At the Board of Directors' meeting chaired by Sophie Bellon on April 11, 2017, Chief Executive Officer Michel Landel presented the Group's performance for the First Half of Fiscal 2017, which ended on February 28, 2017.

  • Revenues up +0.4% and organic growth of +1.4% excluding Rugby World Cup
    and Energy & Resources

• On-site Services organic growth was -0.3%, excluding the Rugby World Cup and the Energy & Resources decline, organic growth was +1.2%

- Solid growth in Corporate North America, Health Care and developing markets.
- This momentum was somewhat offset by a challenging environment in Europe due to continued weakness in Energy & Ressources activity in the North Sea and more generally, in France.

• Benefits & Rewards Services organic growth reached +7.4%,

- Strong activity in Europe, Asia and the USA
- Latin America was more subdued.

  • Operating profit before exceptional expenses and currency effect was up 7.7% and the margin increased 50 basis points, at constant exchange rates
  • Net profit increased 14.7% before non-recurring items, at constant exchange rates
  • Fiscal 2017 guidance: 

• Revenue organic growth of around 2.5%

• Growth in operating profit confirmed at between 8% and 9% (excluding currency effect and exceptional expenses linked to the Adaptation and Simplification program)

  • Medium-term objectives confirmed.

Commenting on these figures, Sodexo CEO Michel Landel said:

"We have delivered a First Half in line with our expectations.
Revenue growth accelerated in the second quarter as expected, we have signed significant new contracts and the pipeline remains strong.
Our Savings plan is well on track and delivered 60 million euro in the First Half of the fiscal year, helping us to achieve a 50bps improvement in operating margins while we continue to make investments that will contribute to future growth.
In the second half of the year, the comparative base will become easier and contract signatures will convert into revenues progressively. As a result, we expect organic growth of around 2.5% for the full year. Our efforts to control costs and adapt our organization will continue to deliver and so we confirm our objective of growth in operating profit of between 8 to 9% for this fiscal year (excluding currencies and before exceptional expenses)."

Highlights of the period

  • First Half Fiscal 2017 Revenues amounted to 10.6 billion euro, up +0.4% on the previous year period. Currencies contributed +0.1% and net acquisitions +0.3%. Organic growth was +1.4% excluding the Rugby World Cup effect and the decline in Energy & Resources.
  • Organic growth for the On-site Services activity was -0.3%, or 1.2% excluding the Rugby World Cup impact and the Energy & Resources activity:

• Business & Administrations organic growth of -2.1%, or +0.7% excluding the Rugby World Cup and Energy & Resources impacts, reflects a return to positive growth in the second quarter. Energy & Resources is improving regularly quarter by quarter, even if activity in the North Sea is still down by 16% in both quarters. Elsewhere, while Government services activity remained difficult during the quarter, Corporate Services activity was solid with high single digit growth in North America and the developing economies more than offsetting continued weakness in Europe.

• Health Care & Seniors organic growth is +3.1%, benefiting from same site growth in Hospitals in North America and strong development in Asia and Brazil. Bidding opportunities in France and the United Kingdom remain highly competitive.

• Education organic growth remained modestly positive at +0.3%. While Schools activity benefits from new business in all regions, the lack of new business last year in Universities in North America is weighing on performance this year. However, the level of signings has picked up in the last few months with three major contract signatures in North America.

  • First Half Fiscal 2017 organic revenue growth in the Benefits & Rewards Services activity was +7.4%. Growth in Europe, Asia and the USA at +11.5% reflected solid growth in both the number of beneficiaries and face values and exceptionally strong Incentive and Recognition activity in the USA and the UK. In Latin America, organic growth was +2.9% for the period. Brazil remained weak. The rest of Latin America continued to grow strongly.
  • Operating profit before exceptional expenses rose to 723 million euro, up +9.7%, or +7.7% excluding the currency effect. As a result, the operating margin before exceptional expenses was up +60 basis points to 6.8%, or +50 basis points excluding the currency effect. Numerous initiatives, as part of the Adaptation and Simplification program, to improve productivity and reduce SG&A have contributed to building the margin. The program delivered 60 million euro of savings for the period, enhancing the Group’s capacity to invest in growth.
  • Exceptional expenses related to the Adaptation and Simplification measures amounted to 137 million euro in First Half Fiscal 2017, bringing the program up to a total of 245 million euro as it closed at the end of the First Half. Annual savings are expected to ramp-up to about 220 million euro for Fiscal 2018.
  • Group net profit before non-recurring items net of taxes totaled 447 million euro, up +16.6% or +14.7% excluding currency effect. After deducting exceptional expenses and an indemnity on the debt restructuring, (amounting to 99 million euro in First Half Fiscal 2017 and 24 million euro in First Half Fiscal 2016, both net of taxes), reported net profit was 348 million euro, down -3.1%.
  • Free cash flow generation was 30 million euro in the First Half. During the period, the Group financed the 300 million euro share buy-back, the full year dividend and a much higher level of acquisitions at a net amount of 165 million euro. Despite this, the financial position remained strong, with net debt at 1,234 million euro, gearing at 34% and the net debt ratio at 0.9.
  • The Group’s corporate responsibility engagement is recognized with the highest score for the sector in Robeco SAM’s 2017 Sustainability Yearbook for the 10th consecutive year.
  • Changes to the Board Committees

Several changes have been made to the three Board committees, effective March 8, 2017.

• Mr. Emmanuel Babeau, Independent Director, was appointed Chairman of the Audit committee and Ms. Cathy Martin, Director representing employees, is now a member of the committee.

• Ms. Françoise Brougher Independent Director, has been appointed Chairwoman of the Nominating committee and Ms. Cécile Tandeau de Marsac, appointed at the AGM in January 2017, has joined the committee.

• Ms. Tandeau de Marsac, Independent Director, has joined and become Chairwoman of the Compensation committee. Ms Brougher has also joined the Committee.

As a result all three committees are now chaired by Independent Directors as defined by the Afep-Medef French corporate governance code.

Outlook

The First Half Fiscal 2017 is in line with expectations.

For the second half, the Board and Executive Committee remain confident in the Group’s capacity to accelerate growth based on the contribution from new business signed in the last quarters, the quarter by quarter improvement in Energy & Resources, an easier comparative base in France, and the positive accounting calendar adjustment in North America in the fourth quarter.

Given a softer than expected environment in Europe and Africa, and the longer lead times from signature to ramp-up of some contracts, organic revenue growth is expected to be around 2.5%.

The Adaptation and Simplification program is perfectly on track to deliver substantial cost savings this year and therefore the Group confirms its objective for Fiscal 2017 of 8% to 9% growth in operating profit excluding the currency effect and exceptional expenses related to the Adaptation and Simplification program.

Confident in the future, with further significant outsourcing potential and opportunity in developing economies, strong potential of the new segment organization and M&A contribution the Group confirms its medium-term objectives of:

  • Average annual revenue growth, excluding currency effect, of between 4% and 7%;
  • Average annual growth in operating profit, excluding currency effect, of between 8% and 10%.

Conference Call

Sodexo will hold a conference call (in English) today at 9:00 a.m. (Paris time), to comment on its results for First-Half Fiscal 2017. Those who wish to connect from UK may dial + 44(0)20 3427 0503 or from France +33(0)1 70 48 01 66 following by the pass code 43 90 978.

The presentation can be followed via live webcast on the Group website, www.sodexo.com.

 

To read the full version of the press release, please download the PDF.

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