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

Good morning. Thank you for standing by, and welcome to the Sodexo's Third Quarter Fiscal 2022 Revenues Conference Call. [Operator Instructions] The conference is being recorded. [Operator Instructions] At this time, I would like now to hand the conference over to the Sodexo team. Please go ahead.

Thank you very much. Good morning, everyone. Welcome to our Q3 2022 revenues call. On the call today, we have Sophie Bellon and Marc Rolland. If you haven't already done so, the slides and press releases are available on sodexo.com. I also sent them to you this morning because we had a bit of an issue on the internet site. I remind you that this call is being recorded, but may not be reproduced or transmitted without our consent. Please get back to us at the IR team if you have any further questions after the call. I remind you that the next announcement will be the full year figures on the 26th of October. And I now turn the call over to Sophie.

Good morning, everyone, and thanks for being with us today. So let's go straight into the presentation, and then Marc and I shall take all your questions. Let's turn to Slide 4. So Q3 revenues grew strongly at 23.2% with a bit of help from currencies. Organic revenue growth was 18.3%, which was better than our expectations. On-site Services was also up 18.3%, with progress in all countries and segments. Benefits & Rewards organic growth accelerated to 17.7% compared to 9.3% in H1 due to a combination of new business, underlying growth in number of beneficiaries and face value increases. In Slide 5, I wanted to show you the improvement we have seen post Omicron in Corporate Services, in Sports & Leisure, and Universities related to fiscal year 2019 levels. While FM remains very solid at 115% of fiscal year 2019 levels, Food Services have seen a strong performance this quarter, reaching 90% of pre-COVID levels, constantly progressing from 1 quarter to another since the bottom of the COVID crisis. Financial year 2021 was at 112%. As you all know, one of my strategic priorities is boosting growth in North America. I'm very pleased to say that year-to-date, development and retention continued to improve in the region. The return to work is definitely continuing to progress in all regions with corporate services back up to 93% of fiscal year 2019 levels in Q3. Two years down the road from the prior Capital Markets Day, we are exactly where we thought we would be in terms of the impact from work for home, and we believe we still have opportunities to recapture business. Sports & Leisure achieved spectacular growth this quarter and the activity is now back up to 83% of fiscal year 2019 compared with the 22% in Q3 last year. Finally, I can confirm that we have good control of inflation in Q3. Now let's turn to Benefits & Rewards. Here we saw a strong acceleration in Q3 due to solid growth in all regions from growth in new business wins in the number of beneficiaries, but also in face value. In Brazil, as we said last quarter, the stars are aligned, because on top of good volumes, we have a favorable interest rate and an improving currency effect. Finally, as you all know, we took the decision to execute our Benefits & Rewards strategic plan without a private equity partner. I want to insist that the offers, while confirming the sum of the part valuation, did not reflect the interesting value of the new strategic plan and the advantages of an external partner did not justify the gap to interesting value. Turning to Slide 8. We have won some exciting new contract during the third quarter. Let me pick some of them. Campus Cyber is a 26 square meter campus spread over 13 floors located in the heart of La Défense in Paris. Sodexo provides the 2,000 Campus Cyber occupants a 360 experience at the cutting edge of innovation with 6 food service spaces to provide enjoyable, quality, responsible, and sustainable meals. These spaces accommodate the new needs of customers in terms of optimizing spaces and new consumer use. Other services include an evolving entertainment program, on-site and remote concierge services. In the U.K., the metropolitan police has chosen Sodexo to manage its estate and property-related services across London. This includes police stations, New Scotland Yard communication facilities, residential and training centers, as well as air and marine support units that support the broad spectrum of activities performed by the metropolitan police. The team will provide a range of services, including strategic property advice, provision of IT systems, financial management, procurement, contract and supply chain management, operation and service continuity planning. In healthcare, we have a good momentum with the retention of Promedica in the U.S. for further 5 years. We provide food and nutrition services on 64 sites and environmental services on 2 sites. Sodexo designed a customized offer for hospitals and senior homes aligned with the client's strategy. The team has also very significantly extended its contract for food services, patient nutrition, and environmental services with Franciscan Missionaries of Our Lady, significantly expanding our presence in the Southeast of the U.S. Finally, our new food model offers and brands are getting traction with tech and finance companies, East and West Coast U.S.A., as well as in London, such as Salesforce and PayPal in the U.S. or Palantir and Netflix in the U.K. The new business signed, whether it be for stand-alone new food services or combined with the traditional restaurant services, represents more than 1/3 of our corporate services food business signed this year. And now, Marc, over to you for the details of the Q3 revenues.

Thank you, Sophie, and good morning, everyone. I am pleased to be with you this morning to provide you with more detail on the performance in Q3. Revenues came in at EUR 5.5 billion for the quarter, up 23.2%, which represents EUR 1 billion more compared to Q3 last year. The currency impact was nearly double that of the first half at 6.6% due to the strength of the dollar and the BRL year-on-year. We are expecting the currency impact for the full year to be about 5%. Scope changes were minus 1.7%, also double that of the first half reflecting, in particular, this quarter, the sale of the Childcare activities on top of the sale of many other much smaller entities as part of our portfolio management. So with all of this, organic growth is 18.3%, of which 18.3% for on-site and 17.7% for BRS. As you all know, inflation is significant in all countries today. We are all fully engaged to manage the impact. Our procurement management teams are very active to identify always to limit food cost inflation relative to the market indices. We are also actively managing operational mitigation plans. We are reengineering menus. We are adjusting labor schedules. We are ensuring that the indexation in our corporate contracts are working well, and we are ensuring dynamic retail price reviews in all our sites. We are also attacking food waste reduction even more energetically. In Q3, the pricing effect on the top line was more than 5% year-on-year. And we expect the full year pricing effect to be between 4% and 5%. Turning to Slide 13. Business & Administration was up a very strong 26.6%. In North America, organic growth was plus 50.9% with continued return to work in corporate services and an acceleration in Sports & Leisure as the convention center activity picked up post COVID. I'll remind you that the convention center started to see bookings recover some months ago, but there is a lead time between bookings and events. Energy & Resources continued to generate solid growth due to new contract start-ups and the return to work of office staff. On the other hand, Government & Agencies growth stalled with no new business. In Europe, organic growth was plus 27.2% with a noticeable return to the office post Omicron and a strong pickup in conventions, corporate events and tourists, benefiting all Sports & Leisure venues. There was a lack of new business in E&R and G&A, though. In Asia Pacific, LATAM, Middle East and Africa, organic revenue growth was plus 10.1%. In Corporate Services, strong growth in Brazil and India more than offset the effect of the lockdowns in Shanghai. Activity in China was down with white collar offices closed in Shanghai. Energy & Resources continued to achieve very solid growth. New business ramp-ups in Latin America and particularly in mining more than offset some contract losses in Asia Pacific. Healthcare & Seniors was up plus 4.6% organically. In North America, organic growth was plus 6.8%. Seniors occupancy and pricing were positive. Hospital same-site sales growth is benefiting from a progressive pickup in retail, but it's still only back to 80%, and pricing reviews are also helping. The good news is that retention is improving and the pipeline is very active. In Europe, organic growth was up at plus 1.4%, impacted by the closure of the testing centers in the U.K. at the end of March. Excluding this closure, the segment in Europe will have been up 9%. Hospital retail sales are recovering, and seniors activity has picked up substantially due to higher occupancy and net new business and some pricing effect, too. In Asia Pacific, LATAM, Middle East and Africa, organic revenue growth was plus 7.4%, helped by pricing revisions in Brazil and solid growth in China due to the COVID-related activities. Education was also up strongly at plus 17.4% organically. The 18.4% increase in North America is linked to a strong pickup in university retail and events post Omicron despite ongoing staff shortages on many sites. Activity is now back up to 91% of fiscal '19 versus 84% in the first and second quarters. Schools were also up, but at a much lower pace relative to previous quarters, as school took up last year from the third quarter. In Europe, organic growth was plus 15%, with a strong recovery in school attendance post Omicron. They also benefited from an easy comparative base due to the lockdowns in France and the U.K. last year. The sale of the Childcare activity was effective during the quarter. In Asia Pacific, LATAM, Middle East and Africa, organic growth was only 8.7% due to the effect of the lockdowns in Shanghai and Beijing schools, which offset some of the very strong recovery in India. Now let's move on to Benefits & Rewards Services. Employee Benefits organic growth accelerated to 21.8% compared to a very strong organic growth in issue volumes of 18.5%. This is the level of growth we have not seen in a while, and it is across all regions. It reflects strong increases in new business, better number of beneficiaries, and rising face values. Service diversification was up 3.4% organically. The fuel and fleet activity grew strongly. However, this was offset by the substantial reduction in COVID-related public benefit. In Europe, Asia and U.S.A., organic revenue growth was 17.5%, with solid volume growth across the region, and in particular in Israel, Romania, and France. In Latin America, organic growth was plus 18%, boosted by growth in new business and increases in face values in meals, food, and fuel across the region, as well as higher interest rates in Brazil. Operating revenues were up strongly, plus 15%. This quarter, the financial revenue was up 62% organically due to the significant hike in the Selic, the official Brazilian interest rate, back up to over 13% today compared to under 4% a year ago. The higher rates in most of the countries have not yet started to have an impact on revenues. Thank you for your attention. I now hand you back to Sophie for the outlook.

Thank you, Marc. So let's turn to the outlook on Slide 21. We maintain our guidance for organic growth of around the bottom of the range of 15% to 18% and I confirm that we are aligned with the current Q4 consensus organic growth of 11.6%. We confirm an underlying operating margin of close to 5% at constant rates for the full year. Enhancing the effectiveness of our organization is 1 of my 4 priorities. As you may remember, in September, I took the decision to transfer responsibility for schools and government and agencies to the region. This was a decision that the team internally had been waiting for. We're now planning a further major step for simplified local and more agile on-site services organization. We plan to transfer full P&L accountability to the countries regrouped into 3 geography zones, Europe, North America, and rest of the world. There will be a gradual implementation from September to December 2022, in compliance with our social dialogue as well as information and consultation processes where necessary. Last point, please put November 2 into your diaries for our Capital Markets Day, where we will present our strategies for the group and also Benefits & Rewards. Thank you for your attention. And I now open the call to your questions. Operator, can we please take the first question?

[Operator Instructions] The first question is from Vicki Stern with Barclays.

Just firstly, coming back to the full year organic growth guidance, I guess it implies very little sequential improvement on the 2019 base into Q4, just trying to unpick the reasons for that. Obviously, I know Q4 is a small quarter. I know you've called out that there'll be 1 less month of the testing centers in the U.K. But just any other sort of specific points you'd like to call out as to why there shouldn't be a sort of slightly better sequential move into that quarter or anything we need to be aware of? Second question is just around the margin, really progression into next year. I think consensus has around 40 to 50 basis point improvement in margins next year. Obviously, there'll be some help year-on-year in terms of volume. But clearly, inflation pressures are pretty significant. So without asking you to just sort of put numbers around it, just keen to hear your latest thinking on those moving parts for margin next year. And then just finally, on retention and new signings, I know you obviously don't give numbers at the Q3 stage, but if you could just help us understand a little bit better the momentum you're seeing on both. I know you've called out in the release some positive momentum in North America. Perhaps you could give color on the retention in Europe as well and just generally direction of travel there for the group's net new business growth?

Thank you, Vicki. For Q4, it's really a question of comparison base because last year, Q4 was strong. We had a ramp up. And if you look at the comparison to fiscal year '19, last year in Q4, we climbed 4 full percentage points between Q3 and Q4. So we are up against a very strong comparison, while Q3 last year was weak. So there is nothing magical, it's pure math. What we see, though, is that this year, we are expecting the seasonality to be a bit more back into play, while last year it was completely erased by the ramp-up. So Q4 is as per consensus and there is nothing specific about it. It's just a comparative base. And as you're right also, the rapid testing centers are completely out and there is the 70 million volume last year that have disappeared this year. That's it. In terms of margin for next year, as we said, we will catch up with fiscal year '19 numbers with regards to revenue and margin next year. And as you pointed out, it's a 50 bps increase. And we are very active towards -- committed towards this. And currently, inflation is managed by us. I mean, we don't comment Q3 numbers, but Q3 margins are where they need to be for the guidance. We explained that we are mitigating inflation by different factors. So we are confident for the evolution of the margin into next year.

Okay. Thank you, Marc. And Vicki, for the retention and the net development, we are still happy with our retention and our development rates. We are very happy with what's happening in the U.S. We don't give numbers at quarter, but we can say that at this stage, the Corporate Services and Healthcare, we have a very good net development year-to-date. Universities and School, as you know it's a little early in the season. But the forecast is also very good. And globally, we're also very confident that we will improve our retention this year and also our development rates.

Just, sorry, 1 follow-up back on the margin question. So I think you called out your full year guidance for price, which I think implies price in Q4 sort of 6.5% to 7%. Just if you could flesh out again what the sort of cost inflation you're seeing is at the moment, sort of where that's come from, and then how you're expecting inflation in your cost to move into next year?

Sorry, I didn't get the 6.5%. What was that?

You'd called out a 4% to 5% full year price for your organic growth, just, which I think implies somewhere sort of 6.5%, 7% in Q4? And just sort of trying to reconcile that with what you're seeing from a cost inflation standpoint and how that's moving?

The cost inflation, as I described, if I take purely procurement and price revision, we have a gap, but it's fully mitigated by operational measures. So currently, I mean, our gross margin is evolving well given that we have -- to manage inflation, we have pricing, we have procurement, and we have operation mitigation. And the 3 together are working well. and we are not expecting them to work less well next year.

The next question is from Jamie Rollo with Morgan Stanley.

Three questions, please. Just first, on the move back to being reorganized along geographical regions. I'm just wondering if we go back over the last 6, 7 years, when you made the change originally, what has sort of company sort of learned? I was wondering why you're reverting back to the original structure? And also, is there any sort of cost we should expect from that reorganization. And indeed, should we expect any improvement? Secondly, it would be great just to get an update on where you are on converting the contracts away from sort of cost plus back to where they were? And what's the sort of time line do you think of when the mix of contracts goes back to what it was pre-COVID? And maybe you could remind us of that split between the different types of contracts? And then finally, just a very general sort of high level 1 on the CMD. I'm obviously not expecting you to preannounce any numbers today. But perhaps you could just give us an idea of the sort of boundaries or scope of any targets you might be giving? Are we looking at annual growth rates? Might you be giving an actual revenue or an actual profit figure? Or is that still very much under review?

Thank you very much, Jamie. So thank you for your questions. Very important point. We are not moving back where we were 7 years ago. We have learned a lot from what happened in the last 7 years. And especially, it has helped us put in place a strategic plan by region -- sorry, by segment and created family and a go-to-market strategy. But now we really want -- we have been working in a dual accountability organization and we want more simplification and more agility, better execution, and we think that by putting the P&L back in the countries, it will give us that agility and that simplification. We've also seen during the last 2 years, during the COVID crisis, that a lot of things happen by country, and we can still see it now. And we have seen also the reactivity of the teams and the agility and they've done an amazing job. So we want to keep that agility. And this will reduce the weight of the global teams and will provide more autonomy to the field and country. So we do expect some savings, but it is a little too early to discuss it now. And we shall come back to you on this later. We also are working on this, and we have to consult the employee representative. So since 2016, we have been working with a matrix organization, and we have not yet demonstrated that it provides an advantage when it comes to growth or margin. So that's why it is the right time to simplify the model. Do you want to take -- and there was the second question where...

There was a part so on cost and savings. So we are currently working on it, but it's mainly something which is going to happen in global structures, not so much in countries. So we are not expecting massive cost. And if there were some costs, we will deal with it. But we could be expecting some savings, too. So it's going to be gradual in fiscal year '23, and it's a little early to give you more details, but I think we'll come with more details next time. On the cost plus, I will say that today we are almost where we were in '19. In the U.S., we are at 40%, 42% cost plus. In the U.K., we are where we were a while ago; same thing in Europe. So I think from a cost plus point of view, portfolio of contracts, we are there where we were.

So on the Capital Markets Day, well, we will share more, obviously, on November 2. But what I can tell you is that next year, we are committed to getting back to revenue and margin level of fiscal year 2019. So meaning, in terms of UOP, we were at 5.5%. And for revenue in 2019, we were at EUR 21.95 billion, so almost EUR 22 billion. Of course, assuming that no new strong pandemic, war, or anything else of that kind will happen.

Can I just get back to just the first answer, Sophie. You're saying not moving back to where you were 6, 7 years ago. But just from the outside, it looks like the 3 regions just look exactly the same. And it looks like we're moving back to where most of your peers are. So what exactly is going to be different about the new internal organization from 6, 7 years ago?

Well, I agree with you. It's kind of a moving back. But what we want to keep is that we have created some segment family, knowledge about the client, about the consumer, and we want to keep that. And we've really made progress in that direction. So it is in that sense that I'm saying we don't want to move back to where we were 7 years ago, because I think we've really made progress of having definition of strategic planning by segments, where we want to go, the countries where we don't want to go with certain segments, and we don't want to go backward in that area, because I think there, in terms of targeting where we want to be, what country, and you've seen that we have made also a lot of improvement. We've gone from more than 80 countries to 55 today. So it's about making choices. And I think it has helped us make choices. And I think we need to keep doing that even further. So that I won't let -- I want that to stay. That's why I'm not saying absolutely going back. But I agree, in terms of P&L, it will much more look like it was before.

Okay. And just on the CMD response, obviously, you're going to reiterate that guidance for 2023, but I assume we'll be getting some longer-term targets as well.

Well, we will discuss that in November.

The next question is from Leo Carrington with Citi.

Firstly, obviously, there has been a number of country exits and disposals of some businesses. I don't think there have been other moves in Q3, and correct me if I'm wrong. Do you -- again, not wanting to sort of preview the CMD, but do you see the portfolio as needing any further rationalization in terms of business lines or countries? And then secondly, back at H1 results, you mentioned the European GPO business being strengthened. Can you give us an idea of the relative scale of this versus the U.S. GPO, what the overall ambitions are for the GPO in Europe, and a general update on the GPOs as a whole, have purchasing volumes recovered, do they need further scale by region, et cetera, that would be really helpful.

Okay. So in terms of the rationalization of the portfolio, absolutely, I think it's 1 of my priority. And we have done a number of things this year, and I'm not going to repeat them. You know them, but the ones that really have an impact on this quarter are Russia and also the active sales of the Childcare business. But yes, we keep looking at what could be done, but it's a little too early to talk about it. But it's definitely an area where we still want to rationalize the portfolio and be more focused, and especially on our food business.

With regard to the European GPO, yes, we have a strategy to expand and to grow into Europe. So it's a mix of greenfield operation and M&A. You may recall, now 5 years ago, we bought a business called PSL in the U.K. Recently, we've done 2 small acquisitions in France and we are opening bureaus in various countries. It's still small. But right now, the U.K. is profitable and we have the mission to break even quickly in most of the European countries and generate organic growth with -- it's a question of lining up more salespeople and investing. So this is what we are doing, but it is relatively modest in size today compared to the U.S., but it's growing and it's a clear focus of the team, and we want to grow bigger in GPO in Europe.

And in terms of the overall purchasing volumes, I guess, maybe for U.S., are they now effectively back to where you were pre-pandemic? Or has there been, has that...

You see that we are only at 90% of the food volume. So we are not fully back where we are. But in terms of overall volumes, as we said that the revenue should be back to '19 level next year, we are getting there. We are getting there.

The next question is from Jaafar Mestari with BNP Paribas.

I have a couple, if that's okay. Firstly, just as a follow-up on new business and retention. Are you able to tell us broadly how much of the 17% organic growth in Q3 was -- sorry, 18% in Q3 was like-for-like. And I'm asking because your retention and new business KPIs are indeed good and accelerating. But as we all know, they tend to be a little bit forward-looking. And in H1, you still had a total organic growth that was lower than your like-for-like, which suggests in H1 net new business was negative. So curious if we've seen that inflection point in Q3, where contribution from net new business is actually already positive, or if we're going to see it in Q4 or if it takes a little bit longer to ramp up those good forward-looking retention and new business numbers?

Yes. If I take Q3, so we have more than 5% pricing effect. And the net new business impact on Q3 is still slightly negative, but it becomes positive in Q4 and it will be quite neutral at the end of the year. So the like-for-like in Q3 is between 13% and 14%, so to speak.

Is that like-for-like volumes and then this extra 5% pricing, just to be clear.

Yes, you've got like-for-like volume, let's say, at 13%, then you've got pricing, and then you've got net new business to balance, yes. So what I mean is that the net new business has not yet turned contributive, because last year net new loss was negative. But as we are progressing into the year, and the openings are starting, we will have a more neutral net new business in this year and a positive net new business in the year after.

Okay. And is that realistic that the Q4 net new business is strong enough to make it neutral for the full year? It was this minus 2 in H1 and you're saying that will turn to positive in Q4.

That's the strategy.

Very, very strong in...

Yes. We signed quite a bit in the beginning of the year. Retention was good. So currently we are operating contracts. And yes, it will have full effect in Q4 compared to Q3, where it was just a more muted impact. So it's coming up.

Super. And then my second question was really just a prompt for some background on the reorganization because there were so many things happening around the same time when this was implemented. Marc Rolland, you were nominated as the next CFO in March '15, but then you actually really only started as CFO after the reorganization was announced. It was announced in November and then you started in December and then Sophie Bellon started in January '16. So it's quite debatable whose baby it was. But I think it's fair to say you're certainly aware the CFO who has implemented it and then increased the cost of it in '17 and defended the benefits from saving costs and then moving to a global organization. So I'm just curious. I don't know if it matters that much. I'm just curious what was the impetus initially and why you took so long to review that?

So let's be clear, first, it was Michel Landel's baby. And then it was Denis. And I can tell you that we had many discussions with Denis trying to -- because we were not as happy as we should have with what had happened. As I said, there are some positive effects of the discerning organization, but Denis didn't want to change or to simplify. And it was also -- so that's where the decision belongs and he was the CEO. So then as soon as I started, I started doing what was obvious with the government and agencies and school and then also working and working with the team, and I decided to go further and make the decision to adapt again.

Very clear. And I guess a part of that complicated situation in '15, '16 is that you had this reorganization? And then at the same time, you had the EUR 200 million, which became EUR 245 million adaptation and simplification program. What's the overlap here? Was the global reorganization, 1 thing, which was a small part of that? Or was it a big chunk of the EUR 245 million directly related to the global organization. When you say no material costs, is it realistic to revert something that costs as much with this time no material cost?

What you have to take into account is that the past, I would say, 2 years, almost 3, with the GET program, we really slimmed down the organization, we simplified it. And here, what Sophie is announcing is the ultimate steps to plan to make the organization more agile and be organized by countries with full accountability. So we have already done quite a bit, and now we are finally putting the last stones to it. And yes, there will be some cost to adapt it, but it's not going to be massive. And you do not have to expect the way you saw our plan in the past. It is not what we have in mind.

Also, 1 more thing that I didn't mention yet. What I'm going to change is that I've been working in the last month with a transition committee of less than 10 people, and this will continue. And I think that's also a very big difference from what it was in Denis' period. We had 16, 17 people reporting to him and I don't think it's good for the organization. So it's also something that is changing.

The next question is from Richard Clarke with Bernstein.

Three, if I may. Just starting on Benefits & Rewards. Obviously, in the last quarter, you decided to step away from the deal. At the H1 results, you were quite confident. So maybe you can just sort of paint the picture of what changed? Were there bids that were in that got pulled away? Or did you change your internal sort of valuation of it? What kind of change between the H1 results of that? And are there any other ways you maybe could monetize the BRS business with regional sales or anything else you might do further down the line. Second question, you sort of mentioned that rates haven't really flowed through in BRS yet. Maybe you can just remind us what kind of sensitivity we should be looking for in BRS as rates begin to increase sort of in your non-LATAM markets? And then lastly, I think you said that you are kind of on track with your 2020 predictions for the sort of return to office. If I go back to your 2020 CMD, you were talking about 27% drop in average time in the office. It looks like your corporate services is quite a lot more recovered than that. It looks more like sort of 93% recovered. So just trying to square that circle and the gap between those 2 numbers. Is that new business? Or is that just inflation? Or is that take-up rate? What's sort of bridging that gap in there?

Okay. Thank you, Richard. So I'm going to take your first question on BRS. So as part of the strategic review in recent months, we have defined a road map to accelerate the development of Benefits & Rewards. So the option of opening up the capital of the Benefits & Rewards business to a private equity was not retained as the Board of Directors considered that it did not create sufficient value. And I would like to add that the offers confirmed the sum of the part valuation that we have seen from analysts, from some of you, they did not reflect the interesting value of this new strategic plan. And the gap between this interesting value was, in our view, too high and did not justify the dilution to existing shareholders. So that's why we didn't decide to go ahead. But we are convinced that we have a strong development potential. And in fact, the current environment is providing tailwinds which are particularly positive for the Benefits and Rewards business model with interest rates and inflation going back up again. So we are very convinced and committed to execute the plan without a partner. And we also have the investment capacity without an external contribution. So that's where we stand today.

And on the sensitivity, the maths are relatively simple, maybe too simple, but let's say, BRS is about EUR 2 billion of cash. So if interest rate goes up by 25 bps, on average, the yield increased by EUR 5 million. And when you look at what cost you have in front of it, you don't have much cost. So the flow-through to UOP of interest rate is pretty high. And if you look back, I mean, we suffered a lot in our European margin because of lowering interest rates. You can see the progression this quarter of EUR 7 million versus last year at 62%. That's going to be definitely helping margin in the future. Now how much the interest rates are going to go up? This is a question we will answer quarter-after-quarter. We know already in Brazil that the Selic is at 13.25%. It was at 4%, which is helping. And on the last question, we actually did a review with the Corporate Services team recently, and we believe that on the food side, between this quarter, Q3, and Q4, we will be back to what we said we will be, or what will happen in September '20, when we did the last Capital Markets Day, the famous 27%. You don't see it in the overall Corporate Services number because the FM business has grown strong during that period, and it's covering part of it. But the work-from-home impact that we modeled in September '20 is currently where we are, and we believe there are opportunities to improve. So we believe we can beat the model, but we are already there.

Also what we're seeing to beat the model is that today, our clients and the consumers, especially in corporate services, they want something different. And our clients, they ask us to help them to bring the employees back on site. So with some clients, before it was all about prices, now they are ready to pay more, so that their employees really want to come back to the office and have a very nice experience, and it goes through the food service and through the offers. So all those new offers that we have with the Good Eating Company, Nourish, Fooditude, they are part of -- or even in France, with the signature, they're also helping the sales -- the revenue recovery.

Just to circle back on the first response there, which was very useful. So what you're saying is you had bids which were in line with what some people on this call have maybe suggested you could have received for BRS, but you decided to turn those down because on your review, you thought it was worth more than that.

Exactly.

[Operator Instructions] The last question is from Andre Juillard with Deutsche Bank.

Most of them have already been answered. But I wanted to come on the balance sheet issue. You are in an especially comfortable situation, and I wanted to know if you have specific plans about it, thinking about new acquisitions to boost the top line growth and the optimization of the profitability? Or if you are more ready to think about some return to shareholders if you believe that you are comfortable enough?

Well, I will start on this and maybe Sophie can complement. We are well aware that we have significant cash available. Right now, as Sophie stated, we are a lot more focused than we've ever been. And I think we will explain all of this at the Capital Markets Day. We are currently working with the team on the strategy and you will see that later. Right now, it's too early to commit cash on anything. So I think let's push back the question to the Capital Markets Day.

And in terms of M&A, yes, we've always said that we would seize opportunity. But now it's going to be more focused. We said we still want to invest in new food model, which we've done, and we will continue to seize opportunity. We want to invest in the U.S., and we've done it recently with the acquisition that we have done in the convenience business. In health care, we are interested by the HTM business. So yes, we will use that cash for acquisitions, but there will be a very targeted acquisition.

So that means that we are more talking about small amounts, which should one more time leave you some margin of maneuver for some potential return to shareholders?

Yes, yes.

So this was the last question. I turn the conference back to the Sodexo team for any closing remarks.

Well, if there is no more question, thanks for being online today, and October 26 is our next meeting for the full year results. So have a good summer.

Thank you.

Thank you very much.

Goodbye.

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