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Thank you, Nash. Good morning, and thank you for dialing in. As usual, I'm joined by Karen, our CFO.I'm sure you've read this morning's Q3 trading update. Before opening the call to questions, I'd like to say a few words on our performance and our outlook.In Q3, our revenues grew by 36.4%, lapping the first full quarter of COVID-impacted revenues. As anticipated, we saw a gradual improvement in B&I and Education, whilst the more defensive sectors of Healthcare & Seniors and Defence, Offshore & Remote continued to grow, now surpassing pre-COVID levels. Our Sports & Leisure business benefited significantly from higher attendance levels following an easing of restrictions in North America. The retention rate remained strong at 95.4% year-to-date, and we continue to see a flight to trust.I'm pleased to say that the trends we reported at the half year results continue, with around 50% of new business wins coming from first-time outsourcing. We're winning contracts across all sectors and all regions, and we're particularly excited by the increased wins in Europe and in defensive sectors such as Healthcare and Education.Our operating margin increased by 80 basis points to 5% as we benefited from some operating leverage and ongoing cost management, which was partly offset by mobilization costs, inflationary pressures and reducing support.Looking forward, we're delighted to be welcoming back consumers, and we're working with our clients to reopen and mobilize sites in line with the changing restrictions. As previously mentioned, September will be a key month in terms of reopening of Education, Sports & Leisure and B&I. And as a result, we expect to be trading at 80% to 85% of pre-COVID levels. In Q4, we also expect to improve our operating margin by a further 50 to 100 basis points, so between 5.5% and 6%.So in summary, revenues are improving across all regions with 2 out of 5 sectors now trading well above 2019 levels. Our retention rate is strong, and we continue to benefit from the acceleration in first-time outsourcing as well as market share gains. We continue to progress our margins across all regions, and we're firmly on track to rebuilding our operating margin above 7% before we return to pre-COVID volumes.Over the longer term, we're excited about the strong pipeline and the significant structural market opportunities globally. These opportunities, combined with innovation and a more efficient operating model, will help us emerge from the pandemic stronger than we've ever been and will allow us to further consolidate our position as the industry leader in food services. We'll update the market again on the 21st of September with the fourth quarter pre-close statements ahead of the full year 2021 results on the 23rd of November.Thank you, and we're now very happy to take your questions.
First question is from Jamie Rollo from Morgan Stanley.
3 questions, if I may. The Q4 sales guidance is a nice step-up. I'm just wondering what you're factoring in for sort of Delta variant and some signs of delayed return to work. What's the sort of cushion there? Secondly on the margin trajectory, you're confirming the return to pre-COVID margins before pre-COVID sales volumes. But I'm just sort of wondering, as we're getting closer to that, what is that threshold? I mean clearly, it's not at the 80%, 85% of sales. But is it 90%, is it 95%? And if it's not too early to talk about next year, given we're only a few months away. Consensus is around 6.5% margin. That probably seems a little bit lower if you're coming out of Q4 at sort of 6-ish percent.And then just one technical question. It'd be helpful to give us the percent of revenue that comes from Sports & Leisure by quarter in a normal year, just if you can think about that sort of seasonal recovery that you've seen in Q3?
Thank you, Jamie. If I take the first 2 and then, Karen, perhaps you can take the latter 2. I think that's why we've given a range of 80% to 85%. I think if Sports & Leisure comes back without any significant restrictions on the attendance levels, so in line with the conversations that we're having with our clients, and that we see the scale of opening up that we anticipate within B&I and education.For example, we would expect, as we've seen in the U.K. on school bubbles that there will be greater attendance levels in schools and less need to isolate and close schools. We know that most higher ed institutions in U.K., U.S. and elsewhere are planning a wider move back to in-person on-campus teaching. So there may be some volumes, which are still held back by international students not being able to return.And within B&I, we are expecting a pickup in volumes in September as we get beyond Labor Day and the Northern Hemisphere summer holidays. So yes, those are the assumptions, which we'd see as the higher end of the range we've given. Should the Delta variant move significantly, again, here or in Europe and U.S., then I think our view is that we would be toward the lower end of that range. And I think that's how we factor things in generally.In terms of the margin trajectory and the threshold, we've deliberately strayed from that and will continue to do so. And we think there are a number of levers, positive and negative, of margin development. On the positive side, we've obviously got the operational and overhead leverage as the volumes come back as well as the self-op that we continue to initiate and drive. And you'll see that we've still got some right-sizing costs to go in Europe in the fourth quarter.I think on the sort of the negative side of that equation, we've obviously got significant mobilization. You've seen that -- and net new is accelerating. Our new businesses is over 11% in the quarter. So we have got mobilization on new business and mobilization on reopening. And we will continue to incur those costs in quarters to come as we grow the order of magnitude of 30%-plus organic. The second is obviously the higher-than-average inflation. Inflation is running at or near double what we used to. So we have to be able to mitigate as much of that as we can as well as being sort of robust on pricing.And then, of course, the sort of the third element for us is that we've had significant support from clients and government. Less of that variance in the U.K. and U.S., more in Europe on the government side, which will run off through the final quarter of this year and first quarter of next. And obviously, the client support has been in different contract structures, which will revert. So I think when we weigh all of that up, we expect to continue to make progress. We're not calling when we'll be at 7%, and we're not calling at what volume level that will be.So as we get closer in and we get to November, I'm sure we'll be able to give you a clearer view of that. Karen, do you want to take the sort of next year view and also the Sports & Leisure, maybe...
Will do, Dominic. In fact, Jamie, I think Dominic has actually picked up quite a lot of what I would say around next year. I mean we're trying to be kind of as helpful as possible a quarter out. And this time line would actually give us some revenue guidance. But as we point out, September is quite a key month for us, and that goes back to the point that you've made about whether or not we'll see any delays in back to work or any impact from the Delta variant. So it's too early for us to comment really on next year, and we will give you some input on that at the full year. I mean it's also going to depend on the combination of these headwinds and tailwinds that Dominic has just spoken about.Sports & Leisure, it can be a bit lumpy. In a normal year, it tends to be slightly weighted towards the second half of the year. But I think in the environment in which we're in, we are actually seeing some rescheduling of certain events into months and we wouldn't necessarily see them. I mean what I can say is that quarter forward is quite a big quarter for Sports & Leisure in North America and in the U.K. In the U.K., for instance, we've got Wimbledon and the football season. In North America, you've got a combination of football, soccer, baseball coming through.
The next question is from Bilal Aziz from UBS.
Just -- I appreciate you don't quantify the net new win in that third quarter, but everything in the statement reads that if you at least perhaps sustain the momentum you saw in the first half of the year. So perhaps just a quick update on that side.And then I think you touched on it already, just on the margin guidance into the fourth quarter. You haven't quite explicitly flagged mobilization or cost inflation specifically. So are some of those costs tapering off? Or are they embedded within that fourth quarter guidance right now still?
Yes. Bilal, welcome back and thanks for the question. Yes, look, the net new in Q3 was around 6%. So if you sort of break down our organic growth in the quarter at 36%, like-for-like was 30% and net new 6%, with retention rates sort of broadly 95.5%. That means that we're seeing new business of 11%. I think you have to recognize that new business calculation for us is new openings in the quarter over the volumes that we experienced in Q3. So it's slightly flatter. But I think what it does show you is a significant acceleration on the trends in the first half, which is a testament to the amount of new business we're winning, the fact that it's now opening up and the benefit we're seeing in the flight to trust.On margin guidance in Q4, yes, I mean, we're very much -- that guidance is all in for everything we're seeing, inflation, the challenges of sort of opening -- reopening new guidance, new protocols, the challenges, things like the pandemic as well as inflation. So we're really pleased that we're still guiding to that significant progress despite a number of those challenges.[ As in the ] the previous answer, the mobilization costs will continue for some time to come. Typically, to open new business, we incur mobilization throughout the first year of the contract. When we've got a step-up, we will continue to incur higher levels of mobilization. I think the mobilization, that is the reopening or the ramp-up in volumes, will be a little bit more near in, but it's likely to affect us for a couple of quarters as those volumes go back. So I think these features are -- they're here with us for a while and they need to be baked into all the guidance we give you. And what we want to do is make progress over and above that.
Next question is from Vicki Stern from Barclays.
Just coming back on the signings. Obviously, incredibly impressive numbers so far. Just a little bit of a sense on how you're feeling on the outlook and the pipeline. And -- I mean more broadly, just the sustainability of this sort of unprecedented 5% to 6% net new versus, I guess, around 3% that you were doing in the years pre-COVID.And then secondly, related to that, just what's happening in Europe? You called that out as one market where you think you're doing particularly well. Is that, in any way, skewed more to first-time outsourcing, more to share gains now than before? Just curious why that's standing out so much for you.And then just jumping on to volumes. Just what's driving such a strong improvement in the organic for Healthcare and Defence, Offshore & Remote so well ahead of 2019 levels? I suppose how much of that is new signings feeding in? How much is sort of cross-sell? And I suppose how much of a drag still remains in those sectors, particularly health care as a result of COVID?
Yes. So let me take the third one first just on volumes. I mean we're very, very pleased that we are almost 10% up on pre-COVID levels in those 2 sectors. A good chunk of that is new business. So we know we've done particularly well in both of those sectors. Then there's also -- within Healthcare, we've talked about a number of our sort of retail offers have had to close because of the containment measures and footfall has been low. They're only opening up sort of now-ish. So we expect to see a benefit from that on top as we go forward in Healthcare. So we think that's very positive.Within DOR, we've had new business wins, but we've also seen an uptick in volumes because of the -- there's been more mandates as production has increased with demand for commodity. So that's been another good sector for us. And actually, in the aggregate, sort of if we can get to sort of 10% above pre-COVID levels on those 2 sectors, it starts to pretty much mitigate, as we've said before, any risk on Remote, in B&I and Education. So we think that's a really sort of positive data point for us.On signings, yes, look, the outlook is good. We continue to see new business at the highest levels. We've enjoyed in most of our regions growth of sort of 20% above 2019, up to 50% first-time outsourcing. The pipeline looks good. When we've taken the measures we've taken to protect margin, we've protected our investments in sales and retention to be very, very focused on exploiting the opportunity. So with a good pipeline, with good sellers, and again, many of the issues we'll talk about today around complexity of managing inflation, volumes that are highly volatile, I think, give us the opportunity to differentiate ourselves, and therefore, unlock first-time outsourcing when self-op could be really struggling or to show our clients that they can really rely and trust us. So it feels positive.I don't think we can talk about the duration of its sustainability. But I think the opportunity is there, and therefore, it's our job to maintain that momentum. If -- Europe looks good in new business. We're having a very strong year, the strongest we've seen for some time, and that's very positive. It's coming across multiple sectors with a bit more contribution from Healthcare, which is good. The first-time outsourcing level is up by around 10 percentage points, still not at the levels that we've quoted for the group. So there's more opportunity there. But we're doing better on new business than we've done, and we're also doing better on retention. So we think that combination will support a positive trajectory in Europe beyond the volume recovery.
Next question is from Jaafar Mestari from Exane BNP Paribas.
Two questions from me, please. Firstly, is it worth updating the gross new business figure? You gave us this GBP 1.1 billion in the first 6 months. And as you commented, there's been a couple of other wins, some particularly large, and some in Healthcare. And then secondly, I'm just curious about Sports & Leisure. What the current attendance level or attendance cap is and whether there's still improvement potential there? Or is this as good as it gets for now and the discussion is only on the seasonality as we've had before?
Yes. First of all, just in terms of the gross new business, I think we'll update you on that at the full year. We don't typically give that whole quarter. But as we said, we continue to trend around the same levels of outperformance of 2019. So very positive in terms of new signings. And of course, those aren't yet showing themselves in our new business ratio and new business KPI because a number of those signings will not yet have mobilized.In terms of Sports & Leisure, look, as you can witness here in the U.K., we are still on a journey of ramping up volumes. So there are some events that are trading at full capacity. There are others that have yet to get there. So I think some of the quick events here in the U.K. are now toward capacity. We know that the football season should be at capacity when that starts up. Of course, a number of the clubs have now said we need double vaccine and [indiscernible] the margin volumes for a while until people bake that into their sort of regular habits. We've seen outdoor events in the U.S. toward capacity. So I think a lot of this now is about sort of continuing the ramp-up and calendar. And there's still -- with the sorts of numbers that we're at, I mean, we're talking in Q3 of being at sort of 50%, there's still a way to go, isn't it, on that recovery for us, which is very positive.
Next, we have Richard Clarke from Bernstein.
Three, if I may. I just want to follow up a bit on Jamie's question about where you are on the sort of volume recovery. The 80% to 85% guidance for Q4, I presume that includes no -- none of the FX drag. But it does include some pricing impact. It does include some -- the footprint increase. So would I be right in thinking actually your volumes are still sort of somewhere between 25% to 30% below pre-COVID. So we've got a fair distance to go -- still to go to get back to pre-COVID volumes, is my math right there?And then the second question is just the news last night on Wall Street Journal article saying that Google is going to require fully vaccinated people to work in its campus. Does that change any of your views at all? And does that change any of your ability to staff your contracts? Does that cause you any issues in getting hold of staff?And then third question is on M&A. I think you mentioned H1, you looked at 3 deals, you passed on all 3. Have you passed on anymore? And maybe any other update you can look at there?
Yes. Thank you, Richard. I mean, look, I think first phase for us is getting this business back to the size and shape that it was pre-COVID. If we're getting a benefit from pricing or footfall and the new business wins, I think that's all positive. And I think we said before that the mix may be different. I think that therefore means that if there's a slower recovery of volumes, then it means that volume recovery will benefit us for several years thereafter if it comes back in a slower order.So I think you may be right, if you were doing a like-for-like calculation of our volumes now compared to the volumes pre-COVID, they would certainly be below the 80% to 85%. But we think this gives us the opportunity to accelerate to the size we were pre-COVID and then hopefully enjoy that volume recovery thereafter and also mitigate the risks that we've talked about in previous calls around any virtual trends.On the comments about -- I haven't spoken to our Google clients since yesterday evening. I mean clearly, what we are seeing is that different clients are making -- putting in place different controls and policies for their workforce. We need to be able to respond to those within local laws and legislation. We think, again, that complexity is an advantage. We've shown that we can manage through the high levels of isolation requirements. It's why having a sort of digitally enabled workforce that's very flexible and can move across sectors is important.If clients require us to have vaccinated staff, we will find staff who are prepared to work in those environments. And if we have staff who aren't, we'll look to put them in other operations where we've got regular testing protocols. So we think we can operate to those requirements, and again, differentiate ourselves.When it comes to the impact on clients, I actually think it could probably be a net positive. Ultimately, if the employees are willing to comply with those policies, I think it means everyone feels more confident about the workplace they're in and potentially enables a quicker return and less social distancing or less caution on site, which I think is ultimately positive for the recovery within the B&I estate. Sorry, Karen, I'm passing over to you. Do you want to take the M&A question?
The M&A question. I think we like M&A, we like bolt-on M&A, but we're very judicious about the things that we look at. And we've got nothing to update on right now from what we said at the half year, Richard.
[Operator Instructions] The next question will be Leo Carrington from Crédit Suisse.
On inflation pass-through, I think your comments implied some sort of lag or negative impact. But more broadly, if there has been a lag, how well have you been able to pass through inflation to clients? And maybe on a related note, can you update us on how your volumes in the GPO are doing? And is inflation a negative or a positive driver for the GPO in terms of attracting more third-party spend?And then on a different note, it appears that competition in vending might be ramping up. Today, Pret, obviously, announced it's launching coffee vending. Your competitor, Sodexo, is now talking about vending, too. Have you seen any changes to competitive dynamics here?
Yes. I'll take just the last question and then hand the first 3 over to Karen. Just with regards to vending, I mean, I think what's most important in vending is you need scale and density for the fixed costs that we incur on distribution centers, delivery logistics and so on. We've built that platform in North America. We continue to bolt on to it through acquisition and through scaled growth. So I think we feel we're very well placed. And what's exciting and interesting in developments there is the offer innovates and how we need to compete on that. I mean, we talk a lot about sort of our open vending offer and how we put hot offers into that through other parts of our business.So I think having that route to market, the logistics and the density gives us a great platform to innovate and compete. So I think the more development we've seen there, the sort of more exciting the sector becomes. And that's a good place to be. I think you have to remember as well that in other countries where we don't have that, we don't compete, and therefore, we seek to partner. And I think the more exciting partnership opportunities there are, the more that can also be a positive for our business because, of course, we have the place in the estate, and therefore, we can partner with others. You've got the compelling offer. Karen, over to you.
Yes. So the question on inflation. I mean we are used to dealing with inflation. It really is part of what we do. What we're seeing at the moment, though, is a higher level of both food and labor inflation than we're used to seeing. But we've got that factored into any guidance that we are giving. Now we try to make sure that we don't have a lag between the inflation that we're seeing and what we pass through. And just to remind you that there actually is quite a lot in our contract structure that does allow for the pass-through. So we will be expected to mitigate to the best of our ability. But our cost-plus contracts allow us to pass on unmitigated inflation and where we've got P&L contracts and where it would allow us to pass inflation on right through to the various parts of consumer pricing.And in fact, the first question and your second question sort of links because you're asking about GPO and impact of inflation there, whether it was positive or negative. Maybe the first thing to say is that our suppliers have been very supportive and continue to be very supportive. And they have generally upheld or honored the pricing structure that we've had in place with them and the volume discount even at a time when volumes have been lower. And volumes are still tracking lower through the GPO than they were pre-COVID. What we've also seen from suppliers is that for a couple of big ones, where they generally put price increases into the marketplace, they have not increased our own prices.In terms of inflation being a positive or a negative, I think it's no different in the GPO really than it is for a new business win. Clearly, we have to manage the impact of any cost inflation in our math really cost. But also, you're right that in the same way as the inflation can act as a catalyst for first-time outsourcing, then it can act as a catalyst for more third parties coming through the GPO.
Next question is from Kean Marden from Jefferies.
So a few questions from me as well. First of all, have you possibly switched away from any cost-plus contracts back to sort of their former economic structure at this point? And if so, can you maybe just provide us with an update about how that dialogue has progressed?Secondly, on resourcing, so obviously, you need to ramp the resourcing to match the volume build over the next couple of months. Have you already secured the headcount for that ramp in sort of late August and into September? Or is that still to come?And then thirdly, [indiscernible] pinning you down. But just to check some math here, would it be right in thinking that your Q4 revenue guidance assumes that Education is back to about 90%, 95% of pre-COVID in September?
Thanks, Kean. First of all, just on the sort of makeup of contracts, I think as we said throughout, this is sort of very dynamic and organic. So I think to give you an example, in our Sports & Leisure sector, we would have moved to cost-plus arrangements in a number of areas where clients have wanted us to retain teams, the skeleton team through lockdown just on the basis of sort of uncertainty about when things might pick up and also to work with them on sort of developments of new offers and new processes sort of when do things pick up -- when things do pick up again.As we've moved into a world of restricted volumes, again, we've put different structures in place, which are based around sort of the targeted anticipated volume levels. And then when we move into a world that's fully reopened with full capacity, then we're moving back to original contract structures again. But where we can, sort of we've downside protections. I think everybody understands that. I think in the main, these conversations are going pretty well.Then obviously, you see that continuous as with one of our teams where it took 7 or 8 rounds to work through this with the clients. And that's why we focus very much on freeing up our operating teams to focus on these things because they really, really matter. But ultimately, as we keep coming back to saying, if you think about our services right now, they're critical in health care, aged care, education, getting the offer right in the complex world of sports and leisure where the hospitality experience is important. And what we're seeing is the consumer is willing to spend more on that than they've ever done. Then our clients sort of really recognize our services and are working with us.When it comes to resourcing, it's a little bit different everywhere. If you think about European countries, there's still a lot of government support. So labor has stayed on the payroll through sort of the government support measures. And we have that labor availability. Within the U.K., we talked about constellation, which gives us the ability to move our labor across sectors very dynamically. And there are obviously some seasonality with our sectors, which allows us to manage that accordingly. And some of the challenges of the labor resourcing, which I think other hospitality sectors are experiencing apply less to us.We have a 9 to 5 routine in most of our sectors, which doesn't mean sort of the long evening shifts, which I think people have moved away from when other job opportunities have come their way. We're working very, very hard in North America. I think the biggest sort of war for talent on the front line is there. And we're working really hard on building that pool and staying in contact with our employees throughout the period of any layoff, putting new benefits in place that attracts them back.And of course, there is a degree of inflation, which Karen talked to. So we're working very, very hard. We're not saying it's easy. We think we're managing it right now. And again, we need to manage it as well or better than anyone else to differentiate ourselves and retain our reputation with clients, both new and future.And then finally, on the sort of Q4 revenue guidance for Education, I think we'd still be more conservative than the numbers you suggest. We'll obviously see a sort of quiet July and August with only 1 month of significant step-up. But we would still expect there to be some marginal disruption there. Talking to some of our clients, we know the international students are flying back into the U.K. U.S. It's costly. It requires isolation or quarantine in many instances.And there's been uncertainty in international students' mind about what might happen next and if we want to see a prolonged period of reopening before they come. So I think we're conservative on the higher ed side. I think -- we think on the lower ed, there's higher volumes, and in the round, that would be lower than the numbers you suggested, which I think still gives us opportunity for volume recovery as we go forward.
It appears there are no further questions at this time. I'd like to turn the conference back to Mr. Speaker for any additional or closing remarks. Please go ahead, sir.
Yes. Thank you all very much for your time, I know it's a busy day, and bearing with us through the technical difficulties. We look forward to speaking to you in November. Thank you, and goodbye.
Thanks so much.