French facilities management and vouchers group Sodexo cut its full year sales growth goal on Thursday after a weaker-than-expected performance in the third quarter. Sodexo, the world’s second-biggest catering services company after Compass Group, said it was still confident revenue growth would accelerate in the fourth quarter due to recent contract start-ups, and kept its full-year profit growth target. Chief Executive Michel Landel told a conference call that business in France was improving, while the image of France had improved abroad since the election of French President Emmanuel Macron, which he said was “extremely favourable” for business.
Sodexo, whose clients range from the Royal Ascot Racecourse in England to the U.S. Marine Corps, posted revenues of 15.984 billion euros ($18.1 billion) in the nine months to May 31, up 0.5 percent on a like-for-like basis, but below market consensus expectations of 1.2 percent growth. In the third-quarter alone, growth was 1.5 percent, which was “disappointing” when compared to the 2.5 percent Sodexo had expected, Landel said.
Business was weaker-than-expected in the health care and universities sectors in north America, and in the corporate sector in Europe during the quarter, offsetting better performances at other divisions. As a result, Sodexo now expected annual, like-for-like sales to rise by between 1.5 percent and 2 percent, instead of the 2.5 percent growth previously anticipated.
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Sodexo, however, still expected operating profit at constant exchange rates, and excluding one-time items, to grow by between 8-9 percent in the full-year ending Aug. 31. However, Landel cautioned that operating profit growth was likely to be near the low end of that range. Looking ahead to the 2017/18 financial year, Landel said he eyed like-for-like sales growth of 2.5-3 percent, which could even rise to 3.5-4 percent, including acquisitions, although he said Sodexo would provide its official guidance only in November.
In May, Sodexo announced that Landel, 65, would retire as CEO in January 2018 and would be replaced by internal executive Denis Machuel. To ensure a smooth transition, Machuel who also heads Sodexo’s benefits and rewards business, will become deputy CEO as of Sept. 1, and work alongside Landel.