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Elior's reassuring third-quarter performance boosts shares

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·2-min read
FILE PHOTO: The logo of Europe's third-largest catering group Elior is seen on top of the company's headquarters in the financial and business district in La Defense at Courbevoie near Paris, France
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By Federica Mileo and Elitsa Gadeva

(Reuters) -Elior Group on Wednesday beat third-quarter revenue expectations on eased coronavirus restrictions, strong business development and a higher retention rate, driving shares in the French caterer 17% higher.

Europe's third-biggest contract caterer reported organic revenue growth of 25% to 1.18 billion euros ($1.20 billion) in the three months ended June 30, topping the 1.11 billion forecast by analysts in a company-compiled consensus.

"All our countries recorded double-digit organic growth, reflecting a significant improvement in public heath situations compared with the same time last year," Elior said.

Business development helped boost revenue by 10.1%, offsetting an 8% impact from contract losses, the group said.

Bernstein said Elior's results were "pleasingly solid" and pointed to the revenue beat as well as improved retention rate, which they see as a "welcome change in momentum".

The firm's shares were top of France's large- and mid-cap SBF index and on track for their best day since November 2020, when they closed 31% higher.

Elior, which supplies businesses, schools, prisons, hospitals and care homes, confirmed its outlook for the current year and medium-term targets to 2024, but remained cautious on the challenging economic situation.

"Our operating conditions continue to be affected by persistent, very high inflation," Chairman and CEO Bernard Gault said in a statement.

After being hit by COVID-19 lockdowns, caterers are now renegotiating tariffs and supplier agreements to cope with soaring energy and food prices.

Elior in May unveiled a margin recovery plan, which included renegotiation of price tariffs, review of contracts, tighter cost controls and new offerings with shorter menu options and seasonal products.

"Compass yesterday showed what is possible for the best in class player - and the structural tailwinds to outsourcing in catering continue to accelerate in today's macroeconomic environment, which Elior is starting to benefit from too," Bernstein analysts said.

British Compass Group, the world's largest caterer, on Tuesday raised its revenue forecast for the second time this year.

($1 = 0.9857 euros)

(Reporting by Federica Mileo and Elitsa Gadeva in Gdansk; editing by Milla Nissi; editing by Jason Neely)

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