Sodexo Q3 Fiscal 2022 better than expected Revenue growth: +23.2%

• Fiscal 2022 organic growth around the bottom of the range of +15% to +18%.
• Fiscal 2022 Underlying Operating Profit margin close to 5%, at constant rates.

***

Conference call

Sodexo will hold a conference call in (English) today at 9:00 a.m. (Paris time), 8:00 a.m. (London time) to comment on its Q3 Fiscal 2022 revenues.

Those who wish to connect:

• From the UK: +44 121 281 8004, or
• From France: +33 1 70 91 87 04, or
• From the US: +1 718 705 8796,

Following by the access code 00 98 16.

The press release and presentation will be available on the Group website www.sodexo.com in both the “Latest News” section and the “Finance – Financial Results” section.

Fiscal 2022 and Fiscal 2023 financial calendar

These dates are indicative and may be subject to change without notice.

Regular updates are available in the calendar on our website www.sodexo.com

About Sodexo

Founded in Marseille in 1966 by Pierre Bellon, Sodexo is the global leader in Quality of Life Services, an essential factor in individual and organizational performance. Operating in 55 countries, our 412,000 employees serve 100 million consumers each day. Sodexo Group stands out for its independence and its founding family shareholding, its sustainable business model and its portfolio of activities including Food Services, Facilities Management Services and Employee Benefit Solutions. We provide quality, multichannel and flexible food experiences, but also design attractive and inclusive workplaces and shared spaces, manage and maintain infrastructure in a safe and environmentally friendly way, offer personalized support for patients or students, or even create programs fostering employee engagement. From Day 1, Sodexo has been focusing on tangible everyday gestures and actions through its services in order to have a positive economic, social and environmental impact over time. For us, growth and social commitment go hand in hand. Creating a better everyday for everyone to build a better life for all is our purpose.

Sodexo is included in the CAC Next 20, CAC 40 ESG, FTSE 4 Good and DJSI indices.

Key Figures

Contacts

Q3 Fiscal 2022 Activity Report

Revenues: Better than expected Revenue growth

Third quarter Fiscal 2022 consolidated revenues reached 5.5 billion euros, up +23.2% year-on-year including a net contribution from acquisitions and disposals of -1.7%, more than compensated by a strong positive currency impact of +6.6%, linked to the strength of the US dollar and the Brazilian Real. Third quarter Fiscal 2022 organic growth was +18.3%, reaching 97% of comparable 2019 revenues. Thanks to the acceleration in the quarter, revenue for the Nine months Fiscal 2022, to end of May, reached 15.8 billion euros, up +17.3%.

The performance of the main segments and activities relative to Fiscal 2019 revenues is as follows:

On-site Services

Third quarter Fiscal 2022 On-site Services revenue organic growth was also up +18.3% and represented 97% of Fiscal 2019 revenues, against 94% in the Second quarter Fiscal 2022, demonstrating a strong recovery after the Omicron impact in the second quarter. Corporate Services continued to benefit from the return to the office. Sports & Leisure activity multiplied by nearly four year-on-year, reaching 83% of 2019 level, against only 61% in the second quarter, as the conventions activity picked up strongly. Universities and Schools also picked up strongly in the third quarter, post-Omicron. However, the exit from the childcare activities masks the improvement in Schools. Excluding Childcare, Education would have been +5 points in the third quarter versus the second quarter. The Food Services recovery was strong, reaching 90% of Fiscal 2019 level compared to 82% for the second quarter. Facilities Management services remained solid, well above the pre-Covid level at 115% versus 112% in the second quarter.
In the Third quarter, the pricing effect is more than 5% against about 3% in the First half Fiscal 2022.

All regions were up strongly.

The recovery in North America continued in Third quarter Fiscal 2022, with organic growth of +22.6%, resulting from a strong recovery in Universities and Sports & Leisure activity, continued progress in the return to the office in Corporate Services. North America is back up at 91% of pre-Covid level compared to 85% in the Second quarter Fiscal 2022.

The +18.0% growth in Europe was particularly strong in the quarter, with a bounce back post-Omicron in Corporate Services, very strong recovery in the number and attendance of sporting events and conventions and a favorable comparative base for Schools which had been impacted by lockdowns in the previous year. Healthcare & Seniors was up despite the closing of the Testing centers in the United Kingdom at the end of March.

Asia-Pacific, Latin America, Middle East and Africa is up +9.8%, despite the decline in activity in China due to the recent confinements, driven by strong growth in India and Brazil.

Business & Administrations

Third quarter Fiscal 2022 Business & Administrations revenues totaled 2.9 billion euros, up +26.6% organically.

Organic growth in North America was +50.9%, with continued return to the office in Corporate Services and an acceleration in Sports & Leisure as the convention center activity picked-up post-Covid, having been slightly behind the trend relative to the sports stadiums. The Energy & Resources segment growth remained solid during the period due to new contract startups and return of office workers onsite. Government & Agencies activity was stable over the quarter.

In Europe, organic growth was +27.2%, with a noticeable return to the office post-Omicron. Sports & Leisure activity was also up substantially with a strong pick-up in conventions, corporate events and tourism. Government & Agencies and Energy & Resources were flat.

In Asia-Pacific, Latam, Middle East and Africa, organic revenue growth was +10.1%. In Corporate Services, strong growth in Brazil and India more than offset the effects of the lockdowns in Shanghai. Activity in China was down because of office closures but production units remained open with a sustained level of activity. Energy & Resources continued to achieve very solid growth. New business ramp-ups in Latin America, and particularly in mining, more than offset the lack of new oil & gas projects and some contract losses in Asia-Pacific.

Healthcare & Seniors

Healthcare & Seniors revenues amounted to 1.4 billion euros, up +4.6% organically.

In North America, organic growth was +6.8%. In Seniors, occupancy and pricing were positive. Hospital same site sales growth is benefiting from a progressive pick-up in retail.

In Europe, organic growth was up at +1.4%, impacted by the closure of the testing centers in the UK at the end of March. This closure masks an underlying trend of about 9%. Hospital retail sales are recovering. Seniors activity has picked up substantially due to higher occupancy, net new business and some pricing.

In Asia-Pacific, Latam, Middle East and Africa, organic revenue growth was +7.4%, helped by pricing in Brazil and solid growth in China due to Covid related services.

Education

Third quarter Fiscal 2022 revenues in Education were 1.0 billion euros, up +17.4% organically.

North America was up +18.4%. The slowdown in growth relative to the previous quarter reflects the higher comparative base with the reopening of Schools from the third quarter last year. In University, retail and events have picked up strongly post-Omicron, despite ongoing staff shortages on many sites with activity back up to 91% of Fiscal 2019 level versus 84% in the first and second quarters.

In Europe, organic growth was +15.0%, is due to a strong recovery in Schools attendance post-Omicron and a favorable comparative base with the previous year lockdowns in France and the UK. The sale of the Childcare activities took effect during the quarter.

In Asia-Pacific, Latam, Middle East and Africa, organic growth was +8.7%, slowing down from the very strong recovery in the First half due to school closures in lockdown regions in China. The recovery in India remained very strong.

Benefits & Rewards Services

Benefits & Rewards Services organic growth was +17.7%, accelerating in the Third quarter, due to solid growth in demand and new business in all regions.

Employee benefits organic growth was +21.8% compared to an +18.5% organic growth in issue volume to 3.6 billion euros. Services Diversification was up +3.4% organically, the significant growth in fuel & fleet card activity being offset by the substantial reduction in Covid-related public benefits.

* Including Incentive & Recognition, Mobility and Public Benefits.

In Europe, Asia and USA, organic revenue growth was +17.5%, with solid volume growth across the region, and in particular in Romania, France and Israel.

In Latin America, organic growth was +18.0%, boosted by growth in demand, new business and increases in face values in meal, food and fuel & fleet across the region, as well as higher interest rates in Brazil.

Operating revenues were up strongly +15.0%. Financial revenues were also up +62.4% organically due to the significant hike in the Selic (official Brazilian interest rate), back up to over 13% today compared to under 4% a year ago.

Financial position

There were no material changes in the Group's financial position as of May 31, 2022, relative to that presented in the Fiscal 2021 Universal Registration Document filed with the AMF on November 10, 2021, and the Interim Financial Report published on April 1, 2022.

Principal risks and uncertainties

There were no significant changes to the principal risks and uncertainties identified by the Group in the Risk Factors section of the Fiscal 2021 Universal Registration Document filed with the AMF on November 10, 2021.

Currency effects

Exchange rate fluctuations do not generate operational risks, because each subsidiary bills its revenues and incurs its expenses in the same currency. However, given the weight of the Benefit & Rewards activity in Brazil, and the high level of its margins relative to the Group, when the Brazilian real declines against the euro, it has a negative effect on the underlying operating margin due to a change in the mix of margins. Conversely, when the Brazilian real strengthens Group margins increase.

The significant positive currency impact of +6.6% is linked to the increase in the U.S. dollar of +6.5% year on year, UK sterling of +4.8% and the Brazilian real of +10.5%.

The currency effect is determined by applying the previous year’s average exchange rates to the current year figures.

Revenue for the first 9 months Fiscal 2022

Alternative Performance Measure definitions

Growth excluding currency effect

The currency effect is determined by applying the previous year’s average exchange rates to the current year figures except in hyper-inflationary economies where all figures are converted at the latest closing rate for both periods when the impact is significant.

Issue volume

Issue volume corresponds to the total face value of service vouchers, cards and digitally delivered services issued by Benefits & Rewards Services for beneficiaries on behalf of clients.

Organic growth

Organic growth corresponds to the increase in revenue for a given period (the “current period”) compared to the revenue reported for the same period of the prior fiscal year, calculated using the exchange rate for the prior fiscal year; and excluding the impact of business acquisitions (or gain of control) and divestments, as follows:

• for businesses acquired (or gain of control) during the current period, revenue generated since the acquisition date is excluded from the organic growth calculation;
• for businesses acquired (or gain of control) during the prior fiscal year, revenue generated during the current period up until the first anniversary date of the acquisition is excluded;
• for businesses divested (or loss of control) during the prior fiscal year, revenue generated in the comparative period of the prior fiscal year until the divestment date is excluded;
• for businesses divested (or loss of control) during the current fiscal year, revenue generated in the period commencing 12 months before the divestment date up to the end of the comparative period of the prior fiscal year is excluded.

Underlying operating profit margin

The underlying operating profit margin corresponds to Underlying operating profit divided by revenues.

Underlying operating profit margin at constant rates

The underlying operating profit margin at constant rates corresponds to Underlying operating profit divided by revenues, calculated by converting 2022 figures at Fiscal 2021 rates, except for countries with hyperinflationary economies.

Attachment

• PR Sodexo Q3 Fiscal 2022 Revenues ENG

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