Sodexo: Solid Revenue and Profit growth in Fiscal 2012

Sodexo: Solid Revenue and Profit growth in Fiscal 2012

  • Solid financial performance

    • Revenues up + 13.6%, including + 6.5% organic growth

    • Operating profit up + 15.4% or + 13.6% excluding currency effects

    • Increase in Group net income: + 16.4%

    • Proposed dividend of 1.59 euro per share, + 8.9%

    • Net cash provided by operating activities: Exceeding one billion euro

  • Relevance of strategic choices

    • Investment in human resources and high potential markets

    • Organic growth in facilities management services, three times that of foodservices

  • Medium-term objectives confirmed


Sodexo (NYSE Euronext Paris FR 0000121220-OTC: SDXAY) (PARIS:SW) (OTCBB:SDXAY):

At the November 6, 2012 Board of Directors meeting chaired by Pierre Bellon, Michel Landel, Chief Executive Officer, presented the performance for Fiscal 2012.

Fiscal 2012 financial performance

millions of euro

Year ended August 31






Main income statement components




+ 10.9%

+ 2.7%

+ 13.6%

Organic growth



Operating profit (reported)



+ 13.6%

+ 1.8%

+ 15.4%

Operating margin (reported)



Operating profit excluding favorable
accounting adjustment in the UK






Operating margin excluding favorable
accounting adjustment in the UK


5,3 %

Group net income



+ 14.0%

+ 2.4%

+ 16.4%

Earnings per share (in euro)



+ 15.3%

+ 2.7%

+ 18.0%

Dividend per share (in euro)



+ 8.9%

Financial structure highlights

Net cash provided by operating activities



Gearing as of August 31



Commenting these results, Group CEO Michel Landel said:

"These results confirm Sodexo's very good financial performance in an ever more difficult environment. Our positive growth momentum is being driven by our leadership in emerging markets, that have strong potential for growth and which now represent 20% of our revenues. Our contract wins demonstrate the attractiveness of the Sodexo brand, recognized for its Quality of Life services offer. For more than two years, our facilities management services have been growing three times faster than foodservices.

Operational efficiency and cost reduction continue to be our priority. We remain confident in the Group's strengths and are maintaining our medium-term objectives."

Revenue growth of 13.6%

Sodexo's consolidated revenues for Fiscal 2012 increased + 13.6% to 18.2 billion euro, including organic growth of + 6.5%.

This performance is in line with the objectives set at the beginning of the fiscal year.

Organic revenue growth accelerated compared to the previous year, in particular reflecting:

  • the success of Sodexo's integrated and unique Quality of Life services offer

  • its strong growth in emerging markets

  • the contribution from contracts for two prestigious sporting events, the London Olympics and Rugby World Cup in New Zealand.

Facilities management services now represent 26% of consolidated revenues, compared with 18% in Fiscal 2005. Sodexo today provides more than 100 types of services to companies, universities, hospitals, senior residences, correctional facilities and individuals. Facilities management services grew three times the rate of foodservices during Fiscal 2012.

  • On-site Services revenues increased + 14% to 17.5 billion euro, including organic growth of + 6.3%.

  • By client segment, organic growth was as follows:

    • + 9.3% in Corporate, a clear acceleration over the + 6.7% achieved in Fiscal 2011

    • + 2.7% in Health Care and Seniors, reflecting modest business development
      (new contract wins)

    • + 4.2% in Education, a result of satisfactory growth in North America.

Organic growth for Benefits and Rewards Services1 reached + 8.5%, driven by growth in Latin America.

Primary performance indicators

Sodexo's primary performance measures during the year were as follows:

  • 94.1% client retention rate, an increase of 0.1% compared to the previous year

  • 3.4% existing site growth compared with 4.3% the previous year, reflecting a decline in volumes, particularly in the Corporate segment and in Europe during the second half of the year

  • 7.6% business development rate (new contract wins), a slight increase over the previous year, reflecting the Group's numerous business successes

  • The retention rate for all employees reached 60% and 84.7% for site managers.

During Fiscal 2012, a fourth global engagement survey was conducted among 130,000 employees in 60 countries. The overall engagement rate has increased by 9 points in the last four years. 85% of respondents continue to rate Sodexo as a better employer than its competitors.

1Sodexo has chosen to modify the name of the Motivation Solutions activity to Benefits and Rewards Services

Increase in operating profit

Operating profit was 984 million euro, an increase of + 15.4%, compared with the prior year and + 13.6% at constant exchange rates.

It should be noted that this result includes the benefit of a favorable accounting adjustment of 26 million euro related to the cost of pension plans in the United Kingdom. As a result of new regulations, the Group elected in October 2011 to replace the Retail Price Index (RPI) with the Consumer Price Index (CPI) in the calculation of pension obligations to certain beneficiaries of its retirement plan.

Excluding this favorable accounting adjustment, the Group's operating profit was 958 million euro, an increase of + 12.3% compared to the previous year, or + 10.6% at constant exchange rates.

This increase is a result of:

  • a more significant contribution to operating profit from On-site Services activities in the emerging markets, mainly resulting from the acquisition of Puras do Brasil in Brazil

  • a very good performance by Benefits and Rewards Services, reflecting higher volumes
    and productivity improvements

  • the favorable impact in the UK of two major sporting events during the year
    (the 2011 Rugby World Cup and the 2012 Olympics)

  • on site productivity gains in North America.

These good performances more than offset the decline in operating profit in Continental Europe resulting from the current economic environment.

Excluding the favorable accounting adjustment for UK pensions, the Group's consolidated operating margin was 5.3%, a level similar to that of the previous year.

Increase in net income and earnings per share

  • Group net income was 525 million euro compared with 451 million euro for the previous year. The + 16.4% increase, or + 14% excluding currency effects, was slightly higher than the increase in operating profit, primarily as a result of the lower effective tax rate. This decrease in the tax rate is explained by the greater weight in the results from activities in countries with lower tax rates.

  • Earnings per share was 3.48 euro, an increase of + 18%, or + 15.3% at constant rates. The increase is slightly higher than net income as a result of an increase in the number of treasury shares, which are excluded from the calculation of earnings per share.


The Sodexo Board of Directors will propose a dividend of €1.59 per share, an increase of + 8.9% over the previous year, at the January 21, 2013 Shareholders' Meeting. This represents a payout ratio of approximately 50%.

A major strength: a solid, cash-generating financial model

Net cash provided by operating activities amounted to more than 1 billion euro, compared to 847 million euro generated in Fiscal 2011. This significant improvement is mainly a result of the increase in operating profit.

This net cash provided by operating activities was utilized to finance:

  • net operating investments and client investments of 319 million euro, or 1.7% of revenues

  • acquisitions totaling 586 million euro, primarily involving the companies Puras do Brasil in Brazil, Lenôtre in France and Roth Bros in the United States.

As of August 31, 2012, net debt was 639 million euro and represented 21% of Group equity compared with 15% as of August 31, 2011. Gross debt represented only about 2.8 years of operating cash flow (compared to 3.2 years at the end of the previous year).

Subsequent events

Sodexo completed its acquisition of Servi-Bonos, S.A. de C.V. in Mexico on November 2, 2012. Servi-Bonos will be consolidated in the Group's financial statements for ten months in Fiscal 2013.

Servi-Bonos is a leading provider of food and meal vouchers and cards, serving close to 5,000 clients in Mexico through its nationwide network. In 2011, Servi-Bonos generated issue volume (the face value of vouchers and cards multiplied by the number of vouchers and cards issued) of close to 300 million euros.

This acquisition reinforces Sodexo's international leadership in Quality of Life services in the buoyant Mexican growth economy.


At the November 6, 2012 Board of Directors meeting, Chief Executive Officer Michel Landel underlined the effectiveness of the Group's long-term strategy, based on a unique range of Quality of Life services, and an unparalleled global network and undisputed leadership in emerging countries.

Michel Landel said that Fiscal 2013 begins with sharply contrasting trends:

On the one hand, the Group benefits from:

  • sustained development and growth in Sodexo's activities (in On-site Services and Benefits and Rewards Services) in emerging economies, where the Group continues to strengthen its positions

  • important new contract awards, such as with HCR ManorCare, one of the largest chains of nursing homes in the U.S. and a stronger pipeline of prospective clients in North America, notably in Health Care and Seniors

  • a differentiated integrated service offering that responds to the increasing demand for mutualized services by major international companies.

At the same time, the current economic environment is weighing on profitability, particularly in Europe.

As a result, for Fiscal 2013 Sodexo projects modest growth1in revenues and operating profit compared to the previous year, which benefited from specific events (Rugby World Cup, the Olympics and a 53rd week in North America).

In this context, Sodexo's management and teams are fully mobilized around specific actions to:

  • accelerate profitable growth by capitalizing particularly on Sodexo's offers and expertise, by client segment and sub-segment

  • strengthen competitiveness with a program of operational efficiency and cost reduction. During the past three years, the Group has achieved 150 million euros in economies in overheads. The program launched today should allow Sodexo, within three years, to reduce on site operating costs by 0.6% of revenues and lower overhead costs by 0.4% of revenues, improving productivity at all levels. The program's implementation will result in exceptional costs between 130 and 150 million euro over the next 18 months with a positive impact of the same amount in Fiscal 2015 and the following fiscal years.

As a result of the initiatives undertaken and the effectiveness of the Group's strategy, CEO Michel Landel confirms Sodexo's medium term objectives to:

  • achieve an average of 7% annual consolidated revenue growth

  • reach a consolidated operating margin of 6.3% by the end of Fiscal 2015.

Michel Landel underlined Sodexo's major strengths:

  • a potential market estimated at over 800 billion euro

  • a unique Quality of Life services offer particularly adapted to respond to changing client needs

  • an unparalleled global network covering 80 countries

  • undisputed leadership in the emerging markets

  • a strong culture and engaged teams

  • excellent financial strength

  • its independence.

These strengths enable Sodexo to look to the future with confidence and to maintain its investments, particularly in the development of its human resources and the reinforcement of its expertise.

In conclusion, Michel Landel thanked the clients for their loyalty, the shareholders for their confidence and the 420,000 employees for their efforts during Fiscal 2012 year and their daily commitment to improve Quality of Life of our clients and consumers.

The Board of Directors, in turn, has thanked Michel Landel and his team for their continued engagement in fostering Quality of Life.

1 Excluding currency effects and the favorable accounting adjustment for UK pensions

Analysts briefing

Sodexo will hold a briefing today at 9:00 a.m. at the Capital 8 Conference Center (32, rue Monceau, Paris 8ème) to comment on the Fiscal 2012 results. The briefing also can be accessed via webcast on

Future financial communications dates

First Quarter Fiscal 2013 revenues

January 9, 2013

General Shareholders' Meeting

January 21, 2013

Fiscal 2012 dividend distribution

February 4, 2013

About Sodexo

Sodexo is the global leader in services that improve Quality of Life, an essential factor in individual and organizational performance. Operating in 80 countries, Sodexo serves 75 million consumers each day through its unique combination of On-site Services, Benefits and Rewards Services and Personal and Home Services. Through its more than 100 services, Sodexo provides clients an integrated offering developed over more than 45 years of experience: from reception, safety, maintenance and cleaning, to foodservices and facilities and equipment management; from Meal Pass, Gift Pass and Mobility Pass benefits for employees to in-home assistance and concierge services. Sodexo's success and performance are founded on its independence, its sustainable business model and its ability to continuously develop and engage its 420,000 employees throughout the world.

Key figures (as of August 31, 2012)

18.2 billion euro consolidated revenue
420,000 employees
20th largest employer worldwide
80 countries
34,300 sites
75 million consumers served daily
9.48 billion euro market capitalization (as of November 7, 2012)

This press release contains statements that may be considered as forward-looking statements and as such may not relate strictly to historical or current facts. These statements represent management's views as of the date they are made and Sodexo assumes no obligation to update them. The reader is cautioned not to place undue reliance on these forward-looking statements.

Comments by activity and geographic zone

1. On-site Services

1.1 North America


(in millions of euro)





rate effect





+ 6.4%

Health Care and Seniors



+ 2.7%




+ 6.3%




+ 4.9%

+ 1.1%

+ 6.1%

+ 12.1%

Revenues in North America were 6.7 billion euro. This amount includes an additional week of activity compared with Fiscal 2011 as Sodexo operates on a 52/53-week calendar as is industry practice in North America. The impact of this 53rd week is estimated at 120 million euro for Fiscal 2012, or approximately + 1.9% of the total + 4.9% organic revenue growth.

The acquisition in the United States of Roth Bros, a technical maintenance and energy management company, contributed + 1.1% to overall growth. Integration of this company and implementation of commercial synergies is proceeding according to plan.

Organic growth in Corporate increased to + 6.4%, despite the lack of a turnaround in employment at large companies; in addition, foodservices patronage on sites was unchanged. Revenue growth was led by the success of integrated service offers for clients such as Campbell's Soup, General Dynamics, Circuit of the Americas (Texas), the Federal Aviation Administration (Washington, D.C.), General Electric Company and MIT Lincoln Library (Massachusetts).

In Canada, Sodexo won major new Remote Sites contracts with Suncor and Thomson Iron Mines/Bloom Lake.

In Health Care and Seniors, organic growth was + 2.7%, reflecting lower client retention, mainly a result of the loss of Ascension Health System and still modest business development. The size and complexity of certain contracts in this client segment tend to result in lengthy tender processes.

Clients that have recently chosen Sodexo include Wesley Willows retirement homes (Illinois), Holy Cross Hospital, Chilton Hospital (New Jersey) and Huntington Medical Hospital (Indiana).

Organic growth in Education was + 6.3%, reflecting the contribution of facilities management services contracts won in Fiscal 2011 (particularly Detroit and Lewisville) and increased university restaurant patronage.

Contracts won in Fiscal 2012 included Vermont State College (Vermont), Mount Ida College (Massachusetts), University of Wisconsin-La Crosse (Wisconsin) and California State University-San Marcos (California).

Operating profit

Operating profit was 346 million euro, up + 7.6% compared to the prior year, at constant rates.

On-site productivity gains and tight control of health and benefit plan costs helped to offset pressure from higher food prices and permitted further investments to enhance technical skills and expertise.

Operating margin was stable compared with the previous year, at 5.1%.

1.2 Continental Europe


(in millions of euro)





rate effect





+ 2.2%

Health Care and Seniors



+ 1.4%




+ 0.1%




+ 1.6%

+ 1.6%



Revenues in Continental Europe were 5.6 billion euro, with modest organic growth of + 1.6%.

French company Lenôtre, acquired at the end of September 2011, contributed 1.6% to overall revenue growth. The process of integrating the Lenôtre teams' prestigious savoir-faire into Sodexo's range of foodservices is going well, although the current economic environment is weighing on the catering business, which experienced slower growth than in Fiscal 2011.

In Corporate, organic growth was + 2.2% compared to + 4.4% the previous year.

This performance was marked by contrasting situations:

  • On the one hand, the effectiveness of the Group's strategic positioning and integrated services offers helped to drive business development, contributing to its success with major international groups such as Unilever, Eli Lilly, Alcatel-Lucent and AstraZeneca in several countries, as well as winning contracts such as Deutsche Telekom in Germany, and Gazprom in Russia.

  • At the same time, there was a pronounced decline in on-site activity during the latter part of the fiscal year. Efforts by clients to find additional cost savings and reduce headcount, along with lower consumer spending, weighed increasingly on revenue growth in several countries, particularly France and the Netherlands.

In Health Care and Seniors, organic revenue growth was + 1.4%, reflecting modest business development and an increasingly selective approach to new business in Southern Europe.

Business wins included Ziekenhuis Gelderse Vallei in the Netherlands, SARquavitae in Spain and Assistance Publique-Hôpitaux de Paris (CHU Louis Mourier and Hôpital Antoine Béclère) and Institut National Marcel Rivière in France.

Education revenues remained flat compared with the previous year, following the Nice city authorities' decision to return the city's schools to self-operation.

During the fiscal year, Sodexo signed a number of new contracts, for example with Utrecht University in the Netherlands, Universidad Politècnica de Catalunya in Spain and several public schools in France such as those in Saint-Cloud, Garges-lès-Gonesse and Livry-Gargan in the Paris suburbs.

Operating profit

Operating profit was 215 million euro, representing a decline of - 12.6% compared to the previous year, at constant rates. Operating margin narrowed to 3.8% in Fiscal 2012 from 4.5% in Fiscal 2011. The decrease resulted mainly from pressure from clients seeking to cut costs in an uncertain economic environment.

1.3 United Kingdom and Ireland


(in millions of euro)





rate effect





+ 21.3%

Health Care and Seniors



+ 3.5%




+ 0.4%




+ 16%