Sodexo announces consolidated revenues of over 15 billion euro for the first nine months of Fiscal 2015, an increase of nearly 10%

7/8/2015, 7:01 AM (Source: GlobeNewswire)

SODEXO+3.58%

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  • On-site Services: revenues up 9.4%, including 1.9% organic growth
    • with more than 6% growth in facilities management services
  • Benefits and Rewards Services: revenues up 14.5%, including 9.1% organic growth
    • led by sustained double-digit growth in Latin America
  • Sodexo confirms its Fiscal 2015 objective of around 10% growth in operating profit

Issy-les-Moulineaux, July 8, 2015 - Sodexo (NYSE Euronext Paris FR 0000121220-OTC: SDXAY), the world leader in Quality of Life Services, today reported its revenues for the first nine months of Fiscal 2015, which ended on May 31, 2015.

Revenues by activity and region

Revenues
(in millions of euro)
9 months  Fiscal 2015 9 months
Fiscal 2014
Organic
growth
Acquisitions Currency
effect
Total
change
North America 6,204 5,323 +1.4% -0.3% +15.4% +16.5%
Continental Europe 4,367 4,409 -0.2%   -0.8% -1.0%
Rest of the World 2,647 2,460 +3.1%   +4.5% +7.6%
United Kingdom and Ireland 1,293 1,079 +10.0%   +9.8% +19.8%
Total On-site Services 14,511 13,271 +1.9% -0.1% +7.6% +9.4%
Total Benefits and Rewards Services 636 556 +9.1% +3.7% +1.7% +14.5%
Elimination of intra-group revenues (4) (5)        
TOTAL GROUP 15,143 13,822 +2.2% +0.0% +7.3% +9.5%

Commenting on these figures, Sodexo CEO Michel Landel said:

"Despite a more challenging economic environment in Latin America and certain European countries, Sodexo's growth in the past three months was in line with the first half of the year. For Fiscal 2015, we confirm our full-year objective of around 10% growth in operating profit excluding the currency effect."

1. Analysis of the Group's organic growth

(in millions of euro) 9 months
Fiscal 2015
9 months
Fiscal 2014
Organic
growth
Corporate 7,387 6,831 +3.7%
Healthcare and Seniors 3,548 3,221 +0.4%
Education 3,576 3,219 -0.3%
Total On-site Services 14,511 13,271 +1.9%
Benefits and Rewards Services 636 556 +9.1%
Eliminations (4) (5)  
TOTAL GROUP 15,143 13,822 +2.2%

Consolidated revenues for the first nine months of Fiscal 2015 totaled 15.1 billion euro, an increase of 9.5%. Favorable changes in exchange rates for several currencies had a positive impact not only on revenues but also on the other income statement items.

On-site Services

On-site Services revenues totaled 14.5 billion euro and organic growth for the nine-month period was 1.9%, reflecting:

  • A continuation of the trends observed in the first half in North America and Europe.
  • Strong demand for facilities management services, with revenues growing by over 6% during the period. Of particular note was Sodexo's performance in the United Kingdom and Ireland, and the solid growth dynamic in the Corporate segment in North America.
  • A significantly more challenging environment in Latin America, particularly in Brazil and Chile.

Organic growth in the Corporate segment amounted to 3.7%, reflecting several different trends:

  • Strong demand for integrated Quality of Life Services offers in all regions, led by the United Kingdom and North America.
  • Ramp-up of new service contracts in the Justice segment in the United Kingdom.
  • The return to growth in Remote Sites revenues, which rose by 7.3% thanks to the many contracts won in the latter part of Fiscal 2014, particularly in Australia.

Healthcare and Seniors revenues grew by 0.4%, primarily as a result of the generally unfavorable operating environment in Europe and Sodexo's withdrawal from part of the HCR ManorCare contract in the United States at the end of Fiscal 2014, which had a lesser impact in the third quarter than in the first six months. During the period, Sodexo leveraged its expertise in this segment to sustain rapid growth in Latin America - particularly Brazil - and in China.

Education segment revenues were down 0.3% based on a comparable consolidation scope and at constant exchange rates. This performance reflects the Group's decision to withdraw from a contract with Detroit Public Schools in North America, as well as the increasingly selective approach to new business adopted in Europe. It also reflects development of On-site Services in the Education segment in emerging markets that are benefiting from Sodexo's global expertise in this client segment.

Benefits and Rewards Services

Organic growth in Benefits and Rewards Services revenues remained high, reaching 9.1% for the first nine months of the fiscal year due to:

  • A strong dynamic in Latin America (with organic growth of 14.7%), driven in part by higher face values on issued vouchers and cards; although the growth rate has been slowing since the start of the year, particularly in Brazil, it remains at a satisfactory level.
  • Improved performance in Continental Europe and Asia (with organic growth of 2.7%), led by a strong business dynamic in Turkey, India and China.

2. Financial position

There were no material changes in the Group's financial position as of May 31, 2015 with respect to what was presented in the Financial Report for First Half Fiscal 2015 published on April 16, 2015.

3. Objectives for Fiscal 2015

For Fiscal 2015:

  • Sodexo anticipates organic revenue growth of around 2.5%, taking into consideration the more difficult economic environment in Latin America and certain European countries.
  • And confirms an increase in operating profit of around 10% (excluding currency effects and exceptional items), representing a further 0.3% improvement in operating margin.

Financial calendar

Fiscal 2015 Results November 19, 2015
Annual Shareholders' Meeting January 26, 2016
Dividend Payment February 2, 2016
First Half Fiscal 2016 Results April 14, 2016

Conference call

Sodexo will hold a conference call (in English) today at 8:30 a.m. (Paris time), to comment on revenues for the first nine months of Fiscal 2015. Those who wish to connect may dial +44 (0) 1452 541 003 (from outside France) or 01 70 70 07 80 (from within France), followed by the passcode 68 52 90 59. The presentation will also be available via live webcast on the Group website, www.sodexo.com, in the "Finance - Financial Results" section.

The press release, presentation and webcast will be available on the Group website www.sodexo.com under both the "Latest News" section and the "Finance - Financial Results" section. A recording of the conference will be available until July 23 by dialing +44 (0)1452 550 000, followed by the pass code 68 52 90 59.

About Sodexo
Founded 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 more than 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 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 420,000 employees throughout the world.

Key figures (as of August 31, 2014)
18 billion euro consolidated revenues
420,000 employees
18th largest employer worldwide
80 countries
75 million consumers served daily
13.3 billion euro market capitalization (as of July 7, 2015)

Forward-looking statements
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.

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 2014 Registration Document filed with the AMF on November 17, 2014.

Contacts

Analysts and Investors Media Relations
Pierre Benaich
Tel. & Fax: +33 1 57 75 80 56
E-mail: pierre.benaich@sodexo.com
Laura Schalk
Tel. & Fax: +33 1 57 75 85 69
E-mail: laura.schalk@sodexo.com

APPENDIX 1
Analysis of organic growth in On-site Services
2.1 North America

Revenues

(in millions of euro) 9 months
Fiscal 2015
9 months
Fiscal 2014
Organic
growth
Corporate 1,478 1,242 +6.0%
Health Care and Seniors 2,121 1,833 -0.1%
Education 2,605 2,248 +0.2%
Total North America 6,204 5,323 +1.4%

On-site Services revenues in North America totaled 6.2 billion euro, an increase of 16.5% compared to the first nine months of Fiscal 2014. Organic growth for the period was 1.4%.

Organic growth in the Corporate segment was strong, at 6.0%, reflecting high business volumes in facilities management services for clients such as Bloomberg, Citigroup, Alcatel-Lucent and Walt Disney World Resorts, along with robust growth in the Defense segment. The many contracts won during the period notably included the U.S. House of Representatives and Zurich Insurance.

The Healthcare and Seniors segment experienced a 0.1% decline in revenue, with the withdrawal from part of the HCR ManorCare contract during Fiscal 2014 and the sale of certain laundry activities having a lesser impact in the third quarter than in the first half. In addition, while business development was limited in Fiscal 2014, contracts won in the first nine months of Fiscal 2015 confirm the market's potential. Contracts won during the period included LHP Hospital Group (Texas) and UMass Memorial Medical Center (two sites in Massachusetts) in the United States.
                                                             
In Education, organic revenue growth of 0.2% reflected higher sales of full room and board foodservices to universities, the effect of which was partially offset by the voluntary withdrawal from a contract with Detroit Public Schools at the end of Fiscal 2014, due to the city's financial difficulties and the risk of non-payment. Recent contract wins included Dakota State University.

2.2 Continental Europe
Revenues

(in millions of euro) 9 months
Fiscal 2015
9 months
Fiscal 2014
Organic
 growth
Corporate 2,602 2,581 +2.0%
Health Care and Seniors 1,012 1,050 -3.3%
Education 753 778 -3.1%
Total Continental Europe 4,367 4,409 -0.2%

In Continental Europe, revenues totaled nearly 4.4 billion euro, on a par with the first nine months of Fiscal 2014.

The 2.0% organic growth in the Corporate segment reflected mixed trends:

  • Foodservices volumes declined, notably in France, Italy, the Netherlands and Finland, and revenues were also adversely affected by Sodexo's withdrawal from certain contracts as part of the September 2012-February 2014 program to improve operational efficiency and reduce costs.
  • These factors were offset by the strong demand for Sodexo's Quality of Life services, especially those with a strong multi-technical services component. Growth was also driven by the ramp-up of contracts signed in Fiscal 2014, among them Carlsberg and Johnson & Johnson in several countries. Contracts won during the period included the Institut Pasteur and GE Power Conversion in France and the National Police Service in the Netherlands.

The 3.3% contraction in Healthcare and Seniors revenues was mainly due to lower client retention rates, especially in France, and limited business development in recent quarters. Contracts won during the period included FPC Gent in Belgium as well as the Forcilles Hospital in France.

In Education, the 3.1% revenue decline was mainly attributable to Sodexo's decision in Fiscal 2014 not to renew certain major contracts in several countries, including Italy, due to reductions in school budgets in those countries. New contracts signed during the first nine months of Fiscal 2015 included the Conseil Général des Yvelines and the Ecole Supérieure d'Art et de Design in France and Tampere University of Technology (TTY) in Finland.

2.3 Rest of the World (Latin America, Asia, Africa, Australia, Middle East and Remote Sites)

Revenues

(in millions of euro) 9 months
Fiscal 2015
9 months
Fiscal 2014
Organic
 growth
Corporate 2,384 2,238 +2.0%
Health Care and Seniors 153 124 +20.3%
Education 110 98 +5.5%
Total Rest of the World 2,647 2,460 +3.1%

Revenues in the Rest of the World (Latin America, Africa, Middle East, Asia, Australia and Remote Sites) totaled 2.6 billion euro in the first nine months of Fiscal 2015, an increase of 7.6%. Organic revenue growth in the Rest of the World was 3.1%.

Remote Sites, which represented 44% of the activity's total revenues in Fiscal 2014, reported organic revenue growth of 5.1%, driven by good sales development in Fiscal 2014, with contracts such as Woodside Energy and Groote Eylandt with Gemco (BHP Billiton) in Australia, Petrex in Peru and, more recently, Mineral Resources/Jerriwah Village in Australia and Compania Minera Nevada in Chile.

Excluding the Remote Sites activity, organic revenue growth in the Rest of the World was 1.5%.

Organic revenue growth in the Corporate segment was 2.0%, reflecting:

  • business development in the Remote Sites activity, as described above,
  • the consequences of the sharp economic slowdown in Brazil,
  • reductions in the scope of certain contracts in Chile, due to changes in local regulations related to social benefits and taxes.

In contrast, growth remained satisfactory in Asia, particularly in India and Southeast Asia, and a large number of contracts were won in emerging markets including JBS on two sites in Brazil, Vodafone and Adobe in India, and the deployment of the Unilever contract in Asia.

In Healthcare and Seniors, organic growth of 20.3% was attributable to contract wins, especially in Brazil. Driven by Sodexo's global expertise in Healthcare and Seniors services, this steady, sustained growth confirms the relevance of the Group's global approach by client segment. The many contracts won during the first nine months of Fiscal 2015 included the Hospital Brasil (Brazil) and Rumah Sakit Pondok Indah Hospital in Indonesia.

In Education, solid performance in both Latin America and India contributed to organic growth of 5.5%. New contracts signed during the period included Nord Anglia International School in Hong Kong.

2.4 United Kingdom and Ireland

Revenues

(in millions of euro) 9 months
Fiscal 2015
9 months
Fiscal 2014
Organic
 growth
Corporate 923 770 +10.3%
Health Care and Seniors 263 214 +11.9%
Education 107 95 +3.9%
Total United Kingdom and Ireland 1,293 1,079 +10.0%

Revenues in the United Kingdom and Ireland for the first nine months totaled 1.3 billion euro, an increase of nearly 20%. Organic growth for the period was 10%.

Corporate segment revenue growth accelerated sharply to 10.3%. This performance was attributable to the provision of non-recurring services with a high facilities management component to clients such as GSK, Rexam, Carlsberg and Zurich. It also reflects the start-up of a contract awarded to Sodexo in six regions under the UK government's Transforming Rehabilitation program to help prepare prison inmates for a successful return to mainstream society. Recent contracts won include one with Diageo, which has chosen Sodexo to provide Quality of Life services on 76 sites in the United Kingdom and Ireland.

In Healthcare and Seniors, organic growth accelerated to 11.9% thanks to the ramp-up of several contracts and the expansion of services provided to several hospitals such as the five in London operated by Imperial College Healthcare.

In Education, the 3.9% growth in revenues for the first nine months was due in no small measure to the contract with the prestigious University College London won in Fiscal 2014.

3. Benefits and Rewards Services

3.1 Issue volume

(in millions of euro) 9 months
Fiscal 2015
9 months
Fiscal 2014
Organic
 growth
Latin America 5,989 5,347 +11.8%
Europe and Asia 6,774 6,271 +4.0%
Total 12,763 11,618 +7.6%

3.2 Revenues

(in millions of euro) 9 months
Fiscal 2015
9 months
Fiscal 2014
Organic
 growth
Latin America 341 297 +14.7%
Europe and Asia 295 259 +2.7%
Total 636 556 +9.1%

In the Benefits and Rewards Services activity, the growth dynamic remained satisfactory in emerging markets (Latin America and Asia), despite the sharp economic slowdown observed in Latin America. Organic growth for the first nine months of Fiscal 2015 was 9.1%.

Note that digital media accounted for nearly 65% of total issue volume for the period. Sodexo's teams are continuously seeking to innovate in the services offered to clients.

In Latin America, organic growth continued at a remarkable rate of 11.8% for issue volume and 14.7% for revenues, led mainly by solid advances achieved in Brazil and Venezuela. This performance was supported by higher face values on vouchers and cards and rising interest rates in Brazil. Although the pace of growth has slowed gradually since the start of the year it is still at a satisfactory level. Sodexo is continuing to deepen its market penetration by developing offers that are closely aligned with demand. Contract wins during the period included Hospital Santa Paula and CEFOR Segurança Privada in Brazil, and Municipio de Xochitepec Morelos in Mexico.

In Europe and Asia, organic growth accelerated compared to the first half of the year, with revenues up 2.7% and issue volume up 4%. These growth rates reflect new contract wins in Quality of Life Services, double-digit growth in Turkey, India and China and more encouraging performance in the rest of Europe.

During the period, new contracts were signed with such clients as Hindustan Zinc Limited in India, Kiloutou in France and Vitaldent in Spain.

APPENDIX 2
Exchange rates and currency effects

The principal changes in average exchange rates for the first nine months of Fiscal 2015 were as follows:

1 EUR = Average rate
9 months Fiscal 2015
Average rate
9 months Fiscal 2014
Change (%) Currency effect
(in millions of euro)
U.S. dollar 1.1775 1.3658 +16% +819
Pound Sterling 0.7581 0.8315 +9.7% +120
Brazilian Real 3.2054 3.1386 -2.1% -17
Bolivar Fuerte 56.0128 70.8925 +26.6% +5

Exchange rate fluctuations do not generate operational risks because each subsidiary bills its revenues and incurs its expenses in the same currency.

Concerning Venezuela, the exchange rate used in the first nine months of Fiscal 2015 is the same as that used in the year-earlier period. The positive change shown above is due to the US dollar's appreciation against the euro.




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Source: Sodexo via Globenewswire

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