Sodexo S.A. (SW.PA) Earnings Call Transcript & Summary

Good morning, and thank you for standing by, and welcome to the Sodexo call this morning. [Operator Instructions] I advise you that this conference is being recorded today, Thursday, the 9th of October 2025. I would now like to hand the conference over to the Sodexo team. Please go ahead.

Good morning, everyone, and thank you for joining us on such short notice. I'm Juliette Klein, Head of Investor Relations. Joining me on the call today is Sophie Bellon, our Chairwoman and CEO; and Gilles Pelisson, Independent Board Director, Chair of the Nominating Committee. After their opening remarks, we will open the line for a few questions. We kindly ask you to limit the number of your questions and keep them focused on today's topic. Finally, a reminder that fiscal 2025 results will be announced on Thursday, October 23. With that, I now hand it over to Sophie.

Thank you very much, Juliette. Good morning, everyone. And yes, thank you very much for joining us this morning. Yesterday, the Board approved the appointment of Thierry Delaporte as Chief Executive Officer of Sodexo, effective November 10. Following our announcement, we felt it was important to give you additional context today around this key milestone in our company's journey. This decision is the result of a governance process the Board has been working on for some time. And 4 years ago, when I stepped into the CEO role, our priority was to complete a deep transformation and reposition the group as a pure-play food and services company. Having completed this transformation, we are now entering a new chapter for the group, one, that will focus on commercial acceleration and operational execution to unlock the full potential of our business. We operate in a dynamic expanding market. Our business model is resilient, and we provide essential services, benefit from recurring demand and generate strong cash flows. We also have the financial flexibility to reinvest in growth while continuing to deliver value to our shareholders. We have made significant progress, yet our performance remains below our expectation and not up to the potential of the market. The bridge that gap -- the bridge to gap -- to bridge that gap, sorry, we need the right leader to take the company forward. I'm very confident that Thierry is that leader. Upon his arrival, I will serve as nonexecutive Chairwoman of the Board, working closely with him to ensure a smooth transition. Thierry will be fully empowered to make decisions, set his own strategy priorities and evaluate the organization. I will now hand over to Gilles Pelisson, Independent Board of Directors at Sodexo, Chair of the Nomination Committee and who also will become our new Lead Independent Director from November 10. Gilles will say a few words about the process that led to this important nomination.

Thank you, Sophie, and good morning, everyone, and I'm very pleased to join you today and share a few words about this important deployment. I would say as President of the Nomination Committee, I had the privilege to lead thorough and structured process, working closely with the Board to ensure we identify the best profile for this role. We hired a leading executive search firm, assessed both internal and external candidates. We were looking for someone who had already led, of course, a publicly listed company in an international environment. Somebody who knows the U.S. market quite well, given the size of the business of Sodexo in the U.S. Who has driven major transformation while delivering results in fast-changing environment. And somebody who could bring a strong B2B services background with a strong client-centric mindset. Somebody also accustomed to leading large organization, we're talking about over 400,000 people at Sodexo, with sizable workforces. And finally, of course, somebody who had worked, if possible, in a family ownership structure because this is one of the characteristics of course of Sodexo. So from a very large number of people we screened, Thierry Delaporte stood out as the clear choice. He has spent more than a decade in the U.S., holding senior CFO and CEO roles at Capgemini. And then over the 4 years, where he was the CEO of Wipro, about half of the business of Wipro was generated in the U.S. So he spent a lot of time there. He knows that market very well. He brings also proven experience in a large-scale company transformation, including the strong IT, digital dimension, highly relevant, we believe, to Sodexo's future necessity to improve data, mining and AI. He has also extensive B2B experience, driving international and people-intensive businesses. His leadership style combined strategic vision, operational discipline and the ability to inspire and mobilize team. And of course, beyond these credentials, Thierry embodies the values we hold dear at Sodexo and we inherited from Pierre Bellon, humanity, openness and responsibility. His ethical standards and transparent approach are a strong fit with Sodexo's culture. So Sophie now, I will hand it back to you to wrap up.

Thank you very much, Gilles, and thank you for your involvement in this very important process. The timing is right for this transition, and I'm convinced of our ability to succeed with our talented teams and resilient business, Sodexo is well positioned to keep evolving with intent and to embrace the future with clarity and ambition. So I also -- yes, I really want to thank everyone who contributed to this process and especially who was very much involved. We are now happy to answer your questions.

[Operator Instructions] The first question is from Jamie Rollo, Morgan Stanley.

First question is, could you just confirm that 2025 is in line with your guidance? And are you still expecting to provide some guidance with the 2026 results -- sorry, 2026 guidance with the results next month? And then just on today's discussion, are you expecting the new CEO to do a review of the business? And if so, how long might that take? And then finally, you talked about new commercial acceleration and better operational execution. What sort of needs to be done, do you think, to get there? Do you think margins need to be taken down with further reinvestment?

So regarding business performance in fiscal year, we are referring to the guidance framework we gave in July. And and that's it. Today, is not a call. We are in a quiet period. We cannot give any information on guidance on results. It's about the CEO nomination. And same thing for the financial '26 guidance. We cannot discuss any of that today. And it will be part of our call on the 23rd. So the review of the business of the new CEO, yes, of course, he will be -- he will start -- he starts to have a meeting today actually with a member of the team. So even before he starts his role on November 10, he will start getting to know the team and visiting the team in countries. He will start on November 10. And of course, as a new CEO especially one coming from outside with his expertise, and he will take a few months to make his own diagnosis. And I think we -- he will be able to come back to the market before in the spring or in June in '26. And on the fourth question, on the new commercial acceleration, it's -- it is a continued intent. When I took over post COVID, the net development was negative and had been negative prior -- not because of COVID, but prior to COVID. Since then, I think we have made a lot of progress. We are doing a very good job in Sodexo Live!, in Australia, in India, in Brazil, in France. We have done a good job also in hospital this year in the U.S., but there are still some countries where our net development is 2 weeks, some countries in Europe, in the U.K. also, it's a little weak and some segment in the U.S. that we have already discussed with you before, like education. Yes. It's a call on the government. So I'm just repeating what was already said before, but let's meet in 2 weeks to discuss the results.

And apologies for asking that question. I was just wondering how you could guide on next year if the CEO subsequently went on to take action that could affect that guidance, but I understand.

The next question is from Jaafar Mestari, BNP Paribas Exane.

I just wanted to come back on the selection process, please. And in terms of it's how would the Board presents the track record of Mr. Delaporte today, he spent some time at Capgemini. He then led Wipro, which you mentioned. I don't think anyone on this call is in IT services experts, but it looks like Wipro was a story of catching up with peers and accelerating growth and reweighting to maybe large, larger clients, a lot of these themes will be familiar with -- for people at Sodexo. I guess, how do we assess the track record? And what were the main achievements in these mandates that made Mr. Delaporte the right fit, please?

Well, maybe I will take this answer. I think we -- the way we look at it was really that having been for 20 over years, at Capgemini in the leading team under Paul Hermelin, he was like a #2, but in charge of very large businesses. He accomplished the booster plan, which was really when Capgemini decided to stay in the U.S., which was a major and significant move for them at the time where they really were asking themselves whether they should pull out or not. So building on this, we are talking about somebody who has tremendous experience coming from a more of a CFO background and moving into sales. We discussed with him and we saw how client oriented he is and over the recent years, he has really been involved both in Capgemini and in Wipro with clients and being very, very just focused on client development. At Wipro, my understanding and the read we made was that -- it's one of the IPPs. He took it. The company was like at $8 billion in sales, took it to $11 billion. So significant improvement between '20 and '24, growing the sales, upgrading the management team, internationalizing the team. So making sure that Wipro could evolve part of the 5 or 6 IPPs and really make a significant jump ahead under his leadership. Under his leadership, not only the sales grew up, of course, the workforce went from 150,000 people to 250,000 people and the market cap was doubled. These were significant achievements that as the Board, we assessed to be a tangible transformation performance that we like very much, which may be very relevant for Sodexo because we know that in general, assume the previous question, there is certainly to be a focus on margin in the future. So targeting excellent performance in margin delivery. And of course, also the consolidation of certainly the IT is an issue. We know that we need to invest in those -- in this field. And with his technological and digital background, we think it will be a real help.

The next question is from Estelle Weingrod, JPMorgan.

I have 2 questions, please. The first one, I just wanted to understand when did the process start. And also, again, on his background, could you tell us more about his U.S. expertise and what it can bring to Sodexo's overall competitiveness, more specifically? Or is it more about him having worked in large organization in the same region before?

So thank you, Estelle, for your question. For -- the process really started quite a few months ago, I'm not going to give you -- but early in the year. So it has not -- it was very much -- something very much planned. And why that? Because when I took over as a CEO post-COVID, I really took over to make some structural milestone changes and I think it's what happened in the last 4 years with the spinoff of Pluxee in February '24, with the simplification of the shareholding structure the last summer, also an active management of the portfolio, selling the TieCare business, selling the home care business, rationalization of the country, we also -- as soon as I took over, I simplified the organization changing from business world, a business unit segment organization to a country-based P&L and we worked on the operating model. We refocused on food and accelerated on food and also other services, but a strong acceleration of food. We did some investment in our brands, in our tech and data in the supply chain. So I really think that the big structural changes that needed to happen, happened during those 4 years. But now we realize that '25 is the end of the cycle. We have a 3-year plan, '22-'25. We are launching -- starting a new phase and with the Board, with the family, with the Nomination Committee, we anticipated that new phase and that's why we decided to launch that process. And as Gilles said, we look for internal candidates, but very quickly, we didn't think that internally, we had anyone ready for this role. So that's why we quickly looked outside. And really, I'm very confident that Thierry is the best person to open this new chapter. And I can tell you that personally, I will really change my hat and become the non-executive Chairwoman and he will be fully empowered to continue the journey, make his own diagnosis and build the best team around him. And maybe, Gilles, you can answer on the U.S. expertise.

Yes. For having discussed with him extensively and myself having lived in the U.S. for 8 years, he knows very well the U.S. in terms of geography. It's not the same thing doing business in Texas and in California or in New York City. He knows the U.S. business structure, the way corporations make decisions are organized, et cetera, even the administration also, although it's changing a lot recently, but he has this approach, so he is not going to have a long learning process to how to do business in the U.S. environment. And as you know, Sodexo's business in the U.S. is very diversified, goes from universities to health, to corporate to Sodexo Live! with lounges, with managing Stadium. So we wanted somebody who was able to take over quickly, had a good grasp on the business, and then lead the team in a significant way because this is important for the company and important for our growth. So this is why we felt very much at least with his knowledge, capitalizing on experience with Capgemini and also with Wipro.

The next question is from Leo Carrington, Citi.

Can I ask two questions. Firstly, what was Mr. Delaporte's rationale for leaving Wipro? And then secondly, the release does draw attention to his acquisition experience. Does that suggest more of a focus for Sodexo on M&A?

I'm sorry, we didn't hear your first question, Leo. Can you repeat, please?

Yes. Sorry, the first question was just around his rationale for leaving Wipro in 2024.

And the second?

On M&A.

The second question is, the release does draw attention to his M&A experience. Is it indicative of more of a focus for Sodexo or just highlighting what his experience is?

Yes. So first, on the rationale for leaving Wipro, I don't think it's something that we want to answer. But what we know is what he has done there. And what we know we have done there is that he has been transforming in 4 years. He has been transforming significantly the company. As Gilles said, he also increased the revenue by 40% in 4 years, which is significant, and he doubled the share value of the company, the capitalization of the company also in 4 years. So he has -- and that's what matters for us. And also, as Gilles said, coming from a tech background, transforming organization and having done it with many clients, I think we will -- in the journey, we are going through at Sodexo. It will be very helpful to get that expertise. Then on M&A, when I first took over, clearly, I said M&A is not a priority. But since then, you heard us with Sebastien, we said that now it's time to go back to M&A to increase our market share, work on -- also be more present in convenience, especially in the U.S., also look for the right targets in our GPO business. So we have a clear capital allocation that reflects our near-term needs at Sodexo. You've seen that we just announced quite significant acquisition in Spain, where we are going to double size and become #1. And we continue to have an active pipeline. As I said a year ago that now we were more ready for M&A, and he will, of course, make his own diagnosis and on that topic.

My understanding was that at Capgemini, there was a lot of M&A activities. So we wanted somebody with that kind of agility so that if we have opportunities to do so, it could be familiar with the process and the way we could handle those situations.

The next question is from Karl Green, RBC.

I've just got 1 question. If Thierry identifies a scenario where more radical action is the most logical strategy to close the performance gap versus the market. And I'm thinking, for example, accelerated contract shedding investments into sales, account management technology, et cetera, possibly large-scale M&A, would Bellon SA contemplate taking the group private moving to and voting or economic minority?

We did not hear you very well. Can you speak a little louder because we -- I'm not sure I heard very well the question.

Yes, apologies. Can you hear me a bit better now?

Yes, a little better, yes.

Okay. The question was, if Thierry identifies a scenario where more radical action is the most logical strategy to close the performance gap, would Bellon SA contemplate taking the group private and moving to a voting or economic minority.

Yes. I think the good news here is that we manage as independent directors to have an ongoing discussion with the Bellon family and a good understanding what was right for the company and for the group. As major shareholders, of course, they are the most interested in the success and the growth of the company. And of course, they are not satisfied at this stage with our recent performance, especially on the share side. So making sure that Thierry is in an environment where the decision and the -- whatever he wants to implement in the company can really happen is key to everybody. And as Sophie mentioned, she will step down as a non-exec Chairwoman. And we are going to make sure that we have a new governance, which can function and operate in the best interest of all shareholders. So I think this is what you should keep in mind that have definitely the intent to put in place that kind of governance to make sure that we can deliver results and that if he needs to take whatever actions he recommends and that we agree, it will have the full support of the entire Board, including the family.

The next question is from Kate Xiao, Bank of America.

Two from me. First, just if you could elaborate on kind of the task that the Board has given to the new CEO in terms of time line and geographies. You kind of mentioned earlier that you expect him to kind of first come to the market after the initial diagnosis in about 6 to 8 months, around June. But I just wonder, what's the kind of multiyear time line like with the task? Is there a time limit to the term of the CEO? What is he looking to accomplish in the first couple of years, if you could lay out that time line? And in terms of geographies, we've talked a lot about the U.S. It sounds like that's where he has a lot of expertise. Is it going to be based in Europe or the U.S. And so what are some of the other geographies that you also focus on? And kind of -- I guess, what are the priorities there? And then my second question is, I think one of the things he was known for when he was CEO at Wipro was he was making big and bold moves, transforming the organization, which is exactly what Sodexo needs. He was also more focused on growth than margins. So just wondering if that's the thinking of the company now that you're willing to kind of be focused more on growth. You talked about investments, but maybe the thinking of investing growth and then margin will come later.

Yes. We are really looking at profitable growth, so to speak. So it's growth, but combined with profitability and margins. To go back to your first question, I think we -- what the board is looking at, and this is also going to be fine-tuned in the coming months. As Thierry goes around the world and discovers, meets the team and sees the challenges, et cetera, but it's really about setting up a very strong ambition to strengthen our market share because we have been losing some in the past month. So we have to be really on top of that. Mobilize the right leadership team, which has anybody who joined a new team, I'm sure he will make his own assessment and his own choices, accelerate the commercial momentum because this is critical, of course, as Sophie mentioned, and she has always been very focused on that, what is called in Sodexo language, the new development, reinforce disciplined operational execution to improve margins. So that's really your question. And this is really something where we all believe there is margin for improvement. And it's based on the systems, it's based on the discipline, on the execution. And we do believe that Thierry can bring something here, which will be important. And then, of course, regarding geographies, I think definitely the U.S. needs to be addressed. Maybe there are some other geographies that you have in mind.

As I said, I think we are doing -- we are performing well in the U.K., for example, in terms of margin. But definitely, we need more development. We need more growth, more new contracts, certain countries in Europe, but I think that we can discuss in 2 weeks because it's not the topic of the -- it's not the topic of the day. Then I think you asked where will Thierry will be based. He will be based in Paris, but he also has a room in the U.S. So he will travel very easily to the U.S. And I think that's it.

Gentlemen, there are no more questions registered at this time. I turn the conference back to you for any closing remarks.

Okay. Well, thank you very much, everyone, for joining the call today. Don't hesitate to reach out to our investment -- Investor Relations team to Juliette and her team. If you have any follow-up questions, and we will speak again at the fiscal year '25 results on Thursday, October 23. Thank you again, and have a very good day.

Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.