Sodexo cuts its growth forecast as uncertainties weigh

The logo of French catering services and facilities management group Sodexo is seen at the company’s headquarters in Issy-les-Moulineaux near Paris, France, November 30, 2018. REUTERS/Gonzalo Fuentes/

April 1 (Reuters) – French catering and catering group Sodexo (EXHO.PA) on Friday lowered its expectations for full-year organic revenue growth, citing the coronavirus pandemic, the conflict in Ukraine and the closure of COVID-19 test centers in the UK.

The Paris-based company now expects organic revenue growth around the low end of its 15-18% range previously forecast for its 2022 fiscal year to August 31.

Shares of Sodexo, the world’s second largest food services group behind Britain’s Compass (CPG.L), fell nearly 6% in early trading.

“The current environment remains fraught with uncertainty. There is a resurgence of localized outbreaks of COVID, several mobilizations in Russia will not take place and testing centers in the UK are closing earlier than expected,” said CEO Sophie Bellon in a statement.

Soaring food prices triggered by Russia’s invasion of Ukraine are also a cloud on the horizon for the global economy as consumer finances come under strain.

“Inflation is something we are working on a lot. We are very, very vigilant because the situation surrounding the war in Ukraine is causing some volatility on certain commodities, so it is something we are watching like a hawk,” said Chief Financial Officer Marc Roland.

However, the group remains confident in its ability to manage the inflationary pressure on its margins, its business model making it possible to gradually pass on price increases to customers.

JPM analysts said Sodexo’s confident projections appeared optimistic.

AlphaValue analyst Yi Zhong, meanwhile, warned of margin pressure.

“Caterers should be more or less immune to any food or staff inflation. However, when inflation rises too quickly, caterers will experience the lag effect in recovering inflationary expenses, straining their margins,” he said. she declared.

The group announced a new contract in July 2021 to operate 121 additional fixed and mobile test centers in the UK for 12 months with an option to extend for another six months, but free testing in England ended on Friday. Read more

“So far, we have already redeployed 1,000 people within Sodexo and we are also working with another 1,000 people who have requested redeployment to other contracts and other Sodexo subsidiaries,” said CEO Bellon. to journalists.

The group posted half-year underlying operating profit of 538 million euros ($595.30 million), beating analysts’ expectations of 530 million euros, and said it had seen a recovery since late February. after coronavirus variants Delta and Omicron slowed recovery. in the second trimester.

Reporting by Federica Mileo and Diana Mandia Editing by Subhranshu Sahu and David Goodman

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