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Sodexo Forecasts Profit, Revenue Growth on Contracts

Nov. 10 (Bloomberg) -- Sodexo, the world’s second-largest catering company, posted a 4.1 percent increase in full-year profit and forecast earnings and revenue growth for next year after winning contracts at a faster pace.

Net income in the 12 months through August advanced to 409 million euros ($563 million) from 393 million euros a year earlier, Issy-les-Moulineaux, France-based Sodexo said today in a statement. That compared with the 407.8 million-euro average of nine analyst estimates compiled by Bloomberg.

Sodexo said it won 8 percent more contracts than in the previous year, compared with 6 percent growth in fiscal 2009. The company is hiring and investing to widen its lineup of services such as building-maintenance and cleaning. Latin America and Asia are leading growth in revenue.

“Sodexo finished the year strongly,” Nigel Parson, an analyst at Evolution Securities in London, said in a research report. He said he plans to raise his estimate of 2011 earnings before interest and tax by about 2 percent.

Sodexo forecast a 10 percent increase in operating profit at constant exchange rates, following a 9.5 percent gain in fiscal 2010. Fiscal 2011 organic sales will rise 3 percent to 4 percent, after climbing 2.5 percent last year, the company also said. Total sales rose 3.9 percent to 15.3 billion euros.

Higher Dividend

Sodexo fell 30 cents, or 0.6 percent, to 47.80 euros at 11:05 a.m. in Paris trading, valuing the company at 7.51 billion euros. The shares have risen 20 percent this year, about matching the almost 21 percent gain for larger rival Compass.

The company exceeded objectives set at the beginning of the year, Chief Executive Officer Michel Landel said in the statement. “Solid earnings growth, the strong generation of cash during the year and its strong confidence for the future,” led the company to propose a dividend of 1.35 euros a share, 6.3 percent higher than the year earlier.

On-Site Service Solutions, Sodexo’s food and facilities management business, increased sales by 4.3 percent to 14.6 billion euros. Revenue at the company’s service-voucher unit fell 3.1 percent to 689 million euros because of the revaluation of the Venezuelan bolivar and the strength of the Brazilian real. Excluding currency shifts, acquisitions and disposals, the unit’s so-called organic sales climbed 7.3 percent.

Organic revenue rose 1.7 percent in continental Europe and 1.9 percent in North America. The rest of the world, including Latin America, the Middle East, Asia and Australia, increased sales by 7.5 percent on the same basis.

To contact the reporter on this story: Armorel Kenna in Milan at akenna@bloomberg.net.

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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