Sodexo: Fiscal 2015, a year of progress

11/19/2015, 7:01 AM (Source: GlobeNewswire)

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  • A solid financial performance and improved profitability
    • Total Revenue growth of 10%, including organic growth of 2.5%;
    • Operating profit up 21.7%
      • +11.9%, excluding currency effects and FY 2014 exceptional charges, exceeding the 10% growth objective set in early FY 2015, with an operating margin up 40 basis points;
    • Growth in Group net income of 42.9% and 32.4% excluding currency effects;
    • Net cash provided by operating activities of more than €1 billion.
       
  • Proposed dividend of €2.20 per share (up 22.2%) and a €300 million share repurchase program for cancellation purposes.
     
  • For Fiscal 2016, Sodexo's objective is revenue growth of around 3% and an increase in operating profit of around 8% (excluding currency effects and before exceptional items).

      
Issy-les-Moulineaux, November 19, 2015 - Sodexo (NYSE Euronext Paris FR 0000121220-OTC: SDXAY). At the Board of Directors meeting held on November 17, 2015 and chaired by Pierre Bellon, Sodexo's Chief Executive Officer Michel Landel presented the Group's performance for the fiscal year ended August 31, 2015.

Fiscal 2015 financial performance:

Millions of euro Year ended August 31 Change
at current
exchange rates
Change
at constant
exchange rates
Fiscal 2015 Fiscal 2014
Revenues 19,815 18,016 +10.0% +2.6%
Organic growth +2.5% +2.3 %    
Operating profit before exceptional costs[1] 1,143 966 +18.3% +11.9%
Operating margin1 5.8% 5.4%    
Exceptional costs 0 (27)    
Reported operating profit 1,143 939 +21.7% +15.1% 
Net financial expense (107) (173)    
Effective tax rate 31.1% 34.8%    
REPORTED GROUP NET INCOME 700 490 +42.9% +32.4%
Operating cash flow 1,017 825 +23.3%  
Dividend per share (in euro) 2.20[2] 1.80 +22.2%  

Commenting on these results,
Sodexo CEO Michel Landel said:

"Fiscal 2015 was a year of progress for Sodexo. We won major On-site Services contracts, with a significant facilities management services component. Growth remained strong in Benefits and Rewards Services. Our results clearly demonstrate our efforts in terms of margin improvement and cash generation.

This robust performance confirms the relevance of the strategic choices made to develop our integrated Quality of Life services offering, which combines all of the Group's activities.

Fiscal 2016 is getting under way with some positive trends, but a volatile global economic environment means some adjustments will be required. As a result, for the current fiscal year we are targeting organic revenue growth of around 3%, and an increase in operating profit of around 8%, excluding currency effects and exceptional items.

Our potential is significant. We are confident in our ability to achieve our medium-term objectives."

Revenues

Consolidated revenue for Fiscal 2015 amounted to 19.8 billion euro, an increase of 10% including organic growth of 2.5%. Favorable changes in exchange rates had a positive impact not only on revenues but also on all other income statement items.

On-Site Services Activity

Organic growth for the On-site Services activity was 2.2%. In a global economy that saw moderate growth, with some developing economies particularly in Latin America experiencing a loss of momentum, this growth rate primarily reflected heightened demand for Sodexo's integrated Quality of Life Services offers in all geographic regions. These offers include a significant facilities management component, which lessened the effect of lower foodservices volumes resulting from headcount reductions and other cost-saving measures undertaken by clients, particularly in Europe.

Organic growth by client segment was as follows:

In the Corporate Services segment organic growth amounted to 3.9%, representing the result of several different trends:

  • Strong demand for integrated Quality of Life Services offers in all regions, led by the United Kingdom and North America;
  • The ramp-up of new contracts in the Justice segment in the United Kingdom; 
  • 5.1% growth in the Remote Sites segment, which benefited - in particular, in the first half of Fiscal 2015 - from the many contracts signed at the end of the prior year, particularly in Australia. 

Health Care and Seniors revenues grew by a modest 1.2%, reflecting the budget constraints on public sector enterprises and the withdrawal from part of the HCR ManorCare contract in the United States at the end of Fiscal 2014. Sodexo nonetheless successfully leveraged its expertise in this segment, and continued to enjoy strong growth in Latin America, especially Brazil, as well as in China.

Education segment revenues were down 0.7% based on a comparable consolidation scope and at constant currency exchange rates. The decline was partly due to the Group's decision to withdraw from a contract with Detroit Public Schools in North America, in light of the city's financial difficulties, and reflected the more selective approach to new business in Europe. In contrast, Education revenues in the Rest of the World grew over the year, lifted by Sodexo's global expertise in this client segment.

Benefits and Rewards Services

Organic growth for the Benefits and Rewards Services activity was 9.5%, reflecting further double-digit growth in Latin America - despite a slowdown in Brazil in the second half of the year - and a healthy increase in revenues in Asia.

Key performance indicators

The On-site Services activity's key growth indicators were as follows:

  • 93.1% client retention rate, little changed from Fiscal 2014. The retention rate remained very high in the United Kingdom and Ireland but declined slightly in other geographic regions.
  • 2.2% growth for existing sites, compared to 2.5% for the prior year. Foodservices volumes continued to decline in Europe, and slower economic growth and inflation in certain developing economies also weighed on growth;
  • 7.5% development rate (new contract wins) compared to 7.1% in Fiscal 2014, reflecting contract wins for integrated service offers, particularly in the United Kingdom. New contracts won during the fiscal year represented 1.3 billion euro in annual revenues.

      
Operating profit

Reported operating profit amounted to 1,143 million euro, an increase of 21.7% at current currencies.

Note that Fiscal 2014 reported operating profit was stated net of 27 million euro in exceptional costs related to the program to improve operational efficiency and reduce costs.

Based on Fiscal 2014 operating profit before these exceptional costs, year-on-year growth was 11.9% excluding currency effects, while operating margin was 5.8% compared to 5.4% in Fiscal 2014. This performance was better than the objective of 10% announced by the Group in November 2014.

All of On-site Services' geographic regions contributed to the high overall rate of growth, with operating profit increases of:

  • 39.4% in North America (18.7% at constant currencies) ;
  • 42.4% in the United Kingdom and Ireland (28.8% at constant currencies) ;
  • 15% in the Rest of the World (Latin America, Middle East, Asia, Africa, Australia and Remote Sites) (7.1% at constant currencies) ;
  •  3.0% in Continental Europe (3.9% at constant currencies).

In Benefits and Rewards Services, higher issue volumes and tight control over costs drove a 15.3% increase in operating profit excluding currency effects and 6.3% at current exchange rates.

This performance also reflected the full year benefits of the program to improve operational efficiency and reduce costs, which generated annual savings of 170 million euro compared to the Fiscal 2013 baseline. This program, which was launched in September 2012 and completed in February 2014, focused on reducing both on-site operating expenses and overheads.

Group net income

The solid increase in operating profit, the reduction in net finance expense and the effective tax rate combined to drive a 42.9% increase in Group net income (32.4% excluding currency effects), to 700 million euro.

Earnings per share totaled 4.60 euro compared to 3.23 euro in Fiscal 2014, representing an increase of 42.4% (32.2% excluding currency effects) in line with the growth in Group net income.

Net cash flows: a solid cash-generating financial model

Net cash provided by operating activities amounted to 1,017 million euro, representing some 200 million euro or 23% more than in Fiscal 2014.

This good performance was mainly due to the sharp 203 million euro rise in operating profit from fully consolidated companies, part of which was attributable to the favorable currency effect. 

The change in working capital, which had a more limited positive effect than in the prior year, reflected two opposing developments, with an increase in trade receivables in North America and Latin America that was partly offset by significant client advances related to the Rugby World cup in the United Kingdom.

Gearing

As of August 31, 2015, the Group had total borrowings of 3,047 million euro. The main borrowings are two euro-denominated bond issues for a total of 1,100 million euro and three U.S. private placements for a total of 2,060 million U.S. dollars.

The operating cash position (which includes Benefits and Rewards Services cash investments and restricted cash) totaled 2,708 million euro, including 1,476 million euro relating to the Benefits and Rewards Services activity.

As of August 31, 2015, net debt was 339 million euro, representing 9% of shareholders' equity, compared to 12% as of August 31, 2014 and the average interest rate on borrowings was 3.8% as of August 31, 2015.

Dividend proposal / Share repurchase program

Based on this strong performance:

  • At the Annual Shareholders' Meeting to be held on January 26, 2016, the Board of Directors will recommend paying a dividend of 2.20 euro per share[3] for Fiscal 2015, an increase of 22.2% over the prior year.  The proposed dividend represents a payout ratio of nearly 50% of Group net income.
  • Confident in the future while maintaining the financial flexibility needed to invest in future development, the Board has also decided to implement a 300-million euro (approximately 2.4% of the share capital) share repurchase and cancellation program in Fiscal 2016. This transaction is expected to be accretive to earnings per share starting in 2016.

Board of Directors

At the Annual Shareholders Meeting to be held on January 26, 2016, the Board of Directors will recommend the appointment of a new director, Mr Emmanuel Babeau, Deputy Chief Executive Officer of Schneider Electric, in charge of Finance and Legal Affairs.

Economic, Social and Environmental Responsibility
Sodexo was named "global leader for its industry" by the Dow Jones Sustainability Indices (DJSI) for the 11th consecutive year and the number one consumer services company for the second year in a row. DJSI is the longest-running global sustainability benchmark worldwide and the key reference point in sustainability investing for investors and companies alike. The annual DJSI review is based on a thorough analysis of corporate economic, environmental and social performance, assessing issues such as corporate governance, risk management, climate strategy, environmental policy/management systems, supply chain standards and labor practices.

Among the initiatives launched during the year, Sodexo announced an ambitious objective to reduce carbon emissions 34% by 2020 compared to 2011 across all internal operations and the entire supply chain. The methodology was developed jointly with the World Wildlife Fund (WWF).

Outlook

At the November 17, 2015 meeting of the Board of Directors, Michel Landel, Chief Executive Officer, reminded the Board of the relevance of the Group's long-term strategy, built on its unique integrated Quality of Life Services offer, its global network and its uncontested leadership position in developing countries.

During the meeting, Michel Landel also discussed the profound changes the world is currently undergoing, sources of opportunity for long-term growth for the Group. Sodexo's future success will depend on its ability to convert these changes into opportunities to create value as an even more agile, innovative and flexible partner.

The trends remain favorable for Fiscal 2016, but in a highly volatile global economy: with low forecasted GDP growth in the short-term in developing economies, in particular in Brazil; oil, gas and mining sectors strongly affected by the decline in commodity prices; uncertainty surrounding currency trends; and a halting recovery in Europe.

Faced with these short-term challenges, the Chief Executive Officer confirms that his Executive Committee is reinforcing the measures needed to adapt. In Fiscal 2016, the Group will continue to pursue its efforts for simplification and standardization, notably through the following efforts:

  • reinforced adaptation of operating costs on site
  • simplification of the organization, and
  • greater pooling of Group expertise on an international scale in both operations and support functions.

The measures taken will progressively generate annual savings of around 200 million euro, between now and Fiscal 2018, when the full benefit will be realized. The implementation of certain of these initiatives will result in exceptional costs over the next 18 months, which are estimated at 200 million euro.

For these reasons, the Group has set the following objectives for Fiscal 2016:

  • organic revenue growth of around 3%;
  • growth in operating profit excluding currency effects and before exceptional items of around 8%.

In the medium-term, the Group's growth will be supported by several major trends:

  • Outsourcing of services by clients in both the private and public sectors continues to represent outstanding growth potential in all markets and geographic regions.
  • "Seniorization" of populations globally: By 2025, the population over 65 will have doubled to 800 million people worldwide;
  • Robotics: New technologies can contribute to automating the Group's processes and services, but the human factor remains essential to consumers' quality of life, throughout the world;
  • Digital: the Group will take advantage of digital technologies which today are revolutionizing the world and transforming relations between Sodexo and its consumers.

In this context, the Group has committed to a reorganization whose progressive deployment started September 1, 2015. Sodexo will evolve from a company organized by country to an organization by client segment. This will allow the Group to continue to deepen its knowledge of consumer expectations in the area of quality of life specific to each segment, and to standardize and pool its expertise thanks to the implementation of operational platforms. This new organization will create enhanced value for Sodexo's clients and consumers, and will thus allow the Group to progressively accelerate growth.

The Board of Directors, confident in the future, confirms the medium-term objectives of:

  • average annual revenue growth, excluding currency effects, of between 4% and 7%;
  • average annual growth in operating profit, excluding currency effects, of between 8% and 10%;
  • an average annual cash conversion ratio[4] of around 100%.

Lastly, the Board reiterated Sodexo's core strengths:

  • significant potential market;
  • unique range of Quality of Life services particularly well aligned with evolving client demand;
  • global network spanning 80 countries;
  • unchallenged leadership in developing countries;
  • robust financial model;
  • independence; and
  • strong culture and engaged teams.

      
In conclusion, the Board added, "We would like to take this opportunity to thank our clients for their loyalty, our shareholders for their confidence, and the Group's 420,000 employees for their efforts in Fiscal 2015 and for their daily commitment to improving the Quality of Life of our consumers and the performance of our clients."

Analyst briefing

Sodexo will hold a briefing today at 9:00 a.m. (Paris time) at the Capital 8 Conference Center (32, rue de Monceau, 75008 Paris) to discuss the Fiscal 2015 results.

The briefing may also be viewed via webcast on www.sodexo.com or via conference call at + 44 (0) 20 3427 1903 followed by the code 35 72 594 (in French) or 34 91 103 (in English).

The press release, presentation and webcast will be available on the Group's website www.sodexo.com, under the tab "Latest news" as well as in the section "Finance - Financial results." A recording of the conference call will be available at + 44 (0) 20 3427 0598 followed by the code 34 91 103, until November 25, 2015.

Financial communications schedule

First quarter revenues - Fiscal 2016 January 13, 2016
Annual Shareholders' Meeting January 26, 2016
Dividend ex-date February 8, 2016
Dividend record date February 9, 2016
Payment of the Fiscal 2015 dividend February 10, 2016
Half-year interim results - Fiscal 2016 April 14, 2016
Nine months revenues - Fiscal 2016 July 8, 2016
Annual results, Fiscal 2016 November 17, 2016

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 nearly 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, 2015)
19.8 billion euro consolidated revenues
420,000 employees
19th largest employer worldwide
80 countries
32,000 sites
75 million consumers served daily
12.6 billion euro in market capitalization (as of November 18, 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.

Contacts

Analysts and Investors Press
Virginia JEANSON
Tel. & Fax : +33 1 57 75 80 56
E-mail: virginia.jeanson@sodexo.com
Laura SCHALK
Tel. & Fax : +33 1 57 75 85 69
E-mail: laura.schalk@sodexo.com

APPENDIX 1
Comments by activity and geography

Revenues by activity

(in millions of euro) Fiscal 2015 Fiscal 2014 Organic
Growth
Change
(at current
exchange rates)
Change
(at constant
exchange rates)
On-site Services          
North America 7,972 6,759 +1.5% +17.9% +1.2%
Continental Europe 5,686 5,702 +0.6% -0.3% +0.5%
Rest of the World 3,504 3,327 +1.7% +5.3% +1.7 %
United Kingdom and Ireland 1,832 1,483 +12.8% +23.5% +12.8%
Total On-site Services 18,994 17,271 +2.2% +10.0% +2.1%
Benefits and Rewards Services 827 751 +9.5% +10.1% +15.3%
Intragroup eliminations (6) (6)      
Total Group 19,815 18,016 +2.5% + 10.0 % + 2.6 %

 

Operating profit by activity[5]

(in millions of euro) Fiscal 2015 Fiscal 2014 Change
(at current
exchange rates)
Change
(at constant
exchange rates)
On-site Services        
North America 499 358 +39.4% +18.7%
Continental Europe 238 231 +3.0% +3.9%
Rest of the World 161 140 +15.0% +7.1%
United Kingdom and Ireland 94 66 +42.4% +28.8%
Total On-site Services 992 795 +24.8% +13.2%
Benefits and Rewards Services 285 268 +6.3% +15.3%
Corporate expenses (128) (91)    
Intragroup eliminations (6) (6)    
TOTAL GROUP 1,143 966 +18.3% +11.9%

1. On-Site Services

Revenues

Revenues by segment:

(in millions of euro) Fiscal 2015 Fiscal 2014    Organic growth
Corporate 9,989 9,208 +3.9%
Health Care and Seniors 4,786 4,280 +1.2%
Education 4,219 3,783 -0.7%
TOTAL 18,994 17,271 +2.2%
 

1.1 North America

Revenues

(in millions of euro) Fiscal 2015 Fiscal 2014 Organic growth Acquisitions Currency effect Total growth
Corporate 2,040 1,704 +5.4%      
Health Care and Seniors 2,889 2,439 +1.1%      
Education 3,043 2,616 -0.6%      
Total 7,972 6,759 +1.5% -0.3% +16.7% +17.9%

On-site Services revenue in North America totaled 8 billion euro, up 18% over Fiscal 2014. Organic growth for the year was 1.5%.

Organic growth in the Corporate Services segment was 5.4%, reflecting high business volumes in facilities management services for clients such as, Citigroup and Alcatel-Lucent, along with robust growth in On-site Services in the Defense segment. Sodexo won a large number of contracts during the year, notably with the House of Representatives, Chevron and Zurich.

In the Health Care and Seniors segment, revenue increased by just 1.1%, due to the adverse impact during most of the year of Sodexo's withdrawal in the prior year from part of the HCR ManorCare contract, and of the sale of certain laundry activities. However, new contracts won with clients such as Vidant Health and Tenet Health System, and faster growth at existing sites confirmed the market's potential and led to a return to growth in the latter part of the year. Other contract wins included LHP Hospital Group (Texas), Erlanger Health System (Tennessee), Avalon Woodland Park Rehab and Care Center (Utah) and UMass Memorial Medical Center (3 sites in Massachusetts).

In Education, the 0.6% decline in revenue reflected mixed trends, with an increase in sales of full board meal plans to universities partially offset by the voluntary withdrawal from a contract with Detroit Public Schools at the end of the prior fiscal year, due to the city's financial difficulties and the risk of non-payment. In the schools segment, growth in existing site revenues reflected changes in students' eating habits in response to the latest changes in the Healthy and Hunger Free Kids Act (HHFKA). Following disappointing sales performances and contract wins in Fiscal 2015, a series of measures to improve the sales teams' efficiency was decided at the end of the year. Recent contract wins included Dakota State University, San Francisco State University and State University of New York at Stony Brook.

Operating profit

Operating profit totaled 499 million euro, an increase of 39.4% (+18.7% excluding currency effects) compared to Fiscal 2014.

Numerous productivity improvement measures paid off in Fiscal 2015 thanks to the systematic deployment of standardized on-site contract management methods, particularly in the Education segment, leading to improved management of the effects of inflation. Off-site administrative cost efficiencies also contributed to this good performance.  In all, these two factors accounted for 40% of the increase in Fiscal 2015 operating profit, with the other 60% attributable to the low basis of comparison in Fiscal 2014 when operating profit was temporarily affected by problems in deploying the HCR ManorCare contract and by the provisions set aside for doubtful receivables and risks on certain contracts.

Boosted by all of these factors, operating margin in North America rose to 6.3% from 5.3% in Fiscal 2014.

1.2 Continental Europe

Revenues

(in millions of euro) Fiscal 2015 Fiscal 2014 Organic growth Acquisitions Currency effect Total growth
Corporate 3,463 3,404 +2.9%      
Health Care and Seniors 1,327 1,380 -3.4%      
Education 896 918 -2.3%      
Total 5,686 5,702 +0.6% -0.1% -0.8% -0.3%

In Continental Europe, revenues totaled nearly 5.7 billion euro.

Organic growth in the Corporate Services segment was 2.9%. However, this performance reflected mixed situations:

  • 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 program to improve operational efficiency and reduce costs;
  • these effects were offset by sustained demand for Quality of Life services, particularly services that required deployment of a variety of technical skills. The ramp-up of multi-site contracts signed in Fiscal 2014, among them Carlsberg and Johnson & Johnson, also acted as a growth driver.

New contracts signed during the year included Institut Pasteur and GE Power Conversion in France, and the National Police Service in the Netherlands.

The 3.4% contraction in Health Care and Seniors revenues was mainly due to lower client retention rates, especially in France, and limited business development in recent quarters. These markets continue to offer considerable medium-term growth potential despite the current economic and political environment. The transition to an organization by global client segment currently in progress should enable the Group to leverage its expertise and deep understanding of its clients and consumers, in order to steadily improve the effectiveness of its sales initiatives.

New contracts signed during the year included Ospedale San Matteo Pavia in Italy and Forcilles Hospital in France.

In Education, the 2.3% decline in revenue was mainly attributable to Sodexo's decision in Fiscal 2014 not to renew certain major contracts, as a result of budget cuts for schools in several countries. Sodexo nonetheless enjoyed a modest return to growth in the fourth quarter and expects a modest improvement in the next twelve months.

New contracts signed during the year included Conseil Général des Yvelines and Ecole Supérieure d'Art et de Design in France and Tampere University of Technology (TTY) in Finland.

Operating profit

At 238 million euro, operating profit was up by 3% (3.9% excluding currency effects) over Fiscal 2014. Operating margin was up 10 basis points compared with the previous year, at 4.2%. The effects of client cost-saving drives and non-recurring contract mobilization costs recorded in the first half were more than offset in the second half, as expected, by the benefits of the program to improve operational efficiency launched in September 2012.

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

Revenues

(in millions of euro) Fiscal 2015 Fiscal 2014 Organic growth Acquisitions Currency effect Total growth
Corporate 3,154 3,030 +0.6%      
Health Care and Seniors 211 172 +20.2%      
Education 139 125 +4.0%      
Total 3,504 3,327 +1.7% 0% +3.6% +5.3%

Revenues in the Rest of the World region totaled 3.5 billion euro in Fiscal 2015, an increase of 5.3% over Fiscal 2014. Organic revenue growth was 1.7%.

The Remote Sites segment, which accounted for 45% of the region's total revenues in Fiscal 2015, reported organic revenue growth of 2.2%, driven by significant contract wins in Fiscal 2014, including Woodside Energy and BHP Billiton subsidiary GemCo for Groote Eylandt, Mineral Resources/Jerriwah Village in Australia, Petrex in Peru and Compania Minera Nevada in Chile. Revenue growth in the second half of the year was nonetheless adversely affected by mine closures, particularly in Latin America.

Excluding Remote Sites, organic growth in the Rest of the World region was 1.4%.

Organic revenue growth in the Corporate Services segment was 0.6%, reflecting both the developments in the Remote Sites segment described above and the consequences of the severe economic slowdown in Brazil, as well as the difficult fiscal and social environment in Chile. Growth nonetheless remained satisfactory in Asia, with near-double digit increases particularly in India and Southeast Asia. Many contracts were signed in emerging markets, including JBS, Valeo, FMC Technologies and Braskem in Brazil, Vodafone and Adobe in India, and deployment of the Unilever contract in Asia began during the year.

In Health Care and Seniors, organic growth of 20.2% was attributable to contract wins in Latin America, especially in Brazil, and strong growth in Asia. Driven by Sodexo's expertise in Health Care and Seniors services, this steady sustained growth confirms the of the Group's global approach by client segment.  During the year, Sodexo won a number of contracts including for the Mater Dei Belo Horizonte hospital in Brazil, and Rumah Sakit Pondok Indah Hospital in Indonesia.

In Education, the 4% organic growth in revenue was primarily attributable to operations in Latin America, India and China. New contracts signed during the year included Nord Anglia International School in Hong Kong and Sri Utama Schools in Malaysia.

Operating profit

Operating profit in the Rest of the World region increased by 15% (7.1% excluding currency effects) to 161 million euro. Operating margin was 4.6% compared to 4.2% in the prior year, maintaining the pattern of growth established over the last two fiscal years. The further improvement was the result of major productivity gains achieved in most of the countries in the region, and also reflected the impact of additional one-off projects in the offshore sector.

1.4 United Kingdom and Ireland

Revenues

(in millions of euro) Fiscal 2015 Fiscal 2014 Organic growth Acquisitions Currency effect Total growth
Corporate 1,332 1,070 +13.9%      
Health Care and Seniors 359 289 +12.7%      
Education 141 124 +4.1%      
Total 1,832 1,483 +12.8% 0% +10.7% +23.5%

Revenues in the United Kingdom and Ireland totaled 1.8 billion euro, an increase of 23.5% over Fiscal 2014 including organic growth of 12.8%.

Corporate Services revenue growth accelerated sharply to 13.9%. This performance was attributable to the provision of services, including one-off projects with a large facilities management component, for clients such as GSK, Rexam, Carlsberg and Zurich. It also reflects the initial months' revenue from 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.

Another highlight of Fiscal 2015 was the contract signed with Diageo to provide an array of integrated Quality of Life services at 68 sites in the United Kingdom and Ireland.

In Health Care and Seniors, organic growth accelerated to 12.7% thanks to the ramp-up of several contracts and the extension of services provided to several hospitals such as the five in London operated by Imperial College Healthcare.

In Education, the 4.1% growth in revenues for the year was principally due to the contract with the prestigious University College London won in Fiscal 2014.

Operating profit

Operating profit increased to 94 million euro, up 42.4% or +28.8% excluding currency effects. The increase was partly attributable to the leverage provided by revenue growth but it also reflected improved margins on several major integrated services contracts that were still in the start-up phase in Fiscal 2014. Operating margin increased from 4.5% in Fiscal 2014 to 5.1%.

2. Benefits and Rewards Services

Issue volume

(in millions of euro) Fiscal 2015 Fiscal 2014 Organic growth Acquisitions Currency effect Total growth
Latin America 7,526 7,323 +11.1%      
Europe and Asia 8,894 8,171 +4.3%      
Total 16,420 15,494 +7.5% +1.7% -3.2% +6.0%
 

Revenues

(in millions of euro) Fiscal 2015 Fiscal 2014 Organic growth Acquisitions Currency effect Total growth
Latin America 431 410 +14.4%      
Europe and Asia 396 341 +3.8%      
Total 827 751 +9.5% +4.1% -3.5% +10.1%

In the Benefits and Rewards Services activity, the growth dynamic remained satisfactory in emerging markets (Latin America and Asia), despite the gradual but nonetheless significant economic slowdown observed in Latin America. This trend was illustrated by the 9.5% organic revenue growth for Fiscal 2015.

Digital-based issue volume accounted for 65% of total issue volume for the year, reflecting the strong innovation culture that prevails at Sodexo and underpins the service offer for clients.

In Latin America, organic growth continued at a satisfactory rate of 11.1% for issue volume and +14.4% for revenues, led mainly by solid advances in Brazil and Venezuela. This performance was supported by higher face values on vouchers and cards and rising interest rates in Brazil. Sodexo continued to deepen its market penetration, thanks to its relevant service offers, and continued development of its expense management activities. Contract wins included Hospital Santa Paula and CEFOR Segurança Privada in Brazil, and Municipio de Xochitepec Morelos in Mexico.

In Europe and Asia, organic growth accelerated to 4.3% for issue volume and +3.8% for revenues. These gains reflected the success of Sodexo's Quality of Life offers, double-digit growth in Turkey, India and China, and more encouraging growth rates in the rest of Europe. Contract wins included Hindustan Zinc Limited and Willis Processing in India, Régie Nationale des Tabacs et Alumettes in Tunisia, Kiloutou in France and Vitaldent in Spain.

Operating profit

Operating profit amounted to 285 million euro, up 6.3% compared to the prior year (+15.3% excluding currency effects). The increase reflected higher issue volumes and tight operating cost management with a particular focus on voucher and card processing costs. The Group continued to invest in research, innovation and development of Quality of Life services during the year, while also launching operations in four new countries (Portugal, panama, Singapore and Taiwan) at the end of the fiscal year.

Operating margin was 34.5% or 35.7% at constant currencies, notably excluding the effect of changes in the exchange rates used to translate operating profit generated in Venezuela[6]. At constant currencies operating margin was stable compared to Fiscal 2014.

APPENDIX 2
Financial statements for Fiscal 2015

Consolidated income statement

In millions of euro Fiscal 2015 Fiscal 2014 Change at
current
exchange rates
Change at
constant
exchange rates
Revenues 19,815 18,016 +10.0% +2.6%
Operating profit
before exceptional items
1,143 966    
Exceptional items[7] - (27)    
Operating profit 1,143 939 +21.7% +15.1%
Financial income 65 20    
Financial expenses (172) (193)    
Share of profit of associates 7 8    
Profit before tax 1,043 774 +34.8% +25.7%
Income tax expense (320) (265)    
Profit for the period 723 509 +42.0% +30.8%
Non-controlling interests 23 19    
GROUP PROFIT FOR THE PERIOD 700 490 +42.9% +32.4%
Earnings per share (in euro) 4.60 3.23 +42.4% +32.2%
Dividend per share (in euro) 2.20[8]  1.80 +22,2%  

Consolidated balance sheet

ASSETS   EQUITY AND LIABILITIES
(in millions of euro) August 31,
2015
August 31,
2014
  (in millions of euro) August 31,
2015
August 31,
2014
 
        SHAREHOLDERS' EQUITY    
        Capital 628 628
        Share premium 1,109 1,109
        Consolidated reserves
and retained earnings
1,973 1,452
        Total Group
shareholders' equity
3,710 3,189
        Non-controlling interests 34 32
NON-CURRENT ASSETS       Total shareholders' equity 3,744 3,221
Property, plant and equipment 594 555        
Goodwill 5,300 4,971   NON-CURRENT LIABILITIES    
Other intangible assets 505 524   Borrowings 2,765 2,895
Client investments 485 361   Derivative financial instruments - 1
Associates 71 60   Employee benefits 418 449
Financial assets 122 122   Other liabilities 192 233
Derivative financial instruments 3 17        
Other non-current assets 22 16   Provisions 88 104
Deferred tax assets 232 226   Deferred tax liabilities 130 148
Total non-current assets 7,334 6,852   Total non-current liabilities 3,593 3,830
CURRENT ASSETS       CURRENT LIABILITIES    
Financial assets 24 8   Bank overdrafts 39 61
Derivative financial instruments 35 35   Borrowings 315 957
Inventories 270 265   Derivative financial instruments 5 15
Income taxes receivable 176 185   Income tax payable 133 132
Trade and other receivables 3,891 3,627   Provisions 83 88
Restricted cash and financial assets related to the Benefits and Rewards Services activity 739 758   Trade and other payables 4,069 3,592
Cash and cash equivalents 2,008 2,748   Vouchers payables 2,496 2,582
Total current assets 7,143 7,626   Total current liabilities 7,140 7,427
             
TOTAL ASSETS 14,477 14,478   TOTAL LIABILITIES
AND EQUITY
14,477 14,478

Consolidated statement of cash flow

(in millions of euro) Fiscal 2015 Fiscal 2014
Operating activities    
Operating profit before financing costs 1,136 933
Non-cash items    
Depreciation 277 250
Provisions (11) (21)
Losses (gains) on disposals and other, net of tax - (30)
Dividends received from associates 10 12
Change in working capital from operating activities 44 117
Change in inventories 5 5
Change in client and other accounts receivable (239) (138)
Change in suppliers and other liabilities 202 218
Change in Service Vouchers and Cards to be reimbursed 100 103
Change in financial assets related to the Benefits and Rewards activity (24) (71)
Interest paid (189) (159)
Interest received 39 24
Income tax paid (289) (301)
Net cash provided by operating activities 1,017 825
Investing activities    
Acquisition of tangible and intangible fixed assets investments (302) (245)
Fixed asset disposals 18 26
Change in client investments (62) (68)
Change in financial assets 17 -
Acquisition of consolidated subsidiaries (56) (50)
Disposals of consolidated subsidiaries 7 -
Net cash used in investing activities (378) (337)
Financing activities    
Dividends paid to parent company shareholders (276) (248)
Dividends paid to minority shareholders of consolidated companies (25) (18)
Purchases of treasury shares (25) (17)
Disposition of treasury shares 2 -
Proceeds from borrowings 7 1,903
Repayment of borrowings (1,048) (700)
Net cash used in financing activities (1,365) 920
CHANGE IN NET CASH AND CASH EQUIVALENTS (726) 1,408
Net effect of exchange rates and other effects on cash 8 (28)
Cash and cash equivalents, as of beginning of period 2,687 1,307
NET CASH AND CASH EQUIVALENTS,
AS OF END OF PERIOD
1,969

2,687




[1]  Operating profit and margin before costs in connection with the operational efficiency program in Fiscal 2014.

[2]  Subject to approval at the Annual Shareholders' Meeting on January 26, 2016.

[3] Shares held in registered form for more than four years as of August 31, 2015 and still held when the dividend becomes payable in February 2016, will qualify for a 10% dividend premium, provided that they do not represent over 0.5% of the capital per shareholder.

[4] Free cash flow divided by net income.

[5] Excluding exceptional costs recorded in Fiscal 2014 in connection with the program to improve operational efficiency and reduce costs.
   All of the information related to operating profit in the remainder of this document is presented excluding exceptional items.

[6] In mid-July 2015, Sodexo decided to transition to the new SIMADI foreign exchange platform and started bidding for dollars on this platform. The Group therefore considers that the currency exchange rate observed on the SIMADI on August 28, 2015 corresponds to the rate at which funds from its Venezuelan operations could be repatriated at the period end. Consequently, the exchange rate used for the fiscal year ended August 31, 2015 is 1 dollar = 198.96 bolivars (1 euro = 223.14 bolivars). Use of this rate had the effect of reducing operating profit for the year by 13 million euro.

[7] Costs recorded in connection with the program to improve operational efficiency and reduce costs in Fiscal 2014.

[8] Subject to approval at the Annual Shareholders' Meeting on January 26, 2016.




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The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Sodexo via Globenewswire

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