Elior slides as caterer continues to lose customers

By Sarah Morland

(Reuters) -French catering company Elior warned on Thursday it was continuing to lose customers in the coronavirus pandemic, sending its shares almost 5% lower.

Europe's third biggest contract caterer said its customer retention rate fell to 91% in the six months to the end of March from 92% the year before - at a time when bigger rivals Compass Group and Sodexo both saw improvements.

It did not give full-year guidance.

"We are in a contract business, it's an everyday battle," Chief Executive Philippe Guillemot told analysts in a call, adding the group's 95% customer retention target could be pushed back from an original 2024 deadline.

"Especially with COVID-19, assumptions used to sign contracts were not met for months, and we had to enter into negotiations," he added.

Credit Suisse analysts said the situation could get worse as some customers have decided to delay tenders.

Elior has around 14,000 contracts with organisations including schools, businesses and hospitals.

First-half revenues dropped 22%, for a core loss of 25 million euros ($30 million) - the first since the group's 2014 return to Euronext. https://bit.ly/3fMqthF

However, after over a year of lockdowns, results were better than feared, with Elior delivering a positive free cash flow and bolstering its cash reserves on the back of a state-backed loan.

Elior does not expect its business and industry operations to see material recovery before September, and warned of more stringent health restrictions in French schools - with entire classes sent home after a single positive COVID-19 test.

Compass, the world's largest catering company, and French rival Sodexo have had to cut jobs and clamp down on costs as extended lockdowns continue to eat into earnings.

($1 = 0.8207 euros)

(Reporting by Sarah Morland in Gdansk. Editing by Mark Potter)