Good morning. Thank you for standing by, and welcome to the Sodexo third quarter fiscal 2022 revenues conference call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero. At this time, I would like now to hand the conference over to the Sodexo team. Please go ahead.
Thank you very much. Good morning, everyone. Welcome to our Q3 2022 revenues call. On the call today, we have Sophie Bellon and Marc Rolland. If you haven't already done so, the slides and press releases are available on sodexo.com. I also sent them to you this morning 'cause we had a bit of an issue on the internet site. I remind you that this call is being recorded, but may not be reproduced or transmitted without our consent. Please get back to us at the IR team if you have any further questions after the call. I remind you that the next announcement will be the full year figures on the 26, October. I now turn the call over to Sophie.
Good morning, everyone, and thanks for being with us today. Let's go straight into the presentation, and then Marc and I shall take all your questions. Let's turn to slide four. Q3 revenues grew strongly at 23.2% with a bit of help from currencies. Organic revenue growth was 18.3%, which was better than our expectations. On-site services was also up 18.3% with progress in all countries and segments. Benefits & Rewards organic growth accelerated to 17.7% compared to 9.3% in H1 due to a combination of new business, underlying growth in number of beneficiaries, and face value increases. In slide five, I wanted to show you the improvement we have seen post-Omicron in corporate services, in sport and leisure, and universities relative to fiscal year 2019 levels.
While FM remains very solid at 115% of fiscal year 2019 levels, food services have seen a strong performance this quarter, reaching 90% of pre-COVID levels, constantly progressing from one quarter to another since the bottom of the COVID crisis. Fiscal year 2021 was at 112%. As you all know, one of my strategic priorities is boosting growth in North America. I'm very pleased to say that year to date, development and retention continue to improve in the region. The return to work is definitely continuing to progress in all regions with corporate services back up to 93% of fiscal year 2019 levels in Q3.
Two years down the road from the prior Capital Markets Day, we're exactly where we thought we would be in terms of the impact from work from home, and we believe we still have opportunities to recapture business. Sport and leisure achieved spectacular growth this quarter, and the activity is now back up to 83% of fiscal year 2019 compared to the 22% in Q3 last year. Finally, I can confirm that we have good control of inflation in Q3. Now, let's turn to benefits and rewards. Here, we saw a strong acceleration in Q3 due to solid growth in all regions from growth in new business wins, in the number of beneficiaries, but also in face values. In Brazil, as we said last quarter, the stars are aligned because on top of good volumes, we have a favorable interest rate and an improving currency effect.
Finally, as you all know, we took the decision to execute our benefit and reward strategic plan without a private equity partner. I want to insist that the offers, while confirming the sum of the parts valuation, did not reflect the intrinsic value of the new strategic plan, and the advantages of an external partner did not justify the gap to intrinsic value. Turning to slide 8. We have won some exciting new contract during the third quarter. Let me pick some of them. Campus Cyber is a 26 square meter campus spread over 13 floors located in the heart of La Défense in Paris. Sodexo provide the 2,000 Campus Cyber occupants a 360 experience at the cutting edge of innovation with six food service spaces to provide enjoyable, quality, responsible, and sustainable meals.
These spaces accommodate the new needs of customers in terms of optimizing spaces and new consumer use. Other services include an evolving entertainment program on site and remote concierge services. In the U.K., the Metropolitan Police has chosen Sodexo to manage its estate and property-related services across London. This includes police stations, New Scotland Yard, communication facilities, residential and training centers, as well as air and marine support units that support the broad spectrum of activities performed by the Metropolitan Police. The team will provide a range of services, including strategic property advice, provision of IT systems, financial management, procurement, contract and supply chain management, operation and service continuity planning. In healthcare, we have a good momentum with the retention of ProMedica in the U.S. for a further five years. We provide food and nutrition services on 64 sites and environmental services on two sites.
Sodexo designed a customized offer for hospital and senior homes aligned with the client's strategy. The team has also very significantly extended its contract for food service, food services, patient nutrition and environmental services with Franciscan Missionaries of Our Lady Health System, significantly expanding our presence in the Southeast of the US. Finally, our new food models, offers, and brands are getting traction with tech and finance companies, East and West Coast, USA, as well as in London, such as Salesforce and PayPal in the U.S. or Palantir and Netflix in the U.K. The new business signed, whether it be for standalone new food services or combined with the traditional restaurant services, represents more than a third of our corporate services food business signed this year. Now, Marc, over to you for the detail of the Q3 revenues.
Thank you, Sophie, and good morning, everyone. I am pleased to be with you this morning to provide you with more detail on the performance in Q3. Revenues came in at EUR 5.5 billion for the quarter, up 23.2%, which represents EUR 1 billion more compared to Q3 last year. The currency impact was nearly double that of the first half at 6.6% due to the strength of the U.S. dollar and the BRL year on year. We are expecting the currency impact for the full year to be about 5%. Scope changes were -1.7%, also double that of the first half, reflecting in particular this quarter, the sale of the childcare activities on top of the sale of many other much smaller entities as part of our portfolio management.
With all of this, organic growth is 18.3%, of which 18.3% for Onsite and 17.7% for BRS. As you all know, inflation is significant in all countries today. We are all fully engaged to manage the impacts. Our procurement management teams are very active to identify all ways to limit food cost inflation relative to the market indices. We are also actively managing operational mitigation plan. We are reengineering menus. We are adjusting labor schedules. We are ensuring that the indexation in our cost-plus contracts are working well, and we are ensuring dynamic retail price reviews in all our sites. We are also attacking food waste reduction even more energetically.
In Q3, the pricing effect on the top line was more than 5% year-on-year, and we expect the full year pricing effect to be between 4% and 5%. Turning to slide 13, Business & Administration was up a very strong 26.6%. In North America, organic growth was +50.9%, which continued return to work in corporate services and an acceleration in sports and leisure as the convention center activity picked up post-COVID. I remind you that the convention center started to see bookings recover some months ago, but there is a lead time between bookings and events. Energy & Resources continue to generate solid growth due to new contract startups and the return to work of office staff. On the other hand, Government & Agencies growth stalled with no new business.
In Europe, organic growth was +27.2%, with a noticeable return to the office post-Omicron and a strong pickup in conventions, corporate events, and tourism benefiting all sports and leisure venues. There was a lack of new business in E&R and G&A. In Asia Pacific, Latam, Middle East, and Africa, organic revenue growth was +10.1%. In corporate services, strong growth in Brazil and India more than offset the effect of the lockdowns in Shanghai. Activity in China was down, with white collar offices closed in Shanghai. Energy and resources continued to achieve very solid growth. New business ramp ups in Latin America, and particularly in mining, more than offset some contract losses in Asia Pacific. Healthcare and seniors was up +4.6% organically. In North America, organic growth was +6.8%. Seniors occupancy and pricing were positive.
Hospital same site sale growth is benefiting from a progressive pickup in retail, but it's still only back to 80%, and pricing reviews are also helping. The good news is that retention is improving and the pipeline is very active. In Europe, organic growth was up at +1.4%, impacted by the closure of the testing centers in the U.K. at the end of March. Excluding this closure, the segment in Europe will have been up 9%. Hospital retail sales are recovering and seniors activity has picked up substantially due to higher occupancy and net new business and some pricing effect too. In Asia Pacific, Latam, Middle East and Africa, organic revenue growth was +7.4%, helped by pricing revisions in Brazil and solid growth in China due to the COVID related activities.
Education was also up strongly at +17.4% organically. The 18.4% increase in North America is linked to a strong pickup in university retail and events post Omicron, despite ongoing staff shortages on many sites. Activity is now back up to 91% of fiscal 2019 versus 84% in the first and second quarters. Schools were also up, but at a much lower pace relative to previous quarters as schools took off last year from the third quarter. In Europe, organic growth was +15% with a strong recovery in schools attendance post Omicron. They also benefited from an easy comparative base due to the lockdowns in France and the U.K. last year. The sale of the childcare activity was effective during the quarter.
In Asia, Pacific, Latam, Middle East and Africa, organic growth was only 8.7% due to the effect of the lockdowns in Shanghai and Beijing schools, which offset some of the very strong recovery in India. Now let's move on to Benefits and Rewards Services. Employee Benefits organic growth accelerated to 21.8% compared to a very strong organic growth in issue volumes of 18.5%. This is a level of growth we have not seen in a while, and it is across all regions. It reflects strong increases in new business, better number of beneficiaries and rising face values. Service diversification was up 3.4% organically. The fuel and fleet activity grew strongly. However, this was offset by the substantial reduction in COVID-related public benefits.
In Europe, Asia and USA, organic revenue growth was 17.5%, with solid volume growth across the region and in particular in Israel, Romania and France. In Latin America, organic growth was +18%, boosted by growth in new business and increases in face values in meals, food and fuel across the region, as well as higher interest rates in Brazil. Operating revenues were up strongly +15%. This quarter, the financial revenue was up 62% organically due to the significant hike in the Selic, the official Brazilian interest rate, back up to over 13% today, compared to under 4% a year ago. The higher rates in most of the countries have not yet started to have an impact on revenues. Thank you for your attention. I now hand you back to Sophie for the outlook.
Thank you, Marc. Let's turn to the outlook on slide 21. We maintain our guidance for organic growth of around the bottom of the range of 15%-18%, and I confirm that we are aligned with the current Q4 consensus organic growth of 11.6%. We confirm an underlying operating margin of close to 5% at constant rate for the full year. Enhancing the effectiveness of our organization is one of my four priorities. As you may remember, in September, I took the decision to transfer responsibility for schools and government and agencies to the region. This was a decision that the teams internally had been waiting for. We're now planning a further major step for a simplified, local and more agile on-site services organization.
We plan to transfer full P&L accountability to the countries regrouped into three geographic zones, Europe, North America and rest of the world. There will be a gradual implementation from September to December 2022, in compliance with our social dialogue, as well as information and consultation processes where necessary. Last point, please put November 2 into your diaries for our Capital Markets Day, where we will present our strategies for the group and also Benefits & Rewards. Thank you for your attention, and I now open the call to your questions. Operator, can we please take the first question?
Thank you. This is the conference operator. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Vicki Stern with Barclays. Please go ahead.
Yeah, morning. Just firstly, coming back to the full year organic growth guidance, I guess it implies very little sequential improvement on the 2019 base into Q4. Just trying to unpick the reasons for that. Obviously, I know Q4 is a small quarter. I know you've called out that there'll be one less month of the testing centers in the U.K., but just any other sort of specific points you'd like to call out as to why there shouldn't be a sort of slightly better sequential move into that quarter. Anything we need to be aware of? Second question is just around the margin, really progression into next year.
I think consensus has around a 40-50 basis point improvement in margins next year. Obviously, there'll be some help year-on-year in terms of volume, but clearly inflation pressures are pretty significant. Without asking you to just sort of put numbers around it, just keen to hear your latest thinking on those moving parts for margin next year. Then just finally on retention and new signings. I know you obviously don't give numbers at the Q3 stage, but if you can just help us understand a little bit better the momentum you're seeing on both. I know you've called out in the release some positive momentum in North America. Perhaps you could give color on the retention in Europe as well and just generally direction of travel there for the group's net new business growth. Thanks.
Thank you, Vicki. For Q4, it's really a question of comparative base. Because last year, Q4 was strong. We had a ramp-up and if you look at the fiscal comparison to fiscal year 2019, last year in Q4, we climbed four full percentage points between Q3 and Q4. We are up against a very strong comparison. While in Q3 last year was weak. There is nothing magical. It's pure math. What we see though is that this year, the seasonality, we are expecting the seasonality to be a bit more back into play, while last year it was completely erased by the ramp-up. Q4 is as per consensus and there is nothing specific about it. It's just a comparative base.
As you're right, also, the rapid testing centers are completely out and there is the EUR 70 million, you know, volume last year that has disappeared this year. That's it. In terms of margin for next year, as we said, you know, we will catch up with fiscal year 2019 numbers with regards to revenue and margin next year. As you pointed out, it's a 50-50 increase. We are very committed towards this. You know, inflation currently, inflation is managed by us. I mean, we don't comment Q3 numbers, but Q3 margins are where they need to be for the guidance. We explained that we are mitigating inflation by different factors. We are confident for the evolution of the margin into next year.
Okay. Thank you, Marc. Vicky, for the retention and the net development, we are still you know happy with our retention and our development rates. We are very happy with what's happening in the US. You know, we don't give numbers at quarter, but we can say that at this stage, you know, in corporate services and healthcare, we have a very good net development year to date. Universities and school, as you know, it's a little early in the season, but the forecast is also very good. Globally, you know, we also very confident that we will improve our retention this year and also our development rates.
Thank you. One follow-up back on the margin question. I think you called out your full year guidance for price, which I think implies price in Q4 sort of 6.5%-7%. Just if you could flesh out again what the sort of cost inflation you're seeing is at the moment, sort of where that's come from, and then how you're expecting inflation in your cost to move into next year. Thanks.
Sorry, I didn't get the 6.5%. What was that?
You'd called out a 4%-5% full year pricing for your organic growth, which I think implies from my math sort of 6.5-7% in Q4. Trying to reconcile that with what you're seeing from a cost inflation standpoint and how that's moving.
The cost inflation, as I describe, you know, if I take purely procurement and price revision, we have a gap, but it's fully mitigated by operational measures. Currently, I mean, our gross margin is evolving well, and given that we have, you know, to manage inflation, we have pricing, we have procurement, and we have operational mitigation. The three together are working well, and we're not expecting them to work less well next year.
Very clear. Thanks very much.
The next question is from Jamie Rollo with Morgan Stanley. Please go ahead.
Thanks. Morning, everyone. Three questions, please. Just first, on the move back to being reorganized along geographical regions. I'm just wondering, you know, if we go back over the last six, seven years when you made the change originally, what has the company sort of learned? I was wondering why you're reverting back to the original structure. And also, is there any sort of cost we should expect from that reorganization? And indeed, should we expect any improvement? Secondly, it'd be great just to get an update on where you are on converting the contracts away from sort of cost-plus back to where they were. And what sort of timeline do you think of when the mix of contracts goes back to what it was pre-COVID?
Maybe you could remind us of that split between the different types of contracts. Finally, just a very general sort of high level one on the CMD. I'm obviously not expecting you to pre-announce any numbers today, but perhaps you could just give us an idea of the sort of boundaries or scope of any targets you might be giving. Are we looking at annual growth rates? Might you be giving an actual revenue or an actual profit figure, or is that still very much under review? Thank you.
Thank you very much, Jamie. Thank you for your question. You know, very, very important point. We are not moving back to where we were seven years ago. We have learned a lot from what happened, you know, in the last seven years. Especially, you know, it has helped us to put in place the strategic plan by segment, and created, you know, family and a go-to market strategy. Now, you know, we really want, we have been working, you know, in a dual accountability organization and we want more simplification and more agility, better execution.
We think, you know, that by putting the P&L back in the countries, it will give us that agility and that simplification. We've also seen, you know, during the last two years, during the COVID crisis, that things, you know, a lot of things happen by country and we can still see it now. We've seen also the, you know, the reactivity of the teams and the agility, and they have done an amazing job. We want to keep that agility. This will reduce the weight of the global teams and will provide, you know, more autonomy to the field and country. We do expect some savings, but it is a little too early, you know, to discuss it now.
We shall come back to you on this later. We also are working on this, and we have to consult the employee representative. I think we've been, you know, since 2016, we have been working with a matrix organization, and we have not yet demonstrated that it provides an advantage when it comes to growth or margin. That's why, you know, it is the right time to simplify the model. On the, on, you want to take the. Another second question whether-
There was a part also on cost and savings. We are currently working on it, but it's, you know, it's mainly something which is going to happen in global structures, not so much in countries. We are not expecting massive cost. If there were some costs, we will deal with it, but we could be expecting some savings too. It's going to be gradual in fiscal year 2023, and it's a little early to give you more details, but I think we'll come with more details next time. On the cost-plus, I will say that today we are almost where we were in 2019. In the U.S., you know, we are at 40%-42% cost-plus. In the U.K., we are where we were a while ago, same thing in Europe. I think from a cost-plus point of view, portfolio of contracts, we are there where we were.
On the Capital Markets Day, we will share more obviously on November second. What I can tell you is that next year we are committed to getting back to revenue and margin level of fiscal year 2019. Meaning, in terms of UOP, we were at 5.5%, and for revenue in 2019, we were at EUR 21.95 billion, so almost EUR 22 billion. Of course, assuming that no new strong pandemic, war or anything else of that kind will happen.
Thank you. Can I just go back to just the first answer, Sophie? You're saying you're not moving back to where you were six, seven years ago, but just from the outside, it looks like the three regions just look exactly the same. It looks like we're moving back to where most of your peers are. What exactly is going to be different about the new internal organization from six, seven years ago?
Well, I agree with you. You know, it's kind of a moving back, but what we want to keep, you know, is that we have created some segment family, you know, knowledge about the client, about the consumer, and we want to keep that, you know. We really made progress in that direction so that it is in that sense that I'm saying we don't want to move back to where we were seven years ago. Because I think we've really made progress, you know, of having definition of strategic planning by segments, where we want to go, the countries where we don't want to go with certain segments. We don't want to go backward in that area.
Because I think there, you know, in terms of targeting, where we want to be, what country, and you've seen that we have made also a lot of improvement. You know, we've gone from more than 80 countries to 55 today. It's about making choices, and I think it has helped us make choices and I think we need to keep doing that, you know, even further. That I won't let, you know, I want that to stay. That's why I'm not saying absolutely going back. I agree, you know, in terms of P&L, it will much more look like it was before.
Okay. Just on the CMD response, obviously, you're going to reiterate that guidance for 2023, but I assume we'll be getting some longer term targets as well.
Well, we'll discuss that in November.
Okay. Thank you very much.
The next question is from Leo Carrington with Citi. Please go ahead.
Thank you. Good morning. Firstly, you know, earlier this year, there's been a number of country exits and disposals of some businesses. I don't think there have been other moves since Q3, and correct me if I'm wrong. Again, not wanting to sort of preview the CMD, but do you see the portfolio as needing any further rationalization or in terms of business lines or countries? Secondly, it's back at H1 results, you mentioned the European GPO business being strengthened. Can you give us an idea of the relative scale of this versus the U.S. GPO? What the overall ambitions are for the GPO in Europe, and a general update on the GPOs as a whole. Have purchasing volumes recovered? Do they need further scale by region, e t cetera. That would be really helpful. Thank you.
Okay. In terms of the rationalization of the portfolio, absolutely, you know, I think it's one of my priority and we have done a number of things this year, and I'm not going to repeat them. You know them, you know, but the one that really have an impact on this quarter are Russia and also the active sales of the childcare business. Yes, we keep looking, you know, at what could be done. It's a little too early to talk about it. It's definitely, you know, an area where we still want, you know, to rationalize the portfolio and be more focused and especially on our food business.
Okay.
With regard to the EMEA GPO, yes, we have a strategy to expand Entegra into Europe. It's a mix of greenfield operation and M&A. You may recall, now five years ago, we bought the business called PSL in the U.K. Recently we've done two small acquisitions in France. We are opening bureaus in various countries. It's still small, but right now the U.K. is profitable, and we have the mission to break even quickly in most of the EMEA countries and generate organic growth with, you know, it's a question of lining up more salespeople and investing. This is what we are doing. It is a relatively modest in size today compared to the U.S. It's growing and it's a clear focus of the team. We want to grow bigger in GPO in Europe.
Okay. Thank you. In terms of the overall purchasing volumes, I guess maybe for the U.S., are they now effectively back to where you were pre-pandemic? Or has that been further-
You see that we are only at 90% of the food volume, so we are not fully back where we are. In terms of overall volume, as we said, that the revenue should be back to 2019 level next year. We are getting there. We are getting there.
Okay. Thank you.
The next question is from Jaafar Mestari with BNP Paribas. Please go ahead.
Good morning. I have a couple of questions. Firstly, just as a follow-up on new business and retention, are you able to tell us broadly how much of the 18% organic growth in Q3 was like for like? I'm asking because your retention and new business KPIs are indeed good and accelerating, but as we all know, they tend to be a little bit forward-looking. In H1, you still had a total organic growth that was lower than your like for like, which suggests in H1, net new business was negative. Curious if we've seen that inflection point in Q3 where contribution from net new business is actually already positive, or if we're gonna see it in Q4, or if it takes a little bit longer to ramp up those good forward-looking retention and new business numbers?
You know, if I take Q3, we have more than 5% pricing effect. And the net new business impact on Q3 is still slightly negative, but it becomes positive in Q4. And it will be quite neutral at the end of the year. The like-for-like in Q3 is between 13% and 14%, so to speak.
Is that like for like volumes and then there's extra 5% pricing, just to be clear?
Yeah. You've got like-for-like volume, let's say at 13%, then you've got pricing, and then you've got net new business to balance. Yeah.
Okay.
What I mean is that the net new business is not yet turned contributive, because last year, net new loss was negative. As we are progressing into the year, you know, starting, we will have a more neutral net new business in this year and a positive net new business in the year after.
Okay, is that realistic that the Q4 net new business is strong enough to make it neutral for this full year? It was -2 in H1, and you're saying not yet positive.
That's the plan.
Okay. Very, very strong in Q4.
Yeah, you know, we signed quite a bit in the beginning of the year. Retention was good, so we are currently opening contracts. Yes, it will have full effect in Q4 compared to Q3, where it was just a more muted impact. It's coming up.
Super. Thank you very much. Then my second question was really just a prompt for some background on the reorganization, because there were so many things happening around the same time when this was implemented. You, Marc Rolland, you were nominated as the next CFO in March 2015, but then you actually really only started as CFO after the reorganization was announced. It was announced in November, and then you started in December, and then Sophie Bellon started in January 2016. So it's quite debatable whose baby it was. But I think it's fair to say you certainly were the CFO who's implemented it and then increased the cost of it in 2017 and you know, defended the benefits from saving costs and then moving to a global organization.
I'm just curious, I don't know if it matters that much, but I'm just curious, what was the impetus, initially and why it took so long to review that?
Let's be clear, you know, it was first Michel Landel's baby, and then it was Denis, you know. I can tell you that we had many discussions with Denis trying to, you know, because we were not as happy as we should have with what had happened. You know, as I said, there are some positive effects of this turning organization. Denis didn't want to, you know, change or to simplify. It was also, you know. That's, you know, that's where the decision belongs. He was the CEO.
As soon as I started, you know, I started doing it what was obvious with the government and agencies and school, and then also working with the team, and I decided to go further and made the decision to adapt again.
Okay. Very clear. I guess a part of that complicated situation in 2015, 2016 is that you had the reorganization, and then at the same time you had the EUR 200 million, which became EUR 245 million, adaptation and simplification program. What's the overlap here? Was the global reorganization, you know, one thing which was a small part of that, or was a big chunk of the 245 directly related to the global organization? When you say no material cost, is it realistic to revert something that costs as much with this time no material cost?
What you have to take into account is that the past, I would say two years, even almost three, with the GET program, we really cleaned down the organization, we simplified it. Here, what Sophie is announcing is the ultimate steps to make the organization more agile and, you know, be organized by countries with full accountability. We have already done quite a bit, and now we are finally, you know, putting the last stones to it. Yes, there will be some costs to adapt it, but it's not going to be massive. You do not have to expect a plan the way you saw a plan in the past. This is not what we have in mind.
Okay. Thank you very much for the background.
One more thing that, you know, that I didn't mention yet, what I'm going to change is that, I've been working in the last month with a transition committee of less than 10 people, and this will continue. I think that's also a very big difference from what it was, you know, in Denis' period. He had, you know, 16, 17 people reporting to him, and I don't think that's good for the organization. It's also something that is going to change.
Thank you. Thank you very much.
The next question is from Richard Clarke with Bernstein. Please go ahead.
Hi. Good morning. Thanks for taking my questions. Three if I may. Just starting on Benefits and Rewards, obviously in the last quarter you've decided to step away from the deal. At the H1 results, you were quite confident. Maybe you can just sort of paint the picture of what changed. You know, were there bids that were in that got pulled away, or did you change your internal sort of valuation on it? What kind of change between the H1 results and that? And are there any other ways you maybe could monetize the BRS business with regional sales or anything else you might do further down the line? Second question, you sort of mentioned that, you know, rates haven't really flowed through in BRS yet.
Maybe you can just remind us what kind of sensitivity we should be looking for in BRS as rates begin to increase sort of in your non-LATAM markets. Lastly, I think you said that you are kind of on track with your 2020 predictions for the sort of return to office. If I go back to your 2020 CMD, you were talking about a 27% drop in average time in the office. It looks like your corporate services is quite a lot more recovered than that. It looks more like sort of 90-93% recovered. Just trying to square that circle in the gap between those two numbers. Is that new business or is that just inflation or, you know, is that take-up rates?
What's sort of bridging that gap in there?
Okay. Thank you, Richard. I'm going to take your first question on BRS. As part of the strategic, you know, review in recent months, we have defined a roadmap to accelerate the development of Benefits and Rewards. The option of opening up the capital of the Benefits and Rewards business to a private equity was not retained as the board of directors considered that it did not create sufficient value. I would like to add that if the offers confirmed the sum-of-the-parts valuation that we have seen from analysts, you know, from some of you, they did not reflect the intrinsic value of this new strategic plan.
The gap between this interesting value was, in our view, too high and did not justify the dilution to existing shareholders. That's why, you know, we didn't decide to go ahead. We are convinced that we have a, you know, strong development potential. In fact, the current environment is providing tailwinds which are particularly positive for the Benefits and Rewards business model. Interest rates and inflation going up back up again. We are very convinced and committed to execute the plan without a partner. We also have the investment capacity without an external contribution. That's where we stand today.
On the sensitivity, the math is relatively simple, maybe too simple. You know, let's say BRS has about EUR 2 billion of cash. If interest rate goes up by 25 bps on average, the yield increased by EUR 5 million. When you look at what cost you have in front of it, you don't have much cost. The flow through to EBITDA of interest rate is pretty high. You know, if you look back, I mean, we suffered a lot in our EBITDA margin because of lowering interest rates. You can see the progression this quarter of EUR 7 million versus last year at 62%. That's going to be definitely helping margin in the future.
Now, how much the interest rates are going to go up, this is a question, we will answer quarter after quarter. We know already in Brazil that the Selic is at 13.25%. It was at 4%. This is helping. On the last question, we actually did a review with the corporate services team recently. We believe that on the food side, between this quarter, Q3 and Q4, we will be back to what we said we will be or what will happen. It's September 20 when we did the last Capital Markets Day, the famous 27%. You don't see it in the overall corporate services number because the FM business has grown strong during that period and it's covering part of it.
The work from home impact that we modeled in September 2020 is currently where we are, and we believe there are opportunities to improve. We believe we can beat the model, but we are already there.
Also what we're seeing, you know, to beat the model is that today our client and the consumers, especially in corporate services, they want something different. Our clients they ask us to help them to bring the employees back on site. With some clients that before it was all about prices, now they are ready to pay more so that their employees will really want to come back to the office and have a very nice experience. It goes through the food service and through the offers. All those new offers, you know, that we have with the Good Eating Company, Nourish, Fooditude, they are part of.
Even in France, you know, with La Signature and they are, you know, the sales, the revenue recovery.
Thanks. Just to circle back on the first response there, which was very useful. What you're saying is you had bids which were in line with what, you know, some people on this call have maybe suggested you could have received for BRS.
Yeah. Yeah.
you decided to turn those down because on your review, you thought it was worth more than that.
Exactly.
Okay. That's very clear. Okay. Thank you very much.
As a reminder, if you wish to register for a question, please press star and one on your telephone. The last question is from André Juillard with Deutsche Bank. Please go ahead.
Good morning. Thank you for taking my question. Most of them have already been answered, but I wanted to comment on the balance sheet issue. You are in an especially comfortable situation, and I wanted to know if you have specific plans about it, thinking about new acquisitions to boost the top line growth and the optimization of the profitability, or if you are more ready to think about some return to shareholders, if you believe that you are comfortable enough. Thank you.
Well, I will start on this, and maybe Sophie can complement. We are well aware that we have significant cash available. Right now, as Sophie has stated, we are a lot more focused than we've ever been. I think we will explain all of this at the Capital Markets Day. We are currently working with the team on the strategy. You will see that later. Right now it's too early to commit cash on anything. I think. Let's push back the question to the Capital Markets Day.
In terms of M&A, yeah, we've always said, you know, that we would seize opportunity, but it's going to be more focused. We said, you know, we still want to invest in new food model, what we've done, and we will continue to seize those opportunity. We want to invest in the U.S. and we've done it recently, you know, with the acquisition that we have done in the convenience business. We are, you know, in healthcare, you know, we are interested by the HCM business. Yes, we will use that cash for acquisition, but they will be a very targeted acquisition.
That mean that we are more talking about small amounts, which should, one more time, leave you some margin of maneuver for some potential return to shareholders.
Yep. Yep.
Okay. Thanks.
This was the last question. I turn the conference back to the Sodexo team for any closing remarks.
Well, if there is no more questions, thanks for being online today. October 26 is our next meeting for the full year results. Have a good summer.
Thank you.
Thank you very much.
Bye.
Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.