Turismo
Sodexo: operating profit guidance maintained despite mixed revenue performance in Q3 2017
Revenue growth in Q3 was disappointing due to lower than expected activity in Health Care and Universities in North America and continued weakness in Corporate services in Europe. However, Energy & Resources has turned positive, the trend in France is improving and developing economies are growing well.
The expected acceleration in Q4 is also still on track with:
As a result, while revenue growth may be softer than previously anticipated, between +1.5% and +2%, operating profit growth before currencies and exceptional items should still be between +8% to +9%.
Long-term trends remain positive with further significant opportunity in outsourcing and contract consolidation, growth in developing economies, strong potential of the new segment organization and increased contribution from acquisitions. The Group confirms its mid-term objectives of:
(Paris time), to comment on its revenues for the first nine months of fiscal 2017. Those who wish to connect from UK may dial + 44(0)20 3427 1905
or from France +33(0)1 76 77 22 30 following by the pass code The presentation can be followed via live webcast on the Group website, www.sodexo.com.
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 75 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 Meal Pass, Gift Pass and Mobility Pass benefits for employees 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 425,000 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. Figures have been prepared in thousands of euro and published in millions of euro.
Due to a slow start to contract signatures in the First Half, Q3 was a busy quarter for start-ups which should therefore contribute to the acceleration in growth in revenue in Q4.
Further recent significant signatures in On-site Services include:
Consolidated revenues for the First Nine Months Fiscal 2017 totaled 16 billion euro, up +1.7%. The currency effect contributed +0.8% to reported growth for the period, with the strength in the US dollar and the Brazilian real more than offsetting the decline in Pound Sterling. Acquisitions net of disposals provided growth of +0.4%. As a result, organic growth was +0.5%.
Analysis of organic growth in On-site Services
9M Fiscal 2017 On-site Services revenues in totaled 7.9 billion euro, down organically by -0.5% compared with 9M Fiscal 2016 which benefited from the RWC, or +1.1% excluding the RWC.
Organic growth in was due to high single digit growth in Corporate Services, supported by development of Facilities management services and a return to growth in Government & Agencies in Q3.
was down Half of the decline was due to the RWC effect. With no signs of improvement in the North Sea oil and gas segment Energy & Resources continued to decline 16%. Corporate services remains lackluster throughout the region, with weak comparable unit sales. On the other hand, the French activities are benefitting from an easier comparable base. In the Justice segment the impact of the loss of a large contract in January 2016 is now over. The tourism activities are better than previous year, even though they are not yet back up to 2015 levels.
In , organic growth of reflects continued strong growth in Corporate Services thanks to new contracts in all the regions, and a return to growth in Energy & Resources due principally to contract start-ups and some improvement in the mining and onshore activities. The offshore activity remains difficult.
In , revenues totaled 3.8 billion euro, with organic growth at +1.9%.
Organic growth in was reflecting a significant slowdown in Q3 due to lower comparable unit sales linked to scope and service changes in a few large contracts and phasing differences in new business.
The decline in reflects the lack of net new business in hospitals in France and the UK due to much greater selectivity in bidding. On the other hand, there has been some good new development in Seniors in Q3 and the focus on developing Facilities Management services is creating more opportunities for cross-selling.
In , growth in the segment is strong at boosted by strong growth in Latin America and particularly in Brazil due to multiple contract wins and increased same site sales.
In , revenues for the first nine months Fiscal 2017 amounted to 3.7 billion euro, up organically by +0.2%.
organic growth was . On the one hand, Schools generated solid growth with the extension of the Chicago Public Schools contract, the ramp-up of the new Washington DC Schools contract and solid retention. On the other hand, in Universities, growth is suffering from the lack of prior year signatures. In Q3, despite a positive calendar shift from Q2, growth was weaker than anticipated due to lower than expected same site sales and the accelerated exit of a large contract in Q2.
In , organic growth of was impacted by a lower number of working days in France, and low prior year development in the UK, compensated in part by high retention in the region.
In , organic growth was resulting from very strong growth in new Schools contracts in China, Singapore and India.
Note: it is important to note that with the new segment reporting, all Energy & Resources business is now spread across the different regions, whereas previously remote sites was included in Rest of the World. As a result, North America and Europe now have a share of Energy & Resources which weighs on their growth this period, particularly in Europe where Energy & Resources revenues is still down 16%.
In organic growth of was supported by high single digit growth in Corporate Services and a return to positive growth in Government & Agencies. On the other hand, lower than expected same site sales in both Health Care and Universities in Q3 severely muted the year to date performance. Energy & Resources declined slightly.
The organic reduction of in reflects a more diluted Rugby World Cup effect, a 16% fall in North Sea Energy & Resources activity and weak Corporate activity. However, the comparable base in France is improving and government and agencies has turned positive in Q3.
achieved organic growth. This was a combination of solid new Corporate business in all regions, strong growth in hospitals, particularly in Latin America, and Schools, particularly in Asia, and growth in Energy & Resources helped by substantial contract start-ups. Africa and Middle East remain impacted by the difficult context in the Oil and Gas industry.
Benefits & Rewards Services
Benefits & Rewards Services revenue amounted to 673 million euro in 9M Fiscal 2017, up +16.9%. Currencies contributed +6.1% to this growth, resulting in particular from the recovery of the Brazilian real. The acquisitions of Inspirus, Xpenditure and iAlbatros contributed a further +4.6% to growth. Organic growth was therefore +6.1%, compared to growth in issue volume also strong at +5.9%.
Organic growth in is at for Issue volume and for revenues Strong growth in issue volume across the region reflected strong demand in most countries, except in Brazil, and increasing face values. Revenue growth remains more subdued due to a highly competitive environment in Brazil. However, in Q3, there were signs of stabilization in Brazil as well as continued growth in the rest of the region. This improvement was masked by the impact of the devaluation of the VEF at the end of May, representing 240 basis points of growth.
In organic growth in Issue volume and revenues has been strong during the first nine months of the year at and respectively. This is due to solid face value increases in Belgium (fully in the comparable base from Q3 Fiscal 2017), strong 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).
Exceptional expenses are the costs of implementation of the Adaptation and Simplification program (€137m in H1 Fiscal 2017 and €108m in Full year Fiscal 2016).
Change excluding currency effect calculated converting 9M 2017 figures at FY 2016 rates, except for countries with hyperinflationary economies. As a result, for Venezuelan Bolivar, 9M Fiscal 2017 and 9M Fiscal 2016 figures in VEF have been converted at the exchange rate of USD 1 = VEF 2,010 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.
Reported Operating Profit excluding exceptional expenses (€137m in H1 Fiscal 2017 and €108m in Full year Fiscal 2016).
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 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 9M 2017 and 9M 2016 in Venezuelan Bolivar, have been converted at the exchange rate of USD 1 = VEF 2,010 vs. VEF 645 for FY 2016.
Sodexo operates in 80 countries. The percentage of total revenues denominated in the main currencies are as follows:
The currency effect is determined by applying the previous year's average exchange rates to the current year figures except for Benefits & Rewards services in Venezuelan Bolivar.
Exchange rate fluctuations do not generate operational risks, because each subsidiary bills its revenues and incurs its expenses in the same currency.
During 9M Fiscal 2017, the U.S. dollar has strengthened by 2.3% relative to the euro. The Brazilian real has strengthened by 17.3%, boosting in particular the contribution of the Benefits & Rewards activity to revenue. The 10.8% decline in UK sterling against the euro from June 2016, after the Brexit referendum, impacts revenues of the onsite business.
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. All 9M Fiscal 2017 and 9M Fiscal 2016 figures in VEF have been converted at the exchange rate of USD 1 = VEF 2,010 vs. VEF 645 for FY Fiscal 2016.
2321 Rosecrans Avenue. Suite 2200
90245 El Segundo Stati Uniti