Elis SA

PAR:ELIS

Earnings Call Transcript 2020-Q3

[Operator]

Ladies and gentlemen, thank you for standing by, and welcome to the Elis Q3 2020 Revenue Presentation. [Operator Instructions] I must advise you the conference is being recorded today. I would now like to hand the conference over to your speaker today, Xavier Martiré, CEO. Please go ahead, sir.

[Xavier Martiré, Chairman of the Management Board & CEO]

Good afternoon, everyone. Welcome to our Q3 revenue conference call, which is also webcasted. After an overview of the Q3 business highlights, Louis Guyot, CFO, will join me for the Q&A session. So let me start with the highlights of our Q3 revenue performance. After the minus 26.7% organic decrease in Q2, we recorded minus 10.6% in Q3 marking a significant sequential improvement. Our Healthcare, Industry and Trade & Services businesses which combined represented 75% of 2019 revenue has come back to normal level of activities. The remaining 25% corresponding to hospitality, remain under pressure in Q3 due to the very sharp drop in international tourism since the beginning of the crisis. I will give you more color on each of our regions in the next slide. In Q3, we were pleased to record very positive trends in our customer satisfaction indicators, leading to further churn rate reduction over the period. We have also been very good in capturing commercial opportunities and won many new contracts in several countries in the context of increasing demand for all hygiene variety products and services. Since the beginning of the crisis, we have frequently communicated on all the measures that we have implemented to tackle the crisis and further reinforce Elis resilience in these difficult times. The first set of measures were protective measures, such as adjusting our cost base and our investments to the sharp volume decrease, while focusing on cash collection. Then we launched structural cost saving plants in our 28 country headquarters, along with operational reorganizations in many countries. On the back of the structural cost-saving modules I am pleased to report today, we will be able to deliver slight EBITDA margin and free cash flow improvements in 2020. I will come back to that at the end of this presentation, but let's first have a look at our dynamic by end market. Industry and Trade & Services, which together represents 50% of our total business have stabilized at minus 3% (sic) [ minus 2% ] in Q3. For the record, Industry is a mixed bag with some sectors very well oriented such as pharma, food processing and food retail, and other sectors more exposed to the crisis, such as automotive or aeronautics. In hospitality, which represented 25% of our 2019 revenue, we posted a minus 40% decrease in Q3. All in all, the summer season was not too bad, thanks to domestic tourism. But as expected, October deteriorated slightly due to the high share of international tourism in the month mix and to the cancellation of some professional events such as seminars or trade shows. The remaining 25% of our business corresponds to Healthcare, which was up plus 3% in Q3 on the back of normalized activity in hospitals and many contract wins, for example, the supply of surgical block garments in several different countries.Moving on to the next slide. The 9-months organic revenue at the end of September was minus 13.3% with all geographies impacted by the crisis, but with some differences linked to the mix. Geographies in which hospitality is the biggest contributor, showed the strongest revenue contraction, France at around minus 18%, Southern Europe at minus 33%, and the U.K. at minus 25%. Conversely, Central Europe and Scandinavia showed good resilience in the first 9 months, driven first by the higher proportion of Industry and Trade & Services in their revenue mix. And second, by the softer lockdown measures in countries like Sweden or Germany between March and May, which led to a lower number of business shutdowns compared to what we observed in Southern Europe, for instance. Latin America and especially Brazil, remain a good growth driver for the group with nearly plus 5% organic revenue growth in the first 9 months. This was driven by a favorable business mix with Healthcare, representing around 2/3 of the revenue in the region and food processing, which accounts for circa 15% being well-oriented. Furthermore, we have signed many significant new contracts, which boosted the performance over the period. Also, it is worth noting that part of these contracts are short term and nonrecurring. Let's now go through our different geographies in more detail, starting with France. France was down minus 12.4% organically in Q3, marking a sharp improvement compared to the minus 35.4% in Q2 with around 2/3 of our business in the country back to normal levels of activity. Hospitality showed a sequential improvement in Q3 over Q2, with domestic tourism, partly offsetting the near total interruption of international tourism during the summer season. This led to satisfactory performance in Q3 in Normandy, Brittany and southwest of the country. Activity is a bit tougher moving into Q4 as the last quarter of the year is usually more exposed to business trips and trade shows, but this does not come as a surprise. We also noted a very good commercial activity at the end of summer, addressing hygiene needs, such as gowns for surgical blocks and supply of hydroalcoholic gels. The curfew recently implemented in the country and reinforced today should contribute to put a bit of pressure on our hospitality business in Q4, also returns the business most impacted by this measure only accounts for 7% of our French revenue in 2019. So we feel there is no need to be overly concerned for now. Q3 performance was pretty good in Central Europe with a limited decrease of minus 4.8% compared to minus 12.4% in Q2. The end market mix in the region is more favorable with a strong contribution from Healthcare and Industry clients, which respectively represent 40% and 30% of total revenue. Industry showed good resilience in the Netherlands, Poland and Germany with our Workwear business back to almost normal levels of activities. And surprisingly, Switzerland was the most impacted country in the region, though due to its higher exposure to Hospitality, especially the Zurich and Geneva regions.Moving on to Scandinavia and Eastern Europe. We see a pretty similar improvement with organic revenue down only minus 6.5% in Q3 compared to minus 14% in Q2. In the region, most countries have continued their activity almost normally through the crisis. Only Sweden, with economy somewhat impacted and Denmark, the country with a higher share of Hospitality in its revenue mix in the region posted sharper decline in Q3. This was partially offset by very good commercial activity in Norway and in the Baltic states, which are all up year-to-date on an organic basis. In the U.K. and Ireland, Q3 organic revenue was down minus 21.6% compared to minus 45% in Q2. The region remains one of our most difficult geographies with a quite adverse economic situation. Our mix is not favorable there with 1/3 of our business in Hospitality, which has suffered significantly since March, especially in the London area, where we have many clients, and we do not see any improvement moving into Q4. Furthermore, our Industry and Trade & Services end markets were down minus 15% in Q3, a significantly stronger decline than in our other geographies, showing that the economy in the U.K. seems to be more impacted than in the other European countries. This was not helped by our exposure to catering clients and fast food clients, 2 sectors largely impacted by the crisis. Finally, Healthcare, which represents 1/3 of our business in the U.K. has improved in Q3 and stood at circa minus 5% organically, which contributes to somewhat mitigate the stronger declines recorded in our other end markets. Moving on to Southern Europe, the most impacted region in terms of top line for the first 9 months of the year. Q3 was down minus 34.5% in Q3 compared to minus 52.9% in Q2. The mix is very unfavorable in this region, too. Around 60% of our revenue normally comes from Hospitality clients. The summer season was quite disappointing in Spain and Portugal as we did not see the same boost from domestic tourism to partly offset the sharp drop in international tourism as we saw in France. Only a very limited number of Spanish regions such as Andalusia eventually managed to post decent numbers during the summer. Other regions, easily exposed to international tourism, such as the Balearic Islands were especially impacted in Q3. However, Italy, where many of our clients operate in Healthcare or in resilient industrial activities, continued to perform better with virtually flat organic revenue in Q3, driven by good commercial activity in the country. To conclude this word too, on a brighter note, let's touch base on Latin America where performance was very good in Q3 with nearly plus 7% organic growth compared to plus 1% in Q2. This was driven by a favorable end market, which has circa 90% of our revenue comes from Healthcare or resilient Industry clients where our Workwear activity was very well oriented in Q3. Commercial activity was also very good in the region at the end of Q2 and at the beginning of Q3. We temporarily supplied other gowns for Brazilian hospitals, leading to double-digit organic revenue growth in June and July in Brazil. We also recorded nice successes in Chile where we signed a few new contracts with hospitals. Let's now look at our M&A activity, which was obviously subdued in the first 9 months. What we did is essentially closed deals we had previously announced and where negotiations were well-advanced. We closed 4 deals, the largest one being Kings Laundry in Ireland. In the U.K., we acquired Central Laundry, a small player in the healthcare market with below EUR 5 million of revenue, where we believe we will be able to generate good synergies in the coming months. We also bought Haber in Germany, a EUR 20 million revenue healthcare player, further consolidating the healthcare market in the country where we are already number one.And finally, we acquired TWC, a small player in Czech Republic to increase our production capacity near pilot. As far as future M&A is concerned, we will remain opportunistic, but it is fair to say that the pipe is currently dry. Good businesses are currently not on the market as owner will wait for recovery, so they can sell the company based on normalized numbers. Moving on to the next slide. I would like to regularly mention one of the key characteristics of the group, which is the resilience of the business. Looking at this graph, you see the evolution of the top line and the margin performance over the last 2 decades. The backbone of this resilience is twofold: first, the diversified geographical footprint, with France representing less than 1/3 of our business; and second, the diversified portfolio of clients in terms of size and end markets. It is worth noting that this resilient profile was significantly improved with the acquisition of Berendsen and the addition of new countries in Central Europe and Scandinavia.Consequently, you can see on the graph that margin has constantly been evolving at high and stable levels within 200 bps range, regardless of the external events. The H1 2020 numbers, we released at the end of July, demonstrated once again this resilience pattern, and we will see in the next slide that the full year numbers will confirm it.On top of that, one very interesting characteristic of our business is that linen investments come hand in hand with top line growth. That means that conversely, they mechanically go down during bad top-line years with a favorable impact on cash generation.Before touching on our 2020 outlook, I would like to comment on all the measures taken by the group in a very timely manner to adapt to this unique situation. As soon as the lockdown measures were implemented and revenue started to decline, we totally reorganized our teams in all countries to cope with a lower level of activity. This resulted in the temporary reduction [indiscernible], sales team, maintenance team, plus manager as well as in headcount at the head offices of our 28 countries. The optimization of our industrial and logistics network in the context of lower linen volume to operate, led to 100 plants being either shutdown or virtually stopped, including 5 that will not reopen.In this context, the governmental measures implemented in many countries provided us with some flexibility and helped us to adjust our staff without having to lay off people. At the same time, we decided the structural cost reduction programs in all our countries to cope with the new environment we live in and to the lower level of activity we expect in the short to midterm period. The structural plans, which we started to implement at the end of Q2 include a wide range of cost-cutting efforts, including permanent layoffs. As far as CapEx are concerned, we have extensively reviewed the 2020 plan and canceled all projects related to capacity increases. The linen CapEx investments have also decreased during the month of low activity as the linen that is currently not used by our clients will not need to be replaced. All these costs and cash adjustments allow us to look at the coming months with great serenity.Finally, on the commercial side, we have been working on redefining new offers to address the needs created by the sanitary crisis, and we are notably seeing significantly increasing demand for all-around hygiene products. We also see many opportunities to promote our Workwear outsourcing solution especially to as establishments, where many players were still buying uniform for their employees without providing any cleaning service, which obviously created a major issue in the context of global sanitary crisis.Now moving on to our 2020 outlook. I would firstly like to underline that even so our Q3 revenue has shown some marked improvement across the board, the economic environment remains very complex and the recent measures implemented in many European countries should be a bit of a drag for Hospitality in Q4, especially for, but not limited to, restaurants, which accounts for 20% of total Hospitality revenue. Therefore, we today estimate that full year 2020 organic revenue evolution should be in line with the 9-month number implying a slowdown in Q4 compared to Q3. Nevertheless, the impressive cost and cash control efforts made since H1 in all countries at plants and head offices have generated a very significant amount of savings. This is why our visibility on EBITDA margin and cash generation is much better.We can say today that we expect slightly improving EBITDA margin and free cash flow generation for the full year 2020. I thank you all for your attention, and we can now move on to the Q&A session.

[Operator]

[Operator Instructions] The first question is from the line of Annelies Vermeulen from Morgan Stanley.

[Annelies Judith Godelieve Vermeulen, Research Analyst]

Congratulations on the results. Just a couple of questions from me. So I wanted to ask about the competitive environment. You've obviously said that on the M&A side that things remain relatively quiet. But among your competition, are you seeing any increase in struggling or bankruptcies in those environments? And those contracts that you've won, have any of those been as a result of existing providers not being able to deliver? That's my first question.And then secondly, on the full year organic guidance where you're implying a Q4 slowdown, is that just driven by the Hospitality mix and the additional restrictive measures that we've seen in several countries? Or is there anything else in there in the other end markets that we should be aware of? And then finally, my third question was on cash collection. You talked at the half year about having a provision for bad debts. I just wanted to see if that had evolved over the Q3. And if you are seeing any issues in collecting payments from any of your customers as the summer has progressed.

[Xavier Martiré, Chairman of the Management Board & CEO]

Okay. So first question around the competitive landscape and M&A. So as I said, it's clear that the pipe is not full today because you have, on one hand, for players that could have some trouble and going to bankruptcy, probably we will not be very interested to make the acquisition because if in a market where we are very profitable, if they have such a difficulty, it's probably linked to a bad quality of industrial assets or some bad prices. And for very nice and interesting company, we have seen some delay in the negotiation because very often families owner of these good companies want to wait a little and not to sell with some poor figures in 2020.In terms of evolution of the competitors, today, it's too early to say that we have seen increase in bankruptcies, not the case yet. And even with the contracts we have signed, in many cases, as you can see, its contracts where we promote outsourcing. That means that we open market, so it's not a big fight again, competitor to take some market share.The second question on Q4 and the slowdown in -- expected in Q4, clearly, is linked to Hospitality. So you have 2 things. First, even before the beginning of the second wave, if I may, we were expecting a slowdown in the activity of Hospitality because in -- after the summer, we will not benefit anymore from the domestic tourism. And international tourism and international exchanges is more the driver of the Hospitality in Q4. So we were expecting a slowdown. Of course, this slowdown and our view of the slowdown has been reinforced with the recent measures taken by some countries like the curfew in France or the lockdown in Ireland or Wales, for example.In the other end markets, it is more the opposite. So that means that in Healthcare, we don't see yet any impact on the last measures taken by the different governments and we have a volume that is even better than Q3. And it's more or less the same for Industry, Trade & Services, where today, we see a stability in the activity, so close to the normal situation and with no impact yet with the measures taken everywhere. It's very important to see that every government make a lot of effort to preserve their economy. It was the main role of the curfew only in France to preserve the economy in France. And even in Ireland, it's very interesting to note that in the shutdown, they had to keep schools open. It's a way to allow people to still continue to go at work. So today, we don't see, in Industry and Trade & Services, any decrease and we don't expect a strong decrease for Q4. So the main driver of Q4 is Hospitality for us.And last topic, cash collection, we have been very efficient, so it will be part of the big satisfaction of the year. So it's also the reason why we are able to be very confident with the level of cash flow generated by the company for the full year. And we don't see, at this stage, a huge increase of bankruptcy or level of bad debts and so on. And the normal trend of cash collection is very good in everywhere, in all our countries.

[Operator]

The next question is from the line of Nicolas Tabor from MainFirst Bank.

[Nicolas Tabor, Analyst]

The first question would be on the Hospitality, which I think, obviously, it's down minus 40% in Q3 globally or your regions. I mean, I found it quite strong compared to the figures we could see in occupancy rate in both France and Spain. Maybe could you explain that and in your local exposure that changed that? And then still on the Trade & services, which is down minus 2% in Q3. Can you explain the resilience because you're exposed to retailers? And is that means, you haven't seen a decrease of the business in major retailers and also for collective catering, collective catering is in operation now. So you haven't seen the impact for your business and your clients?

[Xavier Martiré, Chairman of the Management Board & CEO]

So first question for Hospitality. Inside our portfolio, we have very large and different types of businesses. So it's not only pure hotel. And be careful with all the figures provided by hotel segment as they very often communicate on both occupancy rate, but also RevPAR, which include a part of their own price, so it's not the same for us. We are only dependent on the activity and not the full RevPAR. On top of that, you will have the fact that we have some restaurants inside this perimeter and restaurant this summer has a very good level of resilience, perhaps even better than the occupancy rate everywhere. And we have also some -- such a customer like [indiscernible] and so on and so, where it's not taken into account the official level of occupancy rates. And in our business, it's quite important during the summer period. And they have seen a very good level of activity. When you take the level of activity of this customer this summer, it was very good with extra activity, for instance, in some region of the [indiscernible] much better than usual during the summer season. So it's probably part of the explanation of the not-so-bad figures and performance of Elis in comparison to the global occupancy rate of the sector.For the second part of your question, in Industry, Trade & Services, I think that you have 2 things that explain the good resilience of Elis, probably better than the global economy. First, it is the fact that we are exposed to some sector that usually use a lot of linen like agro-processing, food processing business, agro industry, pharmaceutical industry and so on. So all these industries that needs some uniform for years and years and years have not suffered at all during the crisis. And inside our portfolio, the part of aeronautics or care -- automotive care industry is quite low. So that means that we have a mix advantage even inside our Industry, Trade & Services business. For collective catering, don't forget that in the last month of Q3, they benefited from the fact that the schools are reopened, so canteen inside school are reopened, and it is a large part of the business also.And the second fact that explain why we have a better resilience, it's also the structure of our contracts and the structure of the invoice of Elis, you remember that for washroom, for instance, we charge a monthly fixed fee when you went [indiscernible] at the entrance of your shop or when you have a on dryer in your washroom, it will be a monthly fixed fee, whatever is the level of activity of the shop, for instance.And even for workwear, we charge a monthly fee per wearer. That means that you have a lot of companies that have used partial unemployment but when you have partial unemployment and when you have employees that will stay 2 days at home, it doesn't change the amount of the invoice of Elis. We still continue to provide a stock of uniform for this wearer, even if you will stay 1 day or 2 days at home. So that's why we have also inside our contracts, inside our way to invoice a key amortizer that explains why we are so resilient in this end market.

[Operator]

The next question is from the line of Simona Sarli from Bank of America.

[Simona Sarli, Research Analyst]

Just a couple of follow-ups from my side. If you could please provide the exit rate by end market in September? And secondly, what are the underlying assumptions for Hospitality in Q4, which leads you to say that Q4, it will be lower compared to Q3? If I'm not mistaken, Hospitality should, in theory, represent a lower revenue share than in Q3. So in theory, that should help a bit. And lastly, maybe if you can comment on which conditions you think should be met before you consider reinstating dividend?

[Xavier Martiré, Chairman of the Management Board & CEO]

Yes. So it's complex for me to answer so precisely the first question. For the second question, today, the assumption is close to minus 60% for Hospitality in the last quarter, in comparison to the minus 40% we have seen during summer. So it's an important drop. As we said, backed by the classical expected drop of volumes due to the lack of domestic tourism and due to the new measures implemented in Europe. It's clear. You're right, the weight of Hospitality in Q4 is a little lower than what we had in Q3, for instance. But it is not so significant because when you take the figures from 2019, if you take the part of the Q4 Hospitality compared to the full year, it is a little below 25%, which is 23.5%. So it is below the average but it is not significant, to be honest.And can you repeat, sorry, the third question that I have not catched?

[Simona Sarli, Research Analyst]

Yes. It's related to dividends. So which conditions need to be met for you before you consider reinstating them?

[Xavier Martiré, Chairman of the Management Board & CEO]

So it's too early to answer to this question. And this point has not been yet addressed with our main shareholders and with the support advisory Board. So I will not be able to give you any indication of the dividend policy for '21, but clearly, it will depend on the level of activity in the third quarter and the confidence we will have with full year activity. So at this stage, it's too early to give you more color of the future dividend policy for '21.

[Operator]

The next question is from the line of Chirag Vadhia from HSBC.

[Chirag Vadhia, Research Analyst]

I just wanted to ask a little bit more about the various scenarios that you're looking at in Q4? And given the expectations that it will be tougher. I was wondering if you could just talk a little bit more about those scenarios that you might have looked at in case things worse?And secondly, I just wanted to ask a bit more about the contract things within Workwear and the amount -- revenue amount we're talking about, and if they're expected to continue -- just wanted to get a bit more clarity on how much headcount's there.

[Xavier Martiré, Chairman of the Management Board & CEO]

Okay. So at this stage, as you have seen, we try to be cautious with our approach on the central scenario of the company because we expect a decline in the revenue in Q4 when we compare with the sequence and with Q3, because in Q3, we were around minus 10%, and we expect minus 13% in average for Q4, even if the weight of hospitality is lower. So normally, we should have expected something else. And as I said, Healthcare is better engaged in Q4 that you've heard of Q3 and the same for Industry, Trade & Services. So we expect that we have a cautious approach in Q4. Nevertheless, it's clear that we can always have more complex scenario, if we have a full lockdown in big countries like we had in April or in May.But we have demonstrated, I think, in this period that we have all the reactivity and the flexibility to adjust immediately the cost base and to protect, immediately, the cash. So that means that if we have such kind of a very big and important lockdown everywhere in Europe, we will come back to what we have done in April and May, where it was not a disaster for the company. Of course, a stronger impact on the top line, but at this stage, it's totally impossible to give you more precision because nobody knows what could be this type of lockdown.But for the margin and for the cash flow, the same answer of the company, that means that we would be able to protect the margin, and you remember that we were cash flow positive even in April, even in May. So it's not a big concern for us. And for the new contracts in Workwear that we have signed, it's a lot of small players in Industry and Trade & services. So the typical contract is with a small company. With -- in some cases, 10 wearer, not more, where they didn't use to provide any solution to wash the uniform and where employees in this sanitary context, were not very happy to have to take back the uniform at home and to wash the uniform in between their own personal clothes of the -- and the clothes of the family. So it is a typical small contract that we have signed. And we have some big contracts also with Healthcare, with a lot of scraps, for instance, to protect the people inside big hospitals. In some cases, they had some disposable solutions. But due to the shortage they have to manage during the crisis, they decided to sign long-term contracts with us to be sure that they will avoid any risk of shortage anymore.

[Operator]

The next question is from the line of Christoph Greulich from Berenberg.

[Christoph Greulich, Analyst]

Yes, 3 questions from my side, please. The first one, what is your current outlook on the furlough scheme? So in which countries do you expect those to be available to you next year and which ones not?Then just speaking on the headcount, where do you think that will stand at the beginning of 2021 compared to the beginning of 2020?And then lastly, regarding the nonrecurring expenses for the reduction headcount this year. So how high will the total amount for that? And is there any difference between the P&L and the cash flow impact?

[Xavier Martiré, Chairman of the Management Board & CEO]

[indiscernible] Sorry. Yes. So first question. So flexibility measures in the different countries. What is very important for us and that give us some comfort also, is to see that in our major countries, in our big countries, we have this weapon of long-term partial unemployment scheme. So it is the case in France with the long-term partial unemployment that has been put in place. It allowed us to have, during 2 years, so 24 months, the ability to decrease the number of working days by 40% in average on the period of 2 years.So that means that you can start with minus 60%, if you want, if at the end of the period, you are about to come back to the normal situation or minus 20% to mitigate and to having to reach minus 40%. So that means that it is in place for France for 2 years. It is 1/3 of our business. We have exactly the same types of scheme, as you know, in Germany, it is very usual there. The name is -- of the program is the [indiscernible]. And same situation, we have such kind of ability to have partial unemployment for a long-term in Germany.On top of that, you can see that in Germany, the need is very limited for us because the decrease of the revenue and volume is much more limited. In Spain, we have with [ Elis ] system or [indiscernible] system, we have exactly the same type of measures to help us to have some flexibility with partial unemployment program. So it is something that help us. In U.K., as you know, it's not clear to follow the governmental package and they change very regularly. So that means that we prefer to put in place some structural savings because we don't want to depend to some nonsure policy from the government.In Denmark now, we have quite nothing since beginning of July. So that means that we have demonstrated during summer that even in Denmark, thanks to the structural cost-saving program put in place, we are able to deal without this kind of partial unemployment help.In Sweden, we have something in place at least until the end of the year, and we will see if it is -- if we have a prolongation or not, but today, we have something. So that cover the vast majority of countries where we have a drop in our volumes.And as you know, in Latin America, since the beginning of the crisis, we need to deal without any type of partial unemployment program. So that means that the adjustment of the cost has been made through some layoffs, we had no other choice in Latin America.The second question was what is the amount of headcount, beginning of '21 comparison to beginning of '20. It's always a tough question because inside, a large part of the decrease of the headcount has been made through the constellation of partial contract or short-term contracts. So as you know, it was a kind of internal policy in every big plant. We had everywhere between 15% to 20% of the workforce with short-term contracts or with temporary workers, it's a way to adapt and adjust the activity of the plant in case of the loss of a big customer, for instance, and so on. So that's why a large part of the decrease of the headcount is not linked to layoff program but is linked to this constellation of temporary workers and short-term contract.And all in all, if you take the number of FTEs that has been lay off and the end of the short-term contract, you will find more or less the same decline than the revenue. So with around 10% to 15% less in revenue, we have the ability to have a lot of flexibility. And you can see on the margins that we have been able to follow the decrease with the same decrease in cost. So at the end, you will find the same decrease of number of headcount, around 10% to 15% at the beginning of '21 in comparison to beginning of '20.

[Louis Guyot, CFO & Member of the Management Board]

Third question is around the nonrecurring. So you have the H1 figures in mind, what we said, though, is that in H2, you shall find there only the effects of the [indiscernible] planned payment. That is in the region of EUR 20 million in H2, both for our P&L and cash flow approximately.

[Operator]

The next question is from the line of Florent Thy-Tine from Midcap Partners.

[Florent Thy-Tine]

Yes. Two questions on my side. The first, can we have an idea of the churn rate in the U.K. in Workwear? And the second one, it's more general one. Do you see any loss of some customers, particularly in the hospitality market due to some difficulties of your customers? Or do you expect to lose some clients in 2021 after the end of some government help? Because as you mentioned, you have many small contracts with monthly invoices, which are not really central costs for your customers. So do you see [indiscernible] that these customers have their contracts?

[Xavier Martiré, Chairman of the Management Board & CEO]

So first question, churn rate in Industry and Workwear in U.K., it was clearly a key caveat for us and we have reached a very good level. We are now not totally back to normal, but very close. Because we -- in 2020, we have between 7% and 8% only in the churn rate in the Industry in the U.K. So it's much better than what we had last year, if you remember, and even the year before, where we started with something around 14%. So it's -- we have followed the road of a very good level of service, good level of commercial reactivity, and we had now -- we have now the fruits of the efforts with a low level of churn in U.K., in Industry. The second question around the potential losses of customers due to bankruptcy or due to willingness to stop service, not yet. So clearly, at this stage, we have not seen any strong increase of bankruptcy or constellation of contracts due to -- for economical reason, not yet.You're right. It can be a risk for the second part of '21 at the end of all the measures of support. It's clearly a risk. My feeling is that this risk will be, all in all, limited at the group level. And I think that a good policy is to come back to what happened in the last big economic crisis that we have seen in Europe, it was in 2008. And in 2008, 2009, we were around 0 in terms of organic growth. So that means that, of course, it was below the normal level of organic growth at this stage, was around 2%. So that means that, for me, the risk in '21, if we have a severe -- the continuation of the severe economic crisis, so without all the effects and the merits of all the program launched by the government to help the economy, I think that the worst case is to expect the same level of situation we saw in 2009. So we could lose 1% or 2% at the group level, but it's not, for me, my major concern today.

[Operator]

The next question is from the line of Matija Gergolet from Goldman Sachs.

[Matija Gergolet, Equity Analyst]

2 questions from my side. Firstly, you mentioned you had no sales of disinfection products, perhaps, or some disinfection services. Could you quantify what was the benefit in the third quarter from these services and products for France or for the group as a whole?And then second question is on the cost. I mean, you gave us a lot of details. But just trying to say, think a little bit about the bigger picture. So almost surprising, but your EBITDA margin is going up this year. So is the -- how much cost have you -- how much structural costs have you really been able to take out of the group, i.e., if we have, say, in 2022, like a normal year like 2019, how much of the structural costs would have been taken off the Elis group, which would, therefore, lead to, say, better, higher longer-term profitability?

[Xavier Martiré, Chairman of the Management Board & CEO]

So first question. So beyond the inflation, you have all the owned ideal needs. So it's even a sub dispenser and hydroalcoholic gel dispenser, so it's not -- of course, it's not a game changer for Elis, let's be serious. But we are talking about some millions of euros for the coming quarter, not more. But it is a good trend. And we see everyday, we are able to sign more and more and more contracts. So I think that it will help also to sustain a good level of activity for Industry, Trade & Services in '21.The second question for me, very, very complex to answer because always, you never know, what is done due to the situation of the lack of volume and what is a clear improvement of this -- of the organization that could have been done even without the crisis. So that's why for me to split the structural gains between what is fully linked to the crisis and what is not fully linked to the crisis is very complex. So what I can answer at this stage, is to say that we have done the job this summer everywhere to prepare the company with structural savings to mitigate between minus 10% and minus 15% of the -- on the top line for the midterm. So the job is done. And we know that we have the flexibility on top of that, in the period, in the countries where we could have a more important drop in activity, for instance, if we have a lockdown somewhere.But for the rest, the structural savings are down. But honestly, I'm not able to split inside this minus 10%, minus 15% of savings, what is linked to the need to adjust every structure to the potential slowdown of the activity for the next 18 months. And what is savings that are very smart, and that has been done even without any crisis.

[Matija Gergolet, Equity Analyst]

Okay. But just as a follow-up on that. So if you have a return to normal activity, say, in 2022, as activity returns, you should benefit from some positive operating leverage, i.e., you're improving your EBITDA margin this year despite the fall in volumes. But then as activity returns, your margin should go even higher, right? Or is there something else?

[Xavier Martiré, Chairman of the Management Board & CEO]

Yes. I agree with you. So that means that I can confirm that, of course, with all the efforts we have made, a part of this effort will be definitive gains. So that means that clearly, if in '22, we are back to a normal level of activity, we will have the double good news. Good news on top line. And as we will not reinforce everywhere the structure at the same level that of growth -- at the level of growth, of course, it would allow us to increase the margin. I follow you on these topics, and I confirm this point.

[Operator]

Our next question is from the line of Dan Hobden from Crédit Suisse.

[Daniel James Hobden, Research Analyst]

Just the 2 from me. And if I could build on the previous question or ask in a slightly different way, are you able to indicate the amount of government support that you have received? So to some extent, or to what extent is the EBITDA supported by X tens of millions of government furlough schemes, et cetera?And then the second question is just around the U.K. and I know you mentioned the layoffs and the challenges in the economy. Is there any risk to impairment at all to your operations in the U.K.?

[Xavier Martiré, Chairman of the Management Board & CEO]

So for the first question, I thank you to ask this question because it will give me the opportunity to try to kill this stupid idea that the result of Elis is made with governmental support. I think that it is very important to be clear on what do we have as governmental support and scheme. It is not subsidies, that means that it has never, never, never, increased the amount of profitability of margin of the company or the governmental scheme are just scheme to give us some flexibility to decrease the number of FTEs without putting in place some definitive layoff program. But it doesn't give us any -- Europe, to be clear on this, so it's not subsidies. And if you take the example of Brazil, you will see that we are able to protect and even increase significantly the margin, if you came back to the performance of the group in the first semester, we have improved the margin in Latin America, where we don't have any support from the government. What is a pity there is the fact that we have been forced to fire a lot of employees, and it is a pity because when we will see the recovery in our activity, we will need to find some employees or new employees in Latin America, and for the social culture inside the company, it's a pity to have to make such kind of a layoff.And in Europe, all the different governmental package are just there to avoid to put in place such a brutal number of definitive layoff. Not more. It is not subsidies. And the second question, perhaps, for Louis.

[Louis Guyot, CFO & Member of the Management Board]

I think that was around goodwill and impairment. you may be aware that every company has performed the test on June 30 when assessing the H1 results. And the test was positive on every geography. You have to remember that we clearly said that when we bought the whole Berendsen group that for us, the value of U.K. was very low. And that is exactly what is reflected in the accounts for us. So it means that the risk of impairment in the U.K. goodwill is very weak.

[Operator]

There are no further questions at this time. [Operator Instructions]

[Xavier Martiré, Chairman of the Management Board & CEO]

So thank you for your participation tonight. And the next meeting point with the company will be end of January for the full year turnover. Thank you, and good evening, everyone.

[Operator]

Thank you. That does conclude the conference for today. Thank you for participating, and you may now disconnect.