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Sodexo: Impact of Covid-19 hits revenue

Sodexo has published its full year fiscal results which reports a revenue organic growth of -12%.

While the first half organic growth was +3.2%, the second half was down -27.5%, impacted by the Covid-19 pandemic.

Second half Fiscal 2020 organic revenue growth was in line with the hypotheses published by the Group. The organic trend did improve in the fourth quarter, at -24.9%, relative to the -36%, adjusted for the first two weeks of the third quarter before lockdown.

The underlying operating profit margin for the year was 2.9%. While the 1st half underlying operating margin was stable year-on-year at 5.9%, the 2nd half underlying operating profit margin fell to -1.5%, reflecting a flow-through of the revenue reduction of 20.4%. Excluding the currency impact, the flow-through was 21.2%, close to the most optimistic hypothesis published in July, and the second half margin was -0.9%.

Commenting on the years’ performance, Sodexo CEO Denis Machuel said: “Fiscal 2020 was a tale of two halves. Up to the end of February, we were on track with our Focus on Growth strategic agenda in terms of growth and productivity with enhanced execution on large contracts and increased signing discipline. We were on track to meet our guidance of +4% organic growth in revenues.

“The Covid-19 crisis interrupted this positive momentum.

“We are confident that the resilience of our broad portfolio of services, the investments in marketing and digital, and responsible sourcing, our strong sense of responsibility to our stakeholders and our strong cash positive business model, will ensure that we come out of this crisis in better shape, despite ongoing market disruption.”

In relation to the UK’s performance, Sean Haley, Region Chair, Sodexo UK and Ireland said: “Our full year fiscal results reflect the financial impact Covid-19 is having on our business – despite strong growth in the first half of the year and a continued steady flow of new business wins, particularly in the education and corporate markets.

“Sodexo’s financial stability and portfolio mix has directly helped our public and private sector clients to operate safely in these challenging times and build an economic recovery that benefits everyone.

“As a responsible employer we are doing all we can to keep our colleagues safe and to protect their jobs. We continue to redeploy colleagues to hospitals, prisons and other sites that have remained fully operational as well as creating opportunities to transfer their considerable skills into supporting the operation of Covid-19 testing centres across the country.

“I am proud of our teams and the way they have responded to the many challenges they have faced during the pandemic. Earlier this month, this was recognised by the IWFM, who presented us with three coveted awards, including one for our team at University of Greenwich for the mobilisation of a brand new IFM contract which began at the start of the national lockdown.

“Back in July, I said that we were on the start of the road to recovery. Since then, we continue to navigate the impact of the different Covid-19 restriction levels across the country and support our clients, people, suppliers, communities and the national health infrastructure for managing the pandemic. We are working in close alignment with our clients and our teams to fully support the economic recovery and do so with our priorities firmly placed on ensuring the health, safety and wellbeing of our people and the communities that we serve.”

Sodexo has also published its 2020 Social Impact Report.

Haley added: “We are proud to publish the progress we have made on the challenging social targets we set ourselves in our 2019 Public Service Pledge. The results outlined in our 2020 Social Impact Report demonstrate the market leading focus we have given to delivering and measuring positive social impact – whether that is the continued efforts of our teams to reduce food waste, employ ex-offenders or the ongoing commitment to support and encourage SMEs into our supply chain.”

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