Regulatory News:
Sodexo (NYSE Euronext Paris FR 0000121220-OTC: SDXAY)(Paris:SW)(OTCBB:SDXAY): at the Board of Directors meeting on April 16, 2013, chaired by Pierre Bellon, Chief Executive Officer Michel Landel presented the Group´s performance for the first half of Fiscal 2013.
Financial performance for first half Fiscal 2013:
| millions of euros | First Half | First Half | Change | Change | ||||||||||||
| Revenues | 9 463 | 9 069 | + 4.3% | + 2.8% | ||||||||||||
| Organic growth | + 2.1% | + 6.4% | ||||||||||||||
| Operating profit before exceptional items2 | 528 | 533 | - 0.9% | - 1.1% | ||||||||||||
| Exceptional items4 | (50) | 26 | ||||||||||||||
| Operating profit - reported | 478 | 559 | - 14.5% | - 14.7% | ||||||||||||
| Tax rate | 39% | 35.6% | ||||||||||||||
| Group net income5 | 236 | 297 | - 20.5% | - 20.9% | ||||||||||||
| Gearing | 33% | 38% | ||||||||||||||
| Feb. 28, 2013 | Feb. 29, 2012 | |||||||||||||||
1 Excluding positive impact of Rugby World Cup in Fiscal 2012.
2 Before expenses in first half Fiscal 2013 related to operational efficiency improvement program announced in November 2012 and favorable impact from UK pensions in first half Fiscal 2012.
3 The currency impact is determined by applying the average exchange rate for the first half of the previous year to the figures for the first half of the current year.
4 Expenses related to operational efficiency improvement program in first half Fiscal 2013 and favorable impact from UK pensions in first half Fiscal 2012.
5 After exceptional items and effects of new tax measures, particularly in France (tax on dividends and non-deductibility of interest expenses).
Commenting on these figures, Sodexo CEO Michel Landel said:
"In a more difficult economic environment, Sodexo is showing good resilience. Our Quality of Life services offer continues to be successful. Our clients are increasingly interested in our wide range of integrated services. Our leading position in emerging markets is also a driver of future growth. The operational efficiency improvement and cost reduction program, already underway, will be further enlarged. We are confident in the future and are maintaining our objectives for Fiscal 2015."
Revenue growth of + 4.3%
Consolidated revenues for the first half of Fiscal 2013 were 9.5 billion euro, an increase of + 4.3%, including + 0.7% from acquisitions and changes in scope and + 1.5% from currency impacts.
Organic growth
Organic revenue growth in the first half of Fiscal 2013 was + 2.1%, or + 2.7% excluding the positive impact from the Rugby World Cup on the first quarter of Fiscal 2012.
Organic growth for On-site Services was + 2% and + 2.7%, excluding Rugby World Cup. The first half of Fiscal 2012 had benefited from the 53 million euro in revenue generated by the 2011 Rugby World Cup.
Facilities management services accounted for over one quarter of consolidated revenue. As was the case in the last two fiscal years, revenues from these services are continuing to grow three times faster than foodservices revenues, providing renewed confirmation of the relevance of the Group´s strategic positioning.
Organic growth in Benefits and Rewards Services6 was +4.3%, reflecting:
- continued dynamism in Latin America, and
- slightly higher performance than in the second half of Fiscal 2012 (adjusted for the decrease in activity in Hungary resulting from unfavorable legislation introduced in that country on January 1, 2012) .
1 Formerly Motivation Solutions
Changes in scope
Acquisitions contributed + 0.7% to the Group´s growth in the first half and include the following acquisitions completed since the beginning of the fiscal year:
- Servi-Bonos (Benefits and Rewards Services in Mexico) in November 2012, a leader in Mexico´s checks and vouchers market.
- MacLellan (Technical Services, in India) in December 2012; a major Indian facilities management services company with specific expertise in air conditioning, heating, maintenance and energy management services.
Acquisitions made during the prior year, including Roth Bros (facilities management, U.S., November 2011) and Lenôtre (France in September 2011) also contributed to a lesser extent.
Operating profit
Reported operating profit was 478 million euro, a decline of - 14.5% at current exchange rates and - 14.7% at constant rates.
Responding to the current macro-economic environment, the Group Chief Executive Officer launched an operational efficiency improvement and cost reduction program at the start of the fiscal year. This program should allow Sodexo to reduce site operating costs by the equivalent of 0.6% of revenue and overheads by the equivalent of 0.4% of revenue, using Fiscal 2012 as the baseline, over the period to Fiscal 2015. Exceptional costs of 50 million euro have been recorded in the first half of Fiscal 2013 in relation to this program.
| millions of euro | First Half | First Half | Change | |||||||||||||
| At current | At constant | |||||||||||||||
| Operating profit before exceptional items | 528 | 533 | - 0.9% | - 1.1% | ||||||||||||
| Exceptional items | ||||||||||||||||
| Included in gross profit | (30) | - | ||||||||||||||
| Included in overheads | (20) | - | ||||||||||||||
| Accounting adjustment to pension liabilities | - | 26 | ||||||||||||||
| TOTAL exceptional items | (50) | 26 | ||||||||||||||
| Reported operating profit | 478 | 559 | -14.5% | -14.7% | ||||||||||||
Operating profit before exceptional expenses was 528 million euro in the first half of Fiscal 2013 compared with 533 million euro in the prior year period (excluding exceptional income), a decline of - 0.9% at current exchange rates and - 1.1% at constant rates.
The On-site Services activities in North America, the UK and Ireland and the Rest of the World (Latin America, Africa, Middle East, Asia, Australia and Remote Sites) all increased their contribution to operating profit (excluding currency effects). Operating profit from the Benefits and Rewards Services activity was also higher. However, the contribution from On-site Services in Europe deteriorated as compared to the prior year period.
Consolidated operating margin1 stood at 5.6% versus 5.9% in the first half of Fiscal 2012.
1 Operating margin before exceptional expenses related to the operational efficiency improvement program in first half Fiscal 2013 and favorable impact from UK pensions in first half Fiscal 2012.
Group net income
Group net income was 236 million euro compared with 297 million euro in the prior year period. This result includes the impact of exceptional expenses generated by the operational efficiency improvement program as well as the effects of new fiscal measures, particularly in France (tax on dividends and non-deductibility of interest expense borrowing).
Debt levels and cash flows
- As of February 28, 2013, net debt was 961 million euro and gearing was 33% (compared to 38% as of February 29, 2012). The Group´s financial ratios are very strong.
- Net cash provided by operating activities was 37 million euro, a decline of 278 million euro compared to the same period last year. Three main factors explain this variation:
- Benefits and Rewards Services investments for the period in higher-return financial instruments with longer maturities (100 million euro impact).
- Changes in exceptional items included in operating profit for the two periods (76 million euro impact).
- A slight deterioration in the days sales outstanding ratio.
- By contrast, net cash used in investing activities reduced in the first half of Fiscal 2013. The first half of Fiscal 2012 included 576 million euro related to acquisitions (mainly Puras do Brasil, Roth Bros in the United States and Lenôtre in France).
- Investments for the first half of Fiscal 2013 included:
- Net capital expenditure and client investments for 113 million euro, representing approximately 1.2% of revenues.
- Acquisitions for 81 million euro, mainly Servi-Bonos in Mexico.
Awards
- In March 2013, Sodexo was again listed among the "Most Admired Companies" in FORTUNE magazine, which evaluates the reputation of the largest companies in the world. Sodexo was ranked number one in its industry category, "Diversified outsourced services."
- For the sixth consecutive year, Sodexo was recognized in January 2013 by Sustainable Asset Management (SAM) in its prestigious "2013 Sustainability Yearbook" report for its commitment in terms of economic, social and environmental responsibility and was awarded three prizes: Sector Leader, Gold Class and Sector Mover.
Outlook
At the April 16, 2013 Board of Directors´ meeting, Michel Landel reminded the Board of the relevance of the Group´s long-term strategy, founded on a unique Quality of Life services offer, an unsurpassed global network for its activities and uncontested leadership in emerging economies.
During this meeting he confirmed his confidence in the Group´s medium-term objectives. He noted that between Fiscal 2005 and Fiscal 2012, revenues grew by an average 6.7% per year. The initiatives undertaken by Sodexo over several years will allow the Group to continue its growth, improve its competitiveness and continue to invest in its transformation.
Michel Landel noted that the operational efficiency improvement and cost reduction program announced in November 2012 is well underway. In this regard, he confirmed that all teams are fully mobilized around specific actions to reinforce the Group´s competitiveness. This program will be reinforced, given the economic context. At present, the Group considers that the implementation of this program will result in exceptional charges of between 180 and 200 million euro over a period of 18 months, beginning September 2012, and will have a favorable effect for the same amount in Fiscal 2015 and subsequent years.
Given the first half performance and current trends in the economic environment, Michel Landel provided the following objectives for Fiscal 2013:
- Organic revenue growth between 1% and 2%
- Stable operating profit1 compared with Fiscal 2012
Sodexo confirms its confidence in achieving its objective of a consolidated operating margin of 6.3% by the end of Fiscal 2015.
In addition, the Group maintains its medium-term objective of + 7% average annual consolidated revenue growth.
Michel Landel noted Sodexo´s numerous strengths:
- Its integrated services offer;
- Its choices for development which capitalize on the experience and competence of its teams in each client segment and sub-segment;
- Its solid growth dynamic in emerging economies, where the Group continues to reinforce its positions;
- The engagement and motivation of its teams.
1 Excluding currency impacts and before exception items in Fiscal 2012 and Fiscal 2013.
Analyst briefing
Sodexo will hold a conference call (in English) today at 8:30 a.m. (Paris time), to comment on the first half results for Fiscal 2013. The presentation can be followed via webcast at www.sodexo.com. The press release and the presentation will be available on the Group website: www.sodexo.com under the "latest news" section beginning at 7:00 a.m. A recording of the conference will be available until May 1 by dialing +44 (0) 1452 550 000, followed by the pass code 25 63 74 95.
Financial communications schedule
| Nine months revenues | July 10, 2013 | |||
| Annual results | November 14, 2013 | |||
Key figures (as of August 31, 2012)
18.2 billion euro consolidated revenue
420,000 employees
20th largest employer worldwide
80 countries
34,300 sites
75 million consumers served daily
11.1 billion euros market capitalization (as of April 17, 2013)
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 45 years of experience: from reception, safety, maintenance and cleaning, to foodservices and 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.
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 2012 Registration Document filed with the AMF November 12, 2012.
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.
APPENDIX 1
Comments by activity and geographical area
All of the following data in this document relating to operating profit do not include exceptional items1
1. On-site Services
Revenues
| (millions of euro) | First Half | First Half | Organic | Currency | Acquisitions | Change at current | ||||||||||||||||||
| On-site Services | ||||||||||||||||||||||||
| North America | 3,602 | 3,420 | + 1.3% | + 3.2% | + 0.8% | + 5.3% | ||||||||||||||||||
| Continental Europe | 2,949 | 2,892 | + 0.9% | + 0.6% | + 0.5% | + 2.0% | ||||||||||||||||||
| Rest of the World | 1,838 | 1,708 | + 7.2% | + 0.2% | + 0.2% | + 7.6% | ||||||||||||||||||
| United Kingdom and Ireland | 700 | 680 | - 2.6% | + 3.9% | + 1.6% | + 2.9% | ||||||||||||||||||
| Total | 9,089 | 8,700 | + 2% | + 1.8% | + 0.7% | + 4.5% | ||||||||||||||||||
On-site Services revenue was 9.1 billion euro, up + 4.5% compared with the first half of Fiscal 2012. Organic revenue growth was + 2%, or + 2.7% excluding the positive impact on revenue for the prior year period from the 2011 Rugby World Cup.
| (millions of euro) | First Half | First Half | Organic | Acquisitions | Currency | Total growth | ||||||||||||||||||
| Corporate | 4,719 | 4,444 | + 3.9% | |||||||||||||||||||||
| Healthcare and Seniors | 2,177 | 2,134 | - 0.4% | |||||||||||||||||||||
| Education | 2,193 | 2,122 | + 0.6% | |||||||||||||||||||||
| Total | 9,089 | 8,700 | + 2.0% | + 0.7% | + 1.8% | + 4.5% |
- Organic growth in the Corporate segment was + 3.9% for the first half of Fiscal 2013, or + 5.1% excluding the impact of the 2011 Rugby World Cup. Growth was mainly driven by:
- Increased demand from companies in North America and Europe for integrated service contracts.
- A healthy rate of growth for Sodexo in Asia, Africa, Middle East, Remote Sites and, in particular, Latin America, despite the economic slowdown observed since last summer.
Concerning foodservices, notably in Europe, the slowdown has intensified since the start of the fiscal year. Efforts by clients to find additional cost savings and to reduce employee numbers, along with lower consumer spending, weighed on revenue growth in several countries.
- The - 0.4% decline in Healthcare and Seniors was due to the lower client retention rate in North America in Fiscal 2012. Since the start of Fiscal 2013, Sodexo´s teams in the United States have won a number of contracts that should lead to a gradual return to growth in this client segment in the coming months.
- In Education organic revenue growth was + 0.6%, reflecting a more selective approach to new contracts in the public school sector.
1 Expenses related to operational efficiency improvement program in first half Fiscal 2013 and favorable impact from UK pensions in first half Fiscal 2012.
Operating profit
Operating profit of 427 million euro reflected a slight decrease (- 0.7%) compared to the prior year period. The On-Site Services activities in North America, the United Kingdom, Ireland and the Rest of the World region (Latin America, Africa, Middle East, Asia, Australia and Remote Sites) all increased their contribution to operating profit (excluding currency effects). However, the contribution from Continental Europe deteriorated compared to the prior year period due to the region´s unfavorable economic environment.
Analysis by geographic region, On-site Services
1.1 North America
Revenues
| (millions of euro) | First Half | First Half | Organic | Acquisitions | Currency | Total | ||||||||||||||||||
| Corporate | 792 | 700 | + 6.3% | |||||||||||||||||||||
| Healthcare and Seniors | 1,253 | 1,234 | - 1.6% | |||||||||||||||||||||
| Education | 1,557 | 1,486 | + 1.4% | |||||||||||||||||||||
| Total | 3,602 | 3,420 | + 1.3% | + 0.8% | + 3.2% | + 5.3% | ||||||||||||||||||
Revenues in North America were 3.6 billion euro, up + 5.3% compared with the first half of Fiscal 2012, and included organic growth of + 1.3%.
Organic growth in Corporate was a high + 6.3%. This performance was mainly attributable to the increase in facilities management services for clients such as General Electric, the contribution of new contracts such as the prestigious Circuit of the Americas, home to the United States Formula 1 Grand Prix, and growth in the Remote Sites business in Canada.
Sodexo won several new contracts during the first half, including with Siemens in Canada (44 sites, integrated services), Harley Davidson, Inc. (Wisconsin) and General Electric Aero & Healthcare Systems (South Carolina and New Jersey).
Healthcare and Seniors revenues decreased by - 1.6%, due to weak growth in Fiscal 2012 and a decline in the client retention rate, with first half of Fiscal 2013 revenue bearing the full brunt of the lost Ascension Health System contract. Since the start of Fiscal 2013, Sodexo´s teams have achieved several major contract wins that should help drive a return to growth in the coming months, notably with the gradual ramp-up of the major contract with HCR ManorCare, one of the United States´ largest retirement home operators with 290 homes in 32 states and some 40,000 residents. When services under the contract are fully deployed, annual revenues are expected to reach 220 million US dollars.
Other contracts won during the period included the signature of contracts with Health Corporation of America (HCA) East Florida (9 hospitals), LA County (two UCLA Medical Center sites in California), Ochsner Medical Center (Louisiana), Saint Joseph´s John Knox Village (Florida) and University of Arizona Medical Center.
In Education, organic revenue growth came to + 1.4%. Growth in site revenue was tempered, as a result of:
- A decline in the number of meals served following implementation of the Healthy and Hunger-Free Kids Act, which has changed schoolchildren´s eating habits.
- Lower spending by students and fewer events at the sports stadiums on university campuses.
New contracts signed during the period included Bethune Cookman University (Florida), St John´s College (Maryland) and Confederation College (Ontario, Canada).
Operating profit
Operating profit amounted to 244 million euro, up + 8.0% or + 4.9% excluding the currency effect. Operating margin stood at 6.8% versus 6.6% in the first half of Fiscal 2012, reflecting tight control over all operating costs and productivity gains, particularly in the Corporate segment.
1.2 Continental Europe
Revenues
| (millions of euro) | First Half | First Half | Organic | Acquisitions | Currency | Total | ||||||||||||||||||
| Corporate | 1,730 | 1,678 | + 1.6% | |||||||||||||||||||||
| Healthcare and Seniors | 706 |
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