Earnings Call: Q1 2018

Jan 11, 2018

Good morning. Thank you for standing by, and welcome to the Sodexo First Quarter 2018 Revenues Conference Call. I advise you that this conference is being recorded today on Thursday, January 11, 2018. I would now like to hand the conference over to the Sodexo team. Please go ahead. Thank you. Good morning, everybody. Welcome to our first quarter fiscal 2018 call. On the call today, we have, CEO Michelle Lambert, Deputy CEO, Denis Machuel, and CFO, Mark Rollor, As usual, the slides and press releases can be downloaded from the website, 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. 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. Please get back to the IR team to have any questions after the call I remind you that the next announcement will be the half year figures on Thursday 12th April. Thank you. And I now hand you over to Michel. Good morning, everyone, and happy New Year to all of you, who are joining us this morning. Thank you for for being with us. I am with Denis and Mark. I will do an introduction. Mark will go into the details of our performance, and Denis will talk about the objectives for our fiscal year and moving forward. So, this quarter, as expected, we had relatively soft start. Organic growth is 1.9% on-site Services is 1.8% and benefits and rewards grew at 3.8%. On the one hand, we had a good momentum in business administration. It was an improving trend in energy and resources. The confirmation of a pickup in France and also a continued very strong momentum in developing countries. Healthcare was once again very strong in developing economies, but still slow in Europe and North America. And on the other hand, education, again, as we said back in November, is suffering from poor prior retention in universities and fewer working days benefits and rewards. Growth was the lowest it has been for a long time due Now we have a solid pipeline and we are, of course, signing many very good contracts and our revenue growth should progressively improve in the coming quarters. A few example on Slide 6 of contracts that we are continuing to expand within the scope of services, a rich NARCUS' hospital, which is a very prestigious hospital in Shanghai, Fannie Mae in the U S, which is an important contract for us. We added FM services to a number of location in different states. As I said, in energy and resources, is still very good. We signed an important contract with Vale BioPalma, which is a palm oil producer and new clients in Brazil, And even in Europe, where business has been challenging, as you remember, in the offshore segment, we've seen some encouraging signs I can mention ACRE BP in Norway, where we are going to deliver services and 5 rigs for 5 years. As well, a contract that we won in the UK, Bebay Marine, which is, of course, for full FM and catering services. On Slide 7, you can see that this quarter, we've signed an important 5 year Master Service Agreement with Cata Pacific, We will start by opening their 6 lounges in Hong Kong for an annual value of, roughly 1,000,000. And we should from that expand, Internationally as we move forward. This is a typical example, where our global client segment and sub segmentation organization has really helped us, being successful in our development. And just to give you a perspective on this sub segment, we began this airline lounge business with a 1 United airline launches in Denver, Colorado in the States and steadily grew, in North America, to make actually a global contract for a few years. And then we expanded outside the U. S. Starting with an initial contract with a Virgin Atlantic at London Gatwick Airport. This grew to a global contract with Virgin that we signed in 2009 and that we recently renewed. We also now, as I said, have a global agreement with United. And in parallel, we have developed business with other carriers as in France, Air France, Singapore Airlines, Emirates, Emirates, Delta, American Airlines. And overall, today, we provide services at 200 lounges in 80 cities, and we have a strong pipeline. Clearly, our global footprint and specialized expertise in this sub segment makes us, a strong partner for airlines who want to create a unique branded customer lounge experience at airports around the world. On Slide 8, I would like to highlight the good momentum in food service contract signings. This is a trend which is confirmed by new business, one with clients in France, for example, such as Total, we signed a a contract for all their sites in France, Covia, and the new courts of Justice in Paris, And this is, on top of what we announced last November, we already spoke to you about a significant contract with Michelin, And in the UK, we also signed a 10 year patient dining and retail service contract with Doncaster And Bassett Loeb, teaching hospital, which is actually a 1st generation of outsourcing. And on Slide 9, I wanted to point out also that after the Good Eating company, that's in September 2017, and Peyton and Brian in October 2016, we continue to bring new innovative business models into the group with the recent investments, in food sharing in France. We announced it today, where we have the majority and the Eat Club in the USA, where we took a minority stake. While Food Cherry's business is currently primarily B2C and itcloud B2B, both are innovative entrepreneurial startups at the forefront of the Digital Dining Revolution. We will help them expand their business and they will help us enrich our offer. Thank you. And now, Mark will go, into the details of our financial performance. Mark? Thank you, Michelle. Good morning, everyone. I'm very pleased to be here with you this morning, and I wish you all a happy New Year. Before I start, I just want to remind you that all the alternative performance measures used in this presentation are defined on Slide 24. Now turning to Slide 11. First of all, the detail on growth. Revenues for the quarter were down 2.6% due to a very strong euro against all other currencies, especially the U S. Dollar, the Brazilian reais and sterling. I remind you that this currency impacts are only impacting translation into euro because all our costs are in the currency of our revenues. Scott changes were also negative at 0.3%. This was due to the deconsolidation of Veeva Bulk which is seasonally heavy pre Christmas, as well as some of our activities in the M and A region closed down last year. And finally, disposal of businesses in New Caledonia and Hungary. As far as the acquisitions are concerned, This quarter only includes 1 month of Maurice and 2 months of good eating company. It does not include yet anything from Centerplate. So for next quarter, we should go back to a positive contribution from scope changes. This bring us to 1.9% organic growth for the group, of which On-site is up 1.8% and BRS is up 3.8%. So let us now take the individual segment of the On-site activities 1 by 1, starting on Slide 12 with business and administration. Organic growth in revenue was strong at 5.2% supported by the pickup in the tourism in France and the recovery in energy and resources. In North America, organic growth was +5.9 percent. We had strong growth in the airborne lounge activity, which Michel talked about earlier, but activity was also boosted by projects. So this rate of growth will probably not be sustainable for the next few quarters. In Europe, sales were up 1.3%, reflecting quite a few start ups and the continued recovery in tourism in France as well as growth in the UK. Although the growth in the UK will not last as we should start to feel the progressive impact of the loss of some army contracts from Q2. The regions, Africa, Asia, Australia, Latin America and the Middle East were up 12.2% with robust growth in corporates driven by new business and comparable unit sales growth. The momentum in E and R also remained very strong with a recovery in mining and onshore sub segment and contract startups. I'll remind you that this is the last quarter of the big Rio Tinto contract ramp up. Moving on to health care, in Slide 13, As expected, organic growth was muted at 1.1%. North America was impacted by the lack of new business and some general asset in the sector. We remain very confident in the long term opportunity in North America Healthcare. However, the current environment is complicated by a lot of merger activity, poor financial health of the sector and the need for this industry to enhance productivity and reduce costs. In Europe, organic growth was up 0.5%. Some comparable unit growth was achieved, but this was offset by the shortfall in new business as the teams remain highly selective in their bid due to very competitive pricing. The positive news is that there have been several good hospital wins in the UK in the last few months. So hopefully, things are looking up. In Asia, Latin America and Brazil, Healthcare was up 17.7% thanks to strong new business and comparable unit growth. There were, for instance, many contract startups in Brazil alone in this segment during the quarter. In education, we had a very slow start to the year, which was down 4%. In North America, the segment was impacted by 1.5 fewer days than in the previous quarter, We are expecting to recoup half a day in Q2. However, underlying Zep is the impact of the loss of business last year. This despite some good wins. In Europe, sales were up 0.9% with high single digit growth in the UK, and solid growth in the Mid region. France suffered from some strike as we closed down the Central Kitchen near Paris. On the other hand, we continue to generate strong growth in Asia with the region up 18% thanks to ramp ups in China, Singapore and India. As a result, on Slide 14, the organic growth by region comes out at minus 1% from North America with a strong business and administration activity offset by weakness in Healthcare And Education. Europe was up 1.1% with a recovery in France, but we suffer from ongoing weakness in the oil industry, even though there are signs of improvements with the signature of several new contracts in the North Sea. The 12.8% growth in Africa, Asia Australia Latin America and the Middle East is proof of the enormous opportunity in all these regions and in all segments to grow the business. Now let's move on to benefits and rewards performance. On Slide 16, issue volume organic growth was +5.9 percent, perfectly in line with previous quarters. However, revenue organic growth was up only 3.8%. The reason for this slowdown is in the different regions. In Europe, Asia and USA, the growth has remained strong in both issue volumes at plus 6.9% and even more so in revenues at +8.6 percent. And I remind you that last year, Q1 was already very good, up nearly 10%. The traditional vouchers activities remained strong during the quarter and particularly in Central Europe, offsetting some weakness in India where the imminent by the strength of Of course, you can see here the deconsolidation impact of Veeva Box, which I remind you is very seasonally weighted to the 1st 4 months of the year. On the other hand, in LatAm, things are more difficult specifically in Brazil The issue volume remains positive. However, revenues were impacted by the decline in interest rates and inflation in Brazil. Whereas the expected growth in beneficiaries does not yet come through. As I said in November, I expect the interest rates drop to have a 1,000,000 impact on annual revenues and profit. Thank you for your attention. I now hand you to Denis who's going to cover the outlook. Thank you, Mark, and hello to all of you. I just want to say that we, as a conclusion, that we maintain our fiscal 2018 objectives that we expressed a few months back. We see France being positive. We see an improvement in energy and resources, as Mark was mentioning, And, we see also a strong growth in developing economies. And this is compensating for the lack of growth that we have in North America in education and in healthcare. So we maintain our organic revenue growth guidance of between 2% 4% before the impact of the 53rd week. And, let me remind you that this impact was 0.7% last year. We also maintain our guidance So, thank you for your attention. And I now pass you back to Michel to Manage last Q and A session with all of you. Thank you. And so we we are ready, the 3 of us to answer Please ensure that the mute function on your telephone is switched off you. You. To allow everyone the opportunity and I will take our first person from the queue. Jamie Rollo from Morgan Stanley. Please go ahead. Your line is now open. Thanks. Good morning, everyone. I've got 3 questions, please. The first just on BRS and that 1.5% organic sales drop in LatAm, which I think is your first decline ever. That's a very wide 600 basis points gap to issue volume. It looks like the interest income was, as you say, 1,000,000 to million in the quarter. So maybe 3% to 4% of that difference. Is it therefore fair to say that commission pressure was a negative 2% to 3% And also what's your revenue guidance in the full year for BRS overall? Secondly, on OSS, North America at 1.5 days is about 2% to revenues. So is it fair to say the sort of underlying decline was minus 3%. And when do you annualize that, issue about the lower prior year retention? And then finally, I know there's only a sales call, but if we just think about the mix impact on margins, you've seen double digit growth in rest of world and not much in North America or Europe and your Rest of World margins when you used to report them was significantly lower. And also you've seen much stronger growth in B And A? Than in Health Care And Education and your margins are much lower in B And A. So I calculate that mix impact to be a better 10 basis point headwind to group margins? Do you agree with that? And is that in your full year margin guidance? Thank you. Okay. So, do you, Mark, answer the BRS question? To start with your first question on VRs, indeed, the pressure on interest rates is an annualized value of 1,000,000. It's not actually quite linear because the interest rates were very high in Q1 last year. So I will say that, the pressure just for interest rates is probably 4% to 5% alone in Q1. And then there is a continuous pressure on client commissions given the pressure the competition in Brazil. But there has been a gap for quite a while now between the revenue growth and the BV growth because of that competitive pressure. And this quarter, it's particularly enhanced by the drop in interest rates, which is quite heavy. On the growth. Maybe for the year, Jotin outlook, as you asked, Jamie, we expect to be probably around 5%. Yes. For the overall BRs, I mean, given the strengths of the growth in Europe and in incentive and recognition, we reckon that the guidance of around 5% should be maintained for BRS. In terms of the second question on education, we expected significant drop because we had a very poor performance in retention last year. And we discussed that during the annual results presentations. And that's mathematical impact. As you know, the selling season is late in that business. And we will have results of that selling season in May, June, July, right? So Hopefully, we'll have a better selling season this year. As we discussed, we have made many changes in that business. We are continuing to make changes in that business, because the our CEO of the business left. And so we're taking the opportunity to, reshape the organization So but we are confident because again, it's a good business and we have very, very good footprint. So we'll be able to turn this business around And, the other thing is that same store sales have been weak also, right? But again, we are all working on all this. And we should, as we move forward in the coming years, recover growth in education in North America, right? And the 3rd question, Martin. And just to wrap up this, I think when you do the math of the 1.5 days and what we see is that we will not totally recover that 1.5 day for the full year. And so I will tend to say the underlying, the growth or negative growth is actually between around 2.5% currently. And until we sign new contracts in universities, it's going to be there. Now in schools, we've had quite a few ramp ups of contracts and we sign extension with Chica Group Public School, and this is coming up. So, but the underlying growth is correct. Regards to the mix impact on margin and indeed, it's North America is our highest margin territory. So currently, I mean, it does put some pressure and we have to work very hard. But we believe that over the year, we should be able to maintain now our guidance on margins. Okay. Thank you very much. Julian Bishop from Kepler Cheuvreux. Please go ahead. Your line is now open. Yes, good morning, everyone. Two questions for me, please. The first one on the education segment in America, so you are talking about weak comparable unit growth due to the calendar impact. Excluding that calendar impact, is there any change in terms of unit growth on that segment? And second question, in terms of the pickup in France, is this mainly because of tourism activity that is recovering? Or is it also related to better volumes on-site for your corporate clients? Well, on education, it's the overall environment and the fact that the population on these campuses are probably spending less. But overall, we have in working on marketing programs, new offering. We discussed at the in November, some new offers that we are putting in place. So we are confident that we can build that momentum back and grow the business, as I said, and recover positive growth in the years to come. Now in France, but in France, it's clear that it's, it's the signing of new contract. It's the fact that we have had a very good retention rate last year that we signed some good contracts. So we have a positive momentum Of course, you know, the business in Paris in the, on the river and everything in the tourism is picking up a little bit. But it's not the reason of, the main reason of the positive growth. It's the underlying business and the new business, which is growing a favorable blea and which is very good news, very, very good news. Okay. Thank you. Because France has been negative for a few years in the past. And for the last, I would say, three quarters have been significantly more positive and and it's a good trend and solid trend. Thank you. And now we take our next question, Vicki Stern from Barclays. Please go ahead. Your line is now open. Hi, good morning. 3 questions. Just firstly on U. S. Healthcare. You obviously talked about education, but just on Healthcare. In the U. S, any comments there on thinking around pie line and retention rates. UK, again, some sort of question backdrop in terms of volumes. I think that you'd described this has been somewhat tough last quarter. And again, on business wins and retention. And then just finally, some updated comments, these on tax reform following up to the recent changes? Thanks. Well, on U. S. Healthcare, it's retention last year was weaker than the years before, but still strong, close to 95%. So Of course, it has an impact this year. But in health care, the reason for the the soft growth is mainly new business, right? Again, as we mentioned, for the last few months, we had many, many changes in the U. S. In the teams. We've changed many teams. We are rebuilding those teams and in health care. Again, we should recover some this good, good growth in the years to come. Mark mentioned the fact that this business has a lot of potential. Of course, there is pressure, economic pressure on the, on the, on this segment, But it is a good and strong business for us, and we are putting the necessary efforts and resources to, to come back on positive growth for the UK? Yes. The UK had a positive quarter and supported by growth in many different segments. The positive in the UK is the fact that the health care division is signing more, and that's new after a period where it was very, very soft. We've also benefited and this is what I tried to comment. We benefited in the entire defense business, I will put to repeat, And we won lots at the beginning of the process. So currently, we are carrying the wins we had Unfortunately, later in the process, we lost some lots and those losses will it has in H2. So currently, I mean, we have the benefits of those defense early wins, but we don't yet have the later losses, which are going to E13H too. But, the UK so far is doing good, otherwise, in other segments. With regard to the tax reform, now we have a bit more visibility. So, and if those correspond broad lines to what we had commented earlier. There is a so there in the U. S, there will be a negative impact about the deferred tax, you know, that we were carrying deferred tax. And obviously, with the tax rate drop, we would have an impact there is an impact of the deemed repatriation tax, which is because Canada was a subsidiary of the U. S. We had less dividend in Canada. So now we will have to pay the tax on those dividends. So that's for the 2 negative. The positive is that the impact of the tax reform is going to be prorated this year. So we were expecting the tax reform to impact us only next fiscal year. Actually, it's now impacting us from January. So that's good because it helps the ETR of the U. S. Rights in the 1st year. And we have had some mixed news on the tax credit and allowances that we were using. I think we will be able recoverify and use some this year, but even though we will lose them in the future. In France, the good news on the 3% dividend tax is confirmed, and we will book it. So what we do expect is that now all in we expect the ETR of the group to be around 28% this year. While I think earlier in November, I guided for 32 So it's it's a significant improvement on the ETR. And going forward, because of the safe reforms and the allowances which are going to disappear gradually, we believe that we should be between 28% 30% as a tax rate. It will also depend on the mix, obviously, of profit, varied countries and so forth. So I would say 28 for this year, all in with all the pluses and minuses and 28% to 30% going forward from fiscal year 2019, 2020 and so forth. That's really helpful. Thanks. Thank you. And now we'll take our next person from the queue. Simon Aquipri from Raymond James. From me please. The first one on M and A, if you could comment please on the pipeline, do you expect to strike to strike some new deals in the next few months? And the second one on the rest of the world region, you clearly have very positive momentum. Do you expect this trend to continue the coming quarters, given you will no longer benefit from the ramp up of the Rios inter contract? Thank you. On M and A pipeline, Simon, we don't comment the M and A pipeline. Obviously, we are working And we are looking at things, but it's not something I will want to comment. But let's say we are active. Rest of the world in our was particularly strong this quarter because it was an alignment of various things among which the last effect of the ramp up. When we look at Q2, obviously, I mean, it may slow down a little bit, but it will remain, let's say, in the high single digit that is for too and we'll see for H2 depending on the signing. But we are signing contracts and the momentum is good. Yes, the momentum is strong and Asia is will continue. China is good. Lots of ramp up in Latin America. Brazil is good as well. So The only dark spot is the North Sea as we commented. Even though we've seen some positive signs because it was getting better in Norway, We've made a few we had a few wins, but the CUGAR is still very, very negative. So I mean, the There is a watch point in the North Sea for the moment. Thank you. And now we take our next person. Yifar Maestari from JP Morgan. Please go ahead. Your line is now open. Hi, good morning. I have two questions, please. Firstly, on North America Healthcare And Edge you have flagged that disruptive impact of your reorganization on retention. I think that was last July, so three quarters ago. Of course, this will annualize, but can you explain maybe in more detail, what changes you've made in the U. S. Education and health care business? To help turn that around. When you say you've reshaped the organization, is it new arts and sales, more investments to retention, when you say new offers, Is it about introducing more brands? Is it about a different mix of services, etcetera? And my second question is on meal delivery, how do you view this market with the acquisitions of Foodcherry and the Eat Club? Is it a service that you intend to cross sell to your existing clients for their smaller sites, for example, where there's no canteen? Or is it a service you think will bring your new clients SMEs or even maybe B2C? Thank you for your question. On North America, we said we explained, as you said, as you mentioned, at the end of last fiscal year, that we made a lot of changes, in the U. S. For the last few years. We had early retirement plans, so we lost many people left and was expecting, as we're expecting, we also also made a lot of change in the middle management. We, we cut off some some position. So we've really reorganized this business. We are continuing to do this because it takes time. So we're changing people. We're modifying some of the organization and some of the, regions within North America. So, frankly, this should pay off are convinced of that because it's not the first time that we've been through this kind of reorganization, but this one was was significant. And in terms of, new business and and new developing offers. We've discussed that in In education, we've signed some very good contract last year, actually, based on new offers that we've developed. And actually, we took these new business the price, which was not the lowest price, right? So frankly, it was attractive. So we, there is a it's a big business. It takes some time. This year, hopefully, we'll have a better retention, that we had, in the last year, in these two businesses. We also will have, hopefully, a more good new signing. So, we are rebuilding the momentum step after step, those business are good. It's just a matter of managing our internal issues, right? And, of course, Denis of course, on top of it and he's working on it as we speak. Isn't it, Danny? Additionally, it's me, Michelle. And so we are confident that this business will recover some good growth in the future. Now for the second question, Denis, maybe you should take it. Yes. On the media report, both companies eat club and, and food Cherry have, a very interesting know how with, you know, central kitchens, that, that, that cook and then we, we deliver, mainly in B2B in, in the U. S. And both in B2B and B2C in France, we see that definitely, to your questions so far, we see that, very much also, of course, as a cross sell to our existing clients and consumers, within our existing portfolio, of course, particularly in Corporate Services. And we also see, of course, this being, bringing us additional clients from the small and medium business segment. And which is already the case for its club and for, food Cherry. We also see that in some geographies, like in France, We see synergies, possible synergies coming from, you know, our sales team in benefits and rewards, which addresses, of course, Small and medium businesses. And, so we think that there is leverage there. So, it's definitely both. It's a way also to adapt ourselves to a trend of our consumers particularly in corporate services, but we can imagine that as well in other segments, but a trend of, this food delivery time is something that it's really picking up. And it's a way for us to enter into that market, to learn, and to also profit from the agility, of these startups, which will be, coveted and taken care by their founders. We, the founders stay within the business that was important for us, to a profit from that dynamic and their vision of the market. Thank you. And maybe just following up on that last point. When Elior launch their own delivery service or delivery plus service last year, they have quantified the market at 1,000,000,000 in France, basically saying the market is the vouchers market. So do you think that in the future, the choice is either vouchers or delivery or you think it's a service you can sell on top of? Yes. I don't think it's I don't think you're going to pose one to the other. I think it's a combination of both. I, you know, we haven't seen to be frank, we haven't seen the earlier offer, jeopardizing our voucher business. So it's more a combination of both, actually. All right. Thank you very much. Thank you. And now we take our next person from the queue team Ram Skill from Credit Suisse. Please go ahead. Your line is now open. The first is just around your comments about expected acceleration through the course of the year. I guess, Mark, in your pre prepared comments, particularly on business administration, you talked about less sustainable growth in North America, the loss of army in the UK, the end of the Rio Tinto ramp up. So I'm just kind of interested to understand what the kind of key positive elements you see coming through to see that acceleration. And in particular, I guess to reach the top end of your organic guidance, you'd need something like growth every quarter for the rest of the year, which would seem like an enormous improvement. So just why you think the top end of that range is even relevant And then my second question is a little bit similar to Jamie's around margin, but within BRS. So within BRS historically, particularly as we've seen big FX changes, the margins you've noted are higher in LatAm, and that's had some impacts, as I say, more previously because of FX. Given the different growth dynamics in terms of geographical regions, is that margin differential again something to bear in mind and maybe you could just give us a sense as to whether there is still a meaningful gap in profitability LatAm versus your European and other regions? Yes, there is in B and A, we had a very strong quarter, but it doesn't mean that Q2 is going to fall from the cliff So it is not going to stay at the strengths of what it was in Q1 because it was very strong. But it will remain strong. What we are expecting also the emerging countries are still going to be strong, France is showing some good signs also of remaining strong. The UK, we have this difficulty with the Omnicom track, which is going to start hitting us in H2, but Q2 should remain strong. We're having also development in the med region, which is good. So AirG And Resources. And then AirG And Resources remain, as I said, high single digit at least for what we see in the next quarter. Now the key in health care and education and education, there is a ramp up in schools the key now is actually the pipeline and the signature and the speed of mobilization. And we are actually busy mobilizing contracts. So those contracts will ramp up through the year. But it is a challenge to reach the upper range of when we say 2 to 4 or 4 is going to be a challenge, but the pipeline is there and we've got currently good sign. The retention is also improving. So the KPIs are heading into the right direction. Now it's to solidify them quarter after quarter. With regards to the margin, I mean, we I think we spoke in November that there was a effect are, I mean, impact. And as you're quite right, Brazil is probably our highest margin business when the reais is depreciating it, it will have an impact of the blended margin, so to speak. And then the following interest rates are having an impact of 1,000,000. There is no secret here. It impacts revenue and it also impacts EBITDA, there is no cost in front of it. So this is a 100% negative flow, unfortunately. So yes, there will be an impact on the PRS margin. I don't think this is new, as expected. For us, we factored it into our guidance and we've been very clear on that. So the and we also said last time that you should look less at BRs as a margin rate, but more as the evolution of ABIT in volume because this is making more especially with the development of incentive and recognition, the new acquisition with different models, the expansion in mobility and so forth. So the margin rates that we were displaying over the years were clearly when we were a pure player of 1,000,000 food, it was making sense. Now that we are diversifying in other services, it is a lot more challenging to predict and analyze. That those margins are strong and they are, you know, they are good for the group. Relative for the group margins. Thank you. And now we take our next person, Richard Clark from Bernstein. Please go ahead. Your line is now open. Hi, good morning, everybody. Two questions please. One is on the U. S. Healthcare. You talked about some of the challenges you're seeing there. And one of them you brought out is that you're seeing a need for cost cutting in that segment. Now normally you'd to be a positive for the outsourcing business. So are you being undercut by rivals? What's happening there that you're not picking up from that trend? And then the second one is just following on from Vicki's question on tax reform. Obviously, you've given us the where you expect your tax rate to come up. Are you seeing any change in behavior from your clients? Are they less willing to outsource more willing to outsource more willing to spend more on a higher quality product given the fact that they'll have higher cash flow for themselves? Thank you. Well, in health care, this the challenge of the hospital industry is not new, right? It's been like this for many, many years. Now, of course, today with the all the reforms and the uncertainty about this business, there's still more pressure. We see more and more mergers and acquisitions. So we are definitely doing not as good as compass. We all know that And we've discussed that many times with you, and this is why we're working on reorganizing our business compared to the others. I'm not sure actually not convinced that we are not doing less good than themselves. So You know, we, this is why Mark said again that this business is a good business. It's a business where we should grow and we will recover growth. Again, and I've said that many times in the last few months, the challenge in health care is our problem. We have to fix our issues, and we are fixing them, right? And just to bring some color, we the past few years, we had a very strong same store sales in Healthcare. But because of the cost cutting and synergy searching and so forth, the same store sale is not as strong. And this is where I was heading you to. Now the fact that they are looking at cost reduction is good for the midterm, but in the short term, they are squeezing. But in the midterm, obviously, I mean, it means that a lot more things will come our way. In terms of tax reform, We have not seen any of our clients modifying. It's very early. So we're not expecting any significant movement on that side from Most of our contracts are pre annual contracts. They've got indexation, but they don't have a tax rate closed. So maybe at the next renewal, I don't know, but no, I'm not expecting much pressure on the fact that the tax rate the tax rate in the U. S. Was knowingly very high. So now it's back into a more reasonable rate so I'm not expecting pressure on that. So it's too early to say that. Thank you. I'll now take our next person, Jarrod Castle from UBS. Please go ahead. Your line is now open. Good morning, gentlemen. And, Michelle, I guess, one of your last calls. So thanks for everything. Just two from me, please. One, just coming back to kind of Page 9 and kind of your platform businesses. Can you quantify how big they are at the moment in terms of future revenue generation, if you look across the whole group, this business model. And secondly, most of the catering companies have to some extent, seared away from airline catering, even though it's a big market. Given that some of these activities are centralized, And given the fact that you're also now doing airline lounges, would that be something of an opportunity for you? And then just lastly, any updates on your reinvestment program on the digital front, I. E. The reason for the flat margins, how that's progressed through the quarter? Thanks. Okay, Shahid. Thank you for for your question. Yes, it is not actually one of my last call. It is my last call, right, because Denis will take over in the next few weeks. But, just I would answer on the launches business is a managed managing launches, right? And, it has nothing to do with airline catering, which an industrial business where we provide trays and meals for the planes. We are not in this business, and we will not be in this business. We looked at this business many times. And this is not a business that we want to begin. Now the launch business is a very different business. It's an opportunity for us. To have large contracts to provide services to these airlines and help them provide a customer experience, which is consistent around the world. And we have developed capabilities, specific teams that specific programs and it's actually paying off. It's, as I said, the benefit of our segmentation and sub segmentation. And hopefully, that will continue to grow. So, Denis, on the the question of food sharing? On the food delivery platform, I think the of course, those are startups. So the revenue are very small and not significant at group level. However, the experience that he creates before our clients, is significant and our consumers And it's also, for us, a learning path towards extended offers more consumer centricity and also digital marketing and sales. So it's for us, it's It's very, very interesting. And as far as the last question regarding our digital investments, we we are progressing. We've, we continue to do the investment that we mentioned. As you, as you might know now, we will do this, you know, Capital Market Day early September, and we will have the opportunity to describe in more detail where we invest and what we are doing. What I can tell you is it's we have a good momentum and it delivers as expected. Thanks, Jarrod. Thank you. And now we'll take our next person, Nadid Al Kasier from Berenberg. Please go ahead. Your line is now open. Good morning, everyone. If you can please give us a little bit of color in terms of European voucher, what are the main drivers of growth is it volume or prices? Also same thing on the catering. Can you give us a little bit of color on the volume and prices trend that you're seeing? Thank you. Well, in terms of the benefits and rewards business, Europe is, we have good momentum because the economy in Europe is really, going well. Being in Western or in Eastern Europe. So we have, we have good pickup on volume with, with, good employment and fisheries pick up. We also have some, increase in face value in some countries, that, that also help. So, it's overall, and it's across, I would say it's across all our, all our countries. It's a general trend, across all our countries. And I would say on the revenue side, we have no more negative impact of falling interest rates because they are all at 0. So now it can only get better. So but for the past 3 years, it was going down and down and we had pressure. Now we don't have anymore. And regarding prices, of course, the situation can differ depending upon the countries. In some countries, you have, higher tension and higher competition. But overall, I would qualify the situation in Europe as has reasonably, stable, particularly when we compare to, what we do in Brazil. Now in the on-site business, I would say same. There's no nothing special in terms of pricing. It's against always been and will be a competitive business. And, but it's nothing to say more than what happened in the past. Well, I will say what makes a difference is the offer. And we see that when we have the right offer, we we win the contracts. It's not just about price, but the offer, and this is why, an acquisition led food share is also very important because it enriches the offer. And it was the same also in the UK with good eating company and petron and bird. We have to have sharper offer, more focused segmented And I think this is how we will grow the business in food in Europe. Thank you. And now we take our next person, Angus Tweedie from Bank of America. Please go ahead. Your line is now open. Hi, good morning. Thanks for taking my questions. Just a very quick one. I was hoping in B and A, you could help quantify the scale of the project work. In Q1 that impacted North America, and also remind us of the scale of the impacts in rest of world from the Rio Tinto ramp up? Thanks. Well, I think the size of the project in business and administration in Q1 was about 1,000,000. And the ramp up in RIIO T2 I think now we are at maturity in term of revenue and we are talking, I will say, probably the ramp up this Q1 was about $5,000,000 extra versus Q4. But I think now we are at we are where we should be. Yes, because we got to the full volume last year in December, I think. That's really helpful. Thank you. Do you have any more questions? There are no further questions at this time. I would like to hand the call back to the Sodexo team for any additional or closing remarks. Well, thank you very much for being with us today. And, I wish you all the best Bye bye. Thank you. Thank you. Thank you. So ladies and gentlemen, that concludes today's Sodexo First Quarter 2018 revenues conference call. Thank you for your participation. You may now disconnect.