Sodexo: strong financial delivery in Fiscal 2024

Oct. 24, 2024
PR Fiscal 2024 Results

Organic revenue growth +7.9%
Underlying operating profit +16% at constant currencies, margin up +40 bps at 4.7%
Strong free cashflow resulting in a net debt/EBITDA ratio of 1.7x
A proposed ordinary dividend of 2.65 euros, up 17.8%, in line with the Group dividend policy of 50% of Underlying net income
Fiscal 2025 guidance:
- Organic growth expected between +5.5% and +6.5% (underlying trend¹ between +6% and +7%)
- Underlying operating profit margin improvement expected between +30 to +40 bps, at constant currencies

At the Board of Directors meeting held on October 23, 2024, chaired by Sophie Bellon, the Board closed the Sodexo Consolidated accounts for Fiscal 2024 ended August 31, 2024.

Fiscal 2024 key figures and highlights

Fiscal-2024-key-figures-and-highlights-EN

“2024 has been a year of structural transformation with two decisive steps to further focus the Group : the spin-off of Pluxee and the unwinding of the cross-shareholding with Bellon SA, returning the proceeds to shareholders. With our simplified structure, reorganized by geography, as a pure-player in Food and FM services, we are mobilized on enhancing our operational execution to drive profitable and sustainable growth.
We delivered a strong set of numbers, at the top-end of our guidance, achieving organic growth of +7.9% and a 40 bps improvement in margins. This was driven by effective inflation management, positive net new business, a standout year for Sodexo Live! and strong operating leverage from productivity gains, supply chain momentum and cost reduction. Finally, we reduced our Net debt to EBITDA ratio to 1.7 times, firmly back within the target range.
We achieved a record year for new signings, exceeding 1.9 billion euros including cross-selling, and at above-average margins. While retention was impacted by the loss of a large global contract, our disciplined approach and structural improvements have laid strong foundations. We are determined to recover our trajectory at over 95% already in Fiscal 2025.
Looking forward, I am confident that our progress on deploying our culinary food expertise through our food brands and our new production and distribution models, combined with strong digital features, will help us make a difference for clients and consumers. In the meantime, we are reaping the fruits of our efforts to optimize our supply management, and we are continuing to seek out efficiencies.
I want to thank our teams for their hard work and dedication in driving the Group's transformation."

Sophie BellonSodexo Chairwoman and CEO

Financial highlights

Fiscal 2024 consolidated revenues reached 23.8 billion euros, up +5.1% year-on-year, driven by organic growth of +7.9%, offset somewhat by a net contribution from acquisitions and disposals of -1.0% mainly linked to the sale of the Homecare activities in October 2023 and a negative currency impact of -1.8%.
Organic growth of +7.9% was driven by 4% of pricing and close to 4% of new volumes, including the net new contribution. Pricing decelerated progressively during the year, and volume growth slowed as the Covid recovery in volumes came to an end. The year benefited from two major sporting events with the Rugby World Cup in the first quarter and the Olympics in the fourth quarter. Excluding these events, organic growth would have been +7.5%.
Food services organic growth, at +9.3%, outperformed FM services, at +5.5%. Food services now represent 66% of Group revenues.

By geography:

In North America, organic growth was +8.7%. The ongoing return to the workplace, a solid momentum in hospitals and a strong performance of Sodexo Live!, particularly in the airline lounges, continue to drive growth, as well as the contribution of new business and pricing.
In Europe, organic growth was +7.2%, or +6.0% excluding the Rugby World Cup and the Olympics, with increased volumes and the contribution of net new business, and despite the sequential slowdown in the price increases.
In Rest of the World, organic growth was +7.3%, resulting from strong growth in India and Australia, somewhat offset by a slowdown in China and Chile.

Underlying operating profit was 1.1 billion euros, up +13.7%, and the Underlying operating margin was 4.7%, up +40 bps, driven by the operating leverage from higher revenue, rigorous inflation management and enhanced on-site productivity. Margin improvement was at +30 bps in North America and Europe, and +20 bps in Rest of the World. HQ costs were also reduced by -11% due to strict cost control and the spin-off-linked transfers of employees to Pluxee.
Other operating income & expenses amounted to -58 million euros against -129 million euros in Fiscal 2023. In Fiscal 2024, the gain on the sale of the Homecare services partly offset the spin-off costs, restructuring expenses principally linked to the reduction in HQ and central costs, and amortization of acquisition-related assets.
Operating profit was up +24.1%, or +25.6% at constant currencies, at 1.1 billion euros compared to 847 million euros in the previous year.
Net financial expense was 63 million euros, against 101 million euros in the previous year. While net interest costs remained pretty stable year-on-year, the improvement was mainly due to last year's Pluxee-related bond consent costs, as well as several Fiscal 2024 specific elements such as favorable currency impact and equity investment revaluations.
The Effective tax rate was 25.4%, against 24.6% in the previous year. The effect of the non taxable capital gain on the Homecare disposal and the utilization of previously unrecognized tax assets was offset by the update of the risk related to the tax exposure in France.
Net profit from continuing activities was up +31.8% to 738 million euros. Underlying net profit, adjusted for Other Operating income and expenses net of tax and for exceptional tax, amounted to 775 million euros, up +17.6%. The resulting EPS were respectively 5.04 euros and 5.29 euros.
The Board proposes an ordinary dividend of 2.65 euros, up 17.8%, in line with the Group dividend policy of 50% of Underlying net income. Both the ordinary dividend and the 6.24 euros special interim dividend paid in August 2024 will be proposed at the Shareholders Meeting on December 17, 2024.
Free cash flow was strong at 661 million euros, up +287 millions euros in the previous year, with significant improvements in Operating cash flow and working capital. Net capital expenditure² at 469 million euros, representing 2.0% of revenues, was slightly below last year, due to lower client investments this year.
Net debt decreased to 2.6 billion euros, from 2.9 billion euros at the end of Fiscal 2023³. As a result, the Net debt to EBITDA² ratio was 1.7x, compared to 2.2x at the end of Fiscal 2023, back to pre-spin-off levels and well within the target range of 1-2x.

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Commercial momentum

Net new business signed during the year was positive at 1.6%, lower than the previous year at 2.2%, but still well above pre-Covid levels and at better terms and margins than the previous year.
New development was 7.4%, with a record year in signings, exceeding 1.9 billion euros including cross-selling, compared to 1.7 billion euros last year.
Client retention was 94.2%, down from the previous year, affected by the loss of one large global FM contract for 60 bps, as well as two in Energy & Resources in Latin America, due to a very competitive environment, for 30 bps.

Leading the way in sustainability

In Fiscal 2024, Sodexo’s solid financial performance was accompanied by continued progress on its sustainability commitments:

Further improvement in the performance on safety of our People. At the end of Fiscal 2024, Sodexo achieved 0.47 Lost Time Injury Rate (LTIR), representing a -14.5% reduction compared to Fiscal 2023. This is a second consecutive year with double-digit LTIR reduction.
81.5% workforce retention confirming a positive trend for the third consecutive year.
Retention rate for total workforce and for site managers increased significantly compared to previous years. These results are correlated with the improvement in training indicators as well as with the continued deployment of Vita by Sodexo.
Increased share in renewable electricity in our direct operations. Further progress has been achieved in the share of the Group’s direct electricity consumption that is renewable at 73%, well above the 60% target for the year and therefore facilitating the achievement of our target of 100% by 2025.
Continued progress in GHG emissions reduction. The year-on-year Scope 1, 2 and 3 reduction in Greenhouse Gas (GHG) emissions was -2.5% in Fiscal 2024 while the absolute reduction compared to 2017 was at -16.4% and the reduction in intensity was at -29.6%. This achievement was possible thanks to Sodexo's ability to mobilize its entire ecosystem around four decarbonization levers: sustainable supply chain, low-carbon meals, responsible use of energy and the fight against food waste.

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Sodexo Governance

At the Shareholders meeting on December 17, 2024, approvals of the following resolutions will be proposed:

the renewal of the mandate of François-Xavier Bellon, who would then be confirmed as a member of the Audit, Nominating and Compensation Committees,
the renewal of the mandate of Jean-Baptiste Chasseloup de Chatillon, who would then be confirmed as Chairman of the Audit Committee and a member of the Compensation Committee,
the related party agreement regarding the sale of Sofinsod to Bellon SA.

All the resolutions and Governance details will be presented in the Universal Registration Document to be filed with the AMF (French stock market authorities) on November 5, 2024.

Outlook

Looking ahead to Fiscal 2025, we anticipate sustained growth and continued margin improvement.

Growth will be driven by:

contribution from net new business of around 2% for the full year, expected to accelerate during the year due to the momentum of the signings and a robust pipeline;
pricing expected to average around +3%, as we continue to pass through inflation;
positive volume growth fueled by rising demand for new or upgraded services as well as higher attendance in Corporate Services, despite lapping strong comparatives linked to the leap year and the major sporting events in Fiscal 2024.

We will drive further efficiencies and support margin improvement by our disciplined commercial approach, investments in data and digital, supply management optimization, deployment of our branded offers, and scaling of new production and distribution models, combined with rigorous cost control and reinforced efficiency of our support services.

As a result, our guidance for Fiscal 2025 is as follows:

Organic growth expected between +5.5% and +6.5%.
The underlying trend should be +6% to +7%, excluding the base effect of the Olympics, the Rugby World Cup and the leap year in Fiscal 2024.
Underlying operating profit margin improvement expected between +30 and +40 bps, at constant currencies.

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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 these Fiscal 2024 results.

Those who wish to connect:

from the UK / International, please dial: +44 (0) 121 281 8004
from France, please dial: +33 (0) 1 70 91 87 04
from the USA, please dial: +1 718 705 8796

Access Code: 07 26 13

A live audio webcast is also available on www.sodexo.com.

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Financial calendar

Fiscal 2024 Annual Shareholders Meeting: December 17, 2024
Fiscal 2025 First quarter Revenues: January 7, 2025
Fiscal 2025 First half Results: April 4, 2025
Fiscal 2025 Third quarter Revenues: July 1, 2025
Fiscal 2025 Full year Results: October 24, 2025
Fiscal 2025 Annual Shareholders Meeting: December 16, 2025

These dates are indicative and may be subject to change without notice. Regular updates are available in the calendar on our website www.sodexo.com

¹ Excluding the base effect of the Olympics, the Rugby World Cup and leap year in Fiscal 2024
² New definitions of Net Capital expenditure and EBITDA, please refer to section 1.2.10 of the Financial Report.
³ Net debt as of August 31, 2023, was adjusted to reflect the post spin-off situation, please refer to section 1.2.2 of the Financial Report.

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