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Sodexo Q3 revenues down almost a third due to Covid-19

Q3 fiscal 2020 revenue results for Sodexo are down nearly a third compared to this time last year as a result of Covid-19.

In its latest trading update Q3 fiscal 2020 Group revenue was 3,910 million euro, down -31.2%.

The Group reported organic revenue was down -29.9%, which it says compares favourably to the hypotheses provided in April of -33%.

On-site Services organic revenue growth was -30.1% reflecting the significant impact of the Covid-19 pandemic as it spread across the world on the Group’s business with many sites closed or only partially open:

Business & Administrations was down -28.5%, compared to the -30% hypothesis. While Corporate services was impacted by the lockdowns and home working for white-collar workers, production was maintained in many industries and in many countries, in particular in essential sectors. Even if buildings were closed to workers, essential cleaning, maintenance and security continued, albeit at a slower pace, resulting in more resilience of the FM services (down -2%) than Food services (down -44%). Sports & Leisure sites closed down completely, whereas Energy & Resources and Government & Agencies were more protected from the lockdown by the nature of their business.

Healthcare & Seniors was down -12.9%, a bit more than the -8% hypothesis due to the lack of retail activity and the decline in elective surgery, and not fully compensated by extra COVID-19-linked services.

Education was down -53.9% slightly better than the -60% hypothesis. With most schools and universities closing from mid-March onwards, sales were limited to meals provided by local authorities to families in need.

Benefits & Rewards Services organic revenue growth was -22.8% vs the -20% hypothesis. In employee benefits, sales were impacted by the combination of a decline in issue volume of 12% due to temporary unemployment in most countries and the interruption of paper voucher production in some countries, and the more significant slowdown in reimbursement volumes, due to restaurants being closed. As a result, the float remained solid. Diversification services were impacted by a sharp decline in the home services vouchers specifically during lockdown, and the decline in corporate travel for the Rydoo platform.

Underlying operating profit flow-through from the decline in revenue has improved month by month and is now better than the hypothesis of 25% announced in April.

Sodexo CEO Denis Michael said: “We have lost nearly one third of our Q3 revenues relative to last year due to Covid-19. Nevertheless, our On-site business broad geographic mix, strong Facilities Management and large integrated accounts combined with Benefits & Rewards have given us resilience.

“At the start of the crisis, our focus was on protecting the health and safety of our people, consumers and clients. With a significant number of sites fully or partially closed, we immediately identified all means to protect our cash and reduce our costs.”

Commenting on the impact Covid-19 has had across the business in the UK and Ireland, Sean Haley, Regional Chair, Sodexo UK & Ireland said:  “After a strong first half of our financial year, the lockdown for Covid-19 has had a significant impact on our business in UK and Ireland. While we have had increases in demand in some areas, there have been big reductions in others.

“The health, wellbeing and safety of our people has remained our top priority and I am delighted that we have been able to support our people through our new Employee Relief Fund and through our commitment to paying full salaries to our colleagues in UK and Ireland who have been furloughed. 

“Our commitment to all those we serve has remained the same and I am proud of all we have done to support our people, our clients, consumers and suppliers throughout the lockdown.

“We are starting to see business return to a new normal and we are pleased to be welcoming new clients over the next few months with new contracts being awarded in our schools and universities and corporate businesses.

“However, we are not alone in looking to the future with caution, we are all having to adjust to the new post-Covid-19 normal and the economic reality of the impact the lockdown has had. 

“We are thankful for the continued commitment from our colleagues and the support our clients and our suppliers have continued to give us.  These are challenging times and the road to our recovery starts here.”

Looking ahead, Sodexo expects Q4 revenues to be down circa -27%, vs its original hypotheses in April of -15%. As a result, the 2nd semester decline is now expected to be -28%, or around 3 billion euro and -13.7% for the Full year.

 

 

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