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Sodexo Q3: Organic growth “better than expected”

Sodexo has published its results for the first nine months of Fiscal 2019, reporting organic growth above expectations at 3.5%.

On-site Services organic revenue grew +3.2% reflecting continued improvement in North America, at +1.8% for the period, resulting from a first quarter at +0.2%, the second at +2.4% and the third at +3%. Europe was solid at +3.4% and the region Africa, Asia, Australia, Latin America, Middle East continues to grow at +6.8%. Third quarter organic growth was better than expected in Business & Administrations and Healthcare & Seniors and in line in Education.

During the third quarter, the loss of several medium-sized contracts and one “very challenging” large contract (impacting revenues from first quarter Fiscal 2020) has resulted in a “significant decline” in Health Care retention. According to the Group, these losses have offset the Group’s year-on-year progress on retention achieved by the end of the first half. Overall, however, the group added that “development and same site sales growth remain strong”.

Commenting on the results, Sodexo CEO, Denis Mauchel said: “On-site Services growth continued to improve in all segments and in North America in Q3. Growth in Europe and the rest of the world remains very solid. Both the Business & Administrations and Healthcare & Seniors segments performed better than expected. Education was in line with expectations. Benefits & Rewards is growing strongly, even after four quarters of acceleration.

“We are pleased with this performance to date. However, we see more modest growth in Q4 as we continue to face retention challenges and a relatively high comparable base in Sports & Leisure and North America.

“As a result, our revenue organic growth is expected to be around 3%, the top end of our guidance for the full year, and the underlying operating profit margin around 5.5%, the bottom end of our guidance.”

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