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Elior: Bryan Garnier remains a seller after profit warning.

(CercleFinance.com) - Broker Bryan Garnier this morning confirms its "sell" rating on the Elior share, with the contract catering group having recently made a profit warning, which has resulted in the share collapsing.
The broker maintains its target price of 28 euros.

At three weeks from the announcement of its FY 2016/2017 results, which is scheduled for 6 December, this morning Elior cut its earnings estimates.

Indeed, on the one hand, organic sales growth over 2016/17, excluding contract exits, has been increased from “at least 3%” to 3.6%. However, on the other hand, the group's adjusted EBITDA margin is now expected at 8.3%, while previously management expected it to improve by 20 bp - 30 bp relative to its level in 2015/16 (8.6%). Finally, the target of significant adjusted EPS will not be reached, the group said.

Alongside this, Elior has appointed a new CEO, Philippe Guillemot, who will take office on 5 December.

Bryan Garnier underlines stronger growth than initially expected. However, "That new guidance mainly reflects 1) start-up costs for new contracts (Education in France or with the Italian Ministry of Defense), 2) the impact of the hurricanes and 3) the lower than expected positive effects of cost-savings," the broker writes in a research report.

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