(BFM Bourse) – The collective catering group posted like-for-like growth of 10.5% in the third quarter of its fiscal year ending next August, slightly above expectations. The company also very slightly raised its annual margin target.
Sodexo ticked all the right boxes on Friday. The collective catering and “employee benefits” group (restaurant vouchers, gift vouchers) delivered its activity for the third quarter of its staggered 2022-2023 financial year, Sodexo closing its accounts at the end of August.
In a market context where cantiniers have to deal with high food inflation and salaries that they have to try to pass on to their customers as best they can, the growth is proving to be satisfactory. At least compared to analysts’ expectations.
Over the period, revenues rose 10.5% like-for-like to 6.03 billion euros, while the consensus was for growth of 9.8%, according to Jefferies. However, Stifel considers that the “buy-side” (or, to put it simply, investors) were perhaps expecting a figure closer to 11%.
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A slight disappointment in Europe
On-site services (collective catering but also other services such as cleaning or elevator maintenance) recorded like-for-like growth of 9.9%. In detail, this variation includes price increases of 5%, volumes up 4% and also an increase in “net development” (ie new contract wins) “close to” 2%. Stifel considers this last figure “slow”, because it is just a little lower than the objective of 2% aimed by the company for the whole exercise. “We are in the thickness of the line”, slice for his part a Parisian analyst. On the negative side, the end of the contract for the screening centers in the United Kingdom “negatively impacts internal growth by -0.9%”, indicates Sodexo.
By region, Stifel notes that Europe evolved a little below expectations, with like-for-like growth of 4.4%, while analysts were counting on a rate of 6.9%. The bank considers that this reflects, in France, the loss of a contract in prisons last year, as well as the impact of public holidays and strikes. The North America region – the largest – remains solid with like-for-like growth of 12.1%.
The company’s second business, employee benefits, saw their growth reach 25.5% like-for-like. This division benefits from the rise in interest rates, which allows the company to increase the income it generates by investing in the short term the funds issued by its customers but not yet spent by the employees of these customer companies. In general, inflation supports this activity by increasing the face value of prepaid service vouchers marketed by Sodexo.
Sodexo announced in April the split of this activity with an IPO scheduled for next year. This operation will be done via the distribution of shares to holders of Sodexo, the same scheme that Accor had followed to split Edenred, Sodexo’s major competitor in employee benefits. Recently, Sodexo renamed this division “Pluxee” in view of this future split. This Thursday the company announced the appointment of Didier Michaud-Daniel as Chairman of the Board of Pluxee. This business leader is best known for having been the general manager of the Bureau Veritas testing, inspection and certification (ICT) group from 2012 until June 22. His appointment “should be well received” by the market, judge Royal Bank of Canada.
Possible profit taking
At the end of this third quarter, Sodexo is very slightly raising its operating margin outlook for the current fiscal year. It is now expected “at 5.5%” against “close to 5.5%” previously. The group is also still targeting like-for-like growth “close to 11%”.
For the Pluxee division alone, Sodexo is now expecting growth “at 20%” and an operating margin “over” 32% at constant exchange rates, against growth “close to 20%”, and a margin “close to 32%. %”, previously.
Despite this rather good publication, the stock fell 1.1% on the Paris Stock Exchange around 3:20 p.m., after having hit a low of 3.15% at the start of the session.
“The stock had outperformed the CAC 40 well, and still recorded an outperformance of more than 10 percentage points over the quarter (compared to the index, editor’s note), so profit taking may take place”, explains the analyst Parisian.
“In addition, the communication on the group’s outlook coupled with the increase in those of Pluxee may lead to wondering whether the core business, on-site services, is not, perhaps, worse than expected, because Sodexo may have a little more difficulty in passing on inflation in Europe.Even if the education segment (schools and universities, public customers on which the passing on of price increases is supposed to be more difficult, editor’s note) in this region does not represents only about 4% of turnover”, he develops. “But overall the publication remains correct,” concludes this analyst.
Julien Marion – ©2023 BFM Bourse
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