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Sodexo expects an impact of around €2bn on annual revenues due to Coronavirus pandemic

In a recent announcement, Sodexo has stated its Fiscal 2020 H1 landing to be published on April 9, 2020 is expected to be “in line” with internal forecasts and aligned with the Fiscal 2020 annual guidance.

The global support services firm said the COVID-19 pandemic started to be a “concern” in the second half of January for its business in China, leading to a “rapid deterioration worldwide in February, moving from region to region and generating more and more government precautionary measures to limit the spread of the virus”.

As a result the company is “coordinating globally, regionally and locally to manage its business continuity and pandemic plans to support and protect its employees and consumers across all of its geographies” and has “reinforced” the existing rules for food safety, personal hygiene and infection control.

Sodexo added: “The first half figures include a mild shortfall in revenues in China and Italy due to COVID-19 that we have been able to absorb.

“As much as we have the systems and granularity of reporting to identify with precision the impact of COVID-19 ex post, it is too early to assess the different situations and their impact moving forward. This is due to the variety of situations we are facing, decline in traffic, full or partial closure of sites, and variability between sites, countries and regions.

At this stage, it is too early to determine the impact that these combined factors may have on the Group’s second half results. Based on the last few weeks’ observations in China, Italy, France and the USA we can see that for each €100 million of revenue decline the impact on underlying operating profit is around -30 per cent depending on the country and the segment.

“We are currently running a full bottom-up forecast exercise based on closures and revised traffic estimates and will provide an update on April 9th along with our H1 results. Currently, early estimates, given the many moving parts, could be for an impact of around two billion euro on annual revenues.”

The company concluded: “While we remain confident on our strong market and financial position, and the midterm positive perspectives and potential of Sodexo, we have no other choice at this stage but to suspend our guidance confirmed in January until the situation stabilises.”

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