Sodexo S/Adr

Good morning, and thank you for standing by, and welcome to the Sodexo Fiscal 2023 Results and Strategy Update Conference Call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then one on your telephone keypad. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero. At this time, I would like now to hand the conference over to the Sodexo team. Please go ahead.

Thank you. Good morning, everyone. Welcome to our fiscal 2023 results and strategy update. I'm here with Sophie and Mark. They will go through the presentation and then take your questions. The slides and press releases are available on our site, Sodexo.com, and you'll be able to access this call on our website for the next 12 months. Please get back to the IR team if you have any further questions after the call. I now hand you over to Sophie.

Good morning, and thanks for being with us today for our fiscal 2023 results announcement and strategy updates. As I am sure you have already all seen, we are announcing the detail of the Splexly spin-off. Given the listing is expected early 2024, Plexi has been accounted for as discontinued operation. In this presentation, as usual, I will introduce the numbers and the key strategic moves. Marc will then go into the financials, firstly the group numbers, and then the Sodexo and Plexi standalone numbers. I shall come back to conclude, and then of course, both of us will take your questions. So let's start. First message, we outperformed guidance. Group organic revenue growth was 11.6%. The group underlying operating profit margin was 5.6%, more than 10 basis points higher than we were aiming for. Plexi organic growth accelerated quarter after quarter, resulting in an annual organic growth of 26.9%. an underlying operating margin at 33.1%, again, significantly above expectation. Second message, as a result of this solid operational performance, group net profit increased by 14% and the underlying net profit by 30% to give an underlying earning per share of 6.21 euros. As you all know, our dividend policy is to pay out 50% on our underlying net profit. So the Board is proposing a dividend of €3.10 this year, up 29% on last year, and over the historic dividend high of €2.90 in 2019. Third message, I'm proud of the strategic progress that we've made in a short period. We have implemented significant change to restore Sodexo's agility and growth capabilities. We have made strong choices. Over the last two years, we have put an important focus on executing our strategy in North America. Our retention is now comfortably over 95% in NORAM, and we have seen a solid development at over 8% in 2023, including cross-sales fueled by more targeted and more profitable operations. This is a combination of determination, focus, better incentives, and more key talent. We will continue to improve in North America. We've also made our organization more simple and effective. The transfer of the end-to-end P&L management to countries to bring decision-making closer to the ground is a success. All regions are aligned on our 15 global KPIs to monitor progress on our strategic pillars. We see concrete examples of the added efficiency that our geography-based organization provides. For example, the focus on consolidating and standardizing processes and technologies in transversal function in our four shared service centers has led to economies of scale, improved efficiency, lower operational costs, and is driving competitiveness. In the U.S., the segment HR teams have collaborated to recruit more efficiently and optimize staff utilization between segments. As a result, we no longer have an issue on staff shortages. I also reduced the Sodexo leadership team to 11 members. One thing I'm very proud of is the progress we have made on our gender balance targets at leadership level. Women represent 42% of group senior leaders, which is our top 1,600 leaders, and we have more women in our operational team, with, for instance, new female CEOs in China, Canada, Brazil, and for Sodexo Live in the U.S. and in the U.K. Another highlight is our record client retention. This is the KPI for sustainable, profitable growth. In financial year 23, we broke the record again with a 95.2% retention globally. Now, we need to move the bar to 96%. How did we do this? We have been more proactive with our clients. We have also rigorously implemented our retention tools and processes across the business, resulting in better reporting. We are much more disciplined in tracking and monitoring the KPIs that influence retention. and we will keep challenging ourselves to continue to improve. We are also accelerating on our food services transformation. We are scaling our advanced food models and leveraging enhanced digital experiences. Today, we account for 3.9% of total sales. And we are also being more selective on our FM growth by focusing on value-adding adjacent services that are creative to our business. This year, we are back to a 64-36 mix for food and FM, helped by the strong post-COVID recovery in food services and the end of the testing center's contract in the UK. And by the way, FM is continuing to grow up 3% organically in fiscal year 2023. I'll come back to this in a minute. We define a holistic approach on people and the planet to reach our goal to be a market maker in sustainability, and I'm going to come back on this because it is important to be clear about what we mean by being a market maker. We also made a very important strategic portfolio decision. Back in April, we announced our decision to spin off and lift Plexi. This spin-off project is a historic and very positive turning point in the life of our group, which will lead to the creation of two leading pure players in fast-growing markets. Let's go into this. We are now ready to go ahead with a full Plexi spin-off. The spin-off will be proposed at a dedicated AGM early 2024 and will be followed, subject to Euronext admission decision and market condition, two days later by the listees. Existing voting rights will be maintained through the registration of Plexi in the Netherlands. All shareholders will be able to opt-in for their double voting rights by registering their shares in the Netherlands. Tax residency will remain in France. From a tax point of view, the spin-off will be tax-free for Sodexo and its shareholders, at least in France and the USA. Plexi will host its Capital Market Day early 2024. Their guidance will be provided at this event, but I want to reassure you that organic revenue growth and margin improvement should remain favorable in fiscal year 2024. The governance is currently being finalized. You have seen the announcement of the new chairman, Didier Michaud-Daniel. He will be executive chairman to support Aurélien Sonnet through the transition from subsidiary to quoted pure player. The board will be made up of four Bellon family members, and five independent board members. There will be an animation contract between Bellon Essay and Plexi, similar to that of Sodexo, including the rebuilding of the executive chairman and the CFO. Now that we've reviewed progress made over the past few years, I'd like to focus on our strategic plan for the new Sodexo post-spinoff. Our strategy has not changed. It is now organized around two strategic pillars, that I will develop in further detail in a moment. Focus on food and be more selective in FM, being a market maker in sustainability. Supported by three key enablers, accelerating our investment in tech and data, reinforcing our supply chain competitiveness, and commercial excellence to fuel our growth trajectory. Let's start with a This is our historical growth market. It is at around 240 billion euros, in which we have a leading position and where we know that consumers are looking for more flexibility, more personalization, more sustainable offers, healthier dishes, better taste, and more digital to help us to do all that. We believe that we can grow the business faster by leveraging our expertise to adapt our traditional food model and complement our existing infrastructure with advanced food models. We are scaling our investment in all geographies and environments to upgrade our offer through new production facilities, new distribution organizations, a lot more sustainability in the menus with premium brands, and I'll come back to this later, and more digital. For FM, there is a much more fragmented market, but it is a massive market of €380 billion. We have recognized expertise and integration capabilities, but the maturity and client buying habits still vary significantly from one geography and one segment to another. This is why our aim is to grow selectively in FM for clients who value our services. On identified playgrounds, where we contribute to the enhancement of the end user experience and where we can bring sustainability innovation to our clients. For example, in North America, we took several radical decisions in schools and campus where size, concentration, and margin of the contracts were inadequate. Since the successive crisis of COVID, staff shortages, and then inflation, many very large clients have appreciated the value of our services and have renewed their contract with better pricing. Therefore, we shall continue to grow this business on chosen markets with adequate pace and scale. Within food, we have a growing portfolio of premium brands. These premium brands are a rich source of growth. Each one is designed specifically to address specific sub-segments, whether the client has large or small spaces, a hybrid workforce, and how they want to use food as an engagement lever for their team. For clients with on-site kitchen, we have Modern Recipe. It is a flexible, healthy, and plan-based. This is for large corporate, university, or healthcare clients that need all-day options. Modern Recipe is starting to scale. We have this brand in 11 countries at almost 400 sites. We introduced Modern Recipe in France a year ago and have already added 65 new sites and targeting 200 by 2025. The Good Eating Company is a niche and sustainable brand that gives on-site dining a taste of the good life. We are targeting high-tech, financial, and professional services. We started it in the UK and have expanded it to the U.S. with a total of 126 sites. We plan to grow the numbers of sites time 1.5 by 2025. For clients without kitchen and smaller spaces, we have Fooditude. Meals delivered fresh, creative, and ingredient-focused, the targeting is very specific for this brand. Fooditude is positioned to work only with clients who want to fully subsidize meals for their employees. We see that as a key trend for tech, media, banking, and other visionary clients who want to attract employees and drive engagement. Fooditude is in the UK, and we have just added a second central kitchen in London that will double production capabilities. Next year, we will expand it to the US. To complement our premium brands, we have a strong portfolio that includes kitchen works companies. KitchenWorks is accessible, high-quality, convenient food designed to drive our market share. It is a food court experience targeting manufacturing clients who are looking to attract a new generation of workers and inspire healthier heating. Today, we are scaling KitchenWorks in eight countries with more than 2,000 sites. In Brazil, where food makes up 20, sorry, sorry, 73% of our revenue and 92% of sites use the KitchenWorks brand expressed locally as Sabor Brazil, driving strong profitability and consumer recognition. In August and September, the Netherlands converted 95 sites to KitchenWorks. It gives clients consistency of delivery, consumers get great experience, and we standardize the menus and recipes accordingly. and the way we purchase. By financial 2025, we will expand to six more countries. We had some excellent wins and retention this year in all areas and regions. Let's take a few examples. In Europe, the AXA contract will be an example of advanced food model where we will offer multiple meal solutions, including tocla, food cherry, and modern recipes. I would like to highlight the renewal and extension of the Colgate-Palmolive global contract with 12 new sites in North America. We will be providing IFM services to 43 sites across 25 countries, including manufacturing plants, research centers, and their new global headquarters for the EELS Pet Food Division. We will continue to bring technology innovation like dynamic cleaning and support CSR improvement in energy, waste, water, food, and DNI as identified by our site engagement sustainability assessment tool. We're also piloting a modern recipe solution in the New York office. In Europe, Sodexo Live has been the official hospitality provider at Ascot Racecourse since 1998. and will continue to do so for another 10 years. We shall be creating the Ascot Hospitality Academy and rendering the menu more planet-friendly and biodiverse. This year, I wanted to call out the massive return of live events after the COVID crisis. So, DEXO Live has had a great year. We have brought visitors and fans back with record attendance in stadia and the Parisian boats and in airport lounges, and increased average spend per capita. We have also been winning new clients, 10% of new development, of which 75% is in North America. And the retention rate this year was also very strong at 97%. As everyone knows, internally and externally, I am incredibly focused on retention. And the efforts are paying off. We achieved our best grant retention ever at 95.2%. This is a combination of many different measures that we have been putting in place for the last few years. But I would say that the inclusion of a retention condition in the bonus, the absolute insistence on the use of the reporting tool by all, The consistent following up on all contract losses, the message has become more firmly entrenched down through the organization. And as I have been saying to the team, profitable growth starts with retention. For business development, it was also good at 7% within the 7 to 8 target range. The annual development, including cross-sell, improved to $1.7 billion compared to $1.5 billion last year and with increased profitability. As a result, net new signing remained firmly positive at 2.2%. The commercial momentum is improving. This year, we had an increase in new signature of 10%. Within this new development, there have been improvements an increasing share of food service at 61% of the total versus only 55% last year, and FM activity has reduced demonstration of our more selective approach. We have also seen strong demand for more first-time outsourcing in North America, and particularly in the healthcare sector, now representing 50% of our total signature in the zone. Retention is my obsession, and this year, the really good news is that it has increased, but it has become more uniformly good everywhere. With more than 60% of the countries representing 75% of revenues, generating a retention rate of more than 95%. And we can still continue our progress. The second leg of our strategy is to be a market maker in sustainability. We are a pioneer. We do make more ambitious commitment on both the planet and people. And we deploy these commitments globally and at scale, not just in small pockets of the business. In fiscal year 23, we have continued to deliver our global carbon emission reduction Our global carbon emission reduction has been validated by SBTI. Yes, this is a global ambition, so much beyond the UK, where it has become obligatory. We have established with the WWF a low-carbon standard, which has also been approved by SBTI. This year, Scope 1, 2, and 3 emissions are down 5.4% in the year, and we are also making progress on waste reduction. We are not yet at 50% waste reduction on the sites in which we have introduced Waste Watch. However, the number of sites has increased significantly. The program is now covering 57 of total food raw material costs, up from 46 last year. The aim is to get to 80% So we still have some way to go to achieve our 2025 objectives, and we are tackling this with vigor. We are also paving the way in biodiversity with strong global commitment for physical certification, whether it be in palm oil or paper or fish and seafood. For our people, our action to enhance our focus on our people have also been delivered at scale. This year, we launched an industry-leading common employee benefit standard for our 429,000 people worldwide. It is expected to be implemented in 60% of the countries by the end of 2024. A sure sign that we're getting some things very right, our engagement rate reached a record of 82.5% and on a record response rate. This is 4.5 points better than in the last survey in fiscal year 2021. Safety also improved with our LTIR down 15.4%. Gender balance is very important and we have reached between 40% and 60% of women among senior executives. It is a concept point of attention to keep it there. I could not end without mentioning the iconic Olympic contract, which will boost revenue in fiscal year 2024 by €60 million and a further €30 million in fiscal year 2025, This is also a journey for sustainability. Our teams have put together a program to source responsibly, locally, and seasonally. Recipes will be more than 60% plant-based, and we shall be working hard to avoid food waste and plastic packaging. And we shall be optimizing existing infrastructure and equipment where possible. From a people point of view, we need to recruit 60,000 people of which 15% will come from underprivileged environments. Very importantly, the training that we shall put in place to welcome these employees will be officialized by a certificate. This is an exceptional effort and we are very excited. The teams are ready to go and break new records. On that hand, I now hand you over to Marc for the financial of the year.