By Diana Mandia and Federica Mileo
(Reuters) – French catering and food services group Sodexo on Friday lowered expectations for full-year organic revenue growth, citing the coronavirus pandemic, the Ukraine conflict and closure of COVID-19 testing centres in the United Kingdom.
The Paris-based company now expects organic revenue growth around the bottom of its previously forecast range of 15-18% for its 2022 financial year to Aug. 31.
Shares in Sodexo, the world’s second-largest food catering services group behind Britain’s Compass, fell nearly 6% in early trade.
“The current environment remains full of uncertainties. There is a resurgence of localised COVID outbreaks, several mobilisations in Russia will not happen and the testing centres in the United Kingdom are closing earlier than expected,” Chief Executive Sophie Bellon said in an earnings statement.
Soaring food prices triggered by Russia’s invasion of Ukraine are also a cloud on the horizon for the global economy as consumer finances come under pressure.
“Inflation is a subject on which we work a lot. We are very, very vigilant because the situation surrounding the war in Ukraine is causing a certain volatility in certain commodities, so it’s something we are watching like a hawk,” said finance chief Marc Rolland.
However, the group remains confident it can manage inflationary pressure on margins, with its business model allowing price rises to passed on to clients progressively.
JPM analysts said that Sodexo’s confident projections looked optimistic.
AlphaValue’s analyst Yi Zhong, meanwhile, warned of pressure on margins.
“Caterers should be more or less immunised from any food or staff inflation. However, when inflation goes up too rapidly, caterers will suffer from the lagging effect to recover the inflationary expenses, weighing on their margins,” she said.
The group announced in July 2021 a new contract to operate a further 121 fixed and mobile testing centres in UK for 12 months with an option to extend for a further six months, but free testing in England ended on Friday.
“So far we have already redeployed 1,000 people within Sodexo and we are also working with another 1,000 people who have requested redeployment to other contracts and other Sodexo subsidiaries”, CEO Bellon told reporters.
The group posted half-year underlying operating profit at 538 million euros ($595.30 million), against analyst expectations for 530 million euros, and said it has seen a pick-up since the end of February after the Delta and Omicron coronavirus variants had slowed recovery in the second quarter.
(Reporting by Federica Mileo and Diana Mandia; Editing by Subhranshu Sahu and David Goodman)
