Sodexo S/Adr

Good morning. Thank you for standing by, and welcome to Sodexo's Q1 Fiscal 2025 Revenues Conference Call. If you should need operator assistance today, please press star and zero on your telephone. After the presentation, there will be an opportunity to ask questions by pressing star and one on your telephone. I advise you that this conference is being recorded today on Tuesday, January 7, 2025. At this time, I would like to hand the conference over to the Sodexo team. Please go ahead.

Good morning, everyone, and thank you for joining us today. I'm Juliette Klein, Head of Investor Relations, and I'm pleased to welcome you to our Q1 Fiscal 2025 Revenue School. On the call today is Sébastien Dutramazur, our Chief Financial Officer, to take us through the presentation. After Sébastien's remark, we will open the line to take your questions. The slides and press releases are available on Sodexo.com. The call is being recorded but may not be shared without our consent. Please get back to the IR team if you have any further questions after the call. With that, I'll now hand over to Sébastien.

Thank you, Juliette, and good morning, everyone. I wish you all a very happy, healthy, and successful 2025. And welcome to this fiscal year 25 Q1 revenue presentation. First, and as discussed during our full year results, we anticipated a slowdown in organic growth during H1. with a step-up in H2 for fiscal year 25. And the Q1 outturn is consistent with that and in line with our expectations. Now let's turn to slide four to go through the numbers. So revenues for the quarter were 6.4 billion, up 1.9%. We did experience negative contribution from both scope and currencies. The minus 2% currency impact is mainly due to the depreciation of the Brazilian real since May 2024 and to the depreciation of the US dollar against the euro during the summer of 2024, despite its recovery since October. And looking ahead and assuming current exchange rate remains stable, we expect as this negative impact to reverse in the next quarters. And the minus 0.8% scope impact is mainly linked to the disposal of the home care business in October 2023. Organic growth for the quarter was at 4.6% or 4.9% when adjusted for last year's Rugby World Cup and this year's Paralympics in September. The organic growth included a pricing contribution of around 3%. The remainder was driven by net new business and some volume growth. Now, if we break down by service line, food service delivered solid organic growth of 5.7%, while facility management came in at 2.4%. However, excluding the review roll-up ticketing activity from the last year, facility management growth would have been at plus 3.5%. That said, facilities management organic growth faced some challenges this quarter, especially in Europe. We observed reduced activity at certain sites, along with lower project volume and decline in non-contractual activities. Before we move on to the detailed review of organic growth by region, I'd like to highlight the good commercial momentum we had in Q1 and elaborate with a few examples. First, In Australia, Sodexo has been endorsed as a preferred partner by Rio Tinto for the co-design of Rio's next IFM contract, following a thorough partner selection process. Sodexo has been operating this contract, and this contract is the largest contract at the group level since 2016, and the current agreement was due to expire in 2026, we now evolved into a co-design partnership for the future. And this decision reflects Rio Tinto's confidence in Sodexo, and it highlights our ability to deliver innovative and high-performing solutions at scale, while maintaining a strong safety culture and operational excellence. Now turning to another major achievement, STH, Sodexo Live's dedicated organization, has been chosen to design and commercialize hospitality services for the three upcoming Rugby World Cup, England 2025 for the women, Australia 2027 for the men, and Australia 2027 for the women. And the revenue impact will be most significant in Sodexo Fiscal Year 2028. This is the sixth time that World Rugby has entrusted us with an exclusive contract for the sale of its hospitality package. And these prestigious events represent a unique opportunity to engage fans, elevate the rugby experience, and set new standards in event hospitality. More broadly, we are... very pleased with the strong commercial momentum at the start of this fiscal year, as anticipated, marked by significant contract wins, such two additional launches for airport dimension in the US, a first-time outsourcing with FNET NHS Foundation Trust in the southeast of the UK, a new agreement also with a leading tech giant in the US, following successful partnership with the same client in Brazil, in Chile, and in Asia as well. Our pipeline remains extremely strong, and new signings, if we include cross-signing in the quarter, exceeded 500 million, and this is more than 50% higher in Q1 versus last year. Let's now turn to the review of activities by region, starting with North America, where revenue reached 3.1 billion euros in the fourth quarter, up 5.9% organically. Overall, it's a mixed performance with solid growth in Sodexo Live, corporate and healthcare, and some headwinds in education. Sodexo Live benefited from strong attendance at venues, growth in airline launches with higher volume and the impact of new contracts, and the timing of key events. Corporate continues to see momentum with more people returning to offices and strong performance in food services. Education faces tougher conditions with lower enrollment in universities and weather-related closures in schools, and last year's contract losses, but prices increase helped soften the impact. S-Care also delivers a solid growth driven by price increases, volume growth, and cross-sells. although this was partially offset by losses from last year in senior. Now let's move to Europe, where first quarter revenue reached €2.2 billion, up 2% organically, or 2.7% excluding the impact of major sporting events. Overall, the performance was softer compared to previous quarter, with slower activity and facility management, due to last year's site closure and some decline in project work. In business and administration, growth was supported by price revision, volume increase, new opening in Belgium, partially offset by some site closure and lower project activity in ARDFM. So DexoLive saw a decline due to last year's World Cup, but excluding this impact, this event, growth was driven by higher volume in airport launches and stadiums in the UK. Although this was offset by weather tourist activity, by weaker tourist activity in France following the Olympics and unfavorable weather. Education grew modestly, benefiting from price revision, but held back by the exit of some low-performing contracts in France last year. Healthcare and senior deliver strong growth thanks to volume increase, price revision, and new business in France alongside inflation pass-through in the UK and Ireland. Rest of the world. So in the rest of the world, first quarter revenue reached €1.1 billion, up 6.4% organically, This strong performance was driven by robust growth in key markets like India, Brazil, and Australia. The zone benefited from increased volume, new business, solid development in this largest market, while some areas faced challenges such as Peru, with impact of last year's size losses, and China, where the environment remained challenging despite some signs of recovery. Looking ahead, we remain confident in our performance for the year. In Q1, we delivered moderate organic growth of 4.6%, and we anticipate Q2 to be similar, while with North America expected to temporarily slow compared to Q1, reflecting the prior year leap year and the impact of the large FM contract loss last year. In contrast, Europe is expected to show some improvement. Organic growth is projected to accelerate in the second half of the year, supported by the timing of the net new business contribution and the strong commercial momentum observed at the start of the year. With this in mind, we are maintaining our full year guidance. We expect organic growth revenue growth to be between 5.5% and 6.5%, and our underlying operating profit margin to improve by 30 to 40 bps at constant rate. Thank you for your attention. I'm happy now to take a question. Operator, can you please open the Q&A session?