Sodexo S.A.

Virginia Jeanson - IR Michel Landel - CEO and Chairman Marc Rolland - Group CFO

Jamie Rollo - Morgan Stanley Jaafar Mestari - JPMorgan Jarrod Castle - UBS Tim Ramskill - Credit Suisse Vicki Stern - Barclays James Ainley - Citi Nadia del Kasir - Berenberg Richard Clarke - Sanford C. Bernstein Lena Thakkar - HSBC Kean Marden - Jefferies & Company

Thank you very much. Good morning, everyone.

Welcome to our first nine months call. On the call we have as usual, Michel Landel; and Marc Rolland, CEO and CFO.

As usual, the slides and press releases can be downloaded from the website and you will be able to access this call on our website for the next 12 months. The call is being recorded and may not be reproduced or transmitted without our consent.

I remind you that this presentation contains statements that may be considered as forward-looking statements and as such may not relate strictly to historical or current facts. These statements represent management’s views as of the date they are made and we assume no obligation to update them.

You are cautioned not to place undue reliance on our forward-looking statements. Please get back to 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 Thursday, the 16th of November. I now turn the call over to Michel.

Thank you Virginia and good morning everyone, and thank you for joining us. With Marc we are here to present this fiscal -- these first nine months fiscal 2017 results.

So as you probably have already seen, organic growth was 0.5% or 1.3% excluding the Rugby World Cup. So onsite service growth was disappointing in Q3.

We had lower than expected activity in North America in healthcare and universities, and continued weakness in corporate activities in Europe. And we will of course, go back into details in this presentation on these subject.

On the other hand, we have good news. We -- because there are many fundamental trends, which are improving.

And we are seeing a strong return and positive growth in energy and resources; 4.3% and it's actually accelerating. We see some kind of improvement in France, which is good.

The activity in Asia and South America and specifically in Brazil is strong. And we continue to see very strong activity in the corporate segment in North America.

Now, in benefits and rewards, we have a strong growth of 6.1 for the period. So now, if I go to the next slide, I will comment on a few new good partnership that we have won.

First, some contract in food service. We signed this contract with Citadel, which is a very prestigious military college in South Carolina in the U.S.

where we provide a full comprehensive retail dining and catering service, plus concession services, which is actually managing the sports center of the university. Another good win in the UK, Clifton Collage, which is also a very prestigious school in England.

And also I'll mention, a large contract, hospital contract in Brussels in Belgium, where we also provide full in-patient and staff food service. Now I was telling you that France was getting a little bit better.

We have some good sign of new signatures. I will mention this very interesting partnership where we are a founding partner, thecamp.

We are going to -- this is the first, actually European campus dedicated to emerging technology and social innovation in South of France. And we will provide a full quality of life service solution, 24/7 on this very innovative enterprise.

This is exciting. We also have signed some good pieces of business in sports and leisure.

We signed the Bordeaux Arena and the Aix-en-Provence Arena for a multi-service contract. And also I will mention the new signature that we have with the new campus of Groupama in Paris, where we will provide a full hospitality solution.

Now I will mention also some contract expansion, which are important and renewal, actually with Nokia. We have actually renewed and extended our global contract with Nokia.

We provide today services, which represent 80 million. We are going to increase by 40% our partnership with them.

Pfizer also, who is a very strong partner of us now in America and in Asia. We will expand to India and to more sites in the U.S.

This is also very important and this is a full comprehensive food and FM solution, quality of life services. And I will mention also, as you may recall we have a good development in healthcare in Asia, specifically in the Philippines, 18 months ago.

We have partnered with this Makati Medical Center, which is one of the premier private hospital in the Philippines. And we will add to a clinical technology solution contract and full FM contract, we will add a full food service contract for the next seven years.

So some very good new business there, and now I will hand over to Marc, who will comment in more detail our results.

Thank you, Michel and good morning everyone. So let us turn to the next slide.

Revenues at €16 billion for the nine months were up 1.7%. This was helped by a positive currency impact of 0.8%, aided by the dollar and the Brazilian reais, compensating the weakness of the sterling.

We also have a 0.4% contribution from acquisition net of disposals. The impact of acquisition increased from 0.3% in H1 to almost 1% or €50 million in Q3 which is a figure to take forward for Q4.

As a result, organic growth was 0.5% for the period or 1.3% excluding the Rugby. On-site services were 0.3% or 1.1% excluding Rugby and benefits and rewards were up 6.1%.

Turning to the next slide, we can see that business and administration has seen an improved momentum quarter-after-quarter and the effect of the Rugby is being diluted further. For the nine months revenues are down 0.5% but up 1.1% excluding Rugby.

Energy and resources continues to improve quarter-over-quarter and turn positive in Q3 at 4.3% for the quarter. Health care was up 1.9%, which after a strong first half represents a small decline in Q3.

This is mainly due to very major changes at some North American clients and the phasing difference in net new business this year leaving a bit of a hole this quarter. In healthcare, developing economies are generating strong growth.

Education was flat, very similar to the first half. However this is a combination of growth in school, thanks to new business and good retention and the weaker than expected activity in universities in particular in Q3 due to a contract exit in Q2 and lower than expected comparable unit growth.

Now let us dig deeper into business and administration. In North America we saw continued strong growth in corporate services as we developed our FM offer to existing clients and developed our presence with our global integrated clients.

After several weak quarters in government and agencies the segment has come back into growth in Q3 due to new openings and good like-for-like sales. Europe continues to be affected by the tough comparison with last year due to the Rugby World Cup in Q1 fiscal year 2016.

However quarter -after-quarter the effect is being progressively diluted. So for the nine months it represents half of the 5.4% decline.

However Europe has remained difficult in energy and resources, which is very tough and down consistently high 16% quarter-after-quarter. The segment is still suffering from the North Sea activities, which are predominantly in offshore.

And there is still no visible recovery in corporate services in Europe, where like-for-like sales are shy [ph]. The good news is that the comparative base in France is improving in Q3, particularly in tourism even though we are not yet back to the fiscal year 2015 levels, and also industries where we have lost a large contract in Q2 of fiscal year 2016.

In developing countries there is still strong development in corporate and growth in energy and resources, thanks to the contribution of many new contracts. Healthcare and Seniors are up 1.9% with a strong first half but a weak Q3.

The quarter has been difficult with North America down very slightly. We suffered from some hospitality clients managing their portfolio of units and some reduction in scope of services leading to disappointing comparable site sales.

Added to these, there has been some phasing impact between wins and losses. In Europe, the 1% fall in organic growth, reflect the continued strict selectivity in bids which has led in turn to a lack of new hospital business in France and the UK during the period.

However there has been a pickup in new signature this last quarter in seniors for instance with a large group of senior homes, which is about to startup and where we have been successful in getting a wide areas of facilities management services on top of the food services. The 12.7% growth in Africa, Asia, Australia, Latin America and the Middle East, is boosted by strong growth in Latin America and particularly in Brazil due to multiple contract wins and increased same site sales.

In Asia, where we are winning new contracts but today I’ll remind that Asia account for less than 2% of healthcare revenues. Education is still basically flat.

North America organic growth was rather disappointing at plus 0.1%. On the one hand, School benefited from the solid new contract signed last year with the extension of the Chicago Public Schools contract, and the ramp-up of the new Washington DC Schools contract.

This was helped too by good retention. On the other hand, in Universities, growth has suffered from the lack of prior year signature and the exit of a large contract in Q2 due to the disagreement with the client.

Additionally, in Q3, despite a positive calendar shift from Q2, the same-store sales were weaker than we had anticipated. In Europe, organic growth of minus 0.3% was impacted by lower number of working days in France.

We shall recoup one extra day in Q4. In the UK, low prior year development has been partially compensated by high retention and signature in the UK have been better recently with Clifton College and the Kings College School in Taunton.

In Africa, Asia, Australia, Latin America, and the Middle East, organic growth was 10.5% resulting from very strong growth in new Schools contracts in China, Singapore and India. Slide 13, the 1.9% organic growth in North America is disappointing given the good start to the year with the first half up 2.5%.

It was supported by high single-digit growth in corporate services for the nine months. In Q3, there has been a return to positive growth in government and agencies too.

Energy and resources is still down but less so than in H1. On the other hand, lower than expected growth in both healthcare and education in Q3 severely muted the year-to-date performance.

The 4% organic decline in Europe reflects the more diluted Rugby World Cup effect, a 16% fall in North Sea Energy and Resources activity and ongoing weakness in corporate services. However, the comparable base, particularly in tourist services [ph] in France is improving progressively.

Africa, Asia, Australia, LATAM and Middle East achieved 7.5% organic growth. This was a combination of new Corporate services business, strong growth in hospitals in LATAM and Brazil and schools in Asia, as well as significant growth in Energy and Resources helped by substantial contract start-ups.

Our activities in Africa and the Middle East remained weak, affected by the very morose economic environment in the oil and gas countries and the severe voluntary reduction of our activities in two countries. Now if we move to on Benefits and Rewards Services, organic revenue growth was 6.1%, more or less in line with issue volume growth of 5.9%.

However, the devaluation by 3 of the Venezuelan fuerte impacted our reported year-to-date organic growth by 120 basis points and without it, the revenue growth would have been in line with H1 at circa 7%. Another feature is the 4.6% net contribution from acquisition, in particular Inspirus in incentive and recognition in the U.S., since September and our two mobility acquisition, Xpenditure and iAlbatros since March.

If we look more closely at Latin America, the 6.4% growth in issue volumes across the region reflected increasing face value everywhere, and strong new development in most countries except [ph] in Brazil. On the other hand, the 2.1% increase in revenue reflects continued pricing pressure in Brazil, despite strong growth everywhere else.

We noted in Q3 some sign of stabilization in Brazil. This improvement in Q3 also was marked by the impact of the devaluation of the VEF at the end of May.

Excluding this VEF impact organic growth for the nine month would have been 4.5% in the region versus 2.9% for H1. In Europe, Asia and USA, after a very strong performance in H1, thanks to a high level of activity in incentive and recognition, revenues have continued to grow in Q3 to reach 9.8% for the nine months.

This is due to solid face value increases in Belgium, but be aware that this is now finished in Q3, strong volume growth in Italy and Central Europe and strong momentum in the incentive and recognition activity in the USA and the UK. I remind you that this incentive and recognition business comes without issue volume, which explains why issue volume has grown less than revenue.

Thank you for your attention. And I now hand you back to Michel for the outlook.

Thank you, Marc. So concerning our fiscal '17 objectives, despite a disappointing and softer Q3 because of healthcare and university in North America and business administration in Europe, we are confident that we will have an acceleration in Q4 to get us to 1.5% to 2% growth for this fiscal year.

And this is based on several factors, notably the contribution of contract startups in May and June, energy and resources which will continue to improve, growth in business and administration globally in the world. We have an increase and improvement in the performance quarter-after-quarter.

We talked a little bit about the return of growth -- to growth in France and also we have a very positive calendar effect in North America in Q4. So now, concerning operating profits, Marc just told you about the adaptation and simplification program, which is on track.

But also our teams around the world have very focused action plan. They are very strongly mobilized on achieving our results.

So we are maintaining our guidance of 8% to 9% but given the shortage of revenue in Q3, we should be at the bottom of this range. Now moving forward, talking about medium term objectives, we confirmed our medium term objectives of average annual revenue growth, excluding currency effect of between 4% and 7% and average annual growth in operating profit excluding currency effect of between 8% and 10%.

So now we -- with Marc, we're ready to answer your questions.

Yes. Thank you very much, good morning everyone.

Three questions please. And the first is when you launched [indiscernible] in the middle of April, you were in middle of your first quarter.

And this weakness you're talking about now, I was wondering why you weren't aware of that back then. Secondly, could you just explain and quantify in North America, both the healthcare issues, you talked about scope and service exchanges and phasing of new business?

And also in North America, if you can quantify the contract loss, please in education? And then finally, clearly, you're looking quite a strong Q4 accelerate even adjusting for the extra week in North America.

How does that make you feel about 2018 growth? Do you think that will be within your medium term range, notwithstanding you are going to have that extra week working against you?

Thank you.

Good morning, Jamie, this is Michel. Yeah, the -- of course healthcare is disappointing in the U.S.

In fact, it's several factors. We have lost some purchasing volume.

As you know some hospitals and chain of hospitals are affiliated with GPOs and some time the exchange. So they are switched [ph] in GPOs.

So we have lost some purchasing volume, but we are working hard to get back some different purchasing volume in different healthcare chain. So that's one point.

When we talk about scope change, actually we have some national clients which have -- and that happens -- which have sold few hospitals. So we have national contracts.

They can sale one state or whatever. So that had happened this quarter.

And we also were under negotiation with clients on some services and we've lost some of the services on a couple of contracts. And we've decided to get out of these contract quicker than later because to protect some of our profitability.

So that's basically what happened. Of course, in Q4 we will have a soft development also in healthcare, even if it's little bit better because our pipeline is still good.

But that's basically what happened in healthcare in North America.

So your next question was about university, contract loss in education. Yeah, so we -- the retention in universities and education particularly in North America is not very good.

And so we also had -- and I think we mentioned it at some point in the past but we had some tough discussion with one of our large clients in North America, and we exited actually faster than we thought we would. At some point we thought we would finish the year, but we decided to exit faster.

And it had an impact on Q3.

But it has a good impact on profitability.

But obviously it was a measure that we took because the contract was unprofitable and we didn't see an exit with -- clean exit with the client. So we exited.

So the retention in education especially in universities in North America is not good this year.

And in terms of next year, our Q4 will be stronger and probably will be between 2.5% and 3%. And of course we have the effect of the 53rd week.

All together we should be between 5% and 6% for this quarter. Given that we think that we can be in a 2% to 3% positive growth next year, organically, plus if we had at least 1% of effect of the acquisition, we probably should be close to the low end of our 4% to 7% growth objective medium term.

So that's what we are looking for.

If I can just come back on those points, that 2% to 3% are you adjusting for the 0.5% headwind from the extra week this year?

The headwind next year, the 53rd week, we are evaluating the 53rd week being about 0.7% on a full year basis. So when Michel speaks about 2.5% to 3% it's obviously with that headwind included.

So we have to cover for that.

Yeah, okay, excellent. And just on my first question about the healthcare in the U.S.

You mentioned three factors. They seem to be permanent revenue reductions.

So there is no sort of one off loss in Q3 that you get back in Q4. So as you said we should see softer growth for the next three quarters in the U.S.

healthcare.

In U.S. Healthcare, what we've seen in Q3 is really the conjunction of everything which will go negative.

So when we look at Q4 it is better. It is not great but it is better and now the question is the phasing of the new wins and the losses and how it's going to articulate itself.

Obviously I mean we suffered same-store sales issues, so that will not bounce back immediately but we are working on this and especially for internal repurchasing volume we have action plan and so forth. So we are expecting healthcare to be better in Q4 in North America than in Q3, but it will take a few quarter before it speeds up again.

And can you quantify the contract loss in North American education, either in revenues or percent growth?

The contract I just mentioned was the large contract was about 25 million, but the retention in the U.S. in universities is below 95%.

So it's been a bad year for universities in terms of retention in the U.S.

Thank you very much.

Hi, good morning. I just had one quick question, I know it's not a full results release, but if you could give any color on how the margin trends could be affected by the slightly lower kind of growth in healthcare and seniors and this has been really the vertical that has driven the progress so far.

So should we still expect it to improve and separately is business and administration going to take over as the margin driver, do you have enough clarity that margins will start improving as well in that vertical towards the end of this year and into next year?

Well as I said, we are maintaining our guidance for operating profit for the year on the low end of the 8% to 9%. Of course we are going to miss some margin, but as I said, we have some very strong action plans in place.

Our teams are extremely mobilized and focused and we should and we expect to get to this low end of the range from 8% to 9% and we are confident with our ability to maintain those numbers.

On your second question on business and administration, when we look at Q3 standalone what we see that corporate services is doing as good as during the first half. Energy and resources has really picked up.

I mean you have seen the numbers of Q3 is 4.3%. Government and agencies has a much easier comparison base.

Last year you know we had extra revenue on transforming rehabilitation. We had the loss of the Justice contract and so forth.

And we have new wins also, startups in Q4 in government and agencies. Sports and Leisure should have a better quarter than last year.

I mean last year was a terrible quarter especially in France. So in Q4 should be better.

So we are expecting a pickup in Q4 in business administrations versus Q3. And so the 2.5% to 3% organic growth without the 53 week is going to be carried by business and administration in these coming quarters.

Thank you.

Thank you, good morning gentlemen. Three if I may.

One, you have obviously changed kind of the reporting lines in terms of how you kind of are running the business. And I wanted to know that that’s having any negative impact in terms of the three kind of industry groups that you kind of try to win contracts by, rather than on a geographic basis as much as you did in the past.

So is that having a negative? Secondly, is there anything you can say overall about churn rates and like-for-like growth in terms of on-site?

And then lastly just any color in terms of how the FM -- integrated FM side of the business has done during quarter three? Thank you.

Thank you for your questions. The -- your question on the reorganization, of course when we make a change like that we ask many people to change jobs.

We have to do a lot of changes and it creates turmoil, if I may say in an organization, and we knew that of course. So yes it has an effect I have mentioned that.

I think the U.S. situation is probably a little bit more acute because in the U.S.

we have changed a lot of people. Really we have made a lot of changes in teams, in specifically in healthcare and in education, in operation and sales.

And frankly that has an impact, and maybe I have been too optimistic and -- but I am confident that our strategy of reorganizing the company by segments, by global segment is a good one. We have seen some very good sign of that and it’s a question of real time, and we are settling down and I think things will be fine.

But it takes time, yes and I am very honest. Probably it has affected somewhat growth in this part of the world, that’s for sure.

For your next question, we don’t have a very differential rate, if I understand what you mean versus last year. I mean in terms of losses and wins the churn rate is very stable.

In term of color, it is actually softer than it was last year, and what we have seen in education and healthcare this year is not improving the trend. It is also soft in Europe.

There are parts of the world where it is good, but in general I mean we observe a soft same-store sales this year, softer than last year. FM development in Q3, we have had actually a good growth in IFM this Q3 and I will say particularly when we look at corporate services in North America, in Asia, a lot of the contract massively are IFM contract.

It doesn’t mean that we don’t win food in the rest of the world or in those parts of the world, but the IFM contract are predominantly growing in North America and Asia, it's very strong.

Okay, thanks very much.

Thank you. Good morning.

And two questions for me please. The first is just sticking to the discussion about the comparable unit growth in North America for education and healthcare.

Is that a function of less ancillary activities? I know you talked about in past where you do provide other services, and that can be little bit more lumpy, is that what’s driving it?

And then second question is in benefits and rewards, in LATAM in particular, with organic growth roughly 2%. Does that continue to lead the sort of margin pressure, because I know during the first half of the year the benefits and rewards overall margins were down about 120 basis points, and I seem to recall you were expecting a more stable second half.

I just wonder if you could broadly comment on the profitability of benefits and rewards, but maybe so I think you might through a LATAM sort of lens please.

Well for the first part of your question on the same-store sales, yes, I mean the softness of this is clearly there is one link to less extra services that you know we have to IFM services contract in education and in healthcare. Yes it has an impact, absolutely.

But you know it is very much, it's not a stable growth in that dimension. We have months where we have a lot, we have times where we have much less.

So it really depends on the clients.

On LATAM, maybe also I would like to go back on the Bolivar impact and so forth because it may not be simple. You know that because the Venezuela is a hyper-inflation country we are using the latest rates, we know as the rate to calculate the organic growth.

So we are not using the historical rate, we are using the last known rate. So in the case of Venezuela, the rate -- exchange rate that's divided by 3.

So which means that the impact of Venezuela in our numbers has been reduced significantly, and it was all carried in Q3. So the nine months impact is carrying and weighing on Q3 numbers.

So that's why we are saying that once we recalculate the growth, the growth is 4.5% instead of being 2.9% at the end of H1. So what I want to say that if we are comparing apple with apple LATAM revenues are actually better in Q3 than they were in H1.

So now saying this, what we observed in Brazil, in Brazil there is still competition pressure, I mean to keep the volume. It just as we see signs of that it's getting a little better.

The revenue are holding up better than they were holding in H1, which is a good sign. I will not read yet a full trend for next year, because unfortunately we are expecting lower interest rate in Brazil.

We've already gone from 13% to 10ish and we should get to 9ish at some point before the end of the calendar year. So obviously it will impact the revenue growth in the coming year.

But in this year, we've done pretty well in the financial revenue. We are doing pretty well on the merchants' revenue.

So the LATAM and Brazil is holding up well in Q3. So the margin impact it's too early to say and to comment on that that but I think we are going to be where we said we will be when we forecasted at the end of H1.

Okay, great. And sorry Michel, can I just clarify back to that point about same store sales growth.

So is it really all about that extra services, or are there any other kind of, I don't know what you would called them volume or pricing or macro factors that play or is it all very much about that ancillary revenue that's lumpy and unpredictable that's caused the change?

No, there is no structural change clearly. Yeah, the participation is little bit lower, but I don't think this is a specific trend.

It really varies month-by-month. It's a combination and accumulation of things, but inflation is in the U.S.

a little bit more important than it was and it's increasing a little bit. But this is not an issue for us.

We are able to pass this inflation to our clients, to our contracts. So we should be fine on that side.

Okay. Thank you.

Good morning. And just on margin growth.

So I think again beyond this year you've previously flagged something like 25 bps to 30 bps of potential margin growth next year. Just sort of bigger picture now as the top-line has slowed a little bit, is there any intention on your part of to potentially reinvest some of those good cost savings back into the top-line?

How do we think about sort of shape of future margin growth reconciled with the top-line trends that we're seeing right now? And then second question I think on Bloomberg it was quoted yesterday, I think about 400 million of acquisitions this year.

just on the balance sheet I would assume that's [ph] quite below your stated long-term average target, just how do we think about the potential for the balance sheet potential cash return share buybacks to be announced later in the year, thanks?

To answer this question, we will probably do roughly 400 million this year. We are very active.

We have other potential acquisition in our portfolio. We're working on them.

So we should be active on that side no doubt. So it's frankly too early to tell about what we're going to do in terms of share buyback and this sort of things, and we'll let you know in November.

Now on your first question, I think it's little bit early to tell, but yes, we are reinvesting anyway. We're investing in digital, in new technologies, we are investing in sales.

To tell you what we’re going to do next year it’s probably a little bit too early. We will -- but we are committed to continue to grow operating profit by 25, 30 basis points.

So -- and but we’ll tell -- give you more details in November, definitely.

Okay, thanks very much.

Thank you.

Good morning everybody, two questions please. First on France, you talked about business looking better there.

Can you talk about the drivers of that, is that new business, is it like-for-like growth, maybe comment on which segments you are seeing it in? And then secondly just following on the question on acquisitions, could you perhaps quantify to the likely profit impact of the businesses you acquired this year, as what I’m trying to get to is will the 8% to 9% operating profit growth range would be excluding acquisitions?

Thank you.

When we look at trends, what we observe is that -- and talking about France as a whole, the retention in France is globally better than we had in the past two years. We have had also more wins.

So what we call net new losses is actually positive and contributing. The same-store sales are still a little soft overall, and so we are looking into it and working to develop that.

We’ve also have now in H2 a much easier comparison base. You must remember that last year we had this big Justice contract that we lost in January, I think was ’16.

So now it’s out of the comparison base. And we are having a better season in sports and leisure.

Obviously last year was our worst season in sport and leisure ever. So this year is better we see it in Q3 and we are expecting Q4 to be better.

So when I look at the trend of France Q-by-Q, it is a steady improvement Q-by-Q, I mean it’s still – it can be better but in Q4 we expect France to turn mildly positive and be contributing to the growth. So this is a much better visibility we have in France than when we were talking to you about a year ago.

On the M&A, the acquisition is within our guidance 8% to 9%, and this year it’s not going to be contributing a lot at EBIT level. It is mildly positive I think right now, but we will tell you more in November.

Okay. Thank you.

All my questions have been answered. Thank you very much.

Hi, good morning. Two questions from me.

In response to the Jamie’s question, at the top of it, you made a couple of comments where you said you were making decisions that were maybe bad for organic growth but good for margin. Is there any change in strategy there, where you are becoming more returns focused in general?

And are the contracts you are looking at was maybe good for margin but not so good for organic growth? And then the second question on the healthcare and the loss of services.

Are all of your IFM contract that type [ph] is the mechanism there that people come pick and choose during the contracts and how much of the risk is that to the other IFM contracts?

Clearly we favor profitability to growth. So we are selective and some of the contracts, Marc was mentioning a dispute we had with a client in education.

We would rather terminate that contract and move on then -- so we are much more focused on profitability than simply development. But doesn't mean that we will not accelerate that growth, right.

And the question on IFM, I’m not sure I got it, can you please repeat it? Sorry about that.

Yeah, I guess, it was just the idea in healthcare that you suggest you have lost some services within a contract. Within that contract you’ve retained some services and lost others.

Is that mechanism true across all of your multiservice contracts, that people can -- some -- your clients can pick and choose a little bit as they go along and therefore if someone comes along and undercuts you on one service and is there a risk in your other contracts as well?

Well, it's very different, it's very special in healthcare, I have to say. In healthcare most of the demand is now IFM contract.

But it's contract by contract, very much so, which is not the case in corporate. When we sign a corporate contract IFM it's really the entire scope and so there is not absolutely no risk here.

In healthcare it has always been like this. And yeah, it’s a little bit more volatile, but it's not structural.

It's absolutely not structural. It's really for us a question of having stable teams and so we should be fine on that.

It's not an issue about IFM.

Thank you very much.

You’re welcome.

Hi, good morning everyone. Three quick questions, please.

So firstly, just in terms of the weakness in European corporate that you mentioned. I know you've spoken a bit about France, can you just give any more color by country on that?

And secondly, the organic growth guidance which has been lowered, that obviously hasn’t translated into much of a downgrade to operating profit growth guidance, just the lower end of your range. So I understand that one contract has been lost which wasn't very profitable but are there any other sort of mitigating factors there that’s helped you to hold on to that profit growth?

And then just finally, given that the M&A is ramping up, can you remind us of your financial targets and any discipline that’s applied on acquisitions please? Thank you.

Your first question about Europe, clearly Holland is -- Holland and the Nordic countries are suffering today. It’s a combination of same-store sales and lost contract that we have lost over the last several months, always reflecting on the previous questions, because we want to favor profitability more than growth.

But if you look at Europe in general, Italy and Spain are fine, growing, not as much as they did before, but still positive, it's good. Turkey is solid, Russia is solid, Germany is okay.

We were talking about France, which will recover and will become slightly positive next year, which is good, because it has really weighted on our growth this year. But Holland, as I said, and the Nordics are the countries where we have most of the problems today in terms of organic growth.

Marc you want to take that.

Yeah, on margins, so the softness on the top line is actually if you look at versus the previous guidance we are going to be missing about €150 million of revenue. So now this revenue miss, some of it is same-store sales, some of this have been new sales.

So obviously I mean, you cannot say that’s we are missing some margin. And there is -- this is margins that which we have made in and we are not [ph] making it.

So we have also have a small impact of the Venezuela devaluation which is also going to add. Now we have, as we said we have the competitiveness plan which is delivering and that’s there, and we have had now for this year and last year ongoing operational measures, improving gross profits and so forth and we are committed to hold those very, very tight in Q4 to make sure that we cover the shortages.

Hence, why we say we will be at the bottom of the range in terms of margin guidance. But we can do it.

Now on M&A financial target and discipline, it's really depends what we buy and obviously, we are making M&A not for short term gain but for long-term strategic reasons. So we are focused on making sure that this is giving us new offers growth and capabilities in regions where we are now.

So this is -- we are really looking at M&A mid-term. Now, when we do our evaluation, we look at the impact it has on our capital employed, and we are very, very focused on the return [ph].

We like to calculate what will be the return, we are going to get out of those acquisitions in five years, in 10 years' time, not so much in one year or two year. We are looking at the cash payback and so forth, and it's a mix of those criteria which makes us decide.

Obviously we the multiple on EBITDA compared to our group multiple and so forth is a factor, is a sanity check that what we do have. But it all depends whether we buy something in DRS or as strategic offer or if we buy a more traditional onsite business doing FM services in Israel for instance as we did recently.

So the valuation and the criteria will vary according to what we buy.

Sure. And are there any sort of stated hurdles that you can share I appreciate there are differences and depending on what you buy but is there any kind of headwind.

Historically, we are looking at the returns and the hurdle rates we've had now for many, many years was that we had -- it had to contribute to improve our [indiscernible] and having a mid-term to long-term return over 15%, which we have today. So today the group return is approaching 20% and what we want to do is whenever we do has to fit with the strategy of having a return of 15%.

Okay. That's very helpful thank you.

Thank you. I'm -- just two quick follow ups.

One, obviously we've got a new deputy CEO starting in September. I know it's very early stages.

But I mean I would gather Michel that you've had lots of conversation, I mean do you think we should expect any changes in strategies or rather any material change in strategy at some point when full responsibility is handed over. And then secondly, so you might have said this, but what percent of the total group now is Venezuela in terms of revenues and profits, thanks>?

Yeah, thank you for your question. Well, I don't think Denis will change the strategy.

I think -- Denis is very aligned. And we have set the strategy for now several years.

We are implementing and executing it. So we should not see a change of strategy in the years to come.

Now in terms of Venezuela, let me tell you, Marc what we --.

It doesn't represent much now. In terms of Venezuela, we've lost actually -- with the devaluation we've lost 7 million of revenue in Q3.

So our revenue is down to a full year estimation of the revenue is maybe around 10 million to 12 million. Now in terms of margin, we were making a decent margin in Venezuela and we expect the impact on margin of about 4 million to 5 million drop.

But the -- reduction of margin of 4 million to 5 million. But when I take now Venezuela to the size of the group, the impact on the revenue organic growth I think was 4 to 5 bps.

So to give you an idea I mean it's actually very, very small on the revenue and it will weigh about 4 million to 5 million on the EBIT this year.

Okay, thank you very much.

Good morning. My question relates to the CCR [ph] in France, where I believe President Macron is intends to put through the [indiscernible] reduction and switch basically to a reduction in social charges.

So my question is do you have a feeling for the timeline attached to that change? And if it does pass through what should analysts look to adjust there on these numbers to reflect the impact that we have discussed before?

I think we commented on this last time on the fate here and so forth.

That’s right.

So now he's been elected. The impression we have is that yes there is the intention to change the way the CCR [ph] works but it will not happen this coming year.

It will happen in 2019. So right now what we understand is there is no change in the short term and then we have to wait because changing the CCR from -- will have a significant budgetary impact on the French budget, the year over year changes and right now I understand that there isn't room.

They have decided to postponed that measure to 2019, as you said, yeah and it's been announced actually couple of days ago I think.

Yeah, that’s right. And just for my understanding, I think we have -- previously we discussed a potential €15 million to €20 million reduction in the benefits from CCR, do you have a feeling how that splits between profit sharing with employees and an increase in tax?

Today there will be an impact -- there could be an impact from operating profit, because it has an impact on the profit sharing. I think last time we estimated that impact around 6 or 7 million, but most of the impact is on the net income because the phase here today is non-taxable benefit, so to speak for the company.

So I will say the bulk of the impact is going to be on the tax line and on the net income but there could be some and there should be some impact on the participation. But to benefits, it's too early to say because we need to see the details of what they want to do and it all depends how they are doing it, so…

Frankly, it may change.

And it may change. So that’s why we have made the calculation for the worst case, but we don’t know and the timing and how it will happen.

That's very helpful.

It confirms my -- we confirm the evaluation we had made that time.

Right.

Do you have any more questions? If you don’t, yeah, Virginia?

No, then thank you very much for listening to the call. Don’t hesitate to get back to us, if you have any further questions over the next few days and have a good day.

Yes, thank you all. Thank you very much.

Bye-bye.

Bye-bye.