Sodexo: Q1 Fiscal 2017 impacted by expected high comparative base, annual objectives confirmed

January 12, 2017

Sodexo, world leader in Quality of Life Services, today reported its non-audited revenues for the first quarter of Fiscal 2017, which ended on November 30, 2016.

On-site Services segment reporting changes from geographies to global client segments

• Revenues organic growth -1.5%, with underlying growth at +1.1% excluding the Rugby World Cup and Energy & Resources impact.

On-site Services: -1.8% organic growth, +0.9% excluding the Rugby World Cup and Energy & Resources

- As anticipated, Rugby World Cup contribution in previous year weighed on growth for 2.3%
- Energy & Resources improving, as comparative base eases and new business kicks-in, but still negative
- Education in North America returns to moderate growth
- Significant new business wins including Collahuasi in Chile, and Air France in France.

Benefits & Rewards Services: a strong quarter with +7.2% organic growth

- Strong growth in Europe with +9.8% organic revenue growth
- Resilient organic growth in Latin America, at +4.3%, despite a marked slowdown in Brazil

• Sodexo confirms its Fiscal 2017 objectives of organic revenue growth around 3% and growth in operating profit of 8 to 9%, at constant exchange rates and before exceptional expenses.

New segment reporting

From the beginning of Fiscal 2017, the Group reports the breakdown of its On-site Services revenues and operating profit by global client segment rather than geographies to reflect the progressive reorganization of the Group since September, 2015.

As a result,

• On-site Services revenues are now reported by three global client segments (Business & Administrations, Health Care & Seniors, and Education), with a secondary level by region (North America, Europe -including UK and Ireland- and Africa/Asia/Australia/Latin America/Middle East)
• On-site operating profit is provided by Global client segment.

Commenting on these figures, Sodexo CEO Michel Landel said:

'As anticipated, first-quarter revenue performance reflects the impact from the Rugby World Cup and the weakness in Energy & Resources. The underlying organic growth in this quarter excluding the Rugby and Energy & Resources effect is +1.1%. Education in North America is back to modest growth and the pipeline of new business opportunities is strong, while activity in France generally remains weak. In addition, the revenues momentum was strong in Benefits & Rewards Services this quarter.

Every day, our new organization demonstrates its capacity to provide expertise and value for our clients through our unique offer of integrated Quality of Life services. Revenue growth will progressively accelerate in the coming quarters and we confirm our objectives for Fiscal 2017 of around 3% organic growth and 8 to 9% growth in operating profit, excluding currency impact and exceptional expenses.'

Highlights of the period

• As anticipated, the first quarter is impacted by the very high comparable base last year due to the 131 million euro contribution of the Rugby World Cup, representing a decline of 2.3% of Group revenues.
• The trend in Energy & Resources has improved although organic growth remains negative at -4.5% in this quarter, compared to a double digit decline in Fiscal 2016.
• On-site Services organic growth, excluding the Rugby World Cup and Energy & Resources, was up 0.9% and is expected to progressively accelerate through the year.
• Business & Administrations organic growth was down 5%, impacted as expected by the Rugby World Cup comparable base, and the ongoing negative trend in Energy & Resources (albeit significantly less than in preceding quarters). Business & Administrations organic growth excluding the Rugby World Cup and Energy & Resources effect, was -0.1%, resulting from a low level of contract start-ups in Europe, in particular in the UK, some contract losses and weak demand in France generally.
• Health Care & Seniors organic growth is +2.6%, benefiting from same site growth in Hospitals in North America and the ramp-up of a new Senior contract in France, in a context of an ever greater contract selectivity in Hospitals in France and the United-Kingdom.
• Education organic growth has recovered slightly at +1.0% with modest growth in North America and Europe and continued strong development in new contracts in Asia.
• Organic growth in Benefits & Rewards Services, at +7.2%, picked up substantially in the quarter resulting from strong growth in Europe and resilient growth in Latin America, despite an increasingly competitive environment and lower face value inflation in Brazil.

Fiscal 2017 objectives

This first quarter, as expected, was impacted by challenging revenue comparables which will progressively reduce from the second quarter due to stronger new business pipeline, improved momentum in developing economies, continued improvement in Energy & Resources, the absence of any further Rugby World Cup impact, and the extra days accounting adjustment in North America in Q4.

The Group is confident that it will achieve its Fiscal 2017 objectives:

• Organic revenue growth of around 3%
• An increase in operating profit of 8% to 9%, excluding currency effects and before exceptional expenses relating to the Adaptation and Simplification program.

To read the full version of the press release, please download the PDF.

Sodexo will host a meeting and conference call (in English) today at 11 a.m. (French time), 10 a.m. (UK time) to present the Group's new segment reporting and comment on the 1st Quarter Fiscal 2017 revenues. Those who wish to connect to the call may dial +44(0)1452 555 566 (from outside France) or 01 76 74 24 28 (from within France), followed by the pass code 52 17 364. The presentation can also be followed via live webcast on the Group website, www.sodexo.com, in the 'Finance - Financial Results' section, where there will be an option to ask questions on line.

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 call will be available until January 27 by dialing +44(0)1452 550 000, pass code 52 17 364.