Atalian - comment

The inability to pass on higher wage costs and client losses in France were headwinds in 2024. Revenue was in line with reduced guidance, but EBITDA was below our expectations. Losing another CEO looks careless, and we suspect the Julien family is again exerting control. The decision to stop offering forward guidance doesn’t fill us with confidence about performance in France. The company has €140m of cash available, and we expect 2025 outflow after interest will be around €25m, so there is limited default risk, but the French cleaning business is struggling to restore profitability.

We estimate client losses in 2024 represented a headwind of €50m in Revenue and €3m in EBITDA. The portion of the wage rise not passed through to clients was €9m (about a 1% drag to EBITDA margins). Management claims that the 2024 client loss rate of 14% is reducing, but we are unsure. We expect some losses will continue in 2025, so growth in France will be low). Margins should be flat in 2025, with management expecting that the gap between rises in the French Minimum Wage and the increase in cleaner’s wages (via collective bargaining) will be low this year. However, we expect there will still be a drag. 

The company had cash of €94m at the year-end and received a €63m earn-out payment from the disposal of the UK business. The minimum cash required to run the business is around €15m => cash available is c€140m. If performance is flat year-on-year, cash outflows will be <€25m.