French group Sodexo’s core profits fall in first half of year

Reuters

French food services and facilities management group Sodexo reported a well-flagged fall in first-half core operating profit and kept its recently reduced targets for sales growth and margins for the 2017/18 full year.
Sodexo, which is the world’s second-biggest catering company after Compass Group, struck a cautious tone over its medium-term goals although Chief Executive Denis Machuel said he saw no reason to drop them at this stage.
The group, which has put an action plan in place to bolster sales and margins, said its board had approved a 300 million euros ($371 million) share buy-back programme, reflecting confidence in its future prospects. First-half underlying operating profit declined 7.4 percent from a year earlier to 627 million euros, amid weakness at the company’s north American business.
Sodexo reiterated its earlier March 29 forecast that it expected to deliver organic revenue growth of between 1-1.5 percent for the 2018 fiscal year, and an underlying profit margin of around 5.7 percent. It had issued that warning after giving an estimate of its first-half results, which missed expectations.
In January, Sodexo had previously forecast revenue growth of between 2-4 percent and a flat operating margin at 6.5 percent of sales for the full year ending August 31, 2018, excluding the impact of acquisitions and currency movements. Sodexo has a medium-term objective of average annual revenue growth, excluding currency effects, of between 4-7 percent. It also has a medium-term goal of average annual growth in underlying operating profits, excluding currency effects, of between 8 and 10 percent.
“I see no structural reason at this stage to abandon our medium-term guidance but I am cautious,” Machuel said, noting that those goals had not been reached in
recent years.