Earnings Call: H1 2021

Apr 1, 2021

Good morning. Thank you for standing by, and welcome to the Sodexxa First Half Fiscal twenty twenty one Results Conference Call. I advise you that this conference is being recorded today on Thursday, April 1, 2021. I would now like to hand the conference over to the Sodexo team. Please Go ahead. Thank you. Good morning, everyone. Welcome to our first half fiscal twenty twenty one results call. On the call today, as usual, we have Denis Mathuel, our CEO and Marc Rolland, our CFO. 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. The 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 further questions after the call. I remind you that the next announcement will be the 9 month numbers on July 1. I now turn the call over to Denis. Denis? Thank you, Virginia, and good morning, everyone. I hope you're well. Thanks for being with us today. I'm pleased to be able to announce some much better numbers than we expected at the beginning of the period and much better than the second half last year. We're definitely on our way to recovery. I suggest we turn directly to Slide 5. You see that the group's organic revenue decline was 21.7%, in line with our assumptions. The underlying operating margin was 3.1%, much better than our assumptions. On-site services was down 22.2 percent with a margin of 2.9% and benefits and rewards was down 8.1% with a margin of 23.6%. In the next slide, let's look at our growth KPIs. Retention was down 30 basis points. But if you exclude the loss of the very large transforming rehabilitation contract in the UK, Where the government has decided to in house all the rehabilitation services, our retention rate was actually up 20 basis points, which is pretty solid. Comparable release growth was down 22.7%, clearly impacted by loss of food volumes due to COVID, whereas FM volumes remained steady. Development was slightly down 10 basis points at 2.8% and also solid. I remind you that this is Above the levels of first half twenty seventeen and twenty eighteen and in line with first half twenty nineteen and twenty twenty. And when you look a bit further into the details, I see an encouraging sales dynamic. Firstly, I'm really pleased to highlight the improved situation in Healthcare North America. The teams have worked hard. It's been very difficult, but the results are there. We have an 80 basis points improvement in retention, A 60 basis points improvement in development and the pipeline is being built up progressively. It is currently 5% Above the level of fiscal 2019 year end, pre COVID. However, as the teams know, We still have more to do to get the ratios back up to where they need to be. More generally, I'm also pleased to say that there has been a real improvement in discipline in our signings across all segments With an increase in average expected margins of 40 basis points on new signings, the lost contracts Margins which are 150 basis points below the contracts lost last year. And even more importantly, we have 140 basis points improvement in mobilization margins, which is a short sign that execution is improving. Finally, on the subject of sales dynamic, our pipeline is currently 18% above fiscal year 'nineteen year end. More than half of it is food and a quarter of the opportunities are from first time outsourcing, which is twice as much as at the end of fiscal 2019. So I think it's an encouraging start to the year in terms of development. Now on Slide 8, the transformation of our footwork approach. I remind you of what we said During our Investor Day in November, we are taking a modular 360 degrees approach depending upon the habits of our clients and consumers and our available services in each country or region. For example, we are not presenting BRS in all countries. Depending upon also The type of client. The approach will be very different, whether it is a factory in the middle of the countryside Or an office building in or outside the large city. And of course, it will depend upon the culture and HR policy Of each company that we serve, we are focused on our 3 big countries, U. S, U. K. And France And on our 3 future big countries, Brazil, China and India. And what we are absolutely focused on is affordable, healthy and sustainable food options. This transformation has been part of our journey since 2018. As you can see, over the last 3 to 4 years, we have invested in projects in preparation of this transformation. We have acquired some of the building blocks such as the healthy modern good eating company in the UK, The other food delivery services of FoodShare in France, the technological blocks in China with Meisam, Principally for On-site and in India with Zita, principally for BRS and much more recently, FoodiQ and Nourish, which are pantry services with Cloud Kitchens. These blocks have helped us to launch season in France, A unique offer of delivered fresh meals on a weekly basis to anywhere in France due to a chilled delivery service provided by the French Post Office. Food sharing has expanded into several big cities. We have launched Enjoy in France, Daily Express in Brazil, Good eating delivery in the U. K. And now good eating in the U. S. And all this has been accompanied by a substantial amount of digital, data management and IT investments to optimize our tools and capture and digitalize consumer relationships and payments. This is how we create, design and progressively implement our comprehensive food at work approach. And this puts the client and the consumer needs at the heart of the offers By providing the different services blocks from the traditional on-site restaurants to on-site convenience throughout the day, View on payment cards and delivery at home or on-site and order click and collect and click and delivery services. The integration of all our services creates an any food, any time, anywhere concept, which is highly appreciated by our consumers, of course, and also by many clients, particularly when they partly or totally finance the program to support their own employee value proposition. Now what you see in the slide is what has been chosen by the global headquarters of a prestigious tech client for a 360 degrees offer precisely thanks to all the different blocks that we can make available. Today, the almost 4,000 consumers in France have one single app with a full array of services, The 360 branded canteen offers for the 2 restaurants, a convenience food court Providing lots of food options such as Asian, vegetarian, street food pasta, the 2nd food court, which will be upgraded to our new easy brand I'll let the stage and meal pass cards for those that are working from home. Fully deployed, Employees will be able to use their meat card to order a food cherry and when they are working from home season. With this offer, an employee can eat what, when and where he or she wants at lunchtime. And now before I pass you on to Mark, I just wanted to highlight once again the modular approach that we have Depending on the client needs, the country solutions and the culture, we just won a great contract in India to scale up Amazon's employee experience in the country with a digital benefits offer. It is for more than 100,000 employees And for a period of 3 years, effective January 2021. This is a very exciting win for us with 100% virtual cards, One unique app, which provides delivery options on-site and at home through a seamless digital journey and secure payment via the Sodexo Zita app. And now, Marc, over to you for the detail of the financial performance of the first half. Thank you, Denis, And good morning, everyone. I am very pleased to be here with you this morning. As usual, you will find the alternative performance measures definition in Appendix management by Sodexo teams throughout the COVID crisis. We've had an exceptional 1st half free cash flow, And this is due to strong cash collection, better than expected underlying operating profit and much lower CapEx. But also, the exceptional add flows were much lower than expected, and I shall provide more details on it. As a result, we have generated EUR 237,000,000 of free cash flow in the first half, which is a record for what is usually a neutral to negative semester. Our net debt of €1,700,000,000 is now lower than what it was in February August last year. Our CapEx came out at €86,000,000 or 1% of revenues versus a more normal rate of between 2% and 2.5%. There are 2 major reasons behind this. First, clients are in no hurry to execute their CapEx project Given the current environment and so much of it has been delayed. And second, as part of the renewal of our contract, we had a response of the fire rights We expect CapEx to be higher in H2 and closer to the more normal range of 2 to 2.5. We are on track to deliver our EUR 350,000,000 cash program. So far, we have booked €264,000,000 of cost and generated €85,000,000 of savings. The negotiation in Europe has taken a bit longer than expected, so some of the cash out has been pushed back into the second half. With those, we have a very resilient balance sheet. At the end of the first half, we had €5,300,000,000 of liquidity, A gearing of 57% and a net debt ratio of 3.8 turns. This level of ratio is due to the temporary low level of the rolling 12 month EBITDA rather than the debt level. I shall come back also to this later. Let's now have a look at the P and L performance for the first half twenty twenty one. As you will expect, the year on year performance is badly affected by the pandemic. Since I'm sure you remember that it started to spread worldwide at the beginning of our second half last year. So revenue amounted to €8,600,000,000 down minus 26.5 percent or 21.7 percent excluding the currency effect And also, organic release in the contribution of acquisitions was negligible during the quarter. The good news is that we have 1st quarter in terms of profitability, with an underlying operating profit margin of 3.1%, down 2.80 bps or 2.50 bps excluding the currency mix effect, but a lot better than the minus 1.9% Margin in the second half last year. I shall come back to the analysis of this performance by activity and segment later. I heard that the 3.1% is in fact a 3.3% at constant rate compared to our guidance of at least 2.5%. Our other operating income and expenses were also up significantly to €128,000,000 reflecting the cost of the gas restructuring program. I shall also come back to this in the mid slide. Financial expenses fell to €50,000,000 as we benefit from an average gross debt cost of 1.6% at the end of the period, Having reimbursed the USPP in H2 last year. The tax charge came out at €53,000,000 The effective tax rate amounts to 63%, strongly affected by the non recognition of different tax benefits in France due to the lack of prospect of short term recoverability. Excluding the tax impact of the other income and expenses, The underlying effective tax rate is still high and will have been 40% against 29.3% in H1 2020. As a result, the group net profit was a positive €33,000,000 Stripping out all the exceptional elements, Net of tax, the underlying net profit was €128,000,000 Now I would like to come back on the other income and expenses on Slide 16. As we indicated in November, we've been Actively executing our debt program with a further €107,000,000 of restructuring compared to €158,000,000 In H2 fiscal 2020, all other elements reported in OIE are very similar to the prior years. So let's focus on Guess for a few minutes. As you may remember, we decided, on the one hand, to be proactive and to adjust our on-site labor cost To anticipate the expected end of furlough programs, these measures are margin protective. On the other hand, we are also working Our reduction of our SG and A, which is advancing well. Currently, we are just a couple of months behind schedule in Continental Europe I've seen EUR 264,000,000 of comps in total since the program started, and we have another EUR 85,000,000 to come in the second half of this year, which will complete the program. So far, EUR 123,000,000 of this cost have already been cashed out to date, But because of the delays in Europe, there is about the same amount again to come out in H2 and a further €69,000,000 next year. With all of this, we have generated already €85,000,000 of savings to date, of which approximately 60% are from on-site cost reduction and about 40% upside for SG and A. So I now want to explain how we managed achieve an exceptional free cash flow in the first half, first, we had a pretty reasonable operating cash flow of $405,000,000 given the circumstances. We had an exceptional positive change in working capital during the period. And finally, CapEx, as I have already said, was very low. As a result, our free cash flow was positive for the first half of €237,000,000 And the good news is that it was positive for both On-site as well as PR. In terms of the other flows, we limited acquisition and share buyback to an absolute minimum, And we did not pay a dividend on our fiscal 2020 earnings. As a result, our net debt has been reduced by €187,000,000 since August 31. On Slide 19, I wanted to highlight what happened relative to what we have indicated once again. Our recurring free cash flow for H1 was a positive €277,000,000 This was much better than the minus €100,000,000 outflow Some of it came from a bigger than expected geography as explained, but the bulk came from a much stronger working capital. Our teams have worked very hard on client collection and the BRX float was also higher due to slower reimbursement as a result of fresh Then some of the volume came because of client CapEx delayed into H2. When we look at the expected non recurring element, the restructuring cash outflow was less than Due to the delay that I have already mentioned in the European negotiation, and they will come more significantly in H2. Because of the prolongation of the pandemic, the government support has also been maintained longer and for larger amounts than we thought. And in fact, we had a positive impact of €62,000,000 in H1, but this will reverse in H2. As far as the Tokyo games are concerned, our contract has been renewed, And we've had less clients reform than we expected originally. Although there could be more later, we believe that the cash out in H2 The exceptional elements are well below expectation at only minus €40,000,000 I want to be clear that you should Much of the first half shortfalls of minus €210,000,000 of cash out will actually come out in the second half. A few elements to highlight. The operating cash levels are higher than in August by €200,000,000 Net debt is lower by €187,000,000 as you saw in the cash flow slide relative to OIBDA, but it also followed related to February 2020 pre COVID by nearly €400,000,000 Gearing is at 57% compared to 60% to 67% in OIBDA, even though it is up relative to February last year. Our net debt to EBITDA ratio, on the other hand, has increased to 3.8 turns from 1.3 turns a year ago due to the weakness of our rolling 12 months underlying EBITDA With the past 12 months being all pandemic months, I would like to highlight the effects of the COVID crisis and our rolling 12 months underlying EBITDA in Slide 21. Already, for full year 2020, the underlying 12 months EBITDA was down by 44%. Now at the end of February, the 12 months rolling EBITDA has had a noticeable step down, Although smaller in value than in the previous period, as a result, we believe that we've hit the peak in our net debt ratio at the end of February. We now expect the full ratio to improve gradually. Let's turn to the review of operations. The first half fiscal twenty twenty one revenues remain very impacted by the COVID pandemic. H1 revenue was €8,600,000,000 down 26.5 percent as published. Currencies accounted for 4.8% of this, In particular, the dollar and the rehash, there was no scope effect at all, so organic growth was minus 21.7 percent, Of which, On-site Services were down 22.2 percent or 21.6 percent, excluding the Rugby And benefits and rewards down 8.1%. So let's look at the On-site business, starting with Business and Administration. In H1, G and A organic growth was 26% down, a slight improvement on H2, which was at minus 29.2%. North America was down 46%. While government and agencies as well as energy and Both performed well. Corporate services was still impacted by office closures with food services down significantly And with little quarter on quarter improvement, in sports and leisure, sites were still largely closed. In Europe, sales were down minus 28.9 percent organically or minus 26.8 percent excluding directly. This compares with 31.6% in H2 last year. The 2nd quarter was slightly better than the first and improved in all subsegments Organic growth was plus 0.4%, thanks to a return to growth in the 2nd quarter. Energy and Resources continued to generate solid growth, but lower than in the previous quarter as demand for extra COVID related services subsided, particularly in Australia. China and LatAm remain very strong across the board, somewhat offset by India, which is still severely impacted by the pandemic. Healthcare and Seniors remain much more resilient than the other With the limited organic decline of minus 2.1 percent, a marked improvement from the minus 11.1 percent in H2 last year. Organic decline in North America was minus 9.8%, improving very progressively quarter on quarter And again, the 14.6% decline in H2. There was a positive improvement in patient revenues, But with no signs of improvement in retail sales, cross selling was very solid and as David pointed out earlier, an encouraging sales dynamic. In Europe, organic growth in the first half was plus 12.7% and plus 15.5% in Q2, against the decline of 3.9% in H2 last year. This performance reflects the strong contribution from the ramping up of the COVID-nineteen rapid testing centers contract in the U. K. This contract is expected to remain strong in the next few months. However, patient food services and retail sales are still impacted by lower level of elective surgery across the region Due to the successive COVID-nineteen wave, seniors' activities improving progressively. In Asia Pacific, Qatar, Middle East and Africa, the 3.6% organic decline was better than in H2 last year and improved in the 2nd quarter at minus Education revenue was down 31.9%, a lot better than the minus 47.2% in H2 last year. North America at minus 39.7 percent remains very impacted by the pandemic. Universities are suffering from from low meal volumes due to less student on-site and the late start of the academic year and weakness in the end of our earnings. There was also some further weakness in Q2 due to the late start of the spring semester, representing 14 days late in our Q2. Schools are progressively reopening, but the majority remain closed for most of the fairies. However, our emergency programs are still in place. In Europe, the organic decline was minus 8.3% with most countries For most of the period, even though there were some erosion in volumes due to delayed opening in Q1 and occasional class closures in Q2. The 2nd quarter trend also deteriorated slightly due to the second wave closures of U. K. Schools. Even though there was a significant improvement in Asia Pacific, LATAM, Middle East and Africa in H1 at minus 15% Relative to the minus 45.3 percent in H2 last year, India remained very weak and was not yet compensated by the progressive reopening in China, where the volumes in international schools are still low. Underlying profit for On-site Services recovered half of the drop of H2 fiscal 'twenty to reach €235,000,000 and a margin of 2.9%. The improved level of margin was mainly due to strict cost control, Significant contracts for negotiation, prolonged trial scheme and the first result of the restructuring program. So if we go into each segment, G and A returned to profit with the margin at 0.4% in spite of Sports and Leisure still generating a loss Due to the very significant decline in activity and its incompressible residual costs. The other segments were all positive with government As Garrett's seniors remained much more stable during this crisis and recovered back over the H1 fiscal 2020 level by 10 basis points With an improvement in each region, this solid performance is a result of strong execution on staffing and food cost in Education comes back to a positive 4.3% from a big loss in H2 last year. However, I remind you that this reflects the So despite the contract renegotiation, we still have a big gap of 4 10 bps or 4 100 bps at constant rate. Now let's turn to BIAs. In the first half, employee benefits revenue were down 8.4% organically compared to plus 0.2 percent in issue volume. This is a significant improvement relative to the second half fiscal twenty twenty trend Even if the slowdown in merchant reimbursement from November due to lockdowns in Europe weighed on the Q2. Services diversification was down 7.2% linked to the continued difficulty in the health and wellness and mobility market in most countries Due to the closure of most sports facilities and the lack of business travel, human fleet provided more resilience. Public benefits are up strongly in all regions. The trend was significantly better in the 2nd quarter, not only minus 3.9% due to a return also to growth in incentive and recognition. There was a big improvement in Europe, Asia and U. In H1 down only 7% against 18% in the H2 last year. It was due to a much improved performance in Q1 As restaurants reopen and reimbursements caught up with issue volumes. However, since November, this has reversed itself again This is the 2nd wave of lockdown. Looking at Latin America, sales declined minus 10.1%, Also much better than H2 last year. Overall, issue volumes and reimbursement volumes were stable in the region. Revenues in Brazil are still impacted by a highly competitive environment, while the effect of the decline in interest rate is now subsiding from quarter to quarter. The momentum in the rest of the region remains solid, except in Chile still significantly impacted by the pandemic. In this slide, you can see that operating revenues are down by 7.4% And that financial revenues have fallen more significantly due to lower interest rates almost everywhere and in particular to the decline in Brazilian interest rate. However, given that the rates have stabilized from quarter to quarter, the decline is easing as the comparative figures become less challenging. BRS underlying operating profit and margin are recovering from the lows in the second half last year. This performance is a result of lower production costs linked to the increasing share of digital, the first result of the restructuring program and still Thank you for your attention. I now hand you back to Denis for the outlook. Thank you, Marc. So let's turn to the outlook now. As far as the H2 assumptions are concerned, I want to say that I'm absolutely confident that we will see a rapid recovery once Vaccination is fully deployed. However, in the short term, the situation remains volatile, particularly in Europe with the arrival of new waves of the pandemic. As a result, we expect little improvement in the quarter on quarter trends through to the fiscal year end in August. On the other hand, as we lapped the start of the pandemic last year, As we continue to renegotiate our contracts to ensure the best possible level of profitability, As we execute our restructuring and as we activate all government support available, for the second half of fiscal year twenty twenty one, we expect of around 3.1% at constant rate, with the traditional seasonality gap Between the first half and the second half margins offset by the cost containment and restructuring and an annual cash conversion of more than 100%. I am fully convinced that pent up demand will ensure a strong pickup in all segments and activities Once the pandemic is over, we have also learned a lot during this period. We have the capacity To put our services together into offers, which are really helping our clients today to adapt to the crisis situation in the short term And more fundamentally help them redesign critical elements of their value proposition for their employees, for their patients, medical staff, pupils, students, etcetera, And bring efficiencies in the ways of working of our clients. We are winning contracts With our joint on-site and BRS offers, we are winning contracts with our Vital Spaces offers. There is definitely a positive momentum ahead of us. This is exciting. Our organization is totally mobilized, and I firmly believe that we will fully benefit from all of this. And I can assure you that our teams are extremely active in the field with our clients to promote all these services, And I want to thank our teams for that engagement. So looking further out on the basis that the pandemic will be over by The group aims to return to sustained growth and to rapidly increase the underlying operating margin Back over the pre COVID level, I now open the call Your first question comes from the line of Bilal Aziz from UBS. Please ask your question. Good morning, everyone. Thanks for taking my questions. 3 for me, please. Firstly, just a clarification on the second half Volume related guidance, as per the first half, does that range account for potential new lockdowns such as in France overnight? Just that clarification. Number 2, just on the margins within the second half, please. I appreciate this is a abnormal year, but how should we think about the seasonality In your margins versus your typical 50 bps to 100 bps, I believe your guidance suggests savings of about 60,000,000 in the second half. Does that suggest less of a seasonal impact or is there anything else which is offsetting that? And lastly, on first time outsourcing, you flagged the pipeline accelerating. Pat, can you break that down between some of your verticals, so SA and Medication and Healthcare, please? Thank you. All right. So in terms of thanks for your question. In terms of the volumes, we've given a range of plus 10% and plus 15%, and It includes what we know at this stage. We had some announcements, for example, in schools in France last night, but this is This was somehow anticipated. So this is within the range that we've given in the percent to plus 15% For the second half? In terms of the margins? Yes. In terms of margin, we First, we fundamentally say that we have renegotiated a number of contracts and some of our contracts more of our contracts Today, I mean, the past are costless contracts. So they are they protect our margin better even when the volumes are done. The second thing also is that we have a strong ramp up of the selling program into H2. And we were not expecting at this time of the year to be benefiting also from furlough, but I think we will be benefiting from some furlough In H2, like we did in H1. And the volumes, as we said, we're not expecting The volumes of H2 to be much higher than H1, but they will be similar to H1 and that will also support the margin. And in terms of the pipeline, yes, we have a better pipeline than last year. It's definitely improving. The first time outsourcing part is also improving, not yet at the level we want it to be, but it's improving. And I would say it's coming across the board in the different segments and also it's quite balanced between food and FM. So we have I would qualify our pipeline as healthy. As you know, we've worked a lot on the targeting. You've got some information on the discipline in signings. So all this, I think, will contribute to Some, I think, a strong top line moving forward. Perfect. Thank you very much. Thank you. Your next question comes from the line of Jamie Raulieu from Morgan Stanley. Please Three questions along similar veins To the previous ones, please. First on the sales guidance, if my math is right, that's a decline of about 16% to 20% On the second half of twenty nineteen, so a small improvement it seems like. If you could just sort of break down where you That by geography and industry and maybe if you could talk about perhaps what you're seeing in the U. S. In the most recent weeks, if there's any improvement there? Secondly, on the margin guidance, as you say, seasonally, you're normally, well, I think it's near 100 basis points lower In the second half than the first half. So essentially flat guidance suggests you're sort of maybe 100 basis points better, but That does sound like a slowdown in the pace of underlying momentum and yet you said you've still got further contract negotiation gains, furlough, etcetera. So I'm just wondering whether there really is an underlying slowdown even adjusting for seasonality. And actually, if you could also give the Q1, Q2 margin split, that would be really helpful. And then just finally, on the sales dynamics, Are you seeing enough to give you confidence that your net sales wins or your development can actually accelerate Coming out of this or are we still looking at a similar growth rate to pre COVID? Thank you. In terms of the Thank you, Kevin. Yes, you're pretty right in terms of how you compare with 2019. I would say We don't see any, as we said, major improvements in the next months due to So the factors, as we know, Europe is a bit stalled due to the pandemic and the lockdowns happening here or there. We expect the U. S. To recover more likely from summer onwards Because we see people progressively as vaccination really spread and it's really deployed and we see that very positively. But by the time everything is done, it's going to be summertime. So It's we see the recovery we expect a strong recovery in the U. S, but probably more towards the beginning of next fiscal year. Same thing, the schools season will stop quite soon. And nothing will change in universities. Even summer camps are still a big question mark for the summer. So we're why we are extremely positive in terms of How we can really pick up the volumes from the beginning of next year, we don't expect Some major changes in the second half. Sports and leisure, there will be some pickup Also in the U. S, however, our portfolio in sports and leisure is more skewed towards convention centers and pure sports. So again, it's going to be more in 2022 than many things happening in This until this summer. That's how I would see The trend, what we know is when a full population is vaccinated, I mean, things are really recovering. We have very good numbers, for example, in Israel, in our benefit from our activity in March. Now the whole population in Israel is vaccinated, and we have very strong increase in volumes Compared to pre COVID-nineteen, so that's very encouraging. On the margins, Mark, I'm not clear why you're saying it's just the scoping note. What we are seeing is that Contrary to a normal year because of the contract negotiations we've had, the contracts are not reacting exactly As it were historically, especially in education, so the scope is less. We were not expecting much benefit from furlough in H1 and we did and we believe now that there will also be some furlough impact in H2, It will be lower in H2 than in H1, but there will be some. The savings program, as you've seen, the numbers Ramping up. So there will be more selling in H2 than there will be in H1. And based on our hypothesis, the volume in H2 will be very similar to the volume in H1 and that also brings some extra revenue. And some of our segments and activities are very revenue sensitive. For instance, for Telenetor, today we have incompressible cost. You had a little bit of revenue that helped significantly the margin immediately. So it's also a question of mix and where do you see more revenue. And we see more revenue in Port and Leisure. Definitely, it's something to be a boom, but we are expecting we are heading in August, so we are expecting And we are also expecting universities in August to ramp up significantly. So all of this has an impact on the margin, which allows us to say that we see similar level of margin in H2 That's why we are saying around 3.1% for H2. We are not giving the Q1, Q2 split. But as you know, there is a little bit of seasonality, so Q2 was a little lower than Q1. In terms of how we kind of accelerate growth, yes, I think definitely my ambition is to actually As we get out of COVID, we have growth rates that reach and then Over the rate that we had pre COVID, I focus the organization a lot on, Of course, the sales dynamic, the retention and also the good balance between the growth and the profitability. I think we Much better this evening was highlighted earlier. So we've reinforced our offers. We digitized our business, which helps us capture more of consumer revenues. So I'm confident We are all hands on deck on retention because this is critical. We've done pretty well with the crisis, sanitary crisis. So Yes. My ambition is definitely to have growth rates post COVID that are above pre Yes, please go to rates. Okay, thanks. I think I have most of the answers. Just coming back on the second half sales guidance, you both keep saying there's no major change, no change in volume H1 to H2, but I think your guidance does imply An improvement. Are you saying that's all going to be in Q4, so the Q3 run rate will still be down maybe 21% And then sort of much better than that in Q4? You can assume that. Given also the seasonality, we can also expect the positive towards the real end of Q4 Yes. Schools will start well in the U. S. And universities. We can have a in sports and leisure, we can have an encouraging End of Q4, but it's going to be towards the end of Q4. The difficulty is that it's a matter of weeks and August July August are supposed to be strong in our model. So, if it sits by 1 week or By one week, you can add some volatility here. So that's why we gave a range because we don't control the vaccination and the reopening of everything. So But where we are confident that the economy is building up, that's quite important. Okay. Thank you very much. Thanks, Jamie. Thank you. Your next question comes from the line of Jafar Mestari from Exane. Please ask your question. Hi, good morning everyone. I've got three questions, if that's okay. So firstly, coming back on this Point about seasonality in margins. Historically, the delta in group margins, if I'm correct, has been Almost entirely driven by just the Education segment, which has pronounced seasonality. So if we look So at segments that are less seasonal like Business and Industry, do you think you'd be able to show Sequential margin improvements in B and I into H2. And Secondly, still on margins, I guess, how does it work from here? What's the sequence to better margins in the medium term? And in particular, Can you see margins improve as soon as revenue starts to improve or will there be a lag? Is there a cap on margins on some of your Now renegotiated cost plus contracts, do you need to formally move these contracts individually to P and L to see the margins improve or will they be an automatic improvement? And just lastly on your performance by subsector, you've talked a little bit about how Sports and leisure, the fabric of your portfolio there is a bit more expansion, so a little bit less true sports. There's another sub segment where I was a little bit surprised to actually see universities within education deteriorating Between Q2 and Q1, is it just a matter of weeks months because you don't have much In that base, did you see significantly better trends with a later opening in universities? Or is there anything else in that sequential deterioration, please? As you on your first question, As you saw when the volumes were down, our margins are very revenue sensitive, which was close to Which were double digit and so 20%, 25% when it was coming down. We believe that the same thing will happen when it's coming up. Our models are revenue sensitive. Now we will have to reconvert Some of our contracts from cost plus to P and L to fully benefit from the ramping up. If they remain cost plus, it will slow the ramping up, But those contracts will come back to P and L in due time. So we are Very revenue sensitive now to increase the margin, and that's why I think we are confident in the coming year With more volumes for the margins to increase. Okay. So in terms of sports and Yes, I spoke about this. In terms of universities, yes, the deterioration between Q2 and Q1 is just Turning to a delay in the opening after the Spring semester that has been delayed. So there is no major change In terms of on the market, the university has adapted to the pandemic, and there has been 14 days in Q2 delay, which has impacted the numbers, but there's nothing structural that had happened That would explain further deterioration of the market conditions there. I firmly believe back to the earlier question that key points of revenue coming up With margins coming up as well, of course, as volumes will pick up, we will get back to the margins. The gross margin Has held really strong during the crisis. Marc mentioned that we renegotiated some contracts. We renegotiated them back. Some terms and conditions will be we leverage also some learnings of the crisis in a positive way. So, yes, I'm confident in our capacity to increase margins moving forward, really. Thank you for that. And maybe apologies if I wasn't 100% clear. I just had a first question on the segment Margins, I appreciate there is significant decrease now at the group level. But if I look at the last 4 years, It's almost entirely because of the education segment. So BNI has higher margins in H2 in 'seventeen, 'eighteen, 'nineteen. So with that in mind, would you assume you're actually able to show sequential improvements In B and I margins into H2, please? Yes. Sorry, I mean, I skipped part of the first question. Yes, the slowdown in margin is mostly linked to education historically. What we see historically is that the corporate services margin are relatively stable from last semester to the next. And here, it's really a question of volume and when the food service volume will pick up. So, right now, I mean, we are not expecting A big ramp up of the margins in corporate services from H1 and H2 because it all depends as to when are the consumer getting back into the food service side. And we are seeing it progressively going up. But with the new lockdowns across Europe, it's been very rocky. So yes, the confidence that the margin will increase in Corporate Services there, it's all a question as to when are the volumes picking up in Food Services. But historically, the margin in corporate pricing was relatively flat for 1% and comes from the line of Leo Carrington from Credit Suisse. Please ask your question. Good morning. Thank you. Three questions for me, please. Firstly, on the retention rate. Obviously, underlying improvement, but Is there any impact, any tailwinds from delays to tendering processes due to the pandemic? Maybe it's a related question, CapEx was very low. Is this perhaps connected to the higher retention rate and therefore maybe temporary? Secondly, does the interplay between better gross margins In newly signed contracts and the GET program, to what extent are the better margins in the new business due to pricing? Or is this rather the cost of void infections? And then lastly, just to elaborate on the previous questions On the global pipeline, what are the specific drivers Behind the improvements, is it smaller competitors under pressure, therefore, business coming to you? Is it generally better outsourcing environment? And How would we expect this to flow through to contract wins in terms of timing? So in terms of Thanks, Theo. In terms of retention, yes, we don't see any particular tailwinds During the pandemic, I think we've had we basically had It's very good activity with our clients. So we could say that, that will that can help support our retention, yes. But we will be very, very cautious. Of course, we demonstrated great, Great service, outstanding service to our clients. And this We want to be this retention has been a critical element of our focus. And I'm really confident that we'll continue to be solid on this one. CapEx that has been delayed is not a risk in terms of retention. We've agreed on CapEx with the clients. We've delayed some For very good reasons, due to the pandemic. So yes, I think that's not an issue at all. In terms of GET, Mark, I'm not sure I understand the question completely right, but the GET program It's a cost reduction program. The renegotiation of contracts were not part of GATE, were part of the normal life. So The GET program is really taking labor out of site and increased productivity on-site and adapting The labor to the revenue and to the new offer during the pandemic and post pandemic. So It is the cost management program. The renegotiation is what we did a few times now To adapt the service level, to adapt the pricing, to adapt the structure of the commercial arrangement with the plan, So guess it's cost reduction. And now in terms of the global pipeline that you mentioned, I think there are several elements. We see yes, we see a bit more of first time outsourcing, as I said, I mean, it's probably a mix of Some clients or some prospects really thinking about that it was hard to operate during COVID. There's more and more pressure to operate complex services. And so first time outsourcing It can mean a lot for prospects to ease their way of operating. We also have put a lot of focus on our sales force to that type of client. So I think the targeting that we put Influences, of course, our pipeline. I must say that we put a lot of efforts Even pre COVID on our sales force, we're trying, we're recruiting good people, we We put a lot of focus on the quality of our sales, on the targeting, on how we target, how we did, How we organize this. So I think that's all this contributes to the healthier pipeline that we have today than before. Okay. Thank you. If I might just on that second question on gross margins, I was really just looking at the comment that New Signature gross margins were up 40 basis points, whether that was purely an improvement in quality and improvement in mix Or if you're also factoring in some of the cost savings into that metric. Okay, David. Got you. No, no. When we say that we are improving margins of new signature, it's really complementary Our offer has stronger and better price than they were a few quarters and it's a continuous work. So We continuously work on the O4 and the pricing and the targeting because when you target the right clients with the right terms, You end up with better margins. Okay, great. Thank you very much. Thanks, Tahira. Thank you. And your next question comes from the line of Richard Clarke from Bernstein. Please ask your question. 3, if I may. Just wondering, your commentary that you expect or hope that the pandemic will be over by the beginning of calendar year 2022, On the basis of maybe your conversations with clients, your experiences in Israel, how long between that date and the sort of return to normal volumes or Return to kind of long term volumes would you expect? And second question, you kind of put the phrase out there, pent up demand. Are there any segments where you think there's a possibility that you can We capture any of the lost volumes through this pandemic, maybe in healthcare or in sports, if there's a strong sports calendar coming up in a couple of years. And then last question, maybe a little bit more prosaic, but just wondering about the interaction between benefits and rewards and working from home. My understanding is if you're working from home, You're not necessarily entitled to the same level of sort of vouchering as if you're working in the office. So how is the how do you expect benefits from rewards Thanks, Richard. Well, the rate at which we can get back to previous volumes It's still a bit of a question mark. Of course, we'll get back to the importance, of course. When exactly it's hard to do to have a Preciseis vision today on this as the pattern Behaviors of our clients will evolve. What I'm sure is that In all our segments, including corporate services with the impact of work from home, we can get back Progressive to the levels of pre COVID or even above that, we know and that will answer also your question on work from home. We know that there will be a part of a switch of our volumes In our food volumes, but first, we know and we mentioned that in the Investor Day, we can sell more FM. Our Vital Spaces offer, which is a comprehensive offer that reinvents the workplace, is getting very good traction. And as clients want people to go back to the office, they reinvent Many of them want to reinvent the workplace. So we have lots of opportunities there. Healthcare volumes will come back. Sports and leisure volumes will actually come back and will probably come back quickly in sports and progressively in convention centers. So I'm very confident that we, of course, we go above pre COVID volumes. Well, exactly, it's hard to say. Same thing for the margins as we said. We can recover the margins back over the pre COVID-nineteen margins. In terms of benefits and rewards and working from home, this is, of course, This is very linked to the HR policies that our clients will put in place. What we know, Overall, we've estimated that companies more or less on average will end at 2 days working from home on average. Of course, it Depends upon the industry, on average, that's what we estimate. How many clients will decide to accompany Their employees with that kind of benefit of vouchers when work from home is still hard to say. We are getting good traction In our integrated offer, I mentioned that we signed 20 clients on the fully integrated offer, The one that we described for this tech client, so in France, so we're getting good traction. But it's Too early to say where exactly we will land on what clients will decide to give to their employees. We don't see a massive swap from the canteen to the vouchers. This is not happening. It's just that we are adjusting the volumes on our content and restaurants and getting good traction on vouchers, hard to know what exactly Okay. That makes sense. Maybe if I can just ask a quick follow-up on the sports. Just any commentary on the Olympics This year, it sounds like it's going to go ahead, but with no international fans and what impact that will have on your kind of H2 numbers? Right. Well, yes, it's still a bit early to say because uncertainties. We know that there won't be any For the Olympics, we have, of course, renegotiated the terms Our contract with the Tokyo 2021, HCL, again, it is very volatile. We don't know exactly We have centering protocols they put in place that will impact, of course, our volumes and our hospitality packages. So we've reshuffled the T and Ts of course of our contracts. I think a bit too early to evaluate what exactly you can expect in terms of volumes, Mark, I don't know if you want to no, but we were expecting more than €100,000,000 of revenue in Tokyo 2020. Currently, as you can see on the cash flow side, we have sold €420,000,000 We reimbursed All together, so we still have about $60,000,000 of sales cash in, but we don't believe we will make more than that. We believe we'll make probably a little less than that Because there will be some cancellations of events and so forth. But currently, we have a contract which allows us To provide hospitality on-site. And so it will be much lower than what we were expecting. But If it happens, we will be there. Yes, and we were in that condition, absolutely. And we already were not expecting a massive Inflow of international plants anyway, because we knew that we would be at 9% to 9% to 5% of Japanese Plans. So yes, it's true. The sanitary protocols that will be put in place And that we will have that we know more in the coming months with TELUS, the volumes that we can have. Too early to say. Makes sense. Thanks very much. Thanks, Richard. Thank you. And your next question comes from the line of Yaki Pam from Barclays, please ask your question. Hi, good morning. Yes, Vicki Stern. Just firstly, you talked about the health care improvements in the U. S. In terms of the signings paid attention. Could you just give us an update on U. S. Education? What's the situation there on both and certainly on your expectations around retention going forward? And actually related to that, any thoughts on the structural change potential for education? You obviously talked at length around your views on work from home, but just keen to know what your thoughts are on the education sector, any long term impact? Secondly, around furlough, can you just call out how much help you actually got during first half and what your expectations at this stage would be for second half government support? And then finally on cannibalization, just if you do see that transition from switching from sale in a canteen to more being spent on vouchers, Just what's the sort of net impact on your profit from that from an individual meal sale? Obviously, I guess you take less, but just any sort of help around that. Thanks, Vicki. So yes, we see some improvements in health care. I want to say that in health care, we still have to be very, very cautious. We're The tough race on that market, there is some consolidation of those systems that make the Segments by nature are very competitive. So we're cautious. We're tender. We're stronger, but we're also very cautious. In terms of the U. S. Education, I think we have 1 or 2 large contracts that we're extremely active on At the moment, in terms of retention, there is certain scores. I don't see any major change. I think Apart from the closing of the schools in North America, When they reopen, they reopen. And we get the volumes back. And I don't see any structural changes. In terms of universities, The big question is the level of the balance between what's going to be online and what's going to be on campus. Definitely. We know that the on campus offer will get traction. Particularly, we anticipate that when people are vaccinated, They want to go back to campus. All the surveys that we do for universities, for our clients and also our students, They want a campus life. So the all the efforts that we put Reinvesting, our offer is to really provide extensive food offers. We put robots in place. We have announced a partnership with HelloFresh to capture some additional Of the student wallet, provide additional offers, reinvent, So we're extremely active to be as compelling as possible for our students. So I'm confident in terms of on this segment to be very solid, Very accretive in terms of margin and it's a strong segment. In terms of follow, we don't give numbers for follows. But what I can tell you is in H1, we received, think it's about 3 times less than we had in H2 last year. So it's significantly less than the year before. And it will be Roughly 3 times less in H2 also. So it will almost it will still be present in H2 This year, but it will really be vanishing. And the main places where we get furlough Support is in Continental Europe. I mean, the European countries have been extensive gradually, significantly their programs and we With the announcement yesterday, we will benefit from some furlough in schools too. I mean, the people who are not going to be In April, we'll benefit from fluoro, but it's significantly less, but it's still there and it's still contributing. On your last question, obviously, when you switch if you purely switch A mill from on-site to PRs, you have an impact on the revenue. A €10 Nios in on-site become a €10,000,000 billy in PRS and then the revenue depends on the mix revenue. And obviously, the mix revenue could be ranging from 5% to 7%. Obviously, you see the impact on revenue. When it comes to margin and flow through, the flow through of an extravailing PRS is quite high. So, the margin is actually extremely high, while the flow through of the mill in on-site is not that high. It's still there, but it's so in terms of revenue we will be losing, we should switch 1 to 1. In terms of margin There is a boost. And in terms of margin volume, Sandeep, yes, it may be a little less, but the margin Thank you. There are no further questions at this time. Please continue. Thank you very much. So I want to again Thank you for your questions and listening to us. As you, I think, understood today, We are really on a very strong recovery phase. H2 will be more or less, I'd say, in line with H1, But really preparing for the acceleration for next fiscal year, the teams are extremely active. The margins are solid and will build up progressively. I'm very, very positive in terms of how we will Surge from the crisis, the sanitary crisis and build a very, very solid business moving forward. So thanks a lot. Take care. Stay safe and thanks for having been with us today. Bye bye. Bye bye. Thank you, everyone. That does conclude our conference for today. Thank you all for participating. You may all disconnect.