Earnings Call: Q3 2019

Jul 8, 2019

Earnings release

Good morning, and welcome to the Sodexo 9 months fiscal 2019 revenues conference call. Today's conference is being recorded. At this time, I would like now to hand the conference over to the Sodexo team. Please go ahead. Thank you. Good morning, everyone. Welcome to our 9 months fiscal 2019 revenues call. On the call today are Denis Machouette, CEO and Mark Colin, CFO. As usual, the slide and press release can be downloaded from the website and the website will remain available on our website for the next sorry, the webcast will remain available for the next 12 months. The call is being recorded and may not be reproduced or transmitted without our consent. I remind you that this presentation contains statements that may be considered as forward looking statements and as such, may not relate strictly to historical or current facts. These statements represent management's views as of the date they are made and we assume no obligation to update them. You're cautioned not to place undue reliance on our forward looking statements. I just want to ensure that you all have the date for the full year results announcement, which will be on November 7th, 7th November. Please note it in your diaries because the date has changed. Thanks. I now turn the call over to Denis Machuels. Denis? Thank you very much, Virginia, and good morning, everyone. Thanks a lot for joining us for this 1st 9 months fiscal year 2019 revenue call. And let's go straight to Slide number 5, where you will see that we have delivered a 3.5 percent organic growth. And this is better than expected. The on-site organic growth for the 1st 9 months was at +3.2 percent, with the U. S, improving each quarter from 0.2% in Q1 to 2.4% in Q2 and 3% in Q3. Outside North America, organic growth was 4.4%, benefiting from continued strong performance in the developing economies and a very solid Europe. Benefit And Awards also performed well with Europe, taking up the slack to cover the expected lower growth in Brazil. I'll now pass you to Mark Holland, our CFO, for the detail of the revenue figures. Mark? Thank you, Denis, and good morning, everyone. I'm very pleased to be here with you this morning. Please note that as usual, we have defined all alternative performance measures in the appendix. Now let's turn to Slide 7. Slide 7 shows how we got to the 1,000,000,000 for the 1st 9 months. Total growth was 7.7% helped by an M and A contribution of 3% and currencies of 1.3%. The M and A is principally the impact from Centerplate in the 1st 4 months of the year and the smaller acquisition made this year. We now expect the M and A impact to be around 2.5% for the full year. Is due in particular to the strengths of the dollar compared by the negative impact of the weakness in the Brazilian reais. Organic growth was 3.5% with on-site services up 3.2% thanks to a very strong Q3, and benefits and rewards up 9.7% despite the fact that Brazil had a much stronger comparative base as Q3 was a period in which the business started to pick up strongly last year. As you can see on Slide 9, North America is doing much better, up 1.8%. This was 1.2% at the end of H1 and then 3% in Q3. Europe is 30 at 3.4%. The Africa, Asia, Australia, LatAm and Middle East businesses are still growing fast at +6.8% and despite the base becoming much more significant. The organic growth of on-site services outside North America remains strong at 4.4%. On Slide 10, you will find business and administration which I remind you represents 56 percent of our on-site services revenues. B and A organic growth was up 3.2 percent when restated for intersegment reclassifications. North America, which represents 26% of B and A was up 2.1% as the effect of a major one off energy and resources contract in Q1 last year is diluted. This was a really good performance from corporate services, driven by same site sales growth, new contracts and solid retention. As I have now said for the last quarters, government and agencies activities impacted by the renewal of the Marine Corps at lower comparable unit sales. However, the segment has improved a bit in Q3 due to better volumes. The organic growth at Centerplate is now included in the figures. The team has successfully completed a major round of renewals, Most contracts have been renewed successfully and often extended to new services, while some less profitable ones have been exited. In Europe, which represents nearly half of B And A revenues, organic sales growth was steady at plus 2.3%. Corporate services remain helped by cross selling in most countries. After an excellent start to the year from the third quarter, Sports and leisure is impacted by the loss of a significant contract in France in the tourism segments, which impacts particularly the Third And Fourth Quarter. Governments and agencies on the other hand benefited from an easier comparative base now that the exited British Army contracts are no longer in the base. Energy And Resources performance in the North Sea is stabilizing. Organic growth has continued to be strong in Africa, Asia, Australia, Latin America and Middle East at +5.8 percent, thanks to same site sales and net new business wins in corporate services, particularly in Brazil. Energy and resources remains impacted by the end of several large construction projects and the lack of new ones to replace them. Moving on to Healthcare And seniors in Slide 11. Organic growth was 2.7% for the 1st 9 months. In North America, which represents 63% of the business, growth was plus 2.2% improving quarter after quarter due to solid comparable unit growth, helped by some inflation pass through and cross selling. However, our prudence on retention last quarter has now been validated with the loss of several midsized contracts and one large contract which together account for about EUR 200,000,000 of annualized lost revenues. This will start with the performance in the fourth quarter progressively. Development has not been enough to cover the loss contract in the coming quarter, so you should expect a weak Q4. In Europe, organic growth was +.4 percent, supported by inflation pass through in France. However, the end of the ramp up of the hospital win in Benelux, the negative net new business in the Nordics and lack of bid opportunities in the UK are hampering growth. Growth in Africa, Asia, Australia, Latin America and Middle East remains very strong at +16.8 percent, reflecting many new contract startups in Brazil, India and China. Looking now at Slide 12 and education. Revenues for the 1st 9 months rose 4% on an organic basis. North America, which accounts for 3 quarters of the education segment, was up 1.4%. This would have been plus 3% excluding the IFRS 15 impact. I remind you that the IFRS 15 impact for the group is minimal, but it does impact universities in North America because of the commission and concessions adjustments require under IFRS 15. While net new business from last year's selling season was neutral, same site sales growth has been solid helped by inflation pass through and extra working days in school in the third quarter. In Europe, organic growth was +12.4 percent. This very strong performance is driven by wins in the UK, the new schools contract in the Evelyn in France, which started in January and extra school days. On the working days, beware, there were 2 extra days in Q3 in France, which will reverse out in Q4. In Africa, Asia, Australia, Latin America and the Middle East, organic growth remained strong at +9.2 percent, despite an ever higher comparable base, resulting from the opening of several new school and university contracts in China and India. Was plus 9.7%. I just want to point out that in BRS, we had a significant currency effect of minus 5.1% due to the weakness of the Brazilian reais and the Turkish lira. Also, the Brazilian reais has stabilized in the last quarter. You can see this impact, which is predominantly in the employee benefits chart. Going back to organic growth, Employee benefits organic growth was 10.4% compared to total percent due to improved growth in Europe and Asia and solid growth in Brazil despite a tougher comparable base. Services diversification was up plus 7.2 percent with strong double digit growth in mobility and expenses and a rapid development corporate health and wellness products. Momentum in incentive and recognition remains weak. Organic revenue growth in Latin America is 9.6%, reflecting a strong recovery in activity in both the traditional mill and food card as well as a fuel card in Brazil from third quarter fiscal 2018. However, the growth rates slowed in the 3rd quarter after 4 strong quarters. Combined with the loss of 1 big client, this should slow further in Q3 Q4. However, momentum in particular in Mexico and Chile was strong. In Europe, Asia and the USA, organic growth in revenues is strong at +9.9 percent, particularly in the 4th quarter. Those results are due to a solid performance in Western Europe, double digit growth in Eastern And Southern Europe, Turkey and India. Insective and recognition activities were weak during the period. On the other hand, Rydoo, the hand and travel and expense management system is growing very strongly as Harley Health And Wellness offers. The increase in financial revenue of 11.3 percent was better than the operating growth of 9.6%. This is a result of the exceptionally high issue volume in Romania in Q4 last year, and particularly strong growth in Turkey in the third quarter where interest rates are high. Before I hand over to Denis, I would just like to remind you of the key elements for modeling for the year You will find all this in the appendix of the slide pack. Other income and expense for the full year should be in a region of EUR 140,000,000. This is made up of restructuring costs, which I have said will be around $40,000,000, but in fact, there will be more like $40,000,000 to $45,000,000 this year. Around $40,000,000 of recurring amortization of client relationship and around $40,000,000 of non cash impairment of assets. Net financial expenses, no change. This will be about double the first half number. And finally, the tax rate is still expected be between 28% 30%. Thank you for your attention. I now pass you back to Denis for the rest of the presentation. Thank you, Mark. And let's move now to Slide 18, where I'd like to give you an update on our focus on growth strategic agenda. If we look at the, client and consumer centric bidder on the top left parts of the slide. I'd like to talk about RIDU, which is our end to end solution to manage business travel and expenses, which we launched 1 year ago in June 18. With rights our objective is to eliminate administrative tasks, which are time consuming for our clients and don't add value. We offer a unique and innovative end to end solution, combining travel and expense management Raidu helps create the most seamless flow for all involved from booking trips to expensing and reimbursement employees and organization get the best of both worlds and during a best in class experience. Rider is a very intuitive app. The adoption rate by employees is 93% in the 1st month, compared to traditional solutions which have a 50% adoption rate. The reduction in processing time is 87%. For expense reports, for example, employees on the go take a picture of the receipt and send it for approval. Raidu operates in more than 60 countries. It's a full SaaS application and supports more than 550,000 users. The launch of this end to end solution has attracted market interest. And is performing very well with plus 50 percent organic growth in the 1st 9 months of fiscal year 2019. Raidu already has 6500 corporate clients, including Deloitte, Lavaza, Gross of Zalliance, Movidpiqmieterisa.com, etcetera. And we signed a worldwide contract with one of the leaders in the strategy consulting industry. Internally, the rider team has grown from 150 to 300 employees and has opened 2 new hubs in Lisbon in Manila. And the Independently Global B2B Software Evaluation Organization has also acknowledged Rydoo in their 2019 top harked up 100 leading softwares. Let's talk now about operational efficiency in the top right corner. Part of our Fit for the Future program is a shared services project to centralize our European Accounting in Portugal. And at the same time, move to standardized, digitized and cloud based chance. In January, we successfully transferred the UK activity, which included some team members moving from Manchester. In June, we went live from for the Netherlands accounting transfer, along with the implementation of a series of new IT enablers such as, of course, leveraging RIDU to manage travel and expenses. The transition has been very smooth. We have also implemented a ticketing tool to support the communication between the service center and the countries and to provide a dashboard to monitor the proper KPIs. If we now talk about our nurturing talent pillar, I can say that we've now launched Aspire, which is a new simplified performance development framework to accompany our renewed culture of performance, through empowerment and accountability. Starting in September, all managers will have the majority of their objectives on an EDGV individual basis linked to the specific positioning within the organization. The objectives are directly related to their challenges each year and based on step KPIs. To ensure that these objectives are actively pursued and regularly monitored throughout the year, A continued dialogue and feedback is being put in place as well as the development of competencies and skills to grow individuals. In addition, we have a newly designed compensation policy aimed at rewarding individual contributions towards success. For the past year through the annual bonus and for the future through performance share grants. In the latest plan for 2019, Performance Shares have been allocated to more than 2100 managers around the company. And finally, in terms of anchoring corporate responsibility, the top right, the bottom right corner of the slide, I'd like to focus on one very interesting example the recent 10 year extension of the Drake University contract, which demonstrates how anchoring corporate responsibility supports growth. In June, we announced a 10 year extension with our long time partner, Direct University, based in Des Moines, Iowa. The implementation of promotion of sustainability initiatives, which include recycling cooking oil, composting food and paper products, offering biodegradable straws and mutant cells and providing reusable tubal containers were key elements of our current contract, and we committed to pursue our efforts even further particularly on food waste reduction, which was also a differentiator. We're very proud of this renewal. It is one example amongst many others of how we are proactively developing services and initiatives that our clients and the consumers we serve value and want to engage in as part of our shared sustainability journey. We are absolutely convinced that fully embedding sustainability in the services that we offer is key to our growth. I'd like to mention now several evolutions that have made within the group executive committee after roughly a year and a half into my mandate. To strengthen, the group's go to market strategy, I have appointed Silvia Metairier as Chief Growth Officer, effective September 1st. Since she joined Sodexo in 2006, Cevia has delivered growth in her successive roles by forging very strong client relationships within the Corporate Services segment. Giving her direct view into the needs and aspiration of both clients and consumers, working with Bruno Van Aelst and Velen Moscoso Del Prado, Silvia will have responsibility for aligning strategy, marketing and sales around a co receive clients and consumer centric go to market strategy. And all of that powered by digital. Salil Nyak will succeed Sylvia as Chief Executive Officer for Corporate Services Worldwide, joining the group executive committee. Sunil joined Sodexo in 2009 as the trepreneurial CEO of RKHS in India at the time of its acquisition by Sodexo. And he was then given the reins of Sodexo Oil And South Services, India. As CEO of Corporate Services in Asia PAC, Asia Pacific, since 2015, Sunil drove significant growth, positioning the region as the 3rd largest for corporate services after France, in North America. I'm convinced he will bring his dynamic both to Global Corporate Services segment and to the executive committee. Simon Seaton is appointed CEO Energy And Resources Worldwide, joining the Group Executive Committee. Simon Succeeds Nicolas Zapier, who is retiring after 28 impactful years with Sodexo. Simon joined Sodexo in 2012, as Chief Operating Officer for remote sites for the United States and the North Sea Countries. In 2015, he was appointed CEO onshore energy worldwide, and in 2017, assumed additional responsibility as head of the Middle East Simon will bring his years of unique experience in the oil and gas and remote sites sector, and is particularly strong track record in health and safety. Daniel Verdier, who was producing in charge of strategy, will focused now on being the Chief Corporate Responsibility Officer. He will thus dedicate his substantial experience and knowledge to help us further consumers, employees, shareholders, and society at large. This is an important role as corporate responsibility is one of the pillars of our focus on growth strategic agenda and is at the core of the services we offer. These changes are invigorating for me for the executive committee team and for the organization. This team is increasingly diversified with 1 third women and half of its members coming from countries other than France, including the U. S, Canada, India, Australia, Belgium and the UK. And now on Slide 22, I'd like to conclude the presentation on the guidance for the year. As you've understood, Our growth in the 1st 9 months of fiscal year 2019 at +3.5 percent was above expectations. Thanks to Business And Administration And Healthcare And Senior Segments. Education And Benefits And Awards were in line with our expectations. However, the comparable base in the fourth quarter is more challenging due to some contract losses particularly in North America And Sports And Leisure globally. As a result, the group expects organic revenue growth for the full year The action plans that we are putting in place are delivering and investments to reimburse, invigorate growth are continuing. As a result, the underlying operating profit margin for the year excluding the currency impact is expected to be around Our focus on growth strategic agenda is aimed at delivering market leading growth. As I have often said, on a regular basis, the first step must be to achieve organic growth sustainably above 3%. Margin improvement will come with the right levels of growth, the objective being a return to an underlying operating margin operating margin sustainably above 6%, ideally in fiscal 2021. I now open the Thank you. You. And the first question is coming from the line of Jarrod Castle. Please go ahead, sir. Thank you, and good morning. Just firstly, you talk about about 3% organic and SIM plus margin. My understanding was this was hopefully achievable in 2020, but now sounds like 2021. So, if you could expand on why the change. Then secondly, can you just talk about what doing to improve retention, especially in the health care business given the losses And related to the Health Care business, what does this mean for 2020 organic growth as the impact finds its way through. I'll leave it at that. I've got some other questions, but I'll let some other analysts ask. Thank you, Jarrod. And hello. We've said that we wanted to be, above 3% sustainably. I'm, I would say that I'm confident, for next year I would say that we our objective would be to be, you know, sustainably above 3%. I think we are very confident for this year, to be at the top end of our guidance. And I remain confident for next year. On the 6% operating margin, I've never said that it would be in 2020. I've said in the Capital Market Day that we it would be ideal in 2021, and I said that again today. I did in 2021, but it's true that we've repeatedly said that we have to be, sustainably above 3% to really see a margin improvement, coming up. In terms of, your second question, I think the I can tell you that the team in health care particularly in North America is really all hands on deck, in an H1 call and, different meetings, I've mentioned that we were at risk in retention, particularly in healthcare, essentially linked to the fact that we had some operational issues, like 2, 3 years ago with our clients, We're causing, in part, the difficulties that we had, 18 months ago. And then that would have, there was a risk from the clients who had went through these difficulties in our personal efficiency. And some clients decided to go to bid and we couldn't keep all our clients. We've done everything we could. In some cases, there were wanted also to protect our margins. So we decided not to go below some levels to, secure our margins. But I can tell you the rest, apart from this contract that we lost, I think, team is doing very good work. It's a renewed team, as you know, in health care. They're doing all their efforts to keep the clients. I must say that we have a good dynamic Even though retention is a big impact, Mark mentioned the 1,000,000 of impact for next year. That's, of course, significant. But apart from that, I must say that the development dynamic is improving. Same store sales also. So it's going to be, of course, difficult to offset to fully offset this $200,000,000 losses, but the, apart from that, I'm reasonably positive on the dynamic that the team is delivering on the rest of the portfolio. Okay. Thanks very much. Thank you. The next question is coming from the line of Vicky Stern. Please go ahead. Hi, good morning. Hi. I'm just following through on some of those themes actually. Thinking about the phasing into 2020, I guess, the question really is how much of that Q4 deceleration is coming from the seasonality, the comp versus how much should you think flow through to the 2020 full year? And then if you can give some color around the shape of that, then H1 over H2, And then sticking also with margin progression just to sort of to clarify with the sort of expected levels of growth at this stage, Is it therefore fair to assume something more in the order of a flat organic, a flat margin for next year rather than any growth? Yes. Hi, Vicki. Well, of course, having a weak a weaker Q4 compared to the 1st 3 quarters that we had, will have us enter 20 and T in, with a, not as a, clamboyant, Q1, you would, I think the phasing you would see more, I see probably a stronger, growth, more on the in the H2 than H1. I think that's what you can expect And, in terms of margin progression, we'll talk more about this when we, we don't give any guidance on margins for next year until we publish the result in November 7. So, you have to wait a little bit in terms of, but we think of the margin progression. Just coming back on the organic growth piece. So yes, I sort of see the shape of the more skewed to H2, but in terms of sort of the implied exit rate that we're thinking about for Q4, should that, that low level persist already into Q1 and Q2, or you think, already we can start to see Q1 and Q2 look quite a bit better than the exit in Q4? There are some timing and seasonal and base effect as you mentioned. So for instance, if I take the large sports and leisure contract in France, the biggest quarter of the Q3 and Q4 a bit in Q1, but then it will dilute a little bit. We have also in DRS, I mean, there was a lot of base effect, which will normally continue in Q1. But last year, for instance, U. S. Marine Corps was renewed. And from November, there will be no base effect on the pricing. We have also the Evelyn Schools, which will restart in September. Last year, we didn't have them So it's right now, it's, there are lots of bulls in the air, but we, yeah, we can expect Q1 to be slightly better than Q4 at the start of the year. And also some of the losses in health care will not kick in before months 2 or 3 in the coming years. So a more maybe a more balanced Q1 than Q4. Thank you. And just one other on, like for like, so it seems like you referring to quite strong volume and price dynamics. And just perhaps a little bit more color on that in your key geographies, any evidence of any softening of volumes or indeed anywhere where those are sort of particularly strong right now? The same store sell up actually been pretty strong and much stronger than last year. We should view at H1, we had made an improvement versus last year, and it confirmed in Q3. The gross KPI, which has suffered is a retention, because of health care. And a little bit of sports and leisure. But other than that, the development is improving and cougar is improving. So the dynamic still there. It's really we had I would not want to call it a blip, but we really had this impact in Healthcare and North America. We knew about it. Actually, we saw this will come and kick in Q3 and it will rather be more in Q4 and Q1 But we know there was a lot of stake in Healthcare North America. I would say the retention of the rest of the business is good. Okay. Thanks very much. The next question is coming from the line of James Ayli. Please go ahead. Yes, good morning, everybody. So three questions for me, please. Just kind of reflecting back on to the sort of weakness in the margin first half covering the second half. Are you happy that you've made all the investments you need to in growth initiatives, and that we've now reached a more sustainable level of margin sustainable base for the margin? And secondly, could you give us an updated view on CapEx guidance for the year, please? And then third, Can you just comment a bit more in a bit more detail around what you're seeing on the ground in Brazil given the economic challenges there and sort of volume and employment trends and some color on that be helpful, please. Hi, James. In terms of, the margin, I think we're in the investments. We continue to make investments. We absolutely have to make these investments. We said that we we concentrate in sales, in marketing, in digital, in IT, there's We have significant efforts to make, in this, in those areas. So they are ongoing we have to re reengineering our marketing approach. You heard me say in the past, we also have, to work on our brands, and accelerates the digital transformation of the group. It's true in on-site. It's also true in benefits and rewards. So I think we're we will continue to invest in those, at this more or less the same level as we've had for the past 2 years because it's it's absolutely critical to our future. Regarding CapEx, Mark, maybe? Yes. The training CapEx is still there. We've seen some CapEx in Q3. So we are still aiming at 2% around 2% to be honest. Then the timing of some CapEx will be critical, but let's assume you're about 2%. Right. And regarding Brazil, we there are 2 things. I think, of course, we are very cautious on the, on the economy. We see, some macro indicators that are not so favorable. So far, I think benefits and awards has done very well. Particularly in the development of Small and medium enterprises as clients. So we think we're quite satisfied on that. And, but it's true and Mark mentioned it. We lost 1 big contract. It's more of an impact on the on the volumes than on the margins, because the margins were tight on this big contract, but still, it will have But we'll see, I would say, we'll see the impact. It's not massive that we will see it. But it's true that we were cautious on the economy. There were, I think, more positive expectations with the new government it seems that it doesn't turn into, positive outcomes. So we remain cautious on Brazil. Okay. Thanks very much. On-site is doing pretty well, both in corporate services and health care. That's, I think, it's a good sign. It's a sign also that the outsourcing rate, is not, we have some leeway there. We have some space to, and there is appetite for outsourcing. So I'm, I'd say, I'm positive on the trend in on-site. And, but overall, it's always linked to to the health of the economy. Thank you, James. Thank you. The next question is coming from the line of Jad Far, Ms. Tali. Please go ahead. Hi, good morning. Two questions for me, please. Firstly, on U. S. Healthcare, you're so cautious. It seems to be materializing a little bit more with that large contract in particular, and EUR 200,000,000 is a big number. So I was wondering if you could maybe quantify by the volume of revenue that is up for renewal in the next 12 months, for example, that would sort of help us get a sense of of the risk there? And secondly, you just mentioned that part of the investments were going into your work on brands. So the on an updated brand strategy? Is that something we could hear about around your full year results? So they, yes, it's definitely a big number when about $200,000,000. And as Mark mentioned, it's not only one contract, but within this $200,000,000, there is one significant one. I would say that the volume for renewal next 12 months is less than we had for this half of the year, which we anticipate would be a difficult moment. So again, this will have an impact but the development is encouraging. The same store sales, as Mark mentioned, is also pretty good So, and I think the team is doing a good job. I warned everyone at the beginning of the year and in the H1 call, we're at risk. So this is a confirmation, but I'd say I'm more positive for the next 12 months. Regarding the brands, Yes, I think we are entering into an exercise, as I've said. I think you will hear about that I don't know if it's exactly at the, at the full year result or during, but definitely during fiscal year 2020, you'll hear much more about our new brand strategy. Thank you. The next question is coming from the line of Stuart Gordon. Please go ahead. Looking into next year, how confident are you on hitting that organic growth without the Rugby World Cup? So I think that was around about 75 basis points tailwind at the 2015 World Cup. I think you've got this year's as well. And also could you remind us what margin tailwind that provided? I think it was around about 10 basis points or so in 2015. Just so that it's thank you for your question because with we wanted to give you some numbers about the Rugby World Cup. First, it's in Japan. So it's a little further away from the rugby world. And so we are not expecting the same volume. That's what we had in the UK. Currently, we estimate the volume at around 1,000,000 for next year. And the margin we enjoyed in the UK, we are not too sure yet exactly what it means be for in Japan. So we believe it's going to be neutral on the margin and it's not going to be accretive. Okay. Thanks very much. The next question is coming from the line of Julian Richard. Please go ahead. Yes, good morning, everyone. One quick question for me, please. Could we have an update on the education segment in North America? How do you see the recent tender then what the outcome for 2020 please? Well, I think education in North America is improving. I'd say the schools segment is having a very good dynamic and we're very proud of that. The university's part is more challenging. We are improving we're not fully there yet at the level that I would like in terms of both retention and development. What you will see us for next year is entering into more of a neutral net new loss. So, nothing fantastic, but let's say, we stopped bleeding and we have more solid more solid business, still efforts have to be made in the universities. That's where we put many of our efforts because the school dynamic is very good. Okay. Thank you. Thank you. The next question is coming from the line of Sabrina Blanc. Please go ahead. Good morning. Sabrina Blanc speaking from Societe Generale. I have two questions. The first one is regarding the education segment. I think you have mentioned some positive impact in terms of CAGanda. Should we have the reverse impact in the coming quarter? And the second question is regarding the contract that you have mentioned in the leisure segment in France. Could we have an idea of the size of this contract? Please. Yes, good morning Sabrina. In education, what I mentioned that we had a couple of extra days in France in Q3 and they were reversed out in Q4. So you can expect a negative impact in Q4, but it's all factored in our guidance. And the sports and leisure contract, the Q4 is the most, is the most significant contract, most significant in quarter. And I think we're talking about 1,000,000 a quarter. For Q4. You said 15, one file? 15, one file. Yes, one file. Okay, thank you very much. On Q4, on Q4, Just to bounce back on Stuart's question on the rugby, whenever we give, we give guidance or whatever, we don't give guidance for 2020. But whenever we give indications for 2020, it's not including the rugbyR. We've always been looking at without rugby and with rugby. And so whatever we say is not including the 1,000,000 of rugby. Thank you. The next question is coming from the line of Johanna Zane. Please go ahead. Yes, good morning. Two questions for me please. The first one is regarding the your level of confidence to achieve flat margin guidance for the full year. So what do you expect in H2, especially given the lower operating leverage that we should expect in Q4? And my second question is regarding the perception on the M and A pipeline towards the end of the year. And any potential additional shareholder return that you could announce by the end of the year? I think regarding the margin guidance, we've been through the forecast process at this stage. So what we know is that our margin will be tight around 5.5%. It's true that our growth has been better than expected, but, we could qualify our growth as imperfect because we believe that our retention is not good enough. So, we have to maintain our investments in growth. We have the developments to come. We'll bear their fruits later on. But I can tell you, all hands are on deck. The teams are managing their business very tightly to meet the objectives And, everyone's bonus depend on the top lines, of course, but also on the margin. So I can tell you everyone is focused. To secure the margin for the year. On the M and A pipeline, there is nothing significant in our M and A pipeline. We have a few deals here and there. We are also active selling So don't expect anything major. And we have not planned any share buyback right now. So Thank you. The next question is coming from the line of Jarrod Castle. Please go ahead. Thank you. Just another question. You mentioned some loss of sports and leisure contracts in France. And I'm just wondering in terms of the competitive dynamic, have you seen any changes now that Eleor is, kind of solely focused on contract catering? No, I no, I don't I haven't seen any changes in a yawsh behavior. Lately. And the contract that we lost in sports And Leisure, there are some contracts that else in France, but also some contracts from Centen Play that we that we exited or that we lost and it didn't want to retain because of profitability issues. So But I haven't seen any particular change in competitive behavior. Thank Okay. Maybe one last question or not. Okay. No more questions at this time. No more questions. Okay. I'd like to thank all of you again for attending this call. And I want to confirm the confidence that we see in our capacity to continue the on on the growth path that we have, started to generate. I think we've significantly improved our growth. Definitely, you understood, we have a bit of a weaker Q4. But overall, the growth dynamic is there. We had anticipated that some of our contract could be lost in health care is happening, but the rest of the company has a strong dynamic and confident into our the way we will enter next year. We committed to really doing everything to achieve an organic growth, certainly above 3% and I'm I'm confident that this commitment is, is achievable. Thank you very much. And, so we will exchange again on the November 7th for the full year results. I wish you a very nice week and a very nice summer for those who are in the northern hemisphere. Thank you. Bye bye. Thank you. Bye bye. That concludes our conference for today. Thank you for participating. You may all disconnect.