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Sodexo: Solid Q1 Fiscal 2020 revenue growth

January 09, 2020

• Revenue growth of +7.1%
• Organic growth at +3.8%
• Strong Rugby World Cup contribution

Fiscal 2020 Q1 revenues

Fiscal 2020 Q1 revenues

Commenting on the these figures, Sodexo CEO Denis Machuel said:

“Revenue growth in the first quarter remains solid with a very successful Rugby World Cup which offsets the impact of contract losses and a decision to exit a Healthcare contract in North America.

With renewed management teams in North America, strong outsourcing trends in developing economies, continuing growth in Europe and rigorous implementation of our action plans to enhance productivity and reinvest in sales, marketing, digital capabilities and innovation, we are confident that we are on the right track.”

Highlights of the period

  • First quarter Fiscal 2020 revenues grew +7.1%, with organic revenue growth at +3.8%, in line with the trend in the previous quarter.
  • On-site Services organic revenue growth of +3.8% was also in line with the previous quarter. The Rugby World Cup contributed +150bps to growth. This more than compensated for the Healthcare contract exit and contract losses in North America. Excluding the Rugby World Cup, organic growth would have been +2.3%. The key elements of the quarter were:

The strength of Business & Administrations at +6.6% reflecting the contribution of the Rugby World Cup contract.

The impact of Healthcare contract losses (already in Q4 figures) and exit (this quarter) in North America.

The ongoing effect of the new Yvelines schools’ contract in France, in Education.

This resulted in activity in North America being down -0.9%, while growth outside North America accelerated strongly to +8.3%, boosted by the Rugby World Cup, steady growth in Europe and double-digit growth in the developing economies.

  • Benefits & Rewards Services organic revenue growth was +4.2%, with a very strong performance in Europe at +11.1% and a decline in Latin America of -3.8%, due to falling interest rates and a more competitive environment in Brazil.
  • Acquisitions, net of disposals, contributed +1.3% to growth linked to the ongoing effect of last year’s acquisitions in Corporate Services, Education and Homecare.
  • The Rugby World Cup in Japan was a successful contract. Sodexo designed, developed and marketed a range of innovative offers, creating memorable experiences for rugby fans. Working with a local partner, Sodexo sold 190,000 tickets and 60,000 hospitality packages to fans from over 100 countries around the world.
  • Since November 1, 2019, as part of the EGalim law introduced in France, one school meal a week is now required to be entirely vegetarian. Getting well ahead of this legal requirement, Sodexo has been offering a vegetarian option since the start of the school year. We see this as a great opportunity to introduce children to new food trends while providing them with diversified and well-balanced meals. It’s also an opportunity to help children discover cereals and legumes that they may not be used to eating at home (such as lentils, spelt, barley, etc.).

Outlook

As seen in the first quarter, for Fiscal 2020, growth in North America remains challenging as the Healthcare contract exit and losses impact revenues and with net new business being only neutral in Education. However, the contribution of the Rugby World Cup in the first quarter and the 2020 Summer Olympics in the fourth quarter combined with strong growth in the developing economies and steady progress in Europe should more than compensate.

The Group is continuing to identify additional Fit for the Future initiatives to generate SG&A savings. This will complement operational productivity due to enhanced discipline and STEP (our performance management framework) implementation. These savings will continue to be reinvested in accelerating growth.

As a result, for Fiscal 2020 the Group is expecting:

  • Organic revenue growth of around 4%, including the major sports events.
  • Stable underlying operating profit margin for the year, excluding the currency impact and any impact from the IFRS 16 implementation.

Mid-term, the Group aims to deliver market-leading profitable growth. Current Group investments, activity mix and geographic presence provide us with the opportunities to capture this growth. Sodexo is capable of accelerating organic growth over the years to come while ensuring a sustainable and inclusive business model.

As organic growth increases, growth investments will be kept under control, so that the effects of enhanced discipline and efficiency gains will feed margin expansion.

 


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 results for Fiscal 2020 Q1 revenues. Those who wish to connect:

  • from the UK may dial +44 2071 928 000 or
  • from France + 33 1 76 70 07 94 or
  • from the USA +1 631-510-7495
  • followed by the passcode 524 83 25.

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.

 


1 See Restatements on page10.
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