(BFM Bourse) – The collective catering specialist has delivered aggressive objectives for its next three financial years, aiming in particular for an operating margin of more than 6% for the financial year ending in August 2025. But the stock is falling on the stock market of Paris, the market being skeptical about the achievement of these targets.
Sodexo sets the bar high. On the occasion of a day dedicated to investors, the collective catering specialist unveiled its roadmap for the next three years with new medium-term targets.
For the 2022-2023 financial year, ending next August, the company now managed and chaired by Sophie Bellon, daughter of founder Pierre Bellon, confirmed the objectives unveiled last week, namely organic growth of between 8% and 10 % and an operating margin close to 5.5% at constant exchange rates.
For the next two fiscal years, Sodexo intends to generate organic growth in a range of 6% to 8% and expects to achieve an operating margin of over 6% for the fiscal year ending in August 2025. This would bring the French company closer to its big rival, Compass. The British group, for its part, anticipates a margin of 6% from the 2021-2022 financial year, which ended in September and whose accounts have not yet been published by the company from across the Channel.
A refocusing on restoration
“I am convinced that we are on the right track to achieve long-term profitable growth and to be the world leader in sustainable food and high value-added experiences at all stages of life: education, work , care and entertainment,” said Sophie Bellon, quoted in a press release.
To achieve these new objectives, Sodexo intends to refocus on catering services, by being more selective on so-called “facility management” services, which include the group’s other on-site services, such as cleaning of premises or elevator maintenance.
At the same time, the group intends to accelerate its growth in its “benefits and rewards” activity, which includes restaurant vouchers or gifts. Sodexo had for a time considered opening the capital of this activity before backtracking last May. Sodexo plans to strengthen its presence with SMEs, an under-penetrated market, and expand its offer. For this benefits and rewards activity alone, the group anticipates organic growth in 2022-2023 of between 12% and 15% and an operating margin of around 30%. For the future, the company expects growth of at least 10% for 2023-2024 and 2024-2025 and a margin of more than 30% over 2024-2025.
Sodexo has also repeated that it is aiming for a customer loyalty rate – a crucial indicator in collective catering – of 95%. As an indication, this rate was 94.5% for the 2021-2022 financial year.
In the top 15 of the SBF 120
On paper, the menu drawn up by Sodexo convinces financial analysts. UBS calls the group’s targets “ambitious” noting that the target of 6% to 8% for the 2023-2024 and 2024-2025 financial years exceeds the consensus of analysts which was around 4%. The same is true for the expected operating margin landing, therefore, at more than 6% in 2024-2025 against a figure of 5.6% for the consensus. Royal Bank of Canada evokes, for its part, “punchy” targets.
For Stifel, “the challenge” is however “to convince investors of the feasibility” of these objectives. For now, the market is actually asking to see: Sodexo shares fell 3.3% to 85.84 euros around 2:50 p.m., while the CAC 40, at the same time, dropped 0.6%.
“The value corrects a little and suffers profit taking which is far from abnormal given its course”, underlines a Parisian analyst. Over the whole of 2022 Sodexo takes 11.45%, which allows it to be among the 15 strongest growth in the SBF 120. “The group’s plan is holding up, is not unrealistic, but it requires market confidence “, he adds.
“At the moment investors do not believe it,” slice another financial intermediary. “The group will need to improve its execution for the market to change its approach,” he added.
It will therefore be necessary for Sodexo to carry out its recipe without a hitch so that investors have more appetite for its action.
Julien Marion – ©2022 BFM Bourse
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