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French group Sodexo keeps financial goals as growth accelerates in second quarter

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By Reuters
French group Sodexo keeps financial goals as growth accelerates in second quarter
FILE PHOTO: The logo of French food services and facilities management group Sodexo is seen at the company headquarters in Issy-les-Moulineaux near Paris, France, November 30, 2018. REUTERS/Gonzalo Fuentes   -   Copyright  GONZALO FUENTES(Reuters)

By Dominique Vidalon

PARIS (Reuters) – French food services group Sodexo reported a stronger-than-expected rise in first-half revenues as growth accelerated in north America during the second quarter, and the company also stuck to its financial goals for the year.

Sodexo, which is the world’s second-biggest catering company after Compass Group, said core first half profits also rose although investment costs and other costs associated with renewing a major U.S. Marine Corps contract weighed on profit margins, as the company had previously flagged in January.

Underlying operating profit rose 3.1 percent from last year to 647 million euros (557.2 million pounds), giving an operating margin of 5.9 percent, down from 6.1 percent a year ago.

Revenues reached 11.045 billion euros, marking a 3.1 percent rise which beat analysts’ expectations for 2.7 percent growth in an Infront Data poll for Reuters.

In the second quarter alone, revenue growth accelerated to 3.6 percent as business in north America improved. Europe remained solid while developing economies were also strong for Sodexo.

Sodexo kept its forecast for organic revenue growth of between 2-3 percent and an underlying operating profit margin of 5-5.7 percent for the full year ending Aug. 31.

Sodexo struck a slight tone of caution for the second half of its financial year.

Sodexo’s results during the last year have been impacted by some weakness in north America, where cost savings have lagged and several large contracts have taken time to pay off.

Sodexo is banking on a renewed focus on food contracts, increased productivity and cutting down on its use of temporary workers, to contain costs and improve its overall results.

In September, the group told investors that it planned to deliver revenue growth of above 3 percent by 2019/20, and then improve margins to over 6 percent, and Sodexo stuck to those goals on Thursday.

(Reporting by Dominique Vidalon; Editing by Sudip Kar-Gupta)