Earnings Call: Q3 2021

Jul 1, 2021

Good morning. Thank you for standing by, and welcome to Sodexo Q3 Fiscal 20 20 21 Revenues Conference Call. I advise you that this conference is being recorded today on Thursday, July 1, 2021. At this time, I would like now to hand the conference over to Sodexo team. Please go ahead. Thank you, Nadia. Good morning, everyone. Welcome to our Q3 2021 revenues call. On the call today, as usual, we have CEO, Denis Macielle and CFO, Marc Rolland. If you haven't already done so, the slides and press releases are available at sodexo.com, and you'll be able to access this call on our website for the next 12 months. This call is being recorded, but may not be reproduced or transmitted without our consent. Please get back to the IR team if you have any questions After the call, I remind you that the next announcement will be the full figures full year figures on Wednesday, 27th October, 2021. I now turn the call over to Denis. Thank you, Virginia, and good morning, everyone. I hope you're all well. Thanks for being with us today. So let's look at the Q3 highlights. I suggest we turn directly to Slide 4. So on Slide 4, you'll see that our Q3 organic revenue growth was plus 19%, which is definitely better than our expectations in all activities and segments, driven particularly by the significant recovery compared to the 1st lockdowns in March 2020. Oil and gas services were up 18.8%, thanks to a particularly strong performance in Europe, up 22% and an increase of 17.5% in North America and 15.4% in the Asia Pacific, Latin America and the Middle East and Africa region. Benefits and awards was up 23.8% with a very strong performance in Europe, USA and Asia, up 36.9%. Latin America was up 6%. So now on Slide 5, I wanted to discuss our holistic approach to workplace transformation, which is a big trend at the moment. Indeed, in Microsoft 2021 Work Trend Index, the majority of leaders are saying that their company is considering redesigning its workplace to improve employee experience in a new hybrid work environment. We definitely have a great role to play in this transformation to the next normal. Our Vital Spaces go to market value proposition combines the variety of our on-site services, both food and FM, benefits and rewards and personal home services into a holistic approach focusing on efficiency, employee experience, digitization and sustainability. This is based on providing services from the design of the workplace to completion, operating the services and including the capacity to constantly improve the processes over the long term through technology. It starts with advising clients on transformation strategies, then designing the choices, and managing the transformation with FMS Support Services, always ensuring that client meets its expectations in terms of corporate responsibility, regulatory and compliance requirements through strong asset management and planning, Providing the new array of services such as the food at work, employee and guest services, work from anywhere services and health and wellness services and then providing the technology analytics and reporting to ensure constant productivity and satisfaction enhancement. So in practice, what does this mean? Let me give you a great example on Slide 6, where in the UK, our client awarded us a fully integrated facilities management contract. The client was indeed looking to simplify its FM and supply chain model and at the same time, develop its workplace, well-being and employee experience. For them, it was even more relevant in the context of the pandemic. The 3 year contract covers 4 of its major sites, its headquarters, the distribution center, It's London showroom and a manufacturing facility with 1,000 employees, average age of between 26 32 years old, depending on the size. The client's aim is to create a workplace that will become a strategic advantage for talent attraction, retention and productivity. And they wanted to bring new technology and consumer convenience to the fore. Using Vital Spaces, our comprehensive value proposition that I was talking about, the team was able to design a workplace and work life solution with a wide range of services, including the modern recipe food offer and the delivery offer of the Good Eating Company, Circle's digital concierge services payment and consumer app as well as cleaning, disinfection, mechanical, electrical and fabric services, projects, compliance, cleaning, the whole array of services. The contracts brings together the Vital Spaces consultancy pillar with our co op WX to support the improvement in employee experience. We will also be supplying a comprehensive suite of technology to support consumer experience through sensors, business intelligence and reporting. So now let's turn to benefits and rewards. As you have probably seen on Slide 8, we have continued to signed new partnerships with delivery networks around the world. Today, we have approximately 300 partnerships. We are currently seeing transactions with these delivery platforms running at around 210,000 a day, even though the more recent agreements are only just now being put in place. In total, delivery now account for approximately 5% of reimbursed volumes and growing fast. And now, Marc, over to you for the detail of the Q3 revenues. Thank you, Denis, and good morning, everyone. I'm pleased to be with you this morning. Let's turn to Slide 9. Revenue came in at €4,500,000,000 for the quarter, up 14.7%. The currency impact was a negative 4.2% due to the weakness of the dollar and the BRL. The good news is that the BRL has strengthened and is now less than 6 BRL to 1 euro. So the year on year comparison should be stabilizing. Scope changes were negligible at minus 0.2%, reflecting some disposal of activities as we are now in active execution of the disposal program. I take the occasion to update you on our other income and expense for the year, which will be a bit higher than previously expected at around €280,000,000 versus our prior indication of €240,000,000 this is mostly due to the disposal program picking up some momentum. You will find this in our modeling slide in the appendix. So with all of this, organic growth is 19%, of which 23.8% for PRS and 18.8 percent for On-site. Now let's first look at On-site trends on Slide 11 in percentage of fiscal 2019. On-site has been improving steadily each quarter, reaching 83% of fiscal 2019 in the last quarter. Within this, just to give you an idea, food services are at about 70%, while FM services are above fiscal 2019. The Healthcare and Senior segment has been close to fiscal year 2019 levels since the Q1 of fiscal 2021, with the difference being the COVID related decline in retail sales. The recovery in business and administration has been slow, particularly in sports and leisure, where activity only reached 22% of fiscal 2019 in this quarter. And in corporate services, which is impacted by the timing of the different lockdowns and pandemic waves around the world. From a much lower base, education has seen a significant improvement over the last quarters, except in the Q2 where the UK lockdown and the slow return in the U. S. Weighed heavily. Turning to next slide. Business and administration was up 10.1%. In B and A in North America, organic growth was slower than in other regions at plus 6.4 percent still at only 59% of fiscal year 2019 levels. Government and agencies activity continued to pick up progressively. Energy and resources accelerated, helped by a return to work at 1 of our major energy clients. The recovery in corporate services remains slow. More companies are starting to talk about going back, but it's still very progressive. Sports and leisure is improving but off a very low base, with airline lounges, in particular, beginning to open up again. We do not expect convention centers to open up significantly before September, and the activity was back up to 73% of fiscal 2019 levels. Impacted by the French lockdown in April, the recovery in corporate services was very slow and sports and leisure almost non existent. Both government Energy and Resources benefited from solid volumes and project work and in particular a strong contribution of new business in Energy and Resources. In the region, Asia Pacific, Latin America, Middle East and Africa, organic revenue growth was 13.3%, now 10% above fiscal year 2019 levels. This is due to strong recovery in corporate services in China and Brazil and solid growth in mining in Australia and Latin America, helped by the combination of new contract startups and extra COVID related services. India was still negative this quarter. In Healthcare and Seniors, the organic growth was 9.2%. In North America, activity was stable year on year at 85% for Q3 fiscal 2019 due to the combination of contract losses and the reduction in retail sales. We saw an increase in elective surgery and a very slow return to retail sales, but this was offset by the relative weakness in seniors due to the timing effect on new business as ramp ups are very late in the year where closures were early. Occupancy in senior homes also remains low. In Europe, the 23.9% organic in the UK, which is running at a slightly lower level in Q2 versus Q3 versus Q2. Elsewhere in the region, elective surgery is picking up, but retail activities have not yet started and there is still low occupancy in senior homes. In Asia Pacific, Latin America, Middle East and Africa, the organic revenue growth was also plus 24% with strong recovery in activity in Asia and Brazil to well over fiscal year 2019 levels. Q3 organic growth in Education was plus 73.5 percent with activity levels returning to 79% of fiscal year 2019 levels. In North America, Organic growth was +61.3 percent or 77% of fiscal year 2019 levels. Schools reopened progressively and were running at 75% in the milk count relative to fiscal 2019 and of course, much more in FM Services. University did see more students on campus toward the end of the academic year, The run rate relative to fiscal 2019 was a bit lower than for schools. In Europe, organic growth was 115% up, reflecting the fact that most schools across Europe were fully open during the quarter. Occasional class closures and the effect of several weeks of full closures due to the French lockdown in April meant that activity was at 87% of fiscal 2019. In Asia Pacific, Latin America, Middle East and Africa, organic growth was at plus 75.2%. Schools in China were fully reopened. However, in India, on the contrary, the majority of schools were closed. Now let's move on to Benefits and Reward Services. As you can see in Slide 16 benefits and rewards was much more resilient than on-site, with Europe following the rate of openings of restaurants in the different markets as reimbursements picked up. In Europe, you can see that the Q3 number last year was very badly impacted by the 1st lockdown. However, since then, activity levels have picked back up and are now in line with fiscal year 2019. In Latin America, the lower resilience is more to do with the competitive environment putting pressure on client commissions. Next slide shows the issue volumes and the reimbursement volumes over the last quarters. You can see the delay in reimbursement volume in the 1st 3 quarters, some stabilization in Q2, thanks to the gift seasonal reimbursement and the start of a catch up in Q3. In this chart, you can also see the increase in value in circulation until the end of Q3 Q2, sorry, and since then a slight reversal in trend with some cash out during the last quarter. Employee benefit revenue grew 19.6%, running at 98% of fiscal 2019 activity levels. In the Q3, issue volume was up 15.8% against the low level in Q3 last year at the start of the pandemic. As expected, as restaurants reopened in most of the regions, reimbursement volume picked up, growing by +22.5 percent, boosting merchant commissions. Services diversification revenues were up 42 point 3% off a very low base. There was a strong recovery in health and wellness, incentive and recognition and public benefits. However, Rydoo continued to be significantly impacted by low business travel activity. In Europe, USA and Asia, organic growth in revenue was +36.9%, reflecting the opening of restaurants and the associated boost in merchant revenues. The base in Q3 fiscal 2020 was also were very impacted by weak issue volumes due to difficulties during the 1st lockdown last year. As a result, activity was back up to the levels of fiscal eighteen. In Latin America, growth was more muted at plus 6%, still impacted by weakness in client commissions in Brazil due to a very competitive environment there. The good news is that both the BRL and the CELIC have been increasing in the last few weeks. Activity recovered significantly in Peru and Mexico, while it just stabilized in Chile. I have already explained the strong recovery in operating revenues in the previous slide, reflecting the catch up in merchant volumes as restaurants reopen and an easy comparative base in Europe in Q3 last year. Financial revenue were down minus 7.2% due to the weakness in interest rates, principally in Brazil. However, the CELIC has regained 200 bps from the low point of June 2020, and it should help in the coming quarters. Thank you for your attention. I now hand you back to Denis for the outlook. Thank you, Marc. So let's now turn to the outlook. As you've seen, the improvement in the quarter on quarter trend since September 2020 has been progressive and better than our prior hypothesis. In the second half, we are expecting the Americas to improve, including your return to full opening in schools and a much better start to the new academic year in universities. In this context, we are upgrading our second half guidance to an organic growth of around 15% versus 10% to 15% previously, an underlying operating margin of around 3.5% at constant rates versus 3.1% previously. And I confirm the full year cash conversion of more than 100%. Overall, I am fully convinced that the pent up demand will ensure a strong pickup in all segments and activities once the pandemic is is over, although visibility on this remain a bit weak. We have a unique range of services, which we are putting together to help our clients redesign their value proposition for their employees, for their patients, medical staff, pupils, students, etcetera. And at the same time, we bring efficiency for our clients. Our organization is totally mobilized to fully benefit from all of this. So looking further out on the basis that the pandemic would be over by 2021 calendar year end, group aims to return to sustained growth and to rapidly increase the underlying operating margin back over the pre COVID level. With that, I now open up the call for your questions. So operator, can we please take the first question? The question is from the line of Bilal Aziz from UBS. Please ask your question. Good morning, everyone. Thanks for taking my questions. Just 3 for me, please. First one, just on the implied 4th quarter volume guidance, please. I appreciate there's an element of comparatives and seasonality in your 4th quarter. But perhaps can you put your expectations in context of what you may have seen in June already and that will be very helpful. Secondly, just on The new margin expectations of 3.5%. Relative to the cost savings versus the seasonality bridge you helped us build out at first half, Is the delta now driven purely by higher growth or is it an element of restructuring being pulled forward partly related to the GET restructuring costs, Which are a bit higher as well. And then very finally, you've referenced outsourcing accelerating again. And perhaps just a bit of an update there, if you've seen any pickup in contract signings and the confidence that may be giving you of becoming a high and mid term growth company? Thank you. Thank you for your question. We are expecting a sequential improvement in Q4 versus Q3, but it will be a modest sequential improvement. And we were already expecting a stronger Q3 than Q4 because of that and the seasonality of the business. And so Q4 is going to be slightly better than what we were expecting earlier. But that's why the strength of Q3 and especially on the schools in North America, for instance, was a good news, but it's all Q3 related and they will be much less in Q4. When we look at the new margin expectation, obviously, I mean, having more revenue helps. But The restructuring program, the GET program, as we explained it, is delivering what we were expecting. So We are doing the good work on the restructuring. And I will say from H1 to Q3, I mean, the trend is very similar. The upside comes from the fact that there is more revenue. Yes. And You have to be and you all know that, but September is not enough Q4, right? So the pickup in schools and universities will only impact the very last part of our Q4 and it's more on Q1 next year that we will see the full impact of schools and universities. Back to your third question, Bilal, the Yes. I think we have a strong pipeline. I'm confident we see, yes, the outsourcing trend is there and they are to last. COVID has definitely accelerated the reflection of A lot of our clients on more outsourcing. What we concentrate on at the moment is, of course, on the retention, which is an absolute focus to for all our teams and also the quality of the development. Definitely, we expect once we are in the post crisis mode to return to the development levels and organic growth levels that we had pre COVID. As you might remember, before COVID hit, we were on a very good trend. We had reignited growth In the beginning of the 2020 fiscal year, this got stopped, but we know good trend. And I expect us to be back to That kind of levels once we have the sanitary crisis behind us. Very clear. Thank you. Thank you. Your next question comes from the line of Jamie Waller from Morgan Stanley, please ask your question. Thanks. Good morning, everyone. I've got a few questions just on the margin. Just perhaps following on from Bilal's question. The 40 basis points increase in your guidance in the second half is pretty identical to the €40,000,000 increase in the exceptionals line. I just want to be absolutely clear the margin step up is separate from that high level of costs moving below the line. And perhaps you could talk about maybe by region or by industry where the higher guide comes from. Secondly, normally, as you said before, your second half margins are 100 basis points weaker than the first half. Clearly, This year, they're going to be 40 bps or more higher than the first half. What does that mean for the first half of twenty twenty two? It's really we think there should be no difference in the normal seasonality. So I assume we're looking at 4.5% plus for next year just on seasonality alone with no additional underlying increase? And then finally, any update on labor costs or labor availability, particularly in the U. S, please? Thank you. Thank you, Jamie. There is no connection at all between the 40 bps and the 40,000,000 The $40,000,000 is in other income and expenses is purely the restructuring program is where we are expecting it. What we are doing is that there is disposal being currently worked And which have been executed closed in the past month. And looking at it, it will impact Because we will be making some losses on disposals, it will impact the OIE. So this is where the increase in of OIE comes from. It's mostly write offs and disposals impact. It has nothing to do with the 40 bps margin improvement. When we look at the margin improvement by regions, we saw some strength in margin in the U. S. And so that's an indication. And as we said, we are doing Better in revenue in the U. S. What we say in the Americas, it's not just the U. S, it's LatAm and Brazil also. We are doing well in LATAM Brazil in the U. S. Versus our earlier expectation and it helps the margins, obviously. I will not comment on fiscal year 2022. I must remind you that we have a lot more cost plus contract Then P and L this year, and it does change the dynamic of the quarter. It will revert back to P and L at the start of the New Year. So the dynamic of 2022 is expected to be more in line with the dynamic of 2019 than with the dynamic of 2021. So a word of cautious here, it's a moving lots of moving parts And it's too but anyway, it's too early to comment further on that. And regarding your last question, Jamie, on labor costs, Particularly in North America, this is something we're very cautious about. We're managing inflation both Actually, on the food side, on the labor side, this is something that we're absolutely active on. We've passed inflation to our clients. We renegotiate. We have our indexation clauses in our contracts. So we were extremely active. And this is something that we've been practicing for many years, as you know. And we expect The market is a bit it can be a bit tense in some places in North America. We also think that as government support stops during the course of the summer or around Labor Day, this will ease a little bit some of the tensions on the labor market in the U. S. So we're confident we can manage that properly. The scheduling is very important. We particularly as we remobilize our contracts, We were extremely cautious. We put in place the tools to properly follow the work scheduling that will help us also managing labor costs. Thanks. So I can just follow-up on the disposals. Could you please quantify the sort of annual revenue and maybe operating profit that those businesses generated in 2019? Thank you. There are quite a few files and they are small. So maybe I'll give you more data when we come To the end of the year. But as you've seen so far, what we've closed had an impact of the net is minus 0.2. So There was a few acquisitions, so I think the disposal were about minus 0.4, minus 0.5. They are Slightly bigger entities currently being under review, but it's a little too early because I don't know if they'll be closing this year or next Or whether they'll be closing at all. So, I would say right now, we are around 0.5% of disposal. It's accretive to margin. We are selling things disposing of things which are margin dilutive and focus dilutive. So this is what we said. But nothing is massive. It's not big. But it will have It really depends on the cutoff. So it's a fine line here. Okay. Thank you very much. Thank you. And your next question comes from the line of Vicki Stern from Barclays. Please ask your question. Good morning. Just firstly coming back on the comments around retention. So you mentioned that's a clear focus for the team is improving that retention. Just if you could sort of put some numbers around that currently, sort of where you think retention is running or where you might expect to land this year in the context of pre COVID levels? And perhaps flesh out if there's any sort of big contracts that might be coming up for renewal that might be of any concern? And then sort of related to the previous question around net new business, I think you said you obviously want to get back you want the growth to get back to the growth that you were seeing pre COVID, which if I recall from a net new business growth standpoint was sort of flat and I think you're seeing a good healthy few percent from like for like growth. So is that what you're sort of suggesting you aim to get back to in terms of the net new business growth around flat? And if so, I suppose given your comments about the sort of exciting development, more first on outsourcing, etcetera. I suppose why not better? Thank you. Thank you, Vicki. So yes, I think so far, I mean, the retention is holding pretty well And almost in all segments, we see retention being solid. So that's pretty good. As you know, we had one significant contract in H1, which got reinsourced in the U. K. So that will have an impact on, of course, on the full year retention. But apart from that, at the moment, we're seeing some solid numbers. So our efforts are paying off. In terms of big contracts up to renewal, there are some things in the pipeline In Healthcare, as I mentioned in our previous calls, I am still very Cautious, but lots of efforts are, I think, are paying off. And Q4 is seems to be quite reasonably, I would say, reasonably solid on the retention in Healthcare. And Some large contracts in schools that we're working on. But I'd say overall, Yes. There's maybe 1 or 2 where we have to be cautious, but I'd say reasonably confident on the retention for Q4. And of course, we will concentrate our efforts also, of course, on next year. This is the top priority that I've said to the team. Yes. Regarding the net new business growth, flat It's not what I expect the teams to deliver. But What we're really aiming at is to be have a retention, which is above 95%. That's critical. We have to have a development that is same thing that is above 5%. So And then same fab sales goes on top of it. So that's how you should see the things moving forward. We were on that trend before COVID, and that's really how you should see it. But net new flat net new business growth is not satisfactory for us. And I've been very clear with the teams on that. Thank you. And sorry, just related to that then, do you not see that the potential development could sort of exceed then those previous levels. Just trying to understand how important the sort of vital spaces and some of the other concepts that you can talk into could be? Absolutely. Yes, sure. I mean, we're positive on the fact that we could have a stronger development, and we've seen it in several segments. I think what's critical also for us is the quality of the developments. I insist a lot also. And what we're seeing now is we signed at better margins than the business we lose, which is good. I must say that was not necessarily the case in the past. So we're improving also on that differential. But so good development dynamic plus the quality of the development, defending the value in vital spaces is definitely a way to create a lot of value for the clients and be paid for the value that we deliver. Okay. Thanks very much. Thank you. Thank you, Vicki. And your next question comes from the line of Jaafar Mestari from BNP Paribas. Please ask your question. Hi, good morning. I've got 2, if that's okay. Firstly, on new business, is it Possible to comment a bit more quantitatively for H1, you gave us the number of new sales developments of 2.8%, which if I calculate correctly is a little bit above EUR 500,000,000 of gross new contracts and Compass for benchmarking over the same period talked about It's more like £1,000,000,000 of new business. So has this been catching up a little bit? Or do you think there's Anything we should keep in mind, a natural lag because your multi service contracts take longer to finalize and sign. But in any case, is It's improving from 2.8% in H1. And just secondly, to follow-up on innovation, you're mentioning your consulting services, your software tracking, your hygiene protocols. And I'm sure you appreciate that for the casual observer, it's very difficult to rank Sodexo among competitors on this because literally everyone seems to have launched some sort of consulting offer, literally everyone seems to have launched some sort of high level hygiene protocols. So could you maybe tell us in which exact parts of the offer today you think you're the most differentiating? And in terms of nuggets, for example, it looks like you're relaunching vending in the U. S? Yes. Okay. So thanks, Jafar. First, as you know, we don't comment retention or new business trends on Q3. I must say that the trend that we had in the first half Is continuing, so I'm reasonably confident on the landing. And yes, I think, again, we have a pretty good momentum. And we'll give you the numbers as we reach the full year. In terms of The differentiation, I must say, there's no one there's no one there's no company that can have The set of services that we described in Vital Spaces, there's no one. Because from What WX does and WX has a great pipeline of companies that are really rethinking Their workplace experience, their employee experience to ensure that they attract people. Again, The vast majority of our clients want to create different employee experience to make sure that people go back to the office. And so great pipeline with WX and the whole suite of services that we have is absolutely unique, including The F and the food and the multichannel and multimodel food experience that we've developed with food delivery, with The click and collect and the click and deliver and the reinvention of traditional restaurants. So a lot of things that we've put together, concierge services that we put also in place. So I think it's absolutely unique, and that's what our clients tell us. To be clear, the we see great potential in reinventing our relationship with our clients in the corporate services world. And yes, there are some interesting opportunities in the U. S, particularly in vending that we are looking at. It's still a large market and yes, we'll be active on that. All right. Thank you. Thank you. And your next question comes from the line of Leo Carrington from Credit Suisse. Please ask your question. Good morning. Two questions from me, please. Firstly, on FM, growth seems to be stepping on very well, now about 10% above pre pandemic levels. Is this mostly the effect of extra cleaning requirements and the NHS contracts or other drivers be well too? And does this primarily favor the B and A and Healthcare segments rather than education? And lastly on FM, Have there been any weak points in this offering that have not done well in the pandemic and might perhaps bounce back? And then second question on BRS underlying contract growth. BRS revenues are also nearly back to pre pandemic levels. Can you just split out the impacts of new contracts versus like for like growth and how the sales pipeline progressed in BRS through the pandemic, but especially in recent months as we're approaching the reopening? Yes. So yes, indeed, FM growth is very solid. And yes, the NHS contract has been has supported that growth, but it's only part of that growth. It has helped the numbers in Healthcare, definitely in Europe. But overall, we see that being strong. We've seen That trend sustained a little bit less of extra COVID services in this quarter as COVID sort of maybe phased away a bit, which is a good thing. But despite that, the trend is there. So The array of services that we are providing, the integration of those services is still on high demand in all our segments. It's true that there was good momentum in business administration and healthcare. Education has not been as active just because of The fact that they were not fully open, but I think we're in a very good place. I don't see any particular weak points. We will see, of course, some again, some of the extra COVID services maybe fading away moving forward, But this is going to be a long trend. And the efficiency beyond the pure disinfection services, The efficiency that our FM services provide, particularly when we integrate them, is definitely bringing a lot of value for our clients. We are in a good place there. As you know, we've had over the past 10 years, we had almost double digit growth rate year on year, And that will continue. In terms of BRS, Mark, you want to comment? In terms of BRS, I mean, the new sales activity is there. As we've seen also, we've shown last time In France, there is, for instance, a regain momentum of large clients, but medium sized clients who want to have solutions for work from home. So the For work from home. So the pipeline and the momentum in new sales is there. The tension is more and it's the case For instance, in Brazil, on the employment at our client side where it's tighter than it used to be, so there are less Consumer spend or less employees benefiting from our voucher there and cards there. But in general, the development is still good and strong. Thank you very much. Thank you. And your next question comes from the line of Richard Clarke from Bernstein. Please ask your question. Hi, good morning. Thanks for taking my questions. 3, if I may. Just starting on education, your commentary seems like you've got incrementally more bullish on North American education, as you say, it doesn't hugely benefit your Q4. But how should we think about maybe that into Q1? Are you expecting North American education for Q1 almost back to normal, a few percent off? That's going to be quite a big boost if so. Secondly, some good detail around the new offers in B and I. Does this change any of your view around the 27% drop in office populations that you set out at your Capital Markets Day? And then the last question, you mentioned the uptick from selling new services or incremental services to existing clients. Is that largely an FM concept? Or are you actually managing to sell food services into and some existing FM clients as well? Thanks, Richard. So regarding education, yes, I think Particularly in North America, we are very confident. Schools will we expect schools to be fully reopened. And as you know, there was a big difference between North America and Europe in the past quarters. We expect this to be even now And all schools be reopened. On universities, we're also extremely confident that we see our clients wanting students on campus massively. We also know that students want to be on campus. They suffered from this remote learning. So At which level are we going to be versus 2019? Is it going to be a bit below, a bit above still The jury is out on this one because we will know by in the next few weeks So next few days, we have a much better view, but I'm very confident that levels will be very strong. So and that's very encouraging. And our business there, we have a good sales dynamic and also a good retention. So I think we're in a good place to start on the Q1 2022. With regards to B and I and the new offers, we will see definitely that as this trend of work from home will continue as we expected. We expect what we said, on average, the 2 days of remote working will remain. So that, of course, will have an impact on our volumes, more or less to the extent that we had anticipated. But the good thing is we see, 1st, that we can yes, we can definitely the dynamic in FM can compensate for some of that. But also what we see is new ways of capturing consumers with more attractive food offers. You have to know that even pre COVID, we were not capturing with in a way with a traditional offer. We were not capturing by 100% of the workers on the site, except, of course, when we are only in manufacturing sites where people have, in a way, no choice. But As soon as you talk about white collar, we were not capturing the full potential. So the more we provide digital services, The more we provide multichannel, the more we are attractive to the employees. So We definitely can compensate that loss of less people being on-site by more uptake into the consumer wallet, and that's promising. So that's why we're really accelerating our digitalization and that multichannel food offer that we're implementing across geographies. In terms of cross selling, yes, I think Definitely, this has always been an activity. This is the sort of sales that we like because it's the most efficient. We are already there. So we cross sell food into FM, FM into food, and that works well. So that is part of what we call the same site sales. And I think we always we have a good drop, yes. One thing sorry, one thing to add maybe is the fact that at this moment, and maybe because of the pandemic, People are very our consumers are very concerned about the food quality, the healthy food, the local sourcing. And as we know as you know, this is something that has been high on our agenda for a long time, where we have a very strong And it also helps us capture consumer wallet. Okay, makes sense. Thank you very much. Thank you, Richard. And your next question comes from the line of Andre Juilliard from Deutsche Bank. Please ask your question. Good morning. Thank you for taking my questions. First one was about North America, we see that especially on the B and I, the recovery is taking time same for education. When do you expect the situation to be back to normal? And can you give us a little bit More visibility on that side. Second question is about the competitive environment, considering that I wanted to have your views on how your competitors on the food in all geographies and especially in the U. S. Do you see some opportunities in terms of new contracts? And regarding BRS, do you feel any aggressive competition through the digital development and these kind of things? Thank you. Yes. Thank you, Andre. So yes, B and I in In North America, the recovery will depend upon 2 main things. 1st, People getting back to work in offices. And we see what we hear from lots of our clients that The beginning of September onwards is the moment where most of our clients we really request that people to get back to the office. There is still a during the summertime, there is still some kind of, they say, Easygoing attitude, but everybody said September, you're back to the office. With the amount of remote working that has been load by our clients. So this we should really see a pickup, I think, from September onwards. And of course, in B and A, we have with Sports and Leisure, and we expect that to also pick up. As you might know, we are less The proportion of our portfolio in sports is less than what we have in convention centers and conference centers. So This the pickup there will be a bit slower compared to stadiums, etcetera, because you have a sports event, people come. But for a conference, you have to have a pipeline. People have to get back to more of a Yes, it takes a bit of time. So the ramp up will be there, but probably a bit slower in convention centers than in stations. Regarding the competitive environment, I think particularly on the food side, it's very active. We're also very solid. And I think we're what The various also acquisitions that we've made help us be attractive, particularly in the tech sector, which is good. So I think we are in a good place to redefine our position on food. Regarding BRS, yes, we have seen some new entrants, the sort of the more digital native companies, some of them have taken some market share, But we've also fully digitized our services, as you know. And we are Also confident, and I said, particularly in France, for example, in terms of how the triple play offer is getting momentum with on-site BRs and the food delivery with food sharing or seasoned offers. So and that reinforces the attractiveness of BR services. The partnership that we've signed with food delivery companies that we mentioned, Just Eat Takeaway, Deliveroo and Uber Eats bring attractiveness to our offer. So I think we are in a good place to resist to the those new digital entrants. Okay. Thank you. If I come back on On-site Business, Don't you see any new contracts coming on the market, which were initially delivered by smaller competitors or nothing Significant at this stage? Well, the competition with the smaller ones has always been active. What we So it's always there. What we have not seen so far is and we were expecting maybe some of the smaller ones having difficulties and maybe not delivering the services. It turns out that probably also because we are in a non fully cash intensive business, people can survive even in tough times. So we haven't seen any particular failure from smaller ones. So I would say that the dynamic of the market There is pretty much as it was before. So we win from the smaller ones. We also win from the larger ones, and we also win from 1st time outsourcing. As I mentioned in our earlier call, and it's still the case. Our pipeline of first time outsourcing is continuing to improve, which is also a good sign of the health of the market. Okay. Thank you. Thank you. We have no further questions at this moment. Please continue. All right. Then maybe a few words of conclusion to, of course, thank you all for having been with us. I just want to reconfirm the fact that we have demonstrated a strong resilience during the crisis at the peak of the crisis due to The strong portfolio of clients that we have, the array of services and activities that makes a lot of sense for our clients and the agility that our teams have demonstrated and the discipline that we've put in place pre COVID has been extremely efficient during the crisis. So moving forward, as you can see, we are accelerating. We are improving our guidance. I'm very confident in the future. We are in a much better place than we were 2 or 3 years ago. We've digitized our services. We've reinforced the value proposition for our clients and again, very confident moving forward on how we would develop and get back to good growth levels and improve profitability. Thank you very much, and talk to you in October for our full year results. Take care. Until then. Bye bye. Thank you. Bye bye. This concludes today's conference call. Thank you for participating. 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