Good day, and thank you for standing by. Welcome to the Q3 2022 revenue presentation conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Xavier Martiré. Please go ahead. Thank you. Good evening, and welcome to this trading update presentation, which is also webcasted and recorded. I'm Xavier Martiré, CEO of Elis, and I am here in Paris with our CFO, Louis Guyot. I will first comment on the Q3 revenue numbers, and we'll then provide you with an update on our full-year guidance. Finally, we will have a Q&A session to answer your questions. After our call, Nicolas Buron will be available to answer any of your questions offline. Before we start, please take the time to read the disclaimer. I'm very happy to report another quarter of strong revenue growth for Elis. Revenue increased by +22.8%, of which 17% organic. This growth was driven by solid activity of our hospitality clients during the summer, very good commercial momentum in all our geographies, and also by significant price increase to offset the inflation of our cost base. The bulk of this inflation comes from the increase in energy prices. As you recently noticed, the price of gas and electricity peaked during summer, which led to an additional EUR 35 million increase in our cost base for full year 2022, compared to what we estimated at the end of the first half. To offset this, we launched new pricing initiatives that will be implemented gradually between October this year and January 2023. This means that if you had all the price increase negotiated through 2022, that will roll over next year. The new price increase already negotiated for next year, you should get to a price effect for Elis in 2023 that is above 2022. These higher revenue and cost numbers in Q3 led us to slightly update some of our full-year guidance numbers. We now expect organic revenue growth for the full year at above +20%, compared to between +18% and +20% before. The dilutive effect from inflation should have an additional 50 bps impact on our 2022 EBITDA margin, which should be at 33%. All our other objectives in EUR terms are confirmed. EBIT should be above EUR 530 million. Headline net income per share should be above EUR 1.45. Free cash flow after lease payments should be at circa EUR 200 million. The financial leverage ratio, as of end of December 2022, should be at circa 2.5 times, significantly down year-over-year. Moving on to the next slide, let's first look at the breakdown of Q3 organic revenue growth by geography. Every region posted strong numbers, especially those where the share of hospitality in the mix is high, like in France or in Southern Europe. In the UK and Ireland, we recorded more than +21% organic growth in Q3. This was due to an especially strong price effect on top of the rebound in occupancy rates to offset the very strong inflation in the region. Central Europe and Scandinavia both delivered double-digit organic revenue growth numbers. Even so, the share of hospitality there is more limited, relying on pricing dynamics and commercial momentum. Latin America delivered around 7% organic growth. No hospitality upgrade there, as the activity in the region is almost entirely with healthcare and industry clients. We still see the effect from the absence of some temporary contracts that we signed back in 2020 and that progressively came to an end over the last year. The next slide provides an update on our activity in our three most important hospitality regions. You can see that activity has been strong throughout the summer. France and Southern Europe are now at or above 2019 levels, whereas the UK is still below, around 20%. Our clients remain very optimistic for Q4, and we expect a pretty easy comparable base in Q1 2023, as Q1 2022 was somewhat impacted by the Omicron variant. Finally, pricing discipline was strong in this market to offset the inflation of our cost base. Negotiations are never easy. It is fair to say that our clients, mostly big hotel groups, have been receptive and constructive. Moving on to the next slide, our three other end markets, healthcare, industry, and trade and services, continue to be good due to some structural activity driver. Outsourcing is one strong growth driver for us in Eastern Europe, Southern Europe, and Latam, where more and more companies have decided to manage the washing of their employees' uniforms and do not want to take the risk of letting their employees do it or not at all. As a leader in the industry with a very strong network density, Elis offers second to none reliability in supply. This is a key factor given that without our uniforms, most of our clients simply cannot operate their business. We continue to roll out to some other countries services that have already been deployed in France, such as Pest Control, Washroom, as well as services for care homes and services for small clients. We also continue to record an improvement in our churn rates, rewarding our efforts to always maintain very high standards in terms of service quality and reliability. Finally, the post-COVID environment remains very favorable to Elis, with increasing need for hygiene, sourcing security, and traceability translating into higher revenue for the group. Moving on to the next slide. Also, everyone expects a slowdown in Europe in 2023. We still haven't seen any sign suggesting the beginning of a downturn in any of our markets. In any case, I would like to remind you of Elis' very resilient pattern. In industry, first, most of our clients are operating in very resilient sectors, such as food processing or pharmaceuticals. Furthermore, with the fixed fee invoicing methodology we have in place with these clients, we basically charge them for the inventory in place. It means we are not impacted in case of a temporary and limited activity slowdown at our clients. Second, healthcare is very resilient by nature. Third, trade and services, where, just like in industry, we charge our clients with a fixed fee regardless of their activity level. Therefore, this end market is very resilient, too. At the end of the day, we consider that only our hospitality end markets, which account for circa 25% of total revenue, could be somewhat impacted by a global economic slowdown, even if we continue to see many construction or upgrade projects in the hotel sector in all our geographies, which should be a mitigating factor in case of downturn. To illustrate this resilient pattern, even during very strong economic downturn, I want to remind you that Elis delivered flat organic revenue in 2007 and 2008 at the time where the economy was in a downturn throughout developed countries. Moving on to the next slide. The main highlight of the quarter was a surge in energy costs. The graph presents the gas and electricity price since the beginning of the year, with a sharp increase in Q3, which corresponds to right-hand side of the yellow line. At the end of the first half, both energy and gas price were in line with our full year estimates. Prices then basically doubled in Q3, meaning that, nine-month average price is now above what we factored in. The consequence of this energy cost increase in Q3 is that our full year 2022 cost base new estimates is now higher by around EUR 35 million compared to what we discussed when we presented our H1 result at the end of July. Of this EUR 35 million, 25 come from direct costs for gas and electricity. Some other energy-related cost items also increased, such as paper pulp, which price is now up around 30% year-on-year. All in, this represent an additional EUR 5 million increase compared to our estimates at the end of July. Finally, personnel costs are also above earlier estimates by around EUR 5 million. Therefore, to offset this higher than expected inflation, the group has launched some new negotiations with our clients to clinch additional price adjustments. In B2B, these adjustments are never immediate, and there is always a lag effect. On average, additional pricing corresponding to circa EUR 25 million of additional revenue for 2022 has partially been implemented since the beginning of October, and the remainder will be implemented from 1 January 2023. Overall, we now expect the 2022 price effect to be around +7%, and given what has already been negotiated for 2023, plus the whole forward effect of what has been implemented over 2022, there is no doubt that 2023 price effect will be higher. Moving on to the next slide. Even though our negotiations often result in pricing implementation timelines which generate some minor lag between cost increase and revenue uplift. I am very satisfied with how we have been able to handle inflation so far. This clearly highlights Elis' pricing power, which is a key component of our business model and one of the group's biggest strengths. I want to give you some color on the reasons of this success. First, our services are essential to our clients' activity. Hotels and hospitals simply cannot operate without linen. The same goes for industrial clients. Uniforms are very often mandatory, and they need our service to properly run their business. Second, the cost of our service represents only a fairly small component in our client's P&L. Third and last, our competitors have more or less the same cost base as ours, and there is no risk of disruption from an alternative way of providing the service. It means that everybody is facing the same inflation problem, and we have noticed overall rational behavior from our competitors in most of our markets. These three reasons combined explain why we have been successful with our pricing adjustments in the first half. Now let's talk about the 2022 guidance, starting with organic growth. We now expect organic revenue growth to be above +20% compared to the indication of between +18% and +20% given at the end of July, which was already above what we had in mind when we released our 2021 results in March. Once again, this upgrade is based on, first, the significant pricing adjustments we efficiently put in place to offset the inflation of our cost base. Second, the better-than-expected commercial momentum seen in Q3. And third, the slightly better than expected activity in hospitality. The main underlying assumption to this new guidance is that there will be no emergence of a new variant in Q4. Now looking at 2023, organic growth should be very good again. Even if we factor in a strong slowdown in Europe with a -2% impact on the top line, in line with what we observed back in 2008 or 2009, we expect organic growth of at least +10% or for next year, twice as much as the current consensus figure. This results from the combined effect of pricing for +8, +9%, of hospitality catch up in Q1 2023 for up to 2%, and of volume growth from commercial activity of around +3%. As far as the other financial indicators for 2022 are concerned, we now estimate the full year EBITDA margin will be down -150 basis points at 33%. This is 50 basis points below what we had in mind at the end of July when we presented our H1 results. This slight downgrade is a result of both the dilutive effect from the additional price increase to offset inflation and from the lag effect in the new pricing implementation schedule. Let's say that all expectations are all maintained in Euro terms. EBIT will be above EUR 530 million and headline net income per share will be above EUR 1.45 per share, both significantly up year-on-year. Finally, we confirm that free cash flow will be around EUR 200 million, with a strong improvement in EBITDA to be offset by a negative change in working capital requirement. We are also confirming our year-end target for financial leverage ratio of 2.5 times, which will represent a reduction in leverage of -0.5 times year on year. We were already close to this level at the end of September, with a financial leverage ratio at 2.6 times. On the same topic, we want to firmly commit to continuing to deleverage the company. The steady growth in EBITDA and the decrease of our net debt in EUR terms should mechanically lead to a financial leverage ratio of close to 2 times at the end of 2023 and below 2 times in 2024. This should quickly make Elis eligible for investment grade rating consideration. We therefore aim at obtaining such a rating and maintaining it afterwards. Looking at the debt structure, we don't have any refinancing maturity before April 2024. The financing is diversified with well spread maturities and everything at a fixed rate. We strongly believe that further improving the financial rating of the company and ultimately obtaining an investment grade rating will limit the impact from rising interest rates on our yearly interest costs in the coming years. Last month, Moody's already upgraded its rating from Ba2 to Ba1, which is a good sign. We will be committed to continue to reduce the group's perceived risk profile in the future. This concludes this presentation. I thank you all for your attention, and we can now move on to the Q&A. Operator, back to you. Thank you. As a reminder, if you wish to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. Please stand by while we compile the Q&A queue. Once again, that's star one and one if you wish to ask a question. We will now take the first question, and it comes from the line of Maddie Jobert from Morgan Stanley. Please go ahead. Your line is open. Hi. Thank you for taking my questions. Just two to start with from me. So firstly, in the bridge that you give your organic growth for FY 2023, the -2%-0% impact from an economic slowdown, do you mind just talking us through your assumptions between the different end markets there? Should we be considering similar end market dynamics to what you mentioned in the global financial crisis? Or considering your exposures may be slightly different now, what we should be considering there? And then secondly, on electricity hedging, is this something that you're considering? Have you been able to put any in place, and what are your thoughts for that going forward? Thank you. Okay. Thank you for the question. In the bridge 2023, I think, by the way, that we have been quite conservative in our assumption that it could be a -2%, because -2%, it is what we observed in the last big crisis in Europe, but we didn't have at all the same breakdown of activity and the same balanced portfolio. I think that in 2007 or 2008, we had probably more than 80% of the business made only in France. It's now not at all the case. We have only 1/3 in France, and we benefit from some better geographies, like close to half a billion EUR of revenue in LATAM that will be not impacted by the recession in Europe, for instance. We have also now a nice exposure in the eastern part of Europe with a strong organic growth thanks to outsourcing. For all these reason, I think that even in case of a big recession like in 2008, the impact will be probably more limiting than what we suffered 15 years ago, so -2%. Nevertheless, it's probably cautious to say that it could be 2%. In terms of breakdown by end market, it was your question. As we said, I consider that hospitality will be the end market where we will have the biggest impact in case of a slowdown. For the rest, it will be very, very limited. Nothing in healthcare, limited in trade and services, only if we have more bankruptcy, for instance, of small customer, but it will be limited. Industry, as we said, we have so many exposure to end markets that are not really cyclical, like food processing or pharmaceutical industry, that we are quite confident in our resilient activity with industry. To summarize, I do hope that minus 2% is really a worst case, and honestly a very cautious approach when we see how the mix of activity is now much more well-balanced than 15 years ago, and it will be probably hospitality that could be the most impacted. Second question, hedging for electricity. Yes, clearly it is something that we are looking for with the same kind of strategies and what we decided for gas. At this stage, it's not yet done because when we were in position to decide yes or no to take a hedge, the price on the market were totally crazy. Honestly, we don't have yet any offer at acceptable price. We are still waiting for some better price on the market to hedge electricity. The offer we received today seems to be too high. But it is our willingness, as we did for gas, to have a hedging policy also for electricity. Great. Thank you very much. Thank you. One moment, please. We will now take the next question. It comes from the line of Christoph Greulich from Berenberg. Please go ahead. Your line is open. Yes. Good evening. Thanks for taking my questions. Three from my side, please. Just quick follow-up on the energy costs. I assume the main part of the additional cost came from the electricity side, given that you have the hedges in place for the gas. When we look at the chart and also at today's prices, I mean, the prices have come down again quite a lot from those peak levels in Q3. Just trying to understand a bit, what is your working assumptions for the electricity price in Q4 that leads to your EBITDA guidance? Then also just to understand the additional price increases that you're now implementing, are those temporary surcharges, or are they structural price changes? Just the second one, we have now this guidance for about 150 basis points lower EBITDA margin this year compared to 2021. If you could provide any statement or kind of guidance on how much of that lost margin you think you can recover next year. Lastly, on the churn rate improvements that you mentioned, could you quantify them in any way? Thank you. Okay. We start. Just if I may, a small comment when you say that, the impact of the increase in energy cost was mainly electricity for us because we have a new hedge position. Don't forget that the new hedge position is for Q4. We start to have better hedging position in gas only starting from the first of October. For Q3, we suffer in both electricity and gas. For half of the volume in gas, don't forget that we had this year only half of the gas hedge, and the second half was with spot market price. In Q3, the main deviation in euros is still coming from gas. That is the biggest part of our consumption of energy. For the end of the year, for Q4, we will be close to 70% of gas that will be hedged. We were at 50, and now we'll be at 70. It is better of course, less risk, but we still have 30% that will be floating for the Q4 and 100% floating for electricity. Our assumption for the new guidance of margin is the following. For October, of course, we know perfectly what is the situation, and it's right that if we have a look at the last 10 days, we have seen a very sharp decrease in the cost of energy in gas and electricity. We have already taken in our assumption the good news of October. Nevertheless, we are still very cautious for November and December because everybody knows that this situation on the market is perhaps quite exceptional, linked to the very good weather condition and all the stock of gas in Europe are full. If in two weeks we have a strong decrease of the temperature, immediately we should see the price of energy increase significantly. That's why in our assumption, we have taken something quite cautious, we hope, with for November and December, a price close to what we had on the market in September. For how we negotiate some price increase, is it a temporary surcharge or a fixed increase? For Q4, what we try to negotiate is a part that will be a fixed price increase, a part linked to energy fees or with a temporary surcharge. We negotiate for January 2023 to replace the temporary surcharge by a fixed amount. The goal for 2023, as we will have a large part of the gas that will be hedged, is to have a price increase fixed and not anymore an energy fee that could fluctuate because the biggest part of our cost in energy is still gas, and it will be largely hedged for 2023. margin for 2023 at this stage, I think it is too early because we have quite some confidence on what we will be able to do in price and so on and so on, but we are still in the budget exercise with all the bottom-up approach and so on. At this stage, it's too early to give you some precise guidance for 2023. Of course, we can just say that of course we expect an improvement in 2023 of the margin. The churn rate, the magnitude of the improvement is close to half a point or half a percent more or less. Just follow up on the churn rate. What is the percentage where we are today? We are slightly below six today. Yeah. That, that's all very clear. Thank you. Thank you. Thank you. We will now take the next question. One moment, please. It comes from the line of Oscar Val-Mas from JP Morgan. Please go ahead. Your line is open. Yes, good afternoon. It's Oscar on behalf of Sylvia Barker. I have two questions. The first one, I saw you've increased the employee cost by EUR 5 billion. Could you touch upon how you see the minimum wage increases in Germany and other countries impacting your business? The second question is on your competitors. Have you seen any difficulties at your competitors so that you're able to take share? Is that something that you think will materialize next year? Okay. The first subject, as you know, of course, wages is a main part of our P&L. The impact can be absolutely a drama if a company is not able to pass on to price this impact. Germany is a good example. When we analyze the overall inflation in two years, we are probably between 25% and 30% increase of cost in Germany due to this huge increase of minimum wage. We are doing the job to negotiate customer by customer to be very clear and open with the open book strategy in the negotiation to show what is the impact for us. We will push a lot in Germany to increase the prices to offset this minimum wage. We have more or less the same situation in other countries. You remember in UK we had to increase significantly our package to offset the lack of workers. We had, as a consequence, to increase our price after that. In France, we have a regular increase of the minimum wage, of course, and it is also the reason why we have to increase our price. The same in Spain, where we have some negotiation region by region that force us to increase our price. At the end, the impact for the industry can be offset thanks to the pricing power of Elis. It is a transition for the second part of your question. It's clear that the competitor that will not be able or not brave enough to negotiate the sufficient level of price increase to mitigate their cost will have some strong issue. Our strategy will not be to open a kind of war to try to take a lot of market share by playing with price and so on. It's not our strategy. We will be much more focused on our own development and our own ability to protect our margin by putting the price at the level of a cost increase. What could happen, of course, it's perhaps more opportunity in M&A with some families or only bolt-on, of course. Some families that could be quite tired after two years of COVID, strong inflation in costs, high level of difficulties to find some workers in some countries. It's not impossible that we could have more discussion for consolidation of the market in 2023. It's too early to give you a more precise trend. Okay, thank you. To clarify, no significant impact yet from competitors? Not yet. Okay. Thank you very much. Thank you. Once again, as a reminder, if you wish to ask a question, please press star one and one on your telephone. We will now take the next question. It comes from the line of Ben White from Deutsche Bank. Please go ahead. Your line is open. Hi, good evening, everyone, and thanks for taking my questions. I have two questions, but maybe I'll just start with the first. You've mentioned during the presentation that the pricing effect in 2023 should be higher than in 2022. I think in the publication, in the press release, you're now saying that 2022 cost base inflation should be near 11%. As things stand, do you think cost base inflation will be higher in 2023 than in 2022? No, I don't think because for energy, I hope, except if we have some crazy situation with electricity because we are not hedged for electricity. For gas, thanks to the level of hedging we'll have next year, the level of increase of energy costs will be much more limited in 2023. It will help. We will have some impact of wages with some carryover effect also of what has been increased in 2022, like in Germany with a huge increase of 23%. Nevertheless, all the other inflation of costs for something that is related to energy, we took the example of the paper pulp, for instance. The main impact is in 2022. The same for detergent, for instance, for the chemistry we are buying for our washing processes. The main impact for me of the increase of the cost base is in 2022. We expect not to have this level of increase in percentage in 2023. It's possible next year that the price inflation of 7% and the cost base inflation of 11% is kind of reversed? It's not impossible. It's not impossible, but too early to say at this stage because, of course, if otherwise I would have answered precisely to the question on the guidance for the margin 2023. As I said, it's a little too early at this stage. Clearly, our assumption is to have improvement of the price increase in percentage and not the same level of cost increase in percentage, yes, in 2023. It is a reason why we expect an improvement of the margin next year. Clear. On the second question for me is just thinking about next year, the cash flow. Obviously we've seen shipping costs and cotton and linen costs starting to come down. At the same time, you've obviously got, as you've mentioned, very strong price rises coming through, and we can assume significantly slower volume growth in 2023 than this year. When you combine all of those things, how should we think about CapEx for next year in proportion to sales? Should we expect that particularly the linen CapEx takes up a lower share of sales than in the past? Yeah, absolutely. You're right that, Louis Guyot, here speaking. On all the aspects of inflation we are mentioning, there are today two things which are going down. It's index for cotton and the shipping cost, freight, that is now not back to normal but lower than before. Keep in mind that all that is in a way balanced by the dollar. In which we are buying the linen. Globally, the cost increase for linen shall be limited next year. In percentage, the linen CapEx shall be lower than this year. On the other hand, the industrial CapEx percentage shall be slightly higher as we are following the growth in uniforms, so delivering capacity to wash uniforms all over the group. Globally speaking, it's a bit early, too early to say, but we will be in the famous bracket 18%-18.5% that we spoke about previously. Sure. That's very helpful. A final follow-up, if possible. Again, I'm conscious that you don't want to give guidance for 2023 at this stage, but just thinking again conceptually about working capital for next year. If you're saying linen costs, costing tops costs are coming down, linen as well, how should we think about, or can you remind me how we should think about kind of inventory, inventories for next year, especially if volumes are kind of flat in 2023? Right. The baseline is that you take the balance sheet, which is EUR 150 million of stock, EUR 600 million of receivables and EUR 250 million of payables, and you just put organic growth of the two last months on that. That give you a rough idea. Then more specifically, you're right to say that the linen stock, because inventory is mainly linen, shall follow the price of the linen limited, as we mentioned, and the volume expansion limited, as well, versus the price increase in the top line. Yes, you're right. The inventory shall show a better view in 2023 than what will be the mechanical effect. Clear. Thanks for answering my questions. Really appreciate it. Thank you. Once again, as a reminder, if you wish to ask a question, please press star one and one. There are no further questions at this time. I would like to hand back over to Monsieur Martiré. Okay, thank you. Thank you everybody for your participation tonight, and I wish you a wonderful evening. Bye-bye. That does conclude our call. Thank you for participating. You may all disconnect.