Good day. Thank you for standing by. Welcome to the Elis Full Year 2022 Revenue 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 hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. 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'm here in Paris with our CFO, Louis Guyot. I will comment first on the Q4 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 question 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. Q4 revenue increased plus 20.7%, of which 15.7% organic. This quarter caps a revenue record-breaking year for Elis at EUR 3.82 billion, with more than 25% growth and 21% on an organic basis. In Q4, the growth was driven by, first, solid activity of our hospitality clients, especially in Paris during the recent holiday season. Second, very good commercial momentum with many new contract wins and some specific initiatives to launch additional services or address new markets in some of our geographies. Third, the ramp up of price increases to offset the inflation of our cost base with a full year positive impact slightly above 7% as a result of our negotiations with clients throughout 2022. Our full year results will be published on the 8th of March. Today we can reiterate all the indications we gave regarding 2022 at the end of October, when we commented on our Q3 revenue. As far as 2023 is concerned, what we see so far is encouraging to date. We still don't see anything suggesting a slowdown in our different end markets, and we expect organic growth of at least +10%, driven by a strong price effect in 2023. A stronger price effect in 2023 than in 2022. Also, the different edges we put in place during 2022 should allow us to better control the inflation of our cost base, and we therefore expect all of our key financial metrics to improve this coming year. Finally, financial leverage will continue to go down in 2023. Moving on to the next slide, let's look at the breakdown of full year and Q4 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 U.K. and Ireland, we recorded nearly 30% organic growth in 2022. 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, both on wages and energy prices. Central Europe and Scandinavia both delivered double-digit organic revenue growth numbers, even though the share of hospitality there is more limited, relying on pricing dynamics and commercial momentum. Latin America delivered around 9% organic growth in 2022. There was no hospitality uplift there, as the activity in the region is almost entirely with healthcare and industry clients. We still see the effect of the absence of some temporary contracts that we signed back in 2020, and that progressively came to an end over the past year. Broadly speaking, organic growth in all regions was also fueled by strong commercial dynamism, which led to new contract wins and churn improvements. The next slide provides a bridge between 2021 and 2022 revenue numbers. Nearly half of the total EUR 800 million increase from one year to the next came from higher volumes. This is a consequence of both the sharp rebound in hospitality that we recorded, especially from Q2 2022 onwards, and the uplift from our commercial initiatives on our other end markets. The 2022 price effect represented a total of nearly EUR 260 million of additional revenue to offset the inflation of our cost base. These pricing adjustments have been negotiated throughout 2022, with a strong ramp-up over the year and an even stronger embedded effect entering into 2023. Our Mexican acquisition, closed in July, contributed to EUR 50 million in 2022, the remaining EUR 45 million corresponding to the acquisitions we announced in Germany, Denmark and Chile. FX had an impact of nearly EUR 40 million on revenue in 2022, essentially due to the evolution of the Brazilian real. Moving on to the next slide, our negotiations often result in pricing implementation timelines. We generate some minor lag between cost increase and revenue uplift. I'm very satisfied with how we have been able to undo inflation. 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, 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 PNL. As an example, we charge only between EUR 5 and EUR 10 for the linen of a hotel room. Compared to the actual price of a hotel room, you can see that the cost of our service is not very material. Also, our service is fundamental. Third and last, alternative solutions to our services are very limited. Re-insourcing is not really an option, we don't see this happening in our markets, as it would result in a higher cost for our clients. Furthermore, 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 2022. Moving on to the next slide. Hospitality has shown steady gradual improvements throughout 2022 with a very strong year end. Activity is now above its 2019 level in both France and Spain, and in the U.K. we are still a touch below where we were. In most cases and in most geographies, pricing negotiations were made a lot easier by the fact that average room prices have also significantly increased over 2022. Looking to 2023, we expect a pretty easy comparable base in Q1, as Q1 2022 was somewhat impacted by the Omicron variant. This should lead to a favorable effect of around EUR 50 million fully in the first quarter. Moving on to the next slide. Our three other end markets, healthcare, industry, and trade and services, were strong in 2022 due to some structural activity drivers and to a record year in terms of commercial activity for Elis. 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 home. 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 specific initiatives in some countries, including services that have already been deployed in France, such as services for care homes in Spain and the U.K., and services for small clients in Sweden and in Brazil. We also continue to record an improvement in our churn rates, especially in the U.K., rewarding our efforts to always maintain very high standards in terms of service quality and reliability. Finally, the post-COVID environment remains very favorable for Elis, with the increasing need for hygiene, sourcing security and traceability translating into higher revenue for the group. Let me go through the usual revenue breakdown by activity, end market, and geography to illustrate the group's high level of diversification, which provide us with a highly resilient model in times of crisis. Either way you look at this graph, you will see that Elis positioning is well balanced, which significantly contributes to its resilience. In terms of activity, flat linen and workwear represent 45% and 37% of volume respectively. Our four end markets are always well balanced, with hospitality now back to a more normative level. In terms of geographies, France represents less than a third of our total turnover, and we have a balanced mix with on the one hand Central Europe and Scandinavia being more mature and on the other hand, Southern Europe and Latin America offering higher growth prospects. This good diversification in terms of activity, clients and geographies does not come about it by chance. It is the consequence of a long-term strategy backed by product innovation, commercial efficiency and M&A. Moving on to the next slide. Everyone expects a slowdown in Europe in 2023. We still don't see 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, a large part of our clients operate in a very resilient sectors such as food processing, pharmaceuticals and waste management. Furthermore, with a 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 market, which accounts for 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 downtown. Looking to 2023, our hospitality clients seem quite confident. You should also keep in mind that we are fundamentally less cyclical than hotel players, as the main reason why RevPAR goes down in times of crisis is a decrease in hotel prices, not occupancy rates, and we charge based on occupancy regardless of room prices. Moving on to the full year outlook, I can confirm today all the indications we gave for 2022 back in October. Full year EBITDA margin will be down -150 bps at 33% as 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. EBIT will be above EUR 530 million, significantly up year-on-year. Headline net income per share will be above EUR 1.45 per share, significantly up year-on-year too. Finally, we confirm that free cash flow will be around EUR 200 million. Actually, it should be well above. This will lead to a financial leverage ratio of 2.5x, which will represent a reduction leverage of 0.5x year-on-year. Now, looking at 2023, let me first reiterate the comment I made on organic growth in October. Even if we factor in a strong slowdown in Europe with -2% impact on the top line, in line with what we observed back in 2008-2009, we expect organic growth of at least 10% for 2023. This results from the combined effect of pricing for +8% or +9% of the hospitality catch-up in Q1 that I mentioned earlier in this presentation for up to +2% and a volume growth from commercial activity of around +3%. As far as the other financial metrics are concerned, we will provide an outlook for 2023 when we release our 2022 full year results on the 8th of March. I can already tell you that we expect an improvement of all our key financial metrics, EBITDA margin, EBIT margin, EPS and free cash flow. More especially on EBITDA margin, the different hedges we put in place during 2022 will allow us to better control the inflation of our cost base, which should lead to margin improvement of a magnitude that will depend on the geographical mix of the top line increase. As far as debt is concerned, we don't have any refinancing maturity before April 2024. The financing is diversified with well-balanced maturities and everything at a fixed rate. We strongly believe that the deleveraging trajectory that we anticipate should quickly make Elis eligible for investment grade rating consideration. Moody's already upgraded its rating from BA2 to BA1 last September, which is a good sign. This concludes this presentation. I thank you all for your attention, and we can now move on to the Q&A. Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile a Q&A queue. We will now take the first question. One moment, please. It comes from the line of Annelies Vermeulen from Morgan Stanley. Please go ahead. Your line is open. Good evening. Thank you for taking my question. I have two, please. Firstly, during the comments, you mentioned you'd seen an improvement in the churn rate, and also in your contract wins, lots and lots of new contract wins. I was wondering if you're able to quantify either of those, you know, what that churn rate looks like relative to history. Again, what the pace of your contract wins, compared to what you've seen in the past or any sort of anecdotal examples of that would be helpful. Secondly, just on the assumptions around the 2023 organic revenue growth, could you explain how you get to sort of this -2% scenario, given, as you say, you did 0% in 2009 and arguably the business was perhaps more cyclically exposed back then than it was today. What are, what are the assumptions behind that -2%, potentially? Thank you. Okay. First question, churn rate and pace of new contracts. It's between 5% and 6%, a small improvement in comparison to the past with strong improvement in U.K., where we are close to this level. When you remember the starting point some years ago, we can be quite proud about the evolution of this performance in U.K. In terms of new contracts, we have kept a very solid momentum, so we don't see any sign of any slowdown, and the level of signature is quite important. That's why when we see this evolution, we are totally in line with the long-term guidance we gave. If we exclude the recovery and of the hospitality, we say that for the long-term organic growth of Elis, we expect something around 4%. 3% volume, 1% price. In a context where we would be back to a normal level of inflation, let's say 2%. Today, with the performance we have and what we analyze, we are totally in line with this long-term guidance. The second part of your question, it's true that, I follow you. In 2009, we posted, and the same for 2008, something close to 0% in organic growth. I do believe also that now the portfolio of activity of Elis is better and with a very good level of diversification and better than what it was in 2008 or 2009, so 15 years ago, 'cause we have much more business in the north part of Europe with less hospitality. We have developed now close to EUR half a billion in LatAm. You could consider it's true that this -2% is quite a very pessimistic scenario. By the way, what I could add today is it's only a scenario because as I said, we don't see anything, any sign of slowdown, any sign of beginning of any recession in our geographies. It is just to put an assumption and as always, to try to have a cautious assumption. That's very clear. Thank you. Thank you. We will now take the next question. One moment, please. It comes from the line of Sabrina Blanc from Societe Generale. Please go ahead. Your line is open. Good evening, Xavier. I have one main question regarding the potential investment grade. If I remember correctly in the press release, you mentioned the word quickly. Could you provide some visibility on how you are confident concerning this point? Well, Sabrina, thank you. That's good with you. As you are aware, we are in constant dialogue with Moody's and Standard & Poor's. They have a very good view on the business, its trajectory. They are very clear on the triggers that could move the rating of Elis. Clearly, the key point is leverage, as you are aware. My guess is that there's a more likely scenario which will be somehow to positive in the coming six months, which may be followed by a 12 months maximum period for upgrading to a BBB-. That is the best case scenario. Of course, there's a best case which is faster, and the worst case which is longer. In theory, that's more or less the dialogue we are having with Standard & Poor's, and then Moody's might follow. Okay, thank you very much. Thank you. We will now take the next question. It comes from the line of Simona Sarli from Bank of America. Please go ahead, your line is open. Yes. Hi, thanks for taking my questions. I have two. In your presentation, you show a waterfall chart with the main factors contributing to organic revenue growth in 2022. If you can comment maybe on the main differences, if it is really different compared to Q4. In particular, if you could comment on how pricing is contributing to the organic revenue growth in Q4. The second question, it's again, related to price increases. Clearly, you are getting substantial price increases in 2022 and also 2023 based on the current negotiations. How sustainable are those elevated prices even in a scenario where cost inflation and clearly commodity prices are now normalizing? If you could also comment on what you have achieved in the past. Thank you. Yes. First part of your question, we don't usually give the breakdown of the revenue of the increase of the revenue per quarter. It's quite complex. Just to give you the key trend to analyze what happened in Q4 in comparison to the full year, of course, less volume due to the rebound of the hospitality, because in Q4 2021 it was not so bad. We started to see a slowdown in December with the first sign of Omicron. It was not so bad. As a result, the performance related to occupancy rate is less important in Q4 in comparison to the full year. It is the opposite for prices because we have negotiated all over the year 2022 some additional prices to follow the inflation. Of course it was slightly above the impact of prices in Q4 than for the full year 2022. The second part of your question, very important, is what is our level of confidence in the figures we provide for the expectation in price increase in 2023? It is very high, the level of confidence. First, a significant part is only mechanical links to the report effect of what has been negotiated in 2022. Second part is applied in January 2023, because after the crisis of the energy last summer, we negotiated in September, October some additional price increase with all our main customers. Very often we negotiated something with one part of the new price increase that will be applied in Q4 2022 and the second part in January 2023. It is the reason why we have a very, very clear view on what will be the impact of pricing in 2023. I'm very confident that we will be able to keep this level of prices despite the beginning of slowdown of the price of energy in the market today. We have been quite transparent with all our main accounts, with all our big customer, we were totally transparent with the hedges put in place by the company. All the negotiation were with open book, and we were clear on the level of prices negotiated with fixed term and fixed condition for the full year 2023. It is the reason why we will not have any request from price decrease, because it was clear that the condition we could offer for 2023 were in line with the level of hedges negotiated by the company. Thank you. If I can ask just a follow-up. Historically, did you have any instance where after a time of very elevated, price inflation, then in the following year you had to pull back on prices? No, never. We don't have a lot of experience, to be honest. Also, we don't have a lot of experience where such kind of huge inflation, perhaps only in 2019 in some area due to the inflation of wages. It was the case in Spain, if you remember 2019 with something close to 20%-22% of increase of minimum wages. We had to increase prices in this context and but it was wages. Wages, you have never a decrease of the wages. That's why we have never had to decrease prices. By the way, it will be the same for the months to come. Now what will be the key driver of the inflation of the costs in 2023 will be again, wages. Everybody knows that wage re-wages will never decrease. That's why we are quite protected, and I'm not afraid at all to have to negotiate, a decrease of, the previous condition. Thank you. Very clear. Thank you. We will now take the next question. One moment, please. It comes from the line of Sylvia Barker from JP Morgan. Please go ahead. Your line is open. Thank you. Hi, good afternoon, everyone. I'm afraid a couple more on pricing and then one on volume, please. Firstly, out of your price increases, so if you look at that waterfall, can you maybe comment how much of that was hospitality versus other segments? Can you give us a similar idea for 2023? Then secondly, cost inflation. You touched on this just now, saying that the majority of inflation in 2023 should be linked to wage inflation rather than energy. Can you maybe just give us any color around the likely cost inflation in 2023 linked to wages, energy and any other items that might be material? Finally, on volume growth guidance, if we look at that 2.5%-3.5%, how much of that is driven by Latin America? Thank you. Okay. First part of your question, what is the part of price related to hospitality? It was more a question of product mix. That means that if you analyze where we consume the most energy, it is to produce flat linen and to deliver flat linen. It is in our laundry where we have to suffer the most about the increase of our cost. That means that in a way, the hospitality and healthcare, where the part of flat linen is also important, we can consider that the overall price increase was something 2 to 3 times more important than workwear, where the part of energy is more limited in the breakdown of our costs. It's more healthcare and hospitality between 2 and 3 times more price increase than in the other services in our portfolio, like uniform. For the second question, of course, we will give you much more detail now in one month, so beginning of March, when we will disclose the performance 2022 and the more precise and detailed guidance for 2023. What we said is, globally speaking, wages will be the most important part of our increase in 2023. We will be probably around the level of inflation, the spot inflation at the end of December and beginning of January, country by country. We'll give you more color beginning of March. For energy, the increase will be very limited in 2023 because we have hedged. Now I think that we are close to 90%-95% of gas consumption that are hedged and something close to 75% for electricity. We know perfectly a large part of the energy cost for 2023. It will be in the red, slightly above 2022, but the increase will be very limited. As I said, we will give you much more detail of course, in one month, to when we'll present the detail guidance of the group for the year. Last part of your question in terms of volume, what is related to LATAM, I don't have the figures precisely in mind. What we can see is, globally speaking, LATAM, we expect always something close to between 5% and 10% growth in volume. The basis is, around, now with Mexico, on board, it's close to EUR 400 million. It's more or less the magnitude of the volume coming from LATAM. That means between EUR 20 million and EUR 40 million at the group level. Okay. That's very clear. Thank you. That's interesting on the hedges. You have hedged more for 2023 on gas. I don't know if you can give us anything on the level. Electricity, I guess you haven't had hedged before, you have now, I think you said 75%. Can I just double check? Yes. The electricity to 75% hedged. For the gas, we are close to EUR 80 equivalent PEG Nord price. Okay, great. Thanks very much. Thank you. As a reminder, if you wish to ask a question, please press star one one on your telephone and wait for your name to be announced. We will now take the next question. It comes from the line of Christoph Greulich from Berenberg. Please go ahead. Your line is open. Good evening, Xavier and Louis. Yeah, three questions from my side, please. Quick follow-up to start with on the electricity hedge. The 75%, is that across all regions? I'm asking more specifically regarding France, because I remember that, you had some issues there in the past to find, yeah, attractive hedging opportunities for electricity. You had a statement in the press release regarding pricing in Germany, that this is still insufficient in healthcare and workwear. Just wondering what is your strategy there, to deal with that? Lastly, on the working capital, when I look at the free cash flow guidance for 2022, I feel it assumes a relatively significant cash outflow from the net working capital increase. Just the question then for 2023, will this be a more normalized year for working capital, so basically growing in line with the top line? Thank you. Hello, good evening. I will take the point regarding pricing in Germany. It's clear that with we had not only the impact of the energy like everywhere else, but on top of that, you know that in Germany, the minimum wages has been significantly increased, and we are talking about something close to 20%-25% in the one year with the last impact that arrived in October. We are pushing hard. As I said, for workwear, the breakdown of our cost, wages and energy, are slightly below the, what we have in the flat linen. The big impact is coming from healthcare. We have increased significantly the pace of negotiation with the healthcare, and we are ready with some names. We have been in position to say that we are ready to stop the contract and to stop the service if we are not able to find a decent agreement with price. It is the case for one or two bigger accounts that has been lost in the beginning of the year, but we assume it because the level, the condition were too low and the customer was not ready to follow us with a more decent price. Globally speaking, it was more a success because the vast majority of big accounts where we were quite pushed to say that it is, take it or leave it, we found an agreement at the end. To summarize, what we have decided to change in Germany is the level of strict application of price increase. We have stopped the service if the customer is not ready to follow us because we cannot, of course, deliver the service by losing some money. I will ask Louis to take the two other question. First question, the hedging for electricity. Yes, indeed, the market is now reasonable in France, probably due to the relaunch of the nuclear plant. We have been able to hedge our electricity for Q1 to Q2, Q3. More or less, 65% of the whole consumption. Your question number three is on working capital. Indeed, you have kept in mind that a strong top line growth drive a negative receivables cash outflow. You will see that into the working cap for 2022. 2023, it shall be more normalized because we are speaking of just a low single double-digit organic growth. Though we'll have a small pushback coming from the calendar effect because the last two days will be Saturday 30 on Sunday 31, and that is not good for the cash collection of the countries collecting a lot on the last day. Typically the Nordics. A small smaller flow on that flow coming from that, but much better of course than in 2022. Thank you. There are no further questions at this time. I would like to hand back over to Xavier Martiré for final remarks. Yes, thank you. Thank you everybody for your attention and see you beginning of March for the full year result of the company and the guidance 2023. Have a good evening. Bye-bye. That does conclude our conference for today. Thank you for participating. You may all disconnect.