December 6, 2017 / 6:23 AM / a year ago

UPDATE 1-French caterer Elior eyes sales growth and stable core earnings margin

* Elior issued profit warning in November

* Sees 2017/18 organic sales growth of at least 3 pct

* Eyes possible acquisition targets (Adds detail, comments from CFO, background)

By Dominique Vidalon

PARIS, Dec 6 (Reuters) - Elior, Europe’s third-largest catering group, predicted on Wednesday that organic sales growth would accelerate to at least 3 percent in the 2017/18 fiscal year from 2.3 percent achieved in the 2016/17 fiscal year ended Sept. 30.

Elior, which competes with France’s Sodexo and Britain’s Compass, also predicted that its adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) margin would remain stable in the current year after declining by 20 basis points in the 2016/17 fiscal year.

The company made the forecasts after reporting that revenues rose by a reported 8.9 percent to 6.422 billion euros ($7.59 billion) in the year ended Sept. 30, helped by acquisitions.

Closely watched organic revenue growth was 3.6 percent, excluding the impact of voluntary contract exits, and 2.3 percent, including the negative impact of these exits.

Elior’s adjusted EBITDA rose 5.9 percent to 531 million euros, giving a margin of 8.3 percent of revenue against 8.5 percent a year earlier. This was in a line with toned-down margin target provided in November.

Elior added it would continue to eye acquisitions, notably in the United States, which is now its second-biggest revenue contributor.

Last month, Elior had issued a profit warning on its annual earnings, due to the start-up costs for new contracts, the impact of Hurricane Irma in September and a lower-than-expected contribution from a savings plan this year.

Its adjusted earnings per share (EPS) fell 2.9 percent to 1.02 euros in 2016/17 and Elior predicted a slight rise for 2017/18.

It kept its dividend unchanged at 0.42 euros per share.

The warning and the nomination of a new chief executive tasked with setting medium and long-term financial goals have fueled fears that the company’s 2020 targets could be at risk.

Elior’s chief financial officer Olivier Dubois said one could consider that Elior’s 2020 targets were “not currently relevant”.

Elior’s contract arm, which provides catering to businesses, schools and hospitals, accounts for 76 percent of its overall business. It also has a concessions business, which serves airports, railways and motorways.

Elior’s shares, which fell sharply after the November profit warning, are down by around 16 percent so far in 2017.

$1 = 0.8465 euros Reporting by Dominique Vidalon; Editing by Sudip Kar-Gupta

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