Operator: Welcome to the Compass Group PLC Half Year Results Question-And-Answer Session. Hosting today's call is Dominic Blakemore, Group Chief Executive. Following the opening remarks, you will have an opportunity to ask questions. [Operator Instructions] I will now hand over to Dominic Blakemore for opening remarks.

Dominic Blakemore: Thank you very much.

Good morning and thank you for joining in. As usual, I'm joined by Karen Witts, our CFO. I'm sure you've read this morning's half year statement. Before opening the call to questions, I'd like to say a few words on our performance and outlook. Although our business continues to be impacted by the pandemic, during the first half of this financial year, we delivered continued margin progression, strong cash flow and excellent client retention.

At the end of March, we were trading at 71% of 2019 revenues. Performance across both quarters was broadly unchanged. In B&I, industry volumes were more resilient, while business is affected by widespread working from home. Sports remain mostly close although the sector benefited from a few events at the end of the period. Higher Education in North America improved in the second quarter as university campuses reopened in January.

Defence, Offshore & Remote has been resilient and we saw a strong performance in our Healthcare & Senior Living sector. By controlling the controllable, we improved margins quarter-on-quarter across all regions. In Q2, we recovered more than half of our operating margin of 4.2%. This is 20 basis points ahead of our Q2 pre-close trading update and 150 basis points improvements on Q1. As a reminder, our margin was minus 6% at the lowest point.

Over the last six months, we've seen strong first higher outsourcing momentum with a continued flight to trust. New business wins were up close to 20% over 2019 with first-time outsourcing now accounting for 50% of the value, up from the historic 30%. This acceleration in wins combined with a 60 bps improvement in retention, correlated to a potential increase in net new of some 2%. Because of our strong financial foundation, we've continued to invest in growth. So we innovate our offering to evolve our operating model.

We remain disciplined about bolt-on M&A to gain further sector exposure for additional capability. In the next few months, we look forward to welcoming our consumers back at sites reopen and we mobilize new business with an unrelated focus on health and safety. Although the vaccination rollout is underway, the pace of volume recovery remains uncertain. We expect Q3 revenues to recover slightly over Q2. The Q3 margin is however expected to be between 4.5% and 5% as we absorb a big quarter of reopening costs, but still make further margin progress.

We remain confident about our ability to return to a group margin above 7% before we return to pre-COVID volumes. So in summary, we've covered more than half of our margin in Q2 and expect further progress in Q3. We're really excited about the significant structural growth opportunities in the dynamic outsourcing market. New business wins are up close to 20% over 2019, giving us further portfolio diversification across sectors and regions. These exciting growth opportunities combined with innovation and a more efficient operating model will help us emerge in the pandemic stronger than we've ever been.

It will allow us to further consolidate our position as the industry leader in Food Services. We'll update the market again on the 29th of July. Thank you. And now we're very happy to take any questions.

Operator: Thank you.

[Operator Instructions] Our first question from the line of Bilal Aziz from UBS. Your line is open. Please go ahead. Bilal Aziz : Good morning, everyone. Thank you very much for taking my questions.

Just three for me please. Firstly, just on the rate of net new business wins. You previously talked about confidence in getting back to 3% net new win. It feels like you're now confident that could be 5%. Just can you say, what do you think is the sustainability of that trend could be into the midterm potentially in regards to your retention rate, which could be helped right now as well? Just number two, just on the revenue guiding with gradual improvement expected now any color you can potentially give us for volumes into April or early May please? Just to get a sense of the pace of improvement you think is likely, particularly in education where one of your competitors perhaps is a bit more optimistic into the phone.

And then finally just on CapEx. You've got £400 million in the second half. With this rate of new business win, how have been you thinking about the mid-term capital intensity of your business versus the usual 3.5% gross CapEx you do? Thank you very much.

Dominic Blakemore: Yes. Thanks, Bilal for those.

I'll take the first two and then handover on CapEx to Karen. Look, first of all in terms of the rate of new business wins and what we're seeing versus what we may expect over time. I mean first of all it's very, very positive. In 2019, we had new business wins in the first half of around £850 million. That's now closer to £1.1 billion in this first half year.

So it is very exciting. As you've heard us say today, it is coming more from first-time outsourcing, but we are winning across the piece against our larger competitors as well as the small regional players. And as we've said several times, we do believe that that is around the flight to trust and the quality of services and processes that we can provide at this uncertain time. Obviously, that new business will mobilize over time and the volumes will ramp up over time just as we see with our existing business. So we won't necessarily immediately see it through net new and we will see some of that benefit coming through volume over time as well.

All I can say really about the medium-term is look, the pipeline looks equally positive and it has an equal weighting towards first-time outsourcing which is the most rewarding part of that, our new business portfolio, where we can reward the client with the most savings and we can deliver the best economics for Compass as well. So that does look positive. And on retention, we're seeing an improvement in retention now. And of course, there will be an element there that some processes aren't being deferred. But what we've also done through this is extend our contract terms with many clients as part of our negotiations.

So as an example, I reviewed our UK Sports & Leisure portfolio. And in the average we've added somewhere between two and three years to that portfolio through the downturn and that gives us real confidence around future retention. So hopefully, I believe that gives you a little bit of color. Volume guidance, I mean really by sector, as we look forward is probably the best to give you. If we look at both health care and defense offshore remote, if you look in the statement today, our volumes are up sort of 5% to 9% in those two sectors over the equivalent to 2019.

So that's very positive for us. And of course, the health care sector performance is being driven by mobilization of net new. We're not yet seeing a return to retail, when we see elective surgery coming back in. So we think there is a positive trajectory within the health care sector. The defense offshore remote sector is looking robust and positive as we see strong commodity prices drive production and demand for our services.

So that feels good. In terms of the three core sectors most affected, I think education was back to just over 70% in quarter two. We are going into a northern hemisphere summer now. So we may make a little bit more progress before schools' and universities' break. But it's likely to be in September that we see any significant uptick.

We are hearing that most of academics and most students want the non-campus experience and the demand is high but we will really only be able to see that as we get through the summer and we talk to our clients, because we do expect the return to school in September will be strong. In Sports & Leisure, we're at about a third of our activity levels today. So we cater the O2, we've seen football matches start to open up. But our muted volumes and so we really see the tipping point in the UK and the US of 21st of June and the 4th of July. And at that point, we expect to see volumes grow progressively over time.

And again, I would expect to see that sort of improving towards the end of our financial year and into the beginning of our next financial year at any degree of scale. And then with B&I, which is a significant delta for us I think it's important to say in May, we're pretty much opening all of our B&I sides. I've spoken in the last few days to our managing directors in Australia, risk restaurant associates in London, in New York and on the West Coast. And we are seeing a wide-scale reopening of sites. At this point, we're still seeing those at low volumes.

So again, I talked to a few CEOs yesterday, we're looking at sort of 20% to 30% volumes in the near-term. So I think that's why you're not seeing a massive pickup in volumes in the quarter. But absolutely, as we get into the fourth quarter and it will be muted because of summer. I think September becomes a big month for back-to-school reasons. And of course, the first quarter of the – our next financial year the last quarter of this calendar year I think will be when we see the sort of – the biggest return to the new normal as it work.

So volumes will be phased. What we're having to do is put costs back in in this quarter. So as every site gets opened, we need the minimum teams there. We need to bring people back early. We need to retrain them.

We've got a less efficient food offer. And so we're having to absorb that level of reopening costs. As I said in the opening, continue to make margin progress. So sorry, pretty long answers there but I think they go to the heart of a lot of what many of you will be interested in. So over to Karen on CapEx.

Karen Witts: Thank you very much Dominic. Hi, Bilal and thanks for your question on CapEx. So we continue to believe that CapEx is a really important tool for us. Where we deploy CapEx and we do deploy it judiciously, we see that we get longer and larger contracts. And it's an important tool both in terms of new business and in retention.

In the medium term, the 3.5% of revenue looks broadly okay. But I think the important thing to remember is that we have the means to deploy CapEx and we will take up opportunities as we see them if this is a good opportunity of course, we'll deploy CapEx into it. And just to say that we perform regular post-investment reviews just to test the returns that we're getting on our CapEx and I'm pleased to say that those returns remain very strong.

Dominic Blakemore: And I think Bilal just to add to that, one of the purposes of our raises last year was to give us that financial flexibility to invest in opportunities. As you've heard us say today those opportunities are there.

We want to prosecute them. And we want to build back our scale and accelerate our growth. So as always the economics right as currently described them, it's absolutely the right thing for us to do.

Bilal Aziz: That's very clear. Thank you very much.

Operator: We'll take our next question from the line of Jamie Rollo from Morgan Stanley. Your line is open. Please go ahead.

Jamie Rollo: Thanks. Good morning.

The first question was just coming back on the good numbers you've given on the new business wins. That's helpful to quantify it, from GBP850 million to GBP1.1 billion. So that extra GBP250 million is about 1% to annual sales. Is that the sort of pace we can think of that continuing, or do you think, there may have been some sort of pulling forward of outsourcing as suggested by one of your competitors yesterday? And that actually maybe paid to that facing unusually high just because of very difficult COVID environment and it could slow, or could that pace sort of continue? And also if we look at the mix on slide 33, it's a bit more skewed to Europe and Healthcare. I'm just wondering, if there's any sort of margin implications from that or whether those should be roughly in line with the rest of the group.

And then, the other question was just on, margins. What are you sort of seeing on cost pressures on both food and labor side and how easy is it to pass those on? Thank you.

Dominic Blakemore: Hi. Thanks, Jamie and good morning. I hope you are well.

I'll hand the margin question to Karen and I tackle the first two. Yeah, I mean, look, we -- I've said, it really we're very pleased with the new business wins. You said, 1% annually -- absolutely remember that's a six-month measure. So, if it continues like that, it could be slightly more positive. But I don't want to be too positive.

I think to strike a note of caution. Look, we've seen very buoyant activity. Is that sustainable over years? I think it's too early for us to tell. What we can say is the pipeline is positive. And that pipeline supports the second half of this year and our progress into the next financial year.

So certainly, for that period of time we look forward with cautious optimism on the pace of this. And we also believe, -- I mean, look, you have to remember with first-time outsourcing it is about to what extent you unlock that opportunity. And we're very, focused now that the conditions are right and clients are very interested in outsourcing for all the reasons, we've described and not least the financial pressure some of them are under. So the conditions are right for them. We need to make that halfway.

And we'll focus on that by putting capabilities and resources in the right place to deliver it. So it's a great start. We know we need to do more. We think the opportunities there. Let's see how we go.

In terms of margins, I mean, first of all, in terms of the diversification, we're really pleased with both, the wins and retentions we're seeing in Europe. We know we need to do back in there. And it's only six months, but the indications are positive. And particularly positive is the increase in first-time outsourcing which has typically been lower in that region. So we are pleased with that.

In both, Europe and Healthcare, the margins are at or around historic levels. So it's not that they aim to see results in any dilution. We're very pleased with what we're seeing there. And in particular, with healthcare where our health care sector margins have always been above the average and particularly, where we've got the built-in support services capability which is even more important to winning in that sector right now. Karen?

Karen Witts: Oh! Hi, Jamie, so just with regards to inflation.

It has a big inflation, we are seeing a bit of an increase in the U.S., more than we are in the U.K. Food inflation is something that we're very used to dealing with. It's pretty much within our control that, we can help to mitigate the increases by managing the menu replacing expensive items push and control, food waste reduction et cetera. And the rest can be passed on generally as part of our contract renegotiations. I think labor inflation also looks that it's a bit higher than we have seen.

But over the last year we've done a lot of work on managing our labor and increasing flexibility and increasing use of automation. So the work that we've been doing in the digital environment has helped us to deploy more cashless solutions for instance to a client base. And you heard us talk about, the systems that we use bench in the U.S. and constellation in the U.K. which helped us to deploy labors more effectively and we don't have wasted hours from a labor perspective.

And probably just to quote back to watching your podcast at the end of last week. And you said that, we believe that, we provide with an essential service to our clients. And our commercial models are actually pretty well set the same part to pass on inflation where we can't mitigate it ourselves. But hope you've heard from what I've said that, we actually have the tools set to mitigate a fair amount of what we see in any case.

Jamie Rollo: And are you able to give a figure? Sorry.

Karen Witts: Yeah. Yes, sure. So we think from a food inflation perspective, what we're seeing at the Group level is about 3.4% that's primarily driven up by North America where it's more like 3.5%, 3.6%. And labor inflation is running about 4%, again driven by the North American market which is 4.5% 4.6%. A - Dominic Blakemore And Jamie just as you know I mean whilst on the one hand we need to mitigate this it also is one of the reasons that it can accelerate and unlock first time outsourcing where clients really struggle themselves to manage this and particularly where I think there's going to be significant pressure on deployment and recruitment of frontline labor in North America.

So we think that your three questions are all interconnected and inflation could well be a tailwind for accelerating outsourcing.

Jamie Rollo: Thank you very much.

Operator: Thank you. We'll go to our next question from Vicki -- sorry Leo Carrington from Crédit Suisse. Your line is open.

Please go ahead.

Leo Carrington: Good morning. Thank you. Could I ask a few questions on the new business wins? You mentioned some vending is driving new business in North America. Is this reflective of new clients trying to adapt their offering away from a traditional kitchen leads offer? And on that topic, can you perhaps give some quantification on how the new businesses such as Feedr EAT Club and FOODWORKS have been performing in new tenders? And then secondly in the presentation is also the opportunity and delivery was specifically mentioned.

Is this because you're actually seeing a growing opportunity in delivery for you, or is it more tackling what is happening with competitors and in other parts of the market? And can I just check is delivery still mostly relevant to the office catering market for you?
Dominic Blakemore : Yes. Thank you very much for those questions. There's a few in there. I mean first of all just to give some color on the new business wins. We absolutely called out vending, but again just one fact on North America growth.

Our top five new business wins in North America are all first time outsourcing. So that trend we're seeing across the piece. With regard to vending, I mean we're doing well there. And actually what we've seen is there are a number of clients that have continued to operate through the pandemic in distribution centers and in manufacturing where vending is a very important part of that offer. So it isn't necessarily cannibalization of existing business.

It is incremental new business. And we've all seen the food delivery companies and an online retail companies have boomed. Obviously, that is a subsector of the B&I for us that has been positive. When you talk about -- is it new clients adapting that's absolutely the case as well. I mean we talk about putting a flexible food offer in, it's going to be less reliance on the traditional kitchen and restaurant.

It will be delivered in solutions like FOODWORKS. It will be vending alternatives. It will be grab-and-go on the client-side. And we talked a lot about how we're building that. In part you're absolutely right that needs to be defensive.

It need to be defensive against delivered in competition, but also to ensure that we're providing the solutions that clients want. And particularly solutions that are relevant for all dayparts and not just the traditional meal times. But we also think it unlocks an incremental growth opportunity. And that's why we talk about delivery it is giving us an opportunity to play into smaller accounts. That combination of our 70 central kitchens with the digital capabilities of EAT Club and Feedr here in London and we're obviously building those out around the world means that we can connect small groups of employees with a variety of food offers through the delivery.

And that we feel is an opportunity for us. And as you rightly say it is predominantly offices. So, to one extent it is providing more variety for existing clients. So, another it's unlocking other channels of opportunity that it is about the office and university environments in particular rather than delivery to home. And then finally progress with Feedr or FOODWORKS and EAT Club.

I mean we're very exciting. They're playing a leading part in our tenders particularly within higher ed and B&I. It's an offer that clients are excited about and wants. Of course the rubber hits the road when we see volumes come back and we'll see the growth in that business. But as of today the aggregates of those types of businesses for us are delivering around GBP 400 million of turnover.

And again, we think that that is a sort of subchannel that we can grow over time.

Leo Carrington: Thank you very much.

Operator: We'll take our next question from the line of Vicki Stern from Barclays. Your line is open. Please go ahead.

Vicki Stern: Yeah, morning. And just firstly on the Q3 margins, you're talking to a margin around sort of 50 bps, 60 bps higher than Q2, I guess at the midpoint. But you're also saying that that margin is very much impressed by the fact that you've really got to mobilize and reopen a lot of sites even though there's not much volume coming back. Just any sort of quantification of sort of how much that suppression might be or rather sort of what the underlying level you might be hitting already, would be if it were not for that kind of short-term impact? And sort of related to that, obviously, not asking you to kind of predict volume progression quarter-by-quarter. But just as you look to next year, I think you really sort of touched on it.

If that recovery does in earnest start from September onwards, how do we sort of triangulate your view that you can get margins back above 7% with sort of what next year could pan out? How much is the sort of delay in getting that margin back to pre-COVID levels? And then just finally in terms of sort of dividend and cash return, what are the sort of triggers you're looking for now in terms of thinking about reinstating dividends and the cash returns? And any change in approach perhaps with the relative attractiveness of M&A at this point or CapEx?

Dominic Blakemore: Yes. Thank you, Vicki. If I do the volume and margin progression and handover to Karen on Q3 margin mobilizations and dividends and cash. Just on that volume progression, it's not a perfect world. And therefore, it's difficult for us to predict.

I mean, we're sitting here talking about September and it's been a very bumpy road has in it, so I think the first thing to say is we're really pleased we've made the progress is made. We're really pleased we're still making the progress that we're talking about in Q3 as we put costs back into the business. And of course, what happens when volume comes back is we'll get leverage, but we'll need to put more costs back in as well. And we haven't got perfect line of sight of what that relationship is going to be. We've obviously looked at various different scenarios, which gives us confidence on the 7% before the 90% volume, before the return to pre-pandemic volumes.

But it will be a bit of a fish bite between all of the measures we've taken around contract renegotiations and rightsizing and managing our overhead with the cost we need to put in to reopen and build back the future model. We want to be judicious. 7% is our ambition and first phase. But we also want to make sure that we're building the best possible business with sustainable margin that we can, so I think we will give you more color as we go through the quarters, but I think you know our ambition.

Karen Witts: Yeah.

Vicki, I don't really have anything more to say on the margin. I mean, the quantification of the mobilization cost is something that's really quite hard for us to forecast because the timing of openings and volumes coming back is to keep hearing for us is uncertain. I think the important thing here is that we always said that the margin progression would not be linear. And I think this is a thing it's unlikely to be linear over Quarter three, but nevertheless, it is going to be positive despite the fact that we'll have more cost than we would normally have. And just to reiterate, our confidence in getting back to that 7% margin even before we get all of the volume back.

I think you heard from the earlier question that Dominic said capability is really going to come in the month of September where we feel that we'll start to get something approaching the new normal of path the two independent days and will have passed the summer holiday period in the northern hemisphere. So we'll be updating again at the end of July and hopefully we'll give you a bit more color on the margin then. So if I turn now to the balance sheet and your question was around the triggers to reinstate the dividend. So first thing, I would say is that we do understand that the dividend is important to some or to many and it's something that the Board keeps under review. Board believe that it wasn't appropriate to do anything other than keep the dividend suspended for now, but we will update again at the end of the year.

Now where are we at the moment in terms of the kind of the balance sheet metrics, probably the ones to really point out is that as predicted, we're at a high point from a net debt-to-EBITDA perspective. So we're currently at three times net debt-to-EBITDA when we have a target gearing ratio of one to 1.5 time. And we really do believe that this is the self-op peak, because the way that the metric is calculated is that you've got a trailing 12 months EBITDA. So you've really got all of the worst COVID impact sitting in that EBITDA. So we feel that we are on the point to recovery, but we don't know how long recovery is going to take.

What we can say is that if we haven't raised equity, it will take a lot longer than we're envisaging to actually get back to the kind of metric that would allow us to pay a dividend. Just going back to some of the points that have been made around CapEx, we really do want to stick to the principles of our capital allocation methodology, investing in CapEx for growth is really important to us and we think this is a good point in time to use the strength of our balance sheet to take advantage of opportunities that are in the marketplace. Similarly, we feel that we're well poised to embark on M&A. And we've been looking up lots of opportunities to date, but we do deploy I mean very, very carefully and we want to make sure that any M&A that we do is actually going to deliver shareholder value for us. So we haven't actually spent anything on M&A in this half of the year, but we are actively looking out for opportunity in that area.

Vicki Stern: Thank you. And just to follow-up on that. That's in terms of sort of what types of businesses you're looking at, is that still sort of filling gaps where you may have them? What, sorts of, businesses would be interesting?

Dominic Blakemore: Yeah. I think very much. So, look, we're interested in digital capabilities.

When we talk to our clients today there are three priorities that our clients are talking to us about, it's diversity, it's digital and it’s net-zero. So we know that we need to organically and inorganically build that digital offer. So we're excited about that Vicki. We remain very interested in sector diversification particularly within healthcare and senior living, which is -- it's a good growth good margin sector, which we believe will be invested in over time by private and public sector. So sectorization remains important.

We hope and believe there will be some opportunities for good volume through this cycle. And we'll look for those but the economics will have to work. And finally we'll look for good management capability in brands as well. The pipeline is good. We looked very, very hard at three deals this year.

We concluded that one was a subsector that we didn't think was right for us and we had a better capability and it wasn't the most vibrant to subsectors and we've looked at others with a similar lens. So we'll keep that discipline strategically and financially, but we think the opportunities are emerging.

Vicki Stern: All right. Thanks very much.

Operator: We'll take our next question from the line of Jaafar Mestari from BNP Paribas.

Your line is open. Please go ahead.

Jaafar Mestari: Hi. Morning everyone. I've got two questions if that's okay.

Firstly on reopening and mobilizations in Q3, I appreciate you're not quantifying those, but maybe more qualitatively could you talk us through how this works and how long in advance you start re-staffing and restocking? I mean, your Q3 end in June, is there really that much that's going to be reopening in June-July, or will some of the big reopenings in B&I for example not be in September, October, and therefore, you'd have more of those costs in Q4? And then secondly just in terms of your go-to-market strategy. I'm assuming you're not just waiting for incoming calls from potential first time outsourcing clients. So as this is accelerating what has been the tweaks to the sales teams in terms of numbers or organization, what's been added or removed in the pitch features your brand and how you segment the markets. And in particular I've noticed a couple of recent initiatives where you seem to be helping clients think employee experience software and consulting and such. So is that just anecdotal, or is there a real pivot to sometimes a more holistic approach that historically was not really that central for most of your brands?

Dominic Blakemore: Yeah.

Jaafar thank you. Yeah really interesting questions. First of all just on reopening a mobilization and a bit more color. I mean, I don't think we can give you any more numbers than we've tried to help with this morning. But you're absolutely right.

Many clients want to open now and that's why we talk about most sites being opened in May, so that they can have the experience of managing through lesser activity in June and July. So it isn't a choice to defer opening until it's busy. It's they want to open now, so they can start to figure out what hybrid working looks like, what the offices in the future looks like, what the food offer to go with that is how it's adequately social distance, what new regulations emerge and need to be matched. And there's almost a stuck and see at lower volumes for a few months as they build that back before we all recognize it post the holiday days. And as we get into the autumn and winter those volumes will pick up significantly.

I think we should also not lose sight, there's quite a lot of pent-up employee demand to be back in the office. I don't know what many of you on this call are right now and what your own institution views of life are. But as you talk to clients, one of the key drivers is employees want to get back into the office. And that's regardless of the holiday season. So its right, we believe that we're investing now and the timing is right to go through May to August really recognizing that be lower volumes.

So that when those volumes pick up, we really have the experience to ramp up. Just in terms of what it feels like, I mean I've described it as I mean effectively the reopening of our existing business that shuts and the opening of two years of one business is the equivalent of five years new business being opened simultaneously. So that's an incredible pressure. And what does it mean? We have to re-recruit ahead of opening. We have to train people.

We have to go back through the health and safety protocols. Many of those health and safety protocols have changed. I've been in the office a few days and just trying to remember to wear my mask every time I'm in a public space and not in an office is challenging. So we've got to do the detail of the mini-shows as well as the bigger processes. There are changes to menu design that we've got to implement.

There's new digital initiatives that need to be porting on the site. So there's an awful lot of pre-work going into reopening. And then when we open, obviously, we're operating -- I wouldn't say a full crew, but we have more than half of the team probably for 10% or 20% of the volumes. And that means, we need to go into a new phase of negotiations with clients on the right cost recovery mechanism. That puts pressure on the back office.

In our North American business, we're probably recruiting between 20,000 and 30,000 people in a month, which is volumes, that you've never seen before. And obviously that's in a tight labor market. If anyone can make a virtue of that we can. We have lots of formally trained Compass colleagues that we'll bring back and so on. But that's going to put pressure on the whole industry.

And again, on self-operated clients, in particular. So, there's lots of sort of day-to-day challenges of what that reopening looks like. And of course, we can't afford to get it wrong, because in this environment any failure is very visible and very sensitive. So, we're incredibly focused on getting you right. That -- hopefully that gives you some color as to what the look and feel is.

But I think we get rewarded the other side of it, both in client relationship for having managed it on the front foot. And also we put the cost in when the volumes come back, we believe that we should benefit in the margin recovery. When you talking about the go-to-market strategy, you're absolutely right, we're not awaiting calls. And across our entire business, we are now very focused on the first time opportunity in reaching out to clients where it's been a slow burn before, can we accelerate those relationships. We know who they are, we know where they are, we know what they've been through, where perhaps, we've been building them is we're building this with more energy.

We've upweighted sellers into that particular first time outsourcing opportunity. And the one thing that we said throughout this is that we wouldn't compromise growth investment in our rightsizing. So, where you've seen us have a big impact on MAP 5, we have not compromised growth, and we will put back the growth investments that we need to really maximize the opportunity. In terms of pitch, I mean I think I said it in an answer to another question. The three things all of our clients talk to us about our diversity digital and net zero.

And that is resonating in all of the pictures that we're taking to clients to more or lesser extent, and we feel we're really well placed to deliver on that. You know our capabilities in Compass we'll have to need to stay. We've made acquisitions. We feel we've got the offer now, and we're putting in front and sensor. And I was just reviewing a university bid here in the UK, where actually what was a traditional refactory is almost completely being closed to create new social space for students to spend timing.

Such that, we now produce either off-site or on-site in a different spot, so that we can assume this personalized requirements anywhere on campus. So, there's a way in which our clients can use their real estate differently through this offer. And that's part of the consulting really don't answer. We're working on workplace in the future with our clients and trying to lead on that. We're working on health and wellness in particular.

I mean there's a huge concern around both physical and mental wellness of the workforce as it comes back. And the workforce that comes back the same the when home, we all know that there have been mental health challenges. Many people, who suffered from COVID, may have long COVID and some of our clients are incredibly focused on what that means in terms of how they care for their employees in this next phase. And we think that we can be part of that story. So, we're very focused on health and wellness.

And for, all of these things, I think give us a really important role to play in the future. And we're trying to weave that into our offer and our strategy.

Jaafar Mestari: That's super useful. And that has nothing to do with traditional support services, which you deemphasize this?

Dominic Blakemore: No. Sorry, I interrupted.

No, it's not. I mean, look, support services is a broad umbrella. And as you know, we tightened our portfolio up over the last few years. I think the one service within support services, which is now valued in a way it wasn't is hygiene disinfection cleaning. It has got effectively a premium rating, right? We provide that brilliantly within healthcare and DOR in parts of our education business.

So where we see now that we've got a great portfolio where we see the opportunity to grow that or cross-sell it we will.

Jaafar Mestari: Thank you. Thank you so much.

Operator: We'll take our next question from the line of James Ainley from Citi. Your line is open.

Please go ahead.

James Ainley: Thank you. Yes. Just two questions remaining please. So you sort of painted a picture that obviously, very strong levels of new bidding or new contract activity.

I guess it's against a backdrop where a lot of processes were still post during the COVID period. Are those processes now reopening? And therefore, should we expect more of an acceleration from here in terms of new bidding activity? And then secondly, can you just update on the contract mix? I know you moved a lot of clients to cost-plus or management fee basis during the pandemic, what triggers moving them back to the more normal terms going forward?

Dominic Blakemore: Yes. Thanks, James. And I'll hand contract mix to Karen. Just on store processes, I think if I've heard your question right you're suggesting that growth could be even better.

I think we feel that, actually we were very surprised that new business processes pretty much carried on throughout the pandemic and we're done virtually. We've got a green screen room in one of our offices now where we've done virtual presentations and it's enabled the bid process to carry on. So today whilst we're recognizing the very strong performance on new business of 2021 over 2019 which was the benchmark for us as, sort of, pre-pandemic levels. We also had a really good half one of 2020. I'm not sure we were talking about it when we met and not about half two in 2020 either.

It's just that most of that business hasn't mobilized. And it's why I talked about, sort of, real pressure on opening as we get back into this next phase. So, sort of, new business has held up very well from a new win standpoint. You obviously don't see it in our reported new business growth because it's suppressed by volumes. So I think that trend has been there for a while.

And look if it could continue at these levels as we've said earlier then that would be very positive for us.

Karen Witts: And James just in terms of the contract mix. The underlying contract mix hasn't actually changed. So we're still are working on the basis of one-third, one-third, one-third. One-third fixed price, one-third P&L and one-third some cost plus.

But what we've been doing and what we have to continue to do is the in constant dialogue with our clients to make sure that we are not operating at a loss in these times that are quite volatile. So in the, first instance, we have to make sure that we were recovering cost. We're probably moving into a slightly changed kind of conversation environment and that's related to some of the comments that Dominic made about sites are generally reopening, but at very low volume. So we have to have another conversation about what is the offer that the client wants in times when the volumes are still very low. So it's going to be ongoing work for the teams were involved in those client conversations.

And there isn't really one trigger point that says right we're back to the normal. What we are learning from this though is that as we write new contracts we're kind of fitting more and more protections and blends and giving ourselves some flexibility to operate more hybrid models. I mean let's hope we never have anemic that comes along again. But you can't envisage different kinds of business disruption that might mean that at certain levels of volume you would move into a different kind of contract structure in the short-term.

James Ainley: Okay.

Very good. Thank you.

Karen Witts: Thanks.

Operator: Our next question comes from the line of Kean Marden from Jefferies. Your line is open.

Please go ahead.

Kean Marden: Good morning. Thank you very much. Most of them have been asked just a handful leftover. Just, first of all, coming back to US labor markets.

Dominic, do you there's a lingering supply side issue in the US labor market, or do you think that wage rate inflation will help the participation rates move back up? And are you changing the way that you recruit in this environment? Secondly, just coming back to your point on premium rating in cleaning does that necessarily mean that you're also getting a premium margin for those services that you provided to clients now as well? And then thirdly, if you could possibly provide an update on GPO that would be helpful I think particularly given some marketing material by one of your competitors recently which may be suggested that their overall procurement volumes were now slightly higher than yours? Thanks.

Dominic Blakemore: Yes. Thank you, Kean for those questions. Just taking -- I'll take the premium rating on support services first. I think that is relative to where it was before.

So, obviously, when it was less attractive to us it was more commoditized. I think it's now really being recognized as a core service for all built environment. And that will be the case going forward. I think there's been a big learning there. So I think what he says is the margin is as attractive as all the services we provide and the capabilities are better respected.

And that therefore may mean that it's the time for us to play a bit more thoughtfully in that space. When it comes to US labor, yes, look I mean we all know that some of the benefits that are being received at the moment make certain roles less attractive to the individuals. So there is a squeeze on labor supply. What I hope is we recognize as a great employer. We believe that our overarching proposition is attracted that our colleagues will look beyond the near-term and think again about job security beyond these next couple of quarters as you were.

We also know that we will have to compete on wage rates and that's driving some of the inflation and we're seeing higher labor inflation in North America. And we need to manage that through efficiency and we need to manage it through to cost of negotiation. I think again, the visibility of some of the social any quality issues means that that becomes an easier dialogue in many ways. And then finally look at -- we've built a number of digital platforms for labor recruitment. So we talk about bench in the US, we talk about constellation in the UK.

If I just give you the example on constellation effectively it's an internal labor agency whereby colleagues sign up on it. They're fully accredited, fully trained and then have an access to work across multiple sectors, multiple clients, multiple ships as they which so they can fit in the ships to their own lifestyles when they may have carrying responsibilities and can't work. And sometimes those shift week on week. So what we believe is, it gives us access to a labor pool that we weren't tapping into as well as we could have done before. And I think it's those levels of innovation have to come to the fore for us to be able to address some of those labor supply squeezes.

So we think that that is positive in the manner in which we'll deal with that. And then finally, I'll handover to Karen on the GPO question.

Karen Witts: On the GPO. Good morning, Kean. I'm afraid I can't really comment on what anyone else is saying about their GPO activity.

I mean what we know is that our volumes have been impacted. We are -- our business is impacted by COVID. And we also do third-party volumes through our GPO in areas of hospitality that have been impacted. However, our suppliers have been very supportive and very many have honored their pre-COVID pricing and rebate structures. They know that we want to work with them for the longer term and this is a short-lived phenomenon.

We have talked over the last six to nine months about how controlling food prices is a big part of controlling the controllable. So we have been consolidating suppliers and maximizing the benefits of a narrower food range, but we're switching to more pre-packaged and pre-prepared offers. So that's been helping to support gross margin benefit. And then actually going forward, we think that there are some efficiencies that we've created and learnings that we've taken from this period that will serve us well into the future.

Dominic Blakemore: I mean, I'll just add to that on the Foodbuy.

I mean one of the metrics we clearly track is our relative scale to our biggest competitors and we believe we are at this point significantly bigger relatively to our competitors than we're prior to the pandemic. And that means that we visit the out suppliers, put more volume through them, relatively, and that gives us greater attraction. And we've also continued to grow our third-party, say, even through the downturn. So I think, again, I hope, we are making the best of the circumstances there and we will benefit again when we come through this.

Kean Marden: Thank you, both.

Operator: We'll take our next question from the line of Richard Clarke from Bernstein. Your line is open. Please go ahead.

Richard Clarke: Good morning. Thanks for taking my questions.

Three, if I may. Just following up on the last question around labor supply. A couple of high-profile compass employees have moved to a competitor in the last few weeks. Are you seeing some higher bidding for experienced salespeople? And I know Compass talked about succession policy a couple of years ago to avoid any key person risk. Maybe just any update on what the sort of key person risk is encompassed at this stage.

Second question, your guidance on margin is to be above 7% before volumes recover. You've set out a cost-saving budget that's about another 2%. Is there anything you'd called out that means that structurally you can't get back to the 7.4% margin you did in 2019? And then, lastly, on -- you called out bending today as an opportunity. I think my understanding is, can you confirm that, it's largely a US business. So what is the sort of strategy to get vending to be a global business? Is that somewhere where M&A might be focused or can canteen simply be carried across the pond?

Dominic Blakemore: Yes.

Thank you, Richard. Yes, great questions. Yes, look, as a Board we were very careful through the second half of last year and the beginning of this, to ensure that we've got all of the key people as we see it locked in. So we feel comfortable that we've taken measures for our leaders. Secondly, look there are always people who leave that business.

I don't think that's something we should expect to date on. We're super happy with the team that we've got. And I can say I feel that we've got the best team we've ever had in this business right now. On restoring the margin to 7%, there's nothing that -- in the medium-term would prevent us from getting back to the historic levels of margin. I think we set ourselves the ambition of 7% before volumes come back to ensure that we're putting pressure on ourselves and that it's a positive recovery in journey but we know we're creating efficiency and opportunity, even beyond the model we had pre-pandemic.

The question will be, where do we want to put investments back into. There are areas clearly growth needs to be adequately resourced. Digital capabilities needs to be adequately resourced. Our procurement shifts, as we see the need to better understand sustainable sourcing. So there will be changes which all go to the heart of the quality of our offer and the ability to win in the market.

So, there is a judicious journey to go on of trading margin with investments, to make sure that we grow fastest whilst having industry-leading margins. And then finally just on vending, I mean look there's still a big opportunity for consolidation in the US. Vending has been revolutionized by digital and technology and will continue to be. So we have scale, we have footprint scales. Scale is vital and we think it's a really important play into many of our clients.

It's difficult to build organically. And therefore, you're absolutely right. Our vending presence is predominantly in North America and it's where we'll focus for now.

Richard Clarke: And just maybe as a quick follow-up. Could you let us know what percentage of your US B&I business is vending at the moment?

Karen Witts: It's about 10 -- the B&I, it's about $2 billion business.

Dominic Blakemore: I guess, was pre-pandemic.

Karen Witts: Pre-pandemic, Yes.

Richard Clarke: Okay. Thanks very much.

Operator: We'll take our last question from the line of Tim Barrett from Numis.

You are live. Please go ahead.

Tim Barrett: Hi, good morning. I just had a bigger picture question left please. Last November, you really helpfully talked about any permanent change in consumer behavior because of the pandemic.

And clearly, you were flying slightly blind. What are your updated thoughts now on white-collar B&I patterns and remote study in higher ed, it feels like you may have been overcautious but any thoughts there please?

Dominic Blakemore: Yes. Thank you, Tim. Look, I think -- and I have a little bit more insight into the Higher Ed space. I think generally, there is more likely to be a return to campus than virtual hybrid learning.

And I think that's what we're hearing from our clients. And we're seeing from the seeding body. So perhaps, there was a little bit of caution in that. I think -- within B&I I think, we're about right. That hybrid model in B&I is something that everyone is embracing.

We do expect to see most colleagues offered more time working from home. But as we said at the time, we expect to see more structure in how people work in the office. We're talking to clients about -- at the moment, I think the answer is, it's to 2030, the clients need to use the real estate across five phase. Being redundant four days a week kind of doesn't make sense, which means, there'll need to be an offer throughout the working week. We think individual behavior by employees will be different based on their own personal circumstances.

So, I think there's a lot yet to be developed and to come out. And I know that a lot of companies are seeing collaborative colleague working as a commercial advantage. We're hearing that in tech, we're hearing it in financial services. So, I think we're going to see a range of outcomes. And it will be values-led in many ways and we have to respond to that.

Do I think we've been a touch cautious on the B&I? I think, we're about where we need to be right now. I think what's exciting is, how important our role is in helping clients develop those solutions.

Tim Barrett: And was it 30% you'd originally feel on Higher Ed?

Dominic Blakemore: I think that was about right, yes.

Tim Barrett: Okay. All right.

Thanks very much.

Dominic Blakemore: Super.

Operator: This concludes our question-and-answer session. I'll handover the call back to you for the closing remarks. Please go ahead.

Dominic Blakemore: Just, thank you all very much for your -- your very thoughtful questions today. That was clear. And we look forward to speaking to you in late July.

Karen Witts: Thank you.

Dominic Blakemore: Have a good day.

Bye-bye.

Karen Witts: Bye.