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Sodexo First Nine Months Fiscal 2019 Revenue: Organic growth above expectations

July 08, 2019

Sodexo, world leader in Quality of Life Services, today reported its revenues for the first nine months of Fiscal 2019, which ended on May, 31, 2019.

• Organic growth at +3.5%
• Fiscal 2019 Annual guidance:

  • Organic growth around 3%, top end of the range
  • Underlying operating profit margin around 5.5%, bottom end of the range

 

First Nine Months Fiscal 2019 revenues:

First Nine Months Fiscal 2019 revenues

 

 

 

 

Sodexo CEO Denis Machuel said:

“On-site Services growth continued to improve in all segments and in North America in Q3. Growth in Europe and the rest of the world remains very solid. Both the Business & Administrations and Healthcare & Seniors segments performed better than expected. Education was in line with expectations. Benefits & Rewards is growing strongly, even after four quarters of acceleration.

We are pleased with this performance to date. However, we see more modest growth in Q4 as we continue to face retention challenges and a relatively high comparable base in Sports & Leisure and North America.

As a result, our revenue organic growth is expected to be around 3%, the top end of our guidance for the full year, and the underlying operating profit margin around 5.5%, the bottom end of our guidance.”

Highlights of the period

Organic revenue growth for the First Nine Months Fiscal 2019, at +3.5%, was better than expected, resulting from another encouraging performance in the third quarter up +4.2%, with growth improving in all On-site services segments in North America. Growth remains solid outside North America, and in Benefits & Rewards Services.2018 first nine months revenues amounted to 15.5 billion euro, down -2.9%. During the period, the currency impact was -6.6% due to the weakness of the U.S. dollar and the Brazilian real in particular. Net acquisitions contributed +2.2% during the nine months, accelerating in the third quarter, with Centerplate contributing for the full quarter. Organic revenue growth was +1.6%. This growth was made up of +1.5% for On-site Services and +4.2% for Benefits & Rewards Services.

  • On-site Services organic revenue growth of +3.2% reflects continued improvement in North America, at +1.8% for the period, resulting from a first quarter at +0.2%, the second at +2.4% and the third at +3%. Europe was solid at +3.4% and the region Africa, Asia, Australia, Latin America, Middle East continues to grow at +6.8%, despite the ever higher comparable base. Third quarter organic growth was better than expected in Business & Administrations and Healthcare & Seniors and in line in Education.
  • Benefits & Rewards Services organic revenue growth is +9.7%. In Europe, Asia and USA organic growth improved to +9.9% compensating the slight slowdown in Latin America growth to +9.6%, after 4 quarters of improved market dynamics in Brazil.

During the third quarter, the loss of several medium-sized contracts and one very challenging large contract (impacting revenues from first quarter Fiscal 2020) has resulted in a significant decline in Health Care retention. These losses have offset the Group’s year-on-year progress on retention achieved by the end of the first half. Overall, however, development and same site sales growth remain strong.

Management evolution to support the strategic agenda

  • To strengthen Sodexo’s go-to-market strategy, Sylvia Metayer, is appointed Chief Growth Officer, effective September 1st. Since joining Sodexo in 2006, Sylvia has delivered growth, in successive roles, by forging new client relationships within the Corporate services segment, giving her a direct view into the needs and aspirations of both clients and consumers. Sylvia will have responsibility for aligning Strategy, Marketing & Sales around a cohesive client and consumer-centric go-to-market strategy, all powered by Digital.
  • Sunil Nayak succeeds Sylvia as Chief Executive Officer for Corporate Services worldwide, joining the Group Executive Committee. Sunil joined Sodexo in 2009 as CEO of RKHS at the time of its acquisition by Sodexo, becoming CEO of Sodexo On-site India. As CEO of Corporate Services in Asia Pacific since 2015, Sunil drove significant growth, positioning the region as the third largest for Corporate Services, after France and North America. He will bring this dynamic both to the global Corporate services segment and the Executive Committee.
  • Simon Seaton is appointed CEO Energy & Resources worldwide, joining the Group Executive Committee. Simon succeeds Nicolas Japy who is retiring after 28 impactful years with Sodexo. Simon joined Sodexo in 2012 as Chief Operating Officer for Remote Sites for the United States and the North Sea countries. In 2015, he was appointed CEO Onshore Energy Worldwide and in 2017 assumed additional responsibility for the Middle East region. Simon will bring his considerable experience in the very unique oil & gas and remote sites sector, and his particularly strong track-record in health & safety.
  • Damien Verdier, previously in charge of Strategy, will be dedicated exclusively to his role as Chief Corporate Responsibility Officer providing his substantial experience and knowledge to further anchor Sodexo’s Corporate Responsibility policies and actions for the benefit of our clients, consumers, employees, shareholders and society at large. Corporate Responsibility is one of the pillars of Sodexo’s Focus on Growth strategic agenda and is at the core of the services we offer and how we deliver them.

Outlook

Growth in the First Nine Months Fiscal 2019 of +3.5% was above expectations. However, the fourth quarter will be impacted by a more challenging comparable base and some contract losses, particularly in North America and in the Sports & Leisure segment. As a result, the Group expects its organic revenue growth for the full year Fiscal 2019 to be around 3%, the top end of the guidance.

The action plans are delivering and the investments to reinvigorate growth are continuing. As a result, the underlying operating profit margin for the year, excluding the currency impact, is expected to be around 5.5%, the bottom end of the guidance.

Our Focus on Growth strategic agenda is aimed at delivering market leading growth. The first steps to return to this performance are to achieve organic growth sustainably above 3%. Margin improvement will come with the right levels of growth, the objective being a return to an underlying operating margin sustainably above 6%.

 

 


To read the full version of the press release, please download the PDF:


Conference call

Sodexo will hold a conference call (in English) today at 9:00 a.m. (Paris time), 8:00 a.m. (London time) to comment on its First Nine Months Fiscal 2019 revenues. Those who wish to connect from the UK may dial +44 (0) 207 192 8000 or from France +33 (0)1 76 70 07 94, or from the USA +1 866 966 1396, followed by the passcode 836 45 69.

The press release, presentation and webcast will be available on the Group website www.sodexo.com in both the "Latest News" section and the "Finance - Financial Results" section.

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