Some press releases are available on 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. Don't hesitate to 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 quarter figures on January 9th, 2020. I now turn the call over to Denis Machuel. Denis.
Thank you, Virginia. Good morning to all of you. Welcome to our fiscal 2019 results announcement. The first thing that I want to tell you is that Sodexo is in better shape today. The good news is that organic growth has picked up, and our cash flow has been better than expected. We've also advanced on our responsibility agenda with the launch of our battle against waste, and we are progressing very fast with providing healthier and more biodiverse menu options. I'm confident that renewed discipline is progressively coming back into the organization, which in turn is raising internal confidence, even though we still have some challenges. Now for the highlights of the year. On slide four, you'll see that our revenues grew 7.6%. This was helped by positive currency effect and the ongoing impact of the Centerplate acquisition.
The really good news is that organic growth came out at 3.6%, the first time we are over 3% since 2012. While this is not yet a level that I consider satisfactory, it's encouraging and demonstrates that our action plan is delivering results. This is driven by on-site services up 3.3% with all segments improving. Most notably, the recovery is coming through in North America, which is at + 1.8% of organic growth. Excluding North America, organic growth came out at 4.6%. Benefits and Rewards is up 8.5% with strong growth in all regions, despite a slowdown in Brazil in Q4. Now on slide five. As I said earlier, we're still not where we want to be because net new business was only neutral this year. During fiscal 2019, retention was down 50 basis points at 93.3%.
This was impacted by our decision to exit a large healthcare contract in NORAM, which has always been difficult and was not going to be renewed at the right level of profitability. Excluding this one last contract, retention would have been up 10 basis points. All segments and regions were up or stable except healthcare North America in terms of retention. Business development is down 50 basis points at 6.3% because much stricter discipline on the bidding process is being implemented throughout the organization, so that when contract approvals come up to Marc and myself, they are generally much more solid opportunities. We are absolutely determined to improve the quality of what we sign, even if it may have a short-term effect on signings as we rebuild the pipeline in a more targeted and disciplined manner.
On the other hand, comparable unit growth was very solid at 3.1% against 2.6% last year. Excluding a negative overall impact of 20 basis points from first-time IFRS 15 implementation, the underlying trend was 3.3%. This represents some solid cross-selling and wage inflation pass-through, particularly in North America. The good news is that on top of a very successful Rugby World Cup last month, we've also been awarded the 2020 Summer Olympics hospitality contract, which means that with these two major sports events in Japan, our comparable unit growth in fiscal 2020 will be boosted by 100 basis points. By 100 points, sorry. On slide six, you will see that enhanced discipline is visible in both the way we sell and the way we operate. LTIR, the lost time incident rate, is a good indicator of our operations.
It has fallen by a further 11.1% in fiscal year 2019 to 0.86 for the group as a whole. We know we can still do much better going forward because our best segment, Energy & Resources, is at 0.1. There is no doubt that lowering LTIR represents everyday discipline to ensure that the teams are working in an ever-safer environment, understanding what they have to do, and having the right equipment to do the job. As far as our sales are concerned, it's interesting to note that the gross profit retention is at 95% versus the sales retention at 93.3%. Our margins are 20 basis points higher on the new contract signed than in previous years, which reflects the enhanced discipline through the organization.
In Corporate Services, a lot of work has been done to rebalance the portfolio of the pipeline by boosting smaller local contracts, which tend to ramp up quickly and profitably. They currently stand at 80% of the pipeline. On slide seven, you'll see that the underlying operating profit came out stable at 5.5%. This is in line with expectations at the lower end of the original range, given this time last year. The margin are stable, That's on slide eight, as all the productivity generated by the business has been used to invest in actions to boost growth. We've made good progress in managing labor. We see positive signs in several segments and regions. However, further work is required to ensure consistency in labor management across the company.
On the supply management side, we are also benefiting from better takeup of DRIVE, our internal food management system, which is now being used on more than a quarter of all our sites around the world. This helps to deliver our menu strategy with menu development standards for improved quality, consistency, costing, and speed to market. This is helping us to grow the proportion of healthier dishes in our menus and ensuring fast rollout of our new group retail offers and systems. This is for on-site productivity. Now let me talk about Fit for the Future, our program focused on reducing SG&A. This program is progressing. It's helping us to enhance efficiency of our organization, and results are coming through into the figures.
Thanks to, for example, more streamlined back offices with our European accounting center in Porto, generating savings in the U.K. and the Netherlands, and soon in Germany. We are also simplifying some of our organizations in certain smaller countries in Asia and Eastern Europe by taking out excess segmentation or just exiting countries. We'll talk more about this later. We've also done a substantial review of all our real estate around the group, and adjustments are being made. This efficiency is then being reinjected back into growth. Some of the projects are long-term, like the work we're doing on our brand strategy. Some of it has immediate impact by reducing our prices in certain markets to ensure competitiveness. Some of it will have a progressive impact with investments in more innovative and consumer-centric food offers or digital marketing or better sales targeting tools.
We are continuing to invest in benefits and rewards in the digitalization of the offers, and even more importantly, in our back-office support systems. As an example, the recent investment in Zeta will accelerate the transfer of this excellent Indian platform technology into our other markets. As a consequence, the margins are stable, as all the productivity generated by the business has been used to invest in actions to boost growth in line with our focus on growth objective. Before Marc goes over all this in detail in a few minutes, I'd just like to say that our financials are very solid. Our EBIT and cash conversion remain very high, respectively at EUR 907 million and 136%. That is despite a much higher level of net CapEx this year, mainly in the education and sports and leisure segments. Net acquisitions amount to EUR 301 million.
We have acquired two food specialists in Switzerland on the high end and in the U.K. in the education market. I'll come back to this a bit later in the presentation. Despite this, our net debt ratio has fallen back below one. Let me now give a quick perspective on two contracts that we are really proud of as we move to slide 10. First, our contracts with the Inditex Logistics Center in Spain. Our partnership with Inditex started a year ago as we built our offer together with a clear focus on healthy and responsible diet. We are improving the well-being of employees. We are reducing the impact on the environment and natural resources and working with small local producers around the site. We have really built a unique 360-degree dining concept.
The restaurant serves more than 1,600 meals a day in this logistics center in northern Spain, with 65% of the products coming from local suppliers, including more than 40 organic products. By sourcing local products, we reduce the impact of logistics as well as packaging. The relationships developed with the local producers are really strong, to the point that we now work together on the seasonal planning of their crops. We design our menus accordingly. We also work to promote native varieties of vegetables. The fish comes fresh every day from a fish market at the nearby port. We designed a plastic-free restaurant, where plastic bottles and soda cans have been removed, and filtered water is served from the tap. Edible leftovers are donated to an animal shelter, while the non-edible leftovers are converted into compost and given to a local ecological greenhouse.
The packaging used for takeaway is compostable too. All that remains is transformed into biogas. Our next challenge for this year is to become fully a zero-waste restaurant, as currently only 2.5% of the waste is non-recyclable. In just one year, this restaurant has obtained the LEED Gold certification for its on-site energy efficiency and integration of renewable energy. A few months ago, we opened a second restaurant with the same offer for this client. Slide 11 is another great example of our work in Lima last August, when we supported the organization of the Pan American and Parapan American Games in Lima, Peru, as the official supplier for food services. This came after the success of our first Pan Am game contracts in Canada in 2015.
For 10 weeks, more than 600 Sodexo employees were mobilized to provide food services for about 10,000 people, including 6,700 athletes from 41 countries of the Americas, out of a huge purpose-built tent that you can see on the slide. Our Sodexo teams delivered six food services daily, 24,000 meals each day, 700,000 meals throughout the entire competition. Demonstrating the expertise we have in serving and operating to the highest quality standards, offering the best of Peruvian cuisine while providing for the requirements of an athlete's diet. During these games, standard processes were implemented throughout the chain, from the evaluation of suppliers, control, and distribution of raw materials, processing and tracking to ensure that the food was safe, of the right level of quality, and met regulatory requirements. Our offer was also designed to be environmentally friendly.
More than 3 million biodegradable and compostable paper pulp dishes, plates, and bowls were used, and more than 1.5 billion recyclable glasses. Our teams in Peru designed an innovative process for the event, the technified kitchen, to provide our clients with a faster, more efficient, safe, and not polluting mass service. This service has now been implemented in other kitchens worldwide. We are really proud of the work. Now, after this great example, over to you, Marc, for the details of our financial performance.
Thank you, Denis, and good morning, everyone. I am very pleased to be here with you this morning. As usual, you will find the alternative performance measures definition in appendix 16, along with other information to help you with your modeling. I also remind you that these appendices are not translated into French, please go to the English version for them. Now let's start with the performance in the P&L on slide 13. This has been a better year for the P&L relative to last year. Currency translation had a positive impact this year, and it was also helped by the contribution of acquisition. Revenue growth was therefore 7.6%, and total revenues reached nearly EUR 22 billion. Underlying operating profit at EUR 1.2 billion was up 6%, excluding currencies. The underlying operating profit margin was stable at 5.5%, with or without the currency impact.
This is in line with our adjusted guidance in July. Other operating income and expenses were at EUR 141 million, EUR 10 million higher than last year. I shall come back to this in the next slide. Financial expenses increased by EUR 10 million. I remind you that last year the numbers was helped by EUR 7 million of interest payments on the reimbursement of dividend tax paid in the past. Otherwise, the year-end rate was slightly helped by 10 basis points at 2.6% due to new long-term financing during the year and a reduction in use of the Euro Treasury bill financing at negative rates. The effective tax rate was 29%. This rate now reflects the full effect of the lower rates in the U.S. Because of all of this, the underlying net profit was EUR 765 million, up 7.8%, excluding the currency's impact.
The earning per share benefited from a lower average share count due to the share buybacks in the previous year. As a result, underlying EPS was up 10.1%. Net profit was EUR 665 million, up 2.2%, and EPS was up 3.6%. Now I would like to come back on the other income and expenses. Restructuring costs were EUR 46 million. As we said we would, we have continued to simplify our organization. You should continue to model about EUR 40 million- EUR 50 million of restructuring spend for the coming year. Losses related to perimeter closures were nil. In fact, this year we generated a small gain on disposal on the closure of some activities. I remind you that over the last couple of years, we have reduced the number of countries in which we are present from around 80 to 67 today.
Amortization and impairment of acquired intangible assets was more important than the previous year due to some intangible write-offs. We expect this to come back to around EUR 50 million in fiscal 2020. As a result, other operating income and expenses were EUR 10 million more than in the previous year. Operating cash flow is flat because last year was boosted by the tax reimbursement and interest compensation from the French state on dividend tax. The positive inflow of EUR 182 million in working capital is strong, but lower than the record variation of last year. It benefited from a significant positive working capital inflow due to sports events in Japan. Net CapEx is, as expected, EUR 130 million higher at EUR 415 million, or 1.9% of revenues versus only 1.4% of revenues last year. This was mostly due to more investment in education and in sports and leisure.
Free Cash Flow reached EUR 907 million. M&A spends totaled EUR 301 million versus a particularly high level last year linked to Centerplate acquisition. There were no share buybacks this year. With a stable outflow for dividends, the group reduced its debt by EUR 47 million. The increase in CapEx is linked to some new or renewed education contracts in North America and in Europe, as well as to the substantial sports and leisure renewal program, which traditionally requires more CapEx to sell than most other segments. The investments in BRS also continue to be significant at 6.5% of revenues to ensure the digital transition of the activity. As a result of the very strong Free Cash Flow, cash conversion reached 136% compared to the record 165% in the previous year, and still well above FY 2017 at 123%.
This performance was supported by the Japan sports event and in particular, the early hospitality packages sales of the Rugby World Cup up to the end of August, while the events are held in fiscal year 2020. With net debt declining by EUR 47 million- EUR 1.213 billion, our net debt to EBITDA ratio is just under our target range of 1:2 , and gearing has fallen to 27%, helped by the revaluation of the shares held in Bellon SA. As we mentioned in the H1 figures, IFRS 9 has had an impact on our assets by revaluing our stake in Bellon SA, which was traditionally carried at purchase cost and is currently valued at EUR 708 million. You will find more details in appendix nine, slide 57. As you know, we shall also be implementing IFRS 16 as from September 1st, 2019.
While we do not expect to have any impact on free cash flow and on net cash flow, and only a limited impact on underlying operating profit, I confirm that our net debt is increasing by EUR 1.3 billion, which takes our gearing ratio to 54% from 27%. You will find this in detail in appendix 11, slide 59 and 60. At the end of fiscal 2019, the group had an operating cash position of EUR 2.866 billion, of which nearly EUR 2 billion is linked to the BRS activity, including restricted cash for EUR 650 million and financial assets for EUR 427 million.
I remind you that we renegotiated our revolving credit facility this year, which means that we now have a total of EUR 1.75 billion of backup financings available. As part of the renewal of this credit facility, we have indexed the margin paid to our performance on waste.
Depending on how we perform on waste, the margin paid will vary by ±2 basis points. In slide 19, you can see that the dividend to be proposed by the board to shareholder is EUR 2.9, up 5.5% on last year, compared to the increase in EPS of 3.6%, to reflect the strong cash performance and its confidence in the group strategy. As a result, the payout ratio is 55% of underlying EPS and 64% of published EPS. Now let's go onto the review of operations. Group revenues on slide 21. This year, revenue was up 7.6% to reach EUR 22 billion. There was a 1.5% positive currency effect, predominantly linked to the U.S. dollar, and a 2.6% positive contribution from acquisitions, including the ongoing effect of the consolidation of Centerplate, as well as the smaller acquisition done this year.
As a result, organic growth is 3.6%, the best rate of growth for seven years. On-site services were up 3.3%, and benefits and reward was up 8.5%. Let's look firstly at the on-site business. The good news is that all regions are growing. North America is back to growth at 1.8%. Outside North America, Europe is up 3.2%, and our activities in the developing economies are up 7%, 9%. As a result, the growth outside North America is 4.6%. If we go into the segments. Starting with Business and Administration on slide 24, organic growth was up 3.5%. In North America, organic growth was up 1.9%. Corporate services were strong, driven by same-site sales growth, new contracts, and solid retention, compensating weaker organic growth in other segments. Government and agencies same-site sales growth was impacted negatively by the renewal of the U.S. Marine Corps contract.
However, the team has worked hard to improve the offer, increase efficiency, and renegotiate with the clients when necessary, and the results are coming through month by month. In sports and leisure, organic growth was negative due to the planned exit of some less profitable contracts. The extent of the substantial contract renewal program this year mobilized the sales team, resulting in low levels of new development. The pipeline is currently looking better. Energy & Resources remained volatile quarter by quarter. It was particularly impacted in Q1 by a tough comparable base due to a large weather project in Q1 fiscal 2018. The trends appear better at the end of the year. In Europe, sales were up 2.5% organically. Corporate Services continued to generate solid growth due to cross-selling, with an easier comparative base in Benelux and strong growth in Southern and Eastern Europe.
In sports and leisure, the summer season in Paris was better than expected, partially compensating a contract loss in France. Government and agencies improved quarter by quarter during the year, especially in the U.K., as the effect of the army contract losses subsided progressively. Energy and resources turned positive in the second half, with some new projects being signed up. At 6.8%, organic revenue growth remains strong in Africa, Asia, Australia, LATAM, and Middle East, despite an ever stronger comparable base. This reflects strong growth in same-site sales and new business in corporate services everywhere, and progressive improvement quarter by quarter in energy and resources. We also have the impact of the successful Pan American Games in August in Peru. Moving on to healthcare in slide 25, organic growth was 2.1%. In North America, organic growth was 1.5%.
The management team is absolutely focused on improving execution and productivity, generating more cross-selling on existing contracts, passing through inflation, and putting more discipline into the sales process. This impacted retention with the loss of several healthcare contracts, including one particular large contract for which profitability has been an issue for a long time. This contract started to fall out of revenues in the fourth quarter, which will continue to do so in the first half of fiscal 2020. Development has also been slow due to a much more selective process. However, the contracts signed are more robust. The pipeline is being rebuilt progressively, integrating this more selective process. seniors organic growth improved progressively quarter by quarter after the loss of a significant contract in the first quarter. In Europe, organic growth was 0.9%.
Hospitals and seniors have both been impacted by a lack of development opportunities, impairing growth in most markets. On the other hand, same-site sales growth was strong, particularly in Northern Europe. The pipeline is showing signs of improvement. Despite an ever more challenging comparable base, organic growth in Africa, Asia, Australia, LATAM, and Middle East has remained strong all year at +17.4%. New contract startups and strong same-site sales growth continues in Brazil and Asia as clients are seeking to outsource for the first time in order to benefit from the group's expertise. Development rate has slowed down slightly during the year but remains well up over the average for the segment. Education was +4.7% and much better than last year.
North America turned around up +2.2%, or 3.6% excluding the IFRS 15. Just to be clear on this IFRS impact, the implementation of IFRS 15 in fiscal 2019 has had a negative impact of 20 basis points on fiscal 2019 group organic growth. However, this is made up of a significant negative impact in education in North America here, 140 basis points, and a lesser positive impact disseminated broadly around the other segments and regions. Back to North America education. While net new business from last year was neutral, same-site sales growth has been solid, helped by inflation pass-through, some impact from extra working days, and solid summer works. The selling season in fiscal 2019 remained broadly neutral, with higher retention but lower development. We are starting fiscal 2020 with neutral new business again.
In Europe, organic growth was +12%, driven by solid contract wins in the U.K. last year and the start-up in January of this year of the new school contract in the Yvelines department. The Yvelines contract is the biggest school contract ever signed in France, combining both food and facilities management services. Since it started up in January, it will continue to contribute to growth until December for the first four months of fiscal 2020. In Africa, Asia, Australia, Latin America, and the Middle East, organic growth remained high at +12.3%, despite an ever-higher comparable base. There were several new school and university contracts started up in China, Singapore, and India. On-site services underlying operating profit was up 3.9% at constant rates so that the margin was flat at 5% relative to the previous year.
Business and Administrations underlying operating profit increased by 7.1%. The operating margin was stable at 4.2%. As expected, the productivity generated by the business during the year was reinjected to accelerate growth. The timing differences between investment and productivity gains visible in the first half figures were covered as expected, helped by some client renegotiation to establish better levels of profitability in some of the large contracts, and in particular for the U.S. Marine Corps contract. In healthcare and seniors, the increase in underlying operating profit and margin was respectively +6.3% and +20 basis points, reflecting the enhanced discipline of the new team, particularly in North America, as well as better management of staffing and food costs, and generally more rigorous follow-up of the STEP operational KPIs.
In education, underlying operating profit fell by 5.7% and the margin by 70 basis points due to previous year churn, particularly in North America, and the start-up of many new contracts. The first half was also impacted by strikes in France. North American wage inflation has been passed through. Wage inflation has continued in fiscal 2019, absorbing most of the productivity achieved during the year. Let's move on to benefits and rewards performance. Benefits and rewards services revenue amounted to EUR 892 million, up 4.9% year-on-year. Excluding the negative currency impact of 3.7% due principally to the weakness of the Brazilian real and the Turkish lira, organic growth in revenue was strong at 8.5%, with a very strong first nine months and then a slowdown in Q4 at 5.2% against a higher comparable base in the first quarter of the previous year.
Employee benefits revenues were up 9.4% organically compared to an organic growth in issue volume of 7.1%. In Brazil, growth was strong in the first half, slowing down in the fourth quarter, particularly due to the strong comparable base and the business environment which became progressively more difficult. Growth was strong in Europe. Services diversification was up 5% organically or 18.7%, excluding some portfolio rationalization in incentive and recognition, resulting from strong double-digit growth in mobility and expense and rapid development in corporate health and wellness offers. In Europe, Asia, and U.S.A., organic growth in revenues remained strong at 8.6%. This performance is due to a solid performance in Western Europe, double-digit growth in Eastern and Southern Europe and Turkey. In the non-traditional business, Rydoo, the end-to-end travel and expense management system is growing very strongly, as are the corporate health and wellness offers.
Organic growth in Latin America was 8.3%, reflecting strong growth in activity, particularly in the first half of the year, following on from the strong pickup in Brazil in the third quarter of fiscal 2018. Growth slowed down in the fourth quarter due to the higher comparable base. Growth in Mexico and Chile remained very solid. Operating revenues were up 8.4%, with solid growth in Western Europe, double-digit growth in Eastern and Southern Europe, and strong growth in Latin America. Financial revenues were up 9.1% as a result of continued volume growth across the region this year and high interest rates in Turkey, Czech Republic, and Romania. In Romania, we also had an exceptionally high float due to high insurance at the end of the previous fiscal year. Growth was slower in the fourth quarter due to the decline in Brazilian interest rates.
On slide 34, the underlying operating profit of BRS was up 12.7% at constant rates and 5.7% at current rates. As a result, the margin is increased by 20 basis points to 31% and by 110 basis points excluding the currency effect. Thank you for your attention. I now hand you back to Denis, who is going to cover the new investment in PHS, the strategic agenda, and the outlook.
Thank you, Marc, and hello again. Let's move to slide 36, because I wanted to touch base with you on our personal and home services. About 10 years ago, encouraged by Pierre Bellon , we identified the childcare and home care markets as interesting, because they provide a quality of life value proposition in the continuum of our activities and they represent a huge market potential. These markets benefit from several major trends, demographic shifts, aging populations, urbanization, emerging middle class, etc . Therefore, they are expected to be able to generate high single-digit growth going forward. Home care is currently a EUR 220 million revenue business for us today. We've multiplied sales by seven in the last five years, thanks to a combination of organic growth, acquisitions, and buying out franchisees. We're currently present in six major countries, and the business is accretive in terms of margin.
We strongly believe that this is a major market, which is really made for us. In childcare, we're still starting out on the development path. Our annualized revenue is EUR 150 million, and we have tripled that in the last five years. We currently have 285 childcare centers in three countries, and the business has reached group margins. By widening our scope, we offer more opportunities for our employees to expand their competencies. In both home care and childcare, we've reached a critical mass, and the businesses are absolutely aligned with our quality of life purpose and represent strong growth opportunities.
On slide 37, you'll see that we've started to build up our businesses back in 2009, and we have accelerated our developments with the acquisition this year alone of Crèche de France, doubling our childcare capacity and bringing us up to top thee level in France. Elly & Stoffl, with whom we've entered the German childcare market. With The Good Care Group, which strengthens our position in the U.K. home care market. Domicile Plus, strengthening our position in the French home care market. Pronep and Prima Omsorg, with whom we've entered, respectively, the Brazilian and the Nordics region, both of which have enormous potential for the very long term. Finally, Active Global, with whom we've entered the Asian markets with, in particular, a strong position in Singapore, Shanghai, and Hong Kong.
We are positioned in both markets, principally in the private sector, where a large part of the services is financed by private pay, either by the individual or the family or the company in which the individual works. We are really excited by this opportunity to grow organically and through acquisitions in these highly fragmented businesses. Now, let's turn to our focus on growth strategic agenda on slide 39, and we go on each of the four pillars with some examples. First, being client and consumer-centric. For this quarter, I wanted to talk about what our benefits and what services activity is doing in India with Zeta to provide multi-channel services. We've been using the Zeta technology for our digital transformation since 2018, and this summer we signed two deals with Zeta.
Firstly, to merge our Indian voucher businesses together. Secondly, Sodexo took a stake in the Zeta holding company to back the Zeta technology. Let me explain the offer. The Sodexo Multi-Benefit Pass is a unique solution that works on two different networks, Sodexo's proprietary meal network and RuPay's open loop network for a multitude of employee benefits. You've got to know that RuPay is a leading scheme in India, like Mastercard or Visa. The services that we provide include the customized offer for each client, for each employee, as well as a merchant locator, multiple payment modes, and a marketplace for selected providers and partners. Sodexo's consumers can check and consume the benefits offered on the Sodexo Zeta app. Currently, Sodexo Benefits and Rewards India offers 12 major benefits.
There is definitely strong demand for this product from clients and prospects, especially from the small and medium companies segments. The model is already live in Vietnam and the Philippines, and discussions are already well underway elsewhere around the world. Now, slide 40 on enhancing operation efficiency. This year we have moved forward on several fronts, and particularly, we've continued to rationalize our country portfolio. We've now reduced our number of countries from 72 at the end of last year to 67, according to what we had said in the capital markets day. As a reminder, we were present in 80 countries two years ago, the work is ongoing. We've had two disposals and three closures with very little impact on revenues and bottom line.
The important element is to simplify and focus our efforts on areas where we can grow the business profitably, and we will continue to do so. We've also moved forward on our STEP deployment. This performance management framework has now been rolled out more extensively after the private phase. The standardized cloud-based dashboards are available in six countries with 21 KPIs, and will be available to 7,500 sites by February 2020, and to more than 25,000 users by the summer of 2020. The tool is one lever, but the philosophy is the most important one, as we are getting back to managing our business with operational KPIs. Now on slide 41, in nurturing talent. There are several things that we've done this year which I'm particularly satisfied with, and particularly around food. Our business is 70% food, and we have 40,000 chefs around the group.
Food is at the heart of the quality of life. Good food done well has the power to do good in the world. We are putting food back into the heart of everything we do. Here are several key examples. The Chefs Academy has already engaged 2,500 of our chefs with content from best-in-class practices across Sodexo, with global culinary principles and techniques to define minimum presentation standards that have been perfected by chefs at Lenôtre. The idea is to ensure that all our chefs can be part of a culinary community within Sodexo, where they can express their passion for food and acquire the tools to apply this to the business they run. The Love of Food app is providing the structure for this.
I can tell you that the benefits in terms of rating food quality, lowering operational costs, and improving guest satisfaction on a global basis are proven today. Another program, which I believe is particularly important, is the Global Chef Exchange program. 54 of our executive chefs have created 2,500 recipes and have visited 180 client sites in 14 countries to promote them. This is a way of celebrating success, retaining the best talent, and engaging chefs and their teams around the world. On slide 42. I want to highlight the fact that our absolute responsibility as a food services company with a sustainable and inclusive business model is to fight food waste. We've substantially stepped up the deployment of our game-changing, data-driven food waste management program, which is called WasteWatch, designed in collaboration with the American startup Leanpath. This is a groupwide initiative.
We are targeting 3,000 sites within this year to then accelerate thereafter the deployment of WasteWatch around the group. As of October 1st, already 40% of the 3,000 sites were being deployed, and there are some in every region around the world. The program reduces waste by 50% on average. How do we do that? We empower people with knowledge and engage with our clients and consumers in the process to change behaviors and drive efficiency, innovation, and accountability. There are numerous ways to do so. With new recipes, new ways of thinking about food, planning and cooking methods like batch cooking or using leftovers, turning breadcrumbs into fruit crumbles or salad crunch, you name it. With new collaboration with suppliers also to better plan supply.
Better collaboration with clients to better understand their specific waste patterns. We are committed to publishing the figures from the program to bring a sense of urgency and raise accountability for us, but also for our clients and our consumers. Everyone is playing the game. Marc told you that he had just renewed a EUR 1.3 billion revolving credit facility with a pricing adjustments mechanism based on Sodexo Waste performance. Just to put a figure on this, our collective reach with what we do with our suppliers, our clients and consumers, is potentially reducing 50% of 117,000 metric tons of food. It's a massive endeavor. We can do it. Let's be clear, preventing food waste is not only good for the planet, but also good for reducing our food costs and increasing client and consumer satisfaction.
A quick focus on growth for North America, because North America is critical to our business, as you know, and our on-site business there is having a rough time in terms of growth. We've already done a lot, but it's going to take time to fully recover. If we look at the bottom left box, we've now rebuilt the leadership team in virtually all our segments, but particularly in healthcare and education. More than two-thirds of that team in North America has changed through a combination of internal promotions and external recruitments. We still have a lot of work to rebuild fully the talent pool in the different segments. We have also completely redesigned the compensation policy with a focus on individual performance and behaviors.
Today, an operational person in North America would have only 20% of his or her bonus on collective objectives, the remaining 80% being individual and mostly financial. This is a big change from the previous organization where individual objectives had been significantly reduced. Our program to accelerate growth has been focused on enhanced targeting to improve the hit rate and more web-based tools, which are then being brought together in a new marketing and sales distribution center. This should help the North American teams to improve their ability to engage with both existing clients and prospects, and develop more qualified leads to support the field sales teams to drive growth. We are also focusing the teams on accelerating the deployment of our end-to-end food management process, DRIVE. We are upgrading the labor management tools so as to manage labor more efficiently.
We have reinforced the supply chain leadership team in order to better leverage our purchasing power. The Centerplate synergies have been delivered in full according to the plan. Finally, I wanted to touch base on exciting developments in more healthy foods in North America. Last year, we launched 200 plant-based meals across the country. This year, in February, we signed a Future 50 Foods with WWF in the U.K. and Unilever to provide more sustainable dishes by massively diversifying the plants we use in the kitchens every day, with 50 nutritious foods such as fonio, pumpkin flowers, cactus, and many more, that are healthy, full of flavor, and more affordable than some of the plants we use today. These Future 50 Foods provide 40 recipes using these new ingredients, and they are currently being rolled out in 5,000 Sodexo sites, particularly in the U.S.
In August, we launched our new Impossible Burger, 100% plant-based, at more than 1,500 U.S. locations, particularly in colleges, universities, healthcare, and some corporate services accounts. Last month, we launched an initiative to bring local farmers and artisan food producers into 70 universities in 27 states. Things are moving fast on that front. I am convinced that these steps can have a big impact, and we are committed to continue to innovate to be able to offer the best of food to our consumers with the lightest impact on the environment. With all this, I hope you have a flavor of all the work that we're doing to accelerate growth going forward. Now, let's turn to our guidance for this year on slide 45. For FY 2020, where we have the impact, as we mentioned earlier, on the healthcare losses in North America.
We also know that we have neutral net new business in education in North America. This is a bit of a drag on revenue growth. We have continued growth in developing economies and solid momentum in Europe. We have the advantage of about 100 basis points from the Rugby World Cup and the Olympic Games to boost our CAGR before the North American growth fully takes off. Given all that, we expect organic growth of around 4%, including the sports events. The cost reduction will feed the growth initiatives. Again, we are expecting a stable underlying operating profit margin, excluding currency effects and pre-IFRS 16 implementation. Midterm, we are aiming to deliver market-leading growth.
We are convinced that the investment we are making, our current mix of activities, and the strength of our geographic positioning, provide us with ample opportunity to capture more than our share of the growth in the market. With our sustainable and inclusive business model, we are convinced that Sodexo is capable of accelerating organic growth over the years to come. As organic growth increases, we will ensure that the investments being made to accelerate our growth will be kept in check, so that the effects of our enhanced discipline and our efficiency gain can feed through to sustainable margin expansion in the years to come. Thank you for your attention. Now, if you have any questions, and I believe you have, Marc and I are here to take them. Thank you.
Operator, could you take the questions, please?
Your first question comes from the line of Jamie Rollo. Please go ahead. Your line is now open.
Thanks. Morning, everyone. Just had a few questions on the sales guidance, first of all, please. First of all, the retention rates and development are both about 50 basis points lower than a year ago. I think I'm right in saying both of those are measured at the year-end. Doesn't that point to a weaker sales performance in 2020? Secondly, that development rate, the new contract wins being 50 basis points lower. That's despite CapEx being up quite sharply. I'm sort of wondering what returns you're getting on that spend, please. Thirdly, you sound a little bit cautious on North America still. Are there any sort of big losses still to come there? Are you able to give us what you think North America will be within that 4%? I guess it was 1.8% last year, so will it be better or worse than that?
If I can have a final one, any way you can break down the 100 basis points between the Rugby and the Olympics so we can get a feeling for the cadence of sales growth through the year, please?
Thanks, Jamie. Hello to you. First, on the retention parts, I think if we exclude, as we said, if we exclude this big, this large contract in healthcare, we would be 10 basis points up. Retention is stable or up in all regions and segments except what we have in North America in healthcare. We have a specific situation. We also highlighted in our Q3 call that we were unsure about retention for the end of the past year and for the quarters to come. Of course, we put all our efforts in retention, and we see as a good sign the fact that it's up in many parts of the world. Healthcare is still under pressure. You remember we talked about these operational efficiencies, difficulties that we've had in the past.
They still weigh a little bit in our retention perspective. I can tell you that the team is all hands on deck on this. We would expect the beginning of the year in healthcare in North America being a bit difficult. We still have some large contracts under bid, but we have a reasonable level of confidence in keeping them. We see more the second half of the year being better in healthcare. That's for the retention. For the development part and the CapEx related, you want to say a word?
The CapEx increase this year is mostly linked to education and sports and leisure and a little bit on our IT investment and so forth. The CapEx in education and sports and leisure was very much driven to improve retention. Even though it doesn't show yet into the overall group numbers, it does show in the education numbers where the retention is better. This is a long-term gain because this is good for the margin over time. It may not be immediately good in the year you do the CapEx, but improving retention in North America in education is good for business. That's why we are committing more CapEx resources towards retention.
As Denis stated, retention was not very good in the U.S. because of healthcare and some work we did on the portfolio of sports and leisure, but retention was actually improving and better and very close to 95% in many regions-
Yeah
and many segments across the world. We are believing we are moving the needle in retention. This year, it doesn't show because of the U.S., but it will show over time. We are confident with this.
Regarding NORAM losses, as you said, Marc, healthcare is weighing quite a bit.
You have to anticipate NORAM being not so good in terms of even possibly negative growth for the first half. For the second half, we are more positive on the second half of the year. Overall, NORAM won't be as good this year than the past year, but we believe that the underlying trends for the second half and ongoing will be much better.
Yeah.
Coming to the Japan sports event, the Rugby World Cup is expected to bring, for the full year, 30 basis points of organic growth, and it's mainly focusing on Q1. Everything will happen in Q1, obviously. The Olympic Games, which will be fully in Q4, is 70 basis points of annual organic growth. The two together, they represent 100 basis points.
Thanks for that. Just following up on a couple of those. Just on the last point, if we look at the 3% sort of underlying guidance, excluding the two events, maybe you can give us a feeling on the cadence there. It sounds like clearly first half weaker than second half, but by how much? Sorry, Denis, on your retention point. I take your point that underlying retention is up a little bit, excluding the U.S. healthcare loss, but that U.S. healthcare loss is in the 4% sales guidance. You're still looking for an acceleration in sales, and yet the KPIs suggest things are weaker.
Well, yeah. I'm not sure I understand your point, Jamie Rollo. Sorry, I get your point. Sorry.
Apologies. I was just trying to understand that your 4% sales guidance is despite the loss of that U.S. healthcare contract. It's clearly more like nearer 4.6%.
Yeah.
Right. Retention is not really improved underlying, up 10 basis points. Development's worse, yet you're looking for quite a big acceleration in organic sales. I'm just trying to work out why sales growth is accelerating despite the fact that retention and development together are worse.
When we look at the KPIs, we had a strong like-for-like growth at, I think it's 3.1%, and actually it absorbed the 20 basis points of IFRS 15. The cougar is clearly having a trend above 3%. What we could say is that, yes, the net new loss globally is not very positive, but it's relatively neutral, and the cougar has been strong and stronger. The cougar should be the one fueling the growth in the coming year. We have a pipeline, we have opportunities. We believe that 3% is the right target, excluding the Japan events. When it goes about H1 and H2 moving forward, obviously we see H1 softer. Softer. We are confident on the overall 4%, which is 3% excluding the Japan events.
Okay. Thank you very much.
Thank you. Your next questions come from the line of Geoffrey d'Halluin. Please go ahead, your line is now open.
Hey, good morning. Geoffrey d'Halluin from Bank of America Merrill Lynch. three questions from my side, please. First of all, would you mind to quantify exactly what could be the impact on margins with the Rugby World Cup contract and the Olympics? You gave some comments on top line, but how much can we expect in terms of profitability? Secondly, would you mind to quantify the working capital boost you had last year, thanks to the Rugby World Cup contract? Thirdly, you spoke in the past regarding the 6% margins ideally to be reached in 2021. Would you mind to comment on this, and is it still a guidance which is valid? Thanks.
Thank you, Geoffrey, for the question. Rugby World Cup and Olympic Games are going to have actually about the same underlying operating profit, and they are in the group average. We're still waiting for the Japan results for the rugby because it's coming through, but it was planned to be at group margin. It will not impact positively or negatively the margin. It will stay within the margin. The working capital impact we had, we sell hospitality packages, including access to the stadium and food and beverages during the event. All those packages are sold much before the event, so they were sold during the year from January to August. We've calculated that it had a positive inflow in our current fiscal year 2019 LGU of about EUR 70 million. It is significant.
I was expecting a question on that one, Geoffrey. What I would say is, as you know, I'm not going to give mid-term objectives because we decided not to. I can tell you that I have a very clear idea of where I want to be, and it's very aligned with the board and the Executive Committee.
Getting back to margins that are above 6% is definitely an objective, and all our efforts are aiming at, as I said, first reigniting growth on revenue and then increasing the margins. I'm not going to give any timing on this, but what I can tell you is we're doing everything that we can to achieve that. I expect the EBIT margin to improve from next year onwards.
Okay. Thank you.
Thank you, Geoffrey.
Before we take our next question, just a reminder, everyone, if you wish to ask a question, you can just press star one on your telephone and wait for your name to be announced. Your next question comes from the line of Vicki Stern. Please go ahead. Your line is now open.
Yeah, morning. Just firstly, around the Q4 growth. When you spoke back in July, I think you were clearly quite cautious about Q4, and clearly things got quite a bit better, I guess, in the second part of the quarter. You've touched on some of the points, but if you could just flesh out the biggest drivers of surprise for you, seems more from like for like than anything else, and perhaps a bit less, in terms of contract losses. Yeah, just looking for a bit more color and indeed then the sustainability of that into next year. Secondly, on slide eight, you gave that pretty helpful bridge between savings and investments for 2019. Not expecting you to flesh that out fully for 2020, but could you just give us a sense around those different buckets?
Does that look pretty similar as you see it for 2020 between savings and investments, or are any of those going to be particularly bigger or smaller? Then just finally on food inflation, so particularly African swine fever, is that having much of an impact you expect it to, and is that sort of some of the reason for the like for like being better is as a pass-through? Thanks.
Thanks, Vicki. On the Q4 growth, actually, yes, we had a better Q4 than we had expected, which was good news. Overall, I think all geographies and segments were a bit better than we had expected. We had a slightly better than expected tourism in France. We had good project work in education in North America. Last year was good, but this year was even a bit better, so it was encouraging. We've been, I think, quite good in successfully renegotiating some of our last contracts, and that went through in Q4. A lot of work. This contract renegotiation is part of this new discipline and rigor that we are establishing, and it will support us moving forward.
Yeah. Vicki, on the slide eight question, this is the picture for 2019. The picture for 2020 will be broadly similar, but maybe the buckets will become larger because Fit for the Future is taking momentum, productivity too. The size of those buckets for 2020 is slightly higher than the size for 2019. With regards to food inflation, in Europe, we've been managing food inflation pretty well in most countries. In the U.S., we see a food inflation about 2%. We've had also food inflation, quite a bit of volatility in Brazil, for instance, and passing it through clients and created some distortion on the quarter-by-quarter margins. Overall, we passed inflation pretty well. If I look at the U.S., we still experience a labor inflation of about 3.4%, and the food inflation about 2%.
We have a blended inflation in the U.S. of 2.8%, but this is what we pass to clients on average. I think inflation in the U.S. is pretty covered. That's it.
Thanks. Just one follow-up on the investment piece. If the bucket of investments is going to pick up a little bit, where's the extra emphasis going? Would that be around incremental brand additions? Just a bit more color on that, please.
This year, we'll also, in fiscal year 2020, we are reinforcing our investment in supply management, with new tools, more people.
IT systems
IT systems. We have more work to do in infrastructure. We are also pushing harder on marketing and branding. There will be more work done there. We've decided to give more resources to our GPO activity, for instance, and so forth. It's very much investments which are driven to either bring growth or when it's supply management in IT, enhance margins and the way we operate. I believe it's good investment for the future.
It's quite balanced, I think, across all these issues.
Yeah, we will continue to invest in BRS also significantly because we have to move faster in the digital transformation. I highlighted during the presentation that our CapEx to revenue in BRS is 6.5%. It will probably be higher than that in fiscal year 2020. We have to keep on pushing. This is important. We need to invest more in BRS-
Deliver on cost savings.
in that transformation.
Great. Thanks very much.
Yeah.
Thank you. Your next question comes from the line of Jaafar Mestari. Please go ahead. Your line is now open.
Hi. Morning. I've got three questions, please. The first one's very quick. I don't think I've seen the percentage of group revenue that was in facilities management in 2019. The comparable number is something like 32.5% for 2018. If you have that number handy, please. Then on your 2020 revenue guidance, the Olympics, if it's 70 basis points, it's about EUR 150 million of expected contribution from the Japan Olympics, which is what the London Olympics delivered. It's actually higher, with the fall in sterling, I guess. How will Japan end up being a larger event than London? Is it a wider contract scope or just very high visitor expectations, please? Lastly, on North America growth, you talk about targeting. You say 80 of your salespeople are now sectorized, if I understand correctly, targeting specific markets and verticals.
Can you just help us understand how material this is? What's the total sales force in the U.S. and how exactly it's organized today? Do they pitch sub-brands? Do they just pitch a specific B&I offer, healthcare offer, please?
Sure. Hello, Jaafar. The first question is simple. Today, the FM parts represent 34% of the volume in on-site.
Thank you very much.
Regarding, I'll take your third question on the salespeople. This represents about, depending upon what we call sales, but between, let's say, half or one-third of what we have in sales. The idea to really reinforce the targeting. We already had salespeople that were sectorized, that were organized by the segments. The work that we've done has been focused on more targeting the prospects and the clients that we wanted to win. It's much more advanced thinking, much more pre-sales work to ensure that we maximize the hit rate. We're still not at the levels that we would like in the hit rate, but better targeting, better pre-sales work, better digital sales and marketing around that will help us, I think, deliver results. We see the first signs of it. In the overall NORAM picture, we still have work to do.
It's promising, but it's more of a midterm thing until it fully delivers the full power.
Thank you.
On the Olympics, you're right, 70 basis points is about EUR 150 million. To be honest, I don't remember the number for the U.K. Yeah, it looks like it was EUR 100 million. I don't believe the scope is wider, but the hospitality package and the traveling, the mix is different. This is what we have in our plan and in the model. It's about EUR 150 million. We'll dig more into this, and we'll give you a feedback on the comparison as to why it's bigger.
We established our offer with a very strong partner.
Yeah
local partner, JTB, and that gives us a lot of confidence in the way we will commercialize our offers. That is part of the explanation of a bigger revenue.
Yeah.
Okay, thanks. Because for 2012, you said EUR 200 million in total for New Zealand Rugby and London Olympics. Yeah, it looks like it's big-ish. Thank you.
Okay.
Okay.
Thank you. Your next question comes from the line of Kean Marden. Please go ahead. Your line is now open.
Thank you. Morning, all. I've got a few questions as well, if I may. Starting off on the CICE, the French subsidy regime changes. Marc, I wonder if you can just help summarize the headwinds to profitability in fiscal 2019, then some of the potential tailwinds that come through once the FEON subsidy and the December subsidy payment is reengaged over the next 12 months. Secondly, on the FM business, if we go back to sort of your initial review of the business and the intention to review your activities in FM and potentially introduce more third-party provision, particularly in areas like cleaning. Where do we sit with that at the moment? What actions have you taken? Also mindful of profit warnings elsewhere in the FM sector, over the last week or two, where margin expectations have continued to come down. Thanks.
Yeah, we noticed some of the profit warnings you were mentioning. The FM business is currently under review. You don't turn the ship in three months. FM represents, as I said, 34% of our on-site business. It's going to take time. We are at this very moment, reviewing what our capabilities are, what services we are currently delivering, with what profitability, in what regions, in what segments. There's a whole mapping of our capabilities, business opportunities, and profitability. This is actually ongoing. We are already taking some decisions here and there to outsource more, subcontract more of the FM. Over this next calendar year, we'll give much more visibility on what we do. We have to be cautious because it's complex to operate as a change in direction. Not a massive change, but an adjustment into the direction we take.
The other thing that I want to tell you is that we are, and I think Marc said that as well, we are very cautious on what we sign. In the FM, we ensure that we remain competitive, but we won't sign things at any cost. We've said no to some of the bids because we thought that it was too low. That explains a little bit of the drop in the development. We're very cautious in FM and boosting food at the same time. It's work, it's ongoing work, and I think we'll give more visibility to that in the coming year.
With regard to the CICE, the impact on fiscal year 2019 is negative at net income level. We estimate it's about EUR 12 million. There is a small impact, negative impact on our UOP, about EUR 3 million, and the most of the impact is on tax at EUR 9 million. For fiscal year 2020, we do expect those impact to neutralize at UOP level and at net income, and become much less significant from going forward. The fiscal year 2019 impact was minus EUR 12 million on net income.
Great. That's very helpful. One quick follow-up, Marc. Forgive me. When you mentioned the working capital benefit from the Rugby World Cup, was that EUR 70 million or EUR 17?
Seven zero, yes. Seven zero.
Great. Very kind. Thank you.
Thank you. Your next question comes from the line of James Ainley. Please go ahead. Your line is now open.
Good morning, everybody. Three questions from me, please. I wanted to come back to this medium-term margin guidance, which has been removed. In the absence of a kind of clear guidance, could you maybe help us with some kind of framework as to how to think about the scope for margin potential? What level of organic revenue growth do we need to see before margins can improve? Certainly, if you talk to someone like Compass, they'll say above a certain level, it's actually harder to drive margin improvement, as new contracts tend to be dilutive initially. Can you give us some scope or some range about where you might, of organic revenue growth, where you might see margin expansion? That's the first question. Second question.
I think you referenced in your earlier remarks that some of the cost savings were being reinvested in price to drive competitiveness. Is that reflective of any change in the competitive environment and why the need to reinvest in price, and in which markets, please? The third question is could you give us some sense of underlying volume trends in North America and across the key European markets? Thank you.
Okay. What exactly do you mean by volume trends, James?
Like-for-like volume trends.
Like for like. Okay. On the first question, you understand why I guess we didn't want to give a mid-term guidance because we hadn't reached the guidance in the past. I reiterate the fact that being above 6% is definitely an objective, and we have room for that. We have room for that, and what you said about Compass is we are in a different situation because we are below them in terms of margins. We have room for margin improvement. I don't want to jeopardize the good growth, organic growth in revenue that we have created by pushing margins up too quickly. That's why I said I see this year flat and next year, you'll be margin starting to improve and then reaching these 6% in the future or above 6%.
What we want is sustainably. That I said in the capital market day, we want to be sustainably above 3%, and ideally in the range of 4% and 4% plus. We don't need to be at 5% to improve the margins, but we want to be sustainably above 3%. That's really our goal and to reach best in class in terms of organic growth and improve the margin. No guidance given, but margin improvement for next year. Of course, this objective of 6% and above 6%, really as a target. Sustainably then. The idea is to be sustainably above 6%.
Yeah. Okay.
Now, on the cost savings reinvested in pricing, we've always reinvested some of our savings into our competitiveness. This is the name of the game. I haven't seen major changes in the competitive environment. It has always been competitive. I wouldn't say that this is a change in pattern for us or for others. We are reinvesting in also, in the value that we create in our offers. In several cases, we are also able to price a premium because of the quality of what we do. When typically we introduce some of our very trendy offers, we are able to, in several cases, to price them with a premium or at least to really win with these offers. No particularly more competitive environment.
On volume trends, our performance region by region is more the reflection of our internal issues or strengths than actually the market itself. The U.S., we see the market as still being strong. Yes, we've grown 1.8%, and we cannot be satisfied with 1.8% in such a market. We should be growing faster. We still see the market as being solid in the U.S. In Europe, we are doing better. The market has been slightly better for us, we believe, in the past year, than it was maybe three years back.
Right.
France is better. We also see it in Mediterranean. We have still some issues in Benelux. Again, I think it's more internal issues than actually the market itself. We've done well in Central Europe last year, well in Med. We've done well in the U.K. and France. For us, the trend is very good in France. It's good in Europe. It's not flamboyant. It's there.
Okay. That's helpful. Thank you.
Thank you. We have no further questions coming from the phone lines. Just a reminder, everyone, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Please continue.
Okay. Well, if we have no further question, I just want again to thank you for being with us this morning. I just want to reiterate the strong confidence that we have in the action plan that we've put in place to first reignite growth, strengthen our capabilities, and, with this consolidation of the growth that we see moving forward, then margin increase will come up. We have a very solid team. We have very good perspective. I'm extremely confident for the future of Sodexo. Thank you for being with us today, and looking forward to our next interaction. Thank you to everyone.
Thank you. Have a good day.