07.07.2020, 11:49
COVID-19 Impacts Sodexo Fiscal Q3 Results
Sodexo has reported a -29.9 per cent slide in organic revenue growth as a result of falling demand from the education sector during Covid-19, with its FM division reporting a more modest decline of just 2 per cent.
Q3 Highlights
- Q3 Fiscal 2020 Group revenue was 3,910 million euro, down -31.2 per cent. Currencies impacted revenues by -1.7 per cent and mergers and acquisitions (M&A) contributing +0.3 per cent, resulting in Group organic revenue growth of -29.9 per cent, which compares favorably to forecasts the group published in April of -33 per cent decline. Whereas food services are down -44 per cent, FM services are only down -2 per cent. Benefits & Rewards are down -22.8 per cent.
- On-site Services organic revenue growth was -30.1 per cent reflecting the significant impact of the COVID-19 pandemic as it spread across the world on the Group’s business with many sites closed or only partially open:
- Business & Administrations was down -28.5 per cent, compared to the -30 per cent forecasts. While Corporate services was impacted by the lockdowns and home working for white-collar workers, production was maintained in many industries and in many countries, in particular in essential sectors. Even if buildings were closed to workers, essential cleaning, maintenance and security continued, albeit at a slower pace, resulting in more resilience of the FM services than Food services. Sports & Leisure sites closed down completely, whereas Energy & Resources and Government & Agencies were more protected from the lockdown by the nature of their business.
- Healthcare & Seniors was down -12.9 per cent, a bit more than the -8 per cent hypothesis due to the lack of retail activity and the decline in elective surgery, and not fully compensated by extra COVID-19-linked services.
- Education was down -53.9 per cent – slightly better than a -60 per cent forecast. With most schools and universities closing from mid-March onwards, sales were limited to meals provided by local authorities to families in need.
- Benefits & Rewards Services organic revenue growth was -22.8 per cent vs the -20 per cent hypothesis. In employee benefits, sales were impacted by the combination of a decline in issue volume of 12 per cent due to temporary unemployment in most countries and the interruption of paper voucher production in some countries, and the more significant slowdown in reimbursement volumes, due to restaurants being closed. As a result, the float remained solid. Diversification services were impacted by a sharp decline in the home services vouchers specifically during lockdown, and the decline in corporate travel for the Rydoo platform.
- Underlying operating profit flow-through from the decline in revenue has improved month by month and is now better than the hypothesis of 25 per cent announced in April.
- Free cash flow has stabilized in positive territory since April and is in line to achieve a 2nd semester in the range of -200 and +200 million euro, excluding the USPP “makewhole”1 of around 149 million euro.
- With nearly 5 billion euro of liquidity2 at end May, Sodexo has announced that it will reimburse its USPP notes for 1.6 billion dollars by the end of the fiscal year. The reimbursement conditions include a “makewhole1” provision of around 149 million euro. Going forward, the average cost of debt will fall to approximately 1.2 per cent, versus 2.3 per cent at the end of the 1st half Fiscal 2020. As a result of this operation, Sodexo will have no covenants and will retain full agility to navigate in these uncertain times.
- Sodexo launched “rise with Sodexo“, a global program intended to meet the health, operational and confidence challenges that clients are facing when restarting their business as a result of the COVID-19 pandemic.
Drawing on lessons learned from our support for businesses based in Asia during the restart of their activities, Sodexo teams and experts have identified the new needs of clients and employees from all sectors of activity. “rise with Sodexo” is based on the seamless integration of our services across On-site services, Benefits & Rewards Services and Personal & Home Services, integrating over 20 essential service offerings, customized specifically to our clients’ and consumers’ needs, such as deep cleaning, air control, diversified restaurant services, meal cards for those who remain working at home, digital concierge services, office reorganization to ensure social distancing. - Sodexo has created a Medical Advisory Council, comprised of experts from around the world in epidemiology, family medicine, nutrition, occupational health and behavioral health, as well as pandemic planning and operations, to support the development of new protocols and standards, including COVID-19 related services delivered worldwide. This Council will provide technical guidance and validation of health & safety protocols.
- Sodexo and Bureau Veritas have joined forces to introduce a hygiene verification label for Sodexo procedures and services. It gives quality assurance to our clients and consumers that all necessary health steps have been taken when organizations reopen post-lockdown. It bolsters the “rise with Sodexo” program and the Medical Advisory Council measures.
- To support “rise with Sodexo”, Sodexo has reaffirmed five key sustainability commitments for a more resilient and green economic recovery:
- continuing the deployment of our Wastewatch food waste reduction program,
- maintaining efforts to reduce single-use items and plastic waste,
- providing access to sustainable eating and “low-carbon” meals,
- promoting sustainable and responsible sourcing,
- enhancing environmental training for our employees.
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