Release Date: November 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q: Adjusted for exits, retention came down from 93.6% last year to 92.7% this year. Could you provide some color on this, and how should we look at retention next year? Are there more exits incorporated in your 3% to 5% organic growth guidance? A: Retention was calculated for all activities, including multiservices, based on 2023 revenue pro forma. Facility services historically have a lower retention rate than contract catering. The US retention was slightly lower than last year but still above average. Despite a lower retention rate, we recorded one of the highest net development balances, favoring margin improvement over revenue growth. For next year, we expect limited impact from contract exits on our organic growth guidance.
Q: Your margin guidance for next year implies a 20-basis point expansion year-on-year. Could you provide more color on the different moving parts? It seems a bit conservative. A: Our guidance considers uncertainties in the macroeconomic context, geopolitical, and regulatory environment. We expect a net positive inflation balance in 2025, though at a lower level as inflation decelerates. Operational efficiencies will continue to contribute to margin improvement, comparable to the second half of 2024. Synergies will progressively close the gap to the EUR56 million target by 2026, and net development is expected to be accretive.
Q: Can you talk about the moving parts of organic growth in H2 '24 and the guidance for next year, especially on volumes and net new? A: Organic growth was driven by higher attendance in restaurants and development of annexes. We expect stabilization of this driver next year. The net development was reduced in H2 2024, but the focus remains on accretive margin improvement. Current trading aligns with our guidance, and we are more selective in tenders to ensure margin improvement.
Q: On price increases, you mentioned EUR57 million of carryover. How does this affect your margin expectations for 2025? A: The carryover represents price increases negotiated but not yet impacting results. We expect a positive net inflation balance in 2025, though lower than 2024. The carryover will benefit us as inflation normalizes, and we anticipate a balanced inflation impact by 2026.
Q: Regarding the new business, you mentioned EBIT of EUR16 million on new contracts. Is there further analysis on the range of potential margins? A: The EUR16 million reflects the momentum in opening new contracts, which is the main driver of net commercial balance. The accretive margin is the year-over-year improvement, considering contract losses. We continue to improve margins through commercial development and replacing contract losses with higher-margin contracts.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.