FMJ Facilities Management magazine providing industry-specific intelligence to FM and property professionals
Sodexo’s results for first half Fiscal 2023 show consolidated revenues were at 12.1 billion euros, up +17.8% year-on-year, including a net contribution from acquisitions and disposals of -1.3% and a positive currency impact of +5.7%. Excluding these elements, organic revenue growth was +13.4%.
On-site Services organic revenue growth was +12.9% for the period, benefiting from the ongoing post-Covid ramp-up particularly in Corporate Services, Sports & Leisure and Universities. Food services recovered strongly up +20% organically, and represented 65% of total On-site Services revenues during the period, increasing from 59% in Fiscal 2022. FM services were up +6% excluding the impact of the end of the Testing Centres contract in the UK.
First half Fiscal 2023 net new development was positive. Client retention was 97.8% and new sales development was 3.6%, reaching a record more than 0.8 billion euros including cross-selling.
First half Fiscal 2023 Benefits & Rewards Services revenue organic growth was +24.2%. Operating revenues were up +16.1% organically due to portfolio growth, positive net new development and an increase in face values. Financial revenues more than doubled due to the increase in interest rates in all geographies.
Underlying operating profit was 704 million euros, up +30.9%, and +22.5% excluding currency effects. The Underlying operating margin was up +60 bps at 5.8%.
Operating profit was up strongly at 662 million euros compared to 537 million euros in the previous year.
Europe
In Europe, first half revenues amounted to 4.0 billion euros, up +8.3% organically, or +13.3% excluding the impact of the Testing Centres, helped by price increases.
Organic growth in Business & Administrations was +16.7%, boosted by very strong demand for sporting and corporate events as well as the ongoing return to the office. This was somewhat offset by contract losses in Energy & Resources and Government & Agencies.
In Healthcare & Seniors, organic growth of -8.3% was impacted by the end of the Testing Centres. The rest of the business was +8.6%, with the contribution of new openings, recovery in retail sales and solid occupancy in Seniors.
Education organic revenue growth was +5.3%, reflecting some volume growth compared to the Delta and Omicron variants impact on prior year attendance. Pricing contribution was lower than in most segments, particularly in France where passing on inflation remains slow.
Proposed separation of On-site Services (OSS) and Benefits & Rewards Services (BRS)
The Sodexo Board of Directors has unanimously approved the project to separate the two business units of Sodexo by spinning-off and listing BRS through the distribution of BRS shares to Sodexo shareholders.
Sodexo says that the separation will result in “two leading pure players with highly cash generative business models,” one in Food and Facilities Management services and the other in Employee Benefits and Engagement, and will place both businesses in a “stronger position to execute their respective strategies and realise their full potential in fast growing markets”.
The contemplated transaction is expected to take place during 2024 following the completion of several customary steps, including consultation of the employee representative bodies, and remains subject to market conditions.
Outlook
As a result of the first half Fiscal 2023 being better that expected, Fiscal 2023 guidance for the Group and Benefits & Rewards Services has been revised up slightly.
Group – Fiscal 2023 Organic revenue growth is now expected close to +11%, driven by higher than-expected growth in H1 and price increases to remain above 5% in H2 Fiscal 2023. Underlying operating profit margin is confirmed to be close to 5.5%, at constant rates.
Benefits & Rewards Services – Fiscal 2023 Benefits & Rewards Services organic revenue growth is expected close to +20%, with Fiscal 2023 underlying operating profit margin expected to be close to 32%, at constant rates.
Sodexo Chairwoman and CEO Sophie Bellon said: “The performance in the first half is solid. In On-site Services, despite inflation, the post-Covid ramp-up in volumes, mitigation actions and pricing have helped us to improve our margins. Food inflation has remained high and is likely to remain so in the second half. In Benefits & Rewards Services, growth and profitability have been better than expected.
“To reflect the positive business momentum in the first half, we upgraded the Group organic growth guidance for Fiscal 2023 close to +11% while confirming our UOP guidance, expected to be close to 5.5% at constant rates.
“With the completion of the On-site Services reorganisation into geographies, the Sodexo Leadership Team is totally focused on the execution of our strategic plan.
“The next major step for the Group is the proposed separation of OSS and BRS, that is driven by a strong strategic rationale. More focused, supported by a dedicated and empowered governance as well as an adequate capital structure, each entity would be in an even stronger position to pursue its own strategy, achieve its goals and realise its full potential.”
Commenting on the Group’s trading results in the UK and Ireland, Sean Haley, CEO Sodexo UK & Ireland said: “We have delivered a very solid half year and made great progress delivering our strategy to grow with purpose. We have been successful in retaining significant clients and winning exciting new business in both the private and public sectors who have recognised the strength and value of our services and people.
“We have been pleased that many of our long-standing clients have chosen to retain our services, including Oasis Community Learning, BASF, and Manchester University NHS Foundation Trust to name just a few. We were also successful in winning important public sector contracts including HMP Altcourse in Liverpool and HMP Lowdham Grange in Nottinghamshire; and just a few weeks ago, following a competitive procurement process, HMRC awarded us the contract to manage operations at two inland border facilities at Sevington in Kent and Holyhead in North Wales.
“These significant public sector contract awards reinforce our long history of working as a trusted, strategic partner to the UK government and its agencies, delivering valued public services with excellence and integrity.
“As companies continue to attract colleagues back to the workplace and compete for talent, our Vital Spaces proposition has helped us to retain TriRx Pharmaceutical Services and win new business, including a global banking firm based in London, by offering excellent workplace and exciting food experiences.
“Our success is of course reliant on the talent and hard work of all our colleagues. We are resolute in our commitment to creating a welcoming and inclusive workplace where colleagues feel they belong, where they can act with purpose and thrive in their own way.”
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