Good day. Thank you for standing by. Welcome to the H1 2023 Results Presentation. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one and one on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Martiré. Please go ahead.
Thank you. Welcome to Elis, 2023 half year results presentation, which is also webcasted and recorded. I'm Xavier Martiré, CEO of Elis, I am here in Paris with our CFO, Louis Guyot. After an overview of the H1 2023 business highlights, I will hand over to Louis. He will detail our financial performance. I will then come back to provide you with an update on our recent CSR achievements, then share with you our views on the remainder of 2023. Finally, we will have a Q&A session to answer your questions. After our call, Nicolas Buron will be available to answer any of your questions offline. Before we start, please take the time to read the disclaimer.
I'm very happy to report a very solid financial performance in the first half, with improvement of all profitability KPIs and further deleveraging. Top line momentum continued with a growth of 17.8%, of which 15.2% on an organic basis, to reach more than EUR 2.1 billion, which is a record number for first half. EBITDA reached nearly EUR 700 million, up more than 20% at 33.2%, a 90 basis point improvement. EBIT reached EUR 316 million, up 36%, along with EBIT margin improvement of 200 basis points to more than 15%. H1 headline net income per share was up more than 25% at EUR 0.78.
Free cash flow was at EUR 17 million, which is normal for our first half and perfectly in line with our full year guidance. Finally, financial leverage ratio continued to decrease to 2.4 times at the end of June, and this trend will accelerate in H2 to reach 2.1 time at the end of the year. Commercial momentum was very good this half, with a record of new contract signed in Workwear. Hospitality activity was satisfactory and benefited from a favorable comparable base in the first quarter. Generally, all our markets continue to be well-oriented, and we saw little to no slowdown from the recent events in France. Pricing also contributed to this good performance.
The adjustments negotiated throughout 2022 to offset the inflation of our cost base, as well as the additional adjustments implemented since the beginning of 2023, led to a price effect of around 11% in H1. On top of that, the group continued to deliver productivity gains in the first half, and the significant volume increase generated significant operating leverage in H1. This good set of results allows us to upgrade our 2023 outlook and raise our profitability objectives for the full year. I will come back to this at the end of the presentation. The next slide provides a bridge between H1 2022 and H1 2023 revenue, which increased plus 18% year-on-year. Volumes were up plus 4.6% and contributed to the growth for nearly EUR 85 million.
This can be broken down between around 2.6% or EUR 47 million, corresponding to growth driven by good commercial dynamism, and another 2% corresponding to the catch-up in hospitality on the back of an easy comparable base, which brought EUR 36 million of additional revenue in Q1. Around 60% of the total EUR 317 million increase year-on-year came from pricing, with both the embedded effect of the adjustment negotiated throughout 2022 and the new set of price adjustments that have been implemented since January 1st to offset the inflation of our cost base. Our Mexican acquisition, closed in July 2022, contributed EUR 55 million in H1, and other acquisitions contributed another EUR 10 million. A total impact of +3.6% in H1 revenue.
Lastly, FX had a -1% impact on revenue in Q1, which corresponds to a shortfall of EUR 20 million, especially due to the evolution of the Swedish krona and the British pound. Moving on to the next slide, hospitality continued to show steady improvement in H1, with France showing the strongest momentum, especially in Paris. Denmark was also strong. Growth on the French Atlantic side was a bit softer. Southern Europe was helped by a very low comparable base. Momentum remained limited compared to France. It's also worth noting that the recent turmoil in some French suburbs had little to no effect on our clients' activity. Pricing was also very satisfactory and was surely facilitated by our good quality of service and by the fact that our clients have also increased their pricing over the last 12 months.
As far as new bids and contracts renewal are concerned, we have been increasingly selective in our approach, especially in the UK and Germany, even if this sometimes means letting some contracts go or not signing a new one. As I already mentioned, the comparable base in Q1 was easy, as Q1 2022 was somewhat impacted by the Omicron variant. This led to an additional EUR 35 million catch-up in the first quarter. Moving on to the next slide, we signed a record number of new Workwear contracts in the first half. This reflects the accelerating outsourcing trend that we have noted since the pandemic, and the change in market standards, often driven by new regulations. These changes had been identified by Elis, we reinforced our workforce to capture as many opportunities as possible in all markets and in every country.
We expect this trend to continue going forward, and we see many other pockets of growth across our different business. As an example, we are being proactive in opening the nursing home market in both Spain and in the UK, where we launch dedicated offers under the responsibility of specific sales force. Unlike other countries, such as France, those markets are still largely fragmented among small, independent players that usually insource washing. We currently observe some market consolidation going on, along with an overall professionalization of the industry. These bigger players that emerge generally opt to transition to outsourcing linen washing, and we work on and on with them in that process. In the healthcare market, we have also signed several new contracts with public hospitals in the UK, France, and Brazil in the first semester.
The post-COVID environment remains very favorable for Elis, with the increasing need for hygiene in general, notably for pest control and cleanroom business, which continue to deliver strong double-digit growth in H1, to reach cumulative revenue of nearly EUR 130 million in the first half. Elis is already the European leader in reusable cleanroom garments, cleaning systems, goggles, and related contamination control solutions. Our existing client base provide us with many cross-selling opportunities in this very technical, highly profitable market. We also continue to roll out the offering of our services to small clients. As of today, we only address small clients in fewer than 10 countries. Our ability to efficiently serve small clients is essentially linked to the density we have in a specific country.
Therefore, as we grow steadily everywhere, organically and through M&A, our density is also improving year after year, and we will be able to serve small clients in more and more countries going forward. This should contribute to margin expansion in the future, as very efficient logistic in place with service to small clients generally leads to good margins. We are currently deploying our offer for small clients in Sweden and Brazil. Moving on to the next slide. I'm very satisfied with how we have been able to offset inflation in the first half. This clearly highlights Elis' pricing power, which is a key component of our business model and one of the group's biggest strengths. I want to give you some color on the reasons for this success.
Part of the reason why we have always managed to efficiently pass through the inflation of our cost base to our clients is because we always have been very transparent with them, disclosing our main cost inductors, such as minimum wage and energy price. At the end of the day, the price of these cost items are public data. It was easy for our clients to understand the evolution of our cost base. Second, our services are essential to our clients' activity. Hotel and hospitals simply cannot operate without linen. The same goes for industrial clients. Uniforms are very often mandatory. They need our service to properly run their business. Third, the cost of our service represent only a fairly small component in our clients' PNL.
As an example, we charge only between 5 and 10 EUR for the linen of a hotel room, depending on whether we are talking about a low-budget hotel or palace. Compared to the actual price of a hotel room, you can see that the cost of our service is not very material. Also, our service is fundamental. When looking at our other end markets, the cost of our service is actually even less material for our clients than in hospitality. Bottom line, when we apply a 10% or 20% price increase, we are talking about between 1 EUR and 2 EUR more for a hotel room that is often sold for more than 300 EUR a night, so this is virtually not material for our clients.
Additionally, in most cases and in most geographies, pricing negotiations were made a lot easier by the fact that average room prices have also significantly increased over the last 2 years. Fourth and last, alternative solution to our services are very limited. Insourcing is not really an option. We don't see this happening in our markets, as it would result in a higher cost for our clients. Furthermore, competitors have more or less the same cost base as ours. There is no risk of disruption from an alternative way of providing the service. It means that everybody is facing the same inflation problem as we have noticed, overall, rational behavior from our competitor in most of our markets. These 4 reasons combined explain why we have been successful with our pricing adjustment in this challenging cost environment. Moving on to the next slide.
Our pricing dynamics going forward will be essentially impacted by the increase in salaries. Energy will have only a slight impact. As a reminder, salaries remain by far the most important contributor to our cost base at around 60% of total costs, whereas energy costs only account for around 10%. In 2023, our energy bill will be slightly higher than in 2022 because a share of our 2022 volumes had been negotiated before the energy crisis, so at low prices. All in, we expect the inflation of our costs to be at +9% in 2023. As far as next year is concerned, wages will continue to significantly increase in all geographies. This will mechanically impact our cost base way more than the decrease in energy costs. There is no reason why we would not continue to pass on some pricing adjustment in 2024.
Moving on to the next slide. It is fair to say that the quality of our commercial relationship first relies on the quality of the service we provide to our customer. Therefore, measuring our client satisfaction is a priority. To do this, we run almost 100,000 surveys per year, with specific follow-up campaigns with unsatisfied clients. Client satisfaction is an important KPI for the incentive plan of every plant manager, and we continuously launch new initiatives to optimize the overall satisfaction rate. As an example, we are currently rolling out a new CRM tool and further improving the digitalization of our customer experience. During the recent pandemic, by the way, it is demonstrated both strong service reliability and commercial proximity. Let's have a look on the different geographies of the group. France first, where organic revenue growth was +13.5% in the first half.
This was driven by several factors. First, a good level of activity in hospitality, especially in Paris. Second, very good commercial momentum, as shown by the record number of new work wear contracts signed during H1. These new volumes come with a very good profitability level. Third, a good pricing level corresponding to the carry-forward effect of the adjustment negotiated last year and some new adjustment to offset cost inflation in 23. That said, we noted an increase in the corporate default rate, which returned to the pre-crisis level, and the development of working from home still have a negative impact on some clients, such as collective catering. Margin was up 190 bips because of the neutral balance of inflationary impact and some further productivity gains, especially on logistics, water, and energy consumption. Moving on to the next slide.
Central Europe delivered organic revenue growth of nearly 19%. Price effect was especially strong, as a lot of negotiations initiated in 2022 took some time to unfold and were implemented either late last year or from January 1st onwards this year. Development of Workwear continued, driven by outsourcing, but we continue to be very disciplined on the pricing side. Even so, this sometime means losing some new contact, contract opportunities or not renewing an existing contract. As an example, we decided to terminate some contracts with German hospitals, which did not accept price adjustments that were mandatory to offset the inflation of our costs. As a reminder, another very strong increase of the German minimum legal wage was implemented at the end of 2022, forcing us to negotiate further pricing adjustments.
Despite this, margin was flat in the region at 29.5%, which is a satisfactory performance. The high share of healthcare clients in the mix was definitively a drag, given the major financial constraints in this industry. Scandinavia and Eastern Europe now. Organic growth was at +11.5% in H1 2023. Activity was good in hospitality, especially in Denmark. Outsourcing in the region continues to show good momentum, many new contracts were signed, especially in workwear, including the cleanroom business. Baltic States and Finland were well-oriented. Pricing in the region is lower than in other geographies, due to the high share of healthcare clients in the mix. The inflation of our costs was not fully compensated, which resulted in an EBITDA margin decrease of 50 basis points.
The more hospitality strong momentum in Denmark was also a big derivative on margin. That said, profitability in the region remains very high at 35.5%. Moving on to the next slide, performance was satisfactory in the UK and Ireland, with organic revenue growth of +18.5% and EBITDA margin just a bit short of 30%. Organic momentum was driven by, first, market share improvement in healthcare, thanks to the quality and reliability of our service. Second, we delivered further growth in workwear for industry, which underscores the success of our commercial investments, despite the decline in economic activity in the UK. Third, we maintain grid pricing discipline in hospitality and assume some contract loss in certain cases. EBITDA margin is slightly down in H1 compared to H1 '22.
UK margin was up, margin in Ireland was down as H1 2022 was boosted by the tail end of pandemic-related subsidies. Restated for this one-off, the region's margin was up in the first half. Moving on to the next slide. The success story continues in Latin America, with a +10.9% organic revenue growth in H1, and a +200 basis points EBITDA margin improvement at 34.5%, above the group's average margin for the first time. We continue to open the market in the region, with many new clients outsourcing for the first time. We also made further operational progress in the region and improved many of our industrial KPIs. We are extremely happy with the first year of integration of our Mexican acquisition. So far, it has been a complete success.
The results are above our initial expectation and contribute to the region's strong performance. I will come back to this in a minute. Just before that, let's say a word on Southern Europe, which also posted an excellent performance in H1, with organic revenue growth of +19.4% and EBITDA margin up 320 basis points. The rebound of volume in hospitality largely explains this performance. Even if activity was not that strong, H1 2023 benefited from a very favorable comparable base, and operating leverage explains a significant part of the margin improvement in the first half. This, along with strong pricing discipline and productivity gains, led to margin improvement to above pre-crisis level. Moving on to the next slide. M&A activity was a bit subdued in H1, but our M&A strategy remains the same.
We aim at consolidating our existing positions as much as possible and to regularly open new geographies. Since the IPO, we have been closing around eight acquisitions per year on average, with constant discipline in terms of price, which means these small bolt-ons have little to no impact on our financial leverage. The reason for the quiet market is very likely due to the fact that potential sellers want to wait for fully normalized annual results before putting their assets on the market. Nevertheless, in H1, we acquired a nice B2B pest control business in Italy, with operations across the whole country and revenue of circa EUR 5 million per year. As far as the Mexican acquisition is concerned, revenue was up +18% in H1, at EUR 55 million, with EBITDA margin above 40%, among the best in these countries.
As a reminder, it is the only player in the country with a national network. The group is a market leader, 20 times bigger than the number two. Activity is very resilient and stable, with healthcare clients accounting for more than 85% of total revenue. There are 11 plants, 12 distribution centers through optimized coverage, with a total of 2,600 employees. Management has been in place for more than 20 years and stayed on board. Going forward, we believe we will have the opportunity to develop outsourcing in hospitality and in workwear for industry, as the current level is very low.... This concludes the first part of the presentation, and let me now hand over to Louis for a presentation of the first half financials.
Thank you, Xavier. Good afternoon, everyone. Let me first go through the usual revenue breakdown by activity and market and geography, to illustrate the group's high level of diversification, which provides us with a highly resilient model in times of crisis. Whichever way you look at this graph, you will see that Elis' positioning is well-balanced, which contributes significantly to its resilience. In terms of activity, flat linen and workwear, hygiene, wellbeing represent 46%, 37%, and 17% of revenue, respectively. Looking at our end markets, hospitality is now back to a normative level, and our four end markets, which all have different growth drivers, each roughly wait for 1/4 of our activity, which is a key strength in times of crisis.
In terms of geographies, France represents a bit less than 1/3 of our total turnover. We have a balanced mix, which with on the one hand, Central Europe, Scandinavia being more mature. On the easier other hand, Southern Europe, Latin America, offering higher growth prospects. This good diversification in terms of activity, client, geographies, does not come out by chance. It is a consequence of a long-term strategy backed by product innovation, commercial efficiency, and M&A. Moving on to the next slide. Let's take another look at the evolution of organic growth on the EBITDA margin by geography. Xavier just spent some time going through every region's organic growth and profitability evolution, I will pass quickly on that one.
Let's just keep in mind that organic growth was above 15%, driven by 10.6% price effect to offset inflation, with some differences between countries, depending on the local evolution of wages. Catch-up in hospitality also had a 50% uplift on revenue with France, UK, and Southern Europe, the beneficiaries of this catch-up. As far as EBITDA margin is concerned, it is interesting to note that margin in every geography is now converging with group average, with fewer discrepancies between countries than in the past. In terms of year-on-year evolution, you should bear in mind that there are some different base effects between geographies. Some of them had a significant share of their 2022 energy price fixed, meaning a low 2022 base, and others paid the spot price, meaning 2022 base was much higher.
This contributes to explain the margin dynamics in H1 this year, region by region. Let's now look at the full PNL. Below EBITDA, we already largely commented, all aggregates shows strong growth compared to H1 2022. In the first half, D&A only increased by 11%, reflecting the decrease in linen capex recorded in 2020 and 2021, and the inertia in industrial capex depreciation in relation to inflation, its depreciation period being much longer than linen. This led to a 15.1% EBIT margin, a level that we consider normative. The main items between EBIT and operating income are as follows: First, expenses related to free share plans correspond to the requirements of the IFRS 2 accounting standard. They are stable in 2023, compared to 2022, at EUR 10 million. Second, amortization of intangible assets recognized in business combination, mainly related to the goodwill allocation of Berendsen.
In 2023, the aggregate was stable compared to last year. Third, non-current operating expenses, which are increasing, driven by the revaluation of the earn-out related to the Mexican acquisition. Indeed, the new forecast is way above the initial expectation, leading to an uplift of the forecasted earn-out, which is a P&L treatment, not a balance sheet one. Fourth and last, please remember that we booked a EUR 59 million goodwill impairment in H1 last year, regarding our assets in Russia. Furthermore, net financial expense was at EUR 57 million, more or less in line with the cash interest paid. Please remember that in 2022, the base was very low, with EUR 14 million of Forex gains. Tax rate is normative at 26%. We expect the same for the full year.
At the end of the day, net income increased by nearly 160% year-on-year, at around EUR 139 million. You see the H1 headline net income per share. The main items restated are the usual ones, PPA depreciation, non-cash IFRS 2 expense for free share plans, and non-current operating income and expense, mostly corresponding to the revaluation of the earn-out related to Mexico. All in, headline net income stands at EUR 198 million, up 33% year-on-year, which is an EPS of EUR 0.55, EUR 0.78 on a fully diluted basis, up 32% and 26% respectively, versus last year. The fully diluted number of shares take into account potential dilutive effect from the free share plans and the two convertibles, in which case, we saw restate the virtual interest expense.
Let's now take a look at the H1 cash flow statement, which was stable compared to last year, at EUR 17 million, and reflects the normal seasonality of our business. Just below EBITDA, EUR 7 million correspond to some litigation on damages, which is pretty standard for non-recurring. Capex stood at EUR 414 million in 2023, EUR 93 million more than last year. As a percentage of revenue, it's 19.7% compared to 18% last year. This ratio reflects the return to a normative seasonality of our activity, with more than 50% of the investments made in the first half of the year to prepare the season.
As a reminder, in 2022, only 45% of the investments were made in the first half, due to weak hospitality activity in H1 and to supplier delays linked to the disruption of the global supply chain. In 2023, the change in working capital is strongly negative at EUR 86 million, similar to last year, which reflects the strong growth of the revenue on the calendar. The cash collection remains pretty good at 54 days, more or less similar to last year. All other items in the table are normative. In terms of capital allocation, we spent EUR 62 million in M&A in the first half, which is for a large part, the first on I would paid for the Mexican acquisition.
We paid dividend for EUR 62 million, bearing in mind that 35% of the rights were exercised in favor of the payment in shares, as that option was available. At the end of the day, net financial debt increased by EUR 97 million in the first half to EUR 3,275 million, correspond to a leverage of 2.4 at the end of June. Let's have a look at the profile of the debt. Technically speaking, you see that we are always in the process of fine-tuning the structure of the debt with several targets. First, to have well-split schedules with maturities, long, up to 35, as you can see on the graph. Second, diversity of pockets. As you have seen, we have issued a securitization program in June and a new 12-year USPP in July.
Third, optimize the interest paid so that it shall not increase too much. Of course, fourth, manage the liquidity of the group with the safety net. As of now, we are comfortable to reimburse the bonds of October 2023 and April 2024. This strategy on the profile of leverage should allow us to be investment grade at short term, and as you know, S&P put us on positive outlook in March 2023. Moving to the next slide. Net financial leverage decreased to 2.4 times at the end of June, compared to 2.7 times last year in June, on 2.5 times end of 2022. This decrease is totally normal for our first half, given the seasonal pattern of the business, with cash mostly generated during the second half of the year.
As a reminder, the pandemic had a negative impact on the 20 ratio, since then, the leveraging has accelerated, and we expect to be around 2.1 times at the end of 2023. As we forecast continuous EBITDA growth on debt reduction, financial leverage ratio will continue to decrease in the coming years, which is consistent with the strategy followed since 2019. Well, to conclude, this session, top line momentum continued to be very good, with 15% organic revenue growth, driven by very good commercial momentum in workwear for industry and pricing adjustments tied to inflation. Second, a very strong profitability improvement, in EBITDA margin and EBIT margin, up 90 basis points on 200 basis points, respectively. Third, headline net income on EPS continued to rise significantly.
Finally, financial leverage continued to decrease to 2.4 times at the end of June, down 0.3 times compared to the previous year. We expect this leverage to go down to 2.1 times at year-end. I will now hand back to Xavier, who will give you an update on our CSR achievements in the first half.
Thank you, Louis. As you probably know, this is a real actor of the circular economy, promoting usage rather than ownership, which creates a real virtuous pattern. It means that we always search for extending durability when conserving our products. This can be achieved through maintenance and mending, and we also work very hard on the reuse of the end-of-life articles. We are totally convinced that these efforts will bring further organic growth opportunities in the future, given that our clients are increasingly concerned about this subject. Moving on to the next slide, our circular approach is an alternative option to far less environmentally friendly offers that exist on the market, such as do-it-yourself washing and disposable or single-use products.
We are fundamentally convinced that our CSR approach will be an increasingly important growth driver. We already see more and more tenders with significant CSR components, as our clients are more and more careful about their indirect CO2 emissions and the exemplarity of their supplies with regard to CSR subject. Our business model, together with our efforts to improve our CSR approach at every lawyer of Elis, is becoming a real competitive advantage for us. As an example, you see on the slide some recent clients wins, mainly thanks to the quality of our proposal on CSR criteria. Moving on to the next slide, we help our clients reduce their CO2 emissions. Some in-depth studies clearly demonstrated that.
We have been running a number of studies to better assess the decrease in CO₂ emissions when using our service, compared to buying textiles and washing in-house, or to disposable solution. As an example, using reusable hand towel, decrease CO₂ emission by more than 30% compared to the disposable paper solution. Similarly, the use of reusable hospital scrub suits in healthcare establishment allows a reduction of up to 62% in CO₂ emissions, compared to disposable ones, which are generally sourced in Asia. Finally, our rental and washing solution for workwear allows our clients to decrease CO₂ emission by 37%, compared to a situation in which they would buy and wash their uniform themselves. Moving on to the next slide, let me provide you with some examples of projects we implemented recently.
First, I would like to say a few words about the Workwear to Workwear project. We are now capable of reusing all uniforms instead of simply throwing them away, by completely dismantling the linen in order to reconstruct a fiber ball, that will then be used to manufacture new uniforms. This project has been launched in France in 2022, and we are aiming at rolling it out across the group in the future. Second, we launched a new collection of soap or paper dispensers that is 100% made from recycled plastics. Let me also provide you with an invitation.
Since 2019, we decreased our CO₂ emissions by nearly 20%. Conscious of the environmental challenges with regard to climate change, Elis is committed to an approach to reduce its emissions that is in line with Paris Agreement, to contribute to keeping the increase in temperature below 1.5 degrees compared to pre-industrial levels. The group will thus present its climate objectives during a webcast organized on September 4, 2023. The detailed of this event are on our website. Some more example on the next slide, with the acceleration of the green transition of our logistics fleet towards alternative vehicles, and more generally, the decrease in the environmental impact of our logistics. The number of our alternative vehicles are more than doubled over the last 2 years, with more than 700 vehicles to date.
At the same time, we also deployed the project aiming at optimizing logistic routes, which means fewer kilometers and therefore lower fuel consumption. Finally, as you know, we established two years ago a dedicated CSR committee linked to the supervisory board, and we also have a CSR director, who reports directly to me. Furthermore, the long-term incentive plans for our top 500 executives come with CSR criteria. This achievements have been rewarded by most of ESG rating agencies. Elis was rated A-minus by the Carbon Disclosure Project for its second year of reporting. We also obtained a better scoring by EcoVadis, and the gold level ranks us among the top 5% of 100,000 assessed companies. Finally, we also progressed in our Sustainalytics and Gaïa ratings.
Now, before moving to our 2023 outlook, let's have a quick look at this graph that we present every quarter. There you see the evolution of top line and margin performance over the last two decades, and it is fair to say that the last few years have clearly emphasized the resilience of our business model and our strong pricing power. The backbone of our resilience is twofold. First, the diversified geographical footprint, with France representing less than a third of our business. 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 in Scandinavia.
Consequently, you can see on the graph that margin has constantly been evolving at high and stable levels, within a very narrow range, regardless of external events, and taking into consideration, of course, the impact of IFRS 16 from 2019 onwards. On top of that, one very interesting characteristic of our business that we saw in 2020, is that linen investment comes 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. This led to two very strong years for cash generation during the COVID years, in 2020 and 2021. 2022 free cash flow was nearly at 2021 level, at around EUR 230 million.
We expect free cash flow to improve by at least EUR 30 million in 2023, and going forward, it should continue to improve every year on the back of top line dynamism and progressive normalization of change in working capital requirement. Moving on to the next slide. The good financial performance that the group delivered is a result of the network density strategy we have been deploying for many years. This map shows, we are number 1 in the majority of our 29 countries, sometimes number 2, and very rarely number 3. When we enter a new country, we aim at becoming the market leader immediately or over a short period of time after the first acquisition. Being number 1 allows us to operate a denser network, which eventually leads to efficiency gains for us and offer a second-to-none supply security for all our clients.
At the end of the day, this strong network density is both a key competitive advantage for us and a high barrier to entry for other competitors, as replicating such network is virtually impossible. Moving on to the next slide, we did notice some effect of the economic slowdown in the U.K., but we still do not see anything supporting the case for a general slowdown in Europe. If such slowdown were to come, I would like to remind you of Elis' very resilient model. In industry, first, a large part of our clients operate in very resilient sectors, such as food processing, pharmaceuticals, and waste management. Furthermore, with a fixed invoicing methodology we have in place with these clients, we basically charge them for the inventory in place. It means we are not impacted in case of a temporary and limited activity slowdown at our clients' level.
Second, healthcare is very resilient by nature. Third, trade and services, where, just like in industry, we charge our clients with a fixed fee, regardless of their activity level. Therefore, this end market is very resilient, too. At the end of the day, we consider that only our hospitality end market, which account for 25% of total revenue, could be somewhat impacted by a global economic slowdown, even if we continue to see many construction or upgrade projects in the hotel sector in all our geographies, which should be a mitigating factor in case of downturn. You should also keep in mind that we are fundamentally less cyclical than hotel players, as the main reason why RevPAR goes down in times of crisis is a decrease in hotel prices, not occupancy rates, and we charge based off on occupancy, regardless of room prices.
Moving on to the next slide, I would like to come back to our significantly improved growth profile compared to before the pandemic. We have already discussed the structural increasing need by clients for hygiene products, traceability, and sourcing security that obviously strengthened after the pandemic and contribute to accelerating the development of our team. The need for a more secure supply chain also materialized that some clients reshore production operation from Asia back to Europe. The many shortages that appeared in Europe during the pandemic highlighted the importance of industry resilience in Europe and paved the way for some industrialization. This is clearly an opportunity for Elis, as I told you before, we have already won some contracts, like with some semiconductor manufacturers that recently increased their capacity in Europe.
There should be more opportunities like this in the near future. This should further drive the growth of our workwear activity. I also want to mention the steady development of the nursing home market because of an aging population and the increasing share of Elis' fast-growing market in our mix, which mechanically helps to accelerate the group's overall growth. It's worth repeating that an increasing number of tender come with CSR components, an area in which Elis, as an industry leader providing circular services, is well advanced compared to its small competitor. These three drivers are essentially market-driven. We also are active on our side to further bolster our growth. First, we...
The increasing share of our revenue that is generated in countries with strong organic revenue growth, such as in Latin America or in Eastern Europe, will mechanically contribute to the improvement of the group's total organic growth. In this respect, the deal we finalized in Mexico last year will be another catalyst. Second, as we saw earlier in the presentation, we are working hard to open new markets, to develop our product offering, and to roll out the launch of all our services to as many clients as possible. We are very confident that this internal initiatives, combined with sustainably positive market trends, will support our organic growth going forward. Now let's talk about our 2023 outlook that we presented in March, confirmed in May, and are now upgrading.
The good efforts we made to neutralize the impact of inflation in H1, as well as the productivity gains we achieved, led to good EBITDA margin performance in the first half. This allow us to raise our full year 2023 profitability objectives. We now expect EBITDA margin to be up 70 BPS, compared to +50 BPS, and EBIT to be above EUR 660 million, compared to above EUR 650 million before. Headline net income should be above EUR 410 million, EUR 5 million more above the previous target. We also specify our organic revenue growth guidance to circa 12% in the middle of the +11%, +13% range we provided initially.
As mentioned before in the presentation, our pricing discipline in all countries sometimes led to volume losses that will have an impact slightly below 1% for the full year. FX should also be a slightly stronger headwind than what we initially had in mind. 2023 free cash flow is still expected above EUR 260 million, and financial leverage at year-end, still expected at 2.1 times. Before we move on to Q&A, let me remind you that we will present our 2030 climate targets on September 4, and on this occasion, we'll take the opportunity to provide you with a trading update on summer activities. To conclude, I would like to highlight the main takeaways of this presentation. Elis delivered strong financial performance in H1 2023, with the improvement of all profitability KPIs and further leveraging.
It underscores once again, our ability to neutralize the impact of inflation with significant pricing adjustments, together with strong operating leverage and productivity gains. These good results allow us to raise our full year 2023 profitability objectives, with higher targets for EBITDA margin, EBIT, and headline net results. Finally, we'll provide the trading update and announce our climate objective during a webcast on September fourth. This concludes this presentation. I thank you all for your attention and we can now move on to the Q&A. Operator, back to you.
Thank you. As a reminder, to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Please stand by while we compile the Q&A roster. Once again, if you wish to ask a question, please press star one and one on your telephone. There seems to be no questions at this time. Please continue.
That means that we have been quite clear, and I'm quite happy if everything has been well understood. Thank you for your participation tonight and your attention, and I wish you a wonderful summer and give you a rendezvous for beginning of September for the update of the activity and the presentation of our climate action plan. I see that we have some question now.
We do have one question. Please stand by. Your first question comes from the line of Christoph Greulich, from Berenberg. Please go ahead. Your line is open.
Good evening, Xavier and Louis. Thank you for taking my questions. Three from my side, please. Firstly, you mentioned that the high pricing discipline has led to some contract losses. Could you provide us with some color on how the churn rate has evolved? Is it correct to assume that these contracts then have been picked up by your competitors? Secondly, on the free cash flow guidance, just to clarify, this implies a working capital inflow in H2. Lastly, on the financial result, is it fair to assume that should be fairly stable in H2 compared to H1, or do you expect any kinda material, sequential change there? Thank you.
First question. As I said, we consider that the level of volume that we have lost due to this pricing strategy, it was mainly by the way, in U.K. and Germany. It's slightly below 1%, so you can guess that it is 1% churn more. And yes, each time, the customer will never re-insource because he would not make some savings, that means that he has been able to find a small competitor that has decided to take the volume. You had 2 questions for Louis, 1 for the working cap. Yes, seasonality of the cash flow.
Allow working cap, you remember that it's always very negative in H1, always very positive in H2, so that will be the case. You can see the seasonality, for example, of last year, we'll give you the full detail. Yes, positive inflow for working capital. For interest, we gave some guidance for full year. We are speaking cash on there, around EUR 90 million. We are still there. There's a kind of seasonality of the coupon that we pay. So that with the amount you see in H1, you can guess that we have much less to pay in H2 for the cash interest. Yeah, that's all very clear. Thank you.
Thank you. Once again, if you wish to ask a question, please press star one and one on your telephone. We will take our next question. Please stand by. You have a question from the line of Annelies Vermeulen from Morgan Stanley. Please go ahead. Your line is open.
Hi. Good evening. Thank you for the all the detailed update. I just have a couple of questions. I'm just trying to better understand the sort of the margin upgrade, you know, given at the Q1, you know, you were still talking about 50 basis points. This sort of 20 basis points difference in, in sort of your expected margin for this year, what exactly has changed in the last couple of months? Is it, you know, better pricing that you got at the mid-year point? Is it the productivity gains that you talked about? I'm just wondering where that delta has come from.
Secondly, on the M&A pipeline, you've mentioned sellers are holding off on selling because they want to have a year of normalized results. Do you think that, as we're now sort of a year post-COVID, that is something that might pick up in the second half? Or do you think it'll be more of a 2024 story before you see more of those deals come back? Just one more to finish as well. You've talked about the regionalization of supply chains and reshoring into Europe. I think you talked about that on the last call as well.
I'm just wondering if you're seeing that come through yet in volumes or activities, or is it more something, again, you're expecting over the next, you know, 12, 24 months, to see the benefit from that? Any anecdotal evidence that you're seeing of that would be helpful. Thank you.
If we start with EBD improvement of the guidance, it's clear that we are more comfortable end of July than after the first quarter, to have a better view on where we are. Clearly, the driver of the nice performance, slightly above our expectation, is the productivity and efficiency. We have been very efficient, so not only to make some improvement in logistic, energy consumption, and so on, but what is quite also interesting in the first semester, is to highlight the fact that all the new volumes, so the additional volumes received in the different plants, have been very well managed, and we are very profitable. It has reinforced also the operating leverage, thanks to the increase of the volume.
It's not related to pricing, where we have more or less delivered what we wanted, not less, not more. The second question for M&A, I think that it is more in 2024 that we can expect more deals to come. If we have a view on the pipe, there will it's quite not very important with some potential closing before the end of the year 2023, and a lot of family will wait for the full year 2023 results before having discussion and negotiation with us. I think that we'll have a more normative year of M&A in 2024. Your last question, it's we see a trend that is quite interesting.
We have some example, and we give example, relating to all the subjects of electric car and the impact with mega battery plant and so on. We sign, as you remember, a big contract in Sweden, but we have also some quite interesting new contracts signed in workwear, for cleanroom and for microelectronics. At the end, it's quite complex at this stage to isolate this sole impact to give you a precise figure just for this impact.
I think that it is more important to highlight that it contributes to the global very good momentum we have in the commercial terms and the number of new contract signed, nobody sitting in workwear in Europe. It is one of the reason why we have seen this success in the recent months.
That's great. Thank you very much.
Thank you. We will take our next question. Your next question comes from the line of Ben Wild from Deutsche Bank. Please go ahead, your line is open.
Hi, good evening, everybody. Three questions from my side as well. Just on the selectivity that you flagged in Germany with the healthcare clients and in the U.K. with hospitality clients, is this some of your customers becoming incrementally more price sensitive over versus recent quarters? Or is it just a reflection of customers not accepting the level of price increase that you need as a result of the cost-based inflation you faced? Second question is, the volume growth in Q2 is obviously slightly weaker than Q1. Is that slowdown entirely related to that selectivity that you've mentioned?
Then third question, perhaps for Louis, on the capex guide for this year, just given the strong energy and wage-related price increases you've put through, why is your textile investments and other investments still so high as a proportion of revenue, and how can we think about that going forward? Thank you.
Up, to start, first question about the reason why we have seen some losses. I'm not sure that it is a big difference in the behavior of customer. It's perhaps also a difference in our own behavior, because with all the volume we receive in the first quarter and so on, we had the opportunity to be perhaps more selective. We have some example. It's always big name, that's why it represent some million EUR immediately. When we decide not to continue to serve big hospitals in Germany, we are talking about for one contract, it can be more than 1 or 2 million EUR immediately.
The same with some major hotel chain in in U.K., where we have kept a large part of the of the volume, but at the end, we were ready to lose a small part of the volume. It can be quite sizable at the end, due to the size of the global contract with each customer. I see that this is more our own behavior that has changed, as we had it in mind to to to protect the margin. We need absolutely to pass into our price, the evolution of our cost. The second question for the the evolution of a volume in Q2, it's very simple to understand. It is linked to a comparable basis.
It was very easy in 2022 for the first quarter, because we had still the impact of Omicron variant, with a low level of activity in hospitality, quite everywhere. Of course, in the second quarter of 2022, the activity in hotels was much better. When we compare the level of growth of volume in Q2, it's just a question of basis of comparison, not more. The third question for Louis, for textile CapEx.
Just to complete on the second one, I guess you have made the calculation of restating from the hotel recovery, which is not an exact science, as you can guess. You will see a quite stable volume growth, Q1, Q2, between 2.5% and 3%. Linen CapEx, we can say that the price in linen is peaking in H1. It has taken also some inflation, as you know, with a kind of lag due to the negotiation. Now, we see the price of linen decreasing for H2.
Besides, we have now a normal pattern in the orders on the reception of linen, which was not the case last year. Or for flat linen, we go, we order before the season, so in H1, a lot, and much less in H2. Second, as mentioned, we had a lot of workwear, nice contracts, newly signed. Then you have to buy upfront the linen for said contracts. That provide also some linen CapEx.
Okay, thank you very much. If I may, just a fourth quick question, 'cause you mentioned it during the presentation. That's on pricing for next year. Obviously, it's very early stages, but maybe just coming back to that point, how or what gives you confidence that you will be able to put through further price increases next year, with the energy expense potentially decreasing next year?
The first key criteria is always a breakdown of our cost base. As the wages represent by far the majority of our cost, 60% of the cost base. As you know, the level of wage increase in Europe is still quite strong. We expect something all in around 9% as an impact in 2023, so with some report effect and so on. You can see that regularly you have an increase of minimum wage in the key countries like France, Spain, the same for UK also. They are talking about a new additional wage increase also in Germany. All in, we will have a strong increase again on the wages in our countries.
... largely offset the decrease of the energy, because it is 6 times bigger, the weight of wages and energy. That's why at the end, we know that the global formula will come with something that will be positive. We will explain easily to the customer that we have to replicate this in our pricing strategy. Another thing that make me very comfortable with this assumption for 2024, is also to see what happened in 2023. You could argue that we should be under a very severe pressure, even in 2023, with customer asking some rebates, because now we have some on the spot market, the energy coming back to much lower level of prices.
We see in 2023, and I think that you can see it on our financial performance in the first semester, that we are very easily able to resist. We explained that we have so many other subjects that are increasing in 2023, and notably wages, that we cannot, and it would not be fair to decrease our prices. That's why I have this level of comfort for 2024.
Okay, thank you very much. Thank you. We will take our next question. Please stand by. Your next question comes from the line of Sabrina Blanc from Societe Generale. Please go ahead. Your line is open.
Good evening, everybody, I have just one question, is regarding the level of leverage. You have mentioned 2.1 time at the end of full year 2023. You have already mentioned that you, the board, could think about the potential use of cash. Can you come back on that? To understand your priorities between potentially some share buyback, some increased dividend, or how many?
2.1x is not the end of the story of the deleveraging. What we said is, the discussion will take place with the Board in September, and it is more for the strategy in starting in 2024 and after, than in 2023. That means that clearly we will still continue to deleverage at the 2.1x, end of 2023. The question will come more when we'll be below 2x, so in 2024. Then it's not yet decided. We'll discuss about this subject in September. Short-term, we don't change anything, we deleverage.
Okay, thank you very much.
Thank you. There are no further questions. I would like to hand back to Xavier for closing remarks.
No, no additional comments on my side. Thank you, everyone. I wish you a wonderful summer, as I said, we have a meeting point beginning of September to comment the activity during summer, and to present the climate action plan of the group. Good evening, everybody.
This concludes today's conference call. Thank you for participating. You may now disconnect.