French company Sodexo cautions its recovery will take some time

By Dominique Vidalon

PARIS (Reuters) - French food services and facilities management group Sodexo vowed to accelerate sales growth in the current fiscal year although it cautioned its turnaround would take some time.

Sodexo, the world's second-biggest catering company after Compass Group, made the forecasts after it posted a well-flagged slowdown in sales growth and a lower operating profit margin for the fiscal year ended Aug. 31.

Sodexo reported a 1.6 percent rise in like-for-like revenue of 20.407 billion euros ($23.33 billion), a slowdown from 1.9 percent growth achieved the previous year. An Inquiry Financial poll for Reuters had forecast revenue of 20.277 billion.

"This has been a challenging year for Sodexo, but we know what went wrong, and we know what we need to do to fix it," Sodexo Chief Executive Denis Machuel said in a statement.

"Healthcare and education in North America continue to drag on our performance, and the turnaround is going to take some time," he added.

Sodexo had warned in March that it would not meet its sales and profit targets for the year due to weakness in its North American business, where cost savings have lagged and several large contracts have taken time to pay off.

The new strategy includes a renewed focus on food contracts, improving productivity through better planning and cutting the use of temporary workers to help contain costs. It also plans new ways to measure its progress better across its businesses, and to strengthen its purchasing procedures.

Sodexo's underlying operating profit margin reached 5.7 percent, excluding currency impacts, against 6.4 percent a year ago, in line with the company's revised guidance.

Revenue from on-site services fell 1.1 percent in north America but grew 4.5 percent in other regions.

For the current 2018/19 fiscal year, Sodexo said it was confident of delivering underlying revenue growth of between 2-3 percent, citing a "neutral" net new business in education in North America, signs of a pickup in sales in healthcare and continued solid growth in developing economies.

It also forecast an underlying operating profit margin of between 5.5-5.7 percent, at constant exchange rates.

In September, the group held a presentation where it told investors it planned to deliver revenue growth above 3 percent by fiscal year 2019/20 and to then achieve an underlying operating profit margin above 6 percent..

Sodexo reiterated those goals on Thursday.

($1 = 0.8748 euros)

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