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Sodexo Q3 Fiscal 2023: solid organic revenue growth at +10.5%
Issy-les-Moulineaux, June 30, 2023
Sodexo (NYSE Euronext Paris FR 0000121220-OTC: SDXAY)
Q3 FISCAL 2023 REVENUES
Commenting on the third quarter activity, Sophie Bellon, Sodexo Chairwoman and CEO, said:
"Our third quarter On-site activity continued to grow strongly, despite the much higher comparative base. We continue to have momentum in contract wins and retention. There was some further post-Covid ramping up in the return to the workplace and in event attendance and average spend.
Pluxee third quarter growth is stronger than expected with growing underlying demand, amplified by strong face value increases and higher interest rates. The workstreams associated with the spin-off are on track. We endorsed the appointment of Didier Michaud-Daniel as future Chairman of the Board of Pluxee who will work closely with Aurélien Sonet, the CEO, and Stéphane Lhopiteau who is joining Pluxee as CFO.
We are progressing towards our 2025 ambition to become leader in sustainable food and valued experiences. I want to thank all the teams for their dynamic mobilization around our strategic projects . "
Highlights of the period
Update on the plan to spin-off and list Pluxee (Benefits & Rewards Services)
Outlook
Our Fiscal 2023 guidance has been refined to reflect the strong Pluxee performance and solid in-line performance of On-site Services in the third quarter:
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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 its Q3 Fiscal 2023 revenues.
Those who wish to connect:
Following by the access code 07 26 13 .
The live audio webcast will be available on www.sodexo.com
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
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
About Sodexo
Founded in Marseille in 1966 by Pierre Bellon, Sodexo is the global leader in sustainable food and valued experiences at every moment in life: learn, work, heal and play. Operating in 53 countries, our 422,000 employees serve 100 million consumers each day. The Sodexo Group stands out for its independence and its founding family shareholding, its responsible business model and its portfolio of activities including Food Services, Facilities Management Services and Employee Benefit Solutions. This diversified offer meets all the challenges of everyday life with a dual goal: to improve the quality of life of our employees and those we serve, and contribute to the economic, social and environmental progress in the communities where we operate. For Sodexo, growth and social commitment go hand in hand. Our purpose is to create a better everyday for everyone to build a better life for all.
Sodexo is included in the CAC Next 20, CAC 40 ESG, CAC SBT 1.5, FTSE 4 Good and DJSI indices.
Key figures
Appendix - Biographies
Didier Michaud-Daniel
Future Chairman of the Pluxee Board of Directors
From March 2012 to end of June 2023, Didier Michaud-Daniel has been the CEO of Bureau Veritas, a world leader in laboratory testing, inspection and certification services with annual revenue of €5.7bn and a market cap of €11bn. Bureau Veritas is listed on Euronext Paris and is part of the SBF 120 index. While at Bureau Veritas, Didier Michaud-Daniel has driven continuous growth by progressively transforming the company's market positioning and modernizing its service offer, amplified by multiple acquisitions.
Didier Michaud-Daniel started his career in 1981 at OTIS, the world's leading elevator and escalator manufacturing, installation and service company, where he held different operations and sales positions. He was appointed Deputy General Manager of Operations in January 1998. Didier Michaud-Daniel then became Managing Director of OTIS UK and Ireland, then Chairman of OTIS for the UK, Germany and Central Europe region, before being appointed Chairman of the $12bn revenue company OTIS Elevator in May 2008, a role for which he was based in the US for 4 years.
Since 2019, Didier Michaud-Daniel has been an independent member of the Supervisory Board of Tarkett, a family-controlled company, global leader in the industry of flooring solutions. Didier Michaud-Daniel is also a member of the Board of Directors of the SAUR Group, a global provider of water services, since June 2023.
Didier Michaud-Daniel is a graduate of the Poitiers business management school and European Business Administration Institute INSEAD and is Chevalier de la Légion d'Honneur , one the most recognized French order of merit.
Stéphane Lhopiteau
Chief Financial Officer, Pluxee
Stéphane Lhopiteau started his career in 1994 at Arthur Andersen, where he held various audit and consulting positions. In 2004, Stéphane Lhopiteau joined Morina Baie Biscuits as Head of Business development and Finance. From 2008 to 2011, Stéphane Lhopiteau was CFO for DCNS (today Naval group), European leader in the naval defense sector, before joigning Thales Group in 2011, where he was successively Deputy CFO, then SVP Performance & Business Services, two roles in which he piloted major transformation projects. In 2015, Stéphane Lhopiteau was appointed as CFO for Areva Group, a major player in the nuclear industry, where he actively contributed to the turnaround of the company (today Orano Group). From 2019 to 2022, Stéphane Lhopiteau was CFO of Diot-Siaci, a leader in insurance and social protection brokerage, a role in which he piloted the merger of what were originally Siaci-Saint-Honoré and Diot groups.
Stéphane Lhopiteau will bring to Pluxee his extensive CFO experience developed in various environments, supporting major transformation projects in large international listed companies.
He is a graduate of HEC Business School.
Q3 Fiscal 2023 Activity Report
Revenues: Solid Organic Revenue growth
Third quarter Fiscal 2023 consolidated revenues reached 6.0 billion euros , up +9.1% year-on-year including a negative currency impact of -1.2% and a net contribution from acquisitions and disposals of -0.2%. As a result, Third quarter Fiscal 2023 organic growth was +10.5%, with On-Site Services at +9.9% and Pluxee (Benefits & Rewards Services) at +25.5%. Revenue for the first nine months of Fiscal 2023, to the end of May, reached 18.1 billion euros, up +14.7%, or +12.4% organically.
ON-SITE SERVICES
Third quarter Fiscal 2023 On-site Services revenue organic growth was up +9.9%, benefiting from an accelerated net new business contribution of close to 2%; a pricing effect of above 5% and like-for-like volume growth (including cross-selling) of close to 4%, partially offset by a negative impact from the end of the Testing Centers contract in the UK of -0.9%.
Organic growth in the quarter was driven by Food services, up +13.8% organically, whereas FM services were up +3.6%, or +6.0% excluding the impact of the end of the Testing Centers. Food services now represent 65% of year-to-date total On-Site revenues, increasing from 60% in Fiscal 2022.
The net new development momentum remained positive with improvements in both retention and development year to date.
North America
Third quarter Fiscal 2023 North America revenues totaled 2.7 billion euros , up +12.1% organically, driven by price revisions, some volume recovery, cross-selling, and an acceleration of net opened/closed compared to previous quarters.
Organic growth in Business & Administration was +20.1%, boosted by new contracts in Corporate Services, increased activity in Sports events and Cultural destinations combined with a +28% higher passenger count in Airline Lounges, inflation pass-through, and to a lesser extent the very strong growth of Entegra (Sodexo GPO).
In Healthcare & Seniors , organic growth was +9.0%, driven by pricing and retail volume improvement. The net new development contribution was slightly positive.
In Education , organic revenue growth was +7.2%. Like-for-like growth in food services in Universities was very strong, with volume and price increases due to a higher level of board plans, retail sales and event catering. In Schools, growth stalled at +0.5%, the impact of price adjustments being offset by decreases in volume related to the reduction of government waiver eligibility for students.
Europe
In Europe, third quarter 2023 revenues amounted to 2.0 billion euros, up +4.4% organically, or +6.9% excluding the impact of the Testing Centers, helped by like-for-like volumes and price increases.
In Business & Administrations , organic growth was +7.5%, boosted by strong price revisions in food, continued improvement in the return to the office, particularly in Belgium and Germany, combined with new business and significant IFM project work in Central Europe. Sports & Leisure activity was boosted by strong corporate events, where the recovery took longer to come through last year, and the contribution of the World Baseball Classic Hospitality in Japan in April. Overall, growth was slightly offset by the lower level of activity in France, affected by the loss of the Prisons contract last year, bank holidays and strikes.
In Healthcare & Seniors , organic growth of -0.8% was impacted by the end of the Testing Centers in the UK. The rest of the business was +8.3%, with strong contribution of new openings, especially in Spain, recovery in retail sales and solid occupancy in Seniors in France.
Education organic revenue growth was -1.1%, reflecting the reduction of working days in the UK and France and the impacts of strikes in France along with delay in the price revision where passing on inflation remains slow. The net new in-year Revenue was slightly positive.
Rest of the World
Rest of the World third quarter Fiscal 2023 revenues were 1.1 billion euros, up +16.3% organically, with double digit growth in all geographies except Australia.
Business & Administrations was up +17.1%, driven by the impact of the new openings in Corporate Services and Energy & Resources in Latin America and like-for like growth in all regions and segments, especially in Latin America boosted by inflation pass-through, India and South East Asia with a growing number of regional tech clients in Food services.
Healthcare & Seniors revenue was +1.3% organically, with strong development and project works in India and Latin America being offset by a decrease in China due to low post-Covid development, and in Brazil as a result of the exit of low performing contracts.
Education organic growth was +45.5%, as Chinese schools reopen fully.
PLUXEE
Pluxee (Benefits & Rewards Services) organic growth was +25.5%. Operating Revenues organic growth at +16.7% continued to accelerate in the third quarter, fueled by solid net development and face value increases. The trajectory on Financial Revenues remained very strong, benefiting from the increase in euro rates.
Employee benefits organic growth was +28.4%. This strong performance is the result of +17.8% organic growth in issue volume, which reached 4.2 billion euros, reflecting face value increases, portfolio growth and solid net new development, as well as higher interest rates. Services Diversification was up +11.9% organically, driven by solid growth in Fuel & Mobility and Public Benefits partially offset by a soft quarter in Incentive & Recognition.
* Including Incentive & Recognition, Mobility & Expenses and Public Benefits.
In Europe, Asia and USA , organic revenue growth was +24.0%, with solid growth across all major markets and notably in Romania, Germany and Turkey, and increasing contribution from euro interest rates.
In Latin America , organic growth was +28.1%, with very strong growth in volumes and face values in almost all countries and in particular in Brazil.
FINANCIAL POSITION
Apart from the seasonal changes in working capital, there were no material changes in the Group's financial position as of May 31, 2023, relative to that presented in the Fiscal 2022 Universal Registration Document filed with the AMF on November 9, 2022 and the Interim Financial Report published on April 5, 2023.
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 2022 Universal Registration Document filed with the AMF on November 9, 2022.
ALTERNATIVE PERFORMANCE MEASURE DEFINITIONS
Growth excluding currency effect
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.
Issue volume
Issue volume corresponds to the total face value of service vouchers, cards and digitally delivered services issued by Benefits & Rewards Services for beneficiaries on behalf of clients.
Lost Time Injury Rate (LTIR)
Lost Time Injury Rate (LTIR) corresponds to the number of accidents per 200,000 hours worked. 200,000 hours worked is equal to 100 full-time employees working for one full year. The LTIR includes safety incidents (injuries) and work-related health issues (illnesses) that lead to an employee being unable to work.
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:
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 2023 figures at Fiscal 2022 rates, except for countries with hyperinflationary economies.
REVENUE FOR THE FIRST 9 MONTHS FISCAL 2023
CURRENCY EFFECTS
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 activity in Brazil, and the high level of its 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 strengthens Group margins increase.
The +3.3% currency impact for the first 9 months of Fiscal 2023 is linked to the increase in the U.S. dollar of +7.2% year-on-year, and the Brazilian real of +9.1%. On the other hand, UK sterling was down -3.4%. However, the euro has been increasing since the end of the first half Fiscal 2023 and therefore the currency impact is negative in Q3.
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.
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