Sodexo shares drop 14%

30th March 2018 (Last Updated March 29th, 2018 16:39)

International services provider Sodexo has warned that earnings for the year will be lower than previously forecast. The announcement sent its shares down almost 14% in early trading, according to the Financial Times.

Sodexo shares drop 14%
Sodexo reports €15.5bn in group revenues for first nine months. Credit: Sodexo.

International services provider Sodexo has warned that earnings for the year will be lower than previously forecast. The announcement sent its shares down almost 14% in early trading, according to the Financial Times.

The France-based group, which includes Sodexo UK & Ireland, has issued its First Half Fiscal 2018 Estimates and Annual Guidance Update, covering the period ending February 28, 2018.

It reports organic revenue growth of +1.7% for the first half of fiscal 2018 and an underlying operating margin of 6.1% – both were below market expectations.

For fiscal 2018, the group now expects to deliver organic revenue growth of between +1% and +1.5%, excluding the effect of a 53-week year, and an underlying profit margin of around 5.7%, according to the report.

Sodexo chief executive Denis Machuel, said: “The second quarter performance was below our expectations and we have reduced our financial guidance for fiscal 2018. We have identified specific areas of underperformance and are acting quickly to implement a series of corrective measures.

“As we combine the unique strengths of Sodexo, its offers and the quality of its teams, with greater discipline and accountability across the group, I am confident we will deliver strong growth over the medium term.

The report states underlying operating profit has been impacted by planned measures to increase efficiencies and improve margins in North America that have not yet delivered and a small number of significant contracts yet achieving expected levels of profitability.

The continuing decline of its revenues in North America is expected to weigh on the top line growth and on its margins in the second half, according to the report.

Since the First Quarter Fiscal 2018 trading update on January 11, 2018, the group has delivered year-on-year revenue growth and profitability below management expectations. This has resulted in First Half Fiscal 2018 Revenues of €10.3bn (£9bn), down -3.2% on the previous year, including a negative currency impact of -6.2%.

At constant exchange rates, underlying operating profit decreased by -7.4%.

Net profit was up +6.9%, or +13.9% excluding currency effects, at €372m (£325m).