Elis SA (ELIS) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Elis 2020 Annual Results Presentation. [Operator Instructions] I must also advise you that this conference is being recorded today. I would now like to hand the conference over to the speakers. Please go ahead.

Good morning, everyone. I am Xavier Martiré, CEO of Elis. Welcome to our 2020 annual results conference call, which is also webcasted. The speakers on this call will be Louis Guyot, CFO; and myself. After an overview of the 2020 business highlights, I will hand over to Louis. He will detail the financial performance. I will then come back to provide you with an update on our CSR strategy and share with you our views on 2021. Let me start with the highlights of our 2020 performance, which was, in many ways, remarkable given the unprecedented crisis we are going through. As you will see, the group quickly adapted and proved once again its great resilience. Despite an organic revenue decrease of 13.3%, EBITDA margin was up plus 20 basis points at 33.8%. And free cash flow after lease payments was at EUR 217 million, up nearly 25% year-on-year, enabling the group to decrease its net debt by EUR 91 million. The good performance from both the cost side and the cash side is a consequence of all the efforts made by the management teams or group countries and of the very good reactivity we showed when the first containment measures were implemented. Our actions notably included temporary or permanent plant shutdowns, headcount reduction and implementation of sustainable cost-saving measures in all our countries. We also reviewed and significantly cut our CapEx plan, especially all the industrial projects to increase capacity. This came on top of the mechanical decrease of linen CapEx as activity slowed down. The good resilience we showed in 2020 is also the consequence of our strategy. This includes, first, our M&A activity, which has aimed over the last few years at diversifying our geographies. Our strategy also includes our multi-services and multi-market approach, which limits the group exposure to any given industry and, therefore, provide us with balanced product and client portfolio. Finally, our capacity to react well to the crisis had a lot to do with our decentralized approach, which offers great flexibility. I will return to this shortly. Moving on to the next slide. Let's start with the monthly view on the 2020 organic growth evolution to remind you that this unprecedented crisis had a very strong impact on our activity. As you can see on the graph, the year started well until mid-March. [ Growth ] then decreased sharply in Q2, down more than 25% on an organic basis because of the implementation of the first strict lockdown measures in Europe, which impacted all our end markets. In H2, activity stabilized somewhat at around minus 12% with our most impacted end market being Hospitality, which is a good transition to the next slide. What you see here in the 2020 organic revenue evolution for each of our 4 end markets, the first comment is that circa 75% of our business has remained almost immune to the crisis. The 75% are made up of, first, Industry, where we recorded around minus 3% organic revenue decline in 2020 with, on the one hand, some of our clients impacted such as clients in the automotive or aeronautics industry; but on the other hand, some other clients with only little or no impact such as pharmaceutical, energy, food processing, among others. Second, Healthcare, where we were able to sign some new business, for example, with some small hospitals that switched to the outsourcing business model during the crisis. But this was offset by the fact that most countries decided to postpone all nonurgent medical treatments to make more room for COVID-19 patients, often resulting in some hospitals being partially empty, which means lower activity for us. At the end of the day, Healthcare was up around plus 3% in 2020. Finally, Trade & Services, which, just like Industry, showed a mixed picture with some businesses there impacted, such as all nonfood stores and collective catering, but with other businesses maintaining normal activity like small and large food retailer. All in, organic revenue was down minus 3% in 2020 for Trade & Services. So at the end of the day, the only end market really impacted throughout the year was Hospitality, which accounted for 25% of revenue in 2019. And in 2020, we lost around 50% of our revenue with hotels and restaurants. Looking at 2020 result by region now. Our 5 European geographies were down with geographies in which Hospitality is normally the biggest contributor showing the strongest revenue contractions. Southern Europe was down minus 33% due to the weight of tourism in Spain and Portugal in the country mix. France was also impacted with organic revenue decline of around minus 19%. In the U.K., organic revenue was down around minus 24% in 2020 due to a 33% share of Hospitality in the mix and to subdued performance in Workwear, which has many clients food catering. Conversely, Central Europe and Scandinavia showed good resilience in 2020 driven by: first, the higher proportion of Industry or Trade & Services in their revenue mix; and second, the softer lockdown measures in some countries like Sweden or Germany. Finally, Latin America was up more than plus 5% organically in 2020 driven by a favorable business mix with Healthcare representing around 2/3 of revenue in the region. We were also able to deliver good commercial activities with the win of some short-term contracts for the supply of overgowns for surgical gloves. Now looking at EBITDA margin performance by region. Despite the crisis, we have been able to improve the margin in most geographies. And group margin improved plus 20 bps, which is a remarkable achievement. In France and Scandinavia, we maintained margin above 38%, which is a best-in-class level in the group. Central Europe delivered significant profitability improvement with margin at nearly 33%, up 110 basis points year-on-year, mostly driven by the good progress made in Germany. Even in the U.K. & Ireland, a region very impacted by the crisis, we were able to improve margin by plus 40 basis points. We are now very close to the 30% margin milestone as a result of all the efforts we did to improve the operations since the acquisition of Berendsen on top of very efficient cost-saving matures in 2020. Latin America did very well too, also thanks to efficient cost saving and, as I previously mentioned, to the signature of short-term, very profitable Healthcare contracts that boosted margin. The only decrease of margin is coming from Southern Europe where the weight of Hospitality is too strong in Spain and in Portugal, the drop of activity was too important and all the measures taken to cut costs were not sufficient to preserve the profitability. Moving on to the next slide. It is undisputable that Elis showed great resilience in 2020. The first element I would like to put forward in our diversification in terms of geographies, end markets and services. The group now operates in 28 countries, in Northern Europe, in Southern Europe and in Latin America. We have a very broad range of clients to whom we offer a very large portfolio of products across 3 main segments, combining more than 100,000 SKUs. The second element explaining our strong resilience is our know-how in terms of acquiring and integrating assets. The group has finalized more than 70 deals over the last 10 years and nearly 40 since the IPO. Berendsen is, of course, the most iconic acquisition made by the group. And 4 years after this acquisition, it is fair to say that it has been a real success. This acquisition clearly contributed to a more balanced risk profile and geographical diversification. Finally, the group relies on a very homogenous organization, and we have very good experience in spreading Elis' structure of operational performance in all our countries. Thanks to this homogenous structure, we were able to implement cost-saving measures and reorganization plans in all countries very quickly after the beginning of the sanitary crisis. Moving on to the next slide with the breakdown of our 2020 revenue by activity, end market and geography to illustrate the group's high level of diversification. 2020 numbers are in the outer circle and 2019 numbers are in the inner circle. So you can have an idea of the impacts of the crisis on our mix with a decrease in the share of Hospitality in flat linen. In 2020, Industry, Trade & Services and Healthcare represented a combined contribution of nearly 85% of our sales with Hospitality declining significantly, of course. On the next slide, I'd like to return to our very strong know-how in acquiring and integrating assets that has further reinforced Elis' resilient profile. It is worth noting that in 2020, Elis' historical geographies, that mean France and Southern Europe, were among the countries most impacted by the volume decrease in Hospitality. Fortunately, this history column perimeter today only represents around 44% of our total revenue. Over the last 6 years, we have been able to develop a very strong platform in Latin America in 3 countries: Brazil, Chile and Colombia. This platform today represents a bit less than 10% of the group's total revenue, and it has been developing very successfully in recent years. We have improved EBITDA margin in Brazil from 21% in 2014 when we first entered the country by acquiring Atmosfera to 35% in 2020, on the back of productivity improvement and other well-integrated acquisition in the country. Berendsen also significantly contribute to improved Elis risk profile with the addition of new countries in Europe, such as Scandinavian countries, which were the best countries of Berendsen. We maintained their momentum and smoothly integrated these countries in our operations. In the U.K., the turnaround of the business is very well advanced. And we know that Elis is in 2020 the most profitable player in the country among our largest peer, which is a great achievement given where we started from back in 2017. In Central Europe, we have fully benefited from the merger of Berendsen network in Germany with Elis' historical German network. Germany is now our second-largest country after France, and our operations in the country delivered very good progress in 2020. Moving on to the next slide, I would like now to focus on all the measures taken by the group in a very timely manner to adapt to this unique situation. Our reaction was in 2 stages. First, as soon as the lockdown measures were implemented and revenues started to decline, we reorganized production to concentrate remaining volumes in a smaller number of plants, which resulted in the temporary shutdown of around 100 plants in the world. At the same time, we terminated or did not renew all the short-term contract employees we had in our plants. We also adjusted the remaining headcount with redundancy plans or furlough measures when available. This included blue collar, field agents, sales team, maintenance team, plant manager and central teams. Finally, we also did a great job on the logistics side to decrease the number of trucks and the number of routes. Then from May onward, we entered a second stage and we worked on several structural longer-term measures to prepare for the future. First, we decided to permanently shut down 5 plants. Then in every country, we worked on permanent redundancy plans at the head offices of our 28 countries. We have also extensively reviewed the 2020 CapEx plan and canceled all projects related to capacity increase. Furthermore, linen CapEx investment decreased during the months of lower activity as the linen not used by our clients did not need to be replaced. This linen CapEx review was done by closely monitoring the state of our inventory to optimize change in working capital and cash. I would like to insist on the fact that this CapEx cuts has been done in a rational way, and there is absolutely no risk that we will need to invest more than normal in the future to compensate for the savings made in 2020. Finally, we redefined new commercial offers to address the needs created by the sanitary crisis. We provided hydroalcoholic gel and disinfection services, which, as you can imagine, has met with real success lately. On the linen side, we had many successes in Healthcare workwear with an increasing demand for surgery gowns to replace single-use products. We also noted an increase in linen rotation, especially in Industry, with requests from our clients to increase their level of inventory so their employees can change garment more often. Finally, we saw a significant rise in interest for outsourcing model with many players that were previously asking their employees to wash their work clothes at home deciding to sign contracts with us in the light of health care concerns. Finally, we put a strong focus on cash collection with the implementation of daily monitoring in every country, which enabled us to slightly improve the DSO in 2020 compared to 2019, which clearly underscores the very good relationship between Elis and its clients. Moving on to the next slide, I would like to further elaborate on the sense of service we're demonstrating during the crisis. In 2020, Elis demonstrated both strong service reliability and commercial proximity. For many of our clients, we provide the service that is essential. Without linen or uniforms, most of our clients simply cannot operate their business. We have maintained a perfect service even during lockdowns, thanks to the strong commitment of our employees. The absenteeism rate did not increase in 2020 versus 2019, highlighting our efforts to protect the health of our employees and to offer them a perfectly safe working environment. Furthermore, we were flexible and adapted our invoicing terms to the reality of our customers with discounts or temporary suspension granted. We have also been opportunistic to capture additional business. The Brazilian contracts I mentioned earlier are one example among many others. And we estimate the total additional new business directly linked to the sanitary crisis in the region of around EUR 20 million for 2020. What we demonstrated during the crisis will very likely durably reinforce our relationship with our clients. They view us as a local reliable partner who listens to their needs and who can act as a trustworthy ally in difficult times. Let me now say a few words geography by geography. In France, we delivered a very good performance with EBITDA margin flat at 38% despite the high exposure to Hospitality, which represented more than 1/3 of country total revenue in 2019. Although Hospitality was strongly impacted throughout the year, the other end markets held up quite well, and we limited the organic revenue decrease to minus 19%. The raw marketable margin stability was a consequence of our capacity to variabilize virtually every cost in 2020, which was again a great achievement. As of today, it is quite reassuring to see that roughly 2/3 of the business is almost back to pre-crisis levels. In Central Europe, the performance was very good in 2020 with a plus 110 basis point margin improvement and a limited organic revenue decline of minus 6%. The end market mix in the region is more favorable with a strong contribution from Healthcare and Industry clients, which respectively represent 40% and 30% of total revenue. Industry showed good resilience, and the Netherlands, Poland, the Czech Republic, Slovakia and Hungary were all up in 2020. Unsurprisingly, Switzerland was the most impacted country in the region due to its higher exposure to Hospitality. As far as the margin progression is concerned, I would like to stress the operational projects made in Germany, the second-largest country of the group in terms of revenues. We have been working over the last 3 years on improving the quality of our local team and rationalizing our industrial footprint in the country, and we started to see the results in 2020. Moving on to Scandinavia & Eastern Europe, we see a similar performance with organic revenue down only minus 7% in 2020 and margin up plus 20 bps. In this region, Hospitality normally represent only 15% of revenue, and some countries like Sweden, Norway and Finland, which were not put under strict lockdown, continued their activity almost normally. Norway and the Baltic states even delivered positive organic revenue growth in 2020 on the back of good commercial activity. As far as margin is concerned, the improvement is a consequence of the cost-saving efforts made throughout the year, including decent savings on logistics and of a favorable mix effect as Hospitality is the most impacted end market and a below rate margin in Scandinavia & Eastern Europe. U.K. & Ireland now, our mix was not favorable there with 1/3 of our business in Hospitality which has suffered significantly in 2020. Furthermore, we have a high number of collective catering clients, which are very impacted by the crisis in our Trade & Services end markets. In Healthcare, we also noted a decrease in volume as the NHS has been rolling out a massive plan to postpone an urgent treatment. And to make things worse, the nursing home sector, which held up quite well during the crisis, is generally not outsourced in the U.K. So therefore, we did not benefit from the same buffer as we did in some other geographies, and 2020 organic revenue was down minus 24%. In terms of costs, however, we managed to quickly adjust our cost base on the back of cost-cutting and redundancy plans. On top of that, we continued to roll out all the measures we initiated following the Berendsen acquisition, notably aiming at improving plant productivity and logistics. This resulted in a plus 40 basis point margin increase and make us the most profitable player in the U.K. in 2020. Finally, I would like to say that all these efforts on costs were made without much gauging the future, and we maintain the hiring of 20 new salesmen in the Workwear segment. So we feel ready to capture any opportunity coming from a potential rebound in activity in 2021. Moving on to Southern Europe, the most impacted region in 2020 from a revenue and margin standpoint. The mix is very unfavorable in this region. Around 60% of our revenue normally comes from Hospitality clients, and 2020 organic revenue decreased 33%. However, Workwear was up double-digit in the region, leading to positive organic revenue growth in Italy in 2020 as the country has a high share of Workwear in its mix. We made the same efforts on the cost base as in the other geographies, but the strong drop in revenues led to a 580 basis point margin decrease in 2020. On top of that, there was a lag in the implementation of some operational adjustments due to the prevailing labor procedures in the country, which did not help. But on a more positive note, all these adjustments have eventually been done, and there is no doubt that margin will improve in 2021. To conclude this world, too, let's touch base on Latin America where performance was very good in 2020 with more than 5% organic growth, driven by a favorable end market mix, with around 90% of our revenue coming from Healthcare or resilient Industry clients. There were many cancellation of nonurgent medical treatments, leading to some volume decrease in Healthcare, especially in the first half. Nevertheless, our Brazilian commercial team was very good in signing high-volume, very profitable, short-term contracts with Healthcare clients regarding protective overcoats for medical staff. At the same time, we have implemented headcount reduction measures in our 3 countries in the region: Brazil, Colombia and Chile. This, combined with material productivity gains, led to very strong margin improvement of 330 basis points in 2020. Profitability in Latin America is now above 33%, very close to what we deliver in our best-in-class countries, highlighting once again the value creation Elis can deliver, thanks to M&A. Let's now have a look at our M&A activity in 2020, which had a plus 1% impact on the revenue last year. Our M&A appetite was obviously subdued given the crisis, especially in H1. What we did at that time was essentially closed deals we have previously announced and where negotiations were well advanced. From H2 onwards, we resumed more normal M&A activity. We closed 5 deals during the year, the largest one being Kings Laundry in Ireland. It is pretty much the same rationale as what we did in Spain with Indusal or in Brazil with Lavebras. We were already #1 in Ireland, and we had the opportunity to take over the #2 and further consolidating our leadership in this country. In the U.K., we acquired Central Laundry, a small player in the health care market with below EUR 5 million of revenue, where we believe we will be able to generate good synergies in the coming months. We also bought Haber in Germany, a EUR 20 million revenue health care player, further consolidating the health care markets in the country where we were already #1. In the Czech Republic, we acquired TWC, a small player to increase our production capacity near Prague. And finally, we acquired Clinilaves in November to further improve our health care footprint in the country. I will now hand over to Louis to further comment on the financial results.

Well, thank you, Xavier, and good morning, everyone. Let's start by looking at the full P&L. Revenue decreased by 14.5% in '20, of which 13.3% organic and 12.3% excluding ForEx. As Xavier already mentioned, '20 EBITDA is down 14.1% with EBITDA margin up 20 bps. Below EBITDA, D&A are slightly up year-on-year even though you will see that CapEx decreased. As a reminder, 60% of D&A corresponds to linen and 30% to industrial assets. Overall, the D&A increase is due to the CapEx depreciation period, which is 3 years on average for linen and which can go up to 50 years for any [ 3-year assets ]. Therefore, the impact on D&A of the decrease in CapEx is mechanically delayed in time. To illustrate this, H1 D&A are up year-on-year, but H2 D&A decreased by 2.4% compared to H2 '19. This D&A evolution explains why EBIT margin decreased by 350 bps in '20 although EBITDA margin is up. Below EBIT, noncurrent operating income and expenses is EUR 64 million. It's made up, first, one-off at the peak of the COVID crisis in Q2 for EUR 22 million, just as bonus for [ presentation ], additional protective equipment for employees and so on; second, restructuring costs linked to redundancy plans and closure of plants for EUR 33 million; and third, EUR 5 million of acquisition costs. Moving further down, financial results improved by more than EUR 60 million, reaching a normative level as a result of the '19 refinancings. We'll see the detail later. It's worth noting that '20 net income remains in positive territory, EUR 4 million, with headline net income at EUR 139 million. Let's have a look at the usual detailed calculation. The main items reflected between net result and headline net result are the same as usual: PPA depreciation, noncash IFRS 2 expense for the free-share plan and major one-off net of tax, which are busier restructuring costs and COVID-19 incremental costs. Let's now look at the cash flow statement. Free cash flow improved by EUR 43 million year-on-year, which demonstrates the resilient pattern of the business cash generation. Starting at the top of the table, we see the cash effect of the exceptional items we have previously discussed. CapEx is down EUR 167 million in '20. As previously explained, linen investments decreased significantly with the crisis, and all the capacity-related Industrial CapEx was canceled for the year. For the record, '19 was the last year of our 3-year CapEx program dedicated to Berendsen, which means that the '19 number was higher than normal at circa 20% of revenue versus a normative ratio of circa 18%. Let's underline that EBITDA minus CapEx is up in '20 compared to '19. Working capital requirements improved by EUR 27 million in '20, which is nearly the same exact amount as last year, but for very different results. As a reminder, '19 change in working cap was boosted by [ ICE ] for EUR 15 million, and we recorded very good cash collection at the end of '19. As far as '20 is concerned, you can see in our consolidated financial statement that we made further efforts on cash collection with DSO slightly improving at 58 days at the end of December versus 39 days last year. Receivables are significantly down in '20 because of our strong focus on cash collection, combined also with the decrease in revenue, leading to lower receivables on the balance sheet. So let's stop one moment on that. When you think about it, the change in our receivables in the working cap at year-end, they correspond to the difference between November or December revenues compared to the previous year. So when you look at '20, revenue in December, November was significantly down, explaining the positive effect on working capital. It also means there could be no positive effects in '21 if we see a significant pickup in activity in November, December. Like on the P&L, the lower amount of net interest paid reflects the refinancing done in '19. With an average cost of debt now optimized, we'll see the detail later, we can consider this level as normative. Income tax ratio seems high compared to a normative level of circa 25%, which is user mix, mix of noncorporate tax items like [ serial ] or mix of countries as, by definition, the tax paid is floored by 0. However, we know that the group income tax rate will go down in '21 as a result of the decrease in the French civil tax and in the tax rate in France, too. At the end of the day, free cash flow is up EUR 43 million at EUR 217 million, which is a very good performance, and there the second [ plant ] is. Below free cash flow, we spent EUR 88 million on M&A to strengthen our positions in our existing geographies. And we decreased debt by EUR 91 million in '20, which was obviously not a given when the crisis started in March last year. Just a quick word on the other aggregate, bottom line, which encompasses many different items, some of them recurring, such as the amortization of the convertible option and the amortization of the debt insurance cost for total of circa EUR 14 million. There are also some one-off items, such as accrued interest from the change in maturities following the '19 of financing for EUR 5 million. Finally, the currency effect was minus EUR 8 million. The next slide bridges the interest we actually keep [ better ] in '20 to lenders. And first, the P&L charge on the left-hand side; and second, the cash outflow on the right-hand side. On the P&L side, we notably see the impact of IFRS 16 and the notional interest of our convertible bond, some recurring fees and the amortization of issuing costs. Bottom line, the charge of EUR 88 million can be considered normative. On the cash flow side, we see the same impact from IFRS 16 on some recurring fees to get the 64 cash -- EUR 64 million cash outflow. Finally, let's look at our debt structure. First, I'd like to repeat that Elis reduced its debt by EUR 91 million in '20 while spending another circa EUR 90 million on acquisitions. Second, liquidity is excellent with more than EUR 1 billion immediately available without constraints. As far as financial leverage is concerned, the ratio at the end of '20 is 3.7x, reflecting the decrease in EBITDA. We aim to bring that leverage down significantly in the future. Now looking in depth at the debt structure. We took advantage of the excellent condition on the market in '19 to refinance our debt, the first time in March with the USPP '29 and the Bond '24, then a second time in September with 2 bonds, '25 and '28. All in, this led to a reduced average cost of our debt that is now around 1.5%. And you can see on the chart that we don't have any major maturity before '23. In terms of further refinancing opportunities, all the markets are open for us at good condition, commercial paper, undrawn, convertible, USPP. So we have in mind a strategy with several options. And in the future, we shall remain very opportunistic on this subject to expand maturities and keep the cost as low as we can. Well, as the conclusion to this section, let's keep in mind that, first, the decrease organic of 13% is mainly due to 1 of the 4 segments, being hotel restaurants, impacted at 50%, while the 3 other are broad effects. Second, the operational reactivity to the crisis has been spectacular. All the costs have been adjusted, leading to an increase of the EBITDA margin. Third, the reactivity on CapEx, on cash collection has also been spectacular. These 2 items have played the role of amortizer so that the free cash flow is up 24% year-on-year. And last, Elis was cash positive in '20 even after bolt-on acquisitions. The debt has been reduced by EUR 91 million, and we have a strong focus on deleveraging for the future. I will now hand back to Xavier, who will give you an update on our CSR achievements and who will present our '21 outlook.

Thank you, Louis. We are absolutely convinced that there can't be any sustainable economic development without an ambitious and efficient CSR policy, and we are satisfied by the 2020 achievements. First, Elis' governance continued to evolve with the establishment of the CSR committee in November that will oversee all matters related to corporate social responsibility. Operationally, among other initiatives, we continued a smooth transition when relevant to hybrid, electric or natural gas vehicles. We also recorded a decrease in occupational accident rates. We were also pleased to see our Gaia rating further improving in 2020 and to receive a specific certification in Sweden, Elis being the first company in the country to be certified for its commitment to the 17 sustainability goals of the United Nations. Moving on to the next slide, let me remind you the different commitments we made regarding our impact on society, our environmental footprint and our employees' wellbeing. All these commitments will be attained by the end of 2025. Regarding our impact on society, we first aim at covering 95% of our suppliers by a CSR audit. Second, we want to train all our employees working in sensitive positions on anti-bribery and corruption. Third, we want to triple the budget available for the Elis Foundation. Moving on to the next slide, our environmental commitments. We confirm our will to use by the end of 2025 80% of recycled textiles. We also confirm our objectives to lower our environmental footprint by decreasing our consumption of water, chemical products, gas and fuel and our CO2 emissions. For each item, we set a 2025 target, and you can see on the slide that we are well on track. Finally, our commitments regarding our employees' wellbeing, we aim at decreasing lost time from accident by 50%. We also want to continue the international deployment of our Chevrons program, which rewards the best production employees. Finally, we aim at having at least 40% of women in management position by the end of 2025. Now before moving to our 2021 outlook, I would like to return to this graph that we have been presenting every year since the IPO. There, you see the evolution of the top line and the margin performance over the last 2 decades, underscoring the resilience of the group. The backbone of our resilience is twofold: first, the diversified geographical footprint with France representing less than 1/3 of our business; and second, the diversified portfolio of clients in terms of size and end markets. It is worth noting that this resilient profile was significantly improved with the acquisition of Berendsen and the addition of new countries in Central Europe and in Scandinavia. Consequently, you can see on the graph that margin has constantly been evolving in high and stable levels with a 200 basis point range, regardless of the external events and taking into consideration the impact of IFRS 16 from 2019 onwards, where 2020 demonstrates once again the veracity of this resilient pattern. On top of that, one very interesting characteristic of our business that we saw in 2020 is that linen investments go hand in hand with top line growth. That means that conversely, they mechanically go down during bad top line years with a favorable impact on cash generation. Speaking about cash, we are on a very good trajectory with a steady improvement over the last 3 years from EUR 154 million in 2018 to EUR 217 million in 2020. So now let's talk about 2021, starting with organic growth. What we know so far is that the beginning of the year is not easy. There are several reasons to that. First, some countries have reinforced restrictive measures to fight new variants of the virus, like Germany, Netherlands, Eastern Europe, the U.K. and Ireland. Second, hospitality has not picked up yet. And third, the comparable base in Q1 is difficult because January and February 2020 were 2 good months for us last year. For these reasons, we expect Q1 2020 organic revenue to be down around minus 15%. That said, the comparable base will become much [ leer ] in Q2 as April and May were the worst months of 2020 with the implementation of very strict lockdown measures in many European countries. Since last year, no similar strict measures have been implemented. So we expect Q2 to offset Q1, and organic revenue growth should be flat in the first half of 2021. As far as H2 is concerned, many uncertainties remain around the evolution of the sanitary crisis regarding the efficiency of vaccination campaigns, the emergence of new virus variants, the rebound in international travel, to name but a few. That said, we believe it is fair to expect a modest activity improvement in our markets, starting in Q2 '21, which should lead to around 3% organic revenue growth for the full year '21. Now looking at 2021 EBITDA and free cash flow, there is no doubt we will benefit from all the cost-savings measure we implemented in 2020. We have also proven our capacity to variabilize most of our cost base when activity slowed down. Therefore, EBITDA margin should be slightly up again in '21. As far as cash flow is concerned, we expect another good year of cash generation in '21. And free cash flow after lease payments should be between EUR 190 million and EUR 230 million. The main variable being, as we explained earlier, the change in working cap we will get at year-end, depending only on our November and December '21 activities. So before moving on to Q&A, I would like to sum up the main highlights of this set of results: a strong financial performance in an unprecedented adverse environment with an improvement in EBITDA margin and record free cash flow; the proven capacity of the group to respond to the crisis by quickly and successfully rolling out a road map to variabilize the cost base and protect cash generation; the demonstrated resilience of Elis' business model and the relevance of the group's strategy; and further EBITDA margin improvement expected in '21, along with free cash flow generation between EUR 190 million and EUR 230 million. So I thank you all for your attention, and we can now move on to the Q&A session.

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

Just 3 questions for me, please. So on the 2021 organic growth guidance, I know it's early in the year, but could you talk a little bit about the moving parts within that? What are your assumptions for Hospitality improvement, if any? Does that 3% still assume Hospitality to be down 50%, 60% year-on-year? Or are you baking in some improvement? If you could just talk a little bit about how you get to that number, that would be helpful. And then secondly, you've talked a little bit about the outsourcing opportunity going up in certain segments. How do you see that developing over 2021? Do you think that, that will improve further? And are there any segments or geographies where that is most relevant in terms of the opportunity? And then lastly, just a quick one, could you give us a number or a percentage of your employees that are still in furlough schemes as of the Q1? And how that's -- how does that compare to the levels seen over 2020?

Okay. So let's start with the organic growth expected for 2021. Thank you to ask me this question because I cannot hide the fact that I was a little surprised by some funny comments I read earlier this morning, explaining that our guidance is disappointing. So for me, it's very funny because, honestly, nobody knows what will happen in the sanitary crisis in H2. So that means that we could also have been in position not to give any guidance for the growth in '21. And that's why we consider today that -- as nobody knows what will happen with the sanitary situation in the second semester, nobody knows or perhaps some of you have some information that I don't have. What will be the real pace of vaccination in Europe? Will we have a variant of the virus that could resist to vaccine and so on and so on? Honestly, you have so many uncertainties on the rebound of the activity of the second semester, that for us, it is totally normal to be very cautious with the pace of recovery. But what is very important for me is to highlight that, of course, we don't have any internal issues that could explain that we will not benefit from the rebound of the global activity. So of course, if we have no bad news coming from outside and from the sanitary situation, it's perhaps possible to have a stronger rebound. And of course, Elis is very well placed to benefit from a stronger rebound. So it's not impossible that we'll reach perhaps even above the consensus of the market, that is around 7% or 8% of organic growth. But at this stage, nobody knows, as I explained. And at this stage, it wouldn't be very reasonable for the company to say that, no problem, all the sanitary situation is solved and we are ready to be close to a double-digit organic growth. And by the way, that would mean that we would have organized the company in terms of cost management to a situation where we expect -- we could expect a strong top line and so on that, for me, would be at risk. So we prefer to adopt a low profile in terms of what will be the external situation linked to the sanitary situation, to be low profile in cost management, in investment, program management and so on and, of course, to be ready for the best. And of course, the group is very well placed to benefit from a stronger rebound. But as I said, at this stage, for me, it's little hazardous to give to the market such a big expectation on the rebound. So that's why we have decided to keep this, as you said, cautious expectation for the organic growth for the whole year. What is very important for me is to highlight the fact that where we are sure, we are more optimistic. So that means that in terms of cost management, margin management, we are totally sure that we are able to again improve a little the margin in 2021 and the same for the cash flow. So cash flow, of course, we have the technical subject around the working cap, so the receivables of November, December '21 where, at this stage, nobody knows what will be the activity, the peak of activity in 10 months. But for the rest, all the fundamentals of the cash flow are under control, and we will deliver another solid year of cash flow in '21. And then in this subject, of course, we control things. And so we are much more confident, and that's why we provide some good expectation for the future. But for top line, we don't control the sanitary situation in the H2. So it wouldn't be very reasonable to let the market expect double-digit organic growth. Second subject, outsourcing. So it's clear that it's still a nice potential of organic growth for the entity for the midterm, also for the group. So where we have opportunities? We still have a lot of opportunities in Healthcare, in surgery areas where they used to have a lot of single-use products. And we can see that we are still on a natural switch to come back to some textile solutions. So it's very good for us. We keep, of course, the pace of the -- important pace of outsourcing for Workwear in the eastern part of Europe and in the south part of Europe. You saw that in 2020. Even during an incredible crisis in Italy, in Spain or Portugal, we have been able to deliver a double-digit organic growth in Workwear in this country. So it's very promising. And we know that prior to the crisis, we have increased also some new areas of outsourcing. Like, for instance, in nursing home, we have signed some nice contracts in countries like Ireland. We start to have success also to -- just to start, in U.K., for instance, where total -- where today the market is totally virgin. So it's a nice potential of growth for the future. And same story, of course, in Latin America where outsourcing is still the key driver of our growth. And for nursing home, we have also some opportunities of develop the market, create the market in countries like Portugal or Spain. So we have not only kept, but also increased our opportunities of pushing outsourcing for '21 and for the year after. That is very important for the long-term growth of the company. Your third question, about percentage of people following furlough program. So I don't have some precise figures to share today. But what we can say is that we have applied exactly the same good solution to adapt the cost basis of the group everywhere in '21 than in 2020. So we say that the beginning of the year, of course, in comparison to the Q1 2020, will be with important decline on the top line. But I can also share the fact that in terms of results, we have no doubt on our ability to adapt the company to this kind of drop of volume. And the performance of Elis in January and February is totally in line with what we have delivered in 2020 in terms of margin and totally in line with the guidance. So that means that, of course, the top line was disappointing in January and February, but the margin were very good. So we have exactly the same ability to adapt our cost to this drop on volume, in some cases, by using some furlough scheme put in place by some countries. But don't forget that it is not mandatory for us to adapt the cost basis in some countries where we didn't have anything, like in Latin America. You have seen also that we have been able to manage our cost basis during the peak of the crisis in Brazil. And you have -- and we had no partial employment scheme in place in this country.

That's very clear. Just on your last point, I know you were talking about minus 15% for Q1. And you said the performance in January and February on the top line was disappointing. Can you put some numbers on that?

It's totally in line with the guidance we gave for the full year. So that means that when I say it's disappointing in January, February, that means that it is because the activity is low in January, February, that we expect for Q1 minus 15%. So what we have seen in January, February is in line, of course, with this guidance of minus 15% in Q1; more or less 0 in H1; and for H2, nobody knows, but why not 3% for the full year.

Your next question comes from the line of Sabrina Blanc from Societe Generale.

Xavier, Louis, Sabrina Blanc speaking from SocGen. I have 3 questions. The first one is regarding Brazil. You have mentioned that margin has improved, partly thanks to short-term contracts. Can you provide more figures? And what was the impact on the margin and an idea also of the size of those contracts? The second question is regarding the evolution of your -- of the situation of your clients. And notably, in the Hospitality sector, they are still benefiting from the help of local government. But have you seen at this stage some bankruptcies coming? And the third one is regarding the M&A. I think I have heard that you said that you could come back in 2021 on a more normal M&A program. Do you have something in the pipeline? What is the -- do you have opportunities coming from the pandemic on this point?

Okay. So let's start with the margin in Brazil. So the -- to give you a magnitude of the size of this extra contract signed in Brazil, in terms of sales, it's around EUR 10 million. So it's a good margin. So a little above the average margin of the country, but it's only EUR 10 million. So EUR 10 million, on the total, close to EUR 200 million. So you can see that it was a positive -- it has a positive impact on the margin of the country. But it is not significant in -- regarding the other cost-cutting program rollout there and all the improvements we made in productivity and so on. So that means that the main reason that explain the very good margin in Brazil is more linked to the all the efforts made for the -- that will be in place for the mid and long term. And we have this additional EUR 10 million of revenue with a better margin than the average. But you can see that at the end, it's not massive in comparison to the rest of the operation in Brazil. For Hospitality and more largely, for all the other sector, it's clear that today, we have not seen yet any increase of bankruptcies in this end market. So of course, we are very close to the situation in terms of cash collection to be sure that we will not have too much money outside to protect the company because we know that we will have in the coming months some increase of bankruptcy. It's clear. And for M&A, M&A, I would say that the pipe is more or less comparable to what we had in the past. So we -- you know that we still continue to be very selective. So we study a lot of opportunities, but with a very selective approach. And it's too early to say that the crisis has created some new opportunities. As we said 1 year ago, even at the beginning of the crisis, we said be careful, the market is very profitable. All in, the business is profitable. And that means that the good players will not want to sell during these bad years to wait for some better times. And the business is profitable enough to digest such a crisis. So that means that players will be -- that will be in position to be sold at whatever price will be probably some players with some huge difficulties like bad prices or very bad industrial assets and so on, and then we wouldn't be very motivated to buy them. So that means that, as expected, we don't see the prices today playing a role of a big accelerator of opportunities in M&A. So -- but nevertheless, we have kept a sizable pipeline of small opportunities, as always, to follow our strategy to consolidate our existing position.

Sabrina speaking again. May I have a question regarding this point and what said Louis about the leverage? Could we have more color of the pace of how you can come back to the level pre-COVID?

So it's -- leverage is totally linked to the level of recovery of the activity in Hospitality, of course, because then the question is not only our ability to reduce the debt. So normally, '21, we should deliver more or less the same ability to reduce the absolute level of debt. And then to calculate the leverage, you have the EBITDA in euro. And EBITDA in percentage, we manage without any difficulties this margin. But in euro, it depends on the level of activity where, as I explained, we have the main [ blocks ] for the second semester, what will be the pace of recovery in Hospitality. So that's why it depend on what will be your own assumption of activity in tourism in '21 and '22. But normally, with some reasonable expectation of recovery of Hospitality, we confirm that normally, we should be close to where we were in '19 at the end of '21. And normally, we should expect to be below 3x at the end of '22.

Your next question comes from the line of Simona calling from Bank of America.

So I have a couple of them. First of all, if you could please provide an indication of the growth trends observed in January and February 2021 in Hospitality versus the rest of the group? And secondly, if you could please quantify how much in euro million of the cost savings that you achieved in 2020 are in permanent -- are permanent and will therefore repeat in 2021? And third question, what is the sustainable EBITDA and operating profit margin level in the medium term? And which levers do you have to get there? And also related on margins, how much further can you improve your plant productivity level? And for 1% improvement at the group level, what is the positive impact on margins?

Okay. So for growth trend Hospitality in January, February, so it's totally in line with what we had in Q4. So nothing changed in our environment. Restaurants are closed in some countries and borders are closed, so you don't have any international travel and so on. So that means that we have exactly in January, February the same trend that what we had in the last quarter. So probably like a 2/3 or something like that for the -- around 2/3 less activity in January and February. And as I said earlier, totally aligned, of course, with the guidance gave by -- for the full year and the expectation of minus 15% at the group level for Q1 and 0 for H1. For the question around cost savings, what is permanent and nonpermanent and so on? It's always a difficult question because we have demonstrated in 2020 that more or less, we have been able to make all the cost bases variable. So of course, a part of savings will remain in '21, whatever is the rebound of the activity. But we know also that we were happy to have everything variable for the small level of activity. It will be more or less the same with more activity. So everything will remain also variable. So that's why it wouldn't be serious to say to the market a large part of the cost saving of 2020 is granted forever, and all the new activity coming now will be with incredible marginal gross margin. So that's why we prefer to stay cautious on this and say that we are happy, we have been able to make all the cost bases variable, but it will be for the bad time and for the good time. So if we have more activity tomorrow, what is expected by everybody, of course, we will also need to increase our cost basis in the group. Nevertheless, we remain very confident for the midterm and long-term EBITDA improvement. And your question was, what is sustainable? So as we don't have any exceptional event and subject in the margin in 2020, it's, of course, sustainable. But even more, we see that we are, in one hand, able to stabilize the margin at a very good level in our best-in-class countries like France or Scandinavia. And in the other hand, we made some regular improvements in the other geographies like Latin America, like Central Europe with Germany, like U.K. You know that it was a key subject to able to be successful in the turnaround of the operation there. And I think that it is not nothing to see that in 2020, we have been able to improve the margin in this so difficult situation. And I know that you can easily compare with some other player in U.K. and to see that it is not the same for everybody. And so we still have a lot of room of improvement in some geographies that will enable us to increase regularly the average margin of the group. As we said for the 2 to 3 years now, the strategy is the same. We keep a solid margin stable in our best-in-class countries, and we regularly improve the margin in the other geographies in line with what we made in 2020. In 2020, the sole disappointment is coming from the southern part of Europe, but it is linked to the lack of activity in Hospitality. We have no structural problem to solve in Spain or in Portugal. So that means that the -- immediately after the rebound of the activity in these countries, we will recover the strong level of improvement of margin we had in the past. So no worry on this -- in this area. So that's why we have kept our drivers of margin improvement -- regular margin improvement for the midterm. In terms of productivity, ability and impact on margin, so we posted every year our regular productivity gain, around 2% to 3% at least improvement every year. It's a mix of new idea, transfer of best practices in some country where we have less or a lower level of productivity just after an acquisition, for instance. And also, it is linked to the regular investment program in some projects of productivity. What we confer last year in terms of industrial CapEx was linked to need of capacity, but we have kept our programs to replace old machines, so maintenance CapEx, and also some program of productivity improvements. And so it is a combination of all these subjects that allow us to have a regular improvement of productivity around 3%. After that, you know that factory cost -- to have an idea on what is the impact on the margin of the group, factory cost for Elis represent more or less a small sale, the 25% to 30% of the turnover. And so you can make your own estimation. Of course, it's not as simple as that. You have on top of that to manage some labor cost increase with some minimum salary wage that increase above natural inflation rates in some countries and so on and so on. So part of productivity is also there to mitigate such type of a gap, as Spain 2 years ago, if you remind, or the regular increase of the minimum wage in U.K., for instance.

On the first question, about the trends in January and February, you commented on Hospitality. But how does it compare, for example, for Trade & Services, Industry and Healthcare? Did you see an improvement compared to the organic growth rate in Q4? Or is that as well there is just a continuation of the same trend?

So it depends on geographies, of course. So you have some geographies where it is totally stable. Like France, for instance, we have quite a good start in the sectors except -- in the end market except Hospitality. Perhaps a small slowdown in some countries like the Netherlands or Germany where the lockdown measures where stricter in January, February than in Q4. But it is, at the end, it is marginal at the group level. So to summarize, we can say that nothing changed. And the situation is, outside Hospitality, is quite stable in the 3 other end markets with some positive growth in Healthcare, thanks to all the initiatives taken, and more or less a flattish situation for Industry and Trade & Services.

Your next question comes from the line of Sylvia Barker from JPMorgan.

First question, please. Pricing and labor inflation expectations for 2021, I know that normally you update us at this point. Could you maybe comment on that? Second question, just within the free cash flow guidance, could you give us -- obviously, so you said that the receivables are the main moving part there. Is it kind of neutral working capital, let's say, at the top end of your guidance range and then an outflow of EUR 40 million at the bottom end? Or what is the shape that you've included within that guidance? And then finally, just a final question on Q1, if I may. So essentially, you're saying minus 15%. You were exiting in December at minus 12%. And we know that overall, Q1 is at minus 2%. So essentially, you're saying that the trends will get -- I mean you are saying that the trends will get worse in Q1 relative to Q4. So presumably, you're being, again, a little bit cautious there on March. But basically, is that the right kind of way to think about it overall? And I was still here.

Okay. So pricing and labor cost inflation, nothing special. So it's clear that during the crisis, the pressure around minimum wage decreased a little. It was quite interesting to see what happened in U.K., for instance. They cancel the minimum wage, strong increase scheduled. It was scheduled at 5%, and they finally decided to limit the minimum wage increase in U.K. And we had more or less the same trend everywhere in Europe. Clearly, it was not manageable for countries to push for strong increase in minimum wage. And so that means that the labor cost inflation will be limited in '21. So in terms of pricing, nothing changed. We were able in 2020 to pass through the market the regular small price increase in the middle of the year linked to some index, and we are scheduled to do exactly the same. It is interesting to highlight the fact that today, we don't feel too big pressure on pricing on the market. It could be seen -- it could have been seen as a risk, of course, in the context of low volume to see a kind of a price war. It is not the case. I think that as we are the leader in a lot of markets, we give also the example, and we are very strict in our pricing policy. So we never, never, never accept to decrease our price just to try to protect volume and so on due to the crisis. We explained to the market, to the customer, that thanks to us, what should be normally fixed cost can become variable in some cases. And that means that with our own structure of fixed costs, we are not able to decrease our price. And it is well understood by the market, and the small players are following us. Of course, it's more comfortable for us to follow the leader. So today, we don't see any price war on the market. Perhaps only some pressure in U.K. in Hospitality, where some players have made some mistake. But otherwise, it is under control. For the free cash flow, I will ask Louis to answer. And perhaps, I will answer to the third question around the Q1. Yes, it's clear that it's always very comparable. First comment, always difficult to compare quarter-by-quarter the trend of growth. You have always some calendar effect and so on. So it's -- let's be very cautious with this approach quarter-by-quarter. Nevertheless, it's clear that Q1 is expected a little below Q4 2020, mainly in line with the measures in some countries that were stricter in Q1 than at the end of 2020. We are talking about the situation in Germany, for instance. It's clear that Germany decided to forbid the opening of canteen, for instance, inside every type of industry. We deliver linens for such kind of customer in collective catering. So of course, it has an impact in our activity. It's totally punctual. It's short term, but it has an impact in our business. We were talking about some lockdown measures or closure of some shops in eastern part of Europe. It was a little new. It was not the case, for instance, in Poland, in Czech Republic or in Baltic, such kind of measures at the end of 2020. And for our business of mats, if the shop is closed, of course, we don't deliver the mats, for instance. So it has a small impact also on our top line. So that's why we are a little cautious even in Q1, and we expect the top line a little below what we had in the end of the year 2020. But as you can see, all these measures are totally short term. And we have no structural reason that could jeopardize our ability to the strong rebound that everybody expects for the end of the year or for '22, of course. Now perhaps the question around the free cash flow.

Yes. Yes, so you understand my comments, Louis Guyot speaking, around the clients because that's clearly a key question. The clients account and the balance sheet is around EUR 500 million. That's more or less 2 months of billing. So you understand that when you look November, December or '21 versus '20, if you increase by 10%, it means that these accounts has a negative impact of EUR 50 million. And if it's increased by 20%, this impact has a negative of EUR 100 million. So you understand better why we have a magnitude of EUR 40 million in our guidance for free cash flow because you see how well this is impacted by the only clients receivables impact.

Okay. So in either case, you're assuming some outflow to see the scale of that basically?

Sorry, I understand, is there some mitigator is your question, I guess?

Well, just my question was, yes, is one end of it just basically no outflow at all? Obviously, you will be growing organically, as you've guided. It doesn't -- no, it's just a technical question. We can take it off-line. It doesn't -- just wondering kind of what the scale of that is, if it's outflows at both ends of the guidance or not.

Your next question comes from the line of Nicolas Tabor calling from Stifel.

The first one would be quickly on the Southern Europe where you had the highest margin decrease materially. How should we think of the evolution going forward? I mean not trying to forecast how Hospitality is going to rebound. But you said that you had some delays in the implementation of furlough. How much of that has impacted the H2 margin? And therefore, on a constant level of top line, how much of that should positively impact in H1 or into 2021? So not trying to forecast top line here, but really just trying to understand the delays, the impact on H1 and H2 margin in 2020. Then I wanted to talk about the contracts you've put on hold. Can you give us an idea of the percentage of contracts that are now on hold? Because, obviously, you can't deliver because the clients are closed, which I understand perfectly, but trying to understand here the magnitude. And for those plants which are completely closed and you don't deliver any service, how do you monitor the churn, the churn in clients or the bankruptcies, for example? Because there's no bankruptcies, there's no invoice, but how do you know if there's going to be someone in 2 or 3 months from now? Do your sales force monitor that or have any KPIs? And then finally, do you already -- are you already making a new plan for cost cuttings, permanent cost cuttings in terms of plant and so on? For example, are you looking at Spain, France and U.K., where you have high Hospitality and you're already making, let's say, a second round of, okay, where we -- can we adjust cost? Is it already a new -- do you have already a new process?

So for Southern Europe, so what happened in terms of delay to implement all the type of measures, so as I said, it's linked to the labor cost that is much more rigid, mainly in Spain and Portugal. For instance, in Spain, the same rules in Portugal. When you have negotiated in one plant a partial unemployment scheme, and then when you want to put a more permanent decision with some -- when you want to fire some people and when you want to have a redundancy program, sorry, you have some daily to wait. So that means that, for instance, you have a scheme of partial unemployment, then you need to wait 1 month or 2 months. So that means that you have to pay everybody at the maximum salary before you can put in place a redundancy program. So it's all these types of kind of rigidity that has explained our difficulties to mitigate the drop of volumes in Spain and in Portugal. But what is very important to highlight today is the fact that now all these permanent cost-saving measures have been put in place in Spain and in Portugal. So we will not have anymore this kind of rigid labor cost in front of us to make our cost savings in '21. So it is the reason why that combined to a situation where probably we will see the strongest rebound in Hospitality in '21 because, if you remind, it was a drama in July and August in Spain or Portugal, they even -- during the summer, they closed some regions, they closed some borders. It was impossible for German people or British people to come as usual in Balearic Islands or in south of Portugal. And normally, everything is much more under control now. With the level of vaccination in U.K., we can expect to see British people with the ability to travel this summer. And so this area is perhaps less impacted by business travel and much more impacted by tourism travel. So probably, it will be a region where the rebound of the Hospitality will be the strongest in July and August. And of course, it will give us a nice improvement in the margin. So that's why it's not impossible at all to be close to the margin '19 in Southern Europe due to these 2 effects. So we have put in place and now implemented the fixed cost-saving measures and long-term cross-selling measures in the countries. And it's probably the countries where the rebound of the Hospitality will be the strongest. The second question, around the customers that are 100% closed. It's non-common, so it's unusual. When you analyze the situation today, you have more or less only restaurants that are concerned. And in some cases, a lot -- a large part of our restaurant are even partly open for program of click and collect and so on. So that means that they need some linen for the kitchen and so on. So the number of customer totally closed is very limited in our portfolio. Of course, we monitor it very closely, plant by plant. We have a strict control of all the fleets of customers that are definitively closed. So we don't see any major risk of losing control of what is the churn rate and so on and so on. We have a risk of bankruptcy, for sure, and that's why we were quite strict in the cash collection. And you can see, it is very important to highlight the fact that the DSO of the group has improved in 2020. So we don't have a huge amount of money at risk that we would never recover in case of a big number of bankruptcies. So this risk is under control. And so we are quite confident in this context of some customers is closed. It is limited today in our portfolio and monitor every day in every plant. And the third question was linked to cost cutting?

New cost cutting.

New cost-cutting program, okay. So we don't expect the need of a new structural plan to decrease even more our fixed cost basis. So we consider now that with the efforts we made just after summer 2020, we are ready and prepared to the actual situation. And even if, in some cases, we have some lockdown measures, temporary closure, a very low level of activity of some hotels and so on, with -- we have demonstrated our ability to adapt locally speaking and to decrease all the costs locally speaking. But we consider that today, we are probably at a very low point of activity and revenue. And normally, we have in front of us more activity to come, especially if I read all the notes of analysts this morning, we should have a strong recovery in the activity in the second semester. And as I said, I will be the first very happy. So normally, we don't need to put in place some additional cost-cutting measures to digest the new difficulties in the activities.

Your final question comes from the line of Christoph Greulich calling from Berenberg.

Three questions from my side, please. The first one, with regard to the Trade & Services segment. So on Slide 6 of the presentation, you've shown a breakdown of your customer base. The first question will be, what are the remaining 25%? And then the second question would be, if you could give us a number, a percentage of your customers that have not been affected by the lockdowns in Q1, basically, yes, not -- sorry, essential shops or providers of essential services. The second question would be, yes, a follow-up to your 3% full year guidance for the organic growth. And basically, you've shown, yes, a few, let's say, commercial opportunities during the crisis that has a positive impact on the growth. I think it was on Slide 13. We also have seen, within your group revenues, you had this others line, which was up quite significantly year-over-year due to the kind of activities. So I was just wondering, like to what extent do you take into account the reversal of this kind of positive impact of the crisis when you make -- or when you come to your full year guidance? And then lastly is about the competitive environment. So if I recall correctly, there has been the hope to see, yes, an increase in bankruptcy rates among your competitors as a result of the crisis. So I was just wondering what's the latest status here. And are you still expecting to see higher or increased bankruptcy rates in 2021?

I'll take the first one. So we provided you details of the Trade & Services we have inside. Basically, as you remember, for us, it's big clients on small clients. Big clients will be a retailer, typically. So because -- what you can say, so Carrefour and Intermarché here are doing well. Facility management, cleaning companies like ISS on it, on catering companies, which have a lot of wearer of, let's say, workwear, that will be your compass. What you will see above that is typically garage. Garage are big users of workwear, of hygiene equipment. And small mom-and-pop shop will fall into that, so a hairdresser or the beauty salon. Well, basically, the mom-and-pop shops in the street are typically using masks, hygiene and workwear.

So the 2 other question, so the guidance of 3%, what is inside? Of course, we have taken into account the opportunities of new business. But when you compare with the magnitude of evolution of occupancy rate in Hospitality, it is a small figure all in. We have around a little less than EUR 1 billion of revenue with the hotels. So you imagine, if you put 5% only more or less in occupancy rates, you are talking about, very quickly, about EUR 50 million of sales. And of course, it is not the same magnitude for all the initiatives we have taken. Nevertheless, it is important to take into account for the midterm and the long term because it will help the structural good organic growth of the group for the midterm. In terms of other line, what you have highlighted as a good performance in 2020, it's coming from our subsidiary, Kennedy. It is a company in U.K. that build some washroom dispensers. And of course, we have made an incredible year with these subsidiaries because we have sold a lot of dispensers for hygiene around hands, so soap dispenser or hydroalcoholic dispensers. And it highlights the increasing needs of hygiene everywhere in the world. And it is what is behind the increase of other sales in our P&L. And the third question, bankruptcy for competitors. Today, it's too early to see a real trend in our market. As I said, don't forget that our market is quite profitable, and you have a lot of players with some solid margin and some decent cash flow. That means that globally speaking, the industry is strong enough to digest such kind of crisis. But it's clear that probably starting in Q2, we will start to see some difficulties with some very small players dedicated to hospitality in big cities. I think it is the player that will go for bankruptcy first. We have some example in big cities where today, thanks to all the efforts of government package and so on and so on, they are still alive. But with more or less low activity and with the fixed cost they have to digest, with all the debts they will have to reimburse after the crisis, and they will have also an issue when the hospitality will see a rebound, they will have to reinvest in linen. So in terms of cash, they will be under severe pressure. And probably, we will start to see such kind of bankruptcy starting mid of Q2, but it will be limited, I think. So thank you, everybody, for your participation this morning and your interest in the company. And I wish you a great day. Bye-bye.

Thank you. That does conclude our conference for today. Thank you for participating. You may all disconnect.