Elis SA (ELIS) Earnings Call Transcript & Summary

Good afternoon, everyone, and welcome to this presentation of Elis' new mission statement and its ambitious 2030 climate targets, which is unveiling today. I'm Thomas Kamm, and I'm here today with Xavier Martire, CEO of Elis; and with Claire Bottineau, who is Elis' CSR Director. I will start today by interviewing Xavier on the new mission statement. We'll then ask some questions to Claire about the climate targets. Xavier will then update us on the summer activity of Elis and give us a bit of a trading update, and we will then have a Q&A session, which will be joined by Louis Guyot, the CFO of Elis. So let's start now with Xavier. Xavier may be a simple question to start. Why did you adopt a new mission statement, and what you hope to achieve with it?

So the idea was to define our business category and the value we provide to the market. And so that's why we decided to present Elis now as a leader in circular services at work for hygiene protection and well-being. And now this new mission statement, you need all our employees around the world. They are committed by delivering our circular services to create a bond between us, our clients and the planet.

And how has the pandemic impacted your way of doing business? Was it, in a way, a catalyst for this new Raison d’Être? Or does the Raison d’Être capture what has always been Elis' way of doing business?

Yes. So we have not defined a brand-new business model and circular services is fully aligned with our historical rental business model as Elis was a pioneer in the circular economy. Nevertheless, it's true that after the COVID period, we see clearly that our customer are looking for more hygiene, protection and well-being. And in that sense, of course, our circular services meet perfectly the new needs of the market.

And in a nutshell, what makes circularity important for Elis?

So Elis is a real actor of circular economy by promoting usage rather than ownership, and it's a very real virtuous pattern. We -- that means that we are always looking for extended durability when we conceive all our products. And we are also working hard for the use of our products when they are at the end of their life. And doing that and with all the efforts, we are totally convinced that it will bring some additional organic growth in the future because, clearly, we see that our customers are more and more concerned about these topics.

So thank you very much for this introduction. Xavier. We'll now move on to Elis' 2030 climate targets with Claire, the CSR Director of Elis. So Claire, could you tell us if the circularity business model of Elis has any clear benefits in terms of climate?

Yes, indeed, it has. We believe that circularity is actually a fantastic way to tackle some of the climate and current environmental challenge we are all facing today. When you look at some of the most important associations that are working on circularity like the Ellen MacArthur Foundation, they are actually stating that we need to have circular business model to be able to reach net zero on the longer term. They are also explaining that if our current economy is moving towards a more circular one, it will mean about 10 billion tons of CO2 that will be avoided. It's about 20% of the global CO2 emissions, so it's like fantastic. When we think about Elis, and Xavier was just talking about it before with our renting model where we prefer to rent the product rather than sell it, it's then we are keeping the product in use because we are repairing it, we are refurbishing it, we are reusing it also internally. And by doing all of this, we actually avoid consuming resources, and so we avoid also CO2 emissions. So for our customers, it's actually a fantastic opportunity to go away from single use or acquisition or ownership and at the same time, to reduce the emissions of CO2.

And since when has Elis been engaged on climate matters and what have you achieved to date?

Well, we have been engaged for several years now. And actually, we have a long-standing commitment, and we have targets until 2025. These targets that are part of our CSR engagement program cover the 3 scopes of emission. So you're probably found the [indiscernible], but you have Scope 1, Scope 2 and Scope 3, and when you look at our targets, they are covering these 3 scopes. Some of them, we are on track on all of them, but on some of them, we have actually outperformed the performance, especially on the CO2 intensity. So the kilogram of CO2 per ton of linen delivered, we were targeting minus 20% by 2025, and we are actually already at 25% at end 2022, which is a great performance. But what will make us even more happy and proud that between 2019 and 2022, we actually managed to reduce our total CO2 emission, so really the absolute value by 17.5%. So it's a huge achievement, thanks to all -- the hard work of all Elis team. And on top of that, I will just add that this engagement that we have is not just telling it. It's also ESG rating agency, the CDP, which is, I think, the leader in terms of carbon assessment has actually awarded us with A minus score last year, so positioning us into the leadership category.

So those are the achievements to date, but what are the new targets that you're announcing today?

So we are very proud to be announcing today and share with all the market here, our new targets. So on Scope 1 and 2 that are linked to energy, we are targeting to reduce our emission by minus 47.5%, and on Scope 3, which is linked to all the other procurement, upstream freight and so on, we are targeting minus 28%. These targets are aligned with the Paris agreement. So back in 2015, we had COP21, and we set up ambitious targets, as I will say, a society. So with those targets, Elis will be doing its share to make the global effort that is required. And I would like also to share fantastic news and one that we are very happy with also that we have those targets validated by the SBTi, so increasing even more the credibility and the ambition of those targets.

So reducing your CO2 emissions by -- on Scopes 1 and 2 by nearly half since you've announced a target of 47.5%. That seems like a lot, especially in the context of continuous growth in the business. So can you tell us a bit more about how you're going to achieve this target?

Yes. So indeed it is going to be a challenge, but we are convinced that our plan is really a pragmatic as well. So on Scope 1, for 47.5%, we have 3 main levers, first one will be about efficiency in the operation, so energy efficiency. We are an industrial company. We are providing service as well as saying Xavier, but we have behind the digital tools, digital facility and so efficiencies are really at the heart of what we are doing. The second lever will be decarbonization of the energy, so transitioning to more alternative energies, either by producing on site, but also by procuring it. And the last pillar will be about the logistics fleets working on energy efficiency, but also in terms of transitioning the fleet to electric or biofuel. And COP3 where the targets is minus 28%, we will have an efficiency lever where we will be working on all our operational practices with our customers then there will be the product afterwards, so trying to work on reducing the impact of the product, working on codesign, material selections and also working with our suppliers. And last but not least is all the freight and the transportation. So how can we make the transportation upstream. So before outside more virtuous and also working with our employees to try to and engage them into alternative behaviors.

So on Scope 1 and 2 to go back to that, what levers can you activate to achieve these objectives?

So on Scope 1 and 2, we have -- you can see that on the screen, but we have different levers that we have identified. And if you look carefully, you can see that most of the levers are actually really linked to energy efficiency. That's most of the gain that are behind it. And then you have renewable energy and also the logistic optimization and transitioning. They are very important also because they are what is the most visible for our customers.

And precise on that, what role will energy efficiency play in achieving these targets?

So on energy efficiency, once more is the best energy, I think, is the one we are not consuming. So first target is really going to be on this pillar. We have 2 things. First, we will be looking on energy efficiency projects and approaches that we know are effective that we have already tested and made for the past years. That will be contributing to 50% of the gains, meaning that for 50% of the gains, we are very certain that we can achieve them and also have financial savings behind it. For the others, it means that we have actually performed quite a lot of work in the past coming months with Elis' teams to review the market, other industries, what we were actually doing and what we could be adapting through our operational and industrial facilities. And so we have identified a very promising technology that we are currently experimenting so doing what we call proof-of-concept. And on these ones, that's where we will having tests, assessing really what are the benefits, but also the drawbacks. I'd like just to come back on the established technology because maybe it's not very clear for everybody around the table to understand what -- how I could dry or press and can really save energy. So today, to -- we watch the textile, the flat linen and after what we do, we press it to withdraw some of the water because the goal, of course, is to dry it. And then we put it in a dryer where warm is removing the rest of the water. The idea is actually what we have noticed is you need less water when you're pressing mechanically -- less energy when you're pressing mechanically to withdraw more water than if you are warming it. So just by switching from a normal press to a high-pressure one, we'll actually withdrew more water and you will need less energy, thermal energy and so less gas at the end. So it's mechanically and mathematically savings that we can do with that.

And what decarbonization actions will you be implementing?

On the decarbonization aspect, the idea will be to work on site and to produce more energy on site for consumer, especially on solar panels. So we have identified at least 50 projects that we want to launch in the next coming years, allowing us to produce. We're already doing that. We have some plans like in Barcelona, and [indiscernible], Brussels for example, where we are doing that. In electricity, electricity coming from the solar panel can cover up to 70% of the needs of the facility, which is a very good signal. We will be also looking on alternatives ways of procuring energy. So there may be local opportunities. We will also look at what we call power purchase agreements, so very long-term energy contract to see if it match our needs and if we are confident with it. We will also experience new technologies and new approach and especially biomass in Europe. So we have a very long track record in terms of biomass usage in Latin America. In Brazil, 90% of the energy we are consuming is actually coming from biomass or wood residues. So we know how it works. But in Europe, it's not exactly the same situation. We have more densely population, densely territory. So what are the constraints, what are the costs also. So we want to assess all of this, make pilot project before moving forward and implementing in all the sites.

And on logistics, which is your third pillar, what will you be doing?

So on logistics, we'll build on what we have already, but we go to the next level. So we are developing right now a tool called, GLAD, Global Logistic Assistant for Deliveries, and we are -- we'll be expanding it even more. This tool is actually really helping us to optimize even further the routes, the loads, the type of services we are delivering. And on top of that, it's providing more comfort to the driver plus echo driving tips. We will be also working on echo driving reinforcement with like speed limit, for example, or with also systematic tire checks, so things that we can do or more frequently, let's say. The second point is about transitioning the fleet and it's very important. We will be transitioning more vehicles, and we are targeting to at least have 1,000 electric vehicles by 2030 that we have transitioned. We'll be also working, of course, and biofuel. And keeping a little bit with what we have been doing in the past year, we will be continuing to experiment new type of technologies for EV track, where we know EV tracks is very challenging to transition. And just to give you an insight, we are receiving right now 50 electric truck in France over the summer. So it's really a huge amount, especially when you know that the electric truck, EV truck sector is still at its early age.

So moving on now to Scope 3. What is your road map?

So on Scope 3, once more, the target is minus 28%. And we have 3 main levers, as I was saying before, the operational practices, especially focusing on linen management, reducing the impact of the product and also reducing the freight impact and the employee commuting trying to support them in alternative behaviors.

So you mentioned optimizing operational practices. What do you mean by that, especially on Linen management?

So on this part, we have 3 main levers, let's say, One of them will be to partner with our customers, but also the user of the product. So the consumers, the users, it could be like a patient, could be a visitor, could be an employee. So the idea will be to focus on reducing the loss of the product. Why is that? It's because it's time we have a lot of product, we need to replace it. So we need making a new one. And so if we are making a new one, it makes new CO2 emissions. So we'll be working on that really to try to decrease that part. It's really -- it could be really significant. We have major study in the U.K. within the health care sector. And when we look at the flat linen, it actually can cover 190,000 tennis court the loss of textile we have during 1 year. So it's really huge. So what we want and what we are doing, for example, in the U.K. is we are working with our customers to try to assess what are the root cause, why are we losing textile and try to find the right solution to kind of manage that gap. So the idea will be to work like that with many of our customers, working on full traceability solution that we have already, but also this kind of reward scheme and try to gamify also that to reduce the loss of textile. The second part will be about something that is very close to our DNA, which is built on reuse. So increase the reuse really of our products, so across geographies, across different sites, either because we are pushing more pulling, but because also we're improving our textile management best practices and also because we want to repair more. We have, in Latvia, today a site that is dedicated to repairing mats, and the idea will be to double its capacities in the next coming years. So really working on this reuse part. Then we also have, and we don't really like that, it's some single use aspect, plastic packaging. And so the idea will really be working with the customer to better understand why do we still have plastic packaging, single-use plastic packaging. Is it because of hygiene concern? Is it because of regulation? Is it because of cultural behavior? And what can be the alternative solution based on reusable ones that we can offer? And typically, we have done that for clean room and launched 2 years ago a product called Kangaroo, which is removing the plastic and making the product in itself without it. So it's a very good part. And last but not least of the levers for this part will be about as of Scope 3 about linked to the energy. So we were saying before that we want to reduce our global energy consumption so that will ultimately work on Scope 1 and 2. But also in Scope 3, you have all the upstream of the energy. So all the emissions that are above and before it's used in our site. And so if we decrease that, it means also we will automatically decrease here. So by working with the suppliers, we will be able to really understand how we can have savings and gains here and there.

And regarding your own products, what can you do to reduce their environmental impact.

So on our own product, so we will be working on different parts. First, working with our suppliers. We want to have -- to reduce the impact of our product along the value chain. So the idea will really to be working with them to understand where we can have impact. Is it driving energy efficiency in their operation or decarbonization as well. The second part will be about the environmental footprint really of the product. So by eco-designing it more, but also about thinking about alternative fibers for example. We are extending right now our ranges. We have actually facility range made of alternative recycled plastic. And so we are extending and get adding new projects this year on that range. Similarly -- we are 1 of our biggest collection called Motion collection is going to be switched and it's going to be launched in the next coming months, but is going to be switched towards recycled plastic, cotton, and for some having organic cotton. And we're also having a little tiny project, let's say, pilot project with our really the textile working on the closing the loop, so made from workwear to workwear, so basically making Workwear products out of our old discarded workwear. So it's really a significant part and scheme. When you know that globally, 1% of the textile are recycled today. Today, at least, we recycle 70%. So we are very proud of that, but government is still very tricky. So being able to -- even on a limited scale to recycle and make a new garment of it is really a fantastic challenge. So we'll see in the future if we can make it even bigger. But at least it's what we are working on right now.

And what are you doing on the transportation front to reduce your CO2 emissions?

So on the transportation, so we will be working also with our freight partners to try to see what could be the alternative? Is it intermodal, it's alternative vehicles, and try to see how we can really decrease the impact. For our employees and encouraging them to change the behavior for coming to work, we will be working on different schemes. We also try to explain them what are the different options and also the impact of the different options, try also to engage them in [indiscernible] and think about it.

So we see that overall, this is a very thorough and structured plan. What are the key takeaways?

So I think the key takeaways are, this is SBTi targets. These climate targets are basically just a natural next step for us in terms of CSR strategy. We're also confident that this plan is ambitious, but it's pragmatic, it's feasible. We have prioritized energy efficiency actions that are bringing both operational benefits, but also financial savings and that are actually allowing us to remain into the financial guidelines we have provided to the market. This plan is also going to be a strong opportunity and a strong source of engagement and pride for all employees. It will bring differentiation for Elis on the market and also make us as like a trusted and engaged partner for our customers. So we're also very confident that it will bring profitable growth on the long term.

Claire. Thank you very much for this wide-ranging presentation. And we'll now return to Xavier, who will provide us with an update on the current trading and the summer activity.

Yes, we are back to something more short term. So if we come back to what we presented to the market end of July, so the performance of Elis in the first semester, I think that we deliver very solid set of financial KPIs, a solid performance for the first semester. First, with a strong organic growth, around 15%. So it's massive improvement. It was driven, of course, by the recovery in hospitality. But not only, we have also delivered a very, very good performance in Workwear for industry with level -- record level of signature of a new contract with new customer. And also, of course, we have been able to mitigate the inflation of our costs, thanks to our price increase, and it was also the third driver of this huge level of organic growth in the first semester. So growth is good. but improvement of the margin is even better. We have been able to increase the EBITDA margin by 90 bps and the EBIT margin by 200 bps. So it's very solid performance in the first semester. It was, of course, driven by the operating leverage, thanks to the huge level of increase of volume. But not only, we have been able, as I said, to mitigate the balance of inflation. So it was a very good performance also to be able to convince our customers to increase our price at the level of the increase of our cost and the level of productivity gains in every topic was quite massive in the first semester, and we can be happy with this level of performance. As a result of this good set of growth and margin improvement, we have followed our road map of deleveraging of the group. We posted at the end of the first semester a new leverage at 2.4x. It's a massive improvement in comparison to last year. It's 0.3x lower than last year and not the end of the story of the deleveraging. So that's why this very good level of performance in the first semester allow us to raise the guidance of margin for the full year. So we now expect an improvement of the EBITDA margin by around 70 bps, and we were at 50 bps in the previous guidance. Small improvement also for the EBIT in absolute value. We were at EUR 650 million expected, and now we expect EUR 660 million. We have also been able to precise the guidance of organic growth. And now we expect something around 12% organic growth. It is exactly in the middle of the range we provide to the market at the beginning of the year between 11% and 13%. And we confirm also a very solid level of cash flow for the year, EUR 260 million expected for the full year '23. And it will allow us, as I said, to still decrease the level of leverage of the group, and we expect to leverage at the end of the year that should be around 2.1x.

So that was what you presented to the market in July. How has activity been in July and since then?

So to summarize, we confirm all this set of guidance. So that means that no major surprise during the summer. We have a normal level of activity. We have kept a very solid momentum in Workwear, for industry, and I'm very happy also with the level of commercial performance this summer -- even this summer, we have been able to sign a lot of new contracts. So it's very good for the future growth of the company. For the hospitality this summer, the season was correct. So of course, it depends on the different countries. So we have some countries where it is just correct, like France or Spain. And we have some countries where it was more solid like Portugal or U.K. or in the Nordics or a very good level of activity in Denmark or Sweden, for instance. All in, we have more or less the same level of activity than what we had in '22, and '22 was considered as a good year of hospitality during the season. What is very important, I think, for this summer is to highlight very good level of operational efficiency in our laundry this summer, and it is related to the fact that we have seen a limited level of growth of volume. And our laundries were very efficient to manage this volume this summer and obviously more efficient than last year. So, it's not only a very good news for the quality of service delivered to the customer, but of course, it's also good news for the margin. We have been able to manage very efficiently this volume this summer and it is the good news of the summer. So that's why all in, I'm positioned today to reconfirm all the guidance we gave to the market end of July.

Thank you, Xavier. So we see that Elis has carried by good momentum and we're now ready to start the Q&A part of this session, and we're happy to welcome Louis Guyot, the CFO.

[Operator Instructions] The first question is from Annelies Vermeulen from Morgan Stanley.

I have 3 questions, please. I'll take them one by one. So firstly, thank you for all the detail. So in the past, you've spoken about how your ESG credentials have been a reason for you to win contracts with customers. Could you give some color on what it is you're doing that's different to your competitors? And what is it that is making you win those contracts on the basis of ESG that perhaps your competitors can't do?

Okay. I will take the first question. So thank you for the question, Annelies. So we have some examples where we want such kind of a contract. I think that 1 or 2 criteria that clearly make the difference. First, it is a density of our network, of our logistic network. And it's clear that with our multiservice approach, with all the products and services in the same truck, we are always very close to a potential prospect of customers. So that means that the additional logistic impact for a customer when they sign with Elis will be more limited and it's very easy for us to demonstrate it. And the second, key takeaway, of course, it is a summary of all what has been presented by Claire. We have a lot of effort. For instance, I have in mind, a big contract in washroom, where we propose some dispenser with plastic that is reused. So it's an example that helps us to be much better than the competitor and to win the contract. We have also, as you have seen, a lot of jobs down to reuse at the end of life of articles. We gave some examples also with a big name of beverages where we use some former bottle of this brand to put inside our uniform instead of having some polyester. It is polyester made with former bottle of this company. And so it's a lot of examples like this where all the initiatives of Elis help us to make the difference. And I think that, globally speaking, what we have disclosed tonight with a very ambitious climate road map will reinforce this advantage in comparison to all the rest of the competition.

That's very clear. Secondly, so you've talked a lot about sort of more efficient machinery and alternative energy vehicles and so on. Thinking about your usual sort of 18%, 19% CapEx to sales, are these investments in machinery and vehicles that you'll need to make across your portfolio? Is that included in the CapEx guidance? Or do you think further investment will be required in order to update some of your existing machinery?

So I think it's a very important question. And more largely, it's related to what is the total cost of this program, and what are also the benefits we can expect from this type of investment. And perhaps, Louis, you can elaborate a little on this subject.

Absolutely. So globally speaking, you have understood what the plan is. Machines, more efficient, bringing savings in energy, in a nutshell. And for the Scope 3, lower investment in linen, thanks to a better use of the linen. So when you take the wall, you may say that it doesn't move a lot the ratio CapEx to sales. That shall remain in the zone of the 18.5% we've spoken about. Of course, you may have years slightly above. But globally, we are in the 18.5% region. And you can expect, of course, according to that, some return both in terms of OpEx and energy savings that will show in the P&L. So globally, no major impact. It's all in the trend we already discussed about especially as you understand, the machine comes when we renew as the machines, we take more performing machines at the time where we have to renew them.

Okay. Understood. That's clear. And then just 1 last one. Obviously, I have to ask one on current trading. I'm sorry. Just on the hospitality in France and Spain, you said it was slightly below 2022. Is there anything specific you would call out in terms of trends that you're seeing? Or what has driven that to be slightly lower than last year? I appreciate last year was a very good year, but if there was anything specific in those regions that you would comment on?

No, it's not totally easy for us to have all the detail and the reason why we have seen such kind of very small slowdown and just to precise the points. We are not disappointing by the performance in France or in Spain, and we are talking about something close to minus 2%, minus 3% only in activity in comparison to '22. So that means that it's very close to '22. So we read also and if you cover also some hospitality business that due to perhaps lack of workforce in France, in some cases, some customers decided to even to decrease the level of offer on the market and with an impact at the end. What is very positive, I think, for the future is what is expected in those countries and specifically in France for September and onwards. And here, the message we received from our customers are much more positive. Everybody expects a very strong September, and it is what we start to see in our first figures of volume in our plants at the beginning of September. It will be helped, as you know, in the coming days now with Rugby World Cup in France that will have a positive impact. So that's why we -- globally speaking, the performance this summer in hospitality was totally in line with what we expected.

[Operator Instructions] The next question is from Sabrina Blanc from Societe Generale.

Okay. Yes, I have 1 question is regarding the notably for Claire specific questions. You have provided a lot of new targets for -- notably for Scope 1, 2 and 3. What I would like to understand is where do you see the biggest risk in terms of those targets, notably because you have provided different levels? And then compared to what you have seen in the past, where do you think it might be the most difficult to reach those targets? This is my first question, sorry.

Claire?

Thank you very much, Sabrina, for this is a question. So I think on Scope 1 and 2, we have really made a very detailed work. Honestly, we have reviewed all the energy efficiency renew. We have looked at all the sectors, what they were doing, what was the maturity, what was what we call the TRL, how we call translate that and adapt it to our business model? And this is not something that is finished. That will be a worry that we'll be continuing to do in the next coming months and years. So on Scope 1 and 2, I will say the level of uncertainty is really rather low. There's of course, uncertainties. We are talking about 2030. Nobody knows what will be happening in the future. On Scope 3, of course, it's a little bit more uncertain. We are talking about an area where you have influence. So we need to engage our customers. We need to engage our consumer, the user of the product, but also our supply chain. This being said, we can also see that the world market is really moving forward. And we have customers with whom we have already started working on the topic and that's really engaged and we are building a strong partnership. And that's also something that we really think will continue positioning us as a trusted partner, and that will be a differentiated factor most probably in the years to come into the tendering process.

And yes, I have a follow-up question regarding that. And can you provide more color on where are your competitors concerning their ambition in terms of CO2 reduction? Xavier already mentioned that you were ahead in some cases and to be able to win some contracts. But how the gap is big?

So I will just start with a comment and after Claire will add an answer to your question. But it's very important to keep in mind, Sabrina, that the main landscape of competition for Elis is always a local competition. And at the local level, when you analyze who are our competitors, the majority -- in majority of cases, we are fighting against family business. And they are -- for sure, they are not advanced at all in such kind of subject, and we will make a huge difference against family business. Of course, we have at the European level some international competitor also and then perhaps Claire, you can add some comments.

I think on the international competition, of course, some are also engaged. We have, of course, a much -- I think we have a better plan, very thorough, as I was saying before. We are targeting 2030 with a clear road map on how we want to go there. We were talking about recycled material into our product. We have the chance also to have some of our suppliers that are part of Elis. So it's also helping us to be able to influence coming back about my point before. So it will really be also a game changer for us. Once more, we're also engaged with many. We have a volume effect. And so it will also help us be engaged, drive change along the total value chain and make the change. And I think it's also said that reason that is helping us on this matter.

And perhaps my final question is regarding the methodology that you have used to behind the plan?

yes. Claire?

Yes, sure. So on the methodology, so on Scope 1 and 2, so we really reviewed all the efficiency levers we had. We look at other markets, as I was saying before. And then what we did is that it was really a bottom-up approach. And then we also look at even further detail, we look at each plant we have, and we have more than 400, and we look at all the equipments we had to try to understand which lever we need to implement where. So you see a very detailed and thorough assessment. And then we -- so we did this bottom-up work. And then we did a top down, working very closely with Louis and the Executive Committee to see how we could make it work, try also to make the trade-off and ensure we could stay in the financial guidelines that we have provided to the market. So that's really by joining both sides that we were able to really build this plan that we are super happy to be sharing today with you.

The next question is from Ben Wild from Deutsche Bank.

A couple of questions. Maybe I'll just take the first 1 and come back. Firstly, how do you consider these updated targets our wider approach to M&A.? How important is CSR benchmarking when you're considering specific targets? And more broadly, when you're considering the kinds of markets or geographies that you may enter in the future?

To be sure to understand the question, it's a link between M&A and CSR?

Exactly.

Okay. So it's always something that we will study, of course, what is the state of the art of the company that we could acquire. Nevertheless, to be frank, we have enough confidence in our own knowhow on the business. to improve quite quickly a situation if we see that the target is not well advanced and so on and so on. So that's why at the end, it will not make the difference in the choice to do or not to do an acquisition. You know that in the SBTi methodology, each time you make an acquisition, you take into account also the acquisition in the new target. So that means that we will have to have the same level of effort and improvement with a target that we will acquire, but it will not damage the improvement of the group to respect this guidance. So that's why, at the end, I don't think that we will have a risk of a no go in an acquisition due to CSR. And by the way, even without or before the program that we have disclosed tonight, when we start to see target with a very poor quality of asset with some risk in terms of environment and so on, or with some also legal subject, the way of management and so on, it's immediately a no-go for us and not linked to a potential climate road map, but because we don't want to make such kind of bad acquisition. And so second part of your question, do we consider that it could change the kind of geographies that we could study. I'm not sure that it will change significantly as a part of the world that we are looking for due to this new climate action plan, so same answer. If the industrial assets, is of course, we will escape immediately. And otherwise, if it is a good asset, but not with high level of performance, it can be also interesting for us because we know that we will improve the situation. And by doing this, we have a good chance to extract further synergies. So it will not be reason not to do the deal.

Okay. The second question is related to operational efficiency and the link with pricing. Judging from your comments on the summer season, I think it might have some relevance, both in the very short term this year. And then obviously, in the longer term, as the projects and the targets that you've set out start to come through. Just thinking about that link, do you use the benefits from operational efficiency and retain them in the form of margin, do you think? Or are you likely to share the benefits from greater operational efficiency with your clients in the form of more competitive pricing? Any comments would be helpful.

Yes. We have a position of leader. And we assume that we deliver a more reliable service than the rest of the competition globally speaking. I think that the level of confidence in our service is quite huge, and it is the reason why we have been able to pass the impact of the cost increase into our prices and the reason why customers have accepted to follow us there. And I don't see a lot of reason to start to put pressure on prices and to decrease our prices or to try to take some additional market share because we will be very aggressive on price, thanks to our operational efficiency. And so for the long term, we can consider that we will try to keep our productivity into the improvement of our margin. It is what we are delivering this year. In a B2B world, you have always some negotiation with your major customer, and you will give a part of your gain of productivity to your customer, but this part is limited. And we have not the idea to start to open any kind of price war just because we are very efficient and happy about our productivity. And it is the reason why, end of July, we have more increased the guidance of margin than explain that thanks to this improvement of the productivity, we'll be able to decrease the price to try to open the war to increase the market share of the group.

[Operator Instructions] Ladies and gentlemen, there are no more questions registered at this time. Floor is back to the speakers for any closing remarks.

Thank you very much for your attention and for joining this webinar. And thank you to all of the speakers who are here with me today.

Thank you.

Thank you, Thomas.

Thank you, everyone.