Sodexo: Solid Q1 Fiscal 2020 revenue growth
- Revenue growth of +7.1%
- Organic growth at +3.8%
- Strong Rugby World Cup
contribution
Issy-les-Moulineaux, January 9,
2020 - Sodexo (NYSE Euronext Paris FR
0000121220-OTC: SDXAY).
Fiscal 2020 Q1
revenues
REVENUES BY SEGMENT (in millions of euro) |
Q1 FY20 |
Q1 FY19 |
RESTATED1 ORGANIC GROWTH |
|
ORGANIC GROWTH |
EXTERNAL GROWTH |
CURRENCY EFFECT |
TOTAL GROWTH |
Business & Administrations |
3,195 |
2,874 |
+6.6% |
|
+9.0% |
+0.8% |
+1.4% |
+11.2% |
Healthcare & Seniors |
1,274 |
1,275 |
-2.0% |
|
-5.0% |
+2.7% |
+2.3% |
0.0% |
Education |
1,403 |
1,327 |
+3.1% |
|
+1.3% |
+1.2% |
+3.3% |
+5.7% |
On-site Services |
5,872 |
5,476 |
+3.8% |
|
+3.8% |
+1.4% |
+2.0% |
+7.2% |
Benefits & Rewards Services |
205 |
197 |
+4.2% |
|
+4.2% |
0.0% |
+0.2% |
+4.5% |
Elimination |
-1 |
-1 |
|
|
|
|
|
|
TOTAL GROUP |
6,076 |
5,671 |
+3.8% |
|
+3.8% |
+1.3% |
+2.0% |
+7.1% |
Commenting on 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.
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.
Financial
calendar
Fiscal 2019 Annual Shareholders Meeting |
January 21, 2020 |
Ex-dividend date |
January 30, 2020 |
Dividend
record date |
January 31, 2020 |
Dividend
payment date |
February 3, 2020 |
Fiscal
2020 1st half results |
April 9, 2020 |
Fiscal 2020 Nine-month revenues |
July 7, 2020 |
Fiscal 2020 Annual results |
October 29, 2020 |
Fiscal 2020 Annual Shareholders Meeting |
January 12, 2021 |
These dates are purely indicative and are
subject to change without notice. Regular updates are available in
the calendar on our website www.sodexo.com
About Sodexo
Founded in Marseille in 1966 by
Pierre Bellon, Sodexo is the global leader in services that
improve Quality of Life, an essential factor in individual and
organizational performance. Operating in 67 countries, Sodexo
serves 100 million consumers each day through its unique
combination of On-site Services, Benefits & Rewards Services
and Personal and Home Services. Sodexo provides clients an
integrated offering developed over more than 50 years of
experience: from foodservices, reception, maintenance and cleaning,
to facilities and equipment management; from services and programs
fostering employees’ engagement to solutions that simplify and
optimize their mobility and expenses management, to in-home
assistance, child care centers and concierge services. Sodexo’s
success and performance are founded on its independence, its
sustainable business model and its ability to continuously develop
and engage its 470,000 employees throughout the world.
Sodexo is included in the CAC 40, FTSE 4 Good and DJSI
indices.
Key figures (as of August 31, 2019) 22.0
billion euro in consolidated revenues
470,000 employees 19th largest
private employer worldwide 67 countries
100 million consumers served daily 15.8
billion euro in market capitalization (as of January 8,
2020) |
Contacts
Analysts and
Investors |
Press |
Virginia JeansonTel: +33 1 57 75 80
56virginia.jeanson@sodexo.com |
Mathieu ScaravettiTel: +33 6 28 62 21
91mathieu.scaravetti@sodexo.com |
2020 Q1 REVENUE ACTIVITY
REPORT
Revenues
REVENUES BY SEGMENT (In millions of euro) |
Q1 FY20 |
Q1 FY19 |
RESTATED ORGANIC GROWTH |
|
ORGANIC GROWTH |
EXTERNAL GROWTH |
CURRENCY EFFECT |
TOTAL GROWTH |
Business & Administrations |
3,195 |
2,874 |
+6.6% |
|
+9.0% |
+0.8% |
+1.4% |
+11.2% |
Healthcare & Seniors |
1,274 |
1,275 |
-2.0% |
|
-5.0% |
+2.7% |
+2.3% |
0.0% |
Education |
1,403 |
1,327 |
+3.1% |
|
+1.3% |
+1.2% |
+3.3% |
+5.7% |
On-site Services |
5,872 |
5,476 |
+3.8% |
|
+3.8% |
+1.4% |
+2.0% |
+7.2% |
Benefits & Rewards Services |
205 |
197 |
+4.2% |
|
+4.2% |
0.0% |
+0.2% |
+4.5% |
Elimination |
-1 |
-1 |
|
|
|
|
|
|
TOTAL GROUP |
6,076 |
5,671 |
+3.8% |
|
+3.8% |
+1.3% |
+2.0% |
+7.1% |
First quarter Fiscal 2020 consolidated revenues
totaled 6.1 billion euro, up +7.1% year-on-year. This growth is the
result of organic growth of +3.8%, a net contribution from
acquisitions of +1.3% and positive currency movements for +2.0%,
helped by strength in the US dollar and to a lesser extent pound
sterling, more than offsetting the weakness in the Brazilian
Real.
On-site Services
On-site
Services organic revenue growth was +3.8% in
first quarter Fiscal 2020, in line with the fourth quarter trend
which had benefitted from positive non-recurring elements such as
the contract renegotiations in Business & Administrations,
strong Paris tourism this summer and a higher level of summer works
in Education. The first quarter growth was boosted by the Rugby
World Cup which compensated for the Healthcare contract exit and
losses in North America. Excluding the Rugby revenues, organic
growth was +2.3%.
On-site Services Revenues by Region
REVENUES BY REGION (In millions of euro) |
Q1 FY20 |
Q1 FY19 |
RESTATED ORGANIC GROWTH |
North America |
2,699 |
2,618 |
-0.9% |
Europe |
2,278 |
2,049 |
+7.4% |
Africa, Asia, Australia, LatAm, Middle East |
895 |
808 |
+10.3% |
ONSITE SERVICES TOTAL |
5,872 |
5,476 |
+3.8% |
North America was down -0.9% due to contract losses and exits in
Healthcare and Sports & Leisure.
Outside North America, representing 55% of
On-site Services revenue, organic growth was +8.3%, due to the
contribution of the Rugby World Cup, continued growth in Europe at
+3.3% excluding the event, and double-digit growth in Africa, Asia,
Australia, LatAm, Middle East, as the outsourcing trend accelerates
particularly in Brazil, China and India.
Brexit: In June 2016, the United Kingdom voted to
leave the European Union, confirmed by the recent British
elections. Sodexo has been present in the United Kingdom since 1988
and has around 35,000 employees there today. The Group’s
business should not be materially impacted by the United Kingdom
leaving the European Union. Sodexo is a local player, working with
local suppliers and employees, and very often for Government
authorities and Government services. Action plans have been put in
place to limit the impact of Brexit on food prices and
availability. A slowdown in new business opportunities is visible
but this is compensated by solid same site sales growth and
retention. Of course, growth in activity will remain dependent upon
growth in GDP and employment in the country. |
Business & Administrations
Revenues
REVENUES BY REGION (In millions of euro) |
Q1 FY20 |
Q1 FY19 |
RESTATED ORGANIC GROWTH |
North America |
853 |
823 |
-0.2% |
Europe |
1,559 |
1,339 |
+9.0% |
Africa, Asia, Australia, LatAm, Middle East |
782 |
713 |
+9.9% |
BUSINESS & ADMINISTRATIONS TOTAL |
3,195 |
2,874 |
+6.6% |
First quarter Fiscal 2020
Business & Administrations
revenues totaled 3.2 billion
euro, with organic growth of +6.6%.
In North
America organic growth was down
-0.2%. On the one hand, growth
was solid in Corporate Services and Government & Agencies,
helped by the ongoing improvement in the US Marine Corps contract.
This compensated for the decline in Sports & Leisure due to the
ongoing effects of the exit of some less profitable contracts where
the pipeline is currently being rebuilt. Energy & Resources was
flat impacted by construction contract closures.
In Europe,
sales were up +9.0% organically, boosted by the
revenues from the Rugby World Cup in Japan, consolidated by the
Group’s specialist entity in the UK. Excluding the Rugby World Cup,
organic growth remained steady at +3.0%. While growth in Corporate
Services was more modest than in recent quarters, Government &
Agencies and Energy & Resources were up strongly.
In Africa, Asia, Australia, Latin
America, Middle East organic revenue growth accelerated to
+9.9% in the quarter, reflecting strong growth in
same site sales and new business in Corporate Services and in
Energy & Resources, particularly in mining.
Healthcare & Seniors
REVENUES BY REGION (In millions of euro) |
Q1 FY20 |
Q1 FY19 |
RESTATED ORGANIC GROWTH |
North America |
781 |
784 |
-4.3% |
Europe |
411 |
421 |
0.0% |
Africa, Asia, Australia, LatAm, Middle East |
82 |
69 |
+13.9% |
HEALTHCARE & SENIORS TOTAL |
1,274 |
1,275 |
-2.0% |
Healthcare & Seniors
revenues amounted to 1.3 billion
euro, down -2.0% organically.
Organic growth in North America
was down -4.3% due to the impact of the loss of
several hospital contracts from the fourth quarter Fiscal 2019 and
one large contract exit in this first quarter Fiscal 2020.
Development has also been slow due to a more selective approach in
the new business pipeline. As a result, the contracts signed are
more robust. Seniors organic growth is improving progressively.
In Europe, organic growth was
flat. The lack of new business opportunities in the segment and the
resulting negative net new business in most countries has hampered
growth. On the other hand, sales growth in existing sites was
strong, particularly in northern Europe. The pipeline is showing
signs of improvement in France and the UK.
In Africa, Asia, Australia, Latin
America, Middle East organic revenue growth has remained
strong this quarter, at +13.9% despite the
comparable base becoming more and more challenging quarter after
quarter. This reflects new contract startups in Brazil and Asia, as
clients seek to benefit from the transfer of the Group’s expertise,
and strong existing site sales growth across the regions.
Education
REVENUES BY REGION (In millions of euro) |
Q1 FY20 |
Q1 FY19 |
RESTATED ORGANIC GROWTH |
North America |
1,064 |
1,012 |
+1.1% |
Europe |
308 |
289 |
+9.6% |
Africa, Asia, Australia, LatAm, Middle East |
31 |
26 |
+13.2% |
EDUCATION TOTAL |
1,403 |
1,327 |
+3.1% |
Revenues in Education were
1.4 billion euro, up +3.1% organically.
North America was up
+1.1%. While net new business signed in Fiscal
2019 was neutral, inflation boosted same site sales, as well as
some volume growth, particularly in Schools.
In Europe, organic growth was
+9.6%, driven by the ongoing impact of the
start-up in January 2019 of the Schools contract in the Yvelines
department. This contract is one of the biggest Schools contracts
ever signed in France, combining both food and facilities
management services. This trend was somewhat offset by one day less
in France in the quarter and slower growth in the UK due to a
tougher comparable base after several major ramp-ups in the
previous year.
In Africa, Asia, Australia, Latin
America, and the Middle East, organic growth remained
strong at +13.2%, despite an ever higher
comparable base, resulting from the opening of several new School
and University contracts in China, Singapore and India. On the
other hand, activity in Hong Kong has been severely impacted by the
ongoing protests.
Benefits & Rewards
Services
Benefits & Rewards
Services revenue amounted to 205 million euro, up
+4.2% organically, reflecting double digit growth in Europe offset
somewhat by a tough environment in Brazil.
REVENUES BY ACTIVITY (In millions of euro) |
Q1 FY20 |
Q1 FY19 |
ORGANIC GROWTH |
Employee benefits |
159 |
153 |
+3.9% |
Services diversification |
46 |
43 |
+5.3% |
BENEFITS & REWARDS SERVICES |
205 |
197 |
+4.2% |
*Including Incentive & Recognition, Mobility
& Expenses and Public Benefits
Employee
Benefit revenues were up
+3.9% organically, compared to
organic growth in issue volume (3.4 billion euro) of +3.5%.
Services
Diversification was up
+5.3% organically, or +18.9%
excluding some portfolio rationalization in Incentive &
Recognition, with continued double-digit growth in Mobility &
Expense and rapid development in Corporate Health & Wellness
offers.
REVENUES BY NATURE (In millions of euro) |
Q1 FY20 |
Q1 FY19 |
ORGANIC GROWTH |
Operating Revenues |
189 |
180 |
+5.2% |
Financial Revenues |
16 |
17 |
-5.3% |
BENEFITS & REWARDS SERVICES |
205 |
197 |
+4.2% |
Operating
revenues were up
+5.2%, with double digit growth
in Europe, somewhat offset by a decline in Brazil.
Financial revenues were down
-5.3% due principally to the fall in interest
rates in Brazil.
REVENUES BY REGION (in millions of euro) |
Q1 FY20 |
Q1 FY19 |
ORGANIC GROWTH |
Europe, Asia and USA |
120 |
107 |
+11.1% |
Latin
America |
85 |
90 |
-3.8% |
BENEFITS & REWARDS SERVICES |
205 |
197 |
+4.2% |
In Europe, Asia and USA,
organic growth in revenues remains strong
at +11.1%. This performance is due to a
particularly strong double-digit performance in the traditional
benefits business in Europe and India, as well as continued strong
development in Rydoo, the end-to-end travel and expense management
system and the Corporate Health and Wellness offers. Incentive
& Recognition has stabilized after several quarters of
portfolio management.
In Latin America sales declined
-3.8%. The Brazilian market was affected by falling
interest rates, a more competitive environment, and issues volumes
that were flat. The momentum in the rest of the region remained
solid.
Financial position
Apart from the seasonal changes in working
capital, there were no material changes in the Group's financial
position as of November 30, 2019, relative to that presented in the
Fiscal 2019 Universal Registration Document published filed with
the AMF on November 20, 2019.
Principal risks and uncertainties
There were no significant changes to the
principal risks and uncertainties identified by the Group in the
Risk Factors section of the Fiscal 2019 Universal Registration
Document filed with the AMF on November 20, 2019.
Currency effect
Exchange rate fluctuations do not generate
operational risks, because each subsidiary bills its revenues and
incurs its expenses in the same currency. However, given the weight
of the Benefit & Rewards business in Brazil, and the high level
of the margins relative to the Group, when the Brazilian Real
declines against the euro, it has a negative effect on the
underlying operating margin due to a change in the mix of margins.
Conversely, when the Brazilian Real improves, Group margins
increase.
1€= |
AVERAGE RATE Q1 FY20 |
AVERAGE RATE Q1 FY19 |
AVERAGE RATE Q1 FY20 VS. Q1 FY19 |
CLOSING RATE Q1 FY20 AT
30/11/2019 |
CLOSING RATE FY19AT. 31/08/19 |
CLOSING RATE 30/11/19 VS. 31/08/19 |
U.S. DOLLAR |
1.102 |
1.146 |
+4.1% |
1.098 |
1.104 |
+0.5% |
POUND STERLING |
0.875 |
0.890 |
+1.7% |
0.852 |
0.906 |
+6.3% |
BRAZILIAN REAL |
4.532 |
4.476 |
-1.2% |
4.646 |
4.588 |
-1.2% |
The currency effect is determined by applying
the previous year’s average exchange rates to the
current year figures except in hyper-inflationary economies
where all figures are converted at the latest closing rate for both
periods when the impact is significant.
As a result, for the calculation of organic
growth of the On-site Services activities in Argentina, Peso
figures for first quarter Fiscal 2020 and first quarter Fiscal 2019
have been converted at the exchange rate of 1€ = 65.789 ARS
vs 42.951 ARS for first quarter Fiscal 2019.
Subsequent events
Sodexo acknowledges the decision made by the
French Competition Authority on December 18, 2019 to sanction
several meal voucher issuers for practices within this industry,
including Sodexo Pass France. The fine of 126 million euro will
most probably become payable in the third quarter.
Sodexo firmly contests this decision which
manifests a completely inaccurate appreciation of the alleged
practices and of the market dynamics. Indeed, Sodexo refutes the
anticompetitive nature of the information exchanges through the
“Centrale de Règlement des Titres” (central remittance agency),
which cannot be characterized as strategic. The allegation of
market protection is equally unjustified considering, in
particular, the arrival of several new players on the market.
Consequently, Sodexo has decided to appeal the French Competition
Authority’s decision.
Inter-segment restatements
Since the beginning of Fiscal 2020, in some
European and Asian countries, contracts have been reallocated from
Healthcare & Seniors and Education to Business &
Administrations.
Given the low materiality of these changes, pro
forma figures for Fiscal 2019 are not required. The effects are
detailed below.
Fiscal 2020 organic growth and variations in UOP
margin will be adjusted to take into account such changes.
Below are the adjustments for these restatements
for each quarter of Fiscal 2019.
Revenues (in millions of euros) |
FY19 |
Q119 |
Q2019 |
Q319 |
Q419 |
|
B&A |
HC |
EDU |
B&A |
HC |
EDU |
B&A |
HC |
EDU |
B&A |
HC |
EDU |
B&A |
HC |
EDU |
North America |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe |
+ 221 |
- 143 |
- 78 |
+ 59 |
- 36 |
- 23 |
+ 56 |
- 36 |
- 20 |
+ 58 |
- 35 |
- 23 |
+ 48 |
- 37 |
- 11 |
Africa, Asia, Australia, Latam, Midle East |
+ 17 |
- 17 |
|
+ 4 |
- 4 |
|
+ 4 |
- 4 |
|
+ 4 |
- 4 |
|
+ 5 |
- 5 |
|
GROUP |
+ 238 |
- 160 |
- 78 |
+ 63 |
- 40 |
- 23 |
+ 60 |
- 40 |
- 20 |
+ 62 |
- 39 |
- 23 |
+ 52 |
- 41 |
- 11 |
Alternative Performance Measure
definitions
Issue
volume
Issue volume corresponds to the total face value
of service vouchers, cards and digitally-delivered services issued
by the Group (Benefits and Rewards Services activity) for
beneficiaries on behalf of clients.
Organic
growth
Organic growth corresponds to the increase in
revenue for a given period (the “current period”) compared to the
revenue reported for the same period of the prior fiscal year,
calculated using the exchange rate for the prior fiscal year; and
excluding the impact of business acquisitions (or gain of control)
and divestments, as follows:
- For businesses acquired (or gain of control) during the current
period, revenue generated since the acquisition date is excluded
from the organic growth calculation;
- For businesses acquired (or gain of control) during the prior
fiscal year, revenue generated during the current period up until
the first anniversary date of the acquisition is excluded;
- For businesses divested (or loss of control) during the prior
fiscal year, revenue generated in the comparative period of the
prior fiscal year until the divestment date is excluded;
- For businesses divested (or loss of control) during the current
fiscal year, revenue generated in the period commencing 12 months
before the divestment date up to the end of the comparative period
of the prior fiscal year is excluded.
- For countries with hyperinflationary economies all figures are
converted at the latest closing rate for both periods. As a result,
for the calculation of organic growth of the On-site Services
activities in Argentina, Peso figures for first quarter Fiscal 2020
and first quarter Fiscal 2019 have been converted at the exchange
rate of 1€ = 65.789 ARS vs 42.951 ARS for first quarter Fiscal
2019.
Underlying operating profit
margin
The underlying operating profit margin
corresponds to Underlying operating profit divided by revenues.
Underlying operating profit
margin at constant rates
The underlying operating profit margin at
constant rates corresponds to Underlying operating profit divided
by revenues, calculated by converting 2020 figures at Fiscal 2019
rates, except for countries with hyperinflationary economies.
1 See Restatements on page10.
Attachment
- PR Sodexo Fiscal 2020 Q1 Revenues ENG
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