Q3 2024 Sodexo SA Corporate Sales Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Simona Sarli - Bank of America Corporation - Analyst : Yes. Good morning, and thanks for taking my questions. I have two. So first of all, if you can provide a little bit more color on the contribution and the split in volume growth and specify if your net new business win is sequentially decelerating or not versus H1. And how comfortable you are in still achieving more than 2% for fiscal year '24. Secondly, for underlying volume growth, if you can please provide a little bit more details on China? And especially, which segments in technology you see the softness coming from? And for Chile, if you can please quantify the impact from the end of the fixed-term contract? Thank you.

Question: Vicki Stern - Barclays Bank PLC - Analyst : Yeah. Hi. Morning. Just firstly, on retention. Wanted to come back on your comments there, especially you mentioned a large contract loss in FM, costing you around 60 bps. Can we just get more details on that? So when will that actually start to hit the revenue contribution and the retention rates? Where does that leave you now versus the 95.5% retention that you talked about at the first half? I guess this is quite the key quarter that you're entering now in terms of retention for education contracts, so just trying to test out your level of confidence on retention as we look forward over the next 6, 12 months. I appreciate your comment on the 96% longer-term target. Second question is just on the Sofinsod cross holding. I believe you managed to secure a favorable tax outcome in the event that that stake gets sold. How should we be thinking about any timeframe for that being purchased? And any sense you could give us on how you're thinking about the right discounts and use of proceeds? And then, the final one. On the last call, Marc sounded pretty positive about the landing spot for organic growth next year in the 6% to 8% range, with margins again up 30 bps to 40 bps. Just wanted to again find out how you're feeling about those targets now one quarter on, especially given the political developments in Spain and France. Thanks.

Question: Vicki Stern - Barclays Bank PLC - Analyst : Thank you. Sorry. Just to follow up on that retention question, just on the contract loss. What was the reason behind that loss? Was that something that you chose to voluntarily exit or that was a surprise loss for you?

Question: Vicki Stern - Barclays Bank PLC - Analyst : Okay. Thanks very much.

Question: Julien Richer - Kepler Cheuvreux - Analyst : Yes. Good morning, everyone. Two questions from me, please. The first one regarding Paris and the activity in Paris. The leisure activity seems to be quite weak since a few weeks now, and it seems that July will be weak. Regarding the Olympics and the attendance at the Olympics, have you seen any change to what you initially expected? And do you have more visibility on the corporate activity in Paris during the Olympics? And second question on the pricing impact. So the pricing impact initially was at around 3% for next year. 4% for this year. It's maybe is just a question of forwarding, but it seems that you are maybe a little bit more conservative on this year to be around 4%. Is there any slowdown in pricing that you expect also for next year? And is the pricing impact still at around 3% for '25? Thank you.

Question: Julien Richer - Kepler Cheuvreux - Analyst : Okay. Thank you. Perfect. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 02, 2024 / 7:00AM, EXHO.PA - Q3 2024 Sodexo SA Corporate Sales Call

Question: Leo Carrington - Citigroup Inc. - Analyst : Good morning. Thank you. Just two questions from me. Firstly, on FM organic growth. Separate to the retention issue discussed already, the organic growth in Q3 was approximately around the level of pricing and like-for-like volumes implying limited net developments. Is this just timing or are you finding most attractive growth in food, or perhaps a retention issue? And separately on acquisitions, these seem to be very consistently focused on vending in North America. Is this in effect, the primary area where you think there is a need to accelerate your growth? Thank you.

Question: Leo Carrington - Citigroup Inc. - Analyst : Thank you.

Question: Jaafar Mestari - BNP Paribas Exane - Analyst : Hi. Good morning. I just wanted to come back on the organic growth bridge. Sorry to be the person who asked the decimal questions. First of all, can we maybe just clarify if the Japan ticketing sales are considered to be volumes or to be net new business?

Question: Jaafar Mestari - BNP Paribas Exane - Analyst : Very clear. So then, if I take the comments you've made for this quarter, pricing, I cannot imagine being more than 3.8% or 3.9%. You said about how often, you said below 4%. And then, volumes, you said some volumes, if anything, there's some negatives there, the calendar effect in education that's negative. You just said the EUR10 million of Japan ticketing sales were in volume, so I cannot imagine volumes being more than 0.5%, maybe a bit closer to 1%. So I'm not sure why you're not more clearly talking about net new business effectively continuing or even ticking up 6.8%, minus 3.8%, 2.9% of pricing to minus 0.5%, no worse than 1% of volumes. It looks like it's comfortably 2% something, 2.5%, could even be close to 3%?

Question: Jaafar Mestari - BNP Paribas Exane - Analyst : Okay, great. That's very clear. And apologies. It sounded a bit more uncertain, whether we're ticking further up. Thank you very much for clarifying. And then, more fundamentally, in terms of US education, a big selling season, just curious if you can elaborate a little bit in terms of and what you're seeing there. Is it some rebids and some small first-time outsourcing like it's been for the last couple of years? Or are you already starting to see some of the really big university finally progressing to the RFP stage? Is that now or is that more for next year?

Question: Jaafar Mestari - BNP Paribas Exane - Analyst : Thank you very much.

Question: Estelle Weingrod - JPMorgan Chase & Co. - Analyst : Hi. Good morning. Thanks for taking my questions. Just a couple. Another one on organic growth and new developments specifically. Just to understand, when you expect new developments to get towards the, let's say, mid or higher end of the range at 7.5% or 8%, just in terms of the timeline to get there? And just another question. You mentioned in the release, strong per capita spend in sports stadium, and this is a trend we've seen for some time. Could you just elaborate a little bit more on this when it does not look like comps are particularly easy there? So just want to understand better what's happening and maybe for how long it's going to be there? Thank you.

Question: Estelle Weingrod - JPMorgan Chase & Co. - Analyst : Okay. Thank you.

Question: Estelle Weingrod - JPMorgan Chase & Co. - Analyst : Okay. Great. Thanks.

Question: Neil Tyler - Redburn Atlantic - Analyst : Yeah. Good morning. Thank you. Two left from me, please. Firstly, on the net new contribution, either the end-year contribution, but more -- I think more pertinently, the development, the KPI. Can you offer any perspective by business line how that's developing? Not obviously quantitatively, but perhaps causatively, where you're most pleased with those developments? And then, second question. Coming back to the to the FM contracts, but in the context of you being more selective on those contracts, I just wonder if you look at this development in FM revenues at Sodexo over the last four or five years, they've grown very substantially since 2018. Is there REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 02, 2024 / 7:00AM, EXHO.PA - Q3 2024 Sodexo SA Corporate Sales Call potentially some business that was won over that period that no longer quite makes the grade in terms of the margins or returns that you want to achieve? And so, might we be seeing more of these contracts where it's more difficult to come to agreeable terms? Thank you.

Question: Neil Tyler - Redburn Atlantic - Analyst : Thank you. That's very helpful.