Strategic Review 2016-2020 ELIOR GROUP 2020 Develop, Innovate, Accelerate September 24, 2015
EXECUTIVE SUMMARY 2020 STRATEGY: Develop, Innovate, Accelerate 1 2 3 ELIOR A successful growth story Track record of organic development and acquisitions over time Thanks to the complementarity of its activities in catering, its focused and selective development strategy, its entrepreneurial spirit and its decentralized organization ELIOR Presence on two large and structurally growing markets Contract catering: a 150bn outsourced market (out of a total 430bn market), growing at 6% on average per annum Concession catering: a 23bn market growing at 4% p.a. on average globally, driven by even stronger growth in airports ELIOR Benefits from significant growth opportunities on each market 2
EXECUTIVE SUMMARY 2020 STRATEGY: Develop, Innovate, Accelerate The 2020 strategy answers three critical questions for the upcoming development of the Group: WHAT? Food will remain our core business, in contract and concession catering. We will have a selective approach with regards to BtoB services. WHERE? In countries in which we believe we can reach top 3 positions, either globally or on niche segments. We will thus consolidate our positions in Continental Europe, expand our UK and US contract catering business and set a foot in Asia. We will grow organically in US airports and expand in Northern Europe, Asia and Middle East in airports. HOW? With a stronger focus on the consumer, its needs, its aspirations. We will work on improving their experience, through careful attention, innovation, and technology, including digital. 3
EXECUTIVE SUMMARY 2020 STRATEGY: Develop, Innovate, Accelerate To implement this strategy we have designed a new organization, formed a skilled and experienced team and elaborated an 8-project transformation plan (Tsubaki) focusing on: This roadmap results in financial objectives for 2020: Sales 7-8 bn GROWTH COST REDUCTION QUALITY EBITDA margin 9 to 10% 1. SALES EFFECTIVENESS (BtoB) 4. PURCHASING 7. HUMAN RESOURCES FCF/EBITDA 45 to 55% 2. MARKETING & PRICING (BtoC) 5. ACTIVITIES AND CONTRACTS PORTFOLIO REVIEW 8. OPERATIONAL EXCELLENCE 3. DIGITAL EXPERIENCE 6. G&A OPTIMIZATION 4
Our Vision: the Consumers Turn 5
TO BE THE CATERER OF CHOICE, DRIVEN BY QUALITY AND INNOVATIVE CONSUMER EXPERIENCE 6
TODAY S AGENDA 1 A SUCCESSFUL GROWTH STORY 2 THE CONTRACT CATERING MARKET 3 THE CONCESSION CATERING MARKET 4 STRATEGY 5 2020 AMBITIONS 6 CONCLUSION 7
1 A SUCCESSFUL GROWTH STORY PHILIPPE SALLE Group Chairman and CEO 8
One Core Business: Food Catering 9
Every day, our 106,000 employees* take genuine care of each of our 3.8m customers through 18,000 restaurants and points of sale in 13 countries *In 2014 10
ELIOR GROUP, A LEADER IN EUROPE AND A GROWING CHALLENGER IN THE USA 2006 2007 2008 2009 2010 2011 2012 2013 2014 5 6 6 2 1 1 2 1 1 6 54 3 1 3 POSITION IN CONTRACT CATERING POSITION IN CONCESSION CATERING 11
EVOLUTION OF BUSINESS PROFILE A CONSISTENTLY DIVERSIFIED PORTFOLIO 2011 2012 2013 2014 AN INCREASINGLY BALANCED PORTFOLIO 11% Motorways 12% Airports 7% Railways, City sites & Leisure 32 % Business & Industry 9% USA 15% Spain & Portugal 5% UK 4% Other 53% France 19% Healthcare 20% Education 14% Italy FY 2013-2014 REVENUE: 5.3bn 12
REVENUE ( m) A SUSTAINED GROWTH PATTERN 3,769 4,158 4,464 5,017 5,341 2010-2014 CAGR +9.1% FY 2010A FY 2011A FY 2012A FY 2013A FY 2014A GROWTH RATE Group revenue growth 5.8% 10.3% 7.4% 12.4% 6.5% Organic growth 5.0% 5.1% 0.7% 1.1% 3.9% EBITDA MARGIN 8.8% 8.7% 8.1% 8.5% 8.4% 13
KEY PILLARS OF SUCCESS Focus on selected markets Acquisitions via partnerships Experienced and entrepreneurial management team Decentralized organization 2 activities: Contract Catering Concession Catering 14
2 THE CONTRACT CATERING MARKET PHILIPPE SALLE Group Chairman and CEO 15
A LARGE OUTSOURCED MARKET 150bn TOTAL OUTSOURCED ~ 34bn ~ 7bn ~ 13bn ~ 13bn REST OF EUROPE ~ 47bn ASIA Xbn OUTSOURCED MARKET ~ 36bn REST OF THE WORLD Source: IMF; GIRA; Koncept's Global Contract Catering Market Report 2014. 16
bn, 2014 96 AN EVEN WIDER TOTAL CONTRACT CATERING MARKET 430bn TOTAL ADDRESSABLE 120 48 60 280 17 12 7 7 14 12 5 7 9 4 8 4 150 34 29 12 7 7 4 3 3 3 3 2 2 2 2 2 36 USA Japan China France UK Italy Canada Germany India Turkey Australia Mexico Russia Brazil Spain Other Level of outsourcing 35% 60% 20% 41% 54% 65% 51% 20% 23% 54% 33% 50% 22% 24% 46% 30% 35% average Outsourced catering In-house catering Source: IMF; GIRA; Koncept's Global Contract Catering Market Report 2014. 17
A STRUCTURALLY GROWING MARKET +6% p.a. TOTAL GROWTH Top 15 countries bn 150.0 114.0 9.0 4.2 2.4 2.3 2.2 2.0 1.5 1.2 0.8 0.7 0.4 0.3 0.2 0.2 0.1 9.5 141.4 ~ 190 Other 36.0 45.5 2014 China USA Japan Turkey India Brazil Mexico Canada UK France Australia Germany Spain Italy Russia Other 2018 Market growth CAGR 15% 3% 2% 17% 16% 20% 15% 8% 3% 2-3% 4% 2% 2-3% 1% 1% 6% Elior countries Source: IMF; GIRA; Koncept's Global Contract Catering Market Report 2014. 18
CONTRACT CATERING IS A RESILIENT MARKET France Italy Spain UK Nominal GDP (i.e. including inflation) Total catering market (outsourced + in-house) Source: GIRA; WorldBank. 19
MARKET CHARACTERISTICS Structural growth globally, all geographies have different maturities Local spending, with low level of international purchasing Low level of bundling with other business services Limited barriers to entry but only small players New trends: snacking, local purchases, clients concentration, decreasing length of stay in healthcare, work from home in B&I 20
KEY SUCCESS FACTORS IN THE CONTRACT CATERING BUSINESS B TO C B TO B CONSUMER VALUE PROPOSITION Differentiated purchasing Recipes Brands Digital OPERATIONS EFFECTIVENESS Talent Purchasing Productivity Contract COMMERCIAL RELATIONSHIP Client intimacy Innovation Reactivity 21
CONTINENTAL EUROPE: LEADER ON MATURE MARKETS Outsourced market size Outsourcing rate Expected growth (p.a. 2014-2018) Elior position FRANCE 7bn 41% +2-3% 1 SPAIN 2bn 46% +2-3% 1 ITALY 4bn 65% +1% 1 22
USA & UK: MAJOR CHALLENGER ON HIGH POTENTIAL MARKETS Market size Outsourcing rate Expected growth (p.a. 2014-2018) Elior position UK 7bn* 54% >3% 5 USA 34bn** 35% >3% 6 * At / 1.4 ** At /$ 1.1 23
ELIOR SOURCES OF COMPETITIVENESS Critical size Proximity with clients Innovation New concepts Production tool Purchasing scale and lower G&A costs Differentiation and market share gain 24
CONCLUSION A VERY LARGE MARKET STRUCTURALLY GROWING AND RESILIENT COMPETITIVENESS THROUGH NATIONAL LEADERSHIP SIGNIFICANT OPPORTUNITIES 25
3 THE CONCESSION CATERING MARKET PEDRO FONTANA CEO of Concession Catering Worldwide 26
A WORTHY MARKET 23-26bn TOTAL 4bn 3bn 16-19bn REST OF THE WORLD Xbn MARKET SIZE 27
A GROWING MARKET MAINLY IN AIRPORTS +4% p.a. TOTAL GROWTH 2014-2018 +5-6% p.a. +1-2% p.a. +2% p.a. 28
MARKET CHARACTERISTICS MOTORWAYS RAILWAYS AIRPORTS Segment growth CAGR %, 2008-14 R²=83% Segment growth CAGR %, 2008-14 R²=78% Segment growth CAGR %, 2008-13 R²=88% (excl. Italy) 8 6 4 2 0-2 -4 Italy France Germany USA -6 Spain -8-1 0 1 2 3 8 6 4 2 0-2 -4-6 Spain Italy France Germany -8-1 0 1 2 3 10 8 6 4 2 0-2 -4-6 -8 Spain Italy Germany USA France -4-3 -2-1 0 1 2 3 GDP growth CAGR %, 2008-14 GDP growth CAGR %, 2008-14 Passengers traffic growth CAGR %, 2008-14 The motorways and railways markets are correlated with GDP whereas the airports market is correlated with passenger traffic Source: GIRA; WorldBank. 29
MARKET CHARACTERISTICS RAILWAYS MOTORWAYS AIRPORTS Market features Resilient Local Cyclical Local Cyclical Global Consumer trends Willingness to buy Demand for value-for-money Connectivity Price sensitivity Rational buying Price sensitivity Rational buying Impulse buying Captivity 30
KEY SUCCESS FACTORS IN THE CONCESSION CATERING SEGMENTS RAILWAYS MOTORWAYS AIRPORTS Portfolio of attractive external brands and innovative internal concepts Operational excellence (operations, commercial, financial) National scale National scale International image 31
CONTINENTAL EUROPE: LEADER IN FRANCE, ITALY AND SPAIN Expected growth Market size Per segment (p.a. 2014-2018) position FRANCE SPAIN ITALY 40% MOTORWAYS 1.0bn 28% +3% AIRPORTS 32% RAILWAYS 31% MOTORWAYS 0.5bn 56% +3% AIRPORTS 13% RAILWAYS 69% MOTORWAYS 1.6bn +2% 18% AIRPORTS 13% RAILWAYS 1 1 3 32
USA: CHALLENGER WITH SIGNIFICANT OPPORTUNITIES AIRPORTS Market size Expected growth (p.a. 2014-2018) 3.6bn +6% position 6 MOTORWAYS 0.6bn +3% 2 33
ELIOR GROUP SOURCES OF COMPETITIVENESS Brands & concepts portfolio Leadership positions allowing to be attractive for external brands and meet the diversity of our customers needs Strong local rooting Leverage relationship with concession operators and local consumer trends knowledge Operational excellence Leadership positions allowing to leverage procurement advantage Experience curve on site management 34
A SOLID BRANDS PORTFOLIO Own brands Franchised brands FAST FOOD COFFEE SHOP CASUAL DINING PREMIUM & FINE DINING FAST CASUAL RETAIL divers 35
A FULLY INTEGRATED NETWORK TO CAPTURE GLOBAL OPPORTUNITIES 2015: increased its stake in Areas to 100% A global and integrated organization Capitalizing on expertise on each market segment Sharing best practices Scale economies (purchasing and SG&A) Leveraging access to brands Ensuring international reach 36
CONCLUSION A WORTHY MARKET TWO DIFFERENT DYNAMICS A SOLID BRANDS PORTFOLIO SIGNIFICANT OPPORTUNITIES IN AIRPORTS 37
4 STRATEGY PHILIPPE SALLE Group Chairman and CEO 38
ELIOR GROUP 2020: WHAT, WHERE, HOW? SCOPE EXPERIENCE REACH 39
SCOPE: WHAT? Focus on food Contract and concession catering Selective approach on other BtoB services 40
REACH: WHERE? UNDERLYING STRATEGY Focus Scale Seek top 3 position in selected markets and / or segments Balanced footprint By countries and / or business lines CONTRACT CATERING Consolidate Continental Europe Expand UK (organic & M&A) Expand USA in selected niches (organic & M&A) Enter Asia (emerging markets around 1% of sales in 2020) CONCESSION CATERING Consolidate Continental Europe Grow organically USA airports Expand airports business in Northern Europe, Middle East and Asia 41
EXPERIENCE: HOW? CONSUMER HABITS ARE CHANGING FAST... Increasingly service-based economy Hyper information Mobility Digital natives 42
EXPERIENCE: HOW?... OFFERING A WIDE SCOPE OF OPPORTUNITIES TO STAND OUT Food and nutrition Place entertainment Digital experience 43
AN EFFICIENT ORGANIZATION TO IMPLEMENT THE STRATEGY ELIOR GROUP CHAIRMAN AND CEO CONTRACT CATERING SERVICES CONCESSION CATERING France Iberia Italy UK USA B&I Education Healthcare Other France Iberia Italy LatAm USA Airports Motorways Railways Other Airports (Int.Biz dev) 44
TSUBAKI: 8 PROJECTS QUALITY FOCUS 1 SALES EFFECTIVENESS (BtoB) 8 OPERATIONAL EXCELLENCE 7 HUMAN RESOURCES 6 G&A OPTIMIZATION 2 MARKETING & PRICING (BtoC) 3 DIGITAL EXPERIENCE 4 PURCHASING 5 ACTIVITIES AND CONTRACTS PORTFOLIO REVIEW GROWTH FOCUS COST FOCUS 45
TSUBAKI GROWTH: CLIENT OFFERING 1 SALES EFFECTIVENESS (BtoB) Maintain leadership positions and develop new territories Retention Development (new CRM) 2 MARKETING AND PRICING (BtoC) Strengthen marketing innovation to create competitive advantage Offer modeling and pricing Brands portfolio optimization Innovation 3 DIGITAL EXPERIENCE Leverage digital technology to bring more value to customers and consumers BtoB BtoC 46
TSUBAKI COST: COST-BASE MANAGEMENT 4 PURCHASING Improve efficiency Organization and processes Review of spending (volume and price) New business models 5 ACTIVITY AND CONTRACT PORTFOLIO REVIEW Terminate low-profitability contracts and sell non-core activities 6 G&A OPTIMIZATION Align G&A with 2020 ambitions 47 Organization simplification and delayering Cross-BU benchmarks Shared-services center implementation
TSUBAKI QUALITY 7 HUMAN RESOURCES Attract, motivate and retain performing employees Corporate culture Group organization Incentives review 8 OPERATIONAL EXCELLENCE Improve s operational excellence Quality of service Production tool (central kitchens) 48
A NEW GROUP BRAND IDENTITY A corporate visual identity and baseline to match the Group strategy, driven by quality and innovative customer experience. Time savored 49
STRATEGY IN THE USA CONTRACT CATERING MARKET BRIAN POPLIN CEO of Trust House Services 50
ELIOR GROUP WILL ACCELERATE IN THE USA OUR MISSION IN THE USA BE A TRUE IDEA SHAKER ON THIS KEY MARKET 51
USA: A STORY OF GROWTH IN A LARGE MARKET Total outsourced market size: Market size ( bn) Expected growth (2014-2018) Profitability 34bn B&I 1 13 1-3% CAGR + Total expected growth: >3% Education 10 > 3% CAGR ++ Healthcare 6 > 3% CAGR ++ Recreations & other 5 1-3% CAGR ++ 1. Including vending, military and corrections Source: Technomic 52
SUCCESSFUL TRACK RECORD OF ACQUISITIONS IN THE USA 2008 2011 2013 2015 CREATION Founded by Michael Bailey & Gryphon Investors + 90m + 255m INTEGRATION WITHIN ELIOR PF 2014 sales: 360m + 36m KEY PLAYER IN NICHE MARKETS 53
A NICHE PLAYER ON PROMISING SEGMENTS 3.0bn MARKET Segment Niches Outsourced market Senior nutrition All bn - 2014 1 26% Outs. Rate Elior estimated market share Education (K-12) Private schools 0,5 21% ~25% Correction County jails 0,5 16% B&I-Services High-end 1 82% ~2% 54
CASE STUDY: STARR ACQUISITION Penetration of the attractive high-end business and industry market in the USA Through the acquisition of a fast-growing company (2014 revenue: ~$40m) Providing a combination of strategic implementations in New York, Miami and Philadelphia Capitalising on experienced teams and highly renowned Starr brand Acquisition price in line with 's financial criteria 55
5 2020 AMBITIONS PHILIPPE SALLE Group Chairman and CEO OLIVIER DUBOIS Group CFO 56
2020 AMBITIONS SALES 7-8bn Organic growth >3% on average p.a. (low inflation case scenario) M&A up to 1bn cash investment over 5 years 57
bn 2020 AMBITIONS REVENUES 0.7-1.4 7.0-8.0 5.6 (0.2-0.3) 1.0-1.2 2015E revenues (guidance) Divestments and contracts termination (next 2 years) Organic growth Acquisitions 2020F revenues Current perimeter 58
2020 AMBITIONS EBITDA MARGIN 9-10% 59
In bps 840 20-40 2020 AMBITIONS EBITDA MARGIN 20-60 40-80 ~(20) 900-1000 2015E EBITDA MARGIN (Guidance) Divestments and contracts termination Purchasing G&A Acquisitions 2020F EBITDA 2019-2020 MARGIN 60
2020 MAIN AMBITIONS FREE CASH FLOW*/EBITDA 45-50% * FCF: EBITDA +/- CHANGE IN WORKING CAPITAL CAPEX - NON-RECURRING TAX 61
2020 AMBITIONS ONGOING PRIORITIES FOR USE OF CASH M&A LEVERAGE SHAREHOLDERS RETURN Required returns > 2 x WACC* Target net debt/ebitda: 2.5x Minimum payout: 40% net result *Weighted Average Cost of Capital 62
2020 KPIs OPERATIONS CUSTOMER QUALITY FINANCE HUMAN RESOURCES 63
2020 KPIs OPERATIONS OPERATIONS CUSTOMER QUALITY FINANCE HUMAN RESOURCES 64
2020 KPIs CUSTOMER QUALITY NET PROMOTER SCORE 65
2020 KPIs OPERATIONS OPERATIONS CUSTOMER QUALITY FINANCE HUMAN RESOURCES 66
2020 KPIs HUMAN RESOURCES SENSE OF BELONGING COMP & BEN STAFF TURNOVER 67
2020 KPIs OPERATIONS OPERATIONS CUSTOMER QUALITY FINANCE HUMAN RESOURCES 68
EBITDA 2020 KPIs FINANCE - - +/- - CAPEX NON-RECURRING CASH WORKING CAPITAL TAX CASH FCF - INTEREST CASH NET CASH 69
EBITDA 2020 KPIs FINANCE - - +/- - CAPEX NON-RECURRING CASH WORKING CAPITAL TAX CASH ~5% of revenues Concession Catering (except 2016 and 2017) ~2% of revenues Contract Catering FCF - INTEREST CASH ~ 50m IT plan (over 5 years) NET CASH 70
EBITDA 2020 KPIs FINANCE - - +/- - FCF CAPEX NON-RECURRING CASH WORKING CAPITAL TAX CASH 60m over 2016/2017 Restructuring costs Non-core business exit costs - INTEREST CASH NET CASH 71
EBITDA 2020 KPIs FINANCE - - +/- - CAPEX NON-RECURRING CASH WORKING CAPITAL TAX CASH Reduce DSO Invoicing acceleration Faster cash collection FCF - INTEREST CASH Off-balance-sheet securitization of receivables NET CASH 72
EBITDA 2020 KPIs FINANCE - - +/- - CAPEX NON-RECURRING CASH WORKING CAPITAL TAX CASH Optimization ongoing in France FCF - INTEREST CASH NET CASH Special focus on Spain and USA further to the buyout of minority stake in Areas Assessment of further potential following the new French purchasing organization 73
EBITDA 2020 KPIs FINANCE - - +/- - FCF CAPEX NON-RECURRING CASH WORKING CAPITAL TAX CASH Debt refinancing Renegociation of securitization conditions Swap agreements termination ( 13m non-recurring charges) - INTEREST CASH NET CASH High yield refinancing Enlarged sources of funding 74
2020 KPIs OPERATIONS OPERATIONS CUSTOMER QUALITY FINANCE HUMAN RESOURCES 75
6 CONCLUSION PHILIPPE SALLE Group Chairman and CEO 76
KEY TAKEAWAYS DEVELOP Focus on current scope Specific approach by country 2020 AMBITIONS INNOVATE Differentiation through innovative offering Brands identity Digital strategy ACCELERATE Tsubaki plan Organization and team M&A (up to 1bn cash) 7-8bn 9-10% 45-50% SALES EBITDA MARGIN FCF/EBITDA 77
TO BE THE CATERER OF CHOICE, DRIVEN BY QUALITY AND INNOVATIVE CONSUMER EXPERIENCE 78
Strategic Review 2016-2020 ELIOR GROUP 2020 Develop, Innovate, Accelerate