Earnings Transcript for CMPGY - Q4 Fiscal Year 2024

Dominic Blakemore: Good morning, and welcome to our 2024 full year results. It's been another great year of strong progress. Our operating profit increased by 16% with organic revenue growth of 11% and 30 basis points of margin progression to 7.1%. We operate in an industry that has a significant and attractive structural runway for growth. In recent years, we've improved the quality of our portfolio by exiting noncore markets, and we've continued to invest in capability, CapEx and M&A to sustain higher net new business growth. Over the next few minutes, we'll tell you how our relentless focus on the core, strong competitive advantages and ongoing investment are unlocking further growth opportunities. But first, let me hand you over to Petros.

Petros Parras: Thanks, Dominic. Good morning, everyone. We've delivered another strong financial performance with double-digit growth across all key metrics, organic revenue, operating profit, EPS and free cash flow. Net new was 4.2%, accelerating in the second half to 4.8%. This gives us good momentum into 2025 as the cornerstone of our growth. Pricing trended lower as the year progressed and was in line with our blended rate of inflation at around 4%. And volume growth moderated to around 2% as anticipated. We're sustaining high revenue and profit growth across all regions, with strong organic revenue growth and good margin progression. Importantly, unit margin recovering to pre-pandemic level, every region delivered double-digit improvement in operating profit. Group operating profit increased by 16% to $3 billion. Interest increased to $249 million due to higher interest rates and debt. It is expected to be around $300 million in fiscal year '25, reflecting our acquisition activity. Based on current interest rate expectations and assuming leverage at the midpoint of our 1 to 1.5x range, our interest charge should reduce from fiscal year '26 onwards. As anticipated, our effective tax rate was 25.5%. Earnings per share were up by 15% and in line with our policy, dividends grew by the same amount. Our continued strong cash position gives us flexibility to invest in growth and reward shareholders. CapEx was 3.7% of revenue, reflecting some catch-up from the prior year. Going forward, we expect CapEx to be around 3.5% of revenue. Working capital benefited from payroll and year-end timings, providing us with an inflow of around $200 million. We're continuing to rebuild margin while increasing investment to drive growth and mobilizing higher levels of new business. We expect to make further margin progress as we grow scale and benefit from overhead leverage, productivity and digital initiatives. Looking at our portfolio. We've exited a further 5 noncore markets agreed to dispose of our remaining presence in Latin America and Kazakhstan, all subject to regulatory approval. We're also continuing to invest in our core markets to further unlock growth. Net M&A expenditure was $1 billion, mainly related to sales in CH&CO in the U.K. and HOFMANNs in Germany. Post year-end, we also acquired Dupont Restauration in France, and agreed to acquire for 4Service in Norway, which is yet to complete. The net impact of all announced acquisitions disposals will reduce profit in fiscal year 2025 by around $30 million. Given our disposal program is complete, we expect any further acquisitions to be accretive to profit from fiscal year '26 onwards. The business continues to be very cash generative, giving us flexibility to invest and return capital. In 2024, we invested $2.6 billion in CapEx and M&A to drive growth. In addition, we rewarded our shareholders returning $1.5 billion through dividends and buybacks. Leverage ended the year at 1.3x net debt to EBITDA in the middle of our target range. Our capital allocation model remains unchanged. We're investing in CapEx to drive net new business growth and are currently prioritizing strategic platform acquisitions such as Dupont and 4Service. As a result, we expect leverage at the half year to be towards the top end of our 1x to 1.5x range. Looking ahead, we'll continue to distribute any surplus cash to shareholders and will revisit the scope of further returns later this year. Turning to guidance. In 2025, we expect high single-digit operating profit growth driven by organic growth above 7.5%, which is likely to be first half weighted and continued margin improvement. We anticipate the components of growth to be net new in our 4% to 5% range, pricing of 2% to 3% depending on inflation and while volume is more difficult to predict, it is likely to be a net positive. Now back to Dominic.

Dominic Blakemore: Thank you, Petros. We continue to see stronger outsourcing and favorable market trends, which give us confidence in sustaining higher growth. Food is more valued than ever by clients and consumers. Allergens, dietary requirements and sustainability initiatives continue to add to operational complexities. Major challenges such as heightened inflation put pressure on organizations, leading to further outsourcing. Our unique competitive advantages, sectorization, scale and expertise enable us to address complexity, helping us to win more business, especially with first-time outsourcers. As a result, we're confident we can sustain higher organic growth with a robust sales pipeline and strong retention, we expect net new business to continue in the 4% to 5% range. This is 1 to 2 percentage points higher than our historic rate driven by better growth in Europe. Pricing will depend on inflation and is likely to be around 2% to 3%. And with continued attractive value versus the high street volume could be a net positive. So organic growth is expected to be mid- to high single digit compared to 5% pre-COVID and with some margin progress, operating profit growth is expected to be ahead of revenue growth. We continue to improve the quality of our country portfolio, mainly in our Rest of World region. With the program now mostly complete, we're more resilient and even more focused on the opportunities in core markets. The addressable foodservices market for the countries in which we operate is worth around $320 billion. This has been updated for the countries we've exited and includes vending and micro markets in North America and Europe. With around 3/4 of the market still self-operated or run by small players, there's a large structural growth opportunity. In fact, North America and the next 10 markets account for around 90% of this opportunity. Our business in North America remains as attractive as ever. There's a significant runway for growth across all of our sectors and the market dynamics are favorable. Our strong offer, flexible operating models and further sub-sectorization are fueling this sustained growth. Even though it's our most mature sector, B&I saw the highest rate of organic and net new business growth last year. Some of this is due to changing consumer and client trends, a greater appreciation of food and our attractive value versus the high street. And as ever, we continue to invest in innovation through CapEx and in M&A to unlock further growth opportunities. Europe sustained higher net new as a result of our growth focus and favorable market dynamics. Fragmented sales and retention processes have now been replaced by streamlined growth playbooks. Full market mapping, CRM tools and client feedback have doubled our new business ARO in Europe and doubled our sales pipeline compared to the historic rates. Building scale in country reinforces our market position and generates a positive cycle of growth. In a market where we have only 7% share, there's lots of potential in all countries and in all sectors. Self-help measures have also improved retention in Europe, one of our most important KPIs. Pre-COVID it was significantly lower than North America, averaging around 92.5%. Having invested in a new CRM system, a strong culinary offer and better sales force training, retention has increased to around 95.5%, a substantial step-up. To unlock further growth, we're acquiring high-quality businesses to expand our portfolio of sectors and subsectors. We seek businesses that have unique capabilities or reach with a flexible operating model and an entrepreneurial management team. Historically, our acquisition strategy was focused more on North America. Whilst we're still investing there, we're seeing attractive opportunities in Europe as we replicate the successful North American growth blueprint. High-quality additions to our portfolio include HOFMANNs in Germany, CH&CO in the U.K. and more recently, Dupont Restauration in France, and we've agreed to buy 4Service in Norway. It's early stages, but the integration of these businesses is going well as we generate returns over time. CH&CO's new business wins are 40% higher than expected, and we're saving more on costs too. M&A creates value by accelerating growth, removing costs and increasing scale. This takes time and returns build year-on-year. In the U.S., we're still generating value from businesses bought over 20 years ago as their growth continues to compound year after year. To further enhance growth, we're investing in capabilities and resources across the group. Talent, systems, processes and data are all growth enablers. And with a more systematic approach to leveraging best practice, we can quickly scale the best of Compass across the group. In summary, the combination of the strength of our business and favorable market dynamics give us confidence in achieving higher net new business growth than our historic rates. As a result, our medium-term growth algorithm is mid- to high single-digit organic revenue growth with ongoing margin progression back to our peak and beyond. This leads to profit growth ahead of revenue growth as we maintain our strong record of performance and deliver long-term compounding shareholder returns. This is now a phase of continued sustained execution enabled by our world-class talent at all levels in the company and an agility to innovate with technology at pace and at scale. We're really excited for the future, and we're wholly committed to delivering. Now over to Q&A. The operator will share instructions on how to ask questions. And please remember that you must be connected by phone to ask a question. Operator, over to you.

Operator: [Operator Instructions] We will now take our first question from Jamie Rollo of Morgan Stanley.

Jamie Rollo: Three questions, please. First of all, on the net new, very strong Q4, it looks like it was a bit over 5%. I'm just wondering whether it could be high end of that 4% to 5% this year, given retention is still improving. And maybe you can just quantify the ARO as to how that compares versus the $3.5 billion at the first half. Secondly, sort of similar on volumes, it looks like there were about up 2% in Q4. And your guidance looks like it's maybe 0.5 point of growth at the midpoint of the net new and price ranges. I'm just really wondering the scope for further volume recovery, how much of that growth in Q4 was sort of cyclical back to work, sports and leisure element? How much is the sort of structural share gain from a high stock and improving technology? And then finally, why the buyback? I get it, leverage high end of the target at March, but that's partly seasonal working capital it's not a very strong balance sheet. Is it about more M&A in the pipeline?

Dominic Blakemore: Thank you, Jamie. Thank you very much. I'll take the first 2 questions and then hand over to Petros on the buyback. Yes. First of all, look, 4.2% net new full year '24 with 4.8% in the second half. And as you rightly say, a very strong fourth quarter. It is only a quarter. What's really pleasing is improving retention throughout the year as we guided to the second half retention above 96%. And as you rightly say, again, good ARO on a full year basis, so $3.5 billion ARO full year versus what was $3.4 billion at the half year. So we're entering 2025 with very positive net new momentum. As we said before that, let's just look out into the first half with confidence, but the half 2 will really be about what we can achieve in the first half of our financial year '25. But at this point, look, we're looking forward into '25 with optimism on net new, and we hope to be in the higher end of the 4% to 5% range. In terms of volumes, yes look, volumes have performed strongly through the course of '24, we're guiding to a slight positive in '25. I think we still need to just see whether the return to office volumes have stabilized. I think what we're seeing though, and I think this is positive is that our value gap to the high street is significant now, and I think the consumer feels and sees that. I believe that's driving higher per capita and higher participation on site, which is very exciting. I think as you rightly say, I think technology is playing its part as well in terms of how we communicate our offer. And then we're seeing very positive trends in the sports and leisure sector, which is a growing sector for us. So I think we are well exposed to the opportunity for sustained positive volume. But again, we'll update you as we go through the year. Maybe if I can just bring that together. You've heard us guide today to grow over 7.5% for '24. It feels like the impacts of the pandemic, the impacts of the cost of living crisis are behind us. What we're looking at is the opportunity to sustain net new in the 4% to 5% range with a bit more pricing than we saw -- a bit more inflation than we saw historically. And I think what we're seeing in the U.K. and the U.S. suggest we might see a little bit more inflation going forward. That gives us the right to price, and we think that's helpful to our business model. And as we said, with positive volumes, I think we have the opportunity to be in this sort of mid- to high single-digit growth range going forward. And as a reminder, that's 50% faster growth than we enjoyed pre-pandemic on a business that's 60% larger. And with the portfolio changes we've made increasingly focused on sustaining that. So I think the trends for '25 are good. But more importantly for me, our ability to sustain that over time, I think we're very well placed to do. Petros, on the buyback.

Petros Parras: Jamie, I think on the share buyback, the first thing to say, we're very comfortable with the capital allocation model we have. This gives us the ability to continue to invest in the business organically and inorganically and reward shareholders in dividend and in buybacks. I think what you see for the first half, you see within our framework, a bit more M&A with what we have announced in Dupont in France and in Norway for 4Service. We're going to be towards the high end of our range in the first half. And consistent with our model, we are going to reassess this in the second half of the year. Again, when you look at the balance of our capital allocation model in investing in the business and rewarding shareholders, it's going to be about striking this balance. In the first half, it's a bit more M&A in the second half, we're going to reassess the scope for further share buybacks or investment in M&A.

Dominic Blakemore: Yes, and I'll just add to that. I mean I think you've seen us, as we said today, do 4 significant deals in Europe as we would see them, I'm not sure we see a huge pipeline of those larger deals as we go forward. So I think what you should expect from us now is more of the infill-type deals you've seen in North America around GPOs, around micro markets and around individual subsector brands. I think you'll see a bit more of that outside of North America. But inevitably, those are going to be smaller deals with a smaller price tag. So I think the phase that we're now in is probably a bit more balanced between M&A and buyback. But that's something for the second half rather than the first half given that we will be at the top end of the leverage range.

Operator: And we will now take our next question from Vicki Stern of Barclays.

Vicki Stern: I just wanted to start following the election in the U.S., just how you're thinking about the potential implications of the result. There's obviously potentially broader macro implications to consider positives if we see more onshoring. But just on some of the specific points that have been called out, possible federal government cuts, how exposed you might be there? And RFK Junior, any implications that you might see in terms of school meal nutrition, scaling back of Obamacare. If you could just touch on some of those topics as they might land for you. Second one is just about margin growth. You've obviously made clear in the presentation that the growth algo from here is both top line and margin. But just if you could break out how you're thinking about the key levers of margin growth from here? I imagine, obviously, at the moment that volume growth is pretty important in helping. You're still positive on volume going forward. But there's also sort of investment elements on the other side. So how should we think about the puts and takes on that margin growth and what sorts of level we should have in mind sort of after this year? And then just finally, just a bit more detail as possible on the acquisitions in France and Norway, any financials you can offer us on those? And just sort of specifically how you see those businesses enhancing Compass?

Dominic Blakemore: Great. Thank you, Vicki. If I take the election point, I'll then hand over to Petros on margin, the acquisitions. Look, on the U.S. election, I think the first thing to say is our U.S. business has flourished under both previous administrations. I think secondly, it's important to say whatever measures are enacted, if they benefit the U.S. domestic economy, we will be strongly positioned as a winner. As you rightly say, anything that encourages onshoring, we'll likely see the opportunity from new clients or from higher volume. We have a little exposure to federal government business. Whenever any changes are made around nutritional requirements, I think we've always responded incredibly positively and very quickly. And often that complexity can be a further accelerant of outsourcing. So look, we're going to wait until we see policies enacted. But we're not a business that's exposed to importing in the U.S. And so we wouldn't anticipate tariffs having a major impact on our cost base other than through secondary supply chain factors. And of course, we've always demonstrated our ability to manage that inflation because of our scale and not least because of the Foodbuy presence, but also importantly, anything that puts pressures on our clients' cost base gives us opportunity to unlock savings for them and really push on with the first-time outsourcing. You referenced the impact that might have on the broader global economy. I mean, look, one of my biggest learnings of this business now is it's true resiliency through most cycles. And the fact that a lot of what we're about is self-help and unlocking the huge runway for growth that's everywhere. We've talked today about being focused on North America, U.S., Canada and in the next 10 countries, and that represents 90% of the global marketplace of opportunity. We just think there's a huge runway for growth there. And that will be through cycles. So we see positives and then we're very confident in the ability of this business to manage through whatever is ahead.

Petros Parras: Vicki, so when it comes to margin, I think what you should expect from us is consistent margin progression year-over-year. We have an opportunity across group. We expect to see faster margin progression outside North America, and where we have significant opportunity in purchasing and core processes. We don't see a cap to it in this progression. And we continue to enjoy elevated growth that gives us operating leverage and synergies as we're growing the business. When it goes to your question on the acquisitions, I think what you're seeing that you see what we discussed about CH&CO and HOFMANNs, which practically is our investments in further sectorizing and subsectorizing the business following the North America blueprint. And we have continued investing in the European business. If you look both at the Dupont and 4Service in Norway, they offer presence in subsectors and regional coverage. We did not compete, we did not play in Compass and provide a great opportunity for us to win in these sectors. It's great businesses, they enjoyed good growth, strong retention and we feel there will be a great addition to our portfolio in fabrics of sectorizing and offering bespoke offers to the clients, and they will give us an opportunity to drive attractive financial returns, leveraging economies of scale and integrating into our business. The other thing I want to say is with the acquisitions of CH&CO and HOFMANNs, we have witnessed a great talent and great management teams coming to Compass, which further complements our management capability in the core markets.

Dominic Blakemore: Vicki, just to come back on a couple of builds on Petros' response there. One thing I want to stress is you've seen our unit margin in these results recovered to its pre-pandemic levels. So really what this is about now is the level of investment we're putting into the business and getting that balance right. We've been doing that particularly in sales and retention, but also in technology. I think we're going to be really rewarded for that over time. I think it's kind of getting that balance right, that gives us a sustainable model of growth and profitability. And I think that's what you're hearing in the guidance. Just specifically, I just want to call out the Norwegian deal in 4Service. It's the first time we've talked about it. That's around a $500 million acquisition. So revenue is about $500 million with margins that are broadly in line with the group average. That for me is a really exciting deal. It's still core food, but it is multiservice to multi-tenanted building, typically contracting with the owner/manager of the buildings. And that's a trend we see across some of the Northern European countries. And I think it's a great example of us buying into a subsector and a capability that we can franchise across markets. And I think that's really what we've done in the 4 deals that we struck. We've looked at those platforms that can give us real confidence in sustaining growth over time as we go forward. And I think that deal plays very, very nicely into it, as Petros has said, on the other metrics as well.

Operator: We will now take our next question from Jaafar Mestari of BNP Paribas.

Jaafar Mestari: I've got 3, if that's all right. Just on the gross new business signings, you've given the number for this year, which is $3.5 billion, if I'm correct. Just wondering if you have any more color on the mix of segments and the mix of first-time outsourcing within that for this year, please? And then I also wanted to come back on your implied like-for-like assumptions for next year, especially since you've now said net new business could be top end of 4.5%. Your competitors, Sodexo and Aramark have a pretty consistent message on pricing and on volumes. And they're basically saying just between pricing of 2.5% to 3% and volumes where they're both saying 1% to 2%, they can basically do 4% just like-for-like. Just curious if you've had a look and what part of their views on like-for-like you do not recognize or would expect it to play out differently at the Compass Group or would just be looking at with a more cautious stance? And lastly, just on the acquisitions and disposals, we've got the $30 million EBIT impact. Could you please help us with the net revenue impact as well for 2025? I'm just trying to unpick what you're saying in terms of underlying margin trends. It's like maybe 15 basis points, probably not 20 basis points, but curious what the revenue impact is, please?

Dominic Blakemore: Okay. Let me talk to the first 2 and then Petros on disposals. Look, in terms of gross new business, again, we're sort of get in that 40% to 45% ratio of first-time outsourcing, which we've always said is a really good place to be for us. And we still see lots and lots of first-time outsourcing opportunity across all of our countries and all of our sectors. From a sectoral standpoint, I think what's really exciting is we've seen a lot of new business within B&I, sort of it's the most mature sector isn't it, it's the most mature sector in North America. You've seen the slides today in the presentation with B&I growing above the average in North America and across the group. And we see that continuing. We also continue to see within the pipeline lots of opportunity in health care and education as we really start to work on those 2 sectors ever more. So it was a nice mix of new business, lots of opportunity we look forward, strong pipelines. And I guess that leads into your next question around sort of guidance for next year. I should clarify sort of the upper half of my 4% to 5% range. But clearly, we're going into 2025 with very nice momentum there. In terms of like-for-like, yes, look, I think the 2% to 3% pricing feels about right. We're seeing sort of, let's call it, 4% inflation, which is probably 2% in food and 5% in labor. I think we have a reasonable degree of confidence that that's the sort of level of inflation we're going to see certainly through the first half and into the second. I think the bigger sort of area of uncertainty for us is obviously volume. It's the most economically sensitive. There's been a lot going on in the last couple of years within volume. And I think the jury is still out for us in terms of how much is sort of market tailwinds and how much is the business model initiatives that we've introduced. Look, I think we feel super positive about the things we're doing and excited about what more we can do as well. But I think we should always be a fraction conservative around volume, particularly when we think about what volume trends were pre-pandemic. So look, I think that's how we see it. And then Petros, disposals.

Petros Parras: Yes. Jaafar, I think on the guidance of the $30 million reduction in profit, I think this marks the end of the country exits and you have a bit of timing in there on the exits and the acquisitions. It's about $30 million impact on the profit for the full year with a broadly average margin for group around $420 million in revenue. And maybe you keep in mind as of '26 finishing the country exits any M&A will be profit accretive on a going-forward basis.

Operator: And we will now move on to our next question from Estelle Weingrod of JPMorgan.

Estelle Weingrod: Just 2 questions from me. Is there any seasonality this year in terms of net new, basically, how should we look at H1 versus H2 as last year was more H2 weighted? And also, would you expect any impact from the French budget? I mean you should be caught by the tax surcharge for revenues above $1 billion. Is that in your tax guidance for next year? And I believe that the U.K. budget should be manageable from your side, i.e., somewhat absorbed or -- and all passed on?

Dominic Blakemore: Yes, let me just make a comment on the U.K. budget, and then I'll hand over to Petros on net new and the French budget. I think the first thing is just a reminder for all of this, that the cost and complexity for us, we see them as accelerators of outsourcing. And I think the NI rate increase and lowering of the level in which it kicks in, increases cost for everyone. And what that means is we see an opportunity in first-time outsourcing, we can help clients manage their wider budgets where they're facing an on cost, but also we can manage those services more efficiently. If we deal with the U.K. increases well, then we can deal with it better than anyone else in our industry, and that makes us more competitive. And if we deal with it well, then we'll be more competitive to the High Street, and I think the value equation increases. So that's something which we are planning for. We'll execute against those plans. For those of you with longer memories, I find it analogous to Obamacare, something which we dealt with by managing our costs through efficiency productivity and some pricing. And as a result of that, we saw a greater propensity for outsourcing where self-help in particular, weren't able to manage those costs. So the philosophy we've got with regard to the U.K. budget changes is one of opportunity rather than threat. And then Petros on...?

Petros Parras: I think when it comes to half 1, half 2, you've heard us talking about net new in the 4.8% driven by both better net new retention. We're having good momentum in the first half to '25. We expect growth to be -- as we currently see, we expect growth to be first half weighted as we see some moderation on pricing and inflation. And at this time, this is what we have factored in the guidance. We may -- would like to see second half to be as strong as the first half, but we don't know what we do know at this point in time, and this was how we have guided.

Estelle Weingrod: Okay. And on the French budget, if I may.

Petros Parras: Yes, I'm coming to this. So on France, I think we're watching this space. Nothing has been enacted so far when it comes to legislative changes. You have seen our tax rate has come in line with our guidance, 25.5%. If there is going to be any legislative changes, upwards or downwards, we're going to see our governments will enact legislation.

Operator: And we will now move on to our next question from Neil Tyler of Redburn Atlantic.

Neil Tyler: A couple, please, from me. Firstly, back to the like-for-like and the volume growth. Can I take it from your comments that -- or well, I suppose regionally that you expect that to be more focused in Europe given the comments you made about the favorable market dynamics there? And presumably, end market-wise or vertical-wise, continuing to benefit from the trends that you've been seeing in B&I and Sports & Leisure. So I wonder if you could talk a little bit more both in terms of the like-for-like, in terms of regions and businesses? And then secondly, on the margin, just coming back to on -- sorry if I missed it, but just coming back to your comments on reinvestment and the extent to which that's perhaps holding back normal operating leverage. Can you help me just sort of just go back over those dynamics? Is it sort of 5 basis points of margin from that or somewhere in that region?

Dominic Blakemore: Thanks, Neil. Yes. Look, on the like-for-like and volume growth, actually, I think what's really positive is we're seeing that across the piece. So obviously, we've got sort of high levels of inflation than we witnessed previously. And that's allowing us to take sensible pricing and demonstrate value to our clients across all of our regions. And then separately, we continue to see volume, volume growth across the business, North America and Europe included. We think that's still some return to office. We think that's still some return to office, we think it's still kind of events that are happening within the office environment. But as you rightly say, there's element there of strong performance within Sports & Leisure and increasing per capita spend. And we're building our Sports & Leisure presence ever more outside of North America as well with some very attractive wins over those 12 months. So we feel well placed and well exposed to that opportunity. So again, this is a broad-based opportunity in like-for-like as well as in net new. And then just on the margin point, look, it's an art, not a science. This is about putting the right level of investments in the business for the long-term health and growth of the business. Within that, we see enough opportunity in gross margin expansion year-over-year for us to be able to manage both the investment and to deliver ongoing margin accretion. I think what we're guiding to today is to say don't expect that to be sort of lumpy and bumpy. We're going to manage this to be a continued incremental progression alongside the right levels of appropriate investment in the business to create differentiated offers ever more technological innovation in our business model, in our offer in front of house and back of house. And we're very excited about the opportunity to do that.

Operator: And we'll now take our next question from Simon LeChipre of Jefferies.

Simon LeChipre: Yes. Two questions, please. First of all, on the retention rate and the overall competitive environment. I mean your retention is strong obviously, but still a bit below last year. And some of your peers reported a weaker retention. So I would be interested by any comments in this context on the recent evolution of the competitive landscape? And second question on Europe and profitability, so some nice progress in margins, but still below the previous peak. So how do you see the medium-term outlook here? I mean, especially given the region looks to be much stronger. So would it be reasonable to expect the profitability in Europe should over time exceed the 2019 peak?

Dominic Blakemore: Yes. In terms of retention, look, it was a slight dip in the first half, a good improvement in the second half. I think we're on track. As we look forward, the business that's out to bid next year feels a little less than we've experienced more recently. So I think we feel very well placed. I think you have to look at the long-term trends in retention over multiple years. And I think that it's one of continuous improvement. We see our opportunity to do ever better. We talked to you about our strategic alliance group where we deployed the SAG processes. We've got above average retention where we don't, we're slightly lower. We're not developing lighter processes for non-SAG accounts where we've done that, we've seen a material improvement in retention. So look, we know that there's more we can do all the time to continue to seek marginal gains. And we're going to be relentless in that. We don't see anything really changing in the competitive landscape. And we're really backing ourselves to hold these levels and continue to improve over time. As I said, there may be puts and takes within quarters and so forth. It's the nature of it with these measures and individual accounts can weigh. But I think the long-term trend should be one of continuous improvement. And then just in terms of Europe, yes, you're right. We're somewhere off where we were previously, and there's a delta between our European markets and North America. At the moment, I think that's for the right reasons, we are investing in establishing the growth model. And I think what we'll see is that over time, we'll get more margin accretion out of our businesses outside of North America than in North America. I think both have the right to grow their margins. But the opportunity is greater in Europe. And it really comes back to the basics of using our purchasing scale, in particular and seeking further productivity as we go, particularly as we grow faster and have the right more operational leverage in Europe than we witnessed sort of in the pre-pandemic era when we simply weren't growing the top line. So I think the medium-term outlook is very exciting. And we'd expect to see good margin progress over time in those countries.

Operator: And our last question comes from Andre Juillard of Deutsche Bank.

Andre Juillard: Two questions, if I may. First one about your market share and the fact that you invest quite strongly in Europe at the moment, what is the target you have in mind in terms of market share? Is it comparable to the U.S. or different? And in terms of development, you mentioned that you acquired a business with facility management. Do you have in mind to improve the weight of the facility management in your portfolio? Or do you remain focused on food? Second question about the leverage. I'm sure that some investors are telling you that 1x to 1.5x is maybe conservative and you said that you are comfortable with this leverage. Is it unrealistic to think about a slightly higher leverage, which could help you to return some more cash to shareholders?

Dominic Blakemore: Thank you, Andre. Look, in terms of the market share in EU, we're not setting a target. I think we have the right to grow our share consistently and continuously over time. Now we said today, it's 7% share across the region. That's a huge opportunity for us to grow from here and that's why we're so excited in the processes that we're putting in place, the results that we're getting and the response that we're getting in growth. What does that look like? We should be able to continue to grow our net new business in Europe in that 4% to 5% range for many years to come, right? That is the market opportunity that is ahead of us, and that's the ambition that we hold as we've done in North America over maybe 20 years. And then to your point, I'd be just careful with the phrase facility management, what this business does is more like foodservices, reception, soft support services. It's a bundle of services like the ones that we currently already offer. And remember, 15% of our global business. So that's what, nearly $6 billion is already within those types of services. So we are good at them. We have the capabilities. We're just responding to a trend where we see more bundling, particularly where we are contracting with the building owner rather than the individual client themselves, and there's more of an opportunity to provide synergies in that. But this business remains a majority food business, and it just gives us kind of a new tool and toolbox as it were to respond to a different part of the market and what the M&A is about has been making sure that we've got the right offer for each part of our target addressable market in our major countries in Europe, and we feel good about the deals we've done.

Petros Parras: Andre, I think on the leverage, you heard us talking, we're comfortable with the range. The business generates strong cash flow, enable us to invest in the business organically, inorganically and reward shareholders. It's appropriate, it's balanced, it's conservative. We like it.

Operator: That was the last question. I will now hand back to Dominic for closing remarks.

Dominic Blakemore: Thank you. Thanks for your questions this morning. Before we finish, I'd like to leave you with the following thoughts. We've had another strong year as the business continues to go from strength to strength. We've improved the quality of our portfolio, and we've acquired or agreed to acquire 4 attractive platform businesses in Europe as we further develop our subsector business model and build scale in our core countries with the greatest market opportunity. The actions we've taken together with the favorable market dynamics give us confidence in being able to sustain a heightened level of organic growth for the medium term. With ongoing margin progression, we expect profit to grow above revenue growth and strong cash generation leading to long-term compounding shareholder returns. We're excited about the opportunities, and we're really focused now on delivery. Wishing you a healthy and happy festive period, and we'll speak to you again in February. Thank you very much.