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Good morning. Thank you for standing by, and welcome to the Sodexo First Quarter Fiscal 2021 Revenues Conference Call. I advise you that this conference is being recorded today, on Friday, January 8, 2021. I would now like to hand the conference over to the Sodexo team. Please go ahead.
Thank you, Nadia. Good morning, everyone. Happy New Year. Welcome to our Q1 call. On the call today, we have Denis Machuel and Marc Rolland, as usual. If you haven't already done so, the slides and press releases are available at sodexo.com, and you'll be able to access this call on our website for the next 12 months. I remind you that this call is being recorded and 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 we have our AGM on Tuesday at 3:30, French time, online only due to the pandemic. The next numbers announcement will be the first half figures on April 1. I now turn the call over to Denis Machuel. Denis?
Thank you, Virginia, and good morning, everyone. Happy New Year, and my best wishes to all of you and your loved ones. Thank you for being with us for this first quarter fiscal '21 call. I must say that we are very pleased with this first quarter related to our assumptions and relative to our targets, both on revenues, which are in line in our cost control, contract negotiations and restructuring which are better than expected. So if you move to Slide 4, you'll see that the organic decline in Q1 revenues was 22.7% or 21.5% if we exclude the Rugby World Cup in the base. This was better than in the last 2 quarters of fiscal '20 and, in particular, the fourth quarter, which was at minus 24.9%. We saw an improvement in September and October, even though the second wave impacted our activity in November, reducing some of the progress. The organic decline in On-site was 23.3% and would have been 22.1%, if we exclude the impact of the Rugby World Cup last year. This compares to minus 25.4% in Q4. So while North America has remained very impacted in all segments by the pandemic, the recovery in Europe and Asia Pacific and Latin America has continued. Benefits & Rewards was down 5.6%, showing a significant improvement in the trend relative to the minus 15.1% in Q4 as a result of a return to positive growth in issue volumes and reimbursement volumes, even though the second wave has slowed this recovery. Latin America remains affected by a very competitive environment and lower interest rates in Brazil. In the next few slides, I'd like to go into a bit more detail on the situation in Education, which remains very [ compressive ]. So on Slide 5, let me remind you that our Schools business is about 50% of our education activity and is spread approximately half in North America, 1/3 in Europe and the rest in Asia. As you can see on the slide, European schools were open. And although not all schools and classes are open all the time, the participation rate was high, between 80% and 95%. France has been open since the beginning of September. Schools in the U.K., Spain and Italy have opened more progressively. On the negative side, we are now going back into lockdown in the U.K., which will have an impact on our Q2. In North America, the situation is far more difficult, with only 15% of schools fully opened. However, our activity rate is around 50% due to the critical role we've played in the distribution of emergency meals. On the next slide, you will see that we have renegotiated about 70% of our contracts. And despite the schools closures in North America, we are continuing to provide strong support to communities with approximately 60 million meals provided to bring healthy and nutritious meals to families in need. And during this sanitary crisis, we have remained more than ever focused on promoting and providing good nutrition. In Italy, flexible lunch boxes have been conceived with ingredients to boost immune systems with, for instance, more vitamin C and E, zinc and probiotics. In France, we're still ensuring at least 1 vegetarian meal a week for all school children. And going further than that, we've developed lots of new vegetarian recipes using some of the 50 ingredients of the future such as quinoa, beetroot and spinach. Desserts such as apple and beetroot puree and/or pairing of quinoa cake are being integrated into the school menus. In the U.S. in October, SodexoMAGIC, our venture with Magic Johnson, got together with Impossible Foods to provide the vegetarian burger for more than 5,000 school children across 4 Michigan school district to promote new ways of eating even in these difficult times. Impossible Foods and SodexoMAGIC hosted a socially distanced cookout style event at the Flint Junior High's centralized kitchen. If we now look on Slide 7 at Universities. Our Universities business is principally, as you know, in North America, and many of our clients are suffering there. The overall enrollment decline in this current academic year is 5% but has reached 16% for first year of students across the U.S., according to New York Times research. And when you look at the breakdown on the chart, you'll see that only 27% of learning is physical, 8% is fully online, and the rest is a hybrid approach. This situation cannot last. Surveys have repeatedly shown that students want physical learning and campus life. As far as the situation is concerned, it's still very fluid in universities with very little visibility even for the spring term. As previously mentioned, we've now managed to renegotiate approximately 70% of our contracts mainly on the food side. Cost-plus contracts now account for 30% of the total versus only 10% pre-COVID. These renegotiations guarantee us more security to cope with much lower volumes. We are also successfully cross-selling our Clean4 process into the university campuses. This array of cleaning tools and supplies reduces surface pathogens, therefore, reducing the risk of contagion. We are also deploying our Bite payment app for our university students in more than 170 of our sites for the spring term. There is about 27,000 users so far and growing. Now a look at the benefits. There was a festive year-end gift campaigns accounts traditionally for approximately 7% of BRS revenues. And we have these offers in 10 main countries. The company this year have been very positive, less so in Q1 but more in the final run-up to the holiday season, with 2 main factors to consider: first, because several European governments announced one-off tax exemption increases; and second, many companies diverted other seasonal budgets such as holiday parties, decorations, et cetera, to boost the gift budget this year. And this year, digital offers accounted for 42% of the total, up 11 points versus last year. We've been very successful in new business and cross-selling due to the launch of some new offers, such as our Sodexo Premium Pass Celebrations – Dining in India. We've also enhanced our targeting of companies and sectors, which were not previously big buyers of gift benefits, and we had a strong dedicated sales and marketing campaign in all of these countries. Let me pass you over now to Marc for the revenue analysis.
Thank you, Denis, and good morning, everyone, and my best wishes to all of you for a prosperous 2021. So let's turn to Slide 11. Revenue came in at EUR 4.4 billion for the quarter, down 27.1%. The currency impact was a negative 4.5% due to the weakness of most currencies against the euro and, in particular, the reais. Some scope changes were negligible at 0.2%. This gives us an organic decline of 22.7%, better than in Q4 fiscal 2020, particularly, if you take into account the Rugby World Cup, which had a negative impact of 120 basis points on the group and on On-site numbers. On-site was down 23.3% or 22.1%, excluding the Rugby. Benefits & Rewards improved significantly from one quarter to another, being down only 5.6%. Turning now on Slide 13 for the On-site levers of resilience. Again, this quarter, certain service geographies and segments have been much more resilient than others. FM was flat, and our global IFM accounts were actually up 1%. This is due to our great sectorial mix, with 80% of our global item accounts being in the pharmaceutical and FMCG sectors. E&R and Government & Agencies were varied, up 5.5% combined. It was helped by strong activity in the mining sector due to additional COVID-related services. In Corporate Services, we have also been able to renegotiate all our P&L side contract, which represents 2/3 of our contractual base in that segment. Geographically, we saw strong resilience in our APAC, LATAM and EMEA regions, which was flat this quarter. Europe was down only 19.8% or 16.6%, excluding the impact of the Rugby, and was much better than the previous quarter due to schools going back progressively as of September. On the other hand, North America remains very badly impacted by COVID with little sign of improvement at this stage, particularly given the weight of the Education and Sports & Leisure segment in that region. Slide 14. Business & Administrations' organic decline was 27.7%. The trend was 2.1 points better than in Q4, but double that at 4.2 points if you strip out the Rugby, which was in last year's published figures. You will find full disclosure on the Rugby effect in the appendix of this presentation. And while I'm on the appendices, please take a look at them because we do put quite a lot of detail into them. In B&A North America, the organic decline improved slightly but remained very significant at minus 47%. This trend improved in Energy & Resources and Government & Agencies. However, most Sports & Leisure sites remain closed, and Corporate Services showed no improvement in trend relative to the previous quarter. In Europe, sales were down minus 30.2% organically, more or less in line with the performance of the previous quarter. However, the trend is much better if you exclude the impact of the Rugby at minus 26%. It was visible in all segments with a better September and October more than offsetting the impact of the new lockdown measures in November. In Asia Pacific, LATAM, Middle East and Africa, activity was flat in the quarter, reflecting strong growth in Energy & Resources, particularly in mining, while activity in Corporate Services is stabilizing more progressively. Growth in China and Latin America is offsetting a more difficult situation in India and some other Asian countries. In Healthcare & Seniors, the organic decline of minus 3.5% was much better than the previous quarter. Organic growth in North America was down 10.6% due to the weakness of retail sales in the majority of hospitals during the pandemic and with no sign of any improvement in the previous quarter. On the other hand, cross-selling of new COVID-related services has been solid. Seniors' performance has continued to improve month-by-month with encouraging new wins. In Europe, the strong organic growth of 9.9% reflects the ramping up of the COVID rapid testing center contract in the U.K. and the contribution of a large new contract in France. More generally, hospitals across the region are suffering from the decline in retail sales. Seniors activity is more or less back to previous year levels. In Asia Pacific, LATAM, Middle East and Africa, the organic decline was better at minus 4.3%, with a return to strong growth in China partially offset by the continued weakness due to the pandemic in Latin America. Education revenue in the first quarter was down minus 31.2% organically. In North America, the segment remained similarly impacted by the COVID pandemic, with an organic decline of minus 38.5%. Schools and universities were only very partially open with very patchy performances. Only 15% of schools are fully opened, although activities are at close 50% of normal levels due to the emergency meal distribution. Only 27% of universities are fully opened, the vast majority providing hybrid learning system. In Europe, schools reopened, and so the organic decline was limited to minus 7.4%. Most schools were back by mid-quarter even if some classes are forced to close from time to time due to COVID. In Asia Pacific, LATAM, Middle East and Africa, the organic decline remained significant at 21.5% due to the lockdowns in India, Singapore and Hong Kong. China recovery was visible in the bilingual schools, which are up strongly. However, the international schools remain very difficult. Now let's move on to Benefits & Rewards Services. As you have already seen, the Benefits & Rewards Services revenue trend improved significantly in Q1 versus the previous quarter, down only 5.6% organically. This improvement was due to a strong improvement in Employee Benefits, issue volumes and even more so in reimbursement volumes. Both were up, respectively, 0.8% and 1.6% year-on-year. While issue volumes were down very slightly in Latin America, minus 0.4%, they were up 1.9% in Europe, Asia and U.S.A. In India, for instance, despite the very significant effect of the pandemic in the countries and the strict lockdown, our team was very proactive in moving to virtual digital solutions, leveraging the [ Bite ] technology. Within weeks of the lockdown, we were able to issue meal, cafeteria and multi-benefit solutions totally virtually to overcome the difficulties of manufacturing and distributing physical card. More than 3,200 contracts were set up for digital insurance, and more than 225,000 cards have been issued virtually. We have also started to market joint On-site-BRS offers and have begun to win some contracts. Moving on to Slide 19. Employee Benefits revenues were down 4% organically, demonstrating a clear recovery compared to the fourth quarter fiscal 2020 trend. Services Diversification was down minus 10.7% due to the continued difficulties in sports and travel market in most countries. On the other hand, public benefits are up strongly in all regions. In Europe, Asia and U.S.A., revenue declined by 3.2% organically, which represents a significant improvement relative to the previous quarter in most countries. Issue volumes were solid. And in September and October, we saw an improvement in reimbursement volume, even though the trend reversed in November due to the second round of lockdown. Growth in issue and reimbursement volumes, for instance, in India, in China and Turkey, were strong and by innovation and new offers. In Latin America, sales declined minus 9.4%. Overall, issue volumes and reimbursement volumes were stable in the region. However, revenues were impacted by the highly competitive environment and falling interest rates in Brazil. Although the Brazilian [ stake ] is still declining year-on-year, it has stabilized since last summer at about 2%. The momentum in the rest of the region remained very strong, except in Chile, which was more impacted by the pandemic and the economic environment. I have already talked a lot about the operating revenue. They were down only minus 4.2%. On the other hand, financial revenues were down 23.5%, still impacted by the decline in interest rates, particularly in Brazil. Thank you for your attention, and I will hand you back to Denis for the outlook.
Thank you, Marc. And if we now go to the outlook. So as far as the outlook is concerned, and given the performance in the first quarter on revenues and the fact that there will possibly be further third wave lockdowns in some countries over the next couple of months, as we are seeing in the U.K. at the moment, we maintain the first half organic growth hypothesis at between minus 20% and minus 25%. Given the strict cost control, the solid contract negotiations and the ongoing restructuring, we now target an underlying operating profit margin of at least 2.5%, so above the original estimate of between 2% and 2.5%. As far as the free cash flow is concerned, we maintained our assumptions of a negative free cash flow of EUR 150 million in the first half due to the traditionally negative recurrent first half outflow of about EUR 100 million and the nonrecurrent elements of about EUR 250 million, including previous year restructuring costs, government support payment delays reversals and the reimbursement of the 2020 Olympic Games hospitality packages. For the second half, it's far too early to foresee the way things will play out on our activity as it will depend heavily on the equilibrium between new ways of contamination and the speed of the effects of the vaccination on the pandemic. However, on the basis that the pandemic will largely be dealt with by 2021 calendar year-end, we aim to return to sustained growth and rapidly increase the underlying operating margin back over to the pre-COVID levels. And let me now open the meeting to your questions. Thanks again for being with us. So operator, if you can switch to questions.
[Operator Instructions] And your first question comes from the line of Bilal Aziz from UBS.
Just 2 questions from my side, please. You mentioned in the back of the slide pack some contract wins in EM. Can you talk a bit more broadly once again about the pipeline and how that might be split between integrated contracts and single-service catering contracts and then if you've noticed any pattern between that? And secondly, partly related to that, is there a split between what you're seeing between market share gain and first-time outsourcing, particularly interested in the U.S. with regard to what you're seeing and hearing on smaller competitors?
Bilal, in terms of -- we have a -- contract wins, we have a, I would say, a solid pipeline. The velocity in the pipeline is probably not as fast as we would wish, given the impact of the crisis, of course. But we have a solid pipeline. The split between integrated and single service has not massively moved. You know that the large integrated contracts, we've been very careful about the profitability that we expect from those contracts. So we were more selective. We have a good pipeline of that, but we're selective as well. And sometimes it takes time because we want to negotiate those contracts properly. In terms of single service, we are -- we have in full, particularly, we've put an emphasis on that, and we have good expectations and some nice signatures. First-time outsourcing, we present at the moment about 1/3 of our pipeline, which is good. And again, the speed at which we sign those first-time can be sometimes a bit lower given the pandemic we're still in. But I think it's -- I would say I would qualify our pipeline as solid, safe and promising.
And your next question comes from the line of Simon LeChipre from Stifel.
Three questions, please. First of all, looking to Q2, how confident are you in terms of your guidance for H1, given the new restrictions being put in place? So basically, do you expect Q2 to show a slight deterioration compared to Q1? And secondly, in terms of margin. So if you could please come back on the drivers behind the better performance and give us some details on the segments which are doing better compared to your initial expectations. And lastly, looking to your free cash flow guidance, so you keep it unchanged despite better profitability expected. So does that mean the minus EUR 100 million recurring free cash flow you expect is really a conservative scenario right now, or there are other factors that would offset the impact from the better profitability?
Happy New Year to you as well. So regarding Q2 and H1 as a whole, yes, I think we're confident in the guidance that we've given. It integrates -- that guidance integrates the lockdown that we have at the moment in the U.K. We've upgraded our margin assumptions and kept our revenue guidance. The reason for that is because we've been -- we are improving the business quarter-by-quarter in terms of top line progressively. Q1, as I said, in all segments, is better than Q4. On the cost side, we have focused a lot on how we control the cost, how we, again, get the full impact of our contract negotiations. We're very close to our clients and really deliver the services that are required in a proper contractual framework, and that's very, very important. We -- if we go above and beyond, then we ask for the extra above and beyond revenue that's needed. I must say that mindsets have changed, thanks to this crisis, in our teams, and they are very focused in getting rewarded for the services that we provide. So what we see is we see the gross margin getting more and more solid, improving versus previous quarters. And that's what makes us confident in this improvement of the profit margin. And of course, the restructuring program that we put in place to improve and reduce our SG&A ratio is well underway, and it, of course, brings support to our confidence. In terms of free cash flow, Marc?
Yes. In terms of free cash flow, we were probably a little conservative on maintaining the cadence. Yes. Could be slightly better.
And your next question comes from the line of Jamie Rollo from Morgan Stanley.
Three questions, please. First, just coming back on one of the previous questions, your expectations for Q2. Clearly, the H1 guidance, which is unchanged, gets a pretty wide range for Q2, down 17% to down 27%. It would just be helpful if you can give us a flavor for where you think you might end up. I assume Q2 will be worse than the first quarter. But if you could talk about that and maybe give us a flavor for what November was. Secondly, if we look at the improvement you reported in Q1 versus Q4, as you show, it's nearly all -- well, a lot of it is in Europe, and that's despite, of course, the lockdown there in November. But even within North America, some of the segments seem to have got a bit worse. I'm just wondering what your expectations are. Clearly, it's very difficult to guide on the virus, but there does seem to be a very wide gap between North America and Europe right now, wider than it was in previous quarters. And finally, on the commentary about recovering your margins. Since you last reported, Compass said they hope to recover their pre-COVID margins before recovering their pre-COVID revenues. Do you see a similar trend or do you expect more of a linear relationship?
Thanks, Jamie, and Happy New Year to you. Yes, well, actually, we've seen Q2 as -- we expect Q2 to be more or less in line with Q1, not a massive change one way or the other. We are already halfway through Q2, almost. If some lockdowns come, they will impact the second part of Q2. With schools remain open, except in the U.K., France has said that they would -- the government recently said that they would close a school at the very, very last decision. So we're -- I think we're quite confident that we would have probably a Q2 more or less in the same range as Q1. Yes. Well, NorAm, what we can say over the last 3 months, NorAm is more or less flat in terms of trend. And it's a bit above minus 30%, and it's -- we don't see an improvement here coming up. So -- and -- but it's true that we've seen -- you are progressing a bit. November has been a bit less -- is good than September and October. As we said, we had a promising first 2 months. And then with the lockdowns in Europe, we were a bit down. So that's how you can see Q2 versus Q1. Not a massive improvement, but not necessarily a massive deterioration. In terms of margins, as we've said, we [ have cut ] very much our cost. We reignite the top line as much as we can. And yes, as I said in the guidance, margins will increase. Will their -- will they increase more quickly than our revenue? Probably yes. But let's be pragmatic, let's take things step by step. What we're convinced is we can pre -- post-sanitary crisis, when populations are vaccinated, we can reignite our margin improvement and get back over to the pre-COVID margin levels that we have. That's where we're confident. We are -- we confirm this. The speed between the revenue and the margin is yet to be assessed. But yes, probably we can increase margins quicker than our revenue. It's possible, but let's take it step by step.
Sorry, just a follow-up on -- at 2.5%, you already covered that to where you were, and you're still running with sales down over 20%. So clearly, the pace of margin improvement is going to slow very sharply. If you can give us any help on thinking about that, on the trajectory of sales improving from sort of minus 20% to flat. I mean I'm guessing we're factoring in suddenly a much slower margin performance as you head into the sort of teams-type production. Is that fair?
I'm not sure I -- you were breaking up so much. So what you're suggesting is that we are almost halfway through. Is that right?
Yes. Sorry, there's an echo on my line. I'm just -- so the point I wanted to make was, in your second quarter last year -- so in your third quarter last year, I think your margin was negative 3%, with sales down about 30%, and it's now possibly at least plus 2.5%, with sales down between 20%, 25%. So it's only a fairly small sales improvement but a dramatic margin improvement. And at 2.5%, you're only half of your -- sort of roughly half of your pre-COVID margins. So just mathematically, there must be a much slower pace of improvement from here. But I'm just wondering when that slowdown comes through. Is it when the sales decline? It's in the sort of teens, like between 15% and 20%? Or is it when it's single-digit declines?
It's hard -- sorry, and I'll let Marc complement that. I wouldn't model this like this. There's lots of moving parts. And if you compare the situation in Q3, I mean we had massive changes. We had stocks, inventory that we had to get -- I mean there's not much like-for-like...
There was quite a few one-off issues in Q3 and Q4 which were [ lost later ]. The -- what we have with Q1 is, I think, we have a clean recurrence view on the business for the first time in Q4 and Q3 with lots of moving parts. There are still a few moving parts like government as how long it will carry on, when will it stop and so forth. But today, Q1 gives us a much cleaner view on performance than we had in previous quarter. And as Denis said, we've been encouraged by what we saw in Q1 versus what we were expecting. So we believe there is a best negotiation have given us a good result. Cost control is there. So now let's see how Q2 is performing and Q3, and we will give you more visibility. But we need to confirm. But it's encouraging.
And your next question comes from the line of Vicki Stern from Barclays.
Just coming back on the earlier question around net new business growth. Just firstly, any comment on how retention is faring in this quarter. And obviously, short term, the pipeline is being impacted by the pandemic still. But just you're sort of out there, your best guess at this stage as we look out over the next couple of years or so as to what that level of net new business wins should look like.
Thanks, Vicki. And hello, Happy New Year to you. Just the development is slightly better, which is encouraging, versus last year. So that's a good sign. Retention is yet to be fully assessed. We are, again, at the beginning of the year. The -- we're still very early in the year. So we'll give you more element of that in H1, but I'd say the quality of the pipeline is improving. Definitely, the net new business moving forward will be positive because we -- again, we aim at -- on a steady state phases, we aim at really reigniting our top line growth as well as improving the margins. And retention will be a very, very -- has been and will be a very, very important focus for all the teams moving forward that we put lots of efforts there. So we want a healthy pipeline in terms of new wins. We want to capture opportunities that we can have in first-time outsourcing. We know that they are more profitable in most of the cases, and sometimes the -- we got into a tender and market share gain. And so retention is very, very critical to us. But I'm positive on the, yes, net new business wins that we can have moving forward.
And perhaps a follow-up, there's obviously been a lot of discussion about the impact of all of this on some of your smaller competitors. Just any anecdotal comments around what you're seeing amongst those competitors. Have there been many sort of heavily disrupted?
Some [ spots ]. Smaller competitors have been, of course, disrupted as we've been. Some that are less diversified have been sometimes severely impacted, particularly the ones that operate in schools, for example, in last year. Of course, they've been impacted. The point is, because we are not a cash-intensive business, you can survive even if you struggle. So the ones that had some difficulties in, let's say, spring and summer, as soon as schools reopen, they got oxygen back. So we haven't seen any major failure of even smaller competitors. Will there be some opportunities, maybe some acquisitions moving forward? Yes, we think there will be. But we haven't seen any heavily disrupted competitor of relevant size, I would say.
And sorry, just one last follow-up. Just any regional differences in terms of sort of new activity. Is Europe sort of moving slower, faster than the U.S. on that front, for example?
In terms of business trends or the...
[ Linings ] and/or retention?
No, nothing particular. Nothing particular in terms of signatures or anything. They're mostly linked to the situation that the markets are in. No major regional difference. Yes.
And your next question comes from the line of Leo Carrington from Crédit Suisse.
Two questions. Firstly, on BRS. I guess BRS saw the strongest sequential improvement. I'm interested in the sustainability of its performance and underlying client activity. Firstly, you mentioned gifting was 7% of revenues in BRS last year. What kind of increase in activity have you seen in Q1? And I also appreciate you said it's perhaps more of an effect visible for Q2. And secondly, have you seen any cross-selling progress during the crisis? Can you just remind us on how much client overlap there is and what the potential is there? And then second question, I was surprised to see Compass quietly acquired EAT Club in the U.S., which you, at Sodexo, previously were part-owners of. Can you just give an indication of why you didn't look to take ownership or perhaps if there was a reason why that business didn't fit with yours?
Yes. Thanks, Leo. In terms of BRS, so yes, we believe that this -- the improvement, particularly in the issue volume, will continue. Of course, lockdowns again in Europe, where we have a significant business, may impact a bit. But we think that, that will continue. And we have a good sales activity in BRS, and we continue to be confident. The -- we have a high intensity, high single-digit growth in -- on the Christmas campaign, and that will bring good things, particularly on -- also on the revenue side when reimbursements come in. The good thing also is we're improving our digital offers in gifts. So we see more and more clients ordering digital solutions on gifts, which is good, and yet, at the food level, but it's improving. In terms of cross-selling, yes, I think the joint offers between OSS and BRS are very promising. We accelerated the cross-selling. We've signed really some -- more and more contracts. We have a good pipeline in terms of that really joint offer. And that's -- I think we'll give you more light and more information as we move forward, but this is really promising. In terms of EAT Club, we had a stake into EAT Club. We -- they went into -- it was a minority stake. Yes, they went into trouble because they couldn't find their market. And we looked at the potential, and we decided not to take it over completely. It was -- we had some core discussions, but we felt that was not bringing the value that we would have expected. So we moved to other options rather than taking it completely.
And your next question comes from the line of Joe Thomas from HSBC.
It's Joe Thomas from HSBC. I just wanted to come back on the pipeline, if that's okay. So I think you characterized the pipeline as being solid. And you said that, I think, first-time outsourcing was about 1/3 of the pipeline. How much -- what percentage of the pipeline is first-time outsourcing normally? I just want to get a sense of whether that's increased or decreased and whether the overall scale of the pipeline is going up or going down. It doesn't sound as though there's much coming from smaller competitors, let me say they've been given more oxygen. So I just want to get a better steer on whether there is a potential for the growth to be accelerated. That's the first question. And then the second question is on the health care side of things. We reach a grim headlines in the newspapers daily, especially in the U.K., about the routine operations being delayed, postponed, especially in London at the moment. I don't know to what extent that's more widespread. But any thoughts on how that's -- how you're thinking about the health care business more generally?
Right. So yes. Yes, the pipeline is solid, as I said, first-time is with 1/3. I must say that it's higher as a proportion than we had before. Two things may contribute to that. The first thing is some of our prospects have realized that operating food services or FM services themselves was difficult. Operating disinfection services, we're not a specialist, is complex. And even operating food services to ensure the proper food safety, the proper safety of the people and the way we operate, being more digital, to ensure that the click-and-collect and click-and-delivery services is hard to do when you self-operate. So that's one side of things. The second thing is we had, for the past, let's say, 18 months, 2 years, we have said to the teams that they needed to be more focused on that first-time outsourcing market, which is still -- depending upon the segments, of course, which is still massive. So we have put an emphasis on our sales teams pre-COVID on feeding the pipeline with first-time outsourcing. So I think both elements contribute to that increasing part of first-time outsourcing in the pipeline. And the pipeline is increasing. I would say it's more the quality of the pipeline that is increasing. We always had a good pipeline. But the quality in terms of the margin that we could expect, the quality in terms of our capacity to win, the velocity and everything is improving. In terms of health care, we believe this is a great market. As you know, it suffered less than the -- out of many of other segments. Yes, elective surgery has been postponed in many hospitals. Retail has also disappeared almost in all hospitals. There are no more visitors. Obviously, elective surgery will come back as soon as pandemic goes away. Retail will come back because visitors will come back to hospitals. And we strongly believe in the potential of that market. We are well positioned. In the U.K., yes, it's going to come gradually. But we're positive on that market with strong positions in the U.K., strong position in France, strong position in NorAm. So -- and in Asia as well. So that's going to be an important market for us moving forward. Again, as the pandemic goes away, we'll see volumes progressively picking up.
No. I [indiscernible]. The question was really aimed at understanding whether...
I'm sorry, you broke up. Could you repeat your question? Sorry.
Yes. No, I understand that it's the [indiscernible] come back eventually. My question really was aimed more at understanding, on a quarterly basis, whether Q2 was looking worse than it did in Q1.
Okay. Sorry. Sorry, you want to take it?
Yes. What we've seen is that Healthcare month per month is progressively improving. We've also had the rapid testing centers in the U.K., which gave us Healthcare growth in the U.K. because of the testing centers. So yes, there could be some hiccups in terms of elective surgery for a few months, but the rapid testing centers activity is quite solid. So actually, the U.K. is one of our best-performing markets at the moment in Healthcare, and it's gradually improving. The underlying trend is improving month after month. So I think, today, the health care systems around the globe are a lot more organized than they were a year ago, and they are able to cope more with other surgeries. It's not yet brilliant, and there are some [ gearings ], but it's getting better. So we're not too worried. And we are seeing this going further, progressing positively. Yes. And obviously, in the U.K., we're supported by the testing center.
And your next question comes from the line of Richard Clarke from Bernstein.
Apologies, there was some sound issues on some of the earlier questions. So if any of these have been asked already, then please let me know. In your presentation, you mentioned that there's some working from home benefits in the Benefits & Rewards. Is that the gifting that you referred to in the presentation? Or is there some more longer-term sort of working from home benefit you see within the Benefits & Rewards? In Healthcare, just wondering, I kind of understand in Education why Europe is doing so much better than North America. But why in Healthcare is Europe doing so much better? Is that really down to the testing centers? Or is there something else different in Healthcare between the 2 divisions? And can -- is vaccinations an opportunity for you? Or is it testing the sort of limit there? And then just to push on the longer-term guidance, you talk about the -- if the virus is over, the pandemic is over by calendar year 2021, you'll then go back on margins. Should those things be kind of concurrent? So if -- will H2 FY '22 see margins above pre-pandemic levels? Or would there be more work to go over the sort of coming quarters to get back on to that trajectory?
Yes. Thanks, Richard. And so on the work from home in BRS, it's much more than the sort of gift campaign that we did. We did a good gift campaign. But the fundamental trend is we see clients willing to accompany their employees when they are home. And we see employees asking for support when they work from home. As we said in the Investor Day, we expect work from home to sort of land at like 2 days per week, of course, for office workers, not for production people. But -- and for those 2 days, clients are really figuring out how they will accompany. And accompany people with food services, typically with our cards, makes a lot of sense. And where we're stronger is that we can integrate both offers, the On-site and the BRS cards, in 1 system, 1 integrated system, which is a great value for our clients and for our -- for the employee experience, and we are unique on this. So that trend will support the development of joint offers, and we're really positive on it. We're signing clients. We have a good pipeline, of course, in the countries where BRS is. But it's strong. In terms of -- so we're positive on that. In terms of Healthcare, Marc, do you want to?
Yes. The Healthcare in Europe is better, generally speaking. Even if you move away the rapid testing centers, the trend is better than the U.S. It's also because the retention historically is a lot better in Europe than in the U.S. In the U.S. last year, we had some large losses. And so there is still a compounded effect on the NorAm numbers. And so the NorAm numbers will improve because the base will get more favorable in the coming quarters. In Europe, I would say, if you remove the rapid testing centers, the trend is about minus 5%. And with the rapid testing center, you move to 10% because the rapid testing center is about EUR 20 million a month right now. So that gives you the trend. But the trend is improving. What's important is that, steadily, we see the Healthcare trend improving month after month. And regarding your -- and regarding vaccination, we are open for business. I mean we -- obviously, I mean we did good business, and I think we're providing good service in the U.K. for the testing center. We will be happy to support for the vaccination. Vaccination is a little bit more technical and require some -- but yes, we are open to that. But today, we have no opportunities signed, and it depends on government...
It's critical. The government...
Strategies and everything. But we can do. And as far as your third question, Richard, as I said, we aim -- post-pandemic, we aim at getting back to sustainable growth and increase the UOP over the pre-COVID levels, but I won't give any time frame on that. We've been -- we are always cautious. I think you should take the trend that we have as a positive one. And the efforts that we are making in improving quarter after quarter our gross profit margins after the crisis that we've lived through and -- is, of course, important. The cost control that we do, also good signs, but I won't commit on a date.
And there are no further questions at this time. Please continue.
Okay. All right. So thank you very much for being with us today. I want to -- again, I want to wish you the very best. I want to wish to all of us, I would say, a better '21 than we had at '20. I'm convinced that this year is a year of opportunity. We are -- we've been demonstrating resilience and strength during the crisis. I think we've done really well relative to some of our competitors. We're ready to put our -- all our efforts in surging from the crisis and getting back to the levels that -- and better levels that we had in terms of revenue and profit. That's our goal. We're confident that the teams are absolutely focused and motivated, close to our clients. And I'm positive moving forward, even though, yes, the months to come might be a bit difficult. But the energy is there, the willingness is there to develop the business. And yes, looking for more good things moving forward. Thank you very much. Have a great year.
Thank you. Bye-bye.
Take care, and stay safe.
That does conclude our conference for today. Thank you for participating. You may all disconnect.