Sodexo S/Adr

Good morning, thank you for standing by and welcome to the Sodexo's Q3 fiscal 2025 revenues presentation. After the presentation, there will be an opportunity to ask questions by pressing star and one at any time. I advise you that the conference is being recorded today on July 1st, 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 Q3 Fiscal 2025 Revenue Score. On the call today is CFO Sébastien Depremadur to take us through the presentation. After Sébastien's remark, we will open the line to take your questions. We ask you to please limit yourselves to two questions and one follow-up. The slides and the press release are available on 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 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. Welcome to our Q3 Fiscal 25 Revenue presentation. And let me start by saying that our third quarter performance is in line with our expectations. Back in April, when we presented our first health results, we shared a detailed view of the underlying dynamics, notably the softer performance in some areas of North America, contrasting with better trends in others. And our third quarter performance reflects a continuation of these dynamics. We also began to see early contribution from key contracts worn in H1, while experiencing a softer selling season in education in North America. Now let's begin with the headline figures on slide three. Group revenues for the third quarter reached 6.1 billion euros, up 0.8% reported. Currency effects remain negative at minus 2.1%, largely due to the depreciation of the US dollar and some Latin America currencies. Scope effects were limited at minus 0.2%. And organic growth came in at plus 3% in line with expectations. And just for reference, organic growth for the first nine months of the year stand at plus 3.4%. Now let's look at some operational trends by geographies. In North America, third quarter organic growth was 1.2%, slightly above Q2 as expected. Pricing momentum remains healthy, and new business is contributing. However, prior period contract losses continue to weigh on growth, mainly the initial global facility management contract lost last year, and to a lesser extent, some losses in education. Business and administration is benefiting from the ramp-up of new business, even if this is partially upset by the impact from contract exits linked to prior period buses. So DexterLine continues to perform well, with growth supported by higher passenger volumes in airline lunges. Education shows a slight improvement held by favorable calendar days and extra campus activity but it's still affected by past contracts. Healthcare and Seniors is solid in healthcare in the US, thanks to pricing and scope gains, but impacted by site losses in Canada and in seniors. So overall, we are seeing some contribution for new business and healthy pricing while continuing to back of prior period exits. That said, our recent sales and retention season in universities was below our expectation. A few large client decisions went against us, which will have an impact on Q4 and on our organic growth trajectory into fiscal year 26. We have taken an outlook at what happened. It comes down mainly to two things, market dynamics, including some competitive pressure on this, and turnover, within client organizations and relationships. In parallel, we are still working hard on internal initiatives, and we are pushing to accelerate the outcome on this area. And looking ahead, Fiscal 26 will require disciplined execution and as a university operating environment. We have a renewed leadership team in place, and we remain committed to investing and growing in this important market. In Europe, organic growth of plus 3.3% improved compared to the previous quarter, with clear momentum in S-care and senior across the board, and solid activity in SudXRI, which benefited from strong volume in the UK airport lounges and stadiums, as well as the robust tourism activities in France. In business and administration, growth was driven by pricing and new site openings, However, this was partly offset by softer volumes, reflecting broader macro headwinds and the impact of contract exits. Education remained slightly positive overall, thanks to pricing, but continued to reflect the impact of low-performing contract exits from prior years. So while the external environment remained mixed, we are seeing encouraging signs in several segments, and remains focused on execution and commercial delivery. We have successfully renewed several contracts in France and in the UK, and our mobilization of our mid-size contract opening in April is progressing well. The rest of the world continues to deliver a solid organic growth of plus 7.5% this quarter, driven by strong performances across key geographies, India, Brazil, and Australia all contributed meaningfully. In Australia, the successful mobilization of the Santos contract during the spring was a clear light with excellent plan feedback regarding service quality, professionalism, and execution under challenging conditions. So, altogether, a solid culture for the rest of the world with balanced growth across segments and regions. As a reminder, in April, we guided for full-year organic growth between 3% and 4% and underlying operating margin improvement of 10 to 20 basis points. With two months to go and given the improved visibility on recent business trends in retention dynamics in the U.S. and earlier, our current expectation is to land at the lower end of the range for both organic growth and margins. And please keep in mind that fiscal 25 includes a base effect of around 50 basis points from the non-recurring positive item in the prior year. And for Q4 alone, the year-on-year comparison would be affected by 120 basis points contribution from last year Paris Olympics. And as usual, you will find our assumptions for items below underlying operating profit in the modeling slide in Appendix 4. And please note a slight change compared to last quarter. Other income and expenses are now expected at around minus 160 million euros. Overall, we continue to navigate a more complex environment, and we are working with our teams with discipline and agility to monitor closely our operation and to implement the right changes where needed, with a clear focus on execution and client development. So thank you for your attention. I'm now ready to take your questions.