growth. It's one of the best performance of the company over the last decade. Organic growth that allows the company to keep a solid and stable margin with a 31.5% of EBITDA margin. We are happy with a strong improvement also on the headline net result, up 16%, and a very good news linked to the strong improvement of the free cash flow, EUR 186 million. It's 21% more than what we delivered in 2018. So it is a clear consequence of the very good operational efficiency of the company. We have improved in a lot of countries retention rate. So we have lost less customer in 2019. We have been very efficient also in price increase. And a very good level also of productivity in our laundry. It's also the consequence of the clear success of the integration of Berendsen. So the job is now totally done. We have fully implemented also the extra CapEx program to improve the average quality of the industrial assets of the company. Let's have a look now on the breakdown of the turnover of the company, per product, per end market and per geographies. As always, you will see that our business is very well balanced. We don't depend to one product, one end market or one country. And of course, we can highlight immediately the part of hospitality in our business in the context of the crisis of coronavirus, of course. You will see that it represents more or less 25% of the business only. And it's -- we will come back later in the presentation. Resilience of the business model of Elis is totally key. In this context, let's have a look now per geography of the performance of the organic growth. So as I said at the beginning, 3.3% organic growth is the best performance since the IPO, by the way. We are happy also to see that in the vast majority of our countries, we have improved the performance in '19 in comparison to '18. As expected, we have some pressure in U.K., as you can see, with minus 1.2% in 2019, and we'll come back later on the U.K. situation. In mature markets, like Continental Europe, France or Nordics, we are more or less close to 3% organic growth. And of course, we have a very solid performance in the south part of Europe and in Latin America, where we have been able to deliver more than 7% in 2019. In terms of profitability, we have been able -- in the context of a huge inflation of our costs in 2019, we have been able to stabilize the margin at a very high level, 31.5%. We have -- the best performer have kept very solid margins, so France and Scandinavia. As expected, we were under pressure in U.K. and in Continental -- in Central Europe. So in U.K., it's mainly a question of mix of growth. And in Central Europe, of course, it is a weight of Germany that has explained this decline in the margin in 2019. Southern Europe and Latin America have posted very good performance in 2019 with a strong improvement of the margin. What is very interesting in this chart is to see that in this both area, we are improving regularly year after year. And as we are still below the average margin of the group, of course, it's a driver of the group improvement of the margin expected for 2020 and for the future. One of the big subjects of 2019 was the pricing power of the company. It was a key subject at the beginning of the year. I think that in 2019, we had the opportunity to demonstrate to everybody the clear pricing power of Elis. You remember that it was a year of huge inflation of our costs in 2 main areas: cost of energy with strong increase of the cost of the gas and fuel in a lot of countries; and a strong increase also of salary costs, mainly driven by some minimum wage increase you had in mind the example of U.K., of course, and Spain with a 22% increase of the minimum wage in Spain. Thanks to the market share we have in our countries. You remember that the strategy of the company is to be the leader -- among the leader in each country where we operate. So we have strong market share in the vast majority of our countries. And thanks also to the quality of the relationship we have with our customers, we have been able to explain to our customers why we needed to increase prices. And we have been successful quite everywhere, as you can see on the chart, perhaps except in Germany, where it has been more challenging. You know that our market share is still limited in Germany. And flat linen, the level of competition is still high. That's why it has been more challenging to push prices in Germany. We will now have a look geography by geography. So let's start with the France, 1/3 of the business of the group. It's a very, very good year in France. We have not only a good organic growth, more than 3%, 3.2%, but also a nice improvement of the margin, 70 bps. So we had a good level of activity of our customers. So we benefit from this strong activity inside our customer. We have made some improvement also in terms of churn rate. So we have less losses in 2019 in France. We have been, of course, very efficient in pricing, and we have posted a solid set of productivity in our laundries. So all these factors explain why we have this very good performance in France in 2019. We have here on the chart the nice evolution over the last 20 years of the improvement of the EBIT margin in France, 200 basis points in this period. Central Europe now. Central Europe under pressure, as I said. So organic growth, not so bad, close to 3%, but margin down, mainly due to Germany. So Germany, what happened in Germany, we have 3 different end markets with 3 different dynamism. So Workwear, it's the most profitable market. We are still a small player in Workwear, but we are growing 4% in 2019, and everything is in place to still push this level of growth. And it is a very profitable growth because has -- like in U.K., it is by far the most profitable end market for us in Germany. So we have decided to reinforce our sales force in Workwear in Germany to still push this level of growth. Health care. Health care has a strategy, you keep in mind the fact that we want to be a leader in health care. We want to increase our market share in this end market. It's now the case. So we are the leader of the market in health care. And we start to see, thanks to this consolidation, an improvement of the quality of the end market -- of this end market in Germany. Nevertheless, in 2019, we have made some acquisitions in health care. That has been dilutive at the country level, so that's why it puts some pressure on the margin in 2019. And the last end market, hospitality, prices are very low. We don't see any nice opportunity to consolidate easily this market. So we don't want to grow a lot on hospitality in Germany. In the other countries of the perimeter, we have posted a very solid set of performance. So we are talking about the Netherlands, about Poland and the Eastern part of Europe, where we have mainly some Workwear operations with a very huge level of growth driven, in most cases, by outsourcing. So we convince people to rent uniform instead of buying uniform and with a very solid margin. So we are very happy with this operation. Switzerland, our last country in this perimeter. It's a very stable country for us. So stable but high level of cash flow generated in Switzerland because we don't have to invest a lot in this country. Scandinavia now, so Nordics, it remains, you have seen the best performers in our portfolio of countries. So we are very happy with the level of performance in this list of countries. With a strong activity, you can see a 3.7% organic growth in 2019. We have 2 mix effects that explain the small decrease of the margin at this -- in this perimeter, 2 mix effects. First, it is the growth made in Sweden and Denmark, mainly driven by flat linen. So at the group level, it's good growth. So we are happy with the margin delivered by flat linen in these countries. But at the regional level, the margin is lower than the margin we could have with mats or it's Workwear, so that's why it has a dilutive effect. But we are happy with this growth. And the second mix, negative mix effect is linked to the fact that the countries, where we had the best growth by far, are countries with more limited margin. So we are talking about Norway, Finland, and Baltics. But at the end, this perimeter is very interesting for the group, with solid organic growth and still the best performer in comparison to the other countries. U.K. now. So U.K., you have in mind the 2 key priorities for the group in U.K., so 2 big challenges. First, Workwear. It's -- as it is the most profitable part of the business, we need to keep our customers. So the key issue for us is to decrease the level of losses. And the second key priority, of course, is price increase in hospitality, where the level of profitability is too low and mainly linked to the lack of performance in pricing in the past. So on these 2 KPIs, we have posted a solid year in 2019. You can see the improvement achieved by the company. So in terms of losses for Workwear, starting from very high level of losses in 2017, so 15% of churn rate 2 years ago. In '18, it has been improved, and we reached 13%. And you can see last year a performance of 10%. And when we analyze on a monthly basis, the performance will still improve in 2020. So it's linked to a more efficient organization at the commercial level. We are closer to our customers, and we have improved the rare activity to answer to any question, issue or request from our customers. Now it's time to sign more contracts. So that means that we have stabilized the situation in terms of losses. So we have taken the control of the situation. So it's time to sign more contracts. That -- it is the reason why, as we disclosed one semester ago, we have decided to double the size of the sales team. So we will have more or less 20 people more to sell more contracts to come back to growth in this end market. That is, by far, the most profitable part of the business in U.K. Hospitality now. So hospitality, you remember the story, the quality delivered was very bad. And to try to keep customers, Berendsen offered some very low price to try to keep customers. So first, we have restored a very good level of quality with our customers. And it was very clear this summer that we delivered reliable deliveries, and our customers were very happy. And it is the reason why we have been able to push prices and to be strict on this policy. We have reached in average -- at the end of the year an average increase -- net increase of 7%. So it's a very strong increase of our average prices in this end market. We know that it will have an impact in terms of volume because, of course, we have lost some customers that we considered not profitable enough and customers that didn't want to follow our new pricing policy. We were totally relaxed to accept, to lose this non-profitable part of our business in hospitality. All in all, due to the mix effect, so we have a decline of the business that is, by far, the most profitable. We have seen some pressure on the margin that we have down -- that was done by 60 bps in 2019. South part of Europe now, so it was a challenging area for us. You can imagine, when you start the year with a 22% increase of the minimum wage in our business, the performance posted last year was not forgiven. And we are very happy with what we have delivered in Spain, in Portugal. It's linked to the size now and the market share of Elis in Spain. You remember that it was the key driver of the acquisition of Indusal 3 years ago to double the size of Elis in Spain. And thanks to this new market share and also to the quality of the service delivered, we have been able to pass to the customer the impact of this increase of the salary cost inside our portfolio. In average, we had 8% of increase of the cost of labor in Spain. The good performance is also linked to the level of productivity and with strong improvement in Spain. We are still in a situation where we transfer the know-how of the company, and we increase the productivity in the former Indusal plants with a lot of success, as you can see, on the level of margin. It's also interesting to highlight the very good performance in Workwear in both Portugal and Spain. It is part of Europe, where the level of outsourcing is very limited. We don't have a lot of competitor in these 2 countries, and that's why we are pushing hard in this industry with a lot of success in both countries. We had, in 2019, a double-digit organic growth. And it is very profitable growth, so that's why we have been able to increase also the margin by 60 bps in 2019. To conclude this review of every geography, Latin America. Latin America, it's, for me, an amazing year, more than 7% of organic growth and close to 200 bps of improvement of the margin. It's also, of course, linked to the very good performance in Brazil. Same story. It is also the merits of the big acquisition made with Lavebras 3 years ago. We are now, by far, the leader. We have been very efficient in -- with our commercial team. We have also, in Brazil, decreased the level of losses. So we are more efficient with the existing customers. And we still open the market. So we benefit from the level of outsourcing that is increased in Brazil. And same stories on Spain. We are on the way to transfer the know-how of the company. We had around 10% of productivity gain in Brazil last year, and it explains this strong improvement of the margin. On the same time, Colombia, we have a solid growth in Colombia, both in organic and also in M&A. We see -- continue to consolidate the market. We are now, by far, the leader in Colombia. The sole difficulties in -- difficulty in 2019 in this perimeter was into Chile at the end of the year. Chile, so you know that we had, since October, some very violent protests in Chile that decreased the returns of level of activity. All in all, when we have a look on the story of Elis in Brazil, I think that we can be very happy and proud about the evolution of the business there. You see on the chart, we entered in Brazil 5 years ago with EBITDA margin close to 20%. 5 years after, we have a 30% EBITDA margin. So it's linked to consolidation of the market, organic growth and transfer of know-how, as I explained. M&A in 2019, you know that it is part of the strategy of the company. We want to consolidate every market where we operate. So we are focused on a few number of countries, 28 countries only. But each time, we want to be the leader or among the leaders. It's totally key in our business. We have a clear link between market share and margin. And of course, organic growth helped to increase our market share, but bolt-on is part of the strategy to reach this leadership. So in 2019, we have been able to close 6 deals, as you can see here on the chart, in our existing countries. So in Colombia, in Spain, in Germany, in Denmark, in Sweden and in Russia. And we have already closed one deal in 2020 in January in Czech Republic. So that means that it represents an additional growth, a little less than 2%, in 2019. And we have already in the bucket for 2020 with a report effect of what has been done, 0.3% of growth. Let's have a look now on another key subject of the last 3 years, the integration of Berendsen and the improvement of the industrial network. So you remember that it was probably the key mistake made by this company in the last 10 years. It was a lack of investment in the industrial network. And it is also the reason why we have been able to take over this company. Nevertheless, we knew since the beginning that we will have to invest more than usual to increase the industrial network. And if you remember, we presented since the beginning, so mid-2017, the industrial road map. It was the result of a bottom-up approach, plant-by-plant to see what we will need to invest. It has represented over the last 3 years a little more than EUR 300 million of investments. It's a regular investment we can say 1/3 each year, '17, '18, '19. So what we have -- what did we do with this amount of money? So we have opened some new plants, so 7 new plants in the former Berendsen countries, on which 3 in U.K. And we have also invested in 10 major program, major investments in existing plants. And for the rest of the money, so EUR 75 million, it was a mix of more classical investments linked to maintenance to replace some old machines and to some program to increase the efficiency. So now we consider that the average quality of the industrial network coming from the former world of Berendsen is totally in line with the standard of the group. And it is also the reason why, as we have always explained to everybody, in 2020, we are back to the normative level of investments in this industry. And we will invest around 18% of net sales in the future. Business. Now also another merit of this merger is the new size of the company. So we are now, by far, the leader in Europe with, on top of that, an international platform with Latin America. And of course, we have, in front of us, some international customer that wants to have the same uniform everywhere in every countries or the same level of standard of service in a lot of countries. And of course, we have a unique answer to this set of customers, and it is the reason why we have been quite successful in 2019 by signing some major customers. Each time, we are talking about a contract of several millions of euro per year. So Coca-Cola, it was a success that started here in U.K. So we have been able, thanks to the U.K. team, to sign a long-term contract with Coca-Cola, 5 years. And this contracts will concern 11 countries, as you can see here. Safran, it was thanks to the French team. So we started negotiation in France. And at the end, we had a contract for 5 countries. And Novo Nordisk we signed also a long-term contract with Novo Nordisk, thanks to our Danish team. And the contract will concern a lot of different countries in our network. I will now ask Louis to give you more details on the financial performance of the company last year.

Thank you, Xavier. Good morning, everybody. It's an excellent performance indeed in '19, but I will begin with 2 technical points regarding the accounts. The first one is that, as you are aware, we sold Clinical Solutions last year. It doesn't show in the figure that it was already deconsolidated since 2018. So for that, the accounts are fully comparable. Which is not the case for IFRS 16, the new standard. We state the rents, the long rents in the figures. So '19 is showed with the trends on '18 with rent. So every time, we try to show you pro forma accounts to make a comparison for the performance. The impact of the standard is that we restated EUR 70 million of rent from EBITDA, which mainly impacts the depreciation. So that EBITDA is nearly untouched and the net result is even a negative impact. In the free cash flow as well, the EUR 70 million of rents translate into around EUR 9 million of interest impacting the free cash flow. But the EUR 61 million, as seen as the reimbursement of debt, is below free cash flow, so that the free cash flow has improved by EUR 61 million. We will show you fully the detail. Coming back. So it is the impact of the norms standard and the EBITDA margins, so that you can, in the first columns of variation, see the pro forma evolution of EBITDA margin and that coming back at the very good performance of the year. But you see that we are very proud of France and Latin America being spectacular performer of this year despite a couple of headwinds. Southern Europe was also very good because improving margin this year was not a given considering the huge inflation we had, for example, in Spain. U.K. and Ireland also was able to mitigate the growth top line by reorganizing, making a lot of productivity. Scandinavia, as you know, it has a triple mix effect, mix for products, but also for markets growing faster, for example, in hotels, but also mix for ForEx because you have seen that the Swedish krona was down this year, and it is the most profitable country. And Central Europe, we are making a lot of progress consolidating the health care business in Germany. But also, of course, this comes with a cost. Looking at the full P&L now, very happy with the evolution. You see that going to the bottom of the P&L, the results are getting better and better with the net result improving by 16% pro forma. Below EBITDA, EBIT is improving better. It means that the depreciation increased only by 4% pro forma, which shows the virtues of the model. Below that, you see the amortization of intangible assets. You know that it's a PPA depreciation. Basically, part of the goodwill is put into intangibles on depreciation. You have now reached a normative level with around EUR 90 million per year. Last year was still high due to the end of the depreciation of the PPA, linked to the 2007 last private equity operation. Noncurrent is a little bit high at EUR 18 million, and it is half end of restructuring costs with Berendsen, a couple also of restructuring costs linked to the big program of investments. So sometimes when you've get a greenfield project, you have some over costs moving the plant and so on. And the other half is linked to M&A activity with 2 projects, a bit more expensive than usual. The sale of Clinical Solution was, of course, a complicated deal. So it came with a bit of cost and the lawyers in the U.K. can be, of course, expensive. And those are really the -- Kings Laundry in Ireland because we are fighting with antitrust authorities, and that comes also with a cost. Below that, you see the financial results a bit higher to EUR 150 million. You will see the detail of what is inside. Globally speaking, let's say, there is EUR 40 million of one-offs and that the recurring level is now EUR 90 million, starting with EUR 60 million actually paid to bankers and investors. The tax is lower than last year in terms of rate, and it comes with a couple of good surprises. First, some countries lower their tax rate, just like Sweden. And in the next year, that will be France and Netherlands, for example. And another good surprise is a change in the law in France. So that now it's adjusted to the European norm for deductibility of the interest. And it's, of course, helping the tax rate to go down at 25%. And there, in these figures, you add the [CVL] for EUR 11 million in France. So all in, EUR 260 million of headline net result improving by 16%. Headline net result. As you are now accustomed to is calculated. Restating a couple of things from the net result, basically 3 buckets. First one is a noncash IFRS items, 2 first lines. Then you've got the pure one-off refinancing cost for -- that occurred in 2019. And below is a pure one-off linked to the one-offs I mentioned, exceptional items. That is the same methodology year-on-year so that the figures are fully comparable. Coming on the financial charges. So we start with what we actually pay to regular bankers and investors, more and more investors, by the way, which is EUR 60 million. And this year, we occurred a couple of one-off because, as you are aware, we finalized the reshaping of the debt profile, which is now good and longer, with 2 excellence for financing in April and October. And we had a couple of costs associated to that. The classical fees, of course, for doing those things, but also a breakup cost with an annulled bond, which still had a breakup cost. We don't have that anymore in the bond profile, in the debt profile. And the second was the reimbursing of swaps, interest swaps that we had since a long, long time ago. And now we are free of the things with all the debt being fixed. So an excellent profile so far. But of course, it came with a couple of over cost. So that in the P&L, the EUR 150 million is at normative level around EUR 90 million, which is basically EUR 60 million plus EUR 10 million of lease IFRS 16 like interest item and the national interest of the convertible bond plus amortization of the fees. And for the cash flow, the EUR 111 million is now a regular pace of around EUR 70 million, which is a EUR 60 million actually paid, plus the EUR 10 million of -- like in the rest item due to IFRS 16. Looking at the cash flow. By the way, we are very happy with the free cash flow we posted this year. You know that we expected last -- next year, I mean, in 2020, to be a very good year in cash flow with normalization of all the lines. But already '19 showed a very strong performance, of which we are quite proud, of course. With EUR 247 million of free cash flow, which translates into EUR 186 million of ex-IFRS 16 free cash flow, much better than the EUR 154 million of last year. So what's in that? First-line, exceptional items. 2/3 are, like I said, restructuring costs and of Berendsen integration. Still a couple of things linked to Brazil and the CapEx program linked to one-off items. And the 1/3 is linked to more classical things like a couple of operational excellence or IT developments. Acquisition, I mentioned some over cost, especially in the U.K. and Ireland. So a bit high at EUR 10 million. Shall go down, of course. Interesting line is CapEx. So as mentioned by Xavier, last year of extra Capex, around 20% to sales. And you know that it's not a normative level, which is much lower. The very strong performance of the year came from the change in working capital. Because in all the lines, we have a strong figure. For example, inventory management was a strong focus of the supply chain, so that it's certainly depreciated by EUR 2.6 million for the year. Clients was a very strong focus of the operators this year, and we have seen some strong improvement of DSO in all the geographies. So that at the end of the year, it's a positive flow of nearly EUR 9 million for clients, where you know that the natural growth shall see a negative flow. And we have also a technical effect with CICE. You are aware that in '19, we cash in twice the CICE. So it's a EUR 15 million push in the back, of course, helping a bit the working cap. Net interest paid, I mentioned already, you have in there EUR 40 million of one-off linked to the 2 refinancing occurred this year, but a good figure nevertheless. And the income tax paid benefit from the good news in the regulation in a couple of countries, and there are more to come, as you are aware, with France and Netherlands, for example, lowering their interest rate -- the tax rate. So in all, EUR 186 million of free cash flow, excluding IFRS 16. What have we done with this EUR 186 million? Basically, that's EUR 81 million of dividend given back to the shareholders, and if you accumulate at the lines, EUR 120 million of M&A activity, which is the addition of acquisitions. You have seen the list with Xavier. And sale of -- disposal of Clinical Solutions, which comes in deduction. So in the end, a stable debt year-on-year with full utilization of the free cash flow. So the debt, by the way, it has now a very nice profile with long maturities, nice products with fixed rate bonds, meaning there are no possible impact from a fluctuation of interest. Quite cheap, 1.5% in average, which is a very good way. More opportunities to refinance whenever we want because our spreads are more or less the same as they were the last good times we refinanced. For example, today, 8 years for Elis will be in the region of 1.5%. So, no -- absolutely no issue to raise any money. So very happy with the performance of cash flow. That has been -- that has allowed us to more or less stabilize debt and, of course, reduce the leverage net debt and EBITDA ratio to 3.2x end of '19. And you know that the regular profile of the company is able to reduce more, it means that we have a ton of headroom compared to the covenant, which is at EUR 375 million. My assumption is that we have more than EUR 200 million of EBITDA at norms. Of course, there's no issue at all around that. So happy with the profile of the debt. And we have now a running business of refinancing that in the future to optimize the profile. As a conclusion for the key financial takeaways. Very good top line momentum. A 3.3% organic growth is probably a record for Elis. And it means that the pricing power of the company is demonstrated fully this year, plus, which is very important, capacity to keep the clients doing so. The retention was also at a record level for the year. EBITDA margin stable performance. If you remember, the beginning of the year, it was high end of the bracket, it means that everything went well. I mean, inflation pass-through to the price, productivity in the plants and the last couple of synergies to be delivered due to the past acquisition. Headline net result up 16% because all those lines are now normalizing below, and excellent free cash flow generation plus 21% despite, as we mentioned, refinancing -- 2 refinancing during the year. Extra CapEx program last year of extra CapEx, but excellent operational performance on working capital. So very happy with the performance of this year. And it -- clearly, it paves the way for further good performance in 2020 that Xavier will explain to you.

So let's have a look now on the past to see that the group has gone a very strong transformation over the last 20 years. You can see that we were a very French company with more than 90% of the business made in France. 20 years after, France represent only 1/3 of the business, and we operate in 28 countries. The -- you remember also, there's a breakdown of the activity by end market. It's also very important to see that we don't depend to one big customer or one end market. And it's probably the reason why we have such a resilience over the year. It's the graph. Very important for us. We are very proud about what we have delivered over the last 20 years. We will have, of course, a lot of questions around the actuality. So what would be the impact for the group of this crisis in the world? I think that it's important to come back to facts and to figures. What happened for the group over the last 20 years? Every year, we have been able to develop the company. So every year, we had positive organic growth, whatever the situation in the world. So even in the beginning of 2000 with the Internet crisis, even during a subprime crisis and so on, even during H1N1 crisis and so on. Every year, not only we increase the level of sales of the company, but we keep a very stable and solid level of margin. So I think that it is the best demonstration of the resilience profile of the group. But of course, we will come back later in the presentation end market by end market to imagine what could happen in the existing context. What is also very important is to highlight the fact that we have another natural edge in our business model. It is CapEx investments in linen. So that means that when you have a slowdown in the activity with your existing customer, you will invest less linen and that protect the level of cash flow of the company. So to keep this high level of regular growth, we'd present now 5 key drivers of the natural organic growth of the company. And let's start with our business model and our ability to push cross-selling in our existing customer. So normally, you start with the basic need of customer, mainly linen, so uniform or flat linen. And then thanks to our organization, where you remember that our driver is much more than a driver. It's a field agent. It's a commercial agent. That means that he is dedicated to the customer. He's responsible for the satisfaction of the customer, and he's incentivized to sell more products to the customer. And of course, it allow us to add some additional service, additional product to the customer. It's a very profitable growth because everything is delivered with the same truck, with the same drivers. So you can imagine that we can leverage our logistic costs, and it's still a key component of the strategy of the group. It is the reason why we have decided to roll out this organization in our new countries. And here, we have taken the example of U.K. It's also one of the explanation of the decrease of the churn rate in Workwear industry. It is where we have the small and mid-sized customers. So where we have put in place this organization. So we have now, more or less, 40% of our drivers in U.K. for Workwear that are not only drivers, but field agents. So it has been a huge effort of the group to train these people. And now they are dedicated to a portfolio of customer, responsible for the satisfaction of the customer and with the ability to sign more products. The first results are very good. We registered a high level of satisfaction of customers delivered by these new field agents, and it's a very interesting point for the future. We were talking about small customer and midsized customer. It's also something very interesting for us. You remember that it's more or less the half of our portfolio in mature markets like France. So what is the strategy for us? It's, first, to benefit from the density of the group to launch some services for small customers. You will not have any kind of competition for small contracts. We are talking about EUR 100 per month. So no big competition. So it's -- it can be very profitable if you have been able to have a dense logistics network. So that's why we have taken here the example of Brazil. Very often, when we open in new countries, when we enter in a new country, we will start with major customers. So in Brazil, at the beginning, it was mainly big hospitals that decided to close the internal laundry and to outsource with us or a big industry with 1,000 people that need some uniform. And we always start like this. And then when we have built a dense network, we can launch an offer for small-sized and mid-sized customer. It is what we have launched in Brazil, for instance. Of course, the impact is very mid in 2019, but it is a way to prepare the future organic growth of the group for the next decade. You can see that today, we charge only EUR 1 million in Brazil. If you compare with what we are doing today in France, you can imagine the huge potential we have in Brazil for the next 10 or 20 years. Outsourcing. Outsourcing is also a key driver of the organic growth of the company. And in our portfolio of services, I think that Workwear is by far the service which has a huge potential, the bigger potential of outsourcing. So what are the drivers of outsourcing for Workwear? It's mainly driven by hygiene, by safety and by image of companies that wants to have the same uniform everywhere. It was interesting to see, for instance, Safran, when they decided to make the acquisition of Zodiac in France. A key topic for us of the integration was to define the same uniform for everybody, and that's why they wanted to have a contract with us to help them to roll out the same image for everybody everywhere to make the merger a success. And in this context, we have double-digit organic growth in a lot of countries in Workwear. It is the case in Latin America. It is the case in South part of Europe, so Spain and Portugal. And it is also the case in the Eastern part of Europe, so Czech Republic, Poland and so on. So it's also a nice driver of growth for the company. And innovation, of course. We need to innovate regularly for our customer. It's very important to see now that traceability becomes a differentiating factor in our industry. And when you analyze the landscape of competition for us, you will find not a lot of big international players, but very often some small local family laundry. And it is the reason why they will have a lot of difficulties to follow us in this road of innovation. And now we are able to put an RFID inside our flat linen and inside our uniform. We have developed solution of connected dispenser in our washroom business. And with all this technology, we are able to give some real-time information to our customers and to help them to optimize the management of their stock. And of course, it pushed the future level of growth of the company. And as I said, it will be quite complex for the small family laundry to follow us in this road. All these initiatives will help every country in our portfolio to push their margin. And here, you have the classical chart where we present the performance country-by-country in terms of EBITDA. So to summarize, we have the half of the business that is done in countries where we have a margin above 35%. So it's a mature market, stable level of margin. And it will still continue in the future. And the second half of the business is done in countries where we are below the threshold of 30%. What happened -- what's new in 2019? So we had 2 countries that moves right, so in the good direction. So Brazil, you can see that Brazil has now increased the level of profitability, and we are above 30% of EBITDA margin in Brazil. And it is the same in Baltics. Baltics, thanks to the huge level of organic growth, we better leveraged our fixed cost basis, and we have now a margin above 30%. To continue to provide some sustainable value for the future, CSR, it's also a key subject for us. I think that it is a big opportunity for Elis. Big opportunity because our business model promote circular economy instead of the ownership of a good. You know that we rent uniform, so it's a very good solution for the market. And we have also a lot of studies that demonstrate clearly that when you use industrial laundry instead of washing at home, you will decrease significantly the consumption of water, of energy and detergents. So that's why we consider that it's a huge opportunity for us. So we have a clear strategy in the group articulated around 3 key pillars. So first pillar is the management of our society impacts, and we have different action plans in place. First, of course, we control and we monitor the compliance of all our suppliers everywhere. And we have some regular external audits to be sure that they follow our routes. We have also some action plans to avoid with our management team everywhere any kind of risk of bribery or corruption. And we are very proud about the foundation we have launched recently, the Elis Foundation, totally close to the internal values of the company. We help some talented students coming from family without enough money to pay their studies, and Elis gives some money to help them to still continue their studies. And we'll increase our participation in this program and increase the money dedicated to this foundation. Second pillar of the CSR policy of the group is, of course, to reduce the environmental footprint, 2 key subjects for us. First subject, what do we do at the end of the life of the textiles, so flat linen or uniform? And so we have -- you can see here some very hard commitment disclosed to the market for the company, for the -- and a clear target for 2025. And the goal for us is to have, at the end of the life of our textile, 80% of textile recycled in 2025. And the second subject, of course, is to decrease the consumption of water, energy, chemicals and the same with some clear targets for 2025. Last pillar, our employees. It's very important for us. We are a business of people. It makes a difference in terms of efficiency. And of course, we are very close to our employees. First priority is safety with a clear commitment for 2025 to divide by 2 the lost time from accidents. We have also rolled out everywhere our classical rewarded program for best employees in all our laundries. And we are working in -- around the subject of diversity, we have a clear action plan to help women to reach a position of senior management position in the company. And let me now give you an example of what we are doing with a small movie that explain nice initiatives taken by the company in Colombia. [Presentation] So it's time now to have a look on what we expect for this year, 2020. So in terms of -- of course, now, we forecast another good year of organic growth. So we expect around 3% of organic growth in 2020. We are quite confident for the margin. So we expect improvement of the margin around 20 bps in 2020. And of course, it will become -- 2020 is now a normative year in terms of cash flow, so that's why we forecast a strong improvement of the cash of the company in 2020. We have a guidance of EUR 320 million compared to the more or less EUR 250 million in 2019. Everything, of course, here is given without an impact of coronavirus. And we will have -- and we will see what could happen for the company in this context. Today, we don't see a lot of impact. So it's just started this week and last week, a little in some cities, big cities like Paris or Barcelona. It's still very limited. Nevertheless, let's have a look on what could happen for us in this context. I think that you have seen the profile of resilience of the company. And we can see that we are very confident to be among the company that's less impacted by the actual crisis. Why we have such a level of confidence? First fact, we have seen what happened 20 years ago, and all the regularity of the growth and the margin of the company. Nevertheless, let's focus end market by end market. Our first end market is industry 30%, so a little less than EUR 1 billion, 30% of the business of the company. Of course, our customer will have an impact. And we see it that customers have an impact in their level of activity, but the consequence for this will be limited. Why? It is the -- due to the way we charge our customers in industry. In our contracts, we have a fixed monthly fee per wearer, whatever is the quantity of garments that we will wash after that. And if you remember, what was a key issue of the industry 3 or 4 months ago? The key issue in a lot of countries was we have difficulties to find workers. If you remember in Germany, if you analyze the studies with all the different industries, the key subject is it's very complex to find blue collar in Germany. That is the reason why, what is today the main answer of our customers is industry, is to put in place some partial unemployment answers in Germany. It's called Kurzarbeit. So that means that they keep all the employees, but they will have to work 1 day, 2 day less in the week. And you have understood that with the way we charge our customers, it doesn't change anything in the bill of Elis in this context because we will still continue to have exactly the same level of wearer with our customers. So we charge the same. So it is the reason why even if we see, of course, an impact for our customers, for industry, it's always limited the impact for Elis. Second end market, hospitality. Hospitality, of course, it is a more cyclical business for us. And of course, we will be impacted. So that means that it is a business that is volume-driven. And when you have less tourism, when you have less business travel, you will have a lower level of occupancy rate. And of course, it will have an impact in our business. Just to highlight the fact that it is only 27% of our portfolio, that inside this portfolio, you have a lot of different countries. So we have business in Latin America, for instance. And for now, we don't see any impact in our business in Latin America in Hospitality. We have also a lot of business not only in big cities. So in France, we have an impact in Paris and in the Riviera. But elsewhere, we don't see yet an impact. So it's truly totally impossible for me to take any kind of assumption of what could happen in this portfolio. The sourcing we can disclose today is to come back to what happened the last time we had exactly the such kind of crisis. So it was in 2009 with H1N1. And so the performance of Elis in this end market, Hospitality, in 2009 was a decrease of the sales by 2%. So today, I'm not able to say more about the potential impact in hospitality than what happened in 2009 with the same type of issue. Third, end market, Healthcare, so 26% more or less the same size as hospitality. So of course, we have no impact in Healthcare. So it's even a positive, small impact for us. So we can see today a huge level of activity in our Healthcare portfolio. And we have also some additional benefit. Some hospitals used some disposable solution for surgery. And due to a shortage in their supply chain, they don't have enough volume coming from Asia. And they are requesting some linen from us, so we will have a positive impact, limited. And the last end market, so trade and services, so 18% of the business of the company. I think that the impact will be limited. Limited, same subject, limited due to the way we charge our customers. So it's a monthly fixed fee, whatever is the activity of the customer we are talking here about mats or water coolers or washroom solution. And of course, it's every month the same amount charged by Elis, and we don't follow the level of activity of our customers. If we have more closure of small shops due to the crisis, of course, it could have an impact. It is the reason why we are talking about limited impact. On top of that, so it is for the -- what could be the impact on the top line? How are we able to mitigate this impact on the top line in our margin and in our cash flow? Because if you remember, the chart of the last 20 years of performance of the company, you will see that even in a difficult year on top line, we have been able to protect the margin. So why we are able to protect the margin, it is linked to the flexibility in our basis of costs. First comment, by the way, we are not impacted at all in our own supply chain. So we have 2 suppliers in China that provide fabrics for the company. Today, their plants are normally open. They are not in area impacted by the crisis, and we don't see any disruption in our own supply chain. But what is more important is to analyze how we can reduce our costs in case of a slowdown of the volume. And you remember that we manage -- we have some temporary workers everywhere, then we can immediately stop some contracts. And with our employees in factories, we have always negotiated some labor contracts that allow us to decide week-by-week, even day-by-day to reduce or to increase the number of hours that are worked inside the plant. So it's the reason why, for us, the labor cost, it's a pure variable cost in our company. And of course, the same for other key parts of our costs, energy, water, detergent and so on. It's totally linked to the level of volume of linen wash. And of course, it will follow a potential slowdown of the activity. In terms of cash, we have, of course, an additional natural edge. It is CapEx. So what happened? When we have a slowdown of the activity of existing customers, we have already both the level of stock of linen. So that means that it was a former CapEx from the past. So we have in place the level of stock. And if the customer use less linen, that means that we will invest less to renew the level of stock inside the customer. And it is the reason why we see every time a slowdown of the level of investment in linen, and that had to protect the cash of the company. And for industrial CapEx, of course, a part of the budget of the year is linked to projects for new capacity. And you can imagine that if you have a slowdown in the level of activity of our customers, we will be able to postpone such kind of projects linked to capacity because we wouldn't have any need. So it is for these reasons that the group has always been able to resist during such tough conditions in the market. So to conclude, and before the Q&A session, I think that we can be very happy with what we have delivered in 2019, both in top line with a very good organic growth. And in margin, we have been able to protect the margin of the company. It was last year of the extra CapEx program that is now totally implemented. We have significantly improved the level of cash flow of the company. You have seen that now everything is in place with the list to deliver a very regular and strong level of cash flow for the future. We can also highlight the fact that the start of the year is very good. So when we analyze the performance in January, the performance in February, it would have given us a lot of comfort with the guidance without coronavirus, of course. But even in the context of the crisis linked to this COVID-19, I think that we have a lot of strengths to resist much better than a lot of other industry and a lot of other companies. So thank you for your attention, and now we can answer to your question.

Matija Gergolet from Goldman Sachs. 3 questions for me. Firstly, on the coronavirus disease outbreak. I mean, you gave quite a few slides, quite a lot of details. The question here would be, say, you mentioned you can basically manage your costs. At what level do you think that will become challenging? Let's say, if you have like a minus 5%, minus 10% decline in volumes, would you still be able to manage costs? Or, say, beyond what level, say, does it become really difficult to manage?

Today, I don't see a lot of limits because we -- when we analyze what happened in the past, we had some situation. You can imagine when you have a terrorist attack in Paris. Today, after the attack or the week after the attack, at its local level, the drop of volume was very significant. And at this level, at this -- in this area, in this city in Paris, we could have a minus 20% of volume the week after. And we have always been able to manage it and to reduce immediately our labor costs and also the chemicals, water and so on consumption to adapt to this impact. If we had very incredible decrease of the volumes with a view that it could be long term and so on, we have so many plants everywhere. We have more than 400 plants, we could also manage to close some plants and to move the volume in the closest plant to reduce the fixed cost also. So I'm not afraid at all about kind of threshold underway. We could have some trouble to protect the margin of the group.

Second question on the M&A. Can you give a bit of a color, say, how is the pipeline looking, say, for 2020? And maybe also on that, I mean, it seems to say the price that you paid last year went up a little bit, I calculated like 2x or 2.1x EV sales, is there any reason behind that? Or is the market becoming a bit more, say, expensive?

Yes. So it depends on the profile of companies, of course. You -- sales is one element, but it's by far not the most important element. When you analyze what we have done in 2019, you will find more company in new geographies like Russia, Denmark and Sweden. In this case, it was a company with a lot of mats. And in mats, you will pay more than 2x sales due to the high level of profitability of this company. So it is the reason why you have seen more money in the expenses linked to the turnover, but it's not a structural change. For 2020, the pipe is like usual.

And last one just on, say, financial guidance. Can you just, say, remind us what are you guiding for interest expenses for the year and also for taxes? I think it was the percentage tax rate for 2020.

Yes. So considering interest, what I mentioned is that normative level of P&L is around EUR 90 million, considering that you pay around EUR 60 million actual interest to banks. On the P&L, you had EUR 10 million of notional interest linked to IFRS 16, around EUR 9 million for the convertible bond, and you have a recurring EUR 10 million of deposition of fees. So that is EUR 60 million plus EUR 10 million, plus EUR 10 million, plus EUR 10 million, EUR 90 million. Considering the cash flow, that EUR 60 million paid, and then you adjust the EUR 10 million of IFRS 16, which is a restatement. So around EUR 70 million. And of course, if you have some refinancing, you can have some extra fees linked to that. What -- basically is that -- the point. Second tax rate, tax rate, when you look at P&L, it's a good modernization is to take 25% of benefit before tax, plus EUR 11 million of [CVL], which is a specific French item. And for the cash flow, that's also 25%, but then you take EBIT plus interest cash plus exceptional cash.

Sylvia Barker from JPMorgan. 3 questions from me as well, please. First, on CICE. Could you just clarify, the EUR 15 million was up year-on-year, essentially. I guess you have the extra month, but what was the overall CICE receivable benefit that you got? And do you have any on the balance sheet left? Secondly, just on small customers. So it seems like that should be a logical kind of growth area for a while to come. If you think about, let's say, Spain, you currently presumably use mainly trucks, how much does it cost to kind of add on the Workwear and the small customers, in particular, so the vans and, I guess, the sales force? So any idea of kind of a normalized CapEx and OpEx to go more into the small customer space will be interesting. And then finally, just on volume versus price, what was that in 2019? And how do you see that within the 3% guidance for 2020?

So I will take the 2 second questions and then Louis the first one. So price, it was, in 2020, around 1.5% in price. And in the guidance '20, we expect a 1% price and a 2% volume. For a small customer in Spain, we don't see any need of extra investment, extra CapEx and so on. It's totally in line with the rest of investments linked to the fact that prices and the rate are above for small customers. So it mitigates the fact that when you start, you will have perhaps more investment in sales. So at the end, it's the same profitability. We don't see any difference. We have some -- in France, we are so dense that we have some plants more or less dedicated in Paris to big customers, big hotels and plants more dedicated in Paris to a small customer. At the end, we don't see any difference in terms of profitability in those 2 different plants, so it doesn't change anything for us. And the third question was for Louis and the CICE.

So CICE, we're supposed to use it all in '19. But due to the cost of refinancing, we had to pay less tax. So there was a small residual of CICE to be used in '20, which is the below EUR 5 million.

Okay. And sorry, just on the small customer point. Let's say, in 2020, you invest in the plants. How much is that in CapEx and OpEx? And then I appreciate that the -- then the profitability is the same, but how much is the initial outlay that you might need to put in?

It's not significant at all. You can see that we invest 20% of net sales or more than EUR 600 million or 18% of net sales in 2020. 1 van or 2 vans to launch a business in São Paulo, it's nothing. So it's totally digested in the total amount of investment of the country.

Dan Hobden, Crédit Suisse. If I could ask 3 on M&A and then 1 on operational, and they are all quite small. So M&A, with Berendsen done, obviously, in 2019, you did a whole lot of small deals. Is there a view that maybe you could go and do something larger now into 2020? Question number two, I was wondering if you could talk on the progress of completing Kings? I think you said it's expected in 2020. How is that going? And then the third one on M&A. I think I could be wrong, but there was talk about you merging Lavebras with Atmosfera and that recognizing a tax benefit. I was wondering the progress on that. And then the operational one, not asking on a country-by-country, but on a U.K. basis, how do you see organic growth into 2020? And how do you see the margin? Is it time for improvements to start coming through yet?

So M&A. First question, large deals, small deals and so on. So it's not a willingness of the company. It was not a willingness of the company to say that we don't want any large deal in 2018 or '19, just that we are very strict in what we want to buy. For instance, you know that in the end of '19, we could -- done a big deal with PHS here in U.K. And for instance, we decided not to answer. So we didn't participate to this tender and to this process just because we are considering that the level of risk in this business was too high, the level of risk linked to this company too high and the synergies were not granted for us. And it is the reason why we decided not to answer. The same subject in Australia. You know that the leader of the Australian market is for sales today. And same subject, we have decided not to participate to the tender, not because it is a large deal, just because we consider that today the level of issues in this company and our ability to increase significantly the profitability is not forgiven. So it is the reason why we have decided not to participate. So it's not linked to we were not prepared to do such a large deal or not. It's just that we have a strict policy in the company. And we don't want to make acquisition for acquisition, just if it makes sense or not. And so in '19, the actuality has made that we had only some small deal and bottom deal, but it was not linked to a strategy of the group. For Kings. So we are closer and closer to close definitely the deal. So you know that we have reached an agreement with the CCPC around what kind of remedies we need to put in place. So we had to sell at least 3 customers from the health care market to try to find new laundries that could accept these 3 customers. We have a deal with a small competitor. This deal has been now approved by the CCPC that approved this competitor to take these 3 customers. So now we have to wait for some investment in the small plant of this competitor to be prepared to receive the 3 customer. And we are working with the customer to explain why we will transfer the volume to the small competitor. We expect to close definitely the deal, I think, around summer is probably what we can expect today. Then U.K. So U.K., as we said a few months ago, we don't expect positive organic growth in '20 and improvement of the margin in '20 just linked to the report effect. So even if we have improved the situation in Workwear, we were still down. And that means that we will have a report effect in 2020 due to the losses of '19. We see some improvement regularly month by month. Now the key subject for us is also to see how efficient we are with the new sales team and how quickly we can have a ramp-up in the new sales to work for the growth of '21. It is what we have in mind. And in this context, if we still have and we forecast to still have a slowdown of the activity in Workwear, of course, it will also put some pressure on the margin in 2020 in U.K.

Last question. Tax benefit in Brazil. The good news is that it's still fully available. So we have a bucket of BRL 300 million of tax deduction. So that's great money, but that's a new potential because -- but this is at -- in Brazil. So it's very complicated. And we have not yet found a technical safe, technical way to use that. I must say we will go in Brazil soon to work on that with lawyers and editors. But it's quite complicated. So we have not found a way yet, but it's available, and it will not perish. So one day, probably we'll use it, but I don't have visibility on that.

Chirag Vadhia from HSBC. 3 questions as well. Firstly, again, on the U.K. Regarding the Workwear churn, is it fair to say that it was slightly higher in the second half of the year than the first half? And just sort of what KPIs are using to measure that quality for the clients as well? And secondly, on Italy, I appreciate it's a small part of the business, but has there been any coronavirus impact on the business there? And finally, on the new free cash flow guidance, could you just give some of the working parts that help you deliver that?

So churn in Workwear, no, I'm not sure that we can say that it was worst in second semester than first semester because we see some regular improvement. The sort of one-off, if I may, it's the decrease of volume with TESCO. You know that they have decided to reduce significantly the number of shops and the number of people employed by TESCO as it is a big supplier of Elis. Of course, in the second semester, it has put some pressure because we had less people to -- that were using our linen. But we are still very optimistic with the trend we see in the level of churn. And so that's figures of January, for instance, was even below the 10% that we disclosed for the full year. In terms of KPI used to monitor the satisfaction level of -- satisfaction of customers, it's a very classical set of KPIs. So in terms of volume, we monitor the number of claims, so we are able every month to have a clear view plant-by-plant of the number of claims of the months. And we have a more global classical KPIs linked to the NPS country-by-country to track the evolution of the satisfaction of the customer. After that, so you wanted to know what happened with our customer portfolio in the context of coronavirus in Italy. In Italy, we have 0 business in Hospitality. So we don't see any impact. So we have business in Healthcare and in Workwear for industry. In Healthcare, you can imagine that no impact and even more activity. And for Industry, the key end markets in our portfolio in Italy is pharmaceutical industry and food processing. So 2 businesses where, today, you need to still continue to work, of course. So today, in Italy, we are a small player in Italy. We have only 2 plants, 1 in Milan and 1 in Rome. But today, in Italy, we have no impact of the crisis in Italy due to the -- our exposure to end market not concerned by the crisis. And the last question was?

The question was about the guidance of free cash flow. But...

Some moving parts to deliver that. Sorry. In terms of your free cash flow this year and the moving parts on how you deliver your guidance this year.

The bridge between '19 and '20. But basically, you've got EBITDA improving. So you can make your assumption. CapEx reducing in a ratio, but following the growth. Working cap will be probably less positive than this year. Strong normalization of the finance around tax. So probably a small advantage in rate, but of course, following -- so increasing, so minus impact because it's somewhat related to what is above. So that's the way we bridge '19 to '20.

Lucas Ferhani from Deutsche Bank. So I'll have a few, the first one on the U.K. Can you tell us, excluding TESCO, what's the organic growth? And also the margin in H2 seems flat to almost positive. Can you speak about what happened in H2 the big improvement? Secondly, on Workwear in Europe. Let's just say if unemployment were to go up or there'll be more severe consequences of the coronavirus, you would be potentially impacting also in Workwear. Can you give us your exposure in terms of end market? What's auto, construction, things like that in the U.K.? And another point on M&A, given the free cash flow you'll deliver, and lets say maybe 2019 was a bit below what you usually deliver in terms of M&A growth on revenues, do you plan to accelerate that? And taking into account also the fact that now Berendsen is done, so you should have some more internal resources to handle the extra M&A?

So for M&A, as I said, we don't have any internal target, by the way, because for me, it would be the way to make some mistakes. So we are doing deal when we see some value creation and where it has some interest for us. So we don't have any target. So it will -- '19 was -- 6 deals is not nothing. So it was small deals. And I will not answer that we have a target to increase the pace of M&A in 2020. It will depend on opportunities. The pipe is full. So we have a lot of subject on the table, as usual, small deal in existing countries and so on. But it was not, as I said, in the beginning of the Q&A session, it's not a strategy of the group to say that in '19, we want to slow down the M&A pace due to balancing integration. Not at all. It's just discipline of the company. We don't do deal if we consider that this deal has no merit. The second part of your question for growth without TESCO. TESCO has a limited impact, honestly, at country level. Just if we highlight month-by-month on the churn on a monthly basis, we can see an impact in the Workwear churn month-by-month. But at the country level in terms of organic growth, the impact was limited. So I will not try to use this excuse to explain why we had a negative organic growth in U.K. Margin in H2, you have some effect of price increase in Hospitality. So of course, when you see that we have been able to increase price by 7% on Hospitality and strong improvement in productivity also, nevertheless, I will be very cautious with this. I will not say that we will increase the margin in 2020 in U.K. It is not what we have in our forecast due to this mix effect. That will continue in 2020 with less volume in Workwear, where it is very profitable. Question around unemployment in Europe. Honestly, it's not a part of the business where we have the biggest exposure. You can imagine that we provide the figures of the company over the last 20 years. We had another period in these 20 years, where the level of unemployment was much higher, much bigger, and we didn't see anything in our business for a lot of reasons. I tried to explain how we charge uniform for industry, and it's linked to wearer and so on. So it's -- protect us a lot. I think that we have a level of exposure to industry not impacted that is very high. We were talking about, what are the drivers of outsourcing and hygiene, safety and so on? That means that we are talking about a lot of pharmaceutical industry, food processing, agro business and so on. And they suffered not at all today. And for instance, you took the example of exposure to car automotive. Today, it's very limited. I think that in U.K., car automotive represents less than EUR 0.5 million in our portfolio today in U.K. So we are more or less not a supplier of the car automotive industry in U.K.

And in Germany, the auto?

In Germany, we have some contracts with a car automotive. We -- how much?

EUR 9 million.

EUR 9 million. But as I said, today, the strategy in Germany is to promote Kurzarbeit. That means that they want to keep everybody because it was so complex for them to find blue collar that they don't want to put anybody -- to fire anybody. And for us, it's very good. That means that we still continue to have exactly the same number of wearer. And to date, we don't see any impact in our revenue in Germany in this crisis. And the German industry is suffering for some months now, but we don't see it in our figures.

Sorry, another follow-up on coronavirus. Obviously, it's hard to answer, given we don't really have a clue of what can happen. But if we go back to what happened in France following the terrorist attack, and like you said there was a drop in volumes, I guess the difference here is that you can probably prepare the summer season and adjust volumes. But at that point in time, in France, there was a meaningful drop in margin. I think it was something like 50 bps. It was a very different situation, and also the group was also very different, but can you explain kind of what happened there, and how this is different even if you see big volume drops in Paris and the Riviera?

So we cannot say that the drop of the margin in France in the year of the terrorist attack was 100% linked to the lack of volume. So that's why I will not follow you on this subject. And for me, I don't see any reason today to be pessimistic with the margin in France due to the lack of volume. We have a lot of other end markets in France. We are talking, of course, about big hotels that will be concerned by some cancellation, of course, and we will have an impact. But don't forget also that in our business of hospitality, globally speaking, we have also business with small restaurant in Puy de in Clermont-Ferrand, where I'm not sure that we will see an impact in the level of volume in this small restaurant. The same, globally speaking, at the group level, of course, Hospitality will be impacted. But we have a large exposure of different types of customers. I'm not sure that a small hotel in São Paulo would be today impacted what happened in the world. And we have a lot of business with restaurants in Copenhagen. I'm not sure that the restaurants in Copenhagen are immediately impacted by the situation. Of course, in big cities and in Barcelona, when they can't sell even in Paris today and so on, we have an impact, of course. But it is also the reason why, at the group level, when you analyze what happened in 2009 with the H1N1, minus 2% only at the group level in hospitality. So that means that we have also some natural other edge to protect the top line of the company.

2009 is probably a good reference because when you look at what happened, France was 80% of the total. And in that, hotel was probably more than for us. So minus 2% in hotels in France in 12 months. It was something very substantial. What happened below, EBITDA margin was slightly up, that's right, slightly up. The CapEx was reduced to 16% to sales. So an excellent share in cash flow in 2009.

This is Anvesh Agrawal from Morgan Stanley. I just got a couple of questions. First on the U.K., obviously, you have done a pretty good job of passing on the prices, but that has led to the volume decline, obviously. And then we have seen substantial investment in the U.K. over the last 3 years, which not necessarily will pay off unless the volumes come back. So how do you see the price volume dynamic playing out in the U.K. going forward? Or do you still intend to keep the pushing up your prices?

Yes, yes. We need to still continue to push prices in U.K. We have no issue in terms of, do we leverage enough our fixed cost basis and so on? We had a lot of hospitality plants working in 3 shifts, 7 days with a lack of efficiency due to this non-normal rate of utilization of the industrial assets. So that's why, today, despite the level of investment we made, and despite the slowdown on the volume of nonprofitable customer, we have no issue with this level of subject. Do we have enough volume to justify fixed costs? In every flat linen plant, we are working at the minimum with 2 shifts, 6 days. So we are far, far, far from a situation where we would have an overcapacity in the U.K. market. Even if we see hospitality declining due to the crisis and so on and so on, we are far about this subject.

That's very clear. And the second is on the productivity improvements. And obviously, 2019, we saw benefits in a couple of regions from that. Maybe going forward, what are the reasons why you're targeting the similar improvements? Or the other way is the 20 basis point of margin improvement you have next year, what are the building blocks for that?

So we -- it's not new for the company to make this kind of improvement in productivity. In the past, we disclosed the French productivity. So even in very mature market like France, every year, we have been able to increase by 2% to 3% the level of productivity in our plants. It's linked to, of course, investment. So we have regular investment, and it's part of our 18% of CapEx. Inside, we will find some investments to have some better materials with a higher level of productivity. It's also a link of new ideas with our metals teams that we roll out everywhere, and it's also linked to the fact that we still have in our portfolio a lot of plants that are low performer in comparison to the best-in-class. And so the transfer of know-how everywhere allow us to increase regularly the level of productivity. So for 2020, we have more or less the same level of expectation in terms of productivity at the group level in comparison to what we have delivered in 2019 with a lot of ideas everywhere.

That's clear. And the final question, and this has been -- I have been asked to ask this by clients. So can you comment on your exposures to big hotels in France, particularly like likes of Accor or Euro Disney? And if not, then what's the split between the large hotels and small hotels for you in France?

Probably if you take big hotels, and by the way, what is a big hotel, what is a small hotel? But let's imagine very big hotels and small hotels and restaurants, it will be less than the half probably of big hotels.

And the total is EUR 375 million for France for hotels. Now many hotel -- 90% hotel is on the bit of restaurants, of course.

Just a quick follow-up on the coronavirus impact. Technical question. When it comes to, say, Hospitality, so your contracts are volume-based. How should we think about, it's a bit technical, the depreciation? And will the depreciation be, say, flat, so time-based? Or is it depreciation is actually linked to basically volumes that you basically process?

Depreciation of linen?

Of linen, sorry, for the...

So it's fixed. So it's...

It's fixed. We just -- we have a payout of depreciation by type of linen. So let's say that regular sheets for hotels is 2.9 years, so we buy it. And we don't even think about what we do. As soon as it's put into service, not when it is in inventory. But when it's put into service, it's become an asset. And it's systematically depreciated at 2.9 years. Whatever happens. Because as you can guess, due to the volume, we can't track it.

Okay. But then you will have, say, lower volumes on the incremental stock basically?

Yes, yes. No, the issue you mentioned is that if we have less utilization, rotation of the linen, we have to invest less for maintenance. And you all remember that for flat linen, maintenance is a good part of the...

So if you don't have any other questions, thank you for your presence this morning. And have a good day.