Sodexo: negotiations still tense in France

(Reuters) – Sodexo beat market expectations for its first quarter revenue on Friday as the resumption of face-to-face work, the reopening of various locations and price increases boosted its activity.

However, the group still encounters difficulties in renegotiating its public contracts in France in order to increase its prices.

“There have been a lot of efforts made but the discussions are still tense,” explained financial director Marc Rolland during a conference call. “Some town halls are still struggling to accept renegotiation or discussion.”

On the Paris Stock Exchange, Sodexo shares fell 3.1% to 87.58 euros at 09:35 GMT.

“Investors were perhaps expecting an increase in the target which did not come,” observes Michael Field, an analyst at Morningstar, who also underlines the strong growth experienced by the title in recent months.

Sodexo confirmed on Friday that it is aiming for internal growth expected to be between 8% and 10% for 2023 and an operating margin close to 5.5% at constant exchange rates.

“The strong start to fiscal 2023 in the first quarter was expected. As we move forward in the year, the post-Covid catch-up effect will gradually fade,” the group said.

In the first quarter, its turnover stood at 6.33 billion euros, exceeding the 6.17 billion euros expected by analysts, according to a consensus established by Sodexo, while on-site activity exceeded 2019 levels, with organic growth coming in at 11.9%.

“On-Site Services continues to benefit from the post-Covid recovery, with increased attendance, across all geographies, in the workplace, at stadiums, convention centers and Universities,” said the CEO Sophie Bellon in a statement, adding that price increases have also spurred growth.

Benefits & Rewards Services, which provides companies with vouchers for their employees, recorded organic growth of 23.4% during the quarter.

The group said in November that it wanted to accelerate the growth of its voucher business as companies seek more ways to retain employees amid tight labor markets and job flexibility, more in addition to employees working remotely.

(Report Olivier Sorgho, French version Augustin Turpin and Blandine Hénault, edited by Kate Entringer)

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