Earnings Call: Q1 2020

Jan 9, 2020

Good morning. Thank you for standing by, and welcome to the Sodexo First Quarter 2020 Revenues Conference Call. At this time, all participants are in a listen only mode. I must advise you that this conference is being recorded today. Thursday 9th January 2020. I would now like to hand the conference over to the Sodexo team. Please go ahead. Thank you. Good morning, everyone. Welcome to our Q1 fiscal 2020 Revenues Call. On the call today are CEO, Denis Machuel and CFO, Mark Rolland. As usual, if you haven't already done so, the slides and press releases are available at sodexo.com. And you'll be able to access this call on our website for the next 12 months. The call is being recorded and may not be reproduced or transmitted without our consent. Please get back to Sarah and I at the IR team if you have any further questions after the call. I remind you that the next announcement will be the first half figures on April 9th And I now turn the call over to Zinni. Thank you, Virginia. And hello, everyone. Good morning. And happy New Year on behalf of the whole Sodexo team to all of you. Thanks for joining this call. And let's start right away with the slide on the 4 where we described the organic growth in Q1 that was indeed boosted by the 2019 Rugby World Cup. Our Q1 revenues grew by 7.1% and our Q1 organic growth was at 3.8%. The on-site organic growth was also 3.8%, which is in line with the previous quarter's trend thanks to the 150 basis points contribution of the World B World Cup. As a result, sales outside North America grew by 8.5%. However, North America is down 0.9% impacted by the health care contract losses that we saw in Q4 plus the large contract exits which started to come out of the figures during this Q1 quarter. Benefits and awards was up 4.2%. With double digit growth in Europe, but with a slowdown in Latin America due to, lower interest rate in a very competitive environment in Brazil. Let's now focus a few minutes on the World B World Cup. For the 5th time in a row through our dedicated subsidiary, which is called sports travel and Hospitality STH, We partnered with what would be in the organization of the 2019 World Cup. I'm very proud of our team who tackled technical challenges that was helping to ensure that Japan's first hosting of the World Bay World Cup was memorable We designed, we developed, we're marketing all of the hospitality services with international flights domestic transport, catering, accommodation, etcetera, to create truly seamless and memorable experiences for sports fans in a country where the notion of global sports Hospitality is relatively unknown. So we provided hospitality services at all twelve host stadiums across Japan, including the flagship, web based hospitality pavilion, a temporary structure at the International Yokohama Stadium. With 19 private suites for 600 people, a seven hundred seat restaurant that served 8600 guests during the tournament. We provided innovative guest experiences such as diamond dinner package, a formal sit down dinner with live entertainment on evenings before key matches. And the champions package where guests attended the final and the following night, the Black High World will be Awards. We provided an equally memorable experience through a more simple fair The premium seed package was an exciting and successful innovation for the 2019 Rugby World Cup. Created for the domestic market in Japan. Premium SIP is targeted at entry level of stability in stadiums with little or no physical capacity. So catering is provided in the form of a bento box and still providing category category A seats. Ahead of budget, more than 130 1000 official Rugby World Cup travel packages were sold in more than 100 Countries. As well as 60,000 hospitality packages. And the feedback has been outstanding from consumers, clients, and sales agents alike. So despite the typhoons for which we were insured, this has been a very successful event. And we have demonstrated what a successful event can be in Japan and significant interest as already been generated for the Olympic Hospitality Program in Tokyo this summer, which we, as you know, are also creating selling and delivering. So it's a very good start as the Olympics project kicks off. I'd also like to talk about a large benefits and rewards contract renewal, the Belgium service voucher. Stexo has been responsible for managing the Belgian service voucher since 2008. In 2016, the system was regionalized effectively making it 3 separate systems, which are now tendered separately, and we are beginning to see regional differences emerging. The service voucher provides registered users with a financial aid around of a total cost of, for household services such as cleaning, shopping, transporting elderly people. This is a very technical contract, servicing 1 in 4 households in Belgium or 1.2 active users, which actively promotes declared improvements in All three regions, flanders, Brussels, and Wallonia, retendered in 2019 for the period 2020 to 2023. Brussels and Wallonia focused largely on maintaining the current systems at a reasonable price. While flanders opted for a more fundamental improvement in user experience, and we won each of these markets. The team opted to offer a full rethinking of the user experience. The informative website and user platforms were completely redeveloped from the ground up and rendered fully interactive. In addition, new applications have been developed. Specifically for Flanders, an online payment option is also provided, and the login is fully integrated in the Flamesh citizen identity management system. Our strong position, our technical know how and solid delivery in this market has allowed us to remained highly competitive and innovative in all three regions with very good client relations. We won the contract for 4 years in Brussels, and 2 years with 2 into 2019 issue volume of about EUR 3,100,000,000. This finances the revenues of about 2000 companies active exclusively in the voucher financed home services sector. These companies represent 161,000 employees, and they represent 1 of the largest employment sectors in Belgium. So I'm very proud of the teams in Belgium. Let me now hand you over to Mark for the details in the first quarter reviews, and I'll come back on the action plans and the outlook. Thank you, Denis, and good morning, everyone. And my best wishes to all of you for perspective 2020. So let us turn to Slide 8. Revenues came in at EUR 6,100,000,000 for the quarter, up 7.1%. The currency impact was a positive 2% thanks to the dollar and the sterling. Scope changes accounted for 1.3% linked to the acquisition from last year. This gives us an organic growth of 3.8 percent, in line with the Q4 performance of fiscal 2019. On-site was also up plus 3.8% and in line as well with Q4 of fiscal 2019. Boosted by the Rugby World Cup, which compensated for the expected weaknesses elsewhere. I remind you of what we said Q4 had benefited from better than expected summer works in education, the Paris Tourism Upside and the number of significant client negotiation. The underlying trend in Q1 was plus 2.3%. Benefits and rewards was up 4.2%. Turning now to Slide 10. North America is down 0.9% impacted by contract losses and the exit of one very large contract in health care as well as the portfolio rationalization in sports and leisure. Europe is up 7.4% boosted by the Rugby World Cup. As a reminder, all our large sporting events are managed through our subspecialist UK subsidiary. And excluding the rugby, European organic growth was a solid 3.3%. Africa, Asia, Australia, Alabama and Middle East were up double digits at 10.3%. As a result, On-site, excluding North America, is up plus 8.3% or 5.3% excluding the Rugby worker. Turning to Slide 11, business and administration's organic growth was up 9% on last year's published figures. However, restated for the reallocation of some of the business between segments, organic growth was plus 6.6%. You will find the full disclosure of the restatement in the appendix of this presentation. The main one concerns some previously segmented countries in Europe and Asia, which have now been brought together to reduce structure costs as part of our fit for the future program. Though there has been a transfer of some health care and education business into business and administration, which is where all the non segmented business is consolidated. We have provided you with the adjustments to be made for each quarter to the 19 figures. This transfers obviously do not impact total on-site performance or geographic performance. So back to B And A. In North America, organic growth was more or less flat at minus 0.2%. On the one hand, growth was solid in corporate services and government and agencies, helped by the ongoing improvement This offset the weakness in sports and leisure due to the ongoing effect of the exit of some less profitable contracts last year. In sport and leisure, the pipeline is currently being rebuilt. Energy And Resources was flat impacted by construction contract closures. In Europe, organic growth was 9%. Boosted by the significant contribution of the Rugby World Cup, which is consolidated in the UK. But excluding this, organic growth was +3 percent, slightly better than in Q3 and Q4 last year. Corporate services was held by some new business. But this quarter was characterized by the very strong improvement in government and agencies, driven by higher comparable unit growth, as well as the trend in energy and resources, which is also much better since Q4. In Africa, Asia, Australia, Latin America and the Middle East, organic growth was strong at driven by new business and comparable unit growth in both Asia and Latin America. E and R is also continuing to grow particularly in the mining sector. We are prudent for the next quarter, given the situation in Chile, where the process continue. So far, our people in installation are safe, but activities impacted. And I just want to remind you that Chile accounts for 12% of B And A in Africa, Israel, Latin America and the Middle East. In health care and seniors, restated organic growth was down 2%. In North America, organic growth was minus 4.3%. This is due to the loss of several hospital contracts, which has already impacted Q4 last year and the exit of one very large contract, which started to impact this quarter. You can expect this trend to continue into the 2nd and third quarter as new business signing are still slow. We are also working diligently on retention. And while the teams are very focused, we remain prudent for the next 12 months. Senior has improved slightly with some signings and solid gross selling. In Europe, organic growth was flat. Despite some good signature, the lack of new business opportunities in the segment and the resulting negative net new business in most countries as impaired growth. On the other hand, same site sales growth was good, particularly in Northern Europe. The pipeline is showing signs of improvement in France and the U. K. The growth in Africa, Asia, Australia, Latin America and the Middle East remains very strong at 13.9% due to contract start ups and solid same site sales growth throughout the region, but most particularly Brazil, China, and India. Education organic growth was +3.1 percent, with a very strong quarter in Europe and Asia and North America slightly positive as expected. Organic growth in North America was up 1.1 percent. As anticipated, net new business is neutral and inflation is boosting comparable unit growth and we have seen also higher mill counts in schools. In Europe, organic growth was plus 9.6%, due to the ongoing positive effect quarter. This was offset somewhat by 1 less day in France and a tougher comparable base in the UK after several major ramp ups in the previous year. Organic growth in Africa, Asia, Australia, Latin America and the Middle East remained strong at 13.2%. Resulting from several new school and university contracts in China and Singapore and strong comparable unit growth in India. On the other hand, Hong Kong has been severely impacted by the student demonstrations. Now let's move on to benefits and reward services. As you have already seen, benefits and rewards organic growth this quarter slowed to 4.2%. This is due to 3.9 percent organic growth in the traditional employee benefits in line with issue volume up 3.5%. While Europe is still growing very strongly, Latin America has been affected by the activity in Brazil, suffering from lower interest rate in a very competitive environment. Services diversification is up 5.3%, and 18.9% excluding the incentive and recognition portfolio rationalization. This is due to strong growth in mobility and expenses as well as in Health And Wellness. In Europe, Asia and USA organic growth in revenue was double digit this quarter at 11.1 percent, with solid growth in mature Europe, and strong double digit growth in Eastern Europe, but also in Asia, despite a comparative base in Q1 strong, a top comparative phase in Q1 last year, sorry, Organic growth at minus 3.8 percent in Latin America was impacted by significant downturn in Brazil, due to a much more competitive environment and also lower interest Operating revenues were solid at +5.2 percent. However, financial revenues were down minus 5.3% entirely due to the decline in interest rates in Brazil. Thanks for your attention. I now hand you back to Denis for the strategic agenda and the outlook. Thank you, Mark. And now let's just on, come back to the 4 pillars of our strategic agenda. As you know, every time, you know, on every quarterly announcement, I to update you on some initiatives that we have. And here, we talk about the client and consumer centric pillar. And present the new offer that we've designed and are being deploying, launched it. We are deploying it in the Paris region. Enjoy response to the needs of certain types of clients in specific context. It's it's very innovative. We are sending it into buildings or individual workplaces, which traditionally have never had a continuum. So we are opening possibly new markets. Android is for clients, for whom attracting and retaining talent is important. Where co and nomad working exists and where communal spaces exist, but where there's no room for a kitchen. And juries for consumers that expect to eat healthy food and who work in a flexible manner. The Android offer requires a small modular space. It includes an Android officer who will ensure that fresh, seasonal and locally produced food is provided all day in a clean and friendly environment facilitated by the so happy app. The Enjoy Officer can also provide culture type services. Importantly, the model uses a contact location in the vicinity for optimal costs and low carbon footprint. And of course, we have strict policies on waste management and recyclable disposables. We have currently 15 sites being deployed and many more on our roadmap. Now on Slide 21, Let me just reiterate that growth, so growth in Q1 was in line with expectations. With a very successful Rugby World Cup in Japan, offsetting the contract losses and exits in North American Healthcare. For the year, North America remains challenging as the health care contract exit and losses fall out of revenues and with net new business being only neutral in education. However, the contribution of the World Big World Cup in the first quarter and the 2020 summer Olympics in the 4th quarter for about 100 basis points combined. With strong growth in the developing economies and steady progress in Europe should more than compensate. The group is continuing to identify additional fit for the future initiatives to generate SG and A savings. This will complement operational productivity due to our enhanced discipline and the implementation of step. Our performance framework. These savings will continue to be reinvested in accelerating growth. So as a result, we are expecting the yearly organic revenue growth of around 4% including the major sports event. Stable underlying operating profit margin for the year, excluding the currency impacts and any impact of IFRS 15 implementation. Midterm. Sodexo aims to deliver market leading, profitable growth. Current group investments, activity mix and geographic presence provide us with the opportunities to capture this growth. So DEXO is capable of accelerating organic growth over the years to come, while ensuring a sustainable and inclusive business model. And as organic growth increases, gross investments will be kept under control, so the effects of enhanced discipline and efficiency gains will feed margin expansion. So let me now open the call for your questions. Operator, can you please open the Q And A session Thank And your first question comes from the line of Jamie Rollo from Morgan Stanley. Please go ahead. Thanks. Hello. I'm happy new, everyone. Just a few questions, please. On North America, the comments on Sports And Leisure portfolio rationalization, is that just the same as the comments post the Centerplate deal or are there any new losses there? And on the healthcare losses, you said they started to come through in the first quarter. So it would be helpful just to quantify, please. Maybe the revenue loss in Q1 and then what that might be in Q2 annualized? I think it originally was a million loss in total both for the big exit and the losses? And then finally, in Europe, any signs of deterioration in the corporate service or B and A segment in terms of like for like volumes, please? Hello, Jamie, and happy new to you. For, first question on sponsor labor, yes, it's indeed the same comments that we've done. You know, if you look at what has happened after the integration of Centerplate, We've concentrated on, of course, retaining the clients that we wanted to retain. We've done some portfolio cleanup that that was necessary. So it's absolutely in line with what we said earlier. Concerning Europe, I think we still see solid situation in Europe, in corporate services. We have, still a reasonably good situation in the UK, in France, Med, Mediterranean, Southern Europe overall is solid, Eastern Europe as well. I think we're, we're, for the moment, we were quite happy with our performance in Europe for Corporate Services. Now regarding health care, Mark? Yes, in health care, the large contract we are talking about was was actually came out of our revenue in, I think it was in October. So we've had an impact, which is, I will say, probably half a quarter impact in Q1 and it will be a full impact in Q2. So I think in Q1, the impact was around 1,000,000, and it will be slightly more, in Q2. Thanks. And one more if I may. I might be splitting hairs here, but it looks like the Rugby contribution beat your guidance but your full year guidance is still 4%. So is it fair to say that the guidance for underlying sales growth excluding sporting events is now perhaps a little below 3% or is that just too marginal to make a view? The rugby number came up just a handful of millions above what we were expecting. So it does not change the overall picture. We were we had high expectation of the recipe. And so we've done the numbers in spite of the typhoon. That's why we are quite happy on the numbers but it does not change globally the full picture for the year. And your next question comes from the line of Vicki Stern from Barclays. Please go ahead. Good morning and happy New Year. I have a few questions. Firstly, just as we look into Q2, obviously, you gave the color there on the impact of the Healthcare losses the quarter. But just a few other moving parts I think in Q2, obviously the strikes in France, any comments on the magnitude of that impact? But also calendar. I think you've got obviously leap year this year. So just if you can sort of call out any moving features. And generally, how should we think about the organic growth underlying organic growth, excluding events progressing, over the next few quarters? And secondly, just on BRS, you sort of mentioned there this significant downturn in Brazil. Again, please just sort of fleshing that out a little and the outlook there. Do you think you can still do within the 5% to 10% sort of long term guidance for organic growth for benefits and rewards. And then finally, I know obviously you don't give quarterly figures for retention and new business wins, but just anecdotally compared with when we last spoke at the full year results, anything to call out in terms of progress on either new business or Thank you, Vicki, and happy year to you. Regarding Q2, yeah, definitely, the structure in France have an impact still difficult to absolutely model everything, which started in December. We're still computing the numbers What you have to have in mind, what we, we suffer not only from the swine in France, but also from some other situations, the riots in Chile, that have been also, disturbing our business. We also, suffer from, situation in Hong Kong. Mark mentioned it earlier, you know, still hard to evaluate the impact of Australian fires, not massive, but still can be a bit disruptive. So overall, what we estimate is the impact of all these elements together, should be between 30 basis points 50 basis points in Q2 which would make, like, 10 basis, around 10 basis points for the full year in terms of top line impact. Right. And with regard to the leap year, it actually does not bring an extra working day. I think it's an extra week end date that it bring. So it was already factored in our targets and guidance. But we are not expecting that it will have a major impact on Q2. And therefore, we were we were expecting when we gave our original guidance, a weaker Q2. And so We've got the large contract in health care exists in the North America, but we've also got the Yveline contract, which started last year in January and which has been supporting the growth and it will have a less of an impact in Q2. So Q2 will normally be softer than Q1. But that was as we planned it this year. So nothing surprising. Yes, absolutely. And if we talk about benefits and rewards, particularly in Brazil overall, so we, I must say, we used to bumpy roads in Brazil in Benefits and Awards. So the situation is deteriorating. We've known that in the past. This team, I can tell you, the team is working very hard in, innovating new offers and deploying digital solution at full speed. It's true that the decrease in interest rates, the delinquent from 6.5to4.5 at the moment. So it's it has, of course, a significant impact given the financial volumes that we manage. And the competitive landscape is being, tougher than he's been in the past. We've known in the past. We've done some very tough moments and some say more calm moments. So it's, yeah, it's a bit of a difficult period at the moment. I strongly believe that we can absolutely keep this guidance 5% to 10% organic growth in benefits and rewards It's still absolutely a target that we have. So I'm confident. And I think what we see is we're really happy with the performance, apart from Brazil, Latin America is solid. We have good performance in Mexico, We still have good numbers in Chile despite the events and Europe is really solid Asia is picking up also very well. India is good. So I think the rest of the business is really, in a good shape. Now for your 3rd question, the I would say, as you said, we don't give them KPI's on quarterly announcement, but I must say that the retention is more or less in line with with last year. Development is a bit better as at theendofDecember, which is encouraging. And And in terms of a same size sales growth, we were quite happy. I think we have a good dynamic and in almost, I would say, almost every segment. And that's I think that's very encouraging in the way we are able to pass on inflation. We're able to cross sell services. So we're doing overall, I think, a good business, on the daily good operations in our business. Just one thing back to benefit somewhat, sorry, yeah, definitely given where we are in Q1 and given the difficulties that we have in Brazil, we are guiding, of course, more this year at the bottom end of the range, of course. Sorry for this Okay, that's very clear. Thanks very much. Sure. Thank you. And your next question comes from James Aimee from Citigroup. Please go ahead. Yes. Good morning, everyone. Happy new to everyone. Couple more questions, please, following on from that on BRS. Could you talk a bit more about the nature of the competitiveness in the Brazilian market maybe give us a sense of how the impact split between the impact of interest rates, underlying issued volume and the competitive nature of it in terms of contract losses? And then second, a question on food inflation. We're seeing some indicators that food inflation is accelerating on the back of African swine flu and other issues. Can you talk about what you are seeing please on food inflation? And are you still confident in your ability to pass that on to clients? Right? With regards to BRS, I think we don't split the impact of interest rates and the issue. What we know is definitely the competitive is to offer probably also linked to the economic environment. There is more fights, because, on the last contracts, the price pressure is very, very high. And the development in the small and medium companies is not as active as it has been given also the, I would say, the the fact that some of the small and medium companies are not in necessarily healthy situations. So that's That's, definitely, we have a decrease in issue volume we believe that it's we can, we can turn this around as time goes on. But at the moment, yeah, we're struggling. In terms of, food inflation. Yes, it is relatively a now, we see some price increase on protein in certain geographies, linked also to the Chinese crisis on pork, but it's still a relatively moderate What we see on inflation is a more an ongoing labor inflation in the U. S. Where the hourly labor continue on the same trend on prior years. And there is a slight pickup of food inflation in the U. S. Also But currently, I mean, we are passing this well onto clients. In France inflation is very moderate. And even in the UK, I mean, we have moderate inflation Now what's going to happen is that the national living wage increased by 6.2% that will actually obviously create a labor inflation, but we had anticipated a significant increase anyway. We were expecting this year, a significant increase in the national living wage in the UK. So I mean, last year, we had also a significant inflation, which we passed well to the clients. The fact that it is an official labor inflation, it makes it easier to pass it on to clients. So We are not too worried about the labor inflation in the UK. Thank you very much. And you know what what Denis said on the same site sales growth, I mean, have a very dynamic inside sales growth in the beginning part of the year better than last year. And this is also the reflection of us passing well, the inflation, it's not just the inflation. We also have some volume increases, but the health of the same site sales growth shows that we we are passing in fish and wind. And your next question comes from the line of Jared Castle from UBS. Please go ahead. Thanks. Good morning. And 2 for me, please. Happy New Year. One, can you give any color on kind of how the acquisition pipeline is looking and kind of what the run rate do you think would be on external growth? Should we kind of be thinking around 1%? And then just secondly, kind of any color on the importance of kind of ESG now when you kind of come to market, if that's increased or decreased, over the last 12 months? Thanks. Yes. On the M and A pipeline, you know, we kept on the trend from last year. I mean, we clearly told the on-site service team to focus on developing a pipeline, selling more. And so less distractions from M and A. So I mean, there is very little or no activity on the on-site. We are also active on the disposal side the M and A team is more working on the disposal. And there is still some activity in PHS. We small activities, there is a pipeline of M And A in PHS. And it's very moderate also in PRs, but there are some projects in BRS. So do not expect a lot of M and A this year on given the current pipeline. And the 1.3% scope change impact in Q1 will probably transform itself into a 0.4%, 0.5% impact for the full year at that stage, with what we have in the pipeline today. And, regarding your question on ESG, Jared, definitely, we see an increased focus and request from clients on those topics. It depends on the geographies. Definitely in Europe, it's coming stronger and stronger. In the U. S, it depends on the clients and the sectors. But definitely, and the first, the request for healthy food, local food is more and more important. The questions around the sustainability, plastic, food waste, all this comes into play. And we have several very interesting let's say, I would say showcase prospects in the pipeline where we really would demonstrate the fact that We are leading the way on that. As you probably know, we are absolutely ahead of competition in the way we manage food waste to a massive scale. And of course, and it means meaningful for our clients, for our consumers and for the economic of, of Sodexo. So, definitely, we see that this is coming more and more. And I would say we are well prepared We have very strong assets and knowledge and practices on that. So I'm very positive on this. Okay. Thanks very much. Thanks, Jarrod. Thank you. And your next question comes from the line of Tafar Misari from BNP Paribas. Please go ahead. Hi, good morning. It's Jafar from Exane BNP Paribas. And just on two questions, if that's okay. So first one on the Rafar, we cannot hear you very well. Sorry. Hi apologies. Is that better? Okay. Much better. Thank you. Sorry. And so firstly, on the various disruptions. So if I'm correct, the French strikes only started in December, the Australian bush fires, It's really in November, December, they started to really go out of control. So I'm not sure we should assume they were included in your guidance. So do you simply mean that what you've seen so far in December, January for the French strikes is just not material enough to change the guidance. And second question on U. S. Healthcare. I also just wanted to clarify whether minus 4.3% in Q1 was in line with your is when you say you remain prudent on full year 'twenty, is it basically the same message, what do you mean increasingly prudent? And lastly, on product innovation, you keep sharing some of these new initiatives. Today, you talk about Enjoy, which you launch in Paris. Sougeres in France, Novais in Switzerland, the good eating companies in the UK. So I'm just wondering if North America is still basically the problematic region within the group. Could you maybe share a few more examples of that sort of product innovation and new offers in North America? Yes, on your first question, so when we gave you guidance for the year, we were expecting Q2 to be a softer quarter, not because of the events, but because of the rhythm of losses and exits and and the ramp up of Yveline contract and so forth. So we knew Q2 will be softer. It will be our softer quarter among the 4 quarters. What we've just said is that the events will add some softness to it. And the events is Chile started mid November. Hong Kong has been going on now for a few months. The strikes are all in Q2. And the bush fires is just starting, but I'm expecting very mild impact from the bush fires in Australia. So all of this is currently estimated at 30 to 50 basis points. And this was not in our original target. But what was in our original target was the fact that Q2 will be our softer quarter of the year. And so on your second question, yeah, the Q1 in Healthcare is in line with what we expected. Nothing more. So, and, and, you know, as we get impacted by this contract exit and losses. This will continue, for some months. Are we increasingly prudent? No. Are we prudent? Yes. Definitely. And it's not prudent to be prudent. It's because as I mentioned, We still have a significant pipeline of renewal coming up. And, there's always an uncertainty. We do, are all hands on deck on retention, but there is there are still some, some of the nodes I must say also that the health care sector in the U. S. Is a troubled sector. We have, some of our clients are, leading through financial difficulties. It's not new, but it's, it's quite live at the moment. And the pressure on price is very, very high. So because we also put some, a very strong emphasis on margins and particularly gross margins, We will not play, at any price. Because we want to also ensure profitability. So at this moment, we are cautious both on, of course, on the retention part, but also on ensuring that we have a reasonable profitability in what we retain or in what we gain. So combination of both makes me prudent as have always been for the last year or so. Now on the 3rd question, you, I think you're guiding me into next next announcement to give you more insights into what we do in North America. Definitely North America, I think we are experiencing some some growth issues and, in, some difficulties in health care and education, as you know, but North America remains a big region of innovation. We are very advanced in digital, with lots of apps being deployed, being consumer facing. As you might have heard, we've developed a robot on campuses that has helped us increase our same size sales growth. Particularly for breakfast for students who didn't want to leave their bed to get their breakfast. We've developed a future 50 recipes to put new, you know, new vegetables and new food stuff in, in our menus that are very innovative, protecting biodiversity So this has been live in North America. We are also very active in food waste So there are many offers that are life in North America. So, of course, we've, in the last 1 or 2 announcements. We've talked a lot about things that were happening in India and in Europe. But I think it's a good point that you make and we'll also communicate more into what we do in North America because it remains a country of innovation, where we were, I'm very confident we are able to win very good contracts in the U. S. Retain some very good contracts. We have the right offers. The main issue that we have in North America is the consistency is to be good everywhere. That's the point. It's not we have the good we have some very good offers and capabilities there. Thank Your next question comes from the line of Richard Clark from Bernstein. Please go ahead. Three questions for me, if I may. First one, you mentioned a few times in the presentation, the market for new businesses is quite tough. You mentioned it in relation to European Healthcare. U. S. Education. Just wondering why you expect that to be the case. You've said in the past, you expect sort of weaker macro can drive out sourcing. So why are we not seeing that? 2nd question, there's been quite a lot of press on industrial action at your side, the NHS hospitals, obviously, the university where the democratic debate was. Is that just hitting the news more or are we seeing any spike in industrial action and what impact is that maybe having on your labor costs? And then thirdly, you talked very sort of fusably about the the Japan World Cup, but there was a press report saying you've not bid for the French Rugby World Cup. So what's the current attitude to these big events and why you're not bidding for that one going forward. I think the new business, Europe And Healthcare overall is, is not the most dynamic at the moment. And the outsourcing, and particularly, if I take the case of France, there is, there is a vast potential in the public sector, but they are very slow in turning into outsourcing for many for sometimes for political reasons. Neurom education, I mean, schools, we have a good dynamic in schools, not such a good dynamic in universities, but it's linked to us and I wouldn't say a thing to the markets. As you say, we've had some weak weaknesses in our teams, in our sales development at trying to also in health care, NORAM. So NORAM Healthcare, NORAM education are still active market. There is a specificity in Norham Healthcare linked to, I'd say the price competitiveness in line with some of the difficult economic situations that some of our clients are living through. So very specific things. Overall, the dry force also seeing is still there. And when particularly, of course, still in North America, but when you look at the rest of the world, it's still in particularly the emerging markets. It's massive. Now the strides, yes, we have a 2 very different phenomenon, in, in, on the strikes in North America and in France. France, you know, is linked to the pension question that the government is working on. It's very specific. The strike in North America in the place where we had where the presentation debate had happened is also very, very specific. The trade unions, with which we have an excellent relationship, nationwide some people locally have, of course, I would say, taken the opportunity of of that presidential debate to put pressure on the conditions in which they were working. We've settled a deal, which is, which is very local. Which is a good deal for both parties. And that's it. So it was very, very, I would say, very opportunistic coming from the local section of a National Trade Union. So again, very, very specific. On the Japan World Cup and the French World Cup, well, think the conditions, the contractual conditions and the contractual environment and the stakeholders around the Japan World Cup are very different from the overall ecosystem of the French World Cup. And so far, we've, we haven't bid for the French World Cup because we felt that the we wouldn't be able to develop and have the space to develop relevant offers of Hospitality offers for the French World Be Welcome as we've done in the past. Again, it's very linked to the what I would call the ecosystems around the French World Cup, and there's different stakeholders making the decisions. So on that last one, there's no change in attitude towards these large events. We can expect you to see you doing Olympics and World Cup still going forward. Absolutely. Nothing linked to the French worker, but we decided not to bid for the Olympics in Rio. For other reasons. We felt that, again, the transparency of those markets for Rio, we're not at the level that we expect expected. So we decided not to bid. So there are some specificities per countries where that put us that push us to decide not to play, but the overall, we still believe that there are those big events are great As you know, we've done also the Panam gains in Lima. There's been a big success. We had a standing Ovation from, all the athletes at the end for our teams. So, it's a great showcase of our know how, but we are picky to ensure that we can do our business the way we want to do it and showcase our expertise as we wish to do. Thank you. There are currently no further questions, sir. Please continue. So in that case, let me again wish you a very, a very nice year for 2020. And, looking forward to meeting you and exchanging with you in the H1 announcement. And in the meantime, we are all hands on deck, and do our best to to continue to grow and develop the business in Sodexo. Thank you for your trust. Thank you. That does conclude our conference for today. Thank you for participating.