Good morning, and welcome to Compass Group's Q1 trading update conference call. Hosting today's call will be Dominic Blakemore, Group Chief Executive Officer. This call is being recorded. Following the opening remarks, you will have the opportunity to ask questions. In order to ask questions, please press star one on your telephone keypad to register your questions. I will now turn the call over to Dominic Blakemore. Please go ahead, sir. Thank you.
Thank you very much. Good morning, everyone. As usual, I'm here with Palmer, our CFO. We've had a good start to the year, and we're delighted by the continued strong performance of the business. Group organic revenue increased by 24% as we continue to benefit from strong outsourcing trends and high client retention. Net new business growth was 5.5%, which is significantly above our historical rate of around 3% and in line with last year. We're particularly pleased with the balance of growth, with all regions growing at around the same rate. Our European business continues to perform well, benefiting from the increased focus on growth, supported by investments we've made in recent years. Like for like volumes were particularly strong in Business & Industry as employees continued their return to offices, and in sports and leisure, where participation rates remained high.
With persistent high inflation, we continue to work closely with our clients to mitigate this pressure, both operationally and through appropriate pricing in line with the recent trends. While consumer demand has been resilient, we're mindful about the uncertain macro and any potential impact that may have on discretionary spending. We remain positive for the full year, and we're reiterating our guidance. We expect operating profit growth above 20% on a constant currency basis, with organic revenue growth of around 15% weighted towards the first half of the year, and an underlying operating margin above 6.5%. Longer term, we remain excited about the significant structural growth opportunities globally and the continued strong levels of outsourcing.
The combination of an increasingly complex operating environment and trends that include sustainability and digitalization, as well as our market-leading offer, mean we're best placed to capture these opportunities. Overall, a good start to the year. Let's move to Q&A.
Thank you. As a reminder, if you would like to ask a question, please make a contribution press star one on your telephone keypad. We'll take the first question from line, Jamie Rollo from Morgan Stanley. The line is open now. Please go ahead.
Thanks. Morning, everyone. I've got three questions around the net contract sales contribution, please. The first is, I mean, 5.5% is clearly a very good figure, but I guess the critics would say it's a bit slower than the 7% you delivered in the second half of last year. We've also seen a sort of weaker recent performance from your two large peers in terms of net contribution. Is there any change you're seeing in the outsourcing environment, or is there any sort of seasonality or lumpiness that we should be aware of? Secondly, in terms of some KPIs on those figures, would it be great if we could just get sort of mix of first time outsourcing and maybe quantify the pipeline that you have in the past?
Finally, if we are sort of gliding down to a more normalized figure, is that 5.5%, is that like your high-water mark for the year or can that be sustained, do you think for the rest of the year? Are you still confident in delivering sort of one to two points better than the 3% that you did pre-COVID? Thank you.
Morning, Jamie, thank you for those questions. Let me tackle the first then maybe pass on to Palmer for the next two. I mean, look, first of all, yes, you're absolutely right. There is lumpiness in net new. We have seasonality in sports and leisure in particular, which would benefit the fourth quarter of last year as we saw openings in the sports seasons. We also have a degree of seasonality within higher education as well. There will always be a bit of lumpiness within the quarters. We were super pleased with quarter four of last year. We're super pleased with 5.5% in quarter one. Yes, it's 20 basis points lower than the full- year 5.7%.
You know, we need to see where we play out on a full- year basis. You know, I think what's really important, and maybe going to your third question is, you know, we talked about sustaining 1 to 2 percentage points better than, you know, our historic three. You know, that would be on top of our historic organic of six and gets us the sort of the mid to high single-digit aspiration on a go-forward basis. We feel confident about that. You know, I think this number in the first quarter fully supports that level of performance. Palmer?
In terms of first-time outsourcing, for the trailing 12 months, we're at about 42% of our wins from first-time outsourcing. Still significantly from historical levels of around 30% or so. In terms of pipelines, we've almost completed business reviews for all of our subregions. I think we have one left. And we're doing a deep dive into the sales processes, and one of the things we're looking at is pipeline coverage, and we've never had better coverage. We're looking at coverage throughout all the stages of the sales process. One of the things we're most excited about, frankly, perhaps what we are most excited about is the balance of the growth among all the regions.
We've worked really, really hard at improving that growth outside of North America, and that's just embedding the processes, doing the right things, the mentalities. It's starting to show up in the results. We're taking a more granular look at the processes and where we are in the stages. There's lots of reason to believe it can continue.
Just to add to that, and probably just to build on Palmer's answer, North America has grown organically, historically at 8%, and within that would be 5%-5.5% of net new. I think what's brilliant about, you know, what was being achieved last year and in the first quarter is we've seen those levels of net new outside of North America, which would support a group 8% organic growth rate. I think that's what's exciting. Of course, whilst you know, we suggest that 1%-2% is our ambition over time of an acceleration of net new, we're clearly working on building pipelines, putting in the sales resource, developing the offer to sustain the types of levels that we're seeing today.
Great. Thank you very much.
Thanks, Jamie.
Thank you. We will take the next question from line, Vicki Stern from Barclays. The line is open now. Please go ahead.
Yeah, Morning. Just sticking with that theme firstly, I think you said 42% on the first outsourcing. What's going on in terms of the other sources of growth? Are you seeing any uptick in terms of the contribution from the small regional players, or potentially any sort of change on the large competitors, I guess with some of your big peers, potentially doing a little bit better themselves? Secondly, just more broadly on the full year guide of 15%. I guess given 24% organic growth in the first quarter, that now does imply quite a decent deceleration across the year. Clearly, the comps are gonna get tougher, but still. Would you say your guidance is conservatively struck, or are you genuinely expecting a sort of contraction in volumes? I guess if so, from where?
We can talk perhaps around U.S. tech job losses, et cetera, and what you're seeing there. Then just finally on the margin bridge, you helpfully walked us through that sort of bridge back at the full- year results between the 6.5% you're at at the moment and the 7.5% pre-COVID level. I think the first of the buckets you flagged was obviously inflation. Based on what you're seeing today, first, what is going on in terms of your levels of inflation? Are we sort of likely to see that tipping point moment for margins there in coming months, where that starts to sort of improve for you?
Similarly, the sort of drag from net new on margin, how we should think about the evolution, as we enter sort of back end of this year and into next year? Thanks.
Thanks, Vicki. Let me tackle the second one, and then over to Palmer for a bit of color on the others. Just in terms of the 15% to your question around deceleration. You know, we've seen in the first quarter 5.5% net new around the same level of pricing as last year, so about the same level as net new, and then obviously double-digit volume recovery. We broadly expect similar-ish momentum in the second quarter as we lap an Omicron-impacted comparator. As we go into the second half, you know, broadly would expect the same levels of net new and pricing. The real delta for us is volume, that is, I guess, where the conservatism plays in.
We're lapping a strong volume recovery in the second half of last year. As we said today, there is some macro uncertainty around discretionary spend and you referenced the impact on certain parts of the B&I portfolio of recent sort of restructurings or resets. I think, you know, that is the delta that we need to see how it develops in the second half before, you know, we would revise any guidance. I think we are, you know, more optimistic on that than not, as it were. Specifically, you know, you asked about U.S. tech. I think important to say of our total global portfolio, tech is 5%, and I think the broad levels of restructuring that we're seeing being announced across that sector are sort of 5%, 6%, 7%.
It's sort of less than a half a point impact to us. On the other hand, I think we're still benefiting from a return to office within that sector that is likely to accelerate, we believe, over the coming quarters. I think that's, you know, less of a material factor than perhaps would seem on the surface. I think broadly super pleased with Q1, strong trends. I think the, you know, the element of uncertainty is just volume as we lap that strong recovery in half too. I think Palmer, a couple of questions there.
Yeah. In terms of the sources of growth, are they changing? I mean, we're seeing a continuation of the themes from last year. Really the macro environment, the challenging macro environment is presenting a lot of challenges on the day-to-day operations. When you think about heightened inflation, when you think about supply chain, labor availability, and in terms of client propositions, their desires for wellness and sustainability, more digital, diversity and inclusion. Those kind of things are really playing to the benefit of the bigger players. We think we've positioned ourselves very well with respect to each of those areas. Really I think the bigger players are benefiting more in this environment.
I mean, you're still seeing some of the regionals doing quite nicely in some of their niches. Overall it's playing to the benefit of the bigger players. First time outsourcing would be the most pronounced movement of all. In terms of the margin and the margin progression, yeah, we still we don't see any margin impairment whatsoever. We do expect to see ongoing margin progression, certainly year-over-year. What we've seen in the first quarter has been in line with our expectations, which are, you know, flattish first half, from the, you know, the second half of last year with some margin progression in the second half of this year.
It's really, as you say, Vicki, it's, you know, it's tied to some degree to the rates of inflation and that new business, the business mobilizations. We are seeing some signs of inflation stabilizing. It's still at the high single digits. We're not really seeing any regression in those rates of inflation. We are seeing the signs that it's stabilizing overall. When you think about when inflation really started to get to those heightened levels, it was about at the midpoint of last year. As we start to get to that point of this year, and then with perhaps in a, you know, slightly improving macro environment, you know, we'd like to think that those rates could subside a bit.
We do expect them to be at heightened levels compared to where they've been historically, but perhaps a bit lower than where they are right now. We think that can help the margin progression a bit. We've got some, you know, some pricing activities that have been ongoing for a while, our mitigation activities that are there, and as the volumes continue to increase to be able to produce that leverage. That element's there. The other element is the net new business. It's still very much heightened compared to where we've been historically. We think there are reasons to believe it can stay that way.
It is getting to a more normalized level than perhaps an exceptional level that we experienced in the second half of last year. Certainly that'll have a bit of a benefit as well. Overall, confirming our margin guidance for the year above 6.5%, with that progression really coming in the second half.
If I may, Vicki, I'll just build on one of the points Palmer made. Palmer, Gary, and I did a tour of the U.S., and we also visited Europe in January, meeting clients representing more than 10% of the revenues of the business. I've never heard more clearly those drivers of digital diversity and sustainability being what's really important to our clients. We believe our ability to address those is a true differentiator in our ability to take share and also unlock first-time outsourcing. I think, you know, I identified these as the key things as we came out of COVID. I think they are the absolute must-win battles for us over the next phase.
I'd urge you all, if you haven't already, there's you know, our U.K. business has just published its sustainability report. I think what's striking in that is the level of specificity, data, and science behind all of this. I think that was a bit of an aha moment for me from when I saw that, to realize what it takes to get this right and to have the credentials to demonstrate that you're truly delivering. I think that's where the differentiation in this complex world, you know, really can take us.
Very helpful. Thanks very much.
Thank you. We will take the next question from line, Jarrod Castle from UBS London. The line is open. Please go ahead.
Good morning, everyone. Good morning, Dominic, Palmer. You mentioned a strong pipeline of acquisitions. You know, should we expect the acceleration, you know, on the GBP 55 million per quarter as we move through the year? Secondly, just given the run rate of your buybacks, it looks like, you know, probably completes late 2Q, early 3Q. Do you still see buybacks as a preferred way of returning capital? Related to the acquisition pipeline, do you see any acquisitions that might hinder the ability to do further buybacks or anything pretty chunky, I guess? Maybe, you know, just, you know, just thinking about the balance sheet, you don't have much refinancing to do this year, but next year, you know, there's a GBP 1 billion odd.
How do you see the financing markets at the moment for you? Again, how does that kind of play into capital returns, versus kind of paying it down from internally generated financing?
Dominic's just given me the signal that I'm supposed to take all of those here.
All three. Yeah. I thought he would do that, Palmer.
No, no problem. Yeah, light start to the year in terms of M&A. It's still very much part of our strategy, we're looking at M&A opportunities and, you know, in all the regions. It is a light start to the year. That said, I do expect us to do some, you know, some more as the year progresses. You should expect those numbers to increase, albeit, you know, nothing really, in the significant range. I think it's. We've got to be mindful about, you know, how we go about M&A. We talk about the challenging, you know, operating environment for our operators on a day-to-day basis. It is really tough for them.
If we're going to introduce something that could perhaps be a distraction for them, it needs to be very, very compelling. You've always seen us, you know, have a disciplined approach to M&A before. Certainly that's playing out now. We don't wanna buy just to buy scale. It really should be about, you know, how does it help us grow? If it can help us grow overall, you know, combination of the acquired business coupled with our current business. I think that needs to be the sort of the litmus test, the telltale sign in addition to those normal financial hurdles. No, it is something that's part of the strategy, and we, you know, we do wanna see more of it as we go forward.
In terms of the, you know, the capital returns, the buyback is progressing. As you say, it should be complete by the, you know, by the half year. We are cognizant that, with where we are financially with the buyback, the M&A projections and the like, that leverage will be somewhere around, you know, 1.3x at the, at the half year. We will take a look at the overall landscape, both internally and externally, and make some decisions. You know, our capital allocation framework is pretty clear. We love to invest internally as much as we can. We'd like to do M&A where it makes sense, and then we'll return access to shareholders.
In terms of the, you know, the form that takes, I think you've seen us adopt various forms over time, and I think it's incumbent of us to look at all options and make the best decisions based on, based on that time period. Thus far, that's been share buybacks more recently. It's one we'll always keep all the different return mechanisms in mind. We're cognizant about where we are. It's all about maintaining optionality and we think we'll have that optionality at the half year.
Palmer, just on refinancing for next year?
No, in terms of that, you're right. We don't anticipate any further refinancings for this year. We're looking at our next one, absent anything different, perhaps in the summer of 2024. Certainly interest rates. The interest rate environment is one we're keeping an eye on and is factoring into our decisions in terms of, you know, capital allocation, capital returns and the like. It's no secret it's been a, you know, a material impact on all companies, and we're not immune. I think our, you know, our credit rating and our overall balance sheet works in our favor relative to others, but it's still a significant increase when we look to refinancing. It's gotta be part of the equation. We've got no problem obtaining capital, of course.
It's just the decision as to whether that makes sense.
Great. Thanks very much.
Thank you. We will take the next question from line, Leo Carrington from Citi. The line is open now. Please go ahead.
Good morning. Thank you, Dominic and Palmer. I have two questions. The first on pricing for Q1. If you could just elaborate on the risks and opportunities that you see now. Is there any evidence that the underlying consumer is struggling to accept the inflationary price rises that are going through the outlets and altering their spend or mix? On the flip side, could it be that you have evidence that given the broad inflationary pressure that Foodbuy and mitigation actions are preventing the competitiveness of your offer versus High Street has increased? How do you see the balance of those two factors? Separately on the retention rates, I didn't actually see the retention rate in the release. Can you perhaps give us that KPI?
On retention, I think elevated levels are a combination of your success in recontracting and clients not wanting disruption of a switch during the pandemic. Any sign that sort of retention rates might slip down going forward as clients stabilize themselves?
Thank you very much. Those are two great questions. I'll take retention and pass pricing to Palmer. Look on retention, we didn't report the numbers, but they are, you know, in line with Q4 of last year. Q4 of last year was 96.9%. We're at the same level in Q1 of this year, which, you know, again, is significant improvement on the historic run rates and really pleasingly means that two of our regions, besides North America, are above 96% now, which is really where the delta of improvement we were looking for. Very positive in Europe and rest of world.
In terms of your question on retention, I think it's a bit of a misconception that there wasn't a rebidding of contracts through COVID. It did actually continue and pretty much at the same levels as we saw historically. Obviously these things were done virtually. Many people had the opportunity in the downtime to run those processes. Actually it was almost counterintuitive for us too, that that was the case. I'm not sure that that is what is playing in. I think there's definitely an element that because of the pressures sort of during and after the pandemic, we've been able to demonstrate to our clients the benefits we can bring to them.
I think that's given a greater appreciation of our services and therefore a greater opportunity to retain contracts. You know, that may be true of the industry more broadly. As we look forward, I think we're likely, particularly in a higher inflationary environment, to see more pressure from clients on what we can do to help them with efficiency. You know, look, I think the pressure to retain business will be as acute as ever. We're very focused on that. I think a lot of that plays into, you know, the first question you asked about the efficiency we can deliver through our scale and in particular in Foodbuy.
On your pricing question, Leo, you know, those inflationary pressures, the way they're coming through in the business, we always have to start with mitigation. That's the first place that we need to start. Our clients expect us to mitigate the best way we can. We've got to continue to show the value proposition to them. Pricing is really a secondary type of approach, but we've got to show the mitigation, the value proposition. As you alluded to, Foodbuy is a big part of that. We are seeing some stabilization of the supply chain compared to where we've been.
It's still not normal, but it's been very much disrupted for a couple of years now. We're seeing gradual, you know, return to normalization there, which is helping. What we're also seeing too is, you know, the benefits of a lot of the initiatives we put in place, the last two years really starting to come through. That is helping us significantly in that respect, and we expect it can continue as we go forward, you know, as this normalization continues. When we do price, on the client side and with the consumer, we have been able to get pricing.
You'll see it's in the first quarter, it's been about 6.5%, which is actually a little bit higher than where we were, you know, over the course of last year and the like. The consumer spending still remains strong. We have thought that it could perhaps regress a bit, but we're not seeing it really. The per caps, the check averages and the like in sports and leisure in particular remain very much elevated. It is something that if you'll recall, we flagged at the end of the full year. We're keeping an eye on that. It's one of the, you know, one of the cautionary factors we're looking at as the year progresses, we're really not seeing it thus far yet.
You know, I'd just add to that and to Palmer's point, a couple of data points. I mean, our pricing is probably below what's emerging as average wage in-inflation. So actually could look like a net benefit to the consumer. Aside from that, you know, we're also, we believe pricing below the high street by some distance, which to your point, I think is really worth stressing. You know, we should be demonstrating greater value to the consumer relatively than we did before inflation came along.
Okay. Thank you. That's very helpful.
Thank you. We will take the next question from line, Richard Clarke from Bernstein. The line is open now. Please go ahead.
Thanks. Good morning, everybody. Three questions, if I may. One is just the homogenization of growth net new win levels across your three regions. It used to be sort of talks about the U.S. being a more favorable region. You get longer term contracts, higher margins, albeit with a bit more CapEx. Just wondering, the contracts you're signing now in Europe, the rest of the world, are these sort of matching that historical profile of what you like to sign in the U.S.? The second question, around the one region that accelerated from Q4 was rest of world, despite the fact that I believe that's the one that had the biggest volume recovery up to that point. Maybe just a bit of color around what's happening there?
Are you benefiting from some commodity help or is this in other segments in the rest of the world? Third question, just around you mentioned the prepared remarks, some wariness of around discretionary spend. I think if we go back to 2009, the sort of cyclical risk was a little bit more framed around employment. You know, that if you had high unemployment, you might see some volume weakness, is what you saw back then. Maybe just frame, what do you see the discretionary spend risk as being? Like, you know, if we do see discretionary spend come down, how much risk do you see that to your top line?
Thank you, Richard. Let me just sort of tackle the middle question, and then again look at Palmer on the first. I mean, first of all, just in terms of sort of the relative recovery of our regions, you know, in the first quarter, I think, you know, the group is at 121% of where we were in 2019. Within that, North America is around 125%, and the other two regions around 110%. Actually that relative recovery, it's happening at different paces across different regions, really based on, you know, where we've seen reopening from COVID and any subsequent waves.
Actually, rest of world is being held back a little bit right now because in Asia, you know, we've still got a wave of COVID that's impacting Japan, China, Hong Kong, for example. Whereas, you know, we're now lapping the sort of the end of waves as we saw it in Europe and North America. I'm not sure, you may have seen an acceleration in the quarter, but actually I think it's worth looking at kind of where we are now and where we're likely to go to. We think that's very positive across all three regions. We're still a little bit more in the tank in terms of that volume recovery. In terms of discretionary spend, I think Palmer will give you a bit more detail on sort of how it impacted previously and now.
I mean, the one thing I would say, and I sort of referenced it earlier, in a way, if we can hold prices back below the wage increases of the consumer that we've got within those particular sectors, and particularly hospitality in the sort of more, the more blue ribbon and high-end sports and leisure events, then we feel that, you know, we should be able to mitigate any impact on per caps and volumes. You know, that's what we're working through at the moment. If we also look to the sort of forward order book for the big events, it's very positive right now. Again, I think, you know, you have to, unfortunately, this crisis is impacting different groups differently.
Typically the consumer that is participating in those events tends to be, you know, more protected against the inflationary pressures that we're seeing. That's how we look at it from an inflationary impact. From a sort of, you know, is there an employment impact on that? Maybe I have to Palmer on what we saw sort of last time through.
Yeah. Back in the financial crisis in 2009, we saw decreased volumes of around 3%. Most of that would have been in our sort of more cyclical sectors, B&I and sports and leisure would be, you know, the two biggest. We were able to offset, you know, that with the net new business and pricing to keep it fairly flat overall. Again, it speaks to, you know, sometimes you get the tailwind on the net new and, you know, those kind of factors present themselves as a bit of an offset. The business shape is different now than it was then. At that point, we were about two-thirds or so, 60%, a little over 60% cyclical.
At this point, it's roughly the opposite, with the growth of healthcare, education and the like, which are much more balanced regardless of, you know, the macro factors. We think we're positioned fairly well in that regard, and then our geographical mix plays a part. Yeah, I mean, there is a bit of a risk that we're keeping an eye on, but we certainly don't think it's material, Richard. Then in terms of the net new business, you know, the balance that we're seeing across the regions, just as we've mentioned before, it's something that we are proud of, that we are excited about what's going to. We work really hard on it. It's not the same when you peel that onion back.
Just like in North America, when you peel it back and you look at sector to sector, it's not the same. You've got different sectors that have different capital intensities, different contract terms, different contract structures. We take the approach that's best for the client, and that might differ client to client within a given sector. It's the same thing when you look at the geographies. North America would still be our most capital-intensive business. It's much less so when you get outside of North America. We're still utilizing capital and to try to win and retain new business where we are seeing that take place. There are other items as well.
The contract structures are a bit different, more fixed price, less cost plus when you get outside of North America. The contract durations, the terms are a bit different. They're shorter, outside of North America. We're not really taking a cookie-cutter approach. More so we're looking at the processes. What are the right processes to utilize? Let's make sure we've got the right people in place. We've got tried and true trainings about the processes. Let's deploy those processes, and then the outputs will come. That's where we've been focusing really, really hard on, as we said earlier, going through these business reviews, just taking a really focused and granular approach. We think if we focus on those inputs, the outputs will be there.
Thanks for that.
Thank you. We will take the next question from line, Kean Marden from Jefferies. The line is open now. Please go ahead.
Thank you. A lot might have been asked, but some just a few to wrap up with. Just interested in your line of sight over the education bidding seasons. Were there any particular there might be an outsized wave that you might be bidding on this spring? Secondly, have you seen a positive sequential momentum in your facilities management business over the last six months? That there's been evidence in history data elsewhere that some of we had some negatives and some post-COVID tailwinds might have started to normalize there. Thirdly, just coming back to that balance sheet, Palmer. Just how firm is your forward interest rate hedging policy?
Is there any flexibility to move the hedging proportion around over time, or is that quite a firm entrenched policy? Thanks.
Yeah. Let me take the support, the FM support services question and then Palmer on the higher end of the balance sheets. Yeah, look, you know, let's remember 85% of our business is food, only 15% FM. It's a small impact. That said, our FM business has done very well in recent years. We've seen, you know, effectively accretive net new growth from that part of the business. I think we've developed our capabilities in the key markets where we are competing very well. Particularly, we've always been strong in healthcare and deal, obviously, typically parts of the outsourcing model. We've built our capabilities in the U.S. around B&I, and a little bit more in the education space as well.
Those are accomplished businesses which are growing attractively. I don't think there's any volatility really in that growth. We feel that the opportunity in the market is there. We have the capabilities, and it's sustainable as accretive growth on that part of the portfolio.
Maybe just one more piece there. We are seeing some of the, you know, the one-off volume projects within that area to tail off a bit, which may be what you're seeing, Keane. Overall, that support service business is growing in double digits for us. If you think about it didn't have the volume depression that the other businesses had. It's really about net new business that's the biggest driver there.
It's something that we do like, and we are seeing. Sort of a blend of the two. In terms of education, this is a normal retention year for us in education. I mean, we have some chunky retentions in higher ed and the like, but when you have the number of higher ed contracts that we have, every year is gonna have some chunky retention. It's nothing that's abnormal in that respect. Last year wasn't either. It's more of a continuation there. You know, traditionally, the education selling season's been in the spring. That's, I mean, that's still the case, but we are seeing, you know, more activity happen in other parts of the year.
You know, no additional risk in that area than we would normally have. Frankly, when we look at, you know, these type of things, we always look at the opportunities more so than the risks because we do think we can capitalize. In terms of the balance sheet and the interest rate hedging, we have a bit of a hybrid approach. We are much more fixed in the near term, and as you start to get into longer terms and outer years, less so. Right now we are at the we're maxing out on the high end of the fixed rate, so we're completely fixed for the current year.
As you get into the out years, we're about 70% or so fixed for 2024 and the like. Something that, you know, we're constantly, you know, keeping an eye on, but we do have good line of sight and are pretty comfortable with where that number will land for this year. Just alluding back to, you know, the prior question about future financings, that will be the biggest element in that interest expense is just the overall level of the debt.
Great. Understood. Sorry, Palmer, just to come back on the education point. I guess my question was more around sort of potential new outsourcing opportunities within education rather than a rebid or a retention question. You know, if we have these positive drivers, you know, are we potentially gonna see another step change and a very active sort of first-time outsourcing pipeline that emerges in education in the spring? That was more the direction of the question.
Yeah. Apologies, Kean, for misunderstanding that. It's, you know, it's something we have been seeing, you know, already. We've been seeing a bit more first-time outsourcing there, you know, consistent with some of the other sectors as well. A lot of the, a lot of the pressures are helping to outsource and, you know, K-12 in the U.S., some of the higher ed in the U.S. and different things. You know, the educational institutions are certainly not immune to this. It does take a bit longer and a bit more to get them over the decision-making hump, so to speak. And they're slower to move than others.
There's, you know, that has been happening, and there's certainly reason to think that can continue.
Thank you very much for your time. Cheers.
Thank you. We will take the next question from line, Neil Tyler from Redburn. The line is open now. Please go ahead.
Thank you. Good morning. A couple left, actually. I wanted to go back to your comments on participation rates and wondered if there's any way that you can benchmark those against the sort of alteration in your offer, 'cause presumably that is, you know, one of the critical factors behind the improved participation rates as they stand relative to 2019. If you could just sort of share some qualitative thoughts on that, please. Secondly, on B&I, one of your competitors recently or this week mentioned the contract structure in B&I potentially remaining more management fee based over the longer term.
I wonder if you know, you share that view and if so, whether that alters the sort of structurally the margin of the group or the opportunity there. Thank you.
Thank you, Neil. I mean, on participation rates, you've almost asked us the impossible question. I mean, the reality is there's so much going on within, I mean, I think you're particularly referencing sports and leisure and B&I, in terms of the changed offer. There's an awful lot going on within that. We're seeing obviously, return to office at different levels in different sectors in different countries at a different pace. There's then client specific where we've changed to your second question, contract structures which may be more attractive to some consumers, if they've moved on to a free food program. It is different to what it was before.
I think, to your point, the third element is, in some instances we've closed the traditional restaurant and opened up micro-market. In others, we've added micro-market. In others, we're bringing in food from the local community as well as food trucks and so forth. There's an awful lot going on. We obviously can measure that data to an extent within a site. I think that we bring it all back to is what does this business look like in terms of 2019? At the moment, B&I is 11% bigger than it was for the same quarter in 2019. We know within that there's been a step down in office occupancy, but there has been a step up in pricing.
There's been a significant step-up in e-business wins, and we believe there's been a step up in the average participation on sites of those people who are in the office and the dwell time they spend in our restaurants and facilities. I think we, you know, we looked at the sort of the macro picture there in terms of what is a very positive number, 111% to 2019 within B&I, and one that we think we can still grow from as the sort of return to office continues and potentially accelerates through the course of.
Of this year. The equivalent number in sports and leisure is we're a third bigger than we were pre-pandemic. A lot of that will be about participation, as a result of, you know, we believe a lot of the digital innovation and frictionless solutions that we've brought into the major venues, which is facilitating the consumer spend, as well as the revenge spend we've talked about previously.
In terms of the contract structures, within B&I, you would see a mix of contract structures. Outside of North America, it's predominantly fixed price and management fee. Within North America, it's a bit of a mix. Really it depends on the size of the account, the locations, and the client preferences. You know, what kind of offer do they want? You heard Dominic just, you know, mention more of a move towards free food programs. Those would certainly be, you know, management fee, 100% client paid. On the opposite end of the continuum, think about a P&L contract where there's no client contribution, so it's 100% consumer paid.
In the middle of those two continuums, you would have what we refer to as subsidized contracts. Clients subsidize the offer to certain levels. What we're seeing is a higher level of subsidy compared to historical levels. Maybe not a predominance on the 100% client paid management fee piece, but certainly higher subsidies compared to historical levels. Clients have a preference to reduce those subsidies over time. It's incumbent on us to work with clients to try to achieve what they're looking for, at the same time, have a, you know, business proposition that works for us. I know your question's leading to margin outcomes as a result of those contract structures. I do think it's a bit of a misnomer that there's a major difference between margins on those contract structures.
They're a lot more similar than you would think. It really just depends on what the client's looking for. I mean, we've got certain sectors, you know, within our businesses that are predominantly management fee, you know, 100% client paid that have some of the highest margins in, you know, in the company. It just depends on, you know, the sector and what the clients are looking for.
Thank you. That's very helpful.
Thank you. We will take the last question from line, Jaafar Mestari from BNP Paribas. The line is open now, please go.
Hi, good morning. I have three, if that's okay. Firstly, when you discussed Q2 and H2 growth components, I think you mentioned similar levels of net new and pricing between H1 and H2, with volume the main difference. Just curious on that point, if I heard correctly, are you budgeting on the assumption of inflation staying where it is right now and your path through being similar? It seems like your peers are basically budgeting, assuming inflation ticks down into H2, certainly on margins, it seems they would expect that to help a little bit into H2. On the U.S. tech sector, you made some comments. Just wondering if you could remind us of your factual exposure there. Which one of the GAFAs are known clients to you?
What are the puts and takes there in Silicon Valley between return to the office and layoffs or slow hiring? It's irrelevant because they weren't in the office in the first place, for example. More open-ended, keen to hear a bit more about commercial strategy in Europe. You had a lot of exploratory initiatives there, buying brands in Germany, launching brands organically in France. What's more important going forward? Is it that front end products to brands, bringing U.S. brands into Europe? Is it relentlessness on the back end, the pipeline, just making good old Eurest better at signing and retaining?
Jaafar, sorry, your second question, you said our what exposure in North America?
The large tech companies, some of them are, you know, known clients for you. Is that something you're able to refer to on the publicly available information or trade press reports?
Yeah, sure. I mean, as, you know, as I said earlier on the call, our global exposure to tech is 5%, of our total revenues. Obviously, you know, what we're seeing in terms of announcements of the reset or restructuring that's going on is around 5%, 6%, 7% of the global workforce. I think that's how we're looking at it. You know, obviously, that would be weighted to the West Coast. But I think you also have to remember that, you know, those workforces increased significantly through the pandemic. In many ways, it's still a process of return to office.
You know, from our point of view, we may yet see more people in the office than before the pandemic, but less than it could have been because of the adjustments which are taking place. Which is why, you know, at the moment, we're very focused. Look, for a decade, we've been very focused on helping our tech clients provide the very best offer to their colleagues. You know, we're very focused now on helping our tech clients manage the greatest efficiencies. A slight change of emphasis, but, you know, we feel we can respond to that. On commercial strategy in Europe, I think your answer was in the question. You know, we really are absolutely focused on relentless execution on growth and retention. You know, there is a huge market opportunity.
The pipelines are there. You know, we still, despite the success that we're enjoying in Continental Europe in particular, our conversion rates aren't yet anywhere near the level of North America. We see further opportunity to sustain those growth levels through even better execution. A lot of this is about better data on the pipeline, better management of the sales process, as you heard Palmer say before, and a real focus on the quality of our core offers. That said, we felt it was very important to have, you know, a broader church of brands within B&I for different clients.
I think Exalt in France and Food Affairs in Germany have been extremely successful for us, as has the acquisition we made in the Nordics, which gave us a more premium food offer. I think those have been absolutely critical in underpinning the growth that we're delivering because we have a simply better offer. If there's one area we would be focused on within the offer, it would be the opportunity to deliver a micro-market type solution to clients in Europe. Really, you know, as I said, the answer was in the question that it's about relentless execution now.
In terms of the shape of the growth, I mean, we thought coming into the year that the shape of our growth for the full year would be, you know, around thirds, roughly a little more than a third from net new, the same from pricing, and perhaps just slightly lower for the volume. The 1st quarter is really in line with what we expected, so that net new of 5.5%, you know, is playing out. The pricing of 6.5% that may taper a bit as we go through the year.
It's certainly something we're very focused on to make sure we, you know, we're trying to keep pace at that unit margin level. The volumes will be the biggest regression over the course of the year. You know, that's primarily due to comps and as return to office starts to wind down. That's pretty much the shape. It's pretty much consistent with where we thought it would be coming into the year, and we'll, you know, we'll watch it as the year unfolds.
Okay. Thank you very much.
Thank you. There's no further questions. I'll hand it back over to your host to conclude today's conference. Thank you.
Thank you all very much for joining us today. We look forward to speaking with you for the half year results in May. Have a great day. Thank you.