Turismo
Sodexo : strong growth in net profit, mid-term objectives confirmed
Sodexo (NYSE Euronext Paris FR 0000121220-OTC: SDXAY). At the Board of Directors meeting held on November 14, 2017 and chaired by Sophie Bellon, the Board closed the Consolidated and Company accounts. Sodexo's Chief Executive Officer Michel Landel presented the Group's performance for the fiscal year ended August 31, 2017.
Centerplate
Since year end, further acquisitions have been made for a total committed amount of around 650 million euro: will strengthen the Group's technical expertise and capacities in Singapore. will enhance the Group's presence in remote site services for the mining industry in Australia. is a provider of food and beverage, merchandise and hospitality services at sports facilities, convention centers and entertainment facilities in the United States and Europe. With an annual revenue of 998 million dollars, will double the Group's presence in the Sports & Leisure segment, particularly strengthening its position in the North America market. Its contribution should be mildly accretive to Fiscal Year 2018 net profit.
For Fiscal Year 2018, growth should accelerate and amplify due to external growth of around 2.5%, including the latest acquisitions. The trends are turning positive again in France and the Energy & Resources segment. Developing economies are also expected to grow strongly in all segments. On the other hand, growth will remain modest in Education and Health Care in North America. Added to this there is a base effect of the 53 week in North America to offset.
The Adaptation and Simplification program is on track to deliver its target of 220 million euro of savings in Fiscal 2018. This will free-up resources to invest in boosting the Group's growth.
The financial structure of the Group remains strong and provides the capacity to continue to look for more acquisition targets during the year.
The Group is confident in achieving the following objectives for
The Board of Directors and Executive Committee confirm the
(Paris time), to comment on its results for Fiscal 2017. Those who wish to connect from UK may dial +44 20 3427 1910 or from France + 33 1 76 77 22 22 followed by the passcode .
The www.sodexo.com in both the "Latest News" section and the "Finance - Financial Results" section.
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 80 countries, Sodexo serves 100 million consumers each day through its unique combination of On-site Services, Benefits and Rewards Services and Personal and Home Services. Through its more than 100 services, Sodexo provides clients an integrated offering developed over 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 427,000 employees throughout the world.
Sodexo is included in the CAC 40 and DJSI indices.
This press release contains statements that may be considered as forward-looking statements and as such may not relate strictly to historical or current facts. These statements represent management's views as of the date they are made and Sodexo assumes no obligation to update them. The reader is cautioned not to place undue reliance on these forward-looking statements.
In Fiscal 2017 organic growth in revenues was +1.9% at 20.7 billion euros. Onsite services organic growth was +1.7%. A tough comparable base in the first quarter due to the Rugby World Cup in the previous year was offset by the contribution of the 53 week in North America in the fourth quarter. Excluding these two items, the Onsite services growth of +1.6% reflects a very mixed environment. On the one hand, in the developing economies, high single digit growth resulted from the significant contribution of new contracts and solid same site sales. On the other hand, Energy & Resources and France continued to face strong headwinds for most of the year, even though the trends turned positive in the third and fourth quarters respectively. Retention and new business in Education and Healthcare, particularly in North America, were lower than expected. Benefits & Rewards achieved another year of solid growth of +7.7%, with double digit growth in Europe, Asia, and USA.
Operating profit excluding the currency effect and before exceptional expenses was up +8.4%, in line with the objective set at the beginning of the year of growth between 8 and 9%. The operating margin before exceptional expenses reached 6.4%, up +40 basis points, excluding currency effect. The Adaptation and Simplification program, launched at the beginning of fiscal 2016, reached annual savings of 150 million euros in fiscal 2017, compared to 32 million euros achieved by Fiscal 2016-year end. A total of 137 million euros of exceptional expenses was incurred during the year. Net financial expenses and the tax charge were both down. As a result, Group net profit increased by +13.5%. Net profit before non-recurring items and excluding currency fluctuations, was up +13%.
Confident in the outlook for the Group, and in line with the policy of a regular increase in the dividend and pay-out on earnings before exceptional items of around 50%, the Board has decided to propose a dividend of 2.75 euro per share, up +14.6%, implying a 50% pay-out ratio, net income before non-recurring items.
Fiscal 2017 free cash flow amounted to 887 million euro, up +49% on the previous year which had been impacted by unusually high investments and working capital increase linked to the Rio Tinto contract start-up and the timing impact of the Rugby World Cup activity. After a further 300 million euro share repurchase program and 306 million euro of acquisition spend, net of disposals, net debt was up slightly at 611 million euro. The balance sheet remains solid with gearing of 17% and a debt ratio of 0.4.
In Fiscal 2017 Sodexo accelerated its acquisition activity by investing 306 million euro net of the disposal of non-strategic activities such as in the USA. Since year end the momentum has continued with the signing of several important acquisitions for a total amount of ~650 million euro.
In Fiscal 2017, client retention was up +40 basis points at 93.5%. This increase reflects several trends: improvement in the Energy & Resources segment, in France, and in the Business & Administrations segment more generally. On the other hand, retention has suffered in Healthcare and Education, as the Group continues to exit less profitable contracts particularly in North America. There has also been weakness in the UK with inacceptable pricing conditions for public sector contract renewals.
The development rate of new business at 6.5%, was down -70 points. As a reminder, the major contract accounted for 80 basis points on its own last year. Significant new business opportunities in all segments in the developing economies are offset by slow new business in Universities and Hospitals in North America, and in Europe more generally.
Comparable unit growth was +1.5% excluding the impact of the 53 week. While inflation was lower than it has ever been and the comparable unit growth in Energy & Resources remained negative, contract extensions with new facilities management services have continued to boost growth in most segments, and particularly in Schools in North America and Corporate Services everywhere except in Europe.
The crisis in the energy and resources sector has led clients to recognize the advantages of reducing their number of suppliers around the world, including their service-providers. As a result, the segment has signed several new contracts and extensions with and in Chile, in Australia and operations worldwide.
relationships are also being extended with a Master Services Agreement with (J&J) at approximately 250 sites in 42 countries, in 600 sites across 115 countries, in 8 countries, as well as in Italy or the Department of Work and Pensions, the largest contract of its type in the public sector in the United Kingdom.
several hospital contracts have been signed, in particular in Brazil and Asia, where being able to transfer know-how to new countries has given Sodexo a strong competitive advantage. Contract signatures include in the Philippines, in Goa, India, and in Thailand.
Sodexo has secured several large food-only contracts thanks to its innovative approach and strong focus on healthy eating and variety of choice, with clients such as in France and in India, in the USA, in the UK and in Morocco.
In there have been noteworthy developments around the world including with in the Philippines, in Brazil, in Belgium, and the renewal of our contract with (National Board of Student Aid and Scholarships) to serve 300,000 students in Chile.
In May, the Group relaunched its Better tomorrow 2025 roadmap, to renew and revitalize our corporate responsibility commitments and actions. This approach is based on looking not only at the different roles that we play as a large global organization, but also at the different impact our actions have in the world.
Within the investment community, Sodexo has yet again scored the highest marks of its sector in RobecoSAM's 2017 "Sustainability Yearbook", for the 10 consecutive year. Sodexo is also the top-rated company in its sector within the Dow Jones Sustainability Index (DJSI), for the 13 consecutive year. A new marker for recognition comes from FTSE Indices that have for the first time, entered Sodexo as a constituent of the FTSE4Good Index.
From a more general public point of view, for the 7th year in a row, Sodexo is among the FORTUNE World's Most Admired Companies, and this year was ranked within Fortune's 2017 list of companies that are changing the world.
Sodexo remains at the forefront of gender balance: in this fiscal year, Sodexo reinforced its commitment and kept the momentum by signing the United Nations Women's Empowerment Principles (WEPs) in 24 countries where it operates. By doing so, Sodexo demonstrates its commitment to empowering women for a better tomorrow in the workplace, marketplace and community.
As a leader in Quality of Life Services, Sodexo continues to explore the frontiers of research into the link between Quality of Life and performance in today's rapidly-changing work environment.
The evolution in Sodexo's On-Site Services organization enables the Group to become even more competitive, to adapt ever more quickly to clients' evolving needs and to offer the best of Sodexo around the globe for both local and large global clients.
Clients today are looking for partners who have a deep understanding of their business, are experts in their domains and can bring simplified, innovative solutions to enhance productivity. Client and consumer behaviors are becoming harmonized all over the world, global clients are seeking to leverage their size and local clients are mutualizing their services. Client industry standards are fast globalizing. Local and national governments are looking for global experts to identify innovative ways to manage and deliver their services.
Sodexo is reinventing the way it does business to deliver on our promise of improving the Quality of Life of those we serve.
Sodexo has built significant expertise and a profound understanding of the markets where the Group operates, by segment and sub-segment. It has established strong intimacy with its clients.
To seize market opportunities estimated at 700 billion euro, accelerate growth, become sustainably more competitive over time, and consolidate its position as worldwide leader in Quality of Life services, Sodexo is leveraging its global reach to:
To this end, the Group has progressively adapted the way it does business, building an organization by global segment to better support clients wherever they are, both locally and internationally and by global function to ensure optimized and standardized processes in all product offers and functional activities.
In order to fully reflect the reorganization of the On-site activities by global client segments, from September 2015, the segment reporting needed to change. As a result, from Fiscal 2017, revenues and results have been published by global client segment rather than by geography.
Michel Landel announced his intention to retire in May 2017 and will step down as of the Annual General Shareholders' Meeting on January 23, 2018. To ensure a smooth transition, Denis Machuel became Deputy Chief Executive Officer of Sodexo as of September 1, 2017, Michel Landel retains full executive responsibility for Sodexo's strategy and management during the period leading up to January 23, 2018. Michel Landel will remain on the Board of Directors for the duration of his term, until January 2020.
Sodexo operates in 80 countries. The percentage of total revenues and operating profit denominated in the main currencies are as follows:
Exchange rate fluctuations do not generate operational risks, because each subsidiary bills its revenues and incurs its expenses in the same currency.
The currency effect is determined by applying the previous year's average exchange rates to the current year figures except for Benefits & Rewards in Venezuelan Bolivar.
In terms of the Venezuelan Bolivar, the Group considers that the best estimate of the exchange rate at which funds from its activities in Venezuela could be repatriated is the DICOM rate. The exchange rate used for the year ended August 31, 2017 is therefore 1 U.S. dollar = 3,250 bolivars (1 euro = 3,843 bolivars) relative to the Fiscal 2016 rate of 1 U.S. dollar = 645 bolivars. The effect of this depreciation is not material at Group level, as the Group's operations in Venezuela now represent a negligible share of consolidated revenues and operating profit.
During Fiscal 2017, the average U.S. dollar rate was stable against the euro relative to the previous year. However, the dollar weakened at the end of the year, so that the year-end rate was down 5.9% on the previous year. The Real remained reasonably stable during Fiscal 2017, having picked up strongly at the end of Fiscal 2016, resulting in a 15.4% increase in the average for the year. UK Sterling continued to weaken throughout the year with both the average and the year-end rates being well below previous year rates.
Fiscal 2017 consolidated revenues totaled 20.7 billion euro, increasing +2.2% year-on-year. Organic revenue growth was +1.9%. The currency effect was negative. The contribution from acquisitions net of disposals of subsidiaries amounted to +0.4%.
The year was impacted by two significant events. In the first quarter, the Group had a tough comparison base due to last year's Rugby World Cup event which generated a negative effect for fiscal 2017 of -0.6% in organic growth, and in particular affecting Business & Administrations in Europe. This was more than compensated by the 53 week impact of +0.7% in the fourth quarter of Fiscal 2017 for all segments in North America. The 53 week adjustment is linked to the change from weekly to monthly accounting as from September 2017. Weekly accounting has the side effect of losing one or two days per year, depending upon whether there is a leap year or not. These lost days are usually recovered in the accounts in a one-off every 5 to 6 years. In fiscal 2017, this 53 week effect is the equivalent of six more days of trading. The 53 week has no impact on margins.
On-site Services
The +1.7% organic growth in On-site Services reflects strong growth in facilities management services at +5.5%. On the other hand, food services were flat reflecting the tough comparable base with Rugby World Cup and weak Universities sales, which are predominantly food services. Non-food services now represent 31% of On-site Services sales.
By geography, North America benefited from the 53rd week in the fourth quarter. Excluding this, organic growth would have been +1.6% reflecting on the one hand, disappointing new business and retention in Education and Healthcare, and on the other hand, strong development of Facilities Management services, particularly in Corporate Services. Europe was down -2.8%, impacted by the strong comparison base of the Rugby World Cup and the -16% decline in Energy & Resources in the North Sea. In the developing economies, organic growth reached +9.4% due to a combination of strong new business, the transfer of expertise from more mature economies, and scope expansion with many clients.
Fiscal 2017 revenues totaled , representing organic growth of +2.1% excluding the negative impact of the Rugby World Cup in Europe and the positive impact of the 53 week in North America.
In , organic growth was , reflecting the high single digit growth in Corporate Services as the development continues in the large accounts and Facilities management services. Energy & Resources remains challenging, although there has been a significant improvement quarter by quarter during the year.
sales were , effect due to ongoing weakness in Energy & Resources offshore business in the North Sea which declined by a further -16% during the year, with no signs yet of any recovery. Corporate activity grew in Southern Europe but was weak in Northern Europe, due to a lack of new business. There was a notable pick-up in activity generally in France in the fourth quarter as the comparative base in the Tourism activities became easier, helped by the start-up of a large lounges contract.
In organic revenue growth is strong at reflecting double digit growth in Corporate Services and strong dynamics in Energy & Resources with the ramp-up of the significant and contracts and stabilization in mining and onshore same site sales. Offshore activity remains difficult.
amounted to , up +1.5% organically excluding the 53 week effect. After a solid start to the year, organic growth slowed in the second half due to retention and service losses within existing and ongoing contracts in North America.
In organic growth of excluding the impact of the 53 week, resulted from a strong first half up 4.4% and a second half which was slightly negative due to weaker retention and lower comparable unit sales linked to scope and service changes in a few large contracts. This was compounded by slow new business and a tough environment in the hospital sector with uncertainty over the future of Obamacare.
In organic growth was While development was weak due to the lack of reasonably priced opportunities, it was partially offset by solid retention and same site sales growth.
In organic revenue growth is strong at reflecting many new contract startups in Latin America and Brazil. Many of these contracts have involved transferring expertise from other sites or extending services into new facilities management offers.
Revenues in were 4.2 billion euro, up +0.3% organically, excluding the 53 week contribution.
organic growth was , excluding the 53 week contribution. Schools generated solid growth with the extension of the contract and the ramp-up of the new Washington DC Schools contract. This performance offset a decline in Universities. The commercial successes at , and will only impact Fiscal 2018. However, although these wins reflect improved outcomes, they will merely offset contract losses.
In , activity was flat on an organic basis due in part to a lower number of days in schools in France and Italy and with low prior year development in the UK, compensated by high retention across the region.
In , organic growth was resulting from very strong growth in new Schools contracts in China, Singapore and India.
revenue amounted to 905 million euro, up +16.0%. Currencies contributed +3.3% to this growth, resulting in particular from the recovery of the Brazilian real from March 2016 through to March 2017. The acquisitions of , and contributed a further +5.0% to growth. Organic growth in revenues was +7.7%, on issue volume growth of +6.1%.
Organic growth in is at for revenues and +7.1% for issue volume. Having declined throughout the first half, the number of beneficiaries in Brazil stabilized in the second half, in line with the apparent stabilization of unemployment. In all other countries, the number of beneficiaries continued to increase, and this combined with strong growth in face values bolstered issue volumes. However, revenue growth has been impacted by a very competitive environment in Brazil which affected client commissions From the third quarter, inflation and interest rates in Brazil have started to fall progressively to 2.5% and 9.25% respectively by August 31, 2017.
In organic growth in Issue volume and revenues has been strong for the year at and respectively. This strong performance reflects solid face value increases in Belgium, volume growth in Italy and Central Europe and good momentum in the Incentive and Recognition activity in the USA and the UK (revenues without issue volume).
Fiscal 2017 operating profit before exceptional expenses related to the Adaptation and Simplification program amounted to 1,326 million euro, up +8.4% excluding the currency effect, in line with the Group's objective for the year. The operating margin before these same exceptional expenses was 6.4%, up +40 basis points relative to the previous year, excluding the currency effect, of in particular the strength of the Brazilian real. Total operating profit before exceptional items was up +10.2% and the margin increased +50 basis points.
Numerous initiatives to improve productivity and reduce SG&A have been implemented over the last two years in all segments and all regions, through the Adaptation and Simplification program. These projects are contributing progressively to improve the margin. The program has delivered 150 million euro of annual savings by the end of Fiscal 2017, up from 32 million euro by the end of Fiscal 2016. The program will ramp-up again in Fiscal 2018 to deliver around 220 million euro in total. These savings are enhancing the Group's capacity to invest in growth.
After deducting exceptional expenses related to these Adaptation and Simplification measures of 137 million euro in Fiscal 2017, compared to 108 million euros in Fiscal 2016, operating profit amounted to 1,189 million euro compared to 1,095 million euro in Fiscal 2016.
margins grew +20 basis points led by productivity gains, enhanced operating efficiency and more efficient purchasing. Much of these improvements were linked to the numerous projects included in the Adaptation and Simplification program. The performance by segment is as follows:
In , the operating profit was up +16.7% boosted by the recovery in the Brazilian real and the margin was up +30 basis points. Excluding this currency contribution, operating profit was up +8.9%, and the margin was down -110 basis points. The growth in operating profit was helped by the impact of the gain on the disposal of the non-strategic activities for 16 million euro representing 170 basis points. Excluding these elements, margin was down -280 basis points. About half of the decline in the margin is due to a mix effect linked to the exceptionally strong Incentive and Recognition growth, as well as the first-time consolidation of . The rest is linked to accelerated digital migration investments, the cost of developing the new Mobility activities as well as the impact from diversification in Health and wellness (Sport Card). For the traditional meal and food business, margins remain solid at their current high levels.
reached 1,189 million euro, up +8.5%, after exceptional expenses linked to the Adaptation and Simplification program of 137 million euros, compared to 108 million euro in the previous fiscal year.
decreased by 6 million euro essentially due to a reduction in net borrowing costs of 8 million euro which is a combination of the lower average cost of debt of 2.4%, down from 3.2% in Fiscal 2016, and lower financial income due to lower interest rates on cash deposits. Other financial charges included an 11 million euro exceptional indemnity for the early redemption of 108 million dollars of US private placement debt, as part of the debt restructuring program in August and September 2016, to increase maturities and lower interest rates. The first tranche in the preceding year generated an exceptional charge of 21 million euro. These indemnities will be more than offset over future years by the reduction in future interest expenses.
The fell to 31.7% in Fiscal 2017, from 33.7% the previous year. This 200 basis point improvement is due in particular to the recognition of a tax rebate on past European subsidiary dividend taxes in FY2012 to FY2015, following the decision of the European Union Court of Justice, the reduction in the United Kingdom tax rate, the end of an exceptional surcharge in France and reversal of some tax provisions.
The share of was 4 million euro. Profit attributed to non-controlling interests was 22 million euro against 24 million euro in the previous year.
As a result, was 723 million euro, up +13.5%, or +12.2% excluding the positive currency contribution. (net of taxes) amounted to 822 million euro, an increase of +14.0% at current rates or +13% excluding the currency effect. Non-recurring items included the exceptional expenses related to the Adaptation & Simplification program of 137 million euro and debt reimbursement indemnity of 11 million euro, together 99 million euro net of tax.
before non-recurring items amounted to 5.52 euro, up +15.7%, and after non-recurring items to 4.85 euro, up +15.2%. The 170 basis point accretion relative to the change in net profit is due to the effect of the 300 million euro share buy-back during the year, net of a higher number of treasury shares carried, resulting in a lower weighted average number of shares of 148,998,961 relative to 151,277,059 shares for Fiscal 2016.
At the annual Shareholder's Meeting to be held on January 23, 2018, the Board of Directors has recommended a dividend of 2.75 euro per share for Fiscal 2017, an increase of +14.6% over the prior year. This proposal reflects Sodexo's policy of maintaining regular growth in dividend in line with underlying profits growth. The proposed dividend implies a 57% pay-out ratio on reported figures and a pay-out ratio before non-recurring items of ~50%.
Cash flows for the period were as follows:
Operating cash flow totaled 1,076 million euro up +5.6%. After a couple of years impacted by big events, this year the change in working capital returned to positive inflow of 120 million euros.
Net capital expenditure, including client investments amounted to 308 million euro, representing 1.5% of revenues compared to 2% last year. Last year was significantly impacted by the investment for the contract.
Free cash flow reached 887 million euro. This represented a substantial improvement on Fiscal 2016 free cash flow, at 595 million euro, impacted by the for 51 million euro and mobilization for 65 million euro. As a result, cash conversion reached 123% compared to 93% in Fiscal 2016.
Net acquisitions and disposals of subsidiaries increased significantly to 306 million euro following several years of low spend during the transformation of the Group. After taking into account share buy-backs of 300 million euro and dividend payments of 359 million euro, consolidated net debt rose during the year by 204 million euro to 611 million euro at August 31, 2017.
During Fiscal 2017, Sodexo substantially accelerated its acquisition activities.
The Group enriched its offer with in incentive and motivation in the USA, with a group purchasing organization in the UK and in Food services also in the UK.
Strategic moves were made by Benefits & Rewards to enter the mobility market with the acquisition of digital platforms, in business travel bookings and in expense management.
Technical expertise and offer were also strengthened with the acquisitions of in Israel and in Puerto Rico.
The Group has consolidated its positions in Alaska and China by taking control of and with the acquisition of minority shareholdings, and in the UK with the acquisition of , in the home care market.
On November 17, 2016, Sodexo announced a 300 million euro share buy-back program, for the second consecutive year, reflecting the strong balance sheet at Fiscal 2016 year-end and the Board's confidence in the future of the Group. The share buy-back program was completed in February 2017 with the purchase of 2,910,690 shares, representing 1.9% of the capital, at an average price of 103.07€. These shares were cancelled in June 2017. As at August 31, 2017, the total number of shares was 150,830,449, down from 153,741,139 as at year end Fiscal 2016.
As of August 31, 2017, net debt was 611 million euro, representing a gearing of 17%, compared to 11% as of August 31, 2016, and a net debt ratio of 0.4. The Group's financial position remains strong with cash flow more than covering investments, acquisitions and the dividend. Gearing and net debt ratio have increased due to share buy-backs but remain below the targets of 75% and 1 - 2 respectively. During Fiscal 2017, the Group reimbursed 108 million dollars of its debt which had not yet matured as part of a debt restructuring program aimed at extending maturities and benefiting from extremely low interest rate opportunities. To take advantage of a particularly favorable debt market, the Group issued 800 million euro of a 10-year bond at a coupon of 0.75% in two lots during the year. As a result, at year end, both the cash and the gross debt levels had increased substantially relative to the previous year-end. The average cost of debt fell from 3.2% for Fiscal 2016 to 2.4% in Fiscal 2017.
At the end of Fiscal 2017, the Group had an operating cash position of 2,889 million euro and unused lines of credit totaling 1.1 billion euro. As a reminder, the cash position includes 1,825 million euro for Benefits and Rewards Services (including restricted cash for 511 million euro and financial assets for 398 million euro).
Since the beginning of fiscal 2018, several acquisitions have been closed:
In order to better focus the Group's financial communication, both historic and prospective, on recurring operating profit drivers and to simplify benchmarking with competitors, the consolidated income statement will change as from Fiscal 2018, to include an underlying operating profit, other operating income and other operating expenses, before arriving at Operating profit.
Other operating income and expenses will include gains or losses related to perimeter changes and on changes of post-employment benefits, restructuring and rationalization costs, M&A costs, amortization of client relationships and trademarks and impairment of non-current assets. Other operating income and expenses are detailed below. In Fiscal 2017, the principle elements were the restructuring costs of 137 million euro. All other items more or less cancel each other out.
As a result, from Fiscal 2018, Segment information will be provided to Underlying operating profit.
The Fiscal 2017 pro forma P&L on this new basis is as follows:
At the Board of Directors' meeting chaired by Sophie Bellon on November 14, 2017, Chief Executive Officer Michel Landel highlighted his confidence in the future development of the Group.
While the geopolitical environment remained difficult in Fiscal 2017, commodity prices and currencies stabilized. As a result, demand for services was strong in developing economies, solid in North America but remained relatively modest in Europe. Energy & Resources demand stabilized in some regions but remained very difficult in the offshore market, in particular in the North Sea. Despite disappointing growth in revenues, the Group achieved a solid increase in margins, helped by the results of the Adaptation and Simplification program, and generated strong cash flow which was used to finance a series of significant acquisitions.
For Fiscal Year 2018, growth should accelerate and amplify due to external growth of around 2.5%, including the latest acquisitions. The trends are turning positive again in France and the Energy & Resources segment. Developing economies are also expected to grow strongly in all segments. On the other hand, growth will remain modest in Education and Health Care in North America. Added to this there is a base effect of the 53 week in North America to offset.
The Adaptation and Simplification program is on track to deliver its target of 220 million euro of savings in Fiscal 2018, having already achieved 150 million euro in Fiscal 2017. This will free-up resources to invest in enhancing the growth and accelerating the Group's digital transformation:
The financial structure of the Group remains strong and provides the capacity to continue to look for more acquisition targets during the year.
The Group is confident in achieving the following objectives for
The Board of Directors and Executive Committee confirm the
Exceptional expenses are the costs of implementation of the Adaptation and Simplification program (€137m in Fiscal 2017, €108m in Fiscal 2016, zero in Fiscal 2015 and €27m in Fiscal 2014).
Please refer to section Consolidated financial position.
Change excluding currency effect calculated converting Fiscal 2017 figures at Fiscal 2016 rates, except for countries with hyperinflationary economies. As a result, for Venezuelan Bolivar, Fiscal 2016 and Fiscal 2017 figures in VEF have been converted at the exchange rate of USD 1 = VEF 3,250 vs. VEF 645 for Fiscal 2016.
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.
Group borrowing at the balance sheet date, less operating cash.
Reported Net Profit excluding non-recurring items (for Fiscal 2017 and Fiscal 2016 exceptional expenses and early debt reimbursement indemnity, together net of taxes of €99m and €84m respectively, for Fiscal 2015 no exceptional expenses and for Fiscal 2014 exceptional expenses net of taxes of €18m related to the Operational efficiency plan).
Fiscal 2017 exceptional expenses of €137m related to the Adaptation & Simplification program in operating profit and €11m of early debt reimbursement indemnity in financial expense, together net of taxes of €99m. Fiscal 2016 exceptional expenses of €108m related to the Adaptation and Simplification program in operating profit and €21m of early debt reimbursement indemnity in financial expense, together net of taxes €84m. Fiscal 2014 exceptional expenses of €27m related to the Operational efficiency plan, net of taxes €18m.
Operating profit divided by Revenues
Margin calculated converting Fiscal 2017 figures at Fiscal 2016 rates, except for countries with hyperinflationary economies. As a result, for Venezuelan Bolivar, Fiscal 2017 and Fiscal 2016 figures in VEF have been converted at the exchange rate of USD 1 = VEF 3,250 vs. VEF 645 for Fiscal 2016.
Operating profit before exceptional expenses divided by Revenues
Reported Operating Profit excluding exceptional expenses (€137 m in Fiscal 2017, €108m in Fiscal 2016, €0m in Fiscal 2015 and €27m in Fiscal 2014).
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 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, Benefits & Rewards figures for Fiscal 2016 and Fiscal 2017 in Venezuelan Bolivar, have been converted at the exchange rate of USD 1 = 3,250 (vs. VEF 645 for Fiscal 2016).
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